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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) AUGUST 2, 1999
IDG BOOKS WORLDWIDE, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-24617 04-3078409
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
919 EAST HILLSDALE BLVD., SUITE 400, FOSTER CITY, CA 94404
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (650) 655-3000
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NOT APPLICABLE
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(Former Name or Former Address, if Changed Since Last Report.)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) On August 2, 1999, IDG Books Worldwide, Inc. (the "Company") acquired
all of the outstanding common stock of Macmillan General Reference USA
Inc. ("MGR"), from Pearson Education, Inc. ("Pearson"), for $83
million, subject to adjustments for changes in working capital. MGR is
a publisher of over 3,000 active titles and such leading brands as the
Frommer's Travel Guides(R), Weight Watchers(R)and Betty
Crocker(R)Dieting and Cookbooks, Webster's New World(TM)Dictionaries
and J.K. Lasser(TM)Tax Guides. Additionally the Company acquired the
travel website, frommers.com and related rights. The purchase price was
determined as a result of arm's length negotiations between senior
management of the Company and Pearson. The Company funded the
acquisition with approximately $83 million in borrowings based on a
credit agreement, dated July 30, 1999, between the Company, Bank
Boston, and a group of other banks. A copy of the Company's press
release dated August 2, 1999 is attached hereto as Exhibit 99.1 and is
incorporated herein by reference.
(b) Certain of the assets of MGR constitute plant, equipment and other
physical property, particularly furniture, fixtures and leasehold
improvements used in the business of MGR as described elsewhere herein,
and the Company intends to continue such use.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
The Company is currently evaluating the requirement to file historical
financial statements and pro forma financial information, and will file the
applicable financial information within 75 days of this reportable event.
(a) Financial Statements of Business Acquired.
To be filed by amendment when such financial statements are available.
(b) Pro Forma Financial Information.
To be filed by amendment when such pro forma financial information is
available.
(c) Exhibits Description
2.1 Stock Purchase Agreement dated June 29, 1999 between
Pearson Education, Inc. and IDG Books Worldwide, Inc.
10.1* Credit Agreement among IDG Books Worldwide, Inc., as
borrower, and a group of lending banks, dated July 30,
1999.
99.1 Press release of IDG Books Worldwide, Inc. dated August
2, 1999
* Incorporated by reference from the Registrant's Report on Form
10-Q (File No. 000-24617), filed with the Securities and
Exchange Commission on August 10, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
IDG Books Worldwide, Inc.
Date: August 17, 1999 By: /s/ James A. Doehrman
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JAMES A. DOEHRMAN
Vice President and Chief Financial Officer
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EXHIBIT INDEX
Exhibits Description
2.1 Stock Purchase Agreement dated June 29, 1999 between
Pearson Education, Inc. and IDG Books Worldwide, Inc.
10.1* Credit Agreement among IDG Books Worldwide, Inc., as
borrower, and a group of lending banks, dated July 30,
1999.
99.1 Press release of IDG Books Worldwide, Inc. dated August
2, 1999
* Incorporated by reference from the Registrant's Report on Form
10-Q (File No. 000-24617), filed with the Securities and
Exchange Commission on August 10, 1999.
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
dated as of June 29, 1999
between
PEARSON EDUCATION, INC.
and
IDG BOOKS WORLDWIDE, INC.
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS ....................................................................................1
SECTION 1.01. Certain Defined Terms............................................................1
SECTION 1.02. Other Defined Terms..............................................................8
SECTION 1.03. Terms Generally.................................................................10
ARTICLE II PURCHASE AND SALE..............................................................................10
SECTION 2.01. Purchase and Sale...............................................................10
SECTION 2.02. Purchase Price; Allocation of Purchase Price....................................10
SECTION 2.03. Closing.........................................................................11
SECTION 2.04. Closing Deliveries by the Seller................................................11
SECTION 2.05. Closing Deliveries by the Purchaser.............................................12
SECTION 2.06. Purchase Price Adjustments......................................................12
SECTION 2.07. Payments and Computations.......................................................14
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER...................................................15
SECTION 3.01. Incorporation and Authority of the Seller and its Affiliates....................15
SECTION 3.02. Incorporation and Qualification of the Company..................................16
SECTION 3.03. Capital Stock of the Company....................................................16
SECTION 3.04. No Conflict.....................................................................16
SECTION 3.05. Consents and Approvals..........................................................17
SECTION 3.06. Financial Information...........................................................17
SECTION 3.07. Absence of Certain Changes or Events............................................17
SECTION 3.08. Absence of Litigation...........................................................18
SECTION 3.09. Compliance with Laws............................................................18
SECTION 3.10. Governmental Licenses and Permits...............................................18
SECTION 3.11. The Assets......................................................................18
SECTION 3.12. Intellectual Property...........................................................19
SECTION 3.13. Employee Benefits Matters.......................................................20
SECTION 3.14. Taxes...........................................................................23
SECTION 3.15. Environmental Matters...........................................................25
SECTION 3.16. Material Contracts..............................................................25
SECTION 3.17. Brokers.........................................................................26
SECTION 3.18. Real Property...................................................................27
SECTION 3.19. Undisclosed Liabilities.........................................................27
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SECTION 3.20. Insurance.......................................................................27
SECTION 3.21. Powers of Attorney..............................................................27
SECTION 3.22. Related-Party Transactions......................................................28
SECTION 3.23. EXCLUSIVITY OF REPRESENTATIONS..................................................28
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER................................................28
SECTION 4.01. Incorporation and Authority of the Purchaser....................................28
SECTION 4.02. No Conflict.....................................................................29
SECTION 4.03. Consents and Approvals..........................................................29
SECTION 4.04. Absence of Litigation...........................................................29
SECTION 4.05. Securities Matters..............................................................29
SECTION 4.06. Financial Ability...............................................................30
SECTION 4.07. Brokers.........................................................................30
ARTICLE V ADDITIONAL AGREEMENTS..........................................................................30
SECTION 5.01. Conduct of Business Prior to the Closing........................................30
SECTION 5.02. Access to Information...........................................................33
SECTION 5.03. Confidentiality.................................................................35
SECTION 5.04. Regulatory and Other Authorizations; Consents...................................36
SECTION 5.05. Intercompany Arrangements.......................................................37
SECTION 5.06. Insurance.......................................................................40
SECTION 5.07. Non-Competition.................................................................41
SECTION 5.08. Financing.......................................................................42
SECTION 5.09. Further Action..................................................................42
SECTION 5.10. Ancillary Agreements; Transitional Services.....................................44
SECTION 5.11. Use of Macmillan Name and Mark..................................................44
ARTICLE VI EMPLOYEE MATTERS...............................................................................45
SECTION 6.01. Employees.......................................................................45
SECTION 6.02. Health and Welfare Benefits.....................................................46
SECTION 6.03. Retirement Plans................................................................47
SECTION 6.04. Severance Provisions............................................................47
ARTICLE VII TAX MATTERS....................................................................................48
SECTION 7.01. Tax Indemnities.................................................................48
SECTION 7.02. Refunds and Tax Benefits........................................................49
SECTION 7.03. Contests........................................................................50
SECTION 7.04. Preparation of Tax Returns......................................................52
SECTION 7.05. Cooperation and Exchange of Information.........................................52
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SECTION 7.06. Conveyance Taxes................................................................53
SECTION 7.07. Section 338(h)(10) Election and Allocations.....................................53
SECTION 7.08. Miscellaneous...................................................................54
ARTICLE VIII CONDITIONS TO CLOSING..........................................................................55
SECTION 8.01. Conditions to Obligations of the Seller.........................................55
SECTION 8.02. Conditions to Obligations of the Purchaser......................................55
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER..............................................................57
SECTION 9.01. Termination.....................................................................57
SECTION 9.02. Effect of Termination...........................................................57
SECTION 9.03. Waiver..........................................................................57
SECTION 9.04. Payment of Expenses under Certain Circumstances.................................58
ARTICLE X INDEMNIFICATION................................................................................58
SECTION 10.01. Indemnification by the Purchaser...............................................58
