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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2 TO
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE SECURITIES EXCHANGE ACT OF 1934)
STECK-VAUGHN PUBLISHING CORPORATION
(NAME OF THE ISSUER)
STECK-VAUGHN PUBLISHING CORPORATION
SV ACQUISITION CORPORATION
NATIONAL EDUCATION CORPORATION
HARCOURT GENERAL, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, $0.01 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
85804510
(CUSIP NUMBER OF CLASS OF SECURITIES)
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MICHAEL R. KLEIN, ESQ. ERIC P. GELLER, ESQ.
WILMER, CUTLER & PICKERING SENIOR VICE PRESIDENT AND GENERAL COUNSEL
2445 M STREET, N.W. HARCOURT GENERAL, INC.
WASHINGTON, D.C. 20037-1420 27 BOYLSTON STREET
TELEPHONE: (202) 663-6000 CHESTNUT HILL, MASSACHUSETTS 02167
TELEPHONE: (617) 232-6200
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(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF
PERSON(S) FILING STATEMENT)
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Copies to:
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LEWIS H. LAZARUS, ESQ. ROBERT L. FRIEDMAN, ESQ.
MORRIS, JAMES, HITCHENS & WILLIAMS SIMPSON THACHER & BARTLETT
222 DELAWARE AVENUE, P.O. BOX 2306 425 LEXINGTON AVENUE
WILMINGTON, DELAWARE 19801 NEW YORK, NEW YORK 10017
TELEPHONE: (302) 888-6800 TELEPHONE: (212) 455-2000
</TABLE>
THIS STATEMENT IS FILED IN CONNECTION WITH (CHECK THE APPROPRIATE BOX):
a. [X] The filing of solicitation materials or an information statement subject
to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
b. [ ] The filing of a registration statement under the Securities Act of 1933.
c. [ ] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies: [X]
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This Rule 13E-3 Transaction Statement (the "Statement") of Steck-Vaughn
Publishing Corporation (the "Company"), a Delaware corporation, Harcourt
General, Inc. ("Harcourt"), a Delaware corporation, National Education
Corporation ("NEC"), a Delaware corporation and direct wholly-owned subsidiary
of Harcourt, and SV Acquisition Corporation ("Merger Sub"), a Delaware
corporation and direct wholly-owned subsidiary of NEC, relates to an Agreement
and Plan of Merger (the "Merger Agreement"), dated as of September 29, 1997,
among the Company, Harcourt, NEC and Merger Sub, pursuant to which Merger Sub
will merge with and into the Company (the "Merger"), with the result being that
the Company shall be a direct wholly-owned subsidiary of NEC and an indirect
wholly-owned subsidiary of Harcourt. The Merger Agreement and the Merger have
already been approved by the board of directors and, prior to the date of
mailing of the Information Statement (as hereinafter defined) will have been
approved by, stockholders of all the parties to the Merger Agreement and the
Merger. The Statement is intended to satisfy the reporting requirements of
Section 13(e) of the Securities Exchange Act of 1934, as amended (the "Act"). A
copy of the Merger Agreement is filed by the Company as Exhibit A to the
Company's Information Statement (the "Information Statement") filed as Exhibit D
to the Statement.
The cross-reference sheet below is being supplied pursuant to General
Instruction F to Schedule 13E-3 and shows the location in the Information
Statement of the information required to be included in response to the items of
this Statement. The information in the Information Statement, including all
appendices thereto, is hereby expressly incorporated herein by reference and the
responses to each item in this Statement are qualified in their entirety by the
information contained in the Information Statement.
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CROSS-REFERENCE SHEET
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ITEM IN
SCHEDULE 13E-3 WHERE LOCATED IN INFORMATION STATEMENT
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Item 1(a) "AVAILABLE INFORMATION" and "CERTAIN INFORMATION REGARDING THE COMPANY,
HARCOURT, NEC AND MERGER SUB -- The Company"
Item 1(b) Cover Page; "CERTAIN INFORMATION REGARDING THE COMPANY, HARCOURT, NEC
AND MERGER SUB -- Securities of the Company"
Item 1(c) "CERTAIN INFORMATION REGARDING THE COMPANY, HARCOURT, NEC AND MERGER
SUB -- Price Range of the Shares; Dividends"
Item 1(d) "CERTAIN INFORMATION REGARDING THE COMPANY, HARCOURT, NEC AND MERGER
SUB -- Price Range of the Shares; Dividends"
Item 1(e) **
Item 1(f) "CERTAIN INFORMATION REGARDING THE COMPANY, HARCOURT AND MERGER
SUB -- Purchases of Shares by the Company"
Item 2(a)-(d),(g) Appendix D
Item 2(e)-(f) **
Item 3(a)(1) **
Item 3(a)(2) "SPECIAL FACTORS -- Background of the Merger" and " -- Purpose,
Structure and Reasons for the Merger"
Item 3(b) "SPECIAL FACTORS -- Background of the Merger" and " -- Purpose,
Structure and Reasons for the Merger"
Item 4(a) "THE MERGER"
Item 4(b) "SPECIAL FACTORS -- Background of the Merger", "-- Purpose, Structure
and Reasons for the Merger", "SPECIAL FACTORS -- Background of the
Merger", "-- Purpose, Structure and Reasons for the Merger" and
"-- Certain Effects of the Merger; Operations of the Company After the
Merger"
Item 5(a)-(b) **
Item 5(c) "SPECIAL FACTORS -- Purpose, Structure and Reasons for the Merger" and
"THE MERGER -- Terms of the Merger"
Item 5(d) "CERTAIN INFORMATION -- Price Range of the Shares; Dividends"
Item 5(e) "SPECIAL FACTORS -- Purpose, Structure and Reasons for the Merger" and
"-- Certain Effects of the Merger; Operations of the Company After the
Merger"
Item 5(f) **
Item 5(g) "SPECIAL FACTORS -- Certain Effects of the Merger; Operations of the
Company After the Merger"
Item 6(a)-(b) "FINANCING OF THE MERGER"
Item 6(c)-(d) **
Item 7(a)-(c) "SPECIAL FACTORS -- Background of the Mergers" and "-- Purpose,
Structure and Reasons for the Merger"
Item 7(d) "SPECIAL FACTORS -- Certain Effects of the Merger; Operations of the
Company After the Merger" and "-- Certain Federal Income Tax
Consequences"
Item 8(a) "SPECIAL FACTORS -- Fairness of the Merger; Recommendations"
Item 8(b) "SPECIAL FACTORS -- Fairness of the Merger; Recommendations" and
"-- Opinion of Financial Advisor"
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ITEM IN
SCHEDULE 13E-3 WHERE LOCATED IN INFORMATION STATEMENT
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Item 8(c) "SPECIAL FACTORS -- Background of the Merger"
Item 8(d) "SPECIAL FACTORS -- Background of the Merger", "-- Fairness of the
Transaction; Recommendations" and "-- Opinion of Financial Advisor"
Item 8(e) "SPECIAL FACTORS -- Fairness of the Merger; Recommendations"
Item 8(f) **
Item 9(a) "SPECIAL FACTORS -- Fairness of the Merger; Recommendations" and
"-- Opinion of Financial Advisor"
Item 9(b) "SPECIAL FACTORS -- Background of the Merger" and "-- Opinion of
Financial Advisor"
Item 9(c) "SPECIAL FACTORS -- Opinion of Financial Advisor"
Item 10(a) "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THE
COMPANY -- Principal Stockholders"
Item 10(b) "CERTAIN INFORMATION REGARDING THE COMPANY, HARCOURT AND MERGER
SUB -- Purchase of Shares by the Company" and Appendix E
Item 11 "SPECIAL FACTORS -- Purpose, Structure and Reasons for the Merger", "THE
MERGER" and "CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO
THE SECURITIES OF THE COMPANY"
Item 12(a)-(b) "SPECIAL FACTORS -- Background of the Merger", "-- Fairness of the
Merger; Recommendations" and Appendix D
Item 13(a) "RIGHTS OF DISSENTING STOCKHOLDERS" and Appendix C
Item 13(b)-(c) **
Item 14(a) "SELECTED FINANCIAL DATA"
Item 14(b) **
Item 15 **
Item 16 **
Item 17(a) **
Item 17(b) Appendix B
Item 17(c) Appendix A
Item 17(d) **
Item 17(e) Appendix C
Item 17(f) **
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* The information requested by this Item is not found in the Information
statement.
** The Item is inapplicable or the answer thereto is in the negative.
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SECTION 13E-3 TRANSACTION STATEMENT
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ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION
(a) The information set forth in the Information Statement under the caption
"AVAILABLE INFORMATION" and "CERTAIN INFORMATION REGARDING THE COMPANY,
HARCOURT, NEC AND MERGER SUB -- The Company" is incorporated herein by
reference.
(b) The information set forth in the Information Statement under the caption
"CERTAIN INFORMATION REGARDING THE COMPANY, HARCOURT, NEC AND MERGER
SUB -- Securities of the Company" is incorporated herein by reference.
(c) The information set forth in the Information Statement under the captions
"CERTAIN INFORMATION REGARDING THE COMPANY, HARCOURT, NEC AND MERGER
SUB -- Price Range of the Shares; Dividends" is incorporated herein by
reference.
(d) The information set forth in the Information Statement under the Captions
"CERTAIN INFORMATION REGARDING THE COMPANY, HARCOURT, NEC AND MERGER
SUB -- Price Range of the Shares; Dividends" and Appendix D is incorporated
herein by reference.
(e) Not applicable.
(f) The information set forth in the Information Statement under the Caption
"CERTAIN INFORMATION REGARDING THE COMPANY, HARCOURT, NEC AND MERGER
SUB -- Purchases of Shares by the Company" is incorporated herein by
reference.
ITEM 2. IDENTITY AND BACKGROUND
This Statement is filed jointly by the Company, the issuer of the securities
which are the subject of the 13e-3 transaction, Harcourt, NEC and Merger Sub.
The Company, Harcourt, NEC and Merger Sub are each corporations organized
under the law of the state of Delaware. Harcourt, NEC and Merger Sub are each
affiliates of the Company.
The principal business of the Company is distance learning. The principal
businesses of Harcourt are publishing and specialty retailing. NEC is a global
provider of interactive multimedia products and services for the education and
training marketplace. Merger Sub has been organized for the purpose of
consummating the Merger and has no other business activities. The address of
the Company is 4515 Seton Center Parkway, Suite 300, Austin, Texas 78759. The
address of Harcourt, NEC and Merger Sub is c/o Harcourt General, Inc., 27
Boylston Street, Chestnut Hill, Massachusetts 02167.
(a)-(d),(g) The information set forth in Appendix D to the Information Statement is
incorporated herein by reference.
(e)-(f) Negative.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS
(a)(1) Not applicable.
(a)(2) The information set forth in the Information Statement under Captions "SPECIAL
FACTORS -- Background of the Merger" and "-- Purpose, Structure and Reasons
for the Merger" is incorporated herein by reference.
(b) The information set forth in the Information Statement under the Captions
"SPECIAL FACTORS -- Background of the Merger" and "-- Purpose, Structure and
Reasons for the Merger" is incorporated herein by reference.
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5
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ITEM 4. TERMS OF THE TRANSACTION
(a) The information set forth in the Information Statement under the Caption "THE
MERGER" is incorporated herein by reference.
(b) The information set forth in the Information Statement under the captions
"SPECIAL FACTORS -- Background of the Merger", "-- Purpose, Structure and
Reasons for the Merger" and "-- Certain Effects of the Merger; Operations of
the Company After the Merger" is incorporated herein by reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE
(a)-(b) Not applicable.
(c) The information set forth in the Information Statement under the captions
"SPECIAL FACTORS -- Purpose, Structure and Reasons for the Merger" and "THE
MERGER -- Terms of the Merger" is incorporated herein by reference.
(d) The information set forth in the Information Statement under the Caption
"CERTAIN INFORMATION REGARDING THE COMPANY, HARCOURT, NEC AND MERGER
SUB -- Price Range of the Shares; Dividends" is incorporated herein by
reference.
(e) The information set forth in the Information Statement under the captions
"SPECIAL FACTORS -- Purpose, Structure and Reasons for the Merger" and
"-- Certain Effects of the Merger; Operations of the Company After the Merger"
is incorporated herein by reference.
(f) Not applicable.
(g) The information set forth in the Information statement under the caption
"SPECIAL FACTORS -- Certain Effects of the Merger; Operations of the Company
After the Merger" is incorporated herein by reference.
ITEM 6. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION
(a)-(b) The information set forth in the Information Statement under the caption
"FINANCING OF THE MERGER" is incorporated herein by reference.
(c)-(d) Not applicable.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS
(a)-(c) The information set forth in the Information Statement under the captions
"SPECIAL FACTORS -- Background of the Merger" and "-- Purpose, Structure and
Reasons for the Merger" is incorporated herein by reference.
(d) The information set forth in the Information Statement under the captions
"SPECIAL FACTORS -- Certain Effects of the Merger; Operations of the Company
After the Merger" and "-- Certain Federal Income Tax Consequences" is
incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION
(a) The information set forth in the Information Statement under the caption
"SPECIAL FACTORS -- Fairness of the Merger; Recommendations" is incorporated
herein by reference.
(b) The information set forth in the Information Statement under the captions
"SPECIAL FACTORS -- Fairness of the Merger; Recommendations" and "-- Opinion
of the Financial Advisor" is incorporated herein by reference.
(c) The information set forth in the Information Statement under the caption
"SPECIAL FACTORS -- Background of the Merger" is incorporated herein by
reference.
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(d) The information set forth in the Information Statement under the captions
"SPECIAL FACTORS -- Background of the Merger", "-- Fairness of the Merger;
Recommendations" and "-- Opinion of the Financial Advisor" is incorporated
herein by reference.
(e) The information set forth in the Information Statement under the caption
"SPECIAL FACTORS -- Fairness of the Merger; Recommendations" is incorporated
herein by reference.
(f) Not applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS
(a) The information set forth in the Information Statement under the captions
"SPECIAL FACTORS -- Fairness of the Merger; Recommendations" and "-- Opinion
of Financial Advisor" is incorporated herein by reference.
(b) The information set forth in the Information Statement under the caption
"SPECIAL FACTORS -- Background of the Merger" and "-- Opinion of Financial
Advisor" is incorporated herein by reference.
(c) The information set forth in the Information Statement under the caption
"SPECIAL FACTORS -- Opinion of Financial Advisor" is incorporated herein by
reference.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER
(a) The information set forth in the Information Statement under the caption
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THE
COMPANY -- Principal Stockholders" is incorporated herein by reference.
(b) The information set forth in the Information statement under the captions
"CERTAIN INFORMATION REGARDING THE COMPANY, HARCOURT, NEC AND MERGER
SUB -- Purchases of Shares by the Company" and Appendix E is incorporated
herein by reference.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S SECURITIES
The information set forth in the Information Statement under the captions
"SPECIAL FACTORS -- Purpose, Structure and Reasons for the Merger", "THE
MERGER" and "CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE
SECURITIES OF THE COMPANY" is incorporated herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO THE
TRANSACTION
(a)-(b) The information set forth in the Information Statement under the captions
"SPECIAL FACTORS -- Background of the Merger", "-- Fairness of the Merger;
Recommendations" and Appendix D is incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION
(a) The information set forth in the Information Statement under the caption
"RIGHTS OF DISSENTING STOCKHOLDERS" and in Appendix C to the Information
Statement is incorporated herein by reference.
(b)-(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION
(a) The information set forth in the Company's Annual Report on Form 10-K for the
year ended December 31, 1995, the Company's Annual Report on Form 10-K for the
year ended December 31, 1996, and the Company's Quarterly Reports on Form 10-Q
for the quarters ended March 31, 1997, June 30, 1997 and September 30, 1997
are incorporated herein by reference.
(b) **
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED
(a)-(b) Not applicable.
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ITEM 16. ADDITIONAL INFORMATION
Not applicable.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS
(a) Not applicable.
(b)(1) Fairness Opinion of BZW (incorporated herein by reference to Appendix B to the
Information Statement).
(b)(2) BZW Presentation to the Special Committee of the Company's Board of Directors,
dated September 5, 1997.*
(c)(1) Agreement dated May 30, 1997 by and between Harcourt and the Company
(incorporated by reference to Exhibit 11(a)(21) to Harcourt's Amendment No. 5
to Schedule 14D-1 filed June 5, 1997 with respect to the common stock of NEC).
(c)(2) Agreement entered into July 1, 1997, among Harcourt, the Company and the
unaffiliated directors of the Company (incorporated by reference to Exhibit
99.4 to Amendment No. 2 to Harcourt's Schedule 13D filed on July 10, 1997 with
respect to the Shares).
(c)(3) Agreement and Plan of Merger, dated as of September 29, 1997, by and among the
Company, Harcourt, NEC and Merger Sub (incorporated by reference to Appendix A
of the Information Statement).
(d) Information Statement.
(e) Summary of Appraisal Rights (incorporated by reference to Appendix C to the
Information Statement).
(f) Not applicable.
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* Previously filed.
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SIGNATURES
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
-------------------------------------
Eric P. Geller
Senior Vice President, General
Counsel and Secretary
NATIONAL EDUCATION CORPORATION
By: /s/ ERIC P. GELLER
-------------------------------------
Eric P. Geller
Vice President and Secretary
SV ACQUISITION CORPORATION
By: /s/ ERIC P. GELLER
-------------------------------------
Eric P. Geller
Vice President
STECK-VAUGHN PUBLISHING CORPORATION
By: /s/ ERIC P. GELLER
-------------------------------------
Eric P. Geller
Senior Vice President, General
Counsel and Secretary
December 29, 1997
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EXHIBIT INDEX
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EXHIBIT
NUMBER
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(a) Not applicable.
(b)(1) Fairness Opinion of BZW (incorporated herein by reference to Appendix B to the
Information Statement).
(b)(2) BZW Presentation to the Special Committee of the Company's Board of Directors, dated
September 5, 1997.*
(c)(1) Agreement dated May 30, 1997 by and between Harcourt and the Company (incorporated
by reference to Exhibit 11(a)(21) to Harcourt's Amendment No. 5 to Schedule 14D-1
filed June 5, 1997 with respect to the common stock of NEC).
(c)(2) Agreement entered into July 1, 1997, among Harcourt, the Company and the
unaffiliated directors of the Company (incorporated by reference to Exhibit 99.4 to
Amendment No. 2 to Harcourt's Schedule 13D filed on July 10, 1997 with respect to
the Shares).
(c)(3) Agreement and Plan of Merger, dated as of September 29, 1997 by and among the
Company, Harcourt, NEC and Merger Sub (incorporated herein by reference to Appendix
A to the Information Statement).
(d) Information Statement.
(e) Summary of Appraisal Rights (incorporated herein by reference to Appendix C to the
Information Statement).
(f) Not applicable.
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Previously filed.
10
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INFORMATION STATEMENT
STECK-VAUGHN PUBLISHING CORPORATION
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
This Information Statement is being furnished to stockholders of
Steck-Vaughn Publishing Corporation (the "Company") in connection with the
proposed merger (the "Merger") of a wholly-owned subsidiary of National
Education Corporation ("NEC"), a Delaware corporation and wholly-owned
subsidiary of Harcourt General, Inc. ("Harcourt"), a Delaware corporation, with
and into the Company. The Merger, which will be effected pursuant to an
Agreement and Plan of Merger (the "Merger Agreement"), dated as of September 29,
1997, among the Company, Harcourt, NEC, and SV Acquisition Corporation ("Merger
Sub"), a Delaware corporation and a wholly-owned subsidiary of NEC, has been
approved by the Company's Board of Directors (the "Board") and by the holders of
a majority of the outstanding shares of the Company's capital stock. The Merger
is expected to occur in the fourth quarter of 1997.
In the Merger, each share of the Company's Common Stock, par value $0.01
per share (the "Shares") (other than Shares held in the treasury of the Company
or Shares held by Harcourt, NEC or Merger Sub), will be converted into the right
to receive $14.75 in cash (the "Merger Consideration").
This Information Statement is being mailed on or about , 1997 to
all holders of Shares.
------------------------
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO
SEND US A PROXY.
------------------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
The date of this Information Statement is , 1997.
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ADDITIONAL INFORMATION
Pursuant to the requirements of Section 13(e) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and Rule 13e-3 promulgated
thereunder, the Company, as the issuer of equity securities which are the
subject of a Rule 13e-3 transaction, and Harcourt, NEC and Merger Sub, have
filed with the Securities and Exchange Commission (the "Commission") a
Transaction Statement on Schedule 13E-3 (the "Schedule 13E-3") relating to the
transactions contemplated by the Merger Agreement. As permitted by the rules and
regulations of the Commission, this Information Statement omits certain
information, exhibits and undertakings contained in the Schedule 13E-3. Such
additional information can be inspected at and obtained from the Commission and
the Company in the manner set forth below under "AVAILABLE INFORMATION".
Statements contained herein concerning certain documents are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Schedule 13E-3. Each such statement is qualified in
its entirety by such reference.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and, accordingly, files periodic reports and other information with the
Commission. Such reports and other information filed with the Commission are
available for inspection and copying 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 Nasdaq Stock
Market, Nasdaq Regulatory Filings, 1735 K Street, NW, Washington, D.C.
20006-1500.
Harcourt is also subject to the informational requirements of the Exchange
Act and, accordingly, files periodic reports and other information with the
Commission. Such reports and other information filed with the Commission are
available for inspection and copying in the same manner as set forth with
respect to information about the Company in the preceding paragraph. 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.
Merger Sub is a newly formed, private company which was incorporated in
order to effect the transactions contemplated by the Merger Agreement. Neither
NEC nor Merger Sub files information with the Commission.
THIS INFORMATION STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE
NOT INCLUDED IN THEIR ENTIRETY. COPIES OF ANY SUCH DOCUMENTS, OTHER THAN
EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE
THEREIN, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL
OWNER, TO WHOM THIS INFORMATION STATEMENT IS DELIVERED, UPON WRITTEN OR ORAL
REQUEST TO STECK-VAUGHN PUBLISHING CORPORATION, C/O HARCOURT GENERAL, INC., 27
BOYLSTON STREET, CHESTNUT HILL, MASSACHUSETTS 02167, TELEPHONE (617) 232-8200,
ATTENTION: CORPORATE RELATIONS.
ii
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the Commission
pursuant to the Exchange Act are incorporated herein by this reference:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1996;
2. The Company's Reports on Form 10-Q for each of the quarters ended
March 31, 1997, June 30, 1997, and September 30, 1997 and on Form 10-Q/A
for each of June 30, 1997 and September 30, 1997.
3. A Current Report of the Company on Form 8-K filed on June 19, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), and
15(d) of the Exchange Act subsequent to the date hereof and prior to the date
that the Merger becomes effective shall be deemed to be incorporated by
reference herein and to be a part hereof from the date any such document is
filed.