SECTION 10.02. Indemnification by the Seller..................................................60
SECTION 10.03. Notification of Claims.........................................................62
SECTION 10.04. Exclusive Remedies.............................................................63
SECTION 10.05. Certain Adjustments............................................................63
ARTICLE XI GENERAL PROVISIONS.............................................................................64
SECTION 11.01. Survival.......................................................................64
SECTION 11.02. Expenses.......................................................................64
SECTION 11.03. Notices........................................................................64
SECTION 11.04. Public Announcements...........................................................66
SECTION 11.05. Headings.......................................................................66
SECTION 11.06. Severability...................................................................66
SECTION 11.07. Entire Agreement...............................................................66
SECTION 11.08. Assignment.....................................................................66
SECTION 11.09. No Third-Party Beneficiaries...................................................67
SECTION 11.10. Amendment......................................................................67
SECTION 11.11. Governing Law; Submission to Jurisdiction, Waivers.............................67
SECTION 11.12. Recovery of Litigation Expenses................................................68
SECTION 11.13. Counterparts...................................................................68
SECTION 11.14. No Presumption.................................................................68
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EXHIBITS
Exhibit 1.01(a) Form of Viacom Ancillary Agreement
Exhibit 1.01(b) Form of Transfer Agreement
Exhibit 1.01(c) Form of International Distribution Agreement
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STOCK PURCHASE AGREEMENT, dated as of June 29, 1999, between PEARSON
EDUCATION, INC., a Delaware corporation (the "Seller"), and IDG BOOKS WORLDWIDE,
INC., a Delaware corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Seller wishes to sell to the Purchaser, and the Purchaser
wishes to purchase from the Seller, the 100 (being 100% of the) issued and
outstanding shares of the common stock (the "Shares") of Macmillan General
Reference USA Inc., a Delaware corporation (the "Company"), all upon the terms
and subject to the conditions set forth herein;
WHEREAS, in order that the Purchaser may acquire the Business without
also acquiring certain assets and liabilities that, prior to the Closing, have
been elements of the Company's business, the Company immediately prior to the
Closing will transfer such assets and liabilities to the Seller or an Affiliate
thereof (the "Transfer") pursuant to the terms of the Transfer Agreement (as
defined herein); and
WHEREAS, in connection with the sale of the Shares, the Seller is
willing to provide, or cause its Affiliates to provide, certain services to the
Purchaser upon the terms and conditions specified herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Action" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"Adjusted Assets" means, for the Business as of a particular
date of determination, total assets minus accrued royalties payable
(excluding for purposes of such calculation all (i) cash and cash
equivalents (including deposits-in-transit), (ii) accounts receivable
(including all applicable reserves and allowances for returns and bad
debts) and accounts payable, in each case subject to the next
succeeding sentence, (iii) property, plant and equipment, net, (iv)
intangible assets and goodwill, net, (v) other non-current assets, net
(except plant costs, net, which shall be included), (vi) bonus accruals
(including annual performance and sales related bonuses, retention
bonuses and change of control management bonuses), (vii) subject to the
next succeeding sentence, long-term
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liabilities or any liabilities of any nature other than accrued
royalties payable, (viii) liabilities for payroll costs, payroll taxes
and employee benefits, (ix) tax assets and liabilities, and (x)
intercompany receivables and payables with Seller and its other
Affiliates), calculated pursuant to "year-end" procedures (including a
physical inventory) as of the close of business on the date of
determination using the same accounting policies, principles and
methodologies for estimates used in preparing the 1998 Pro Forma
Financial Statements and the Statement of Adjusted Assets set forth in
Schedule 2.06(a) and using the Specified Accounting Policies.
Notwithstanding anything in the immediately preceding sentence to the
contrary, "Adjusted Assets" shall include: (i) net accounts receivable
and accrued liabilities and deferred revenues attributable to the
production and sale of the Company's "Chek Chart" products and (ii) net
subrights receivables and subrights suspense accrual.
"Affiliate" means, with respect to any specified Person, any
other Person that, directly or indirectly through one or more
intermediaries, Controls, is Controlled by or is under common Control
with such specified Person.
"Agreement" means this Agreement, including the Disclosure
Schedule, the other Schedules and the Exhibits and all amendments
hereto made in accordance with Section 11.10.
"Ahsuog" means Ahsuog Inc., a California corporation and an
Affiliate of the Seller.
"Ancillary Agreements" means the Viacom Ancillary Agreement,
the Transfer Agreement and the International Distribution Agreement.
"Assets" means the assets and properties of every type and
description that are owned, leased or licensed by the Company and used
primarily in connection with the Business (including the Imprints, the
Owned Intellectual Property, the Licensed Intellectual Property, the
Works, ISBN prefixes used solely in connection with the Works and all
rights under the Material Contracts).
"Base Price" means $83 million.
"Budgeted Gross Sales Amount" means the budgeted gross sales
for the Business during the period from and including the first day of
the Company's fiscal year 1999 through and including the last day of
the Company's fiscal month which immediately precedes the fiscal month
in which the Closing occurs, all as set forth in Schedule 2.06(e).
"Business" means the general reference publishing business
conducted on the date hereof by the Company, including all of the
Works, but specifically excluding (a)
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the business of publishing the Elements Titles and the titles published
under the imprints, series, colophons or brands The Complete Idiot's
Guides and The Lazy Way and (b) the library reference publishing
business.
"Business Day" means any day that is not a Saturday, a Sunday
or other day on which banks are required or authorized by Law to be
closed in the City of New York.
"Closing Adjusted Assets" means the Adjusted Assets as of the
effective time of the Closing, as set forth in the Final AA Statement.
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder.
"Contract" means any agreement, lease, license or sublicense,
evidence of indebtedness, mortgage, indenture, security agreement, deed
of trust or other contract, commitment or obligation.
"Control" means, as to any Person, the power to direct or
cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by Contract or
otherwise. The term "Controlled" shall have a correlative meaning.
"Disclosure Schedule" means the Disclosure Schedule delivered
by the Seller to the Purchaser on the date hereof.
"Elements Titles" means each of The Elements of Style, The
Elements of Writing and The Elements of Grammar and all derivative and
related works.
"Environmental Law" means any currently effective Law relating
to pollution or protection of the environment, including the use,
handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Materials, including the Resource Conservation
and Recovery Act (42 U.S.C. Section 6901 et seq., as amended), the
Comprehensive Environmental Response, Compensation and Liability Act
(42 U.S.C. Section 9601 et seq., as amended), the Toxic Substance Act
(15 U.S.C. Section 2601 et seq., as amended), the Clean Water Act (33
U.S.C. Section 466 et seq., as amended), and the Clean Air Act (42
U.S.C. Section 7401 et seq., as amended).
"Environmental Liability" means any claim or demand, order,
suit, obligation, Action, liability, cost (including the cost of any
investigation, testing, compliance or remedial action), damages
(consequential or direct), Loss or expense (including reasonable
attorneys' and consultants' fees and expenses) arising out of, relating
to or resulting from any Environmental Law or any environmental matter
or condition and
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related in any way to the Company, the Assets, the Business or this
Agreement or its subject matter.
"Environmental Permit" means any permit, approval,
identification number, License or other authorization required under or
issued pursuant to any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Final AA Statement" means the determination of the Closing
Adjusted Assets that is final and binding on the parties, either
through agreement by the parties or through the action of the
Independent Accounting Firm in the manner set forth in Section 2.06.
"Final Gross Sales Statement" means the determination of Prior
Month-End Gross Sales that is final and binding on the parties, either
through agreement by the parties or through the action of the
Independent Accounting Firm in the manner set forth in Section 2.06.
"Governmental Authority" means any United States federal,
state or local or any foreign government, governmental, regulatory or
administrative authority, agency or commission or court, tribunal or
judicial or arbitral body or any private arbitrator.
"Governmental Order" means any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by or
with any Governmental Authority.
"Hazardous Material" means (a) petroleum, petroleum products,
by-products or breakdown products, radioactive materials, friable
asbestos or polychlorinated biphenyls, and (b) any chemical, material
or substance defined or regulated as toxic or hazardous or as a
pollutant, contaminant or waste under any Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations thereunder.
"Imprints" means the imprints, series, colophons and brands
owned by or licensed to the Company and used in the Business, including
Frommer's, Places Rated, Monarch Notes, Howell Book House, J.K.
Lasser's, ARCO, Burpee, Webster's New World, Weight Watchers,
Unofficial Guides (including those published under the "Alpha
Reference" series), Betty Crocker's, Cassell's, Harraps, Macmillan,
Macmillan USA, The Essential Guides, Audel, America on Wheels, Spectrum
and Chek Chart, but excluding
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Alpha Reference, Teach Yourself in 24 Hours, The Complete Idiot's
Guide, The Lazy Way and the Elements Titles.
"Independent Accounting Firm" means (a) an independent
certified public accounting firm in the United States of international
recognition mutually acceptable to the Seller and the Purchaser or (b)
if the Seller and the Purchaser are unable to agree upon such a firm,
then each party shall select one such firm and those two firms shall
select a third firm, unaffiliated with either Seller or Purchaser, in
which event "Independent Accounting Firm" shall mean such third firm.
"Intellectual Property" means United States, international,
and foreign (a) patents, patent applications and statutory invention
registrations, including reissuances, divisions, continuations,
continuations in part, extensions and reexaminations thereof, all
inventions, all rights provided by international treaties or
conventions with respect to the foregoing, and all improvements
thereto, (b) trademarks, service marks, trade dress, logos, proprietary
icons, trade names, corporate names, internet domain names and other
source identifiers (whether or not registered) including all common law
rights therein, and registrations and applications for registration
therefor, all rights provided by international treaties or conventions
with respect to the foregoing, and all reissuances, extensions and
renewals of any of the foregoing and all goodwill associated therewith
(collectively, "Trademarks"), (c) copyrightable works, copyrights
(whether or not registered), and registrations and applications for
registration therefor, and all rights provided by international
treaties or conventions with respect to the foregoing (collectively,
"Copyrights"), (d) confidential and proprietary information, including
trade secrets, technology, know-how, formulae and customer and supplier
lists, (e) computer software (including source codes, data and related
documentation) and (f) all other proprietary rights.
"Interest Rate" means an interest rate per annum equal to the
average of the rate per annum publicly announced by Citibank, N.A. or
any successor thereto in New York, New York from time to time as its
"base" rate, on each day during the period for which interest is to be
paid.
"International Distribution Agreement" means the International
Distribution Agreement to be entered into on the Closing Date by the
Company, on the one hand, and the Seller or an Affiliate thereof, on
the other hand, in substantially the form of Exhibit 1.01(c), as the
same may be amended, supplemented or otherwise modified from time to
time.
"IRS" means the United States Internal Revenue Service.
"Knowledge of the Seller" or "Seller's Knowledge" or words of
similar import means the actual knowledge of any of the following
Persons: Robert Dancy, Traci Dolan,
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Philip Hoffman, Peter Jovanovich, Walter Kazmierczak, John LaVacca,
Gordon Macomber, William Oldsey and Lloyd Short (and, in the case of
Sections 3.12(b), (c) and (f) only, Marie Butler-Knight, Jennifer
Feldman, Peter Monte, Katherine Nebenhaus and Michael Spring), in each
case without specific investigation or inquiry by such Person.
"Law" means any federal, state, local or foreign statute, law,
ordinance, regulation, rule, code, order or other requirement or rule
of law.
"Leased Real Property" means any real property leased or
subleased by the Company.
"Licenses" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, filings,
qualifications, privileges, franchises and similar consents granted or
issued by any Governmental Authority.
"Lien" means any mortgage, deed of trust, pledge,
hypothecation, security interest, encumbrance, claim, lien or charge of
any kind, or any conditional sales Contract, title retention Contract
or other Contract to create any of the foregoing (it being understood
that a Contract which permits a purchaser to return items purchased
thereunder shall not be deemed to constitute a Lien solely by virtue
thereof).
"Manuscripts" means manuscripts or manuscripts in progress
created or to be created in connection with the Works, including all
computer files, notes, plates, film, negatives, bluelines, art boards,
laser generated proofs, treatments and illustrations relating thereto.
"Material Adverse Effect" means any event, change, occurrence
or development that has had or is reasonably expected to have a
material adverse effect on the business, assets, results of operations
or condition (financial or otherwise) of the Business; provided,
however, that any adverse effect arising out of or resulting from (a)
an event or series of events or circumstances affecting (i) the
publishing industry generally or the particular segment in which the
Business operates in any country in which the Business operates or (ii)
the United States economy generally or the economy generally of any
other country in which the Business operates or (b) the entering into
of this Agreement or the consummation of the transactions contemplated
hereby, shall be excluded in determining whether a Material Adverse
Effect has occurred.
"Permitted Liens" means the following Liens: (a) Liens for
Taxes, assessments or other governmental charges or levies that are not
yet due or payable or that are being contested in good faith by
appropriate proceedings; (b) statutory Liens of landlords and Liens of
carriers, warehousemen, mechanics, materialmen and repairmen and other
Liens imposed by Law for amounts not yet due; (c) Liens incurred or
deposits made in the ordinary course of business of the Business
consistent with past practice in connection
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with worker's compensation, unemployment insurance or other types of
social security; and (d) Liens not created by the Seller or the Company
which affect the underlying fee interest of any Leased Real Property.
"Person" means any natural person, general or limited
partnership, trust, corporation, limited liability company, firm,
association, Governmental Authority or other legal entity.
"Prior Month-End Gross Sales" means the aggregate gross sales
of the Business during the period from and including the first day of
the Company's fiscal year 1999 through and including the last day of
the Company's fiscal month which immediately precedes the fiscal month
in which the Closing Date occurs, calculated using the same accounting
policies, principles and methodologies used in preparing the Budgeted
Gross Sales Amount set forth in Schedule 2.06(e) and using the
Specified Accounting Policies.
"Purchase Price" means the Base Price, as such amount may be
adjusted pursuant to Sections 2.06(d) and (e).
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"Site" means any of the real properties currently owned or
leased by the Company, including all soil, subsoil, surface waters and
groundwater thereat.
"Specified Accounting Policies" means the specified accounting
policies referred to in Schedule 2.06(a), which are more fully
described in the Notes to the 1998 Pro Forma Financial Statements
included in Section 3.06 of the Disclosure Schedule.
"Subsidiary" of any Person means any corporation, partnership,
joint venture, limited liability company, trust, estate or other Person
of which (or in which) more than 50% of (a) the issued and outstanding
capital stock having ordinary voting power to elect a majority of the
board of directors of such corporation (irrespective of whether at the
time capital stock of any other class or classes of such corporation
shall or might have voting power upon the occurrence of any
contingency), (b) the interest in the capital or profits of such
partnership, joint venture or limited liability company or other
Person, or (c) the beneficial interest in such trust or estate is at
the time directly or indirectly owned or controlled by such Person, by
such Person and one or more of its other Subsidiaries or by one or more
of such Person's other Subsidiaries.
"Tax" or "Taxes" means all income, excise, gross receipts, ad
valorem, sales, use, employment, franchise, profits, gains, property,
transfer, payroll, intangibles or other taxes, fees, stamp taxes,
duties, charges, levies or assessments of any kind whatsoever (whether
payable directly or by withholding), together with any interest and any
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penalties, additions to tax or additional amounts imposed by any Tax
authority with respect thereto.
"Tax Returns" means all returns and reports (including
elections, declarations, disclosures, schedules, estimates and
information returns) required to be supplied to a Tax authority
relating to Taxes.
"Transfer Agreement" means the Transfer Agreement to be
entered into on the Closing Date by the Company, on the one hand, and
the Seller or an Affiliate thereof, on the other hand, in substantially
the form of Exhibit 1.01(b), as the same may be amended, supplemented
or otherwise modified from time to time after the Closing in accordance
with the provisions thereof.
"URLs" means all internet domain names that are used primarily
in connection with the Business and that are owned or otherwise used by
the Company, including: frommers.com, chekchart.com, arcotestprep.com,
jklasser.com, lovejoys.com, newmonarchnotes.com, mgr.com. and
webstersnewworld.com.
"Viacom" means Viacom International Inc., a Delaware
corporation.
"Viacom Ancillary Agreement" means the Assignment and
Assumption Agreement with respect to the Trademark License Agreement,
dated as of November 27, 1998, among Simon & Schuster, Inc., Viacom and
Pearson Inc., to be entered into by the Purchaser and Pearson Inc. on
the Closing Date in substantially the form of Exhibit 1.01(a), as the
same may be amended, supplemented or otherwise modified from time to
time in accordance with the provisions thereof.
"Viacom Stock Purchase Agreement" means the Stock Purchase
Agreement, dated as of May 17, 1998 as amended by Amendment No. 1
thereto, dated as of November 25, 1998, among Viacom, Pearson Inc., a
Delaware corporation, and Pearson plc, a corporation organized under
the laws of the United Kingdom.
"Works" means all of the literary works and related products
published by the Company as part of the Business under the Imprints,
under Contracts or otherwise, including original and revised editions,
frontlist and backlist titles, and any and all existing Works and Works
in progress, and regardless of whether such Works are stored or
published in print, electronic (including online) software or other
media.