Any statements contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document which also is incorporated by reference
herein) modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed to constitute a part hereof except as so modified
or superseded. All information appearing in this Information Statement is
qualified in its entirety by the information and financial statements (including
notes thereto) appearing in the documents incorporated herein by reference,
except to the extent set forth in the immediately preceding statement.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS WITH RESPECT TO THE MATTERS DESCRIBED IN THIS INFORMATION
STATEMENT OTHER THAN THOSE CONTAINED HEREIN OR IN THE DOCUMENTS INCORPORATED BY
REFERENCE HEREIN. ANY INFORMATION OR REPRESENTATIONS WITH RESPECT TO SUCH
MATTERS NOT CONTAINED HEREIN OR THEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THE DELIVERY OF THIS INFORMATION STATEMENT SHALL NOT,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION IN THIS
INFORMATION STATEMENT OR IN THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THEREOF.
iii
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TABLE OF CONTENTS
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PAGE
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INTRODUCTION.......................................................................... 1
Approval of the Merger.............................................................. 1
Consummation of the Merger and Related Transactions................................. 1
SPECIAL FACTORS....................................................................... 1
Background of the Merger............................................................ 1
Purpose, Structure and Reasons for the Merger....................................... 9
Fairness of the Merger; Recommendations............................................. 10
Opinion of Company Financial Advisor................................................ 12
Certain Financial Projections....................................................... 16
Accounting Treatment................................................................ 16
Interests of Certain Persons in the Merger; Conflicts of Interest................... 16
Certain Effects of the Merger; Operations of the Company After the Merger........... 17
Certain Federal Income Tax Consequences............................................. 17
THE MERGER............................................................................ 19
The Merger.......................................................................... 19
Effective Time of the Merger........................................................ 19
Payment for Shares.................................................................. 20
Representations and Warranties...................................................... 20
Business of the Company Pending the Merger.......................................... 21
Additional Covenants................................................................ 21
Conditions; Waivers................................................................. 21
Termination; Amendment.............................................................. 22
Fees and Expenses................................................................... 22
FINANCING OF THE MERGER............................................................... 23
RIGHTS OF DISSENTING STOCKHOLDERS..................................................... 23
CERTAIN INFORMATION REGARDING THE COMPANY, HARCOURT, NEC AND MERGER SUB............... 24
The Company......................................................................... 24
Securities of the Company........................................................... 24
Price Range of the Shares; Dividends................................................ 24
Purchases of Shares by the Company.................................................. 25
Harcourt............................................................................ 25
NEC................................................................................. 26
Merger Sub.......................................................................... 26
Directors and Executive Officers of the Company, Harcourt, NEC and Merger Sub....... 26
Recent Transactions in Securities of the Company.................................... 26
SELECTED FINANCIAL DATA............................................................... 27
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THE COMPANY......... 28
Principal Stockholders.............................................................. 28
</TABLE>
iv
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO SECURITIES OF THE COMPANY... 29
The Harcourt Agreement.............................................................. 29
The Fair Value Agreement............................................................ 29
APPENDIX A -- Agreement and Plan of Merger............................................ A-1
APPENDIX B -- Fairness Opinion of BZW, the investment banking division of Barclays
Bank PLC................................................................ B-1
APPENDIX C -- Summary of Appraisal Rights............................................. C-1
APPENDIX D -- Certain Information Regarding Directors and Executive Officers of the
Company, Harcourt, NEC and Merger Sub................................... D-1
</TABLE>
v
<PAGE> 6
INTRODUCTION
This Information Statement is being furnished to holders of Shares in
connection with the Merger in accordance with rules and regulations promulgated
by the Commission.
APPROVAL OF THE MERGER
On September 5, 1997, a special committee of the Board of Directors of the
Company comprised entirely of disinterested directors approved the price of the
Merger, subject to the negotiation and execution of a definitive merger
agreement. On September 25, 1997 the special committee of the Board of Directors
of the Company unanimously approved and recommended the adoption of the Merger
Agreement and the transactions contemplated thereby and determined that the
Merger Consideration to be received by holders of the shares in the Merger
(other than Harcourt and its affiliates) is fair to such holders. Also, on
September 29, 1997, the full Board of Directors approved and adopted the Merger
Agreement and the transactions contemplated thereby. NEC, a stockholder holding
in the aggregate 82% of the outstanding Shares, has acted by written consent in
lieu of a meeting of stockholders and voted to approve the Merger Agreement and
the Merger. This is more than is required by Delaware law. ACCORDINGLY, NO
ADDITIONAL STOCKHOLDER VOTE IS NECESSARY TO APPROVE THE MERGER. NEITHER YOUR
VOTE NOR YOUR PROXY WILL BE SOLICITED.
CONSUMMATION OF THE MERGER AND RELATED TRANSACTIONS
The Company currently anticipates that the Merger will be consummated
during the fourth quarter of 1997.
WHEN THE MERGER IS CONSUMMATED, STOCKHOLDERS WHO COMPLY WITH APPLICABLE
DELAWARE LAW WILL HAVE "DISSENTERS' RIGHTS" ENABLING THEM TO DECLINE THE $14.75
PER SHARE CASH PAYMENT OFFERED IN THE MERGER AND, IN LIEU OF RECEIVING SUCH
CASH, TO PETITION THE DELAWARE COURT OF CHANCERY FOR THE "FAIR VALUE" OF THEIR
SHARES. THERE CAN BE NO ASSURANCES THAT ANY DETERMINATION OF "FAIR VALUE" IN ANY
SUCH PROCEEDING WILL RESULT IN A STOCKHOLDER RECEIVING MORE THAN $14.75 PER
SHARE, AND SUCH A PROCEEDING COULD RESULT IN A STOCKHOLDER RECEIVING LESS THAN
$14.75 PER SHARE. STOCKHOLDERS PURSUING DISSENTERS' RIGHTS WILL NOT RECEIVE ANY
PAYMENT FOR THEIR SHARES UNTIL CONCLUSION OR SETTLEMENT OF THE APPLICABLE COURT
PROCEEDINGS BUT WOULD RECEIVE INTEREST THEREON AT THE TIME OF JUDGMENT. SEE
"RIGHTS OF DISSENTING STOCKHOLDERS" BELOW, AND THE SUMMARY OF APPRAISAL RIGHTS,
TOGETHER WITH THE RELEVANT STATUTORY PROVISIONS, ATTACHED AS APPENDIX C TO THIS
INFORMATION STATEMENT.
For additional information concerning the Merger, see "THE MERGER" and in
particular, "THE MERGER -- Terms of the Merger".
SPECIAL FACTORS
BACKGROUND OF THE MERGER
Harcourt's Acquisition of NEC. 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 NEC, the parent of
the Company, to explore the possibility of an acquisition of NEC. In connection
therewith, Harcourt and NEC entered into a confidentiality agreement, which
included a standstill provision expiring on October 26, 1996. After reviewing
certain preliminary information provided by NEC and after several telephone
conversations between Mr. Cook and each of Mr. Cwertnia and Mr. Richard C. Blum,
a member of NEC's Board of Directors, Harcourt terminated discussions with
representatives of NEC in connection with its consideration of a possible
acquisition of NEC.
On March 12, 1997, NEC announced that it had entered into an Agreement and
Plan of Merger between NEC and Sylvan Learning Systems, Inc. ("Sylvan"),
contemplating the merger of a wholly-owned subsidiary of Sylvan with and into
NEC, with NEC being the surviving corporation (the "Proposed Sylvan Merger"). In
the Proposed Sylvan Merger, each share of common stock, par value $0.01 per
share, of NEC (an "NEC Share") was to be converted into the right to receive
0.58 of one share of Sylvan Common Stock. Based on the
1
<PAGE> 7
closing price of the Sylvan Common Stock on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") National Market ("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 NEC Share.
Based on the closing price of the Sylvan Common Stock on the NASDAQ NM on April
15, 1997 ($29 1/8 per share), the last day preceding the date of Harcourt's
announcement that it would be commencing an offer to purchase all outstanding
NEC Shares at a purchase price of $19.50 per NEC Share upon the terms and
subject to the conditions set forth in the Offer to Purchase dated April 21,
1997 and in the related Letter of Transmittal (which together constituted the
"NEC Offer"), the Proposed Sylvan Merger would have had a value of approximately
$653 million or $16.89 per NEC Share.
On April 14, 1997, the Board of Directors of Harcourt approved the
commencement of the NEC Offer. On the same day, Robert L. Friedman of Simpson
Thacher & Bartlett, counsel to Harcourt, telephoned Richard C. Blum, a member of
the Board of Directors of NEC, and informed Mr. Blum that Harcourt wished to
acquire NEC. 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 NEC Shares at $19.50 per NEC 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 NEC would endorse Harcourt's offer. On the morning of April 16,
1997, Richard A. Smith, the Chairman and Chief Executive Officer of Harcourt,
sent the following letter to Sam Yau, President and Chief Executive Officer of
NEC:
"Mr. Sam Yau
President and Chief Executive Officer
National Education Corporation
2601 Main Street
Irvine, CA 92614
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 on 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
2
<PAGE> 8
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 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 education 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
3
<PAGE> 9
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, Harcourt, through Nick Acquisition Corporation ("Nick"),
a Delaware corporation and wholly-owned subsidiary of Harcourt, commenced the
NEC Offer.
On April 25, 1997, Richard A. Smith, Chairman and Chief Executive Officer
of Harcourt, Robert A. Smith, President and Co-Chief Operating Officer of
Harcourt, John R. Cook, Senior Vice President and Chief Financial Officer of
Harcourt, and Robert L. Friedman of Simpson Thacher & Bartlett, counsel to
Harcourt, met with Richard C. Blum and Frederic V. Malek, members of the Board
of Directors of NEC, to explore the possibility of a negotiated acquisition
transaction between Harcourt and NEC. Although Mr. Richard Smith indicated a
possible willingness to increase Harcourt's pending offer from $19.50 to $20.25
per NEC Share in order to secure a negotiated transaction, Messrs. Blum and
Malek indicated their doubt that the Board of Directors of NEC would endorse a
revised Harcourt offer at $20.25 per NEC Share.
On the evening of April 29, 1997, Messrs. Richard Smith and Blum discussed
further on a telephone conversation the possibility of a negotiated acquisition
transaction between Harcourt and NEC at a price of, but in no event more than,
$21.00 per NEC Share subject to confirmatory due diligence by Harcourt.
On April 30, 1997, several telephone conversations occurred between
representatives of Harcourt and its legal advisors and representatives of NEC
and its legal advisors relating to a possible negotiated acquisition transaction
between Harcourt and NEC at a price of, but in no event more than, $21.00 per
NEC Share, subject to confirmatory due diligence by Harcourt to be completed
during the following week.
At a meeting on May 1, 1997, NEC's Board of Directors agreed to permit
Harcourt to conduct confirmatory due diligence during the next week.
On May 1, 1997, Harcourt issued the following press release:
"Harcourt General, Inc. announced today that it was engaged in
negotiations with National Education Corporation concerning an acquisition
transaction based on a per share price of, but in no event more than,
$21.00. Pursuant to the contemplated transaction, Harcourt General would
increase its present offer to purchase all NEC shares to $21.00 per share.
This transaction is subject to confirmatory due diligence by Harcourt
General to be completed during the next week. The NEC Board has agreed to
permit Harcourt General to conduct this due diligence pursuant to a
standard confidentiality agreement. Harcourt General said that there can be
no assurance that such discussions will lead to an acceptable transaction
or that any such transaction will be approved by the Board of Directors of
Harcourt General or NEC. If these negotiations are not successful, Harcourt
General will continue its offer to purchase all NEC shares at $19.50 per
share."
On May 2, 1997, Harcourt and NEC entered into a confidentiality agreement.
On such date and during the following week, representatives of Harcourt met with
management of NEC and its subsidiaries and conducted due diligence.
On Friday, May 2, 1997, Harcourt's legal advisors delivered a draft merger
agreement to NEC and its legal advisors.
Pursuant to teleconferences held from Wednesday, May 7, 1997 through
Monday, May 12, 1997, negotiations were conducted between representatives of NEC
and Harcourt concerning the terms of an Agreement and Plan of Merger (the "NEC
Merger Agreement") between Harcourt, Nick and NEC.
On May 8, 1997, Sam Yau, the Chief Executive Officer of NEC, telephoned
Douglas L. Becker, the President and Co-Chief Executive Officer of Sylvan, and
Messrs. Yau and Becker discussed the possibility of Sylvan terminating the
Sylvan Merger Agreement in exchange for the payment by NEC of the $30 million
fee contemplated by Section 6.3 of the Sylvan Merger Agreement.
On Friday, May 9, 1997, the Board of Directors of NEC met to discuss
Harcourt's proposal to acquire NEC at the price of, but in no event more than,
$21.00 per NEC Share, including the terms of the draft NEC Merger Agreement.
Following the delivery of the oral opinion of BZW, the investment banking
division of
4
<PAGE> 10
Barclays Bank PLC ("BZW"), financial advisor to NEC, to NEC's Board of Directors
(subsequently confirmed in writing) that the consideration to be received by
holders of NEC Shares (other than Harcourt and Nick) pursuant to each of the NEC
Offer and the merger (the "NEC Merger") of NEC with Nick pursuant to the terms
of the NEC Merger Agreement, was fair to such holders from a financial point of
view, NEC's Board of Directors approved the terms of such proposal, including
the terms contained in the draft merger agreement in the form presented at the
meeting which had been negotiated by the two parties and their respective
representatives during the course of the week. NEC's Board of Directors
authorized designated officers of NEC to execute the NEC Merger Agreement
substantially in the form presented at the meeting with such changes thereto as
designated officers of NEC deemed appropriate, subject to termination of the
Sylvan Merger Agreement.
On May 12, 1997, Harcourt, NEC and Sylvan entered into an agreement whereby
(i) Sylvan agreed that the Sylvan Merger Agreement would automatically terminate
immediately prior to the execution of the NEC Merger Agreement and receipt by
Sylvan of the $30 million termination fee due thereunder, (ii) Harcourt and NEC
jointly and severally agreed to have NEC pay Sylvan the $30 million termination
fee and (iii) Sylvan, on the one hand, and Harcourt and NEC, on the other hand,
agreed to release all claims they might have against each other.
Pursuant to negotiations held by teleconferences on Monday, May 12, 1997,
an agreement was reached between representatives of NEC and Harcourt on all of
the remaining terms of the NEC Merger Agreement. Later that evening, the NEC
Merger Agreement was executed. In the morning of Tuesday, May 13, 1997, Harcourt
and NEC issued a joint press release announcing the transaction.
On June 4, 1997, the NEC Offer terminated, and on June 5, 1997, Harcourt
acquired approximately 34.4 million NEC Shares representing approximately 95.6%
of the issued and outstanding NEC Shares.
On June 11, 1997, Harcourt announced that it had merged Nick into NEC with
NEC continuing as the surviving corporation in the NEC Merger. As a result of
the NEC Merger, NEC became a wholly-owned subsidiary of Harcourt. As a result of
the consummation of the Offer and the NEC Merger, Harcourt became the indirect
beneficial owner of 11,900,000 Shares of the Company, representing approximately
82% of the outstanding Shares.
Proposed Merger With the Company.
Prior to acquiring control of the Company, Harcourt entered into an
agreement with the Company dated May 30, 1997 (the "Harcourt Agreement")
pursuant to which Harcourt agreed that until June 4, 2000, it would not
consummate any business combination (as defined in Section 203 of the Delaware
General Corporation Law (the "DGCL")) with the Company unless and until (i) the
proposed business combination had been submitted by Harcourt in writing to the
Board, (ii) a committee of the Board comprised solely of Disinterested Directors
(the "Special Committee") affirmatively recommended its approval of such
business combination, finding that the terms thereof were fair to the
stockholders of the Company other than NEC and Harcourt and (iii) the business
combination was approved by a majority of the Board, including a majority of the
Disinterested Directors.
Pursuant to the Harcourt Agreement, Harcourt has the right, subject to
complying with applicable requirements of the Commission, to cause the Company
to cause a number of designees of Harcourt to be elected to the Board such that
the Harcourt designees will constitute a majority of the entire Board, and prior
to such time, to cause a number of designees of Harcourt to be elected such that
they will constitute half of the entire Board.
In order to effectuate the provisions of the Harcourt Agreement, Harcourt
agreed in the Harcourt Agreement to cause the Board at all times until June 4,
2000 to have at least three Disinterested Directors and, subject to their
willingness to serve, invited Leonard W. Jaffe, Michael R. Klein and N. Colin
Lind, all of them existing directors of the Company, to serve initially as
Disinterested Directors and, as long as such individuals remain Disinterested
Directors, to constitute a majority of the members of the Special Committee. The
Special Committee was formed on June 23, 1997, in advance of a formal merger
proposal being made by
5
<PAGE> 11
Harcourt to the Company in order to allow its members ample time to retain
advisors and inform themselves concerning the Company and any proposed
transaction. The Special Committee is comprised of Messrs. Jaffe, Klein and
Lind.
Under the terms of the Harcourt Agreement, the term "Disinterested
Director" means a member of the Board who is not an officer, director, employee
or affiliate of Harcourt, NEC or their respective affiliates, who does not have
a direct or indirect material financial interest in Harcourt, NEC, or its
affiliates, and who would be deemed to be an outside director qualified to serve
on the audit committee of the Company under the rules of the New York Stock
Exchange.
On June 23, 1997, the Board of the Company was reconstituted to reflect
Harcourt's controlling ownership position. The Board of the Company now includes
four Harcourt officers: Richard A. Smith, Chairman and Chief Executive Officer;
Robert A. Smith and Brian J. Knez, Presidents and Co-Chief Operating Officers;
and John R. Cook, Senior Vice President and Chief Financial Officer. In
addition, the four Disinterested Directors remained on the Board.
The Special Committee met immediately after the Board's June 23, 1997
meeting and after considering various potential advisors retained Morris, James,
Hitchens & Williams of Wilmington, Delaware ("Morris James"), as its legal
counsel, and discussed retaining BZW as its financial advisor, to advise the
Special Committee in connection with the expected merger proposal from Harcourt.
On July 7, 1997, after negotiating an engagement agreement acceptable to the
Special Committee and BZW, the Special Committee formally retained BZW as its
financial advisor. For a description of the terms of the engagement of BZW and
certain information concerning BZW, see "SPECIAL FACTORS -- Opinion of Financial
Advisor." During the June 23, 1997 meeting, the Special Committee authorized BZW
to begin its background preparatory work on the Company to be in a position to
analyze the expected merger proposal and, after consultation with the Company's
senior management, to begin to determine whether, and when, it would be in a
position to render an opinion as to the fairness of the consideration proposed
to be received by the holders of the Shares (other than the Shares held by
Harcourt, NEC or Merger Sub) in any merger proposal of Harcourt from a financial
point of view, on the basis of Harcourt's previously announced intention to seek
to acquire the Shares at a price per Share of $14.00.
On June 23, 1997, Richard A. Smith, in his capacity as Chairman and Chief
Executive Officer of Harcourt, delivered a letter (the "Harcourt Proposal") to
the Special Committee in which Harcourt proposed, pursuant to the Harcourt
Agreement, to enter into a transaction pursuant to which NEC would acquire the
shares of the Company it did not already own, and the stockholders of the
Company (other than NEC and its affiliates) would receive $14.00 in cash for
each Share. The Harcourt Proposal contemplated that such transaction would be
effected through a merger (the "Proposed Steck-Vaughn Merger") of the Company
with a direct or indirect subsidiary of NEC. The text of the Harcourt Proposal
follows:
"To the Independent Directors of
Steck-Vaughn Publishing Corporation:
As you know, Harcourt General, Inc. ("Harcourt") has recently
completed the acquisition of all of the outstanding shares of common stock
of National Education Corporation ("NEC") pursuant to a tender offer and
merger transaction with NEC. As a result of such transaction, Harcourt has
become the indirect owner of approximately 82% of the outstanding common
stock of Steck-Vaughn Publishing Corporation (the "Company").
Pursuant to an agreement dated as of May 30, 1997 (the "Agreement")
between the Company and Harcourt, we are writing to propose to the Board of
Directors of the Company a transaction pursuant to which NEC would acquire
the shares of the Company it does not already own, and the stockholders of
the Company (other than NEC and its affiliates) would receive $14.00 in
cash for each share of common stock.
We believe that this proposal presents an attractive opportunity for
your public stockholders to realize a price which represents a 33% premium
over the market price of the Company's common stock
6
<PAGE> 12
on April 15, 1997, the trading day before Harcourt announced its intention
to commence a tender offer for the NEC shares and to acquire the Company
shares not owned by NEC. We believe that this price is at a level which
both you and your stockholders should support.
Our proposal contemplates a merger of the Company with a direct or
indirect subsidiary of NEC. We believe that a mutually acceptable
definitive merger agreement containing provisions customary for
transactions of this type can be expeditiously negotiated and executed.
We fully recognize the interests of the public stockholders in the
Company. Accordingly, our proposed transaction would be subject to
satisfaction of the requirements set forth in the Agreement, including the
approval of a majority of the "disinterested directors" of the Company (as
defined in the Agreement) after the retention of such financial and legal
advisors deemed necessary or desirable by the disinterested directors.
These requirements will ensure that the interests of the Company's minority
stockholders are protected in our proposed transaction.
We hope that we can proceed together promptly to allow the Company's
public stockholders to realize value for their shares to an extent not
likely to be available to them in the marketplace. As you know, Harcourt is
required to file a Schedule 13D with the Securities and Exchange Commission
relating to its indirect ownership of the common stock of the Company. We
have been advised by our counsel that, as a result of our proposal of this
transaction, we will be required by law to disclose this letter in such
Schedule 13D and to make certain related disclosures in such filing.
We look forward to discussing the foregoing with you soon.
Sincerely,
/s/ RICHARD A. SMITH
--------------------------------------
Richard A. Smith
Chairman and
Chief Executive Officer
Distribution:
Mr. Leonard W. Jaffe
Mr. Manuel J. Justiz
Michael R. Klein, Esq.
Mr. N. Colin Lind"
Pursuant to an agreement (the "Fair Value Agreement") entered into on July
1, 1997, among Harcourt, the Company and the Special Committee, Harcourt agreed
that, among other things, it would not attempt to effectuate any transaction
contemplated by the Harcourt Agreement pursuant to which Harcourt would acquire
any Shares not owned by it at such time at a price less than the fair value of
the Shares, as determined in accordance with Section 262 of the DGCL, as of May
30, 1997. Additionally, pursuant to the Fair Value Agreement, four executive
officers of Harcourt were elected to identical positions as executive officers
of the Company on July 1, 1997. Anita Kopec subsequently resigned as President
and Chief Executive Officer of the Company on July 8, 1997.
On Tuesday, July 8, 1997, the Special Committee met with Morris James and
BZW to discuss, among other things, preliminary valuation issues in connection
with the Harcourt Proposal and the Proposed Steck-Vaughn Merger. On Wednesday,
July 9, 1997, the Board met to discuss various valuation issues relating to the
Proposed Steck-Vaughn Merger.
7
<PAGE> 13
On Friday, July 11, 1997, a representative of Goldman, Sachs & Co.
("Goldman"), financial advisor to Harcourt, met with a representative of BZW. At
such meeting, BZW and Goldman discussed various valuation methodologies that
could be used in arriving at a valuation of the Company.
On Monday, July 14, 1997, Harcourt's legal advisors delivered a draft form
of merger agreement to Mr. Klein, as representative for the Special Committee,
that Harcourt was prepared to enter into with the Company and which, among other
things, contemplated a merger of Merger Sub with and into the Company pursuant
to which all Shares would be converted into the right to receive $14.00 per
Share in cash. See "THE MERGER."