SECTION 1.2. Other Defined Terms. The following terms have the
respective meanings defined for such terms in the Sections set forth below:
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<PAGE> 14
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Adjustment Allocation 7.07(b)
Advance Amount 2.06(d)
Affiliated Group 3.14(a)
Bonus Plan 6.01
Business Employees 3.13(a)
Closing 2.03
Closing Date 2.03
COBRA 6.02(c)
Company Recitals
Competing Business 5.07(d)
Copyright Office 5.09(c)
Copyrights 1.01 (definition of
"Intellectual Property")
Confidentiality Agreement 5.03(a)
Contest 7.03(b)
Election Allocations 7.07(b)
Elections 7.07(a)
ERISA Affiliate 3.13(a)
Financing 4.06(a)
Former Business Employees 3.13(a)
Forms 7.07(a)
GAAP 3.06
Indemnified Party 10.03(a)
Indemnifying Party 10.03(a)
Initial AA Statement 2.06(a)
Initial Gross Sales Statement 2.06(a)
Licensed Intellectual Property 3.12(a)
Losses 10.01(a)
Macmillan Limited Agreement 5.11
MADSP 7.07(b)
Material Contracts 3.16(a)
1998 Pro Forma Financial Statements 3.06
Non-Compete Lines 5.07(b)
Notice of Disagreement 2.06(b)
Owned Intellectual Property 3.12(a)
Pearson ERISA Plans 3.13(a)
Pearson Plans 3.13(a)
Post-Closing Date Tax Benefit 7.02(b)
Pre-Closing Period 7.01(d)
Products 5.07(b)
Purchaser Preamble
Purchaser Indemnified Parties 10.02(a)
Real Property Leases 3.18(b)
Recipients 5.03(b)
</TABLE>
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<PAGE> 15
<TABLE>
<S> <C>
Reimbursable Amount 5.05(d)
Reimbursable Amounts Maximum 5.05(d)
Returns Maximum 5.05(c)
Sales Difference 2.06(e)
Seller Preamble
Seller Indemnified Parties 10.01(a)
Seller Refunds 7.02(e)
Shares Recitals
Straddle Period 6.01(c)
Trademark License Agreement 5.11
Trademarks 1.01 (definition of
"Intellectual Property")
Transfer Recitals
Year 2000 Problem 3.12(g)
</TABLE>
SECTION 1.3. Terms Generally. (a) Words in the singular shall be held
to include the plural and vice versa and words of one gender shall be held to
include the other genders as the context requires, (b) the terms "hereof",
"herein" and "herewith" and words of similar import shall, unless otherwise
stated, be construed to refer to this Agreement and not to any particular
provision of this Agreement, and Article, Section, paragraph, Exhibit and
Schedule references are to the Articles, Sections, paragraphs, Exhibits and
Schedules to this Agreement unless otherwise specified, and (c) the word
"including" and words of similar import when used in this Agreement shall mean
"including, without limitation", unless otherwise specified.
ARTICLE II
PURCHASE AND SALE
SECTION 1.4. Purchase and Sale. On the terms and subject to the
conditions set forth in this Agreement, at the Closing, the Seller shall (or
shall cause Ahsuog to) sell, convey, assign, transfer and deliver to the
Purchaser, and the Purchaser shall purchase, acquire and accept from the Seller
(or Ahsuog), all of the Seller's (or Ahsuog's) right, title and interest in and
to the Shares.
SECTION 1.5. Purchase Price; Allocation of Purchase Price.
(1) The Purchaser shall pay the Base Price in cash to the Seller (or
its designee) at the Closing, as provided in Section 2.05(a). The Base Price
shall be subject to adjustment after the Closing as set forth in Section 2.06.
(2) Subject to any allocation pursuant to Section 7.07, all of the
Purchase Price shall be allocated to the Shares. The Seller and the Purchaser
shall report the federal, state,
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<PAGE> 16
local and foreign Tax consequences of the transaction contemplated by this
Agreement in a manner consistent with such allocation. The Seller and the
Purchaser further covenant and agree not to take a position with respect to
Taxes that is inconsistent with such allocation on any Tax Return or otherwise,
except as may be required by Law; provided, however, that if any Tax authority
makes or proposes an allocation with respect to the Purchase Price which differs
materially from such allocation, each of the Purchaser and the Seller shall have
the right, at its election and expense, to contest such Tax authority's
determination. In the event of such a contest, the other party agrees to
cooperate reasonably with the contesting party, consistent with the provisions
of Article VII. Each party shall provide the other party with all notices and
information reports filed with Tax authorities and agencies with respect to the
allocation of the Purchase Price.
SECTION 1.6. Closing. Subject to the terms and conditions of this
Agreement, the sale and purchase of the Shares contemplated hereby shall take
place at a closing (the "Closing") to be held at 10:00 a.m., New York City time,
on the first to occur of August 2, 1999, August 30, 1999, September 27, 1999 and
November 1, 1999 following the satisfaction or waiver of the conditions to the
obligations of the parties set forth in Sections 8.01 and 8.02, at the offices
of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, New York, or at such
other time or on such other date or at such other place as the Seller and the
Purchaser may mutually agree upon (the day on which the Closing takes place
(regardless of when the Closing is deemed effective) being the "Closing Date").
The Closing shall be deemed effective as of the close of business on the Closing
Date or, if the Closing Date is the first Business Day of the Company's fiscal
month, as of the close of business on the last day of the immediately preceding
fiscal month. The parties agree to use their best efforts to cause the Closing
Date to be August 2, 1999.
SECTION 1.7. Closing Deliveries by the Seller. At the Closing, the
Seller shall deliver or cause to be delivered to the Purchaser:
(1) stock certificates evidencing the Shares, duly endorsed in blank or
accompanied by stock powers duly executed in blank;
(2) a receipt for the Base Price;
(3) executed copies of the Ancillary Agreements required to be
delivered by the Seller pursuant to Section 8.02(h);
(4) a duly completed and executed certification of non-foreign status
pursuant to Section 1445(b)(2) of the Code;
(5) resignations of each director and officer of the Company; and
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<PAGE> 17
(6) all certificates and other documents required to be delivered on
the Closing Date pursuant to Section 8.02.
SECTION 1.8. Closing Deliveries by the Purchaser. At the Closing, the
Purchaser shall deliver to the Seller:
(1) the Base Price by wire transfer in immediately available funds, to
an account or accounts designated at least one Business Day prior to the Closing
Date by the Seller in a written notice to the Purchaser;
(2) any required stock transfer tax stamps;
(3) executed copies of the Ancillary Agreements required to be
delivered by the Purchaser pursuant to Section 8.01(f); and
(4) all certificates and other documents required to be delivered on
the Closing Date pursuant to Section 8.01.
SECTION 1.9. Purchase Price Adjustments.
(1) As promptly as practicable, but no later than 90 days after the
Closing Date, the Purchaser shall prepare and deliver to the Seller (i) a
statement of Adjusted Assets (including the related notes and schedules thereto)
as of the effective time of the Closing, which shall set forth the Purchaser's
determination of the Closing Adjusted Assets and shall set forth in detail the
amounts underlying such calculation in the same format and detail as in Schedule
2.06(a) (the "Initial AA Statement") and (ii) a statement (including the related
notes and schedules thereto) which shall set forth the Purchaser's determination
of the Prior Month-End Gross Sales and shall set forth in detail the amounts
underlying such calculation (the "Initial Gross Sales Statement"). The Purchaser
shall certify to the Seller at the time of delivery of the Initial AA Statement
and the Initial Gross Sales Statement that (x) the Initial AA Statement
(including the computation of Closing Adjusted Assets set forth therein) was
prepared using the same accounting policies, principles, methodologies and
estimates used in preparing the 1998 Pro Forma Financial Statements and the
Statement of Adjusted Assets as of December 31, 1998 as set forth in Schedule
2.06(a) and using the Specified Accounting Policies and (y) the Initial Gross
Sales Statement was prepared using the same accounting policies, principles and
methodologies used in preparing the Budgeted Gross Sales Amount set forth in
Schedule 2.06(e) and using the Specified Accounting Policies. At all times
during the 45 Business Days immediately following the Seller's receipt of the
Initial AA Statement and the Initial Gross Sales Statement, the Seller and its
representatives will be permitted reasonable access during normal business hours
to review at the Company's offices the work papers (including work papers of the
Purchaser's or the Company's accountants and other advisors) relating to the
Initial AA Statement or the Initial Gross Sales Statement, as well as all of the
books and records relating to the operations and finances of the Business with
respect to the period up to and including the
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<PAGE> 18
Closing Date, and the Purchaser shall make available its and the Company's
employees and accountants responsible for the preparation of the Initial AA
Statement or the Initial Gross Sales Statement in order to respond to the
inquiries of the Seller related thereto; provided, however, that any such review
shall be conducted in such a manner as not to interfere unreasonably with the
operations of the Company.
(2) The Seller shall notify the Purchaser in writing (the "Notice of
Disagreement") within 45 Business Days after receiving the Initial AA Statement
and the Initial Gross Sales Statement if the Seller disagrees with the
Purchaser's calculation of either the Closing Adjusted Assets or Prior Month-End
Gross Sales, which Notice of Disagreement shall set forth in reasonable detail
the basis for such dispute and the U.S. Dollar amounts involved and the Seller's
good faith estimate of the Closing Adjusted Assets or Prior Month-End Gross
Sales, as the case may be. If the Seller does not deliver a Notice of
Disagreement with respect to the Initial AA Statement or the Initial Gross Sales
Statement to the Purchaser within such 45 Business Day period, then the Initial
AA Statement or the Initial Gross Sales Statement (as applicable) shall be
deemed to have been accepted by the Seller, shall become final and binding upon
the parties and shall be the Final AA Statement or the Final Gross Sales
Statement (as applicable).