On Thursday, July 17, 1997, Messrs. Klein and Lind, as representatives of
the Special Committee, met with Messrs. Richard Smith, Robert Smith, Knez and
Cook, as representatives of Harcourt. Messrs. Klein and Lind advocated the view
at the meeting that the $14.00 per Share price offered by Harcourt was
inadequate. After further discussion, Mr. Richard Smith, on behalf of Harcourt,
offered to increase the consideration in the Proposed Steck-Vaughn Merger to
$14.50 per Share.
During the period from July 18, 1997 to September 5, 1997, telephonic
negotiations were conducted between representatives of the Special Committee and
its financial advisor and representatives of Harcourt and its financial advisor
concerning the per Share consideration that Harcourt was offering in the
Proposed Steck-Vaughn Merger. Representatives of the Special Committee and its
financial advisor attempted to obtain greater consideration in the Proposed
Steck-Vaughn Merger for the holders of the Shares (other than the Shares held by
Harcourt, NEC or Merger Sub), while Harcourt contended that $14.50 per Share
represented a full and fair price.
On September 4, 1997, Mr. Lind, on behalf of the Special Committee,
telephoned Mr. Cook of Harcourt and informed him that a meeting of the Special
Committee was scheduled for September 5, 1997 to discuss the Harcourt Proposal,
and (attempting to achieve greater consideration for the unaffiliated
stockholders of the Company) asked whether Harcourt would be willing to pay
$15.00 per Share. Mr. Cook, on behalf of Harcourt, responded that Harcourt would
not be willing to pay $15.00 per Share in the Proposed Steck-Vaughn Merger, but
that Harcourt would be willing to consider paying $14.75 per Share in the
Proposed Steck-Vaughn Merger if a majority of the unaffiliated stockholders of
the Company indicated to Harcourt that they would support the Proposed
Steck-Vaughn Merger at the price of $14.75 per Share.
On September 5, 1997, the Special Committee met with BZW and Morris James
to evaluate the $14.50 per Share Harcourt Proposal. Representatives of Morris
James explained the legal responsibilities of the members of the Special
Committee and the legal principles applicable to actions taken by the Special
Committee with respect to the Harcourt Proposal. Following a presentation from
BZW in which BZW discussed various valuation methodologies that could be used in
arriving at a valuation of the Company and the $14.50 per Share Harcourt
Proposal, BZW concluded that the $14.50 per Share Harcourt Proposal was fair to
the holders of the Shares from a financial point of view. The Special Committee
then determined that it would be prepared to recommend the $14.50 per Share
Harcourt Proposal or a Harcourt Proposal of $14.75 per Share in the event that
Harcourt were to increase its offer if a majority of the unaffiliated
stockholders of the Company indicated its support for the Proposed Steck-Vaughn
Merger at such price, subject to the negotiation of satisfactory terms and
provisions of the draft merger agreement. The Special Committee also determined
that members of the Special Committee and the advisors to the Special Committee
should seek to negotiate further with Harcourt to attempt to increase the
Harcourt Proposal to an amount greater than the consideration being offered by
Harcourt.
On the basis of telephone conversations on the morning of September 8,
1997, between representatives of Harcourt and a stockholder holding a majority
of the outstanding Shares not held by Harcourt, Harcourt agreed to increase its
offer to $14.75 per Share. Thereafter, Harcourt informed the Special Committee
that Harcourt would increase its offer to $14.75 per Share, and that Harcourt
would not be willing to pay in excess of $14.75 per Share in the Proposed
Steck-Vaughn Merger.
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In the morning on September 8, 1997, Harcourt issued the following press
release:
"Harcourt General, Inc. announced today that it had completed price
negotiations with the independent directors of Steck-Vaughn Publishing
Corporation who approved a transaction in which Harcourt General will
purchase the publicly-held Steck-Vaughn shares it does not already own for
$14.75 per share in cash. Harcourt General acquired ownership of
approximately 82% of Steck-Vaughn's common stock when it completed a merger
with National Education Corporation in June.
Steck-Vaughn has approximately 3.4 million publicly held common and
common equivalent shares outstanding, giving the transaction a total value
of approximately $42.8 million.
Harcourt General said that consummation of the transaction is subject
to the finalization of a definitive merger agreement which must be approved
by the Steck-Vaughn independent directors and Harcourt General. Once the
definitive merger agreement is approved, the plan will be subject to
approval by a majority vote of Steck-Vaughn shareholders. Because Harcourt
General already owns 82% of the Steck-Vaughn shares and will vote those
shares in favor of the transaction, that approval is assured.
Harcourt General estimated that the merger process, including required
filings with the Securities and Exchange Commission, would take several
months to complete.
Harcourt General is a leading global multiple-media publisher and
service provider to established educational, trade and professional markets
as well as to emerging for-profit educational, career-training and
assessment markets. The Company is also a leading specialty retailer
through its 53% controlling interest in The Neiman Marcus Group."
During the period of September 8, 1997, to September 26, 1997, the Special
Committee, through its legal advisors, negotiated with Harcourt and its legal
advisors the terms and provisions of the form of merger agreement proposed by
Harcourt. See "THE MERGER."
On September 25, 1997 the Special Committee met with BZW and Morris James
to evaluate the Merger Agreement and the $14.75 Harcourt Proposal. At the
meeting, the Special Committee reviewed, among other things, the provisions
contained in the draft of the Merger Agreement with Morris James. The Special
Committee also received, among other things, the confirmatory financial analysis
and advice of BZW and received BZW's fairness opinion that the consideration to
be received by the holders of the Shares (other than Shares held by Harcourt or
any direct or indirect wholly-owned subsidiary of Harcourt) as set forth in the
draft of the Merger Agreement was fair from a financial point of view. After
discussion and consideration, the Special Committee voted unanimously to approve
the Merger, the Merger Agreement and all of the related transactions and
recommended that the Board approve the Merger Agreement. The full Board approved
the Merger Agreement and the transactions contemplated thereby by means of a
unanimous written consent dated as of September 29, 1997.
PURPOSE, STRUCTURE AND REASONS FOR THE MERGER
General. The purpose of the Merger is to acquire all Shares not
beneficially owned by Harcourt. After examining various long-term financial,
governance and business issues currently faced by the Company, the Board of
Directors of Harcourt concluded that 100% private ownership of the Company is
the most effective way to stabilize the business of the Company and improve its
financial performance.
The acquisition of the Company is structured as a cash merger in which
Harcourt, NEC and Merger Sub will cash out all Shares other than Shares held by
NEC. The Company's purpose in effectuating the Merger at this time is to allow
the stockholders of the Company an opportunity to receive a cash payment at a
price that has been unanimously determined by the Special Committee and the
Board to be fair to the stockholders. The Merger has been structured as a cash
merger in order to provide a prompt and orderly transfer of complete ownership
of the Company to Harcourt and to provide the stockholders (other than Harcourt
and its affiliates) with cash for all of their Shares.
When the Merger is consummated, the stockholders of the Company (other than
Harcourt and its affiliates) will no longer have any equity interest in the
Company, and therefore will not share in its future
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<PAGE> 15
earnings and growth. Instead, each such stockholder (other than such
stockholders who properly perfect appraisal rights in accordance with Section
262 of the DGCL) will receive, upon surrender of the certificate or certificates
evidencing the appropriate number of Shares, the Merger Consideration in
exchange for each Share owned immediately prior to the Effective Time (as
hereinafter defined).
Except for the Merger, Harcourt does not have any present plans that relate
to or would result in an extraordinary corporate transaction such as a merger,
reorganization or liquidation involving the Company or any of its subsidiaries
or a sale or other transfer of a material amount of assets of the Company or any
of its subsidiaries or any changes in the Company's corporate structure or
business. Harcourt, however, will continue to evaluate the business and
operations of the Company after the Merger and make such changes as are deemed
appropriate.
FAIRNESS OF THE MERGER; RECOMMENDATIONS
On September 5, 1997, the Special Committee and its financial and legal
advisors met to formally evaluate the Harcourt Proposal. On September 25, 1997,
the Special Committee and its financial and legal advisors met to formally
evaluate the Proposed Merger Consideration, the proposed Merger and the draft of
the Merger Agreement. At such meeting, the Special Committee unanimously
recommended that the Board approve the Merger Agreement, and the transactions
contemplated thereby. The Special Committee also unanimously recommended to the
Board that the Merger is fair to, and in the best interests of, the holders of
Shares (other than with respect to Shares held by Harcourt or any direct or
indirect wholly-owned subsidiary of Harcourt). The full Board approved the
Merger Agreement and the transactions contemplated thereby by means of a
unanimous written consent dated as of September 29, 1997.
The Board of Directors, in determining to approve the Merger Agreement and
the transactions contemplated thereby, considered the recommendation of the
Special Committee and all of the factors considered by the Special Committee as
described below.
The members of the Board believe that the factors considered by the Special
Committee operate both individually and in combination to support their
determination that the Merger is fair to the holders of Shares (other than with
respect to Shares held by Harcourt or any direct or indirect wholly-owned
subsidiary of Harcourt) and that the Merger is the best possible transaction
reasonably available under the circumstances. The Board did not assign relative
weights to particular factors considered by the Special Committee. Four of the
eight members of the Board are employees of Harcourt and, therefore, have a
potential conflict with respect to the Merger and the Merger Agreement. See
"SPECIAL FACTORS -- Interests of Certain Persons in the Merger; Conflicts of
Interest."
In determining to recommend to the Board of Directors that it approve the
Merger Agreement, and in determining the fairness of the terms of the Merger,
the Special Committee considered the following factors, which taken together, in
the Special Committee's view, supported the Special Committee's determination to
recommend the Merger:
(1) the Special Committee's knowledge of the business, financial
results and prospects of the Company, which are reflected in the reports
and financial statements incorporated by reference herein (see
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE"), as well as the Special
Committee's knowledge of the supplemental publishing industry generally;
(2) the terms and conditions of the Merger Agreement, including the
amount and form of consideration and the nature of the parties'
representations, warranties, covenants and agreements;
(3) the fairness opinion and financial presentation of BZW, as
described under "SPECIAL FACTORS -- Opinion of Financial Advisor";
(4) the condition to the consummation of the Merger that the Special
Committee shall not have modified or rescinded its recommendation with
respect to the Merger as a result of the withdrawal or material
qualification, on or prior to the Effective Time of the Merger, of the
fairness opinion delivered by BZW to the Special Committee;
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<PAGE> 16
(5) the fact that the Merger Consideration of $14.75 per Share
represented a premium of 40% over the April 15, 1997 closing price of the
Shares on the Nasdaq National Market, the trading day before Harcourt
announced its intention to commence a tender offer for the NEC shares and
to acquire the Shares not owned by NEC and a premium of 31% over the March
11, 1997 closing price of the Shares, the trading day before the Proposed
Sylvan Merger was announced;
(6) the unwillingness of Harcourt to consider a sale or
recapitalization of the Company or to engage in other alternative
transactions with respect to the Company;
(7) the Special Committee's recognition of its ability and power to
reject the Proposed Steck-Vaughn Merger and say "no" to the Harcourt
Proposal in the event the Special Committee concluded that the Merger was
not fair to the holders of the Shares (other than the Shares held by
Harcourt or any direct or indirect wholly-owned subsidiary of Harcourt);
and
(8) the Special Committee's recognition of its ability and power to
negotiate on an arm's-length basis with Harcourt as a result of the
limitations on Harcourt's ability to effectuate a business combination with
the Company that the Special Committee had obtained pursuant to the
Harcourt Agreement and the Fair Value Agreement.
In addition to the foregoing, however, the Special Committee and the Board
did note that the $14.75 Harcourt Proposal was below the median of the range
suggested by BZW's Selected Comparable Transaction Analysis and at the low end
of the range suggested by BZW's Discounted Cash Flow Analysis. See "Special
Factors -- Opinion of Company Financial Advisor".
In light of the number and variety of factors the Special Committee
considered in connection with its evaluation of the Merger, the Special
Committee did not find it practicable to assign relative weights to the
foregoing factors, and, accordingly, the Special Committee did not do so.
Rather, the Special Committee viewed its position and recommendations as being
based on its judgment, in light of the totality of the information underlying
the factors presented to and considered by it, as to the overall effect of the
Merger on the unaffiliated stockholders of the Company compared to the likely
effect of rejecting the Harcourt Proposal.
The Special Committee frequently consulted with BZW during the course of
its work and analysis of the financial evaluation of the Company and of the
Merger. The Special Committee believes that BZW's analysis was reasonable.
The Special Committee believes that the Merger is procedurally fair
because: (1) the Special Committee consisted of Disinterested Directors
appointed to represent the interests of, and to negotiate on an arm's-length
basis with Harcourt on behalf of, the holders of Shares (other than Shares held
by Harcourt or any direct or indirect wholly-owned subsidiary of Harcourt); (2)
the Special Committee retained and was advised by Morris, James as independent
legal counsel; (3) the Special Committee retained and was advised by BZW as
independent financial advisor; (4) the Special Committee possessed the ability
and power to negotiate on an arm's-length basis with Harcourt as a result of the
limitations on Harcourt's ability to effectuate a business combination with the
Company that the Special Committee had negotiated for pursuant to the Harcourt
Agreement and the Fair Value Agreement; and (5) the consummation of the Merger
requires as a condition that the Special Committee shall not have modified or
rescinded its recommendation with respect to the Merger as a result of the
withdrawal or material qualification, on or prior to the Effective Time, of the
fairness opinion delivered by BZW to the Special Committee. In addition, the
Special Committee believes that the Merger is procedurally fair because the
$14.75 per Share price and the other terms and conditions of the Merger
Agreement resulted from active arm's length bargaining between the Special
Committee and Harcourt.
The rules of the Commission require each of Harcourt, NEC and Merger Sub to
express its belief as to the fairness of the Merger to the holders of Shares.
While each of Harcourt, NEC and Merger Sub has undertaken no evaluation of the
Merger from the standpoint of fairness to the holders of Shares, it has
considered the factors noted above which were taken into account by the Board of
Directors and Special Committee. Although Harcourt, NEC and Merger Sub did not
find it practicable to quantify or otherwise attach relative weights to the
specific factors considered by the Board of Directors or the Special Committee,
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<PAGE> 17
each of Harcourt, NEC and Merger Sub did consider in particular the fact that
(i) the Merger Consideration represented a significant premium over the
historical stock prices of the Shares as described above in the discussion of
the Board's approval, (ii) the limitations on Harcourt's ability to effectuate a
business combination with the Company that the Special Committee had negotiated
for pursuant to the Harcourt Agreement and the Fair Value Agreement and (iii)
that the consummation of the Merger required as a condition that the Special
Committee shall not have modified or rescinded its recommendation with respect
to the Merger as a result of the withdrawal or material qualification, on or
prior to the Effective Time, of the fairness opinion delivered by BZW to the
Special Committee. Each of Harcourt, NEC and Merger Sub also considered the fact
that it required, as a condition to its execution and delivery of the Merger
Agreement, the Board of Directors and the Special Committee to have determined
that the Merger Agreement was fair to the holders of Shares and to have obtained
an opinion of BZW that the Merger Consideration to be received in the Merger by
holders of the Shares pursuant to the Merger Agreement is fair to such holders
from a financial point of view. On the basis of the foregoing considerations,
each of Harcourt, NEC and Merger Sub believes that the Merger is fair to the
holders of Shares. In addition, each of Harcourt, NEC and Merger Sub have
considered the measures taken by the Board of Directors to ensure the procedural
fairness of the transaction, including the formation of the Special Committee,
the retention of legal and financial advisors by the Special Committee and the
arms-length nature of the negotiations. See "SPECIAL FACTORS -- Background of
the Merger".
OPINION OF COMPANY FINANCIAL ADVISOR
The Company and the Special Committee engaged BZW, pursuant to a letter
agreement dated July 7, 1997 (the "Advisory Agreement"), to act as the financial
advisor to the Special Committee in connection with the Proposed Steck-Vaughn
Merger and to render an opinion as to the fairness, from a financial point of
view, of the Merger Consideration to the holders of the Shares (other than the
Shares held by Harcourt or any direct or indirect subsidiary of Harcourt). At
the September 5, 1997 meeting of the Special Committee at which the price of the
Merger was approved by the Special Committee, BZW delivered its oral opinion
that, as of such date and based on the matters described therein, the proposed
Merger Consideration of $14.50 per Share was fair, from a financial point of
view, to the holders of the Shares (other than Harcourt or any direct or
indirect subsidiary of Harcourt). At a subsequent meeting of the Special
Committee on September 25, 1997, BZW confirmed in writing, as of such date, its
opinion with respect to the Merger Consideration of $14.75 per Share and
reconfirmed such opinion as of December 8, 1997 (the "BZW Opinion") is attached
as Appendix B hereto and is incorporated herein by reference, and the summary of
the opinion set forth below is qualified in its entirety by reference to the
full text of such opinion. Stockholders of the Company are urged to read such
opinion carefully and in its entirety for a description of the procedures
followed, the factors considered, the assumptions made and the scope of review
undertaken, as well as the limitations on the review undertaken, by BZW in
rendering its opinion. No limitations were imposed by the Special Committee on
BZW with respect to the investigations made or procedures followed by it in
furnishing its opinion. The BZW Opinion addresses only the fairness, from a
financial point of view, of the Merger Consideration and does not constitute a
recommendation to any such holder of Shares in the Merger as to what action such
holder should take with regard to the Merger. BZW expressed no opinion as to the
tax consequences of the Merger, and the BZW Opinion does not take into account
the particular tax status or position of any holder of the Shares. In furnishing
its opinion, BZW did not act as an agent or fiduciary of the Company's
stockholders or any other third party.
In connection with the preparation of its opinion rendered on September 25,
1997, and the BZW Opinion, among other things, BZW: (i) reviewed financial
information with respect to the Company furnished to BZW by the Company,
including certain internal financial analyses and forecasts prepared by the
management of the Company; (ii) reviewed publicly available information
regarding the Company; (iii) held discussions with the senior management of the
Company and Harcourt concerning the business, past and current business
operations, financial condition and future prospects of the Company; (iv)
reviewed the stock price and trading history of the Company; (v) reviewed the
valuations of publicly traded companies which BZW deemed comparable to the
Company and compared the financial terms of the Merger with such valuations;
(vi) compared the financial terms of the Merger with other transactions which
BZW deemed relevant;
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<PAGE> 18
(vii) prepared a discounted cash flow analysis with respect to the Company;
(viii) reviewed the Merger Agreement; and (ix) made such other studies and
inquiries, and reviewed such other data, as BZW deemed relevant.
As noted above, certain internal management projections were provided by
the Company to BZW for purposes of its analysis in arriving at BZW's fairness
opinions. As a matter of course, the Company does not publish or make generally
available internal projections or forecasts as to its future performance,
earnings or financial condition, and such information was not prepared with a
view to public disclosure or in accordance with applicable accounting
guidelines. These forecasts were based on numerous variables and assumptions
which are inherently uncertain, difficult to predict and may not be within the
control of the Company, including without limitation economic and competitive
conditions. Consequently, actual results may differ materially from those set
forth in such forecasts.
The Special Committee did not request BZW to solicit, and BZW has not
solicited, indications of third party interest regarding the sale of all or part
of the Company or its Shares, assets or businesses. Additionally, Harcourt has
advised BZW, through the Special Committee, that Harcourt, as the controlling
stockholder of the Company, would not support alternative transactions to the
Merger.
The following paragraphs summarize the material quantitative and
qualitative analyses performed by BZW in arriving at its opinion dated September
25, 1997 but do not purport to be a complete description of the analyses
performed by BZW. BZW reviewed information that was based on the financial
condition of the Company as of a date or dates shortly before the date of such
opinion rendered on September 5, 1997 and based on available stock price
information through the close of trading on the New York Stock Exchange and the
NASDAQ Stock Market on August 29, 1997. In addition, BZW's analysis was based
upon the then proposed Merger Consideration of $14.50 per Share (the "Proposed
Merger Consideration"), which was subsequently increased to $14.75 per Share.
Such analyses are set forth in materials prepared by BZW and furnished to the
Special Committee (the "BZW Report"). A copy of the BZW Report has been filed as
an exhibit to the Schedule 13E-3 filed with the Commission with respect to the
Merger, may be inspected and copied, and obtained by mail, from the Commission
as set forth in "AVAILABLE INFORMATION" and will be made available for
inspection and copying at the principal executive offices of the Company, c/o
Harcourt General, Inc., 27 Boylston Street, Chestnut Hill, Massachusetts 02167
during regular business hours by any interested stockholder of the Company or
his or her representative who has been so designated in writing. The following
summary is qualified in its entirety by reference to the BZW Report.
Stock Price and Trading Analysis. BZW reviewed the trading activity of the
Shares since August 23, 1996. With respect to the Company, BZW noted that, since
August 23, 1996, the daily closing sale prices of the Shares ranged from a high
of $14.50 on August 22, 1997 to a low of $10.50 on April 14, 1997 with an
average closing price of $12.11 for the period. BZW noted that the Proposed
Merger Consideration of $14.50 compared favorably to the Company's stock price
performance during the reference period.
Offer Premium Analysis. BZW analyzed the premium represented by the $14.50
per Share Harcourt Proposal as compared to the closing share price for the
Shares on April 16, 1997 (the date of Harcourt's announcement of its intention
to enter into a transaction with the Company) and to the average of the
historical closing share prices for the Shares for the trailing one, six and
twelve month periods prior to April 16, 1997. Such premiums were 38.1%, 32.8%,
29.5% and 29.5%, respectively. By comparison, BZW noted that the simple averages
of the offer premiums paid for all acquisition transactions with transaction
values between $100 million and $300 million from January 1995 through August
1997, as provided by Securities Data Corporation, were 24.4% and 39.3%,
respectively, to the target's market price one day and four weeks prior to the
date of announcement of such transactions. BZW also noted that the average offer
premiums paid for "going private" transactions from January 1995 through August
1997, as provided by Securities Data Corporation, were 18.8% and 25.3%,
respectively, to the target's market price one day and four weeks prior to the
date of the announcement of such transactions. BZW noted that the premium
represented by the Proposed Merger Consideration compared favorably to the
premium statistics for the reference transactions.
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Selected Comparable Company Analysis. BZW compared certain income
statement parameters of the Company with those pertaining to publicly held
companies deemed by BZW to be comparable to the Company for the most recent
trailing 12-month period. BZW also compared estimated earnings per share for the
12-month period ending December 31, 1997 ("Calendar 1997"). The companies
examined were Golden Books Family Entertainment, Inc., Houghton Mifflin Company,
John Wiley & Sons, Inc., The McGraw-Hill Companies, Inc., Plenum Publishing
Corporation, and Scholastic Corporation (collectively, the "Comparable
Companies"). Financial data compared, for the most recent trailing 12-month
period, included equity market capitalization, enterprise value (i.e., equity
market capitalization plus debt plus preferred shares plus minority interest
less cash and cash equivalents), revenues, operating income before depreciation
and amortization ("EBITDA"), operating income, net income, earnings per share,
EBITDA margin, operating margin, and net margin. Financial data for Calendar
1997 were based upon projected earnings per share as reported by third party
sources. Multiples compared for the most recent trailing 12-month period
included enterprise value to revenue, enterprise value to EBITDA, enterprise
value to operating income, and price per share to earnings per share. For
Calendar 1997, BZW compared multiples of price per share to projected earnings
per share.