(3) During the 30 Business Days immediately following the delivery of a
Notice of Disagreement with respect to the Initial AA Statement or the Initial
Gross Sales Statement, the Seller and the Purchaser shall seek in good faith to
resolve any differences that they may have with respect to any matter specified
in such Notice of Disagreement. If the Seller and the Purchaser resolve all such
differences during such 30 Business Day period, then the Initial AA Statement or
the Initial Gross Sales Statement (as applicable), as modified by the Seller and
the Purchaser's agreement, shall be the Final AA Statement or the Final Gross
Sales Statement (as applicable). If at the end of such 30 Business Day period
the Seller and the Purchaser have been unable to agree upon a Final AA Statement
or a Final Gross Sales Statement (as applicable), then the Seller and the
Purchaser shall submit to the Independent Accounting Firm for review and
resolution any and all matters that remain in dispute with respect to the
relevant Notice of Disagreement. The Purchaser and the Seller shall cause the
Independent Accounting Firm to use commercially practicable efforts to make a
final determination (which determination shall be binding on the parties hereto)
of the Closing Adjusted Assets or Prior Month-End Gross Sales (as applicable)
within 30 Business Days from such submission, and such final determination shall
be the Final AA Statement or Final Gross Sales Statement (as applicable). The
cost of the Independent Accounting Firm's review and determination shall be paid
by the party that has determined an amount of Closing Adjusted Assets or Prior
Month-End Gross Sales (as set forth in the Initial AA Statement or Initial Gross
Sales Statement or in the Notice of Disagreement, as applicable), that is the
greatest amount different from the Closing Adjusted Assets or Prior Month-End
Gross Sales (as applicable) on the Final AA Statement or Final Gross Sales
Statement (as applicable). During the 30 Business Day review by the Independent
Accounting Firm, the Purchaser and the Seller will each make available to the
Independent Accounting Firm interviews with such individuals and such
information, books and
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<PAGE> 19
records as may be reasonably required by the Independent Accounting Firm to make
its final determination.
(4) Within three Business Days after the Closing Date, the Seller shall
pay to the Purchaser an amount equal to $2,500,000 (the "Advance Amount"),
representing an advance against the Seller's potential obligations under the
next succeeding sentence. If (i) the sum of (x) the Closing Adjusted Assets (as
set forth in the Final AA Statement) plus (y) the Advance Amount is less than
$25,877,000, then the Seller shall pay to the Purchaser an amount equal to such
difference; or (ii) the sum of (x) the Closing Adjusted Assets (as set forth in
the Final AA Statement) plus (y) the Advance Amount exceeds $25,877,000, then
the Purchaser shall pay to the Seller an amount equal to such excess; in either
case within five Business Days after the Final AA Statement becomes final and
binding on the parties hereto and, in either case, together with interest on the
amount of such difference or excess from the Closing Date until the date of
payment at the Interest Rate. If the sum of (x) the Closing Adjusted Assets (as
set forth in the Final AA Statement) plus (y) the Advance Amount is equal to
$25,877,000, then neither the Purchaser nor the Seller shall owe any amount to
the other party pursuant to this Section 2.06(d).
(5) If the Prior Month-End Gross Sales (as set forth in the Final Gross
Sales Statement) are less than 80% of the Budgeted Gross Sales Amount (such
difference, the "Sales Difference"), then the Seller shall pay to the Purchaser
an amount equal to the product of (i) 0.85 multiplied by (ii) the Sales
Difference, such amount to be paid by the Seller to the Purchaser within five
Business Days after the Final Gross Sales Statement becomes final and binding on
the parties hereto.
(6) The Purchaser agrees that following the Closing through the date on
which payment if any, is made by either party pursuant to Section 2.06(d) or (e)
(as applicable) or, if the Final AA Statement or the Final Gross Sales Statement
indicates that no such payment is required, then through the date on which the
Final AA Statement or the Final Gross Sales Statement (as applicable) becomes
effective, the Purchaser will not take any actions that would make it impossible
or impracticable to calculate the Closing Adjusted Assets or Prior Month-End
Gross Sales in the manner and utilizing the methods required hereby. The
Purchaser further agrees that following the Closing through the date on which
payment, if any, is made pursuant to Section 2.06(b) of the Viacom Stock
Purchase Agreement (notice of which the Seller shall provide to the Purchaser),
the Purchaser will not take any actions that would make it impossible or
impracticable to calculate the Closing Net Assets (as such term is defined in
the Viacom Stock Purchase Agreement) in the manner and utilizing the methods
required by the Viacom Stock Purchase Agreement.
SECTION 1.10. Payments and Computations. Each party shall make each
payment due to the other party hereunder on the day when due in U.S. dollars by
wire transfer in immediately available funds. All computations of interest
hereunder shall be made on the basis of a year of 360 days, in each case for the
actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest is payable. Whenever any
14
<PAGE> 20
payment hereunder shall be stated to be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of payment
of interest.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Purchaser that, as of the
date hereof (after giving effect to the Transfer as if the Transfer occurred on
or prior to the date hereof):
SECTION 1.11. Incorporation and Authority of the Seller and its
Affiliates.
(1) The Seller is a corporation duly incorporated, validly existing and
in good standing under the laws of its jurisdiction of incorporation and has all
necessary corporate power and authority to enter into this Agreement and the
Ancillary Agreements to which the Seller is a party, to carry out its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by the Seller of
this Agreement and the Ancillary Agreements to which the Seller is a party, the
performance by the Seller of its obligations hereunder and thereunder and the
consummation by the Seller of the transactions contemplated hereby and thereby
have been duly authorized by all requisite corporate action on the part of the
Seller. This Agreement has been, and upon execution the Ancillary Agreements to
which the Seller is a party will be, duly executed and delivered by the Seller,
and (assuming due authorization, execution and delivery by the Purchaser) this
Agreement constitutes, and upon execution the Ancillary Agreements to which the
Seller is a party will constitute, legal, valid and binding obligations of the
Seller, enforceable against the Seller in accordance with their respective
terms.
(2) Each Affiliate of the Seller that is a party to one or more
Ancillary Agreements is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has or
prior to Closing will have all necessary corporate power and authority to enter
into the Ancillary Agreements to which it is a party, to carry out its
obligations thereunder and to consummate the transactions contemplated thereby.
The execution and delivery by each such Affiliate of the Ancillary Agreements to
which it is a party, the performance by such Affiliate of its obligations
thereunder and the consummation by such Affiliate of the transactions
contemplated thereby have been, or prior to Closing will have been, duly
authorized by all requisite corporate action on the part of such Affiliate. Upon
execution, each Ancillary Agreement will be duly executed and delivered by each
Affiliate of the Seller that is a party thereto, and (assuming due
authorization, execution and delivery by each party thereto that is not the
Seller or an Affiliate of the Seller) will constitute the legal, valid and
binding obligation of each such Affiliate that is a party thereto, enforceable
against each such Affiliate in accordance with its terms.
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<PAGE> 21
SECTION 1.12. Incorporation and Qualification of the Company. The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has the
corporate power and authority to conduct the Business as currently conducted and
to own, operate or lease the Assets. Except as set forth in Section 3.02 of the
Disclosure Schedule, the Company is duly qualified as a foreign corporation to
do business, and is in good standing, in each jurisdiction where the character
of the Assets or the nature of its activities in connection with the Business
makes such qualification necessary, except where the failure to be so qualified
or in good standing would not, individually or in the aggregate, have a Material
Adverse Effect.
SECTION 1.13. Capital Stock of the Company. The Shares constitute all
of the issued and outstanding shares of capital stock of the Company. The Shares
have been duly authorized and validly issued and are fully paid and
nonassessable and were not issued in violation of any pre-emptive rights. There
are no subscriptions, pre-emptive rights, options, warrants or rights of
conversion or other rights, agreements, arrangements or commitments relating to
the capital stock of the Company obligating the Company to issue or sell or to
purchase or redeem any of its shares of capital stock. Ahsuog owns the Shares,
beneficially and of record, free and clear of all Liens except for any Liens
arising out of, under or in connection with this Agreement or created by or
through the Purchaser or any of its Affiliates. There are no voting trusts,
stockholder agreements, proxies or other Contracts in effect with respect to the
voting or transfer of the Shares. The Shares were issued in compliance with all
applicable federal and state securities laws. The Company has no direct or
indirect Subsidiaries, whether or not consolidated, and no direct or indirect
equity interests in any other Person.