Based on enterprise value to revenue multiples ranging from 2.3x to 0.9x
for the most recent trailing 12-month period obtained for the Comparable
Companies, and after adjusting for the Company's net debt, BZW determined a
range of reference values for the Shares of $13.76 to $4.84, with a median of
$11.63 per Share. Based on enterprise value to EBITDA multiples, for the most
recent trailing 12-month period, ranging from 10.1x to 4.7x for the Comparable
Companies, and after adjusting for the Company's net debt, BZW determined a
range of reference values for the Shares of $12.21 to $5.31, with a median of
$10.58 per Share. Based on enterprise value to operating income multiples, for
the most recent trailing 12-month period, ranging from 20.9x to 5.6x for the
Comparable Companies, and after adjusting for the Company's net debt, BZW
determined a range of reference values for the Shares of $19.93 to $4.93, with a
median of $14.44 per Share. Based on the Comparable Companies' price per share
to earnings per share multiples ranging from 30.2x to 13.5x for the most recent
trailing 12-month period, and the Comparable Companies' estimated price per
share to earnings per share multiples ranging from 22.8x to 21.6x for Calendar
1997, BZW determined a range of reference values for the Shares of $17.82 to
$7.97, with a median of $14.22 per Share, and a range of $14.59 to $13.82, with
a median of $13.95 per Share, respectively. BZW noted that the Proposed Merger
Consideration of $14.50 compared favorably to the median reference values
derived from this analysis.
Selected Comparable Transaction Analysis. BZW analyzed publicly available
information for selected pending or completed mergers and acquisitions involving
supplemental educational publishers. In examining these transactions, BZW
analyzed certain financial parameters of the acquired company relative to the
consideration offered. Financial parameters compared included consideration
offered plus net debt assumed ("total consideration") to the trailing 12-months'
revenue prior to the date of the transaction. The acquisitions reviewed included
Tribune Co./Wright Group (January 1994), Harlequin Enterprises Ltd. (Torstar
Corp.)/Frank Schaffer Publications (April 1994), Tribune Co./Everyday Learning
Corp. (August 1995), National Education Corp./Edunetics (December 1995), Tribune
Co./Educational Publishing (January 1996), Tribune Co./NTC Publishing Group
(February 1996), Harlequin Enterprises (Torstar Corp.)/Tom Snyder (April 1996),
IBM Corp./Edmark (November 1996), Harlequin Enterprises (Torstar Corp.)/Troll
Communications LLC (June 1997) and Cinar Films/Carson-Dellosa Publishing Corp.
(July 1997) (collectively, the "Education Transactions"). Based on total
consideration to the trailing 12-month revenue multiples obtained with respect
to the selected transactions, ranging from 3.0x to 1.1x, BZW determined a range
of reference values for the Shares of $18.04 to $6.25, with a median of $14.96.
BZW noted that the proposed Merger Consideration of $14.50 per share was
consistent with the reference value range derived from this analysis but below
the median.
Discounted Cash Flow Analysis. BZW performed certain discounted cash flow
analyses to estimate the present value of the stand-alone, unlevered (before
interest expense), after-tax cash flows included in the financial projections
prepared by the management of the Company. BZW first discounted the projected,
unlevered after-tax cash flows from July 1, 1997 through December 31, 2001,
using a range of discount rates from 13.0% to 17.0%. The range of discount rates
was based on the Company's weighted average cost of capital as estimated by BZW.
The Company's unlevered after-tax cash flows were calculated as the after-tax
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<PAGE> 20
operating earnings of the Company after adding back non-cash expenses and
deducting uses of cash not reflected in the income statement. BZW then added to
the present value of the cash flows an assumed terminal value of the Company at
December 31, 2001, discounted to present value using the same range of discount
rates. A broad range of assumed terminal values was computed by multiplying the
Company's projected tax effected earnings before interest in the fiscal year
ending December 31, 2001 by terminal multiples ranging from 15.0x to 20.0x, by
multiplying the Company's projected EBITDA in the fiscal year ended December 31,
2001 by terminal multiples ranging from 7.0x to 9.0x, and by multiplying the
Company's projected revenues for the fiscal year ended December 31, 2001 by
terminal multiples ranging from 1.50x to 2.00x. The range of terminal multiples
was selected by BZW based on its judgment and experience. Based on this
analysis, BZW obtained a range of reference values for the Shares, as of June
30, 1997, of $18.39 to $12.58 with a median of $15.29. BZW noted that the
proposed Merger Consideration of $14.50 was within, but at the lower end of, the
range of reference values derived from this analysis.
General. The preparation of fairness opinions involves various
determinations as to appropriate and relevant quantitative and qualitative
methods of financial analysis and the application of those methods to the
particular circumstances; therefore, such opinions are not readily susceptible
to summary description. In arriving at its opinion, BZW did not attribute any
particular weight to any analysis or factor considered by it, but rather made
qualitative judgments as to the significance and relevance of each analysis and
factor. Accordingly, BZW believes that its analyses must be considered as a
whole and that considering any portion of such analyses and current factors
could create a misleading or incomplete view of the process underlying its
opinion. In its analyses, BZW made numerous assumptions with respect to industry
performance, general business and other conditions and matters, many of which
are beyond the control of the Company. Any estimates contained in these analyses
are not necessarily indicative of actual values or predictive of future results
or values, which may be significantly more or less favorable than as set forth
therein. In addition, analyses relating to the value of businesses do not
purport to be appraisals or to reflect the prices at which businesses actually
may be sold. Accordingly, such analyses and estimates are inherently subject to
substantial uncertainty. BZW's opinion and financial analyses were only one of
many factors considered by the Special Committee in its evaluation of the Merger
and should not be viewed as determinative of the views of the Special Committee
or management of the Company with respect to the Merger Consideration or the
Merger.
In arriving at its opinion, BZW did not independently verify any of the
foregoing information and relied on all such information being complete and
accurate in all material respects. Furthermore, BZW did not obtain any
independent appraisal of the properties or assets of the Company. With respect
to the financial and operating forecasts (and the assumptions and bases
therefore), estimates and analyses provided to BZW by the Company, BZW assumed
that such projections, estimates and analyses were reasonably prepared in good
faith and represent the best currently available estimates and judgments of the
management of the Company as to the Company's future financial performance. BZW
noted, among other things, that its opinion is necessarily based upon market,
economic and other conditions existing as of the date of the opinion and
information available to BZW as of the date thereof.
While BZW selected the Comparable Companies based on the similarities in
markets served and businesses conducted, no company examined in the analysis of
selected publicly traded companies is identical to the Company. Similarly, no
transaction examined in the Education Transactions is identical to the Merger.
BZW was retained based on BZW's experience as a financial advisor in
connection with mergers and acquisitions and in securities valuations generally,
as well as BZW's investment banking relationship and familiarity with the
Company. BZW has provided investment banking and corporate banking services to
NEC, including acting as exclusive financial advisor to NEC with regard to the
acquisition of NEC by Harcourt in June 1997, and has received fees for those
services.
The Company and the Special Committee engaged BZW pursuant to the Advisory
Agreement. The Advisory Agreement provides that, for its services, BZW received
a retainer fee of $100,000 and upon the delivery of BZW's fairness opinions,
became entitled to receive an additional fee of $250,000. Such fees were not
dependent in any respect on the outcome of BZW's analyses or BZW's fairness
opinions. The Company
15
<PAGE> 21
has also agreed to reimburse BZW for its out-of-pocket expenses, including
attorney's fees, and to indemnify BZW against certain liabilities in connection
with this engagement.
CERTAIN FINANCIAL PROJECTIONS
In connection with the analyses described above under "-- Opinion of
Company Financial Advisor", BZW was provided in August of 1997 with certain
non-public financial projections for the Company, which projections were updated
in November of 1997, each of which had been prepared by the Company's management
(the "Projections"), the material portions of which are set forth below. The
updated November projections were significantly lower than the projections BZW
was provided in August of 1997 as a result of several factors. The decline in
the Company's third quarter results of operations for 1997 negatively impacted
projections for the fourth quarter of 1997 and for fiscal year 1998. The
Company's shift in emphasis, following the acquisition by Harcourt of its 82%
ownership interest in the Company, from technology based products to print based
products lead to a decline in sales in the second half of fiscal 1997. In
addition, transition issues arising out of the Harcourt acquisition resulted in
a turnover in the Company's sales staff, negatively impacting projections.
<TABLE>
<CAPTION>
NOVEMBER
AUGUST PROJECTIONS PROJECTIONS
------------------ ------------------
FISCAL YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1998 1997 1998
------ ------- ------ -------
(IN MILLIONS EXCEPT PER SHARE DATA)
-----------------------------------------
<S> <C> <C> <C> <C>
Total Revenues........................................ $ 92.0 $ 109.2 $ 86.5 $ 101.7
Total Earnings Before Interest and Taxes.............. 7.0 11.9 3.9 7.1
Total Net Income...................................... 3.7 7.2 1.8 4.3
Earnings Per Share.................................... 0.25 0.49 0.12 0.29
</TABLE>
BZW relied on these Projections in connection with the analyses and
opinions described above under "-- Opinion of Company Financial Advisor". The
Company does not, as a matter of course, publicly disclose projections as to
future revenues, earnings or other financial information. The Projections were
based upon a variety of assumptions, including those related to the achievement
of strategic goals, objectives and targets over the applicable periods. Such
assumptions involve judgments with respect to, among other things, future
economic, competitive and regulatory conditions, foreign currency exchange
rates, financial market conditions and future business decisions, all of which
are difficult or impossible to predict accurately and many of which are beyond
the control of the Company. The Projections were not prepared with a view to
public disclosure, use in this Information Statement or compliance with
published guidelines of the Commission, nor were they prepared in accordance
with the guidelines established by the American Institute of Certified Public
Accountants for preparation and presentation of financial projections. In light
of the uncertainties inherent in any projected data, stockholders are cautioned
not to place undue reliance on the Projections.
ACCOUNTING TREATMENT
The merger of Merger Sub with and into the Company will be accounted for as
a reorganization of entities under common control. Accordingly, the combined
assets and liabilities will be accounted for on a historical cost basis. The
exchange of Shares for cash in the Merger will eliminate all Shares which are
not properly withheld for purposes of judicial appraisal, and will reduce
stockholders' equity.
INTERESTS OF CERTAIN PERSONS IN THE MERGER; CONFLICTS OF INTEREST
Special Committee. Four of the eight members of the Board are officers of
Harcourt. Harcourt believes that all four of such directors would have a
conflict of interest with respect to the Merger and the Merger Agreement.
Accordingly, on June 23, 1997, the Board appointed the Special Committee. See
"SPECIAL FACTORS -- Background of the Merger." The members of the Special
Committee are Leonard W. Jaffe, N. Colin Lind and Michael R. Klein. The Company
will pay the Chairperson of the Special Committee, Mr. Klein, $1,500, and each
member of the Special Committee $1,000, for each day on which the Chairperson or
such member devotes more than one hour of time to the business of the Special
Committee, retroactive to
16
<PAGE> 22
May 30, 1997, for service on the Special Committee. Pursuant to the terms of the
Harcourt Agreement, the members of the Special Committee are entitled to
indemnification by the Company and advancement of expenses to the maximum extent
permitted by applicable Delaware law and, absent a final non-appealable judicial
determination that indemnification is not proper, such members shall be
conclusively deemed to have met the applicable standard for such
indemnification. In the event such indemnification by the Company is held not to
be appropriate, Harcourt has agreed under the Harcourt Agreement to indemnify
each such member in certain circumstances. In addition, members of the Special
Committee will be entitled to certain indemnity rights under the Merger
Agreement and the Company's by-laws. See "THE MERGER -- Additional Covenants."
The Special Committee retained the law firm of Morris James as the
Committee's legal counsel. The Company will pay the fees and out-of-pocket
expenses of that firm. The Special Committee also retained the investment
banking firm of BZW as its financial advisor. The Company will pay BZW $350,000
for its services in that capacity, and will reimburse the firm for certain
out-of-pocket expenses. The Company, in accordance with customary practice, has
agreed to indemnify BZW against certain losses, claims, damages and liabilities,
including liabilities under the federal securities laws, to which it may become
subject in connection with these services.
CERTAIN EFFECTS OF THE MERGER; OPERATIONS OF THE COMPANY AFTER THE MERGER
When the proposed Merger is consummated, all Shares will be cashed out in
the Merger and the holders of Shares will have no continuing equity interest in
the Company following the Merger. Each holder of a Share will have the right to
receive the Merger Consideration for each such Share held. Each holder of
outstanding options will receive an amount in cash equal to the product of (a)
the number of Shares subject to such option and (b) the excess, if any, of
$14.75 over the exercise price per Share under such option.
The Company will, as a result of the Merger, become a wholly-owned
subsidiary of Harcourt and NEC. Following the Merger, it is expected that the
Company will cease to, and Harcourt and NEC will not be required to, file any
financial or related business information with the Commission with respect to
the Company. Accordingly, less information concerning the Company will be
required to be made publicly available than is presently the case.
Immediately after the Merger, all of the then outstanding Shares would be
beneficially owned by Harcourt, and Harcourt's, NEC's and Merger Sub's interest
in the Company's net book value and earnings, will rise to 100%.
The directors of Merger Sub immediately prior to the Effective Time, who
will be designees of Harcourt and will not include any members of the Special
Committee or other directors who could be considered "independent" directors,
will be the directors of the Company from and after the Effective Time (until
their successors are duly elected or appointed and qualified).
Except as otherwise described in this Information Statement, Harcourt
currently expects that the Company will initially be operated after the Merger
in a manner similar to that of its current operations. Harcourt currently
expects that upon consummation of the Merger, the Board of Directors of the
Company will be reduced to three persons and the persons serving on the Board,
other than the Disinterested Directors and Mr. Cook, and as officers of the
Company will be the same as those presently serving in such capacities.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary is a general discussion of certain of the United
States federal income tax consequences of the Merger to the holders of Shares.
This summary is based upon laws, regulations, rulings and decisions now in
effect, all of which are subject to change, possibly retroactively. No ruling as
to any matter discussed in this summary has been requested from the U.S.
Internal Revenue Service (the "IRS"), and no such ruling is expected to be
obtained.
EACH STOCKHOLDER IS URGED TO CONSULT AND RELY ON SUCH STOCKHOLDER'S OWN TAX
ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO THE STOCKHOLDER OF THE MERGER.
17
<PAGE> 23
Treatment of Shares in the Merger. The exchange of Shares for the Merger
Consideration in the Merger will be a taxable transaction to holders of Shares.
A holder of Shares will recognize gain or loss under federal income tax laws in
an amount by which the proceeds received in exchange for such Shares exceed or
are less than the holder's tax basis in the Shares. If the Shares are a capital
asset in the hands of the holder, such gain or loss will be capital. Under
recently enacted legislation, capital gains of individuals derived in respect of
capital assets held for at least one year are eligible for reduced rates of
taxation depending upon the holding period of such capital assets. Prospective
investors should consult their own tax advisors with respect to the tax
consequences of the new legislation.
Backup Withholding. Under the backup withholding provisions of federal
income tax law, unless the conditions described in the next sentence are
satisfied and except in the case of certain foreign persons, Harcourt or a
paying agent appointed by Harcourt (the "Paying Agent") will be required to
withhold 31% of the cash paid in the Merger to holders of Shares. This
withholding generally applies only if the holder (1) fails to furnish his or her
social security or other taxpayer identification number ("TIN"), (2) furnishes
an incorrect TIN, (3) is notified by the IRS that he or she has failed properly
to report payments of interest and dividends and the IRS has notified the Paying
Agent that he or she is subject to backup withholding, or (4) fails to provide a
certified statement, signed under penalty of perjury, that the TIN provided is
the correct number and that the stockholder is not subject to backup
withholding. Any amount withheld from a payment to a holder under the backup
withholding rules is allowable as a credit against such holder's federal income
tax liability, provided that the required information is furnished to the IRS.
Certain holders are not subject to backup withholding. Holders should consult
their tax advisors as to their qualification for exemption from backup
withholding and the procedure for obtaining such an exception.
To prevent backup withholding, each stockholder who does not otherwise
establish an exemption from such withholding must notify the Paying Agent of
such stockholder's correct TIN (or certify that such taxpayer is awaiting a TIN)
and provide certain other information by completing a Substitute Form W-9 (which
will be included in the letter of transmittal forwarded in connection with the
Merger).
THE SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS A GENERAL
DISCUSSION OF CERTAIN OF THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF
THE MERGER TO THE HOLDERS OF SHARES. ALL STOCKHOLDERS SHOULD CONSULT THEIR OWN
TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE TRANSACTIONS TO THEM,
INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS AND
POSSIBLE CHANGES IN TAX LAW.
18
<PAGE> 24
THE MERGER
THE DESCRIPTION OF THE MERGER AGREEMENT SET FORTH BELOW DOES NOT PURPORT TO
BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER
AGREEMENT, A COPY OF WHICH IS ATTACHED AS APPENDIX A TO THIS INFORMATION
STATEMENT AND INCORPORATED BY REFERENCE HEREIN.
THE MERGER
The Merger. Subject to the terms and conditions of the Merger Agreement
and the DGCL, Merger Sub will merge with and into the Company at the Effective
Time (as defined below). The separate corporate existence of Merger Sub will
then cease, and the Company will be the surviving corporation in the Merger (the
"Surviving Corporation").
Certificate of Incorporation and By-Laws. The Merger Agreement provides
that, at the Effective Time, the text of the Certificate of Incorporation of the
Company will be amended, restated and integrated (except with respect to the
name, registered agent and the name and address of the incorporator) to read in
its entirety to be identical to the Certificate of Incorporation of Merger Sub
as in effect immediately prior to the Effective Time. The By-Laws of Merger Sub
in effect at the Effective Time will become the By-Laws of the Surviving
Corporation.
Directors and Officers. At the Effective Time, the number of persons
constituting the whole Board of Directors of the Surviving Corporation shall be
three (3), and each person serving immediately prior to the Effective Time as a
director of the Company shall be (effective immediately prior to the Effective
Time) removed from office, and the directors of Merger Sub at the Effective Time
will become the directors of the Surviving Corporation until their successors
have been duly elected or appointed and qualified or until their earlier death,
resignation, removal or disqualification. The officers of the Company at the
Effective Time will be the officers of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation, removal or disqualification. See "SPECIAL FACTORS --
Certain Effects of the Merger; Operations of the Company After the Merger."
Conversion of Shares in the Merger. At the Effective Time, (1) each issued
and outstanding Share (other than any Shares held of record by Harcourt, NEC,
Merger Sub or any other direct or indirect wholly-owned subsidiary of Harcourt
or of the Company, which Shares will be automatically cancelled and retired and
will cease to exist with no payment being made with respect thereto, and other
than any Shares as to which stockholders have a right to demand, and who
properly demand, an appraisal of such Shares in accordance with Section 262 of
the General Corporation Law of the State of Delaware (the "DGCL") ("Dissenting
Shares")) will be converted into the right to receive $14.75 in cash, the Merger
Consideration, and (2) each share of capital stock of Merger Sub issued and
outstanding immediately prior to the Effective Time will be converted into one
fully paid and nonassessable share of Common Stock, par value $0.01 per share,
of the Surviving Corporation in the Merger. See "RIGHTS OF DISSENTING
STOCKHOLDERS."
Treatment of Outstanding Options. Prior to the Effective Time, the Board
shall take all actions necessary to provide that immediately prior to the
Effective Time, each outstanding option then outstanding, whether or not then
exercisable, shall be cancelled, and the holder thereof shall be entitled to
receive at the Effective Time or as soon as practicable thereafter from the
Surviving Corporation in consideration for such cancellation an amount in cash
equal to the product of (a) the number of Shares subject to such outstanding
option and (b) the excess, if any, of $14.75 over the exercise price per Share
subject to such outstanding option.
EFFECTIVE TIME OF THE MERGER
As soon as practicable after all conditions to the Merger have been
satisfied or, if permissible, duly waived, the Merger will be consummated and
become effective at the time at which the Merger Agreement or a certificate of
merger, in lieu thereof (the "Certificate of Merger") to be filed pursuant to
the DGCL is filed with, and is accepted for filing by, the Secretary of State of
the State of Delaware, or such later date and time
19
<PAGE> 25
as may be specified in the Certificate of Merger (the "Effective Time"). See
"THE MERGER -- Conditions; Waivers."
PAYMENT FOR SHARES
At or prior to the Effective Time, Harcourt shall designate a bank or trust
company to act as agent for the holders of Shares (other than Shares held in the
treasury of the Company and Shares held of record by Harcourt, NEC, Merger Sub
or any other direct or indirect wholly-owned subsidiary of Harcourt or of the
Company) in connection with the Merger (the "Exchange Agent"), to receive the
Merger Consideration to which holders of such Shares may become entitled, some
or all of which funds may be invested by the Exchange Agent in certain permitted
investments. As soon as practicable after the Effective Time, the Exchange Agent
will mail to each record holder of a certificate or certificates which
immediately prior to the Effective Time represented issued and outstanding
Shares other than Dissenting Shares (the "Certificates") (other than Harcourt or
any direct or indirect wholly-owned subsidiary of Harcourt or of the Company) a
form of letter of transmittal which will specify that delivery will be effected,
and risk of loss and title to the Certificates will pass, only upon proper
delivery of the Certificates to the Exchange Agent, together with instructions
for use in surrendering such Certificates and receiving the Merger Consideration
therefor. Upon the surrender of each such Certificate, together with such letter
of transmittal duly executed and any other required documents, the Exchange
Agent will pay, by check or by draft, to or upon the order of the holder of
record of such Certificate, in consideration therefor, the Merger Consideration
multiplied by the number of Shares (other than Dissenting Shares) formerly
represented by such Certificate, and such Certificate will thereupon be
cancelled. Until so surrendered, each such Certificate (other than Certificates
representing Dissenting Shares and Certificates representing Shares owned by
Harcourt or any direct or indirect wholly-owned subsidiary of Harcourt) will
represent solely the right to receive the aggregate Merger Consideration
relating thereto. No interest will be paid or accrued on the Merger
Consideration.
The Merger Consideration will be net to each holder of Certificates in
cash, subject to reduction only for any applicable federal back-up withholding
or stock transfer taxes payable by such holder. After the Effective Time, there
will be no transfers on the stock transfer books of the Surviving Corporation of
any Shares which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Company or the
Exchange Agent, they will be surrendered and cancelled in return for the payment
of the aggregate Merger Consideration relating thereto, subject to applicable
law in the case of Dissenting Shares. See "RIGHTS OF DISSENTING STOCKHOLDERS."