SECTION 1.14. No Conflict. Assuming all consents, approvals,
authorizations and other actions described in Section 3.05 have been obtained or
taken, and except as may result from any facts or circumstances relating to the
Purchaser or its Affiliates or as described in Section 3.04 of the Disclosure
Schedule, the execution, delivery and performance of this Agreement and the
Ancillary Agreements by each of the Seller and its Affiliates party thereto do
not and will not (a) violate or conflict with its or the Company's Certificate
of Incorporation, other constitutive documents or by-laws, (b) conflict with or
violate any Law or Governmental Order applicable to it or the Company or (c)
result in any breach of, or constitute a default (or event which with the giving
of notice or lapse of time, or both, would become a default) under, or give to
any Person any rights of termination, amendment, acceleration or cancellation
of, or give to any Person any additional rights or entitlement to increased,
additional, accelerated or guaranteed payments under, or result in the creation
of any Lien on any Shares or on any of the Assets pursuant to, any Contract,
License or other instrument to which it or the Company is a party or by which
any of the Shares or the Assets are bound or affected, except (i) for Liens
created by or through the Purchaser or any of its Affiliates or (ii) for
breaches, defaults, rights of termination, amendment, acceleration or
cancellation, additional rights or entitlement to payments, or Liens as would
not have, individually or in the aggregate, a Material Adverse Effect.
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<PAGE> 22
SECTION 1.15. Consents and Approvals. The execution and delivery of
this Agreement and the Ancillary Agreements by each of the Seller and its
Affiliates party thereto do not, and the performance of this Agreement and the
Ancillary Agreements by each of the Seller and its Affiliates party thereto will
not, require any consent, approval, authorization or other action by, or filing
with or notification to, any Governmental Authority, except (a) as described in
Section 3.05 of the Disclosure Schedule, (b) the notifications required by the
HSR Act and applicable filings under foreign antitrust and competition Laws, (c)
where failure to obtain such consent, approval, authorization or action, or to
make such filing or notification, would not, individually or in the aggregate,
have a Material Adverse Effect or (d) as may be necessary as a result of any
facts or circumstances relating solely to the Purchaser or its Affiliates.
SECTION 1.16. Financial Information. Subject to the exceptions set
forth in the Notes thereto, Section 3.06 of the Disclosure Schedule accurately
sets forth in all material respects, in accordance with the Specified Accounting
Policies, the unaudited pro forma balance sheet of the Business as of December
31, 1998, and the unaudited pro forma statement of operations of the Business
for the year then ended, together with the unaudited notes to such pro forma
statements (collectively, the "1998 Pro Forma Financial Statements"). The 1998
Pro Forma Financial Statements have been prepared on the basis of presentation
and using the Specified Accounting Policies described in the Notes thereto. The
1998 Pro Forma Financial Statements were prepared based upon the information
contained in the Company's books and records. The 1998 Pro Forma Financial
Statements (i) do not purport to present the financial position or results of
operations of the Business as a stand-alone entity in accordance with generally
accepted accounting principles ("GAAP") and (ii) are not a complete set of
financial statements under GAAP. The Purchaser acknowledges that the 1998 Pro
Forma Financial Statements do not reflect the financial position or results of
operations of the Business that would have occurred if the Business were a
separate, stand-alone business during the period presented.
SECTION 1.17. Absence of Certain Changes or Events. During the period
commencing on December 31, 1998 and ending on the date hereof, except (i) as
disclosed in the 1998 Pro Forma Financial Statements or in Section 3.06 or 3.07
of the Disclosure Schedule, (ii) for transfers of assets not constituting Assets
and for entering into Contracts to specify operating procedures and/or trade
practices among the Company and the Seller and certain affiliated entities, or
(iii) as contemplated by this Agreement, the Business has been conducted in all
material respects in the ordinary course consistent with past practice and there
has not occurred a Material Adverse Effect. In addition, except as set forth in
Section 3.07 of the Disclosure Schedule, during the period commencing on
December 31, 1998 and ending on the date hereof, the Company has not taken any
action referred to in Section 5.01(b) (other than any action referred to in
clause (ii) of Section 5.01(b) taken in the ordinary course of business).
SECTION 1.18. Absence of Litigation. Except as set forth in Section
3.08 of the Disclosure Schedule, there are no Actions pending or, to the
Knowledge of the Seller,
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<PAGE> 23
threatened against the Seller or the Company, or to which any of the Shares or
Assets are subject, that would reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.
SECTION 1.19. Compliance with Laws. Neither the Seller nor the Company
is in violation of any Laws or Governmental Orders applicable to the Business,
the Shares or any Asset, or by which any of them is bound, except (a) as set
forth in Section 3.09 of the Disclosure Schedule or (b) for violations the
existence of which would not, individually or in the aggregate, have a Material
Adverse Effect.
SECTION 1.20. Governmental Licenses and Permits. The Company holds all
Licenses necessary for the operation of the Business as currently operated by
the Company, and all of such Licenses are in full force and effect in all
material respects and the Company is in compliance with the terms of such
Licenses, except in each case (a) as set forth in Section 3.10 of the Disclosure
Schedule or (b) for such failures to be in full force and effect and violations,
the existence of which would not, individually or in the aggregate, have a
Material Adverse Effect.
SECTION 1.21. The Assets.
(1) Except (i) as set forth in Section 3.11(a) of the Disclosure
Schedule, and (ii) for certain assets and services currently made available to
the Company by entities that as of the date hereof are Affiliates of the
Company, the Assets, taken together with the assets, services and facilities to
be provided pursuant to the Ancillary Agreements, will, as of the Closing Date,
constitute all of the assets (other than people resources) material to the
conduct of the Business as conducted on the date of this Agreement.
(2) The Assets include, without limitation, (i) all furniture,
fixtures, computers, software, office equipment, books and records, files,
customer lists, subscription lists, mailing lists, computer and all other data
storage files and other items of personal property primarily used in the
Business, and all data relating to the Business maintained on the local area
networks and desktop computers primarily used in the Business (which data is not
or will not be on the Closing Date commingled with data relating to other
businesses of the Seller and its Affiliates, including Macmillan Library
Reference USA Inc.) and (ii) all Manuscripts.
(3) Except for (i) Permitted Liens and (ii) Liens created by or through
the Purchaser or any of its Affiliates, the Assets are owned, licensed or leased
by the Company, free and clear of all Liens.
SECTION 1.22. Intellectual Property.
(1) The Company owns or has the right to use (or as of the Closing Date
will own or have the right to use), in each case as and to the extent currently
used in the Business, all Intellectual Property that is material to the
operation of the Business as currently operated by the
18
<PAGE> 24
Company, including the (i) material Copyrights (including Copyrights in and to
the Works, the Imprints, the Manuscripts, the Company's internet websites that
have as their domain names, or are otherwise accessed by, the URLs, promotional
and marketing materials, catalogs and brochures, graphic design materials,
characters, cartoons and other copyrightable works as used in the Business),
(ii) material domain name registrations for the URLs, and (iii) Trademarks and
all rights therein listed on Section 3.12(a) of the Disclosure Schedule (as
applicable, "Owned Intellectual Property" or "Licensed Intellectual Property").
With respect to any and all copyrightable material contained in the Works which
is not owned by the Company, the Company either (i) is the licensee (under a
valid license) of all rights necessary to publish such copyrightable material in
the Works in the manner in which they are published on the date hereof, or (ii)
possesses all necessary consents and permissions from the respective copyright
owners for the publication, sale, distribution and other exploitation of such
copyrightable material as used in the Business, except in each case for such
invalidities which would not, and such consents and permissions which if not
possessed would not, individually or in the aggregate, have a Material Adverse
Effect. The Owned Intellectual Property and the Licensed Intellectual Property
collectively constitute all of the Intellectual Property material to the
continued operation of the Business, as conducted by the Company on the date
hereof. The Owned Intellectual Property and the Licensed Intellectual Property
are not subject to any Liens, other than Permitted Liens.
(2) To the Knowledge of the Seller, (i) the Owned Intellectual Property
and the Licensed Intellectual Property, and the use thereof in the operation of
the Business as conducted by the Company on the date hereof, do not infringe any
Copyright, Trademark or other Intellectual Property right of any Person, and
(ii) except as disclosed on Section 3.12(b) of the Disclosure Schedule, no
claim, written or oral, has been asserted which threatens that the use of such
Owned Intellectual Property or Licensed Intellectual Property in a manner
consistent with past practice does or may infringe upon the Intellectual
Property rights of any Person.
(3) Except as set forth in Section 3.12(c) of the Disclosure Schedule,
to the Knowledge of the Seller, no Person is engaging in any activity that
infringes in any material respect upon the Owned Intellectual Property or the
Company's rights in or to any Licensed Intellectual Property. Except as set
forth in Section 3.12(c) of the Disclosure Schedule or as would not,
individually or in the aggregate, have a Material Adverse Effect, the
consummation of the transactions contemplated by this Agreement will not result
in the termination or impairment of any of the Owned Intellectual Property or of
the Material Contracts pertaining to the Company's right to use the Licensed
Intellectual Property.
(4) Neither the Company nor any of its Affiliates is in breach of, or
default under, any term of any Contract relating to the Licensed Intellectual
Property, and, to Seller's Knowledge, no other party to any such Contract is in
breach thereof or default thereunder, except in each case for such breaches or
defaults as would not, individually or in the aggregate, have a Material Adverse
Effect.