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of the
parties thereto. The Merger Agreement includes representations and warranties by
the Company as to (1) the corporate organization, standing and power of the
Company and its subsidiaries, (2) approval by the Board, (3) capitalization, (4)
brokers and financial advisors employed by the Company, (5) the satisfaction of
certain conditions specified in the Harcourt Agreement, (6) the fact that the
Merger Agreement and the transactions contemplated thereby do not constitute a
violation, breach or default under any material corporate obligation or contract
of the Company and that, except as expressly disclosed, no material filings,
consents or approvals are necessary to approve the Merger Agreement or the
transactions contemplated thereby, other than the approval of the Merger
Agreement by the Company's stockholders, (7) certain actions taken by the Board
with respect to Section 203 of the DGCL, (8) receipt by the Board of the opinion
of BZW that the Merger Consideration is fair to such stockholders from a
financial point of view and (9) the conclusion of the Board that the Merger is
fair to, and in the best interest of, the Company and the holders of record of
Shares (other than Shares held of record by Harcourt or the Company or any
direct or indirect wholly-owned subsidiary of Harcourt or of the Company) and
approving and adopting the Merger Agreement.
The Merger Agreement also includes representations and warranties by
Harcourt, NEC and Merger Sub as to (1) the corporate organization, standing and
power of each of Harcourt, NEC and Merger Sub, (2) approval by the respective
Boards of Directors of Harcourt, NEC and Merger Sub, (3) the prior activities of
Merger Sub, and (4) the fact that the Merger Agreement and the transactions
contemplated thereby do not
20
<PAGE> 26
constitute a violation, breach or default under any material corporate
obligation or contract of Harcourt, NEC or Merger Sub and that, except as
expressly disclosed, no material filings, consents or approvals are necessary to
authorize the Merger Agreement or the transactions contemplated thereby.
BUSINESS OF THE COMPANY PENDING THE MERGER
Pursuant to the Merger Agreement, the Company has agreed that, except as
expressly contemplated by the Merger Agreement or as consented to by Harcourt,
during the period from the date of the Merger Agreement to the Effective Time,
the Company and its subsidiaries will conduct their operations only in the
ordinary and usual course of business and consistent with past practice and will
use their reasonable best efforts in the ordinary course of business and
consistent with past practice to preserve intact the Company's business
organization, assets, prospects and advantageous business relationships, to keep
available the services of its officers and employees and to maintain
satisfactory relationships with customers, suppliers, contractors, distributors,
licensors, licensees and others having business relationships with it.
ADDITIONAL COVENANTS
The Merger Agreement also provides the following additional covenants: (1)
the Company has agreed that during the time from the signing of the Merger
Agreement to the Effective Time, subject to customary confidentiality agreements
if requested, it will provide Harcourt, NEC, Merger Sub and their authorized
representatives with reasonable access to corporate information of the Company
and its Subsidiaries, (2) the Company, Harcourt, NEC and Merger Sub have agreed
to use their reasonable best efforts to take or cause to be taken all actions
and to do, or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by the
Merger Agreement, including the filing of the Schedule 13E-3 with the Commission
and the dissemination of certain information to the Company's stockholders, (3)
Harcourt, NEC and Merger Sub have agreed to cause their affiliates who are
directors, officers, stockholders and/or employees of the Company to use their
best efforts (to the extent reasonably within their power or ability) to honor
the provisions of the Merger Agreement, (4) Harcourt, NEC, SVAC and the Company
have agreed to consult with each other before making any public announcements
relating to the Merger, (5) Harcourt has advised the Company that it is its
desire to effect stockholder approval of the Merger by written consent in lieu
of a stockholder meeting and (6) the Company, and after the Effective Time, the
Surviving Corporation, have agreed to indemnify and hold harmless its officers
and directors, including members of the Special Committee, against any claim or
proceeding arising out of any actions taken prior to the Effective Time and to
maintain for a period of five years after the Effective Time directors' and
officers' liability insurance covering those persons covered as of the date of
the Merger Agreement on terms and in an amount comparable to such policies held
by the Company as of the date of the Merger Agreement.
CONDITIONS; WAIVERS
Conditions to Each Party's Obligations to Effect the Merger. The
respective obligations of each party to effect the Merger are subject to the
satisfaction of the following conditions which may not be waived: (1) the Merger
Agreement and the Merger will have been duly approved by the requisite vote
(which may be effected by written consent in lieu of a meeting) of the holders
of Shares in accordance with applicable law and the Certificate of Incorporation
of the Company, (2) the Merger Agreement and the Merger will have been duly
approved by the requisite vote (which may be effected by written consent in lieu
of a meeting) of the stockholders of Merger Sub in accordance with applicable
law and the certificate of incorporation of Merger Sub, (3) there shall not be
outstanding any order, statute, rule, regulation, executive order, stay, decree,
judgment, or injunction which restrains or prohibits the consummation of the
Merger and (4) the terms and conditions of the Harcourt Agreement required to be
satisfied in order to consummate the Merger shall have been satisfied by each of
the parties thereto.
Conditions to the Obligations of Harcourt, NEC and Merger Sub. The
respective obligations of Harcourt, NEC and Merger Sub to effect the Merger are
subject to the satisfaction or waiver of the following additional conditions:
(1) each of the representations and warranties of the Company contained in the
Merger Agreement that are qualified as to materiality will be true and correct,
and the representations and warranties
21
<PAGE> 27
that are not so qualified will have been true and correct in all material
respects when made and at and as of the Effective Time, and (2) at or prior to
the Effective Time, the Company will have performed or complied in all material
respects with all agreements and conditions required of it pursuant to the
Merger Agreement.
Conditions to the Obligations of the Company. The obligations of the
Company to effect the Merger are subject to the satisfaction or waiver of the
following additional conditions: (1) each of the representations and warranties
of Harcourt, NEC and Merger Sub contained in the Merger Agreement that are
qualified as to materiality will be true and correct, and the representations
and warranties that are not so qualified will have been true and correct in all
material respects when made and at and as of the Effective Time, (2) at or prior
to the Effective Time, each of Harcourt, NEC and Merger Sub will have performed
or complied in all material respects with all agreements and conditions required
to be performed and complied with by them pursuant to the Merger Agreement, (3)
the Special Committee will not have modified or rescinded its recommendation
with respect to the Merger as a result of the withdrawal or material
qualification, on or prior to the Effective Time, of the fairness opinion
delivered by BZW to the Special Committee on the date of the Merger Agreement,
and (4) no event will have occurred nor circumstance exist which creates a
reasonable doubt on the ability of Harcourt to pay monies to the Exchange Agent
as required under the terms of the Merger Agreement.
TERMINATION; AMENDMENT
The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, before or after the approval by the
stockholders of the Company, by the mutual consent of the Boards of Directors of
Harcourt and the Company.
The Merger Agreement may also be terminated by either Harcourt or the
Company (1) if the Effective Time shall not have occurred by January 31, 1998,
or (2) if a court of competent jurisdiction or governmental, regulatory or
administrative agency or commission shall have issued an order, decree or ruling
or taken any other action (which order, decree or ruling Harcourt, NEC, Merger
Sub and the Company shall use their reasonable best efforts to lift), in each
case permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by the Merger Agreement which order is not subject to
appeal.
Finally, the Merger Agreement may be terminated by Harcourt or the Company,
if the Special Committee shall have modified or rescinded its recommendation
with respect to the Merger as a result of the withdrawal or material
qualification of the fairness opinion delivered by BZW to the Special Committee
on September 25, 1997.
In the event of termination of the Merger Agreement pursuant to its terms,
written notice thereof shall be delivered to the non-terminating party and the
agreement shall terminate and the Merger be abandoned without further action by
any of the parties thereto. No party shall then have any further liability or
obligation under the Merger Agreement except that the provisions regarding
amendment and modification, fees and expenses, and indemnification will survive
such termination.
The Merger Agreement may, subject to applicable law, be amended, modified
or supplemented at any time prior to the Effective Time by written consent of
all of the parties thereto, provided, that any amendment, modification or
supplement that is adverse to the holders of Shares (other than Shares held by
Harcourt or any direct or indirect wholly-owned subsidiary of Harcourt), or any
waiver of any obligation, covenant, agreement or condition, or the giving of any
consent by the Company or its Board, shall require the consent of the Special
Committee, which shall not be unreasonably withheld.
FEES AND EXPENSES
The Merger Agreement provides that all costs and expenses will be borne by
the party incurring them.
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<PAGE> 28
FINANCING OF THE MERGER
It is estimated that the total amount of funds necessary for payment of the
Merger Consideration and expenses related to the Merger will be approximately
$42.5 million. Those funds are expected to be obtained by Harcourt from its cash
resources as well as from the proceeds of borrowings from banks or other lending
institutions.
Estimated costs and fees in connection with the Merger, assuming completion
of the Merger, are as follows:
<TABLE>
<S> <C>
Legal Fees........................................................ $250,000
Investment Banking Fees........................................... 350,000
SEC Filing Fees................................................... 6,896
Printing Costs.................................................... 6,000
Miscellaneous..................................................... 37,104
--------
Total................................................... $650,000
</TABLE>
RIGHTS OF DISSENTING STOCKHOLDERS
Under Section 262 of the DGCL ("Section 262"), any stockholder who does not
consent to the Merger in writing and who delivers a demand for appraisal to the
Company within 20 days of the date on which the Company mails to such
stockholder notice of the approval of the Merger and the effective date thereof,
and who has otherwise complied with the applicable requirements of Section 262,
has the right to an appraisal of, and to receive cash payment for, the "fair
value" of such stockholder's Shares at the Effective Time (excluding any element
of value arising from the accomplishment or expectation of the Merger). THE
COMPANY INTENDS TO MAIL NOTICE OF THE MERGER TO STOCKHOLDERS AS SOON AS
PRACTICABLE FOLLOWING THE EFFECTIVE TIME. IN ORDER TO EXERCISE THE RIGHT TO SEEK
APPRAISAL, A STOCKHOLDER MUST COMPLY WITH EACH OF THE PROCEDURAL REQUIREMENTS OF
SECTION 262, A SUMMARY OF WHICH AND THE TEXT OF WHICH ARE SET FORTH IN APPENDIX
C HERETO. STOCKHOLDERS SHOULD READ SECTION 262 IN ITS ENTIRETY.
The Merger Agreement provides that, notwithstanding anything in the Merger
Agreement to the contrary, Dissenting Shares will not be converted into the
right to receive the Merger Consideration, as provided in the applicable
provisions of the Merger Agreement, unless and until the holder thereof fails to
perfect or withdraws or otherwise loses his right to appraisal and payment under
the DGCL. If, after the Effective Time, any stockholder fails to perfect or
withdraws or loses his or her right to appraisal, such Dissenting Shares will
thereupon be treated as if they had been converted as of the Effective Time into
the right to receive the Merger Consideration to which such holder is entitled,
without interest thereon. The Company has agreed in the Merger Agreement to give
Harcourt prompt notice of any demands received by the Company for appraisal of
Shares and Harcourt will have the right to participate in all negotiations and
proceedings with respect to such demands. The Company will not, except with the
prior written consent of Harcourt, make any payment with respect to, or settle
or offer to settle, any such demands.
The Delaware courts have found that in cases involving an alleged breach of
fiduciary duties such as the duties of due care or loyalty in connection with a
merger involving a controlling stockholder, stockholders opposed to the merger
may pursue an action for relief, in addition to or in lieu of that available
pursuant to Section 262, including "rescissory damages" designed to compensate
for the value of the shares cashed-out in the merger calculated as of the date
of judgment, or another date before judgment, rather than as of the date of the
merger.
In connection with the appraisal rights available to stockholders pursuant
to Section 262, the Fair Value Agreement provides that Harcourt would not
contest an assertion by stockholders that perfected their appraisal rights under
Section 262 in an appraisal proceeding that the "fair value" of the Company
should not be less than it was as of May 30, 1997. For additional information
concerning the Fair Value Agreement, see "Contracts, Arrangements or
Understandings with Respect to Securities of the Company" and in particular,
"-- The Fair Value Agreement".
23
<PAGE> 29
CERTAIN INFORMATION REGARDING THE COMPANY,
HARCOURT, NEC AND MERGER SUB
THE COMPANY
The Company is a Delaware corporation. Its principal business address is
4515 Seton Center Parkway, Suite 300, Austin, Texas 78759. The principal
business of the Company is supplemental publishing.
SECURITIES OF THE COMPANY
The securities which form the subject matter of the Schedule 13E-3 are the
Shares. As of September 25, 1997, there were issued and outstanding 14,509,666
Shares (not including 272,000 Shares held in the treasury of the Company), and
1,225,634 Shares reserved for issuance in connection with the Company's stock
option plans (of which options to purchase 682,875 Shares are outstanding). As
of such date, there were 57 holders of record of Shares. Each Share is entitled
to one vote on all matters subject to a vote by the holders of Shares.
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 NASDAQ NM under the symbol STEK. The following table sets forth, for the
quarters indicated, the high and low market prices per Share and the average
market price per Share, as reported by published financial sources.
<TABLE>
<CAPTION>
HIGH LOW AVERAGE
----- ---- -------
<S> <C> <C> <C>
Year Ended December 31, 1995:
First Quarter............................................. $3 3/4 $ 5 5.78
Second Quarter............................................ 8 3/4 6 1/4 7.40
Third Quarter............................................. 8 3/4 6 1/2 7.46
Fourth Quarter............................................ 8 1/4 6 3/4 7.13
Year Ended December 31, 1996:
First Quarter............................................. 10 7 3/8 8.58
Second Quarter............................................ 14 3/4 9 1/2 11.56
Third Quarter............................................. 12 3/4 9 3/4 11.03
Fourth Quarter............................................ 12 10 1/2 11.20
Year Ended December 31, 1997:
First Quarter............................................. 12 1/8 10 7/8 11.36
Second Quarter............................................ 14 1/4 10 1/2 13.03
Third Quarter............................................. 15 1/8 13 7/8 14.22
</TABLE>
According to the Company's 1996 Annual Report on Form 10-K, the Company
historically has paid dividends to NEC from time to time with respect to its
capital stock, although the Company states therein that it does not intend to
pay any cash dividends with respect to the Shares in the foreseeable future. The
Company has not paid any dividends for the last two years.
24
<PAGE> 30
PURCHASES OF SHARES BY THE COMPANY
The following table indicates, with respect to any purchases of Shares made
by the Company or any affiliate of the Company since January 1, 1995, the
purchaser and the amount of Shares purchased, the date of the transaction and
the prices paid for such Shares.
<TABLE>
<CAPTION>
AMOUNT OF
PURCHASER DATE OF TRANSACTION SHARES PURCHASED PRICES PAID
- ----------------------- ------------------- ---------------- -----------------------------------------
<S> <C> <C> <C>
Company................ March 3, 1995 25,000 $6.00(1)
Leonard Jaffe.......... October 11, 1995 1,090 $0 (valued at $7.3375 as of issuance)(2)
Manuel Justiz.......... October 11, 1995 1,635 $0 (valued at $7.3375 as of issuance)(2)
Michael Klein.......... October 11, 1995 1,090 $0 (valued at $7.3375 as of issuance)(2)
Colin Lind............. October 11, 1995 1,090 $0 (valued at $7.3375 as of issuance)(2)
Leonard Jaffe.......... May 17, 1996 658 $0 (valued at $12.15 as of issuance)(2)
Manuel Justiz.......... May 17, 1996 988 $0 (valued at $12.15 as of issuance)(2)
Michael Klein.......... May 17, 1996 658 $0 (valued at $12.15 as of issuance)(2)
Colin Lind............. May 17, 1996 658 $0 (valued at $12.15 as of issuance)(2)
Michael Klein.......... October 31, 1996 1,500 $5.525(3)
Richard Blumenthal..... February 24, 1997 15,000 $5.525(4)
Richard Blumenthal..... February 24, 1997 2,500 $7.6875(4)
Company................ February 24, 1997 17,500 $11.125(5)
</TABLE>
- ---------------
(1) Open market repurchase through a licensed broker.
(2) 1995 Director Fee Shares (annual retainer).
(3) Exercise of stock option; stock acquired on exercise sold same-day in the
open market for $11.25 per share.
(4) Exercise of stock option; stock acquired on exercise sold same-day to the
Company for $11.125 per share.
(5) Repurchase of Shares from Richard Blumenthal.
HARCOURT
Harcourt is a Delaware corporation. Its principal business address is 27
Boylston Street, Chestnut Hill, Massachusetts 02167. The principal businesses of
Harcourt are publishing and specialty retailing.
The name, citizenship, business address, principal occupation or
employment, and five-year employment history of each of the directors and
executive officers of Harcourt, NEC and Merger Sub and certain other information
are set forth in Exhibit D hereto.
Harcourt currently beneficially owns 11,900,000 Shares (approximately 82%)
of the 14,509,666 Shares represented by the Company as outstanding at September
22, 1997, all of which Shares were acquired by Harcourt as a result of the
consummation of the NEC Offer and the NEC Merger. See "SPECIAL
FACTORS -- Background of the Merger."
Except as set forth elsewhere in this Information Statement: (i) neither
Harcourt, NEC nor Merger Sub nor, to the knowledge of Harcourt, any of the
persons listed in Exhibit D hereto or any associate or majority-owned subsidiary
of Harcourt, beneficially owns or has a right to acquire any Shares or any other
equity securities of the Company; (ii) neither Harcourt, NEC nor Merger Sub nor,
to the knowledge of Harcourt, 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, NEC nor Merger Sub nor,
to the knowledge of Harcourt, NEC, any of the persons listed in Exhibit D
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
25
<PAGE> 31
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, NEC or Merger Sub or any of
their respective subsidiaries or, to the knowledge of Harcourt, any of the
persons listed in Exhibit D 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, NEC or Merger Sub, or any of their respective subsidiaries or,
to the knowledge of Harcourt, any of the persons listed in Exhibit D 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, of securities, an
election of directors or a sale or other transfer of a material amount of
assets.
NEC
NEC is a Delaware corporation and a wholly-owned subsidiary of Harcourt.
Its principal business address is c/o Harcourt General, Inc., 27 Boylston
Street, Chestnut Hill, Massachusetts 02167. NEC is a global provider of
interactive multimedia products and services for the education and training
marketplace. NEC's business is conducted primarily through three operating
entities: ICS Learning Systems, Inc., the Company and National Education
Training Group, Inc.
MERGER SUB
Merger Sub, a Delaware corporation and a direct wholly-owned subsidiary of
NEC, was formed for the purpose of effecting the Merger and has not conducted
any other business. Its principal business address is c/o Harcourt General,
Inc., 27 Boylston Street, Chestnut Hill, Massachusetts 02167.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY, HARCOURT, NEC AND MERGER SUB
Certain information concerning the directors and executive officers of the
Company, Harcourt, NEC and Merger Sub is set forth in Appendix D to this
Information Statement.
RECENT TRANSACTIONS IN SECURITIES OF THE COMPANY
During the sixty days prior to this filing, there were no transfers of
Shares effected by (i) directors of the Company, (ii) executive officers of the
Company or (iii) persons who beneficially own more than five percent of the
Shares.
26
<PAGE> 32
SELECTED FINANCIAL DATA
The following table presents historical income statement data and balance
sheet data of the Company for the past two fiscal years and the latest interim
periods and the corresponding interim periods of the preceding year. This data
has been derived from the consolidated financial statements of the Company,
which have been audited by Price Waterhouse LLP, independent public accountants.
The information set forth below should be read in conjunction with the
consolidated financial statements of the Company and the related notes thereto
contained in the Company's Form 10-K for the appropriate year, as filed with the
Commission.
<TABLE>
<CAPTION>
YEAR ENDED
QUARTER ENDED QUARTER ENDED QUARTER ENDED QUARTER ENDED QUARTER ENDED QUARTER ENDED DECEMBER 31,
SEPTEMBER 30, SEPTEMBER 30, JUNE 30, JUNE 30, MARCH 31, MARCH 31, -----------------
1997 1996 1997 1996 1997 1996 1996 1995
------------- ------------- ------------- ------------- ------------- ------------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING
RESULTS:
Net
revenues... $26,888 $32,419 $23,014 $18,296 $15,818 $15,461 $85,505 $58,226
Gross
profit.... 19,019 23,634 16,157 12,592 11,041 10,319 59,630 43,512
Percentage
of net
sales..... 71% 73% 70% 69% 70% 67% 70% 75%
Operating
income
(loss).... 1,848 7,192 3,355 (2,334) 1,337 1,035 7,616 9,499
Net income
(loss).... 962 4,346 1,866 (2,976) 690 797 3,170 6,847
Ratio of
earnings
to fixed
charges... 4.0 18.0 7.3 n/a 3.7 8.3 7.2 19.9
PER COMMON
SHARE DATA:
Net income
(loss).... $ 0.07 $ 0.30 $ 0.13 $ (0.21) $ 0.05 $ 0.06 $ 0.22 $ 0.48
Book
value..... 4.40 4.08 4.36 3.78 4.21 3.99 4.16 3.93
BALANCE SHEET
DATA
Total
current
assets.... $67,991 $58,343 $64,064 $53,436 $57,383 $54,306 $53,963 $50,774
Long-term
debt, less
current
portion... 17,782 10,204 17,907 12,063 9,742 943 6,731 2,904
Total
stockholders'
equity.... 63,880 58,515 63,144 54,133 60,986 57,117 59,684 56,294
Net working
capital... 50,672 40,265 48,495 37,942 40,100 39,629 35,510 41,073
Current
ratio..... 3.9 3.2 4.1 3.5 3.3 3.7 2.9 5.2
</TABLE>
27
<PAGE> 33
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT OF THE COMPANY
PRINCIPAL STOCKHOLDERS
The following table contains information, as of September 15, 1997, with
regard to the beneficial ownership of Shares by each person who beneficially
owns more than five percent and each of the directors and executive officers of
the Company, Harcourt or NEC. All of such persons are citizens of the United
States of America. Except as otherwise noted, the business address of all
persons listed is 27 Boylston Street, Chestnut Hill, Massachusetts 02167.
<TABLE>
<CAPTION>
AMOUNT
AND NATURE
NAME OF INDIVIDUAL OR ENTITY OF BENEFICIAL PERCENT
OR NUMBER OF PERSONS IN GROUP POSITION WITH THE COMPANY OWNERSHIP(1) OF CLASS
- ------------------------------------------------ ------------------------- -------------- --------
<S> <C> <C> <C>
National Education Corporation.................. N/A 11,900,000(2) 82%
Westport Asset Management, Inc.................. N/A 1,438,200(3) 9.9%
Leonard W. Jaffe(4)............................. Director 6,748 *
Larlen
3100 West Warner, Suite 7
Santa Ana, CA 92704
Manuel J. Justiz................................ Director 5,488 *
4806 Precipice Cove
Austin, TX 78731
Michael R. Klein(4)............................. Director 3,658 *
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037
N. Colin Lind(4)................................ Director 6,248 *
Richard C. Blum & Associates
909 Montgomery Street, Suite 400
San Francisco, CA 94133
</TABLE>
- ---------------
* Less than 1%.
(1) The shares listed include shares subject to stock options currently
exercisable as follows: Mr. Jaffe -- 4,500; Mr. Justiz -- 4,500; Mr.
Klein -- 3,000; and Mr. Lind -- 4,500.
(2) As of December 31, 1996, NEC had sole voting and dispositive power over
11,900,000 Shares constituting approximately 82.1% of the total outstanding
Shares. As of June 10, 1997, upon consummation of the Offer, Harcourt
indirectly had sole voting and dispositive power over the Shares held by
NEC.