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(5) Except as disclosed in Section 3.12(e) of the Disclosure Schedule,
with respect to registrations and applications relating to any Owned
Intellectual Property that have been filed with or recorded by any Governmental
Authority (including patent, Trademark, Copyright and other registrations and
applications), all of such registrations and applications are valid and in full
force and effect and all necessary registration, maintenance and renewal fees in
connection therewith have been paid and all necessary documents and certificates
in connection therewith have been filed with the relevant patent, Copyright,
Trademark or other authorities in the United States or foreign jurisdictions, as
applicable, for the purpose of maintaining the registrations or applications for
registration of such Owned Intellectual Property, except for such failures to
pay such fees or make such filings as would not, individually or in the
aggregate, have a Material Adverse Effect.
(6) To the Knowledge of the Seller, the Works do not contain defamatory
or unlawful statements, or statements that violate any Person's privacy,
publicity or similar right. To the Knowledge of the Seller, the Company uses
commercially reasonable efforts consistent with industry practice to attempt to
make the factual statements and data contained in the Works true and accurate in
all material respects.
(7) The Seller has (i) initiated a review and assessment of the
business operations of the Company (including those areas affected by suppliers
and vendors) that could reasonably be expected to be adversely affected by the
"Year 2000 Problem" (that is, the risk that computer applications used by the
Company (or its suppliers and vendors) in connection with the Business may be
unable to recognize, or perform properly date-sensitive functions involving,
certain dates prior to and any date on or after December 31, 1999), (ii)
developed a plan and timeline reasonably intended to address the Year 2000
Problem, and (iii) to date, implemented such plan substantially in accordance
with the timetable set forth in Section 3.12(g) of the Disclosure Schedule,
except in any such case as would not, individually or in the aggregate with
other such cases, have a Material Adverse Effect.
SECTION 1.23. Employee Benefits Matters.
(1) Section 3.13(a) of the Disclosure Schedule contains a true and
complete list of all employee benefit plans (within the meaning of Section 3(3)
of ERISA) and all other bonus, stock option, stock purchase, restricted stock,
incentive, deferred compensation, supplemental retirement, severance, pension,
profit sharing, stock ownership, phantom stock, savings, dependent care,
employee assistance, fringe benefit, medical, dental, post-retirement welfare,
retention, vacation, disability, death benefit or other material benefit plans,
programs or arrangements and all employment, termination, severance, change in
control or other Contracts with respect to which the Seller, the Company or any
of their Affiliates has any obligation and which are maintained, contributed to
or sponsored by (or, in the case of Contracts, have been entered into by) the
Seller, the Company or any entity that would be deemed a "single employer" with
the Seller or the Company under Section 414 of the Code or Section 4001 of ERISA
(each, an "ERISA Affiliate") with or for the benefit of (i) any current
employee, officer or director of
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the Seller, the Company or any of their ERISA Affiliates who is employed in the
Business (other than any such individual who is receiving long-term disability
benefits from the Seller or any of its Affiliates on the Closing Date)
(collectively, the "Business Employees") or (ii) any former employee, officer or
director of the Seller, the Company, Viacom or any of their respective ERISA
Affiliates who was previously employed in the Business (collectively, the
"Former Business Employees") (collectively, the "Pearson Plans"). Except as
disclosed in Section 3.13(a) of the Disclosure Schedule, each Pearson Plan is in
writing and the Seller has previously made available to the Purchaser a true and
complete copy of (i) each Pearson Plan (and any amendments thereto), (ii) the
most recently received IRS determination letter for each Pearson Plan that is
intended to be tax-qualified pursuant Section 401(a) of the Code, and (iii)
summary plan descriptions for each Pearson Plan which is an employee benefit
plan within the meaning of Section 3(3) of ERISA (the "Pearson ERISA Plans").
(2) Except as otherwise disclosed in Section 3.13(b) of the Disclosure
Schedule, none of the Pearson ERISA Plans (i) is a "multiemployer plan", within
the meaning of Section 3(37) or 4001(a)(3) of ERISA, or a "single-employer
plan", within the meaning of Section 4001(a)(15) of ERISA, for which the Seller
or the Company could incur liability under Section 4063 or 4064 of ERISA, or
(ii) provides or promises to provide retiree medical or life insurance benefits.
(3) Subject to such exceptions as would not, either individually or in
the aggregate, have a Material Adverse Effect:
(1) All Pearson Plans are maintained and administered in all
respects in accordance with their respective terms and are in all
respects in compliance with applicable Law, including, without
limitation, the provisions of ERISA and the Code.
(2) All contributions, insurance premiums, benefits and other
payments required to be made to or under each Pearson Plan with respect
to all periods prior to the Closing have been made or will be made
prior to the Closing. With respect to each Pearson Plan, (A) no
application, proceeding or other matter is pending before the IRS, the
Department of Labor or any other governmental agency; (B) no Action
(other than routine claims for benefits) is pending or, to the Seller's
Knowledge, threatened; and (C) to the Knowledge of Seller, no facts
exist which could give rise to an Action (other than routine claims for
benefits) which, if asserted, could result in a liability for the
Company or the plan assets.
(3) With respect to each Pearson ERISA Plan that is intended
to be tax-qualified under Section 401(a) of the Code, (A) a favorable
IRS determination letter is currently in effect and, since the date of
the last determination letter, the Pearson ERISA Plan has not been
amended or operated in a manner which would adversely affect its
qualified status, and no event has occurred which has caused or could
reasonably be
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expected to cause the loss of such status; and (B) there has been no
termination or partial termination within the meaning of Section
411(d)(3) of the Code.
(4) The Company, the Seller and its ERISA Affiliates have
complied in all respects with the provisions of Subtitle K, Chapter 100
of the Code, Section 4980B of the Code and Title I of ERISA with
respect to each Pearson Plan which is a group health plan within the
meaning of Section 5001(b)(1) of the Code, and no such group health
plan is a noncomplying group health plan within the meaning of Section
5000(c) of the Code.
(5) Business Employees have been properly characterized as
exempt or nonexempt under the Fair Labor Standards Act, and individuals
engaged in the Business and characterized as independent contractors by
the Company have been properly characterized as such.
(4) The Company is not directly or indirectly liable, and no
circumstances currently exist pursuant to which the Company would be jointly and
severally liable, with respect to any employee benefit plan within the meaning
of Section 3(3) of ERISA maintained or contributed to by the Seller or any ERISA
Affiliate that is subject to Section 302 or Title IV of ERISA or Section 412 of
the Code.
(5) Except as disclosed in Section 3.13(e) of the Disclosure Schedule,
neither the Seller nor the Company is a party to any collective bargaining or
other labor union Contract applicable to any Business Employees. As of the date
hereof, there is, to the Knowledge of the Seller, no material labor strike,
slowdown or work stoppage against the Seller or the Company pending or, to the
Knowledge of the Seller, threatened in writing, which may interfere in any
material respect with the business activities of the Business.
(6) Except as provided under the agreements and arrangements disclosed
in Section 6.04 of the Disclosure Schedule, the consummation of the transactions
contemplated by this Agreement will not (either alone or in conjunction with
another event, such as a termination of employment or other service) (i) entitle
any Business Employee or other Person to receive severance or other compensation
from the Company which would not otherwise be payable absent the consummation of
the transactions contemplated by this Agreement or (ii) cause the acceleration
of the time of payment or vesting of any award or entitlement to any Business
Employee.
(7) Schedule 3.13(g) sets forth a list of the Business Employees as of
the date hereof, which list is true and correct in all material respects. (1)
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SECTION 1.24. Taxes. Except as set forth on Section 3.14 of the
Disclosure Schedule:
(1) All material Tax Returns required to be filed by or on behalf of
the Company or any affiliated, consolidated, unitary or similar group of which
the Company is or was a member ("Affiliated Group") have been properly prepared
and duly and timely filed with the appropriate taxing authorities in all
jurisdictions in which such Tax Returns are required to be filed (after giving
effect to any valid extensions of time in which to make such filings) and all
such Tax Returns were true, complete and correct in all material respects.
(2) All material Taxes (whether or not shown on such Tax Returns)
payable by or on behalf of the Company either directly, as part of the
consolidated Tax Return of another taxpayer, or otherwise, have been fully and
timely paid.
(3) Adequate reserves or accruals for Taxes have been provided in the
books and records of the Company with respect to any period for which Tax
Returns have not yet been filed or for which Taxes are not yet due and owing.
(4) The Company has not executed or filed with the IRS or any other Tax
authority any Contract, waiver or other document or arrangement extending or
having the effect of extending the period for assessment or collection of Taxes
(including, but not limited to, any applicable statute of limitation), and no
power of attorney of the Company with respect to any Tax matter is currently in
force.