(3) Based on a Form 13G dated February 13, 1997, and filed with the Commission,
Westport Asset Management, Inc. ("Westport") reported sole voting and
dispositive power over 10,000 Shares beneficially owned by officers and
stockholders of Westport and shared voting and dispositive power over
1,428,200 Shares held in discretionary accounts managed by Westport.
Westport disclaims beneficial ownership of Shares held by such officers and
stockholders and disclaims the existence of a group. Westport's principal
business address is 253 Riverside Avenue, Westport, Connecticut, 06880.
(4) Member of the Special Committee.
28
<PAGE> 34
CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH
RESPECT TO SECURITIES OF THE COMPANY
THE HARCOURT AGREEMENT
Prior to acquiring control of the Company, Harcourt entered into the
Harcourt Agreement, pursuant to which, among other things, Harcourt agreed that
until June 4, 2000, it would not consummate any business combination (as defined
in Section 203 of the DGCL) with the Company unless and until (i) the proposed
business combination has been submitted by Harcourt in writing to the Board,
(ii) the Special Committee affirmatively recommends the approval of such
business combination by the Board, finding that the terms thereof are fair to
the stockholders of the Company other than NEC and Harcourt and (iii) the
business combination is approved by a majority of the Board, including a
majority of the Disinterested Directors.
Pursuant to the Harcourt Agreement, Harcourt has the right, subject to
complying with applicable requirements of the Commission, to cause a number of
designees of Harcourt to be elected to the Board such that the Harcourt
designees will constitute a majority of the entire Board; and prior to such
time, to cause a number of designees of Harcourt to be elected such that they
will constitute half of the entire Board.
In order to effectuate the provisions of the Harcourt Agreement, until the
consummation of the Merger (or if the Merger is not consummated, until June 4,
2000), Harcourt will, among other things, cause the Board to at all times have
at least three Disinterested Directors and, subject to their willingness to
serve, has invited the following outside directors (Messrs. Jaffe, Klein and
Lind) to serve initially as Disinterested Directors and, as long as such
individuals remain Disinterested Directors, to constitute a majority of the
members of such Special Committee.
THE FAIR VALUE AGREEMENT
Pursuant to the Fair Value Agreement, Harcourt agreed that it would not
attempt to effectuate any transaction contemplated by the Harcourt Agreement
pursuant to which Harcourt would acquire any Common Stock not now owned by it at
a price less than the fair value of the Shares, as determined in accordance with
Section 262 of the DGCL, as of May 30, 1997. Additionally, pursuant to the Fair
Value Agreement, Harcourt agreed that it would not contest an assertion by
stockholders that perfected their appraisal rights under Section 262 of the DGCL
in an appraisal proceeding that the "fair value" of the Company should not be
less than it was as of May 30, 1997. For purposes of the Fair Value Agreement,
the term "fair value" shall be defined as such term is used in Section 262(h) of
the DGCL. In connection with the Fair Value Agreement, certain executive
officers of Harcourt were elected to positions as executive officers of the
Company.
CURRENT INFORMATION; NO PERIODIC REPORTING
The Company is subject to certain of the informational requirements of the
Exchange Act, and in accordance therewith, files reports and other documents and
information with the Commission. Such reports and other documents and
information, as well as the aforementioned Schedule 13E-3, are available for
inspection and copying at the Commission and from the Company as described under
"AVAILABLE INFORMATION."
After the Effective Time, the Company will cease to file, and NEC will not
be obligated to file, reports with the Commission.
29
<PAGE> 35
APPENDIX A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of September 29, 1997 (the
"Agreement"), by and among STECK-VAUGHN PUBLISHING CORPORATION, a Delaware
corporation (the "Company"), HARCOURT GENERAL, INC., a Delaware corporation
("Harcourt"), NATIONAL EDUCATION CORPORATION, a Delaware corporation and a
direct wholly-owned subsidiary of Harcourt ("NEC"), and SV ACQUISITION
CORPORATION, a Delaware corporation and a direct wholly-owned subsidiary of NEC
("SVAC").
WHEREAS, the Board of Directors of the Company, based upon the unanimous
recommendation of a special committee of independent directors of the Company
(the "Special Committee") has (i) determined that this Agreement and the
transactions contemplated hereby, including the Merger (as defined below), is
fair to and in the best interests of the stockholders of the Company (other than
Harcourt and any direct or indirect wholly-owned subsidiary of Harcourt) and
(ii) approved this Agreement and the transactions contemplated hereby; and
WHEREAS, the Board of Directors of Harcourt, NEC and SVAC have each
approved this Agreement and the merger (the "Merger") of SVAC with and into the
Company in accordance with the General Corporation Law of the State of Delaware
("DGCL"), upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Harcourt, NEC, SVAC and the Company hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. At the Effective Time (as defined in Section 1.3
hereof), and subject to the terms and conditions of this Agreement and the DGCL,
SVAC shall be merged with and into the Company, the separate corporate existence
of SVAC shall thereupon cease, and the Company shall be the surviving
corporation in the Merger (the "Surviving Corporation").
Section 1.2 Surviving Corporation; Effects of the Merger. At the
Effective Time, the Surviving Corporation shall continue its corporate existence
under the laws of the State of Delaware. The Merger shall have the effects set
forth in the applicable provisions of the DGCL. Without limiting the generality
of the foregoing and subject thereto, at the Effective Time, all the property,
rights, privileges, immunities, powers and franchises of the Company and SVAC
shall vest in the Surviving Corporation, and all debts, liabilities and duties
of the Company and SVAC shall become the debts, liabilities and duties of the
Surviving Corporation. The name of the Surviving Corporation shall continue to
be "Steck-Vaughn Publishing Corporation."
Section 1.3 Effective Time. As soon as practicable after the satisfaction
or due waiver of the conditions set forth in Article V, the parties hereto shall
cause the Merger to be consummated by filing this Agreement or a certificate of
merger, in lieu thereof, (the "Certificate of Merger") with the Secretary of
State of the State of Delaware, in such form as required by and executed in
accordance with the relevant provisions of the DGCL (the date and time of the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware (or such later time as is specified in the Certificate of Merger) being
the "Effective Time").
Section 1.4 Certificate of Incorporation of the Surviving Corporation. At
the Effective Time and without any further action on the part of the Company or
SVAC, the text of the certificate of incorporation of the Company shall be
amended, restated, and integrated to read in its entirety as set forth in
Exhibit A hereto, and as so amended, restated, and integrated shall be the
certificate of incorporation of the Surviving Corporation.
A-1
<PAGE> 36
Section 1.5 By-laws of the Surviving Corporation. At the Effective Time
and without any further action on the part of the Company or SVAC, the By-laws
of the Company shall be amended, restated, and integrated to read in their
entirety as set forth in Exhibit B attached hereto and incorporated herein by
this reference and as so amended, restated, and integrated shall be the By-laws
of the Surviving Corporation.
Section 1.6 Board of Directors and Officers of the Surviving
Corporation. At the Effective Time, the number of persons constituting the
whole Board of Directors of the Surviving Corporation shall be three (3), and
each person serving immediately prior to the Effective Time as a director of the
Company shall be, and hereby is (effective immediately prior to the Effective
Time) removed from office, and each person serving immediately prior to the
Effective Time as a director of SVAC shall become at the Effective Time a
director of the Surviving Corporation, each of such directors to hold office,
subject to the applicable provisions of the Certificate of Incorporation and
By-laws of the Surviving Corporation, until the next annual stockholders'
meeting of the Surviving Corporation and until his successor shall be duly
qualified or until his earlier death, resignation, removal, or disqualification.
Each of the officers of the Company immediately prior to the Effective Time
shall be and continue upon the Effective Time as an officer of the Surviving
Corporation until his respective successor is duly elected or appointed and
qualified or until his earlier death, resignation, removal, or disqualification.
Section 1.7 Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of the holders thereof:
(a) Each share of common stock of the Company, par value $0.01 per
share (each, a "Share" or, collectively, the "Shares"), that is issued and
outstanding immediately prior to the Effective Time (other than Shares held
of record by Harcourt, NEC, SVAC or any other direct or indirect
wholly-owned subsidiary of Harcourt or of the Company and Dissenting Shares
(as defined herein)), shall be converted into and represent the right to
receive $14.75 in cash (the "Merger Consideration") payable to the holder
thereof, without interest thereon, upon surrender to the Surviving
Corporation of the certificate representing such Share.
(b) Each Share held in the treasury of the Company immediately prior
to the Effective Time and each Share issued and outstanding immediately
prior to the Effective Time and held of record by Harcourt, NEC, SVAC or
any other direct or indirect wholly-owned subsidiary of Harcourt or of the
Company, shall be cancelled and retired without any conversion thereof and
no payment or distribution or other consideration shall be made or payable
with respect thereto. Each such Share, upon such cancellation and
retirement at the Effective Time, shall have the status of an authorized
but unissued share of the Common Stock of the Surviving Corporation
(subject to the reduction of the number of authorized shares of stock of
the Company effected in the Merger).
(c) Each share of common stock, par value $.01 per share, of SVAC that
is issued and outstanding immediately prior to the Effective Time shall be
converted into one fully paid and non-assessable share of common stock of
the Surviving Corporation. Each holder of a certificate or certificates
that immediately prior to the Effective Time evidenced outstanding shares
of SVAC common stock may, at such holder's option, surrender the same to
the Surviving Corporation for cancellation, and each such holder shall be
entitled to receive from the Surviving Corporation in exchange therefor a
certificate or certificates representing the number of shares of the common
stock of the Surviving Corporation into which such holder's shares of SVAC
common stock shall have been converted, and each certificate that
immediately prior to the Effective Time evidenced outstanding shares of
SVAC common stock thereupon and thereafter shall, until surrendered, by
virtue of the Merger and without any further action by such holder,
evidence the number of shares of the common stock of the Surviving
Corporation to which the holder thereof is entitled pursuant hereto.
SECTION 1.8 Treatment of Outstanding Options. Prior to the Effective
Time, the Board of Directors of the Company (or, if appropriate, a committee
thereof) shall adopt appropriate resolutions and take all other actions
necessary to provide that, immediately prior to the Effective Time, each
Outstanding Option (as defined herein) then outstanding, whether or not then
exercisable, shall be cancelled, and the holder thereof shall be entitled to
receive at the Effective Time or as soon as practicable thereafter from the
Surviving
A-2
<PAGE> 37
Corporation in consideration for such cancellation an amount in cash equal to
the product of (a) the number of Shares previously subject to such Outstanding
Option and (b) the excess, if any, of $14.75 over the exercise price per Share
previously subject to such Outstanding Option.
SECTION 1.9 Dissenting Shares. (a) Notwithstanding the provisions of
Section 1.7 or any other provision of this Agreement to the contrary, Shares
which are issued and outstanding immediately prior to the Effective Time and
which are held of record by stockholders who have the right to, and who properly
perfect the right to, an appraisal of such Shares in accordance with Section 262
of the DGCL (or any successor provision) (the "Dissenting Shares") shall not be
converted into the right to receive the Merger Consideration at or after the
Effective Time, unless and until the holder of such Dissenting Shares shall have
failed to perfect or shall have effectively withdrawn or lost such right to
appraisal and payment under the DGCL. If a holder of Dissenting Shares shall
have so failed to perfect or shall have effectively withdrawn or lost such right
to appraisal and payment, then, as of the Effective Time or the occurrence of
such event, whichever last occurs, such holder's Dissenting Shares shall
automatically be converted into and represent the right to receive the Merger
Consideration, without any interest thereon, as provided in Section 1.7(a).
(b) The Company or the Surviving Corporation, as the case may be, shall
give Harcourt (i) prompt notice of any written demands for appraisal,
withdrawals of demands for appraisal and any other instruments served pursuant
to Section 262 of the DGCL received by the Company or the Surviving Corporation,
as the case may be, and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under Section 262 of the DGCL.
The Company or the Surviving Corporation, as the case may be, will not
voluntarily make any payment with respect to any demands for appraisal and will
not, except with the prior written consent of Harcourt, settle or offer to
settle any such demands.
SECTION 1.10 Payment for Shares. (a) Prior to the Effective Time,
Harcourt shall (i) designate a bank or trust company to act as agent for the
holders of Shares (other than Shares subject to Section 1.7(b)) in connection
with the Merger (the "Exchange Agent") to receive the Merger Consideration to
which holders of such Shares may become entitled pursuant to Section 1.7(a) and
(ii) enter into a written agreement with the Exchange Agent requiring the
Exchange Agent to perform its obligations under this Agreement. When and as
needed, Harcourt will make available to the Exchange Agent sufficient funds to
make all payments pursuant to Section 1.10(b). Out of such funds, the Exchange
Agent shall, pursuant to irrevocable instructions, make the payments referred to
in Section 1.7(a). Such funds shall not be used for any other purpose. The
Exchange Agent may invest some or all of such funds as Harcourt directs,
provided that all such investments shall be in obligations of or guaranteed by
the United States of America, in commercial paper obligations receiving the
highest rating from either Moody's Investors Service, Inc. or Standard & Poor's
Ratings Group, a division of McGraw-Hill Inc., or in certificates of deposit,
bank repurchase agreements or bankers' acceptances of commercial banks with
capital exceeding $250,000,000 (collectively, "Permitted Investments") or in
money market funds which are invested in Permitted Investments. Any net profit
resulting from, or interest or income produced by, such investments, shall be
payable to the Surviving Corporation or Harcourt, as Harcourt directs in its
sole discretion. Harcourt or the Surviving Corporation shall replace any monies
lost through any investment made pursuant to this paragraph (a) of this Section
1.10.
(b) As soon as practicable after the Effective Time, the Exchange Agent
shall mail to each holder of record (other than Harcourt or any direct or
indirect wholly-owned subsidiary of Harcourt or of the Company) of a certificate
or certificates which immediately prior to the Effective Time represented issued
and outstanding Shares (the "Certificates"), a letter of transmittal (the
"Letter of Transmittal") for return to the Exchange Agent, and instructions for
use in effecting the surrender of Certificates and receipt of the Merger
Consideration for each of such holder's Shares. The Letter of Transmittal shall
specify that delivery shall be effected, and risk of loss and title shall pass,
only upon proper delivery to and receipt of such Certificate or Certificates by
the Exchange Agent. The Exchange Agent, as soon as practicable following receipt
of any such Certificate or Certificates, together with the Letter of
Transmittal, duly executed, and any other items specified by the Letter of
Transmittal, shall pay, by check or draft, to or upon the order of the holder of
record of Certificates an amount, subject to reduction for any applicable
back-up withholding or stock transfer taxes payable by such holder, equal to the
product obtained by multiplying the number of Shares (other than Dissenting
Shares) represented by the Certificate or Certificates so surrendered and the
Merger Considera-
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tion. No interest will be paid or accrued on the Merger Consideration payable
upon the surrender of a Certificate or Certificates.
(c) Any portion of the funds made available to the Exchange Agent which
remain unclaimed six months after the Effective Time shall be paid to Harcourt
or to the Surviving Corporation upon demand. Any holders of Certificates who
have not theretofore complied with Section 1.10(b) hereof shall thereafter look
only to the Surviving Corporation for payment of their claim for the
consideration set forth in Section 1.7 hereof, without any interest thereon, but
shall have no greater rights against the Surviving Corporation than may be
accorded to general creditors of the Surviving Corporation under Delaware law.
SECTION 1.11 No Further Rights or Transfers. At and after the Effective
Time of the Merger, each holder of record of Shares that were issued and
outstanding Shares immediately prior to the Effective Time shall cease to have
any rights as a stockholder of the Company or the Surviving Corporation, except
for the right to surrender his or her Certificate or Certificates in exchange
for the Merger Consideration provided pursuant to Sections 1.7 and 1.10 hereof
and/or to perfect his or her right to an appraisal of and receive payment
thereupon for his or her Dissenting Shares pursuant to Section 262 of the DGCL
and Section 1.9 hereof if such holder has validly exercised and perfected and
not withdrawn or lost such appraisal rights, and no transfer of Shares that were
issued and outstanding prior to the Effective Time shall be made on the stock
transfer books of the Surviving Corporation. If, after the Effective Time,
Certificates formerly representing Shares other than Dissenting Shares are
presented to the Surviving Corporation, they shall be cancelled and exchanged
for the Merger Consideration set forth in Section 1.7 hereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Harcourt, NEC and SVAC that:
SECTION 2.1 Corporate Organization. Each of the Company and each material
subsidiary of the Company (each, a "Subsidiary") is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with all requisite power and authority to
own, operate and lease its properties and to carry on its business as it is now
being conducted. The Company and each of the Subsidiaries is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not, individually or in the aggregate, have a Material Adverse
Effect on the Company or the Subsidiaries. As used herein, the term "Material
Adverse Effect" means, with respect to any person or entity, any change or
effect that would be materially adverse to the business, assets (whether
tangible or intangible), financial condition, results of operations or business
prospects of the person or entity taken as a whole or the ability of such person
or entity to consummate the transaction contemplated hereby.
SECTION 2.2 Authorization. The Company has the necessary corporate power
and authority to enter into this Agreement. The execution and delivery of this
Agreement by the Company, the performance by the Company of its obligations
hereunder and the consummation by the Company of the transactions contemplated
hereby have been duly and validly authorized by the Company's Board of
Directors, and no other corporate proceeding on the part of the Company is
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby (other than the approval of this Agreement by the
stockholders of the Company). This Agreement has been duly and validly executed
and delivered by the Company and, assuming the due authorization, execution and
delivery hereof by Harcourt, NEC and SVAC and the enforceability of this
Agreement against each of them, is a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to bankruptcy, insolvency, moratorium, reorganization, receivership, or other
similar laws relating to, or affecting enforcement of, creditors' rights
generally, and general principles of equity (regardless of whether considered
and applied in a proceeding in equity or at law).
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SECTION 2.3 Capitalization of the Company. (a) The Company's entire
authorized capital stock consists of 30,000,000 shares, of which 5,000,000
shares are classified as Preferred Stock, par value $0.01 per share, and
25,000,000 shares are classified as Common Stock. As of the date hereof, there
are no shares of Preferred Stock issued and outstanding, 14,509,666 shares of
Common Stock are issued and outstanding (not including 272,700 shares of Common
Stock held in the Company's treasury) and 1,225,634 shares of Common Stock are
reserved for issuance in connection with the Company's stock option plans (of
which options to purchase 682,875 shares of Common Stock are outstanding (the
"Outstanding Options")). Except as set forth above, there are outstanding (i) no
shares of capital stock or other voting securities of the Company, (ii) no
securities of the Company or any of the Subsidiaries convertible into or
exchangeable for shares of capital stock or other voting securities of the
Company, (iii) no options, warrants or other rights to acquire from the Company
or any of the Subsidiaries (including any rights issued or issuable under a
shareholders rights plan or similar arrangement), and no obligations of the
Company or any of the Subsidiaries to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of the Company, (iv) no equity equivalents, interests in the
ownership or earnings of the Company or any of the Subsidiaries or other similar
rights (the shares of capital stock, options, warrants, rights, obligations,
equity equivalents, and other securities listed in clauses (i) through (iv)
referred to collectively as the "Corporation's Securities"), and (v) no
outstanding obligations of the Company or any of the Subsidiaries to repurchase,
redeem or otherwise acquire any of the Corporation's Securities or to make any
investment (by loan, capital contribution or otherwise) in any other entity.
(b) All of the outstanding capital stock of, or other ownership interests
in, each of the Subsidiaries, is owned by the Company, directly or indirectly,
free and clear of any Lien or any other limitation or restriction (including any
restriction on the right to vote or sell the same, except as may be provided as
a matter of law). For purposes of this Agreement, "Lien" means, with respect to
any asset (including, without limitation, any security) any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset. There are no securities of the Company or any of the Subsidiaries
convertible into or exchangeable for, no options or other rights to acquire from
the Company or any of the Subsidiaries, and no other contract, understanding,
arrangement or obligation (whether or not contingent) providing for the issuance
or sale, directly or indirectly, of any capital stock or other ownership
interests in, or any other securities of, any of the Subsidiaries. There are no
outstanding contractual obligations of the Company or any of the Subsidiaries to
repurchase, redeem or otherwise acquire any outstanding shares of capital stock
or other ownership interests in any Subsidiary.
(c) All issued and outstanding shares of the capital stock of the Company
and each of the Subsidiaries have been duly authorized and validly issued and
are fully paid and nonassessable, free of any preemptive rights. The Outstanding
Options have been duly authorized and validly issued and are in full force and
effect.
SECTION 2.4 Certain Fees. With the exception of a fee payable to BZW, the
investment banking division of Barclays Bank Plc ("BZW"), which has acted as
financial advisor to the Special Committee in connection with the Merger,
pursuant to a letter agreement which has been delivered to Harcourt, neither the
Company nor any Subsidiary has employed any broker or finder or incurred any
liability for any financial advisory, brokerage or finders' fees or commissions
in connection with the transactions contemplated hereby.
SECTION 2.5 The Harcourt Agreement. The conditions specified in Section
2(a) through (e) of the agreement dated May 30, 1997 (the "Harcourt Agreement"),
by and between Harcourt and the Company, including but not limited to the
appointment of a Special Committee and approval by a Special Committee of any
Business Combination (as defined in the Harcourt Agreement) involving the
Company, have been satisfied in their entirety.
SECTION 2.6 Consents and Approvals; No Violations. (a) Except for (i)
applicable requirements of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder (the "Exchange Act"), and state securities
and "blue sky" laws and (ii) the filing and recordation of the Certificate of
Merger as required by the DGCL, no filing or registration with, no notice to and
no permit from, and no authorization, consent or approval of any public or
governmental body or authority or third party is necessary on behalf of, the
Company for the consummation by the Company of the transactions contemplated by
this Agreement
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(other than approval of this Agreement by the stockholders of the Company),
except where the failure to make such filing, registration or notice or to
obtain such permit, authorization, consent or approval would not, in the
aggregate, have a Material Adverse Effect.
(b) Neither the execution and delivery of this Agreement by the Company nor
the consummation by the Company of the transactions contemplated hereby nor
compliance by the Company with any of the provisions hereof will (i) conflict
with or result in any breach of any provision of the Certificate of
Incorporation or By-laws of the Company, (ii) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation to which the
Company or any of its Subsidiaries is a party or by which any of them or any of
their properties or assets may be bound or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company, any
of its Subsidiaries or any of their properties or assets, excluding from the
foregoing clauses (ii) and (iii) violations, breaches, defaults or such rights
which in the aggregate would not have a Material Adverse Effect.
SECTION 2.7 Delaware Section 203. The Board of Directors of the Company
has taken all appropriate and necessary action such that the provisions of
Section 203 of the DGCL will not apply to any of the transactions contemplated
by this Agreement.
SECTION 2.8 Opinion of Financial Advisor. The Company has received the
opinion of BZW, the Special Committee's financial advisor, substantially to the
effect that the Merger Consideration to be received in the Merger by the holders
of record of Shares (other than Harcourt and any direct or indirect wholly-owned
subsidiary of Harcourt) is fair to such stockholders from a financial point of
view.
SECTION 2.9 Board Recommendation. (A) At a meeting duly noticed, called
and held on September 5, 1997, the Special Committee unanimously concluded that
the terms of the Merger are fair to the holders of record of the Shares (other
than Shares which are held of record by Harcourt or the Company or any direct or
indirect wholly-owned subsidiary of Harcourt or of the Company), subject to the
finalization of a definitive merger agreement; (B) at a meeting duly noticed,
called and held on September 25, 1997, the Special Committee unanimously
concluded that the terms of the Merger and this Agreement are fair to the
holders of record of the Shares (other than shares which are held of record by
Harcourt or the Company or any direct or indirect wholly-owned subsidiary of
Harcourt or of the Company) and has recommended that the Board of Directors of
the Company adopt and approve this Agreement; and (C) in light of such
recommendation, the Board of Directors of the Company concluded, by means of a
unanimous written consent dated as of September 25, 1997, that the Merger is
fair to, and in the best interest of, the Company and the holders of record of
the Shares (other than Shares which are held by Harcourt or the Company or any
direct or indirect wholly-owned subsidiary of Harcourt or of the Company) and
approved and adopted this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HARCOURT,
NEC AND SVAC
Harcourt, NEC and SVAC hereby represent and warrant to the Company that:
SECTION 3.1 Corporate Organization. Each of Harcourt, NEC and SVAC is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and each has all requisite corporate power and
authority to own, operate and lease its properties and to carry on its business
as it is now being conducted, except where the failure to be so organized,
existing and in good standing would not have a Material Adverse Effect on
Harcourt, NEC or SVAC.
SECTION 3.2 Authorization. (a) Each of Harcourt, NEC and SVAC has the
necessary corporate power and authority to enter into this Agreement and to
carry out their respective obligations hereunder. The execution and delivery of
this Agreement by each of Harcourt, NEC and SVAC, the performance by each of
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Harcourt, NEC and SVAC of their respective obligations hereunder and the
consummation by each of Harcourt, NEC and SVAC of the transactions contemplated
hereby have been duly and validly authorized by the respective Boards of
Directors of Harcourt, NEC and SVAC, and no other corporate proceeding on the
part of Harcourt, NEC or SVAC is necessary to authorize this Agreement or to
consummate the transactions contemplated hereby (other than the approval of this
Agreement by NEC as the sole stockholder of SVAC which approval NEC hereby
agrees it shall provide). This Agreement has been duly and validly executed and
delivered by each of Harcourt, NEC and SVAC and, assuming the due authorization,
execution and delivery hereof by the Company, is a legal, valid and binding
obligation of each of Harcourt, NEC and SVAC, enforceable against each of
Harcourt, NEC and SVAC in accordance with its terms.
SECTION 3.3 No Prior Activities of SVAC. SVAC has not incurred, directly
or indirectly, any liabilities or obligations, except those incurred in
connection with its incorporation and capitalization or with the negotiation of
this Agreement and the consummation of the transactions contemplated hereby.
SVAC has not engaged, directly or indirectly, in any business or activity of any
type or kind, or entered into any agreement or arrangement with any person or
entity, or is subject to or bound by any material liability, obligation or
undertaking, that is not contemplated by or in connection with its incorporation
and capitalization or this Agreement and the transactions contemplated hereby.
SECTION 3.4 Consents and Approvals; No Violations. (a) Except for (i)
applicable requirements of the Exchange Act, state securities or "blue sky"
laws, and (ii) the filing and recordation of the Certificate of Merger as
required by the DGCL, no filing or registration with, no notice to or permit
from, and no authorization, consent or approval of any public or governmental
body or authority or third party is necessary on behalf of Harcourt, NEC or SVAC
for the consummation by Harcourt, NEC or SVAC of the transactions contemplated
by this Agreement, except where the failure to make such filing, registration or
notice or to obtain such permit, authorization, consent or approval would not
have a Material Adverse Effect on Harcourt, NEC or SVAC.
(b) Neither the execution and delivery of this Agreement by Harcourt, NEC
and SVAC nor the consummation by Harcourt, NEC and SVAC of the transactions
contemplated hereby nor compliance by Harcourt, NEC and SVAC with any of the
provisions hereof will (i) conflict with or result in any breach of any
provision of the Certificate of Incorporation or By-laws of Harcourt, NEC or
SVAC, (ii) result in a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, license, agreement or
other instrument or obligation to which Harcourt, NEC or SVAC is a party or by
which any of them or any of their properties or assets may be bound or (iii)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Harcourt, NEC or SVAC or any of their properties or assets,
excluding from the foregoing clauses (ii) and (iii) violations, breaches,
defaults or such rights which in the aggregate would not have a Material Adverse
Effect on Harcourt, NEC or SVAC.
ARTICLE IV
COVENANTS
SECTION 4.1 Conduct of Business of the Company. Except as expressly
contemplated by this Agreement or as consented to by Harcourt, during the period
from the date of this Agreement to the Effective Time, the Company and its
Subsidiaries will each conduct their respective operations only in, and the
Company and its Subsidiaries shall not take any action except in, the ordinary
and usual course of business and consistent with past practice, and each of the
Company and the Subsidiaries will use its reasonable best efforts in the
ordinary course of business consistent with past practice to preserve intact its
business organization, assets, prospects and advantageous business
relationships, to keep available the services of its officers and employees and
to maintain satisfactory relationships with customers, suppliers, contractors,
distributors, licensors, licensees and others having business relationships with
it.
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SECTION 4.2 Access to Information. Between the date of this Agreement and
the Effective Time, subject to customary confidentiality agreements if
requested, the Company will give Harcourt, NEC and SVAC, and their authorized
representatives, reasonable access to all personnel, plants, offices, warehouses
and other facilities and to all books and records of the Company and the
Subsidiaries and will permit Harcourt, NEC and SVAC to make such inspections as
they may reasonably request and will cause its officers and those of the
Subsidiaries to furnish Harcourt, NEC and SVAC with such financial and operating
data and other information with respect to the business and properties of the
Company and the Subsidiaries as Harcourt, NEC and SVAC may from time to time
reasonably request.
SECTION 4.3 Reasonable Best Efforts. (a) Upon the terms and subject to
the conditions hereof, each of the parties hereto agrees to use its reasonable
best efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things reasonably necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement and shall use its
reasonable best efforts to obtain all waivers, permits, consents and approvals
and to effect all registrations, filings and notices with or to third parties or
governmental or public bodies or authorities which are necessary or reasonably
appropriate in connection with the transactions contemplated by this Agreement,
including, without limitation, filings to the extent required under the Exchange
Act. In addition, Harcourt, NEC, SVAC and the Company shall timely file with the
Securities and Exchange Commission (the "Commission") a Schedule 13E-3 (the
"Schedule 13E-3") with respect to the Merger and disseminate to stockholders
such information as is required by Rule 13e-3 under the Exchange Act and as is
required in an information statement under Regulation 14C under the Exchange Act
(the "Information Statement"). None of the information supplied by Harcourt, NEC
and SVAC, on the one hand, or the Company on the other hand, for inclusion in
the Schedule 13E-3 or Information Statement, in any information disseminated to
stockholders or in any amendments or supplements thereto, will, at the
respective times such Schedules 13E-3, Information Statement or amendments are
filed with the Commission or such information is mailed to stockholders, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein, in light of the circumstances under which they
were made, not misleading. The Schedule 13E-3 and Information Statement will
comply as to form in all material respects with all applicable provisions of the
Exchange Act. Harcourt, NEC, SVAC and the Company shall promptly correct any
information in the Schedule 13E-3 or Information Statement that shall have
become false or misleading and take all steps necessary to cause the Schedule
13E-3 and Information Statement as so corrected to be filed with the Commission,
as and to the extent required by applicable law. If at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers or directors of each of the
parties hereto shall take such action.
(b) Harcourt, NEC and SVAC hereby agree to cause their respective
affiliates who are directors, officers, stockholders and/or employees of the
Company to use their best efforts (to the extent reasonably within their power
or ability) to cause the Company to honor the representations, warranties,
covenants and agreements made by the Company in this Agreement and to take such
actions necessary in furtherance, and not in contravention, of such
representations, warranties, covenants and agreements.
SECTION 4.4 Public Announcements. Harcourt, NEC, SVAC, and the Company
will consult with each other before issuing any press release or otherwise
making any public statements with respect to the Merger and shall not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by law.
SECTION 4.5 Action by Written Consent. Harcourt has advised the Company
that NEC has committed to vote, or has agreed to cause to be voted, Shares
representing a majority of the outstanding Shares in favor of the Merger; and
that it is the desire of Harcourt that such action be taken by written consent
in lieu of a meeting of stockholders. The Company hereby agrees that, pursuant
to its Certificate of Incorporation and the provisions of the DGCL, the Merger
may be approved by means of a written consent in lieu of a meeting of
stockholders.
SECTION 4.6 Indemnification. (a) The Company shall and Harcourt shall
cause the Surviving Corporation to, from and after the Effective Time,
indemnify, defend and hold harmless each person who is now, or has been at any
time prior to the date of this Agreement or who becomes prior to the Effective
Time,
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an officer or director of the Company or any of the Subsidiaries or a member of
the Special Committee (the "Indemnified Parties") against all losses, claims,
damages, costs, expenses (including, without limitation, reasonable attorneys'
and other professionals' fees), liabilities or judgments or amounts that are
paid in settlement with the approval of the indemnifying party (which approval
shall not be unreasonably withheld) of or in connection with any claim, action,
suit, proceeding or investigation (whether civil, criminal, administrative, or
otherwise) based in whole or in part on or arising in whole or in part out of or
pertaining to the fact that such person is or was a director or officer of the
Company or any of the Subsidiaries or a member of the Special Committee or is or
was serving at the request of the Company or any Subsidiary as a director,
officer, employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise (within the meaning of DGCL Section 145(i)), whether
pertaining to any matter existing or occurring prior to, at or after the
Effective Time and whether asserted or claimed prior to, at or after the
Effective Time ("Indemnified Liabilities") including, without limitation, all
losses, claims, damages, costs, expenses (including, without limitation,
reasonable attorneys' and other professionals' fees), liabilities, judgments, or
amounts paid in settlement based in whole or in part on, or arising in whole or
in part out of, or pertaining to this Agreement or any of the transactions
contemplated hereby, in each case to the full extent a corporation is permitted
under the DGCL to indemnify its own directors and officers. The Company or the
Surviving Corporation, as the case may be, will pay expenses (including, without
limitation, reasonable attorneys' and other professionals' fees) in advance of
the final disposition of any such action, suit, proceeding or investigation to
each Indemnified Party to the full extent permitted by law upon receipt of any
undertaking to repay required by Section 145(e) of the DGCL. Without limiting
the foregoing, in the event of any such claim, action, suit, proceeding or
investigation (whether arising before, at, or after the Effective Time), (i)
Harcourt or the Surviving Corporation shall have the right to assume the defense
thereof and Harcourt shall not be liable to such Indemnified Parties for any
legal expenses of other counsel or any other expenses subsequently incurred by
such Indemnified Parties in connection with the defense thereof, except that if
Harcourt or the Surviving Corporation elects not to assume such defense or
counsel for the Indemnified Parties advises that there are issues that raise
conflicts of interest between Harcourt or the Surviving Corporation and the
Indemnified Parties, the Indemnified Parties may retain counsel satisfactory to
them, and Harcourt or the Surviving Corporation shall pay all reasonable fees
and expenses of such counsel for the Indemnified Parties promptly as statements
therefor are received; provided, however, that Harcourt shall be obligated
pursuant to this paragraph (a) to pay for only one firm of counsel for all
Indemnified Parties in any jurisdiction unless there are, under applicable
standards of professional conduct (as reasonably determined by counsel to the
Indemnified Parties), separate and distinct interests or legal positions of any
two or more Indemnified Parties, in which event such additional counsel as may
be reasonably required by reason of such separate or distinct interests or legal
positions may be retained by the Indemnified Parties, (ii) the Indemnified
Parties will cooperate in the defense of any such matter and (iii) Harcourt
shall not be liable for any settlement effected without its prior written
consent, which consent shall not be unreasonably withheld; and provided,
further, that Harcourt shall not have any obligation hereunder to any
Indemnified Party when and if a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final and nonappealable,
that the indemnification of such Indemnified Party in the manner contemplated
hereby is prohibited by applicable law. Any Indemnified Party wishing to claim
indemnification under this Section 4.6, upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify the Company or the
Surviving Corporation (but the failure so to notify an indemnifying party shall
not relieve it from any liability which it may have under this Section 4.6
except to the extent such failure materially prejudices such party), and shall
deliver to the Company (or, after the Effective Time, the Surviving Corporation)
any undertaking to repay required by the DGCL.
(b) For a period of five years after the Effective Time, Harcourt shall
cause the Surviving Corporation to use reasonable efforts to maintain in effect,
if available, directors' and officers' liability insurance covering those
persons who are currently covered by the Company's directors' and officers'
liability insurance policy (a copy of which has heretofore been delivered to
Harcourt, NEC or SVAC) on terms and in an amount comparable to those now
applicable to directors and officers of the Company; provided, however, that in
no event shall the Surviving Corporation be required to expend in any year in
excess of 175% of the current premium being paid by the Company for such
coverage.
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(c) In the event that the Surviving Corporation or any of its respective
successors and assigns consolidates with or merges or converts into any other
person, entity, or association and shall not be the continuing or surviving
corporation, entity, or association of such consolidation or merger or
conversion or transfers and conveys all or substantially all of its property and
assets to any person, then, and in each case, proper provisions shall be made so
that the successors and assigns of the Surviving Corporation assume the
obligations set forth in this Section 4.6.
(d) The provisions of this Section 4.6 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party, his or her heirs and
representatives, and may not be amended, altered or repealed without the written
consent of any affected Indemnified Party.
ARTICLE V
CONDITIONS TO THE MERGER
SECTION 5.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to this Agreement to
consummate the Merger shall be subject to the following conditions, which may
not be waived:
(a) This Agreement and the Merger shall have been approved and adopted
by the requisite vote (which may be effected by written consent in lieu of
a meeting) of the stockholders of the Company required by the Company's
Restated Certificate of Incorporation and the DGCL.
(b) This Agreement and the Merger shall have been approved and adopted
by the requisite vote (which may be effected by written consent in lieu of
a meeting) of the stockholders of SVAC required by SVAC's certificate of
incorporation and the DGCL.
(c) There shall not be outstanding any order, statute, rule,
regulation, executive order, stay, decree, judgment, or injunction which
shall have been enacted, entered, issued, promulgated or enforced by any
court or governmental authority which restrains or prohibits the
consummation of the Merger.
(d) The terms and conditions of the Harcourt Agreement required to be
satisfied in order to consummate the Merger shall have been satisfied by
each of the parties thereto.
SECTION 5.2 Conditions to the Obligation of Harcourt, NEC and SVAC to
Effect the Merger. The obligations of Harcourt, NEC and SVAC to effect the
Merger shall be further subject to the fulfillment at or prior to the Effective
Time of the following conditions, any one or more of which may be waived by
Harcourt on behalf of itself, NEC, and SVAC:
(a) The Company shall have performed and complied in all material
respects with the agreements and obligations contained in this Agreement
required to be performed and complied with by it at or prior to the
Effective Time.
(b) The representations and warranties of the Company contained in
this Agreement that are qualified as to materiality shall be true and
correct, and the representation and warranties that are not so qualified
shall be true and correct in all material respects, in each case when made
and at and as of the Effective Time.
SECTION 5.3 Conditions to the Obligations of the Company to Effect the
Merger. The obligations of the Company to effect the Merger shall be further
subject to the fulfillment at or prior to the Effective Time of the following
conditions, any one or more of which may be waived by the Company:
(a) Harcourt, NEC and SVAC each shall have performed and complied in
all material respects with the agreements and obligations contained in this
Agreement required to be performed and complied with by them at or prior to
the Effective Time.
(b) The representations and warranties of Harcourt, NEC and SVAC
contained in this Agreement that are qualified as to materiality shall be
true and correct, and the representations and warranties that
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are not so qualified shall be true and correct in all material respects, in
each case when made and at and as of the Effective Time.
(c) The Special Committee shall not have modified or rescinded its
recommendation with respect to the Merger as a result of the withdrawal or
material qualification, on or prior to the Effective Time, of the fairness
opinion delivered by BZW to the Special Committee on the date hereof.
(d) No event shall have occurred nor circumstance exist which creates
a reasonable doubt on the ability of Harcourt to pay monies to the Exchange
Agent as required under Section 1.10 of this Agreement.
ARTICLE VI
TERMINATION AND ABANDONMENT
SECTION 6.1 Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time,
whether before or after approval of the Merger by the stockholders of the
Company and SVAC:
(a) By mutual consent of the Boards of Directors of Harcourt and the
Company.
(b) By either Harcourt or the Company:
(i) if the Effective Time shall not have occurred by January 31,
1998; or
(ii) if a court of competent jurisdiction or governmental,
regulatory or administrative agency or commission shall have issued an
order, decree or ruling or taken any other action (which order, decree
or ruling the parties hereto shall use their reasonable best efforts to
lift), in each case permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement which order
is not subject to appeal.
(c) By either Harcourt or the Company if the Special Committee shall
have modified or rescinded its recommendation with respect to the Merger as
contemplated by Section 5.3(c) hereof.
SECTION 6.2 Procedure and Effect of Termination. In the event of
termination of this Agreement and abandonment of the Merger by the Company or
Harcourt or both pursuant to Section 6.1 hereof, written notice thereof shall
forthwith be given to the other and this Agreement shall terminate and the
Merger shall be abandoned, without further action by any of the parties hereto.
If this Agreement is terminated as provided herein no party hereto shall have
any liability or further obligation to any other party to this Agreement except
that the provisions of this Section 6.2 and Sections 4.6 and 7.5 hereof shall
remain in full force and effect.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1 Survival of Representations, Warranties, Covenants and
Agreements. The respective representations, warranties, covenants and
agreements of the parties hereto, other than those contained in Sections 1.7,
1.9, 1.10, 1.11 and 4.6 hereof and this Article VII shall not survive the
Effective Time.
SECTION 7.2 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified or supplemented only by written agreement of
Harcourt, NEC, SVAC and the Company at any time prior to the Effective Time with
respect to any of the terms contained herein. Notwithstanding the foregoing, any
amendment or modification of, or supplement to, this Agreement that is adverse
to the holders of the Shares (other than Shares which are held by Harcourt or
the Company or any direct or indirect wholly-owned subsidiary of Harcourt or the
Company) shall require the consent of the Special Committee.
SECTION 7.3 Waiver of Compliance; Consents. Any failure of Harcourt, NEC
or SVAC, on the one hand, or the Company, on the other hand, to comply with any
obligation, covenant, agreement or condition (except for as provided in Section
5.1) herein may be waived in writing by the Company or Harcourt,
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respectively, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure; provided,
however, that the waiver of any obligation, covenant, agreement or condition
herein, or the giving of any consent or the exercise of any material right
hereunder, by the Company or its Board of Directors shall require the consent of
the Special Committee. Whenever this Agreement requires or permits consent by or
on behalf of any party hereto, such consent shall be given in writing in a
manner consistent with the requirements for a waiver of compliance as set forth
in this Section 7.3.
SECTION 7.4 Validity of Provisions; Severability. Wherever possible, each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
SECTION 7.5 Fees and Expenses. All costs and expenses incurred in
connection with the transactions contemplated by this Agreement shall be paid by
the party incurring such expenses.
SECTION 7.6 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and, except as provided in
Section 4.6, nothing in this Agreement, express or implied, is intended to
confer upon any other person or entity other than the parties hereto any rights
or remedies of any nature whatsoever under or by reason of this Agreement.
SECTION 7.7 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use reasonable best
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement. In case at any time after the Effective Time any further
reasonable action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each corporation which is a
party to this Agreement shall take all such reasonable necessary action and the
officers and directors of the Surviving Corporation, upon and after the
Effective Time, are and shall be fully authorized, in the name and on behalf of
SVAC, to do and take and cause to be done and taken any and all such action.
SECTION 7.8 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, by messenger,
by a nationally recognized overnight delivery company or by registered or
certified mail (return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Harcourt, NEC or SVAC:
Harcourt General, Inc.
27 Boylston Street
Chestnut Hill, Massachusetts 02167
Attention: Eric P. Geller, Esq.
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Venue
New York, New York 10017
Attention: Robert L. Friedman, Esq.
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(b) if to the Special Committee:
Michael R. Klein, Esq.
Chair, Special Committee of
Disinterested Directors of
Steck-Vaughn
Publishing Corporation
c/o Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037-1420
with a copy to:
Morris, James, Hitchens & Williams
222 Delaware Avenue
P.O. Box 2306
Wilmington, Delaware 19801
Attention: Lewis H. Lazarus, Esq.
SECTION 7.9 Governing Law; Jurisdiction. Regardless of the place of
execution of this Agreement, the domicile or residence of any party hereto, the
location of the principal executive office of any party hereto, or any other
fact or circumstance, this Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware (without regard to conflicts
of laws principles). EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY SUBMITS TO
THE EXCLUSIVE JURISDICTION OF THE STATE COURTS OF THE STATE OF DELAWARE AND THE
FEDERAL COURTS LOCATED IN THE STATE OF DELAWARE IN ANY ACTION, SUIT OR
PROCEEDING ARISING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH
ACTION, SUIT OR PROCEEDING SHALL BE BROUGHT ONLY IN SUCH COURTS (AND WAIVES ANY
OBJECTION BASED ON FORUM NON CONVENIENS OR ANY OTHER OBJECTION TO VENUE
THEREIN); PROVIDED, HOWEVER, THAT SUCH CONSENT TO JURISDICTION IS SOLELY FOR THE
PURPOSE REFERRED TO IN THIS PARAGRAPH AND SHALL NOT BE DEEMED TO BE A GENERAL
SUBMISSION TO THE JURISDICTION OF SUCH COURTS OR IN THE STATE OF DELAWARE OTHER
THAN FOR SUCH PURPOSE. THE PARTIES HERETO HEREBY WAIVE ANY RIGHT TO A TRIAL BY
JURY IN CONNECTION WITH ANY SUCH ACTION, SUIT OR PROCEEDING.
SECTION 7.10 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
SECTION 7.11 Headings. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not affect in any way the meaning or interpretation of
this Agreement.
SECTION 7.12 Entire Agreement. This Agreement, including any exhibits
hereto and the documents and instruments referred to herein, and except as
contemplated hereby, embodies the entire agreement and understanding of the
parties hereto in respect of the subject matter contained herein and supersedes
all prior agreements and understandings between the parties with respect to such
subject matter. There are no agreements, restrictions, promises,
representations, warranties, covenants, or undertakings, other than those
expressly set forth or referred to herein.
SECTION 7.13 Certificates of Secretaries or Assistant Secretaries. The
certificates of the respective Secretaries or Assistant Secretaries of the
Company and SVAC under DGCL Section 251(c) shall be attached hereto, shall be
incorporated herein by this reference, and shall be considered on and part of
this Agreement.
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SECTION 7.14 Specific Performance. The parties hereby acknowledge and
agree that the failure of any party to this Agreement to perform the provisions
in accordance with their specific terms or other breach of such provisions,
including its failure to take all actions as are necessary on its part to the
consummation of the Merger, will cause irreparable injury to the other parties
to this Agreement for which damages, even if available, will not be an adequate
remedy. Accordingly, each of the parties hereto hereby consents and agrees to
the issuance of injunctive relief by any court of competent jurisdiction to
compel performance of any party's obligations, including an injunction to
prevent breaches, and to the granting by any such court of the remedy of
specific performance of the terms and conditions hereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed on its behalf by its duly authorized officers, all as of the day and
year first above written.
STECK-VAUGHN PUBLISHING CORPORATION
By: /s/ ERIC P. GELLER
------------------------------------
Name: Eric P. Geller
Title: Senior Vice President,
General Counsel
and Secretary
HARCOURT GENERAL, INC.
By: /s/ ERIC P. GELLER
------------------------------------
Name: Eric P. Geller
Title: Senior Vice President and
General Counsel
NATIONAL EDUCATION CORPORATION
By: /s/ ERIC P. GELLER
------------------------------------
Name: Eric P. Geller
Title: Vice President and Secretary
SV ACQUISITION CORPORATION
By: /s/ ERIC P. GELLER
------------------------------------
Name: Eric P. Geller
Title: Vice President
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<PAGE> 49
APPENDIX B
December 8, 1997
Committee of Disinterested Directors of the
Board of Directors
Steck-Vaughn Publishing Corporation
4515 Seton Center Parkway, Suite 300
Austin, TX 78759-8365
Gentlemen:
You have requested us to provide our opinion with respect to the fairness,
from a financial point of view and as of the date hereof, of the consideration
to be received by holders of common stock, $.01 par value ("SVPC Common Stock"),
of Steck-Vaughn Publishing Corporation ("SVPC"), other than Harcourt General,
Inc. ("Harcourt"), National Education Corporation, a wholly-owned subsidiary of
Harcourt ("NEC"), and SV Acquisition Corporation, a wholly-owned subsidiary of
NEC ("SVAC"), pursuant to the Agreement and Plan of Merger, dated as of
September 29, 1997, by and among SVPC, Harcourt, NEC and SVAC (the "Agreement").
The Agreement provides for the merger of SVAC with and into SVPC (the
"Merger"). In the Merger, each outstanding share of SVPC's Common Stock, other
than shares owned by Harcourt, NEC, SVAC or any other direct or indirect
wholly-owned subsidiary of Harcourt or of SVPC, will be converted into the right
to receive $14.75 in cash, without interest (the "Merger Consideration"). The
terms of the Merger are described in greater detail in the Information Statement
of SVPC (the "Information Statement").
For purposes of this opinion we have: (i) reviewed financial information
with respect to SVPC furnished to us by SVPC, including certain internal
financial analyses and forecasts prepared by the management of SVPC; (ii)
reviewed publicly available information regarding SVPC; (iii) held discussions
with the senior management of SVPC and Harcourt concerning the business, past
and current business operations, financial condition and future prospects of
SVPC; (iv) reviewed the stock price and trading history of SVPC; (v) reviewed
the valuations of publicly traded companies which we deemed comparable to SVPC
and compared the financial terms of the Merger with such valuations; (vi)
compared the financial terms of the Merger with other transactions which we
deemed relevant; (vii) prepared a discounted cash flow analysis with respect to
SVPC; (viii) reviewed the Agreement and a draft version of the Information
Statement; and (ix) made such other studies and inquiries, and reviewed such
other data, as we deemed relevant.
In connection with our opinion, we have not, however, independently
verified any of the foregoing information and have relied on all such
information being complete and accurate in all material respects. Furthermore,
we did not obtain, or assume any responsibility for obtaining, any independent
appraisal of the properties or assets and liabilities of SVPC. With respect to
the financial and operating forecasts of SVPC which we have reviewed, we have
assumed that such forecasts have been reasonably prepared in good faith on the
basis of reasonable assumptions and reflect the best currently available
estimates and judgments of SVPC's management, and that such projections and
forecasts will be realized in the amounts and in the time periods currently
estimated by the management of SVPC. This opinion is necessarily based upon
market, economic, and other conditions that exist and can be evaluated as of the
date of this letter, and on information available to us as of the date hereof.
BZW has provided certain investment banking and corporate banking services
to NEC from time to time, including the acquisition of NEC by Harcourt, and has
received fees for those services. Furthermore, BZW has acted as financial
advisor to the Committee of Disinterested Directors of the Board of Directors of
SVPC in connection with the Merger, and is entitled to receive fees in that
regard.
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Based upon and subject to the foregoing considerations, it is our opinion
that, as of the date hereof, the Merger Consideration is fair to the holders of
SVPC Common Stock, other than Harcourt, NEC and SVAC from a financial point of
view.
Very truly yours,
BZW
A division of Barclays Bank PLC
By: /s/ RICHARD J. ADUBATO
------------------------------------
Richard J. Adubato
Director
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APPENDIX C
SUMMARY OF APPRAISAL RIGHTS
Terms used herein without definition shall have the meanings assigned
thereto in the Information Statement.
Stockholders are entitled to appraisal rights under Section 262 of the DGCL
("Section 262"). Section 262 is reprinted in its entirety following this summary
in Appendix C. A person having a beneficial interest in Shares that are held of
record in the name of another person, such as a broker or nominee, must act
promptly to cause the record holder to follow the steps summarized below
properly and in a timely manner to perfect whatever appraisal rights the
beneficial owner may have.
The following discussion is not a complete statement of the law relating to
appraisal rights and is qualified in its entirety by reference to Section 262.
This discussion and Section 262 should be reviewed carefully by any stockholder
who wishes to exercise statutory appraisal rights or who wishes to preserve the
right to do so, since failure to comply with the procedures set forth herein or
therein will result in the loss of appraisal rights. Stockholders of record who
desire to exercise their appraisal rights must satisfy all of the following
conditions. Stockholders cannot have consented in writing to the Merger.
A written demand for appraisal of such stockholder's Shares must be
delivered to the Company at the address set forth below within 20 days of the
date on which the Company mails notice to such stockholder of the approval of
the Merger and the effective date of the Merger. The Company intends to mail
notice of the Merger to stockholders as soon as practicable following the
Effective Time. The demand for appraisal must be executed by or for the
stockholder of record, fully and correctly, as such stockholder's name appears
on the Certificate or Certificates representing such stockholder's Shares. If
the Shares are owned of record in a fiduciary capacity, such as by a trustee,
guardian, or custodian, such demand must be executed by the fiduciary. If the
Shares are owned of record by more than one person, as in a joint tenancy or
tenancy in common, such demand must be executed by or for all record owners. An
authorized agent, including an agent for two or more record owners, may execute
the demand for appraisal for a stockholder of record; however, the agent must
identify the record owner and expressly disclose the fact that, in exercising
the demand, such person is acting as agent for the record owner.
A record owner, such as a broker, who holds Shares as a nominee for others,
may exercise appraisal rights with respect to the Shares held for all or less
than all beneficial owners of Shares as to which such person is the record
owner. In such cases the written demand for appraisal must set forth the number
of Shares covered by such demand. Where the number of Shares is not expressly
stated, the demand will be presumed to cover all Shares outstanding in the name
of such record owner. Beneficial owners who are not record owners and who intend
to exercise appraisal rights should instruct their record owners to comply
strictly with the statutory requirements with respect to the exercise of
appraisal rights.
A Stockholder who elects to exercise appraisal rights must mail or deliver
his or her written demand to:
Steck-Vaughn Publishing Corporation
c/o Harcourt General, Inc.
27 Boylston Street
Chestnut Hill, Massachusetts 02167
Attention: General Counsel
The written demand for appraisal must specify the stockholder's name and
mailing address, the number of Shares owned, and that the stockholder is thereby
demanding appraisal of his or her Shares.
Within 120 days after the date on which the Merger becomes effective (the
"Merger Date") any stockholder who has complied with the required conditions of
Section 262 may file a petition in the Delaware Court of Chancery (the "Delaware
Chancery Court") demanding a determination of the fair value of the Shares of
all stockholders who have so complied with such conditions. If a petition for an
appraisal is timely filed, after a hearing on such petition, the Delaware
Chancery Court will determine which stockholders are
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entitled to appraisal rights and will appraise the Shares owned by such
stockholders, determining the fair value of such Shares, exclusive of any
element of value arising from the accomplishment or expectation of the Merger,
together with a fair rate of interest, if any, to be paid upon the amount
determined to be the fair value. In determining fair value, the Delaware
Chancery Court is to take into account all relevant factors. In Weinberger v.
UOP, Inc., et al., decided February 1, 1983, the Delaware Supreme Court, in
discussing the considerations that could be taken into account in determining
fair value in an appraisal proceeding, stated that "proof of value by any
techniques or methods which are generally considered acceptable in the financial
community and otherwise admissible in court" should be considered and that "fair
price obviously requires consideration of all relevant factors involving the
value of a company." The Delaware Supreme Court stated that in making this
determination of fair value the court must consider market value, asset value,
dividends, earnings prospects, the nature of the enterprise and any other facts
which could be ascertained as of the date of the merger which throw any light on
future prospects of the merged corporation. Section 262 provides that fair value
is to be "exclusive of any element of value arising from the accomplishment or
expectation of the merger." In Weinberger, the Delaware Supreme Court construed
Section 262 to mean that "elements of future value, including the nature of the
enterprise, which are known or susceptible of proof as of the date of the merger
and not the product of speculation may be considered."
Within 120 days after the Merger Date, any stockholder who has complied
with the requirements for exercise of appraisal rights as discussed above and
stated in Section 262 is entitled, upon written request, to receive from the
Company a statement setting forth the aggregate number of Shares not voted in
favor of the Merger and with respect to which demands for appraisal have been
received and the aggregate number of holders of such Shares. Such statement must
be mailed within 10 days after the written request therefor has been received by
the Company or, if later, within 10 days after the expiration of the period for
delivery to the Company of appraisal demands.
STOCKHOLDERS CONSIDERING SEEKING APPRAISAL SHOULD HAVE IN MIND THAT THE
FAIR VALUE OF THEIR SHARES DETERMINED UNDER SECTION 262 COULD BE MORE THAN, THE
SAME AS OR LESS THAN THE CONSIDERATION THEY ARE TO RECEIVE PURSUANT TO THE
MERGER IF THEY DO NOT SEEK APPRAISAL OF THEIR SHARES. STOCKHOLDERS PURSUING
DISSENTERS' RIGHTS WILL NOT RECEIVE ANY PAYMENT FOR THEIR SHARES UNTIL
CONCLUSION OR SETTLEMENT OF THE APPLICABLE COURT PROCEEDINGS BUT WOULD RECEIVE
INTEREST THEREON AT THE TIME OF JUDGMENT. The cost of the appraisal proceeding
may be determined by the Delaware Chancery Court and assessed against such
parties as the Delaware Chancery Court deems equitable in the circumstances.
Upon application of a dissenting stockholder, the Delaware Chancery Court may
order that all or a portion of the expenses incurred by any dissenting
stockholder in connection with the appraisal proceeding, including without
limitation reasonable attorneys' fees and the fees and expenses of experts, be
charged pro rata against the value of all Shares entitled to appraisal.
Any stockholder who has duly demanded appraisal in compliance with Section
262 will not, after the Merger Date, be entitled to vote for any purpose the
Shares subject to such demand or to receive any dividends or other distributions
on such Shares, except for any dividends or distributions payable to
stockholders of record at a date prior to the Merger Date.
At any time within 60 days after the Merger Date, any stockholder will have
the right to withdraw his or her demand for appraisal and to accept the terms
offered pursuant to the Merger; after this period, the stockholder may withdraw
such stockholder's demand for appraisal only with the consent of the Company as
the Surviving Corporation. If no petition for appraisal is filed with the
Delaware Chancery Court within 120 days after the Merger Date by any stockholder
who has demanded appraisal, such stockholder's rights to appraisal will cease,
and such stockholder will be entitled to receive the Merger Consideration.
Inasmuch as the Company has no obligation to file such a petition, and has no
present intention to do so, any stockholder who desires such a petition to be
filed is advised to file it on a timely basis. No petition timely filed in the
Delaware Chancery Court demanding appraisal shall be dismissed as to any
stockholder without the approval of the Delaware Chancery Court, and such
approval may be conditioned upon such terms as the Delaware Chancery Court deems
just.
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SECTION 262 OF THE GENERAL CORPORATION
LAW OF THE STATE OF DELAWARE
SEC.262. APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec.228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec.251 (other than a merger effected pursuant to sec.251
(g) of this title), sec.252, sec.254, sec.257, sec.258, sec.263 or sec.264 of
this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec.251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec.251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depositary receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec.253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to sec.228 or
sec.253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
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<PAGE> 55
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consultation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register of Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
C-5
<PAGE> 56
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effect date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
C-6
<PAGE> 57
APPENDIX D
CERTAIN INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS OF
THE COMPANY, HARCOURT, NEC AND MERGER SUB
Terms used herein without definition shall have the meanings assigned thereto in
the Information Statement.
DIRECTORS AND EXECUTIVE OFFICERS OF STECK-VAUGHN PUBLISHING CORPORATION
The table below identifies the current directors and executive officers of
the Company, along with their offices, positions and ages. All such persons are
citizens of the United States of America.
<TABLE>
<CAPTION>
NAME AGE OFFICE AND POSITION
- ----------------------------------------- --- -----------------------------------------
<S> <C> <C>
Leonard W. Jaffe......................... 78 Director
Manuel J. Justiz......................... 48 Director
Michael R. Klein......................... 55 Director
N. Colin Lind............................ 41 Director
Richard A. Smith......................... 72 Director, Chairman of the Board and Chief
Executive Officer
Brian J. Knez............................ 39 Director, President
Robert A. Smith.......................... 38 Director
John R. Cook............................. 56 Director, Senior Vice President & Chief
Financial
Officer
Eric P. Geller........................... 50 Senior Vice President, General Counsel
and
Peter Farwell............................ 54 Secretary Vice President -- Corporate
Relations
James P. Levy............................ 57 Vice President and Chief Operating
Officer
Paul F. Gibbons.......................... 46 Vice President and Treasurer
Gerald T. Hughes......................... 40 Vice President -- Human Resources
Michael Panutich......................... 49 Vice President -- General Auditor
Stephen C. Richards...................... 42 Vice President and Controller
</TABLE>
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<PAGE> 58
DIRECTORS AND EXECUTIVE OFFICERS OF STECK-VAUGHN PUBLISHING CORPORATION
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 the Company and certain other
information are set forth below. Unless otherwise indicated, the business
address of each such director and executive officer is c/o Harcourt General,
Inc., 27 Boylston Street, Chestnut Hill, Massachusetts 02167. Unless otherwise
indicated, each occupation set forth opposite an individual's name refers to
employment with the Company. Biographical information regarding Messrs. Richard
A. Smith, Brian J. Knez, Robert A. Smith, and John R. Cook, all of whom are
directors and/or executive officers of the Company, and Eric P. Geller, James P.
Levy, Peter Farwell, Paul F. Gibbons, Gerald T. Hughes, Michael Panutich, and
Stephen C. Richards, all of whom are executive officers of the Company, is
included under the subcaption "Directors and Executive Officers of Harcourt
General, Inc." in this Appendix D. All directors and executive officers listed
below are citizens of the United States. To the extent known by the Company, no
executive officer, director or affiliate of the Company currently intends to
tender or sell Shares owned or held by such person.
<TABLE>
<CAPTION>
NAME POSITION
- ------------------------------ -------------------------------------------------------------
<S> <C>
Leonard W. Jaffe.............. Disinterested Director; Private investor and consultant, Vice
Chairman of the Board of NEC from July 1989 to June 1997.
Director of NEC from 1976 to June 1997.
Manuel J. Justiz.............. Disinterested Director; Dean of the College of Education,
University of Texas at Austin, since 1990. Director of the
National Institute of Education, Washington, D.C. from 1982
to 1985. Director of Wackenhut Corrections Corporation.
Michael R. Klein.............. Disinterested Director; Partner, Wilmer, Cutler & Pickering
law firm since 1974. Director of NEC from May 1991 to June
1997 and Perini Corporation since January 1997. Chairman of
Realty Information Group, Inc. since 1987.
N. Colin Lind................. Disinterested Director; Managing Director of Richard C. Blum
& Associates, L.P. since 1986.
</TABLE>
D-2
<PAGE> 59
DIRECTORS AND EXECUTIVE OFFICERS OF HARCOURT GENERAL, INC.
The table below identifies the current directors and executive officers of
Harcourt, along with their offices, positions and ages. All such persons are
citizens of the United States of America.
<TABLE>
<CAPTION>
NAME AGE OFFICE AND POSITION
- -------------------------------- --- -------------------------------------------------------------
<S> <C> <C>
Richard A. Smith................ 72 Director, Chairman of the Board, and Chief Executive Officer
Brian J. Knez................... 39 Director, President and Co-Chief Operating Officer
Robert A. Smith................. 38 Director, President and Co-Chief Operating Officer
John R. Cook.................... 56 Senior Vice President and Chief Financial Officer
Eric P. Geller.................. 50 Senior Vice President, General Counsel and Secretary
Peter Farwell................... 54 Vice President -- Corporate Relations
Paul F. Gibbons................. 46 Vice President and Treasurer
Michael F. Panutich............. 49 Vice President -- General Auditor
Gerald T. Hughes................ 40 Vice President -- Human Resources
Stephen C. Richards............. 42 Vice President and Controller
William F. Connell.............. 59 Director
Gary L. Countryman.............. 58 Director
Jack M. Greenberg............... 54 Director
Jeffrey R. Lurie................ 46 Director
Lynn Morley Martin.............. 57 Director
Maurice Segall.................. 68 Director
Paula Stern..................... 52 Director
Hugo Uyterhoeven................ 66 Director
Clifton R. Wharton, Jr.......... 71 Director
</TABLE>
D-3
<PAGE> 60
DIRECTORS AND EXECUTIVE OFFICERS OF HARCOURT GENERAL INC.
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; Chief Executive Officer of McDonald's
USA since July, 1997; 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; Co-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; Director
and President of the Company since June 1997; 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.
</TABLE>
D-4
<PAGE> 61
<TABLE>
<CAPTION>
NAME POSITION
- ------------------------------ -------------------------------------------------------------
<S> <C>
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; Director, Chairman and Chief
Executive Officer of the Company since June 1997; 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; Co-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; Director
and President of the Company since June 1997. 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. International Trade Commission; Alkire
Chairholder in International Business at Hamline
University; Director of Westinghouse Electric Corporation,
Wal-Mart Stores, Inc. and Avon Products, 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.
</TABLE>
D-5
<PAGE> 62
<TABLE>
<CAPTION>
NAME POSITION
- ------------------------------ -------------------------------------------------------------
<S> <C>
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;
Director, Senior Vice President & Chief Financial Officer
of the Company since June 1997; 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.; Vice President of NEC
since May 1997; and Senior Vice President, General Counsel
and Secretary of the Company since June 1997.
Peter Farwell................. Vice President -- Corporate Relations of Harcourt and of The
Neiman Marcus Group, Inc.; Vice President -- Corporate
Relations of the Company since June 1997.
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; Vice President and Treasurer of
the Company since June 1997.
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; Vice
President -- Human Resources of the Company since June
1997.
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; Vice President -- General
Auditor of the Company since June 1997.
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; Vice President and Controller of
the Company since June 1997.
</TABLE>
D-6
<PAGE> 63
DIRECTORS AND EXECUTIVE OFFICERS OF NEC
The table below identifies the current directors and executive officers of
NEC, along with their offices, positions and ages. All such persons are citizens
of the United States of America.
<TABLE>
<CAPTION>
NAME AGE OFFICE AND POSITION
- ------------------------------------------- --- ----------------------------------------------------
<S> <C> <C>
Richard A. Smith........................... 72 Director; Vice President
Brian J. Knez.............................. 39 Director; President and Chief Executive Officer
Robert A. Smith............................ 38 Director; Vice President
John R. Cook............................... 56 Vice President
Eric P. Geller............................. 50 Vice President and Secretary
Michael Banks.............................. 51 Vice President
Kathleen Bursley........................... 43 Vice President and Assistant Secretary
John R. Dilworth........................... 57 Vice President
Paul F. Gibbons............................ 46 Vice President and Treasurer
James P. Levy.............................. 57 Vice President
George W. Nelson, Jr....................... 50 Vice President
Stephen C. Richards........................ 42 Vice President and Controller
Robert R. Simons........................... 43 Vice President
Ernest H. Urquhart......................... 47 Vice President
</TABLE>
D-7
<PAGE> 64
DIRECTORS AND EXECUTIVE OFFICERS OF NEC
Biographical information regarding Messrs. Smith, Knez, Smith, Cook, Geller
and Gibbons is included under the subcaption "Directors and Executive Officers
of Harcourt General, Inc." in this Appendix D. The name, present principal
occupation or employment and material occupations, positions, offices or
employments during the last five years of each of Messrs. Banks, Dilworth, Levy,
Nelson, Simons and Urquhart and Ms. Bursley is set forth below. The business
address of each executive officer of NEC is 27 Boylston Street, Chestnut Hill,
Massachusetts 02167. All executive officers listed below are citizens of the
United States.
<TABLE>
<CAPTION>
NAME POSITION
- --------------------------------------------- ---------------------------------------------
<S> <C>
Michael Banks................................ Vice President and Controller of Harcourt
Brace & Company since 1992.
Kathleen Bursley............................. Vice President and General Counsel of
Harcourt Brace & Company since 1992.
John R. Dilworth............................. President of The Psychological Corporation
since 1992; Group Vice President of Harcourt
Brace & Company since June, 1997.
James P. Levy................................ Group Vice President of Educational
Publishing at Harcourt Brace & Company since
1992; President of Education Group at
Harcourt Brace & Company from 1993 to 1994;
President of Education & Trade Group at
Harcourt Brace & Company since 1995.
George W. Nelson, Jr......................... Vice President, Technology and Distribution
at Harcourt Brace & Company since January,
1993.
Robert R. Simons............................. Vice President for Finance at Harcourt Brace
& Company from 1992 to 1993; Senior Vice
President & Chief Financial Officer of
Harcourt Brace & Company since 1994.
Ernest H. Urquhart........................... Vice President, Human Resources at R.W.
Johnson Pharmaceutical Research Institute (a
Johnson & Johnson Company) prior to 1993;
Vice President, Human Resources &
Administrative Services at Fisons
Corporation from 1993 to 1996; Vice
President, Human Resources at Harcourt
Brace & Company since March, 1996.
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS OF SV ACQUISITION CORPORATION
The current directors of SV Acquisition Corporation are Richard A. Smith,
Brian J. Knez and Robert A. Smith. Biographical information regarding Messrs.
Smith, Knez and Smith is included under the subcaption "Directors and Executive
Officers of Harcourt General, Inc." in this Appendix D. The current executive
officers of Merger Sub are as follows: Brian J. Knez, President; John R. Cook,
Vice President; Eric P. Geller, Vice President and Secretary; and Paul F.
Gibbons, Vice President and Treasurer. The biographical information regarding
each of the individuals mentioned in the preceding sentence is included under
the subcaption "Directors and Executive Officers of Harcourt General, Inc." in
this Appendix D.
D-8