(5) The Company has complied in all material respects with all
applicable Laws relating to the payment of any withholding of Taxes and has duly
and timely withheld from employees' salaries, wages and other compensation and
has paid over to the appropriate Tax authorities all amounts required to be so
withheld and paid over for all periods under all such applicable Laws.
(6) Purchaser has received complete copies of (A) all material federal,
state, local and foreign income or franchise Tax Returns of the Company (or, in
the case of Tax Returns filed for an Affiliated Group, the portion of such
consolidated Tax Returns relating to the Company) relating to the taxable
periods since 1993 and (B) any audit report issued within the last three years
relating to any material Taxes due from or with respect to the Company or its
income, Assets or operations. All income and franchise Tax Returns filed by or
on behalf of the Company for the taxable years ended on the respective dates set
forth on Section 3.14 of the Disclosure Schedule have been examined by the
relevant Tax authority or the statute of limitations with respect to such Tax
Returns has expired.
(7) No claim has been made by a Tax authority in a jurisdiction where
the Company does not file Tax Returns such that it is or may be subject to
taxation by the jurisdiction.
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(8) All deficiencies asserted or assessments made as a result of any
examinations by the IRS or any other Tax authority of the Tax Returns of or
covering or including Seller or the Company have been fully paid, and there are
no other audits or investigations by any Tax authority in progress with respect
to any such Tax Returns, nor has the Seller or the Company received any notice
from any Tax authority that it intends to conduct such an audit or
investigation. No issue has been raised by a federal, state, local or foreign
Tax authority in any prior examination which, by application of the same or
similar principles, could reasonably be expected to result in a proposed
deficiency for any subsequent taxable period.
(9) Neither the Company nor any other Person (including the Seller) on
behalf of the Company has (A) filed a consent pursuant to Section 341(f) of the
Code or agreed to have Section 341(f)(2) of the Code apply to any disposition of
a subsection (f) asset (as such term is defined in Section 341(f)(4) of the
Code) owned by the Company, (B) agreed to or is required to make any adjustments
pursuant to Section 481(a) of the Code or any similar provision of Law by reason
of a change in accounting method initiated by the Company or has any knowledge
that the IRS has proposed any such adjustment or change in accounting method, or
has any application pending with any Tax authority requesting permission for any
changes in accounting methods that relate to the business or operations of the
Company, (C) executed or entered into a closing agreement pursuant to Section
7121 of the Code or any predecessor provision thereof or any similar provision
of Law with respect to the Company, or (D) requested any extension of time
within which to file any Tax Return, which Tax Return has since not been filed
prior to the expiration of such extension.
(10) The Seller is not a foreign person within the meaning of Section
1445 of the Code.
(11) The Company is not a party to any Tax sharing or similar Contract
or arrangement (whether or not written) pursuant to which it will have any
obligation to make any payments after the Closing, other than this Agreement.
(12) The Company is not subject to any private letter ruling of the IRS
or comparable rulings of other Tax authorities.
(13) There are no Liens as a result of any unpaid Taxes (other than
Taxes which are not yet due and payable) upon any of the Assets of the Company.
(14) The Company is not a party to any joint venture, partnership or
other arrangement that is treated as a partnership for federal income Tax
purposes.
SECTION 1.25. Environmental Matters. Except as disclosed in Section
3.15 of the Disclosure Schedule, to the Seller's Knowledge, the Company is in
compliance with all applicable
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Environmental Laws and has obtained and is in compliance with all applicable
Environmental Permits. Except as disclosed in Section 3.15 of the Disclosure
Schedule: (i) there are no pending or, to the Seller's Knowledge, threatened
Actions pursuant to or under Environmental Laws against the Seller or any of the
Seller's Affiliates (relating to the Business) or against the Company; (ii) to
the Seller's Knowledge, no releases of Hazardous Material at concentrations that
would be reasonably likely to give rise to Environmental Liabilities have
occurred at, from, in, to, on or under any Site; and (iii) to the Seller's
Knowledge, there are no (A) underground storage tanks, active or abandoned, (B)
polychlorinated biphenyl containing equipment or (C) friable asbestos containing
material at any Site, except for those the presence of which could not
reasonably be expected to result in the Company incurring Environmental
Liabilities.
SECTION 1.26. Material Contracts.
(1) Section 3.16(a) of the Disclosure Schedule lists each of the
following Contracts of the Company (such Contracts being "Material Contracts"):
(1) each Contract for the purchase or lease of inventory,
other materials or real or personal property with any supplier or for
the furnishing of services (including printing services and fulfillment
services and the development of electronic products) to the Business or
the Company (A) under the terms of which the Company (I) is likely to
pay or otherwise give consideration of more than $100,000 in the
aggregate during the calendar year ending December 31, 1999 or (II) is
likely to pay or otherwise give consideration of more than $200,000 in
the aggregate over the remaining term of such Contract (excluding in
the case of author contracts, for purposes of this clause (A), amounts
payable as royalties other than as a guarantee or minimum), and (B)
which cannot be canceled by the Company on 90 days' notice or less
without penalty or further payment;
(2) each Contract for the sale or lease of inventory or other
personal or real property or for the furnishing of services by the
Company which: (A) (I) is likely to involve consideration of more than
$50,000 in the aggregate during the calendar year ending December 31,
1999 or (II) is likely to involve consideration of more than $100,000
in the aggregate over the remaining term of the Contract, and (B)
cannot be canceled by the Company on 90 days' notice or less without
penalty or further payment;
(3) each Contract relating to indebtedness for borrowed money
of the Company or mortgaging, pledging or granting or creating a Lien
on any of its Assets, and each Contract evidencing any guaranty of the
Company of payment or performance by any other Person;
(4) any Contract for capital expenditures or leasehold
improvements involving expenditures of $50,000 individually (or
$250,000 in the case of multiple contracts providing for a series of
related capital expenditures or leasehold improvements);
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(5) any Contract entered into with an Affiliate of the Company
or the Seller or not made in the ordinary course of business of the
Business;
(6) any joint venture Contract or similar Contract;
(7) all Contracts (including, for this purpose, Contracts of
the Seller or any Affiliate thereof) that limit or purport to limit the
ability (insofar as it relates to the Business) of the Company to
compete in any line of business or with any Person or in any geographic
area or during any period of time after the Closing Date; and
(8) each Contract (A) with authors and similar content
providers, (B) with illustrators, graphic artists and voice talent, or
(C) by which the Company licenses or sublicenses to or from others the
use of any Intellectual Property, and each other Contract which is
still in full force and effect and set forth on the Dataroom Index
delivered on April 21, 1999 to the Purchaser in connection with the
Purchaser's due diligence investigation, in each case (AA) under the
terms of which the Company (I) is likely to pay or otherwise give
consideration of more than $25,000 in the aggregate during the calendar
year ended December 31, 1999 or (II) is likely to pay or otherwise give
consideration of more than $100,000 in the aggregate over the remaining
term of such Contract (excluding, for purposes of this clause (AA),
amounts payable as royalties other than as a guarantee or minimum) and
(BB) which cannot be canceled by the Company on 90 days' notice or less
without penalty or further payment.
(2) Except as disclosed in Section 3.16(b) of the Disclosure Schedule
and except as would not, individually or in the aggregate, have a Material
Adverse Effect, each Material Contract of the Company is valid and binding on
the Company and, to the Knowledge of the Seller, each other party thereto, and
is in full force and effect. Except as would not, individually or in the
aggregate, have a Material Adverse Effect, (i) the Company is not in breach of,
or default under, any Material Contract and (ii) to the Knowledge of the Seller,
no other party to any Material Contract is in breach of, or default under, such
Material Contract. Except to the extent that any consents set forth in Section
3.04 or Section 3.05 of the Disclosure Schedule are not obtained or as otherwise
contemplated by this Agreement, all of the Company's Material Contracts (other
than those which are terminated or expire prior to the Closing) shall continue
to be in full force and effect on the Closing Date immediately after giving
effect to the consummation of the transactions contemplated by this Agreement.
SECTION 1.27. Brokers. Except for fees and commissions which will be
paid by the Seller, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement and the Ancillary Agreements based
upon arrangements made by or on behalf of the Seller or its Affiliates.
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SECTION 1.28. Real Property.
(1) The Company does not own any real property.
(2) Section 3.18(b) of the Disclosure Schedule contains a list of all
Leased Real Property. All leases and subleases with respect to such Leased Real
Property (including all modifications, extensions or amendments thereto) (the
"Real Property Leases") are subject to no Liens except Permitted Liens.
(3) True and complete copies of the Real Property Leases have been made
available to the Purchaser by the Seller. Subject to the terms of the respective
Real Property Leases, the Company has a valid and subsisting leasehold or
subleasehold estate in each Leased Real Property. The Real Property Leases are
in full force and effect and neither the Company nor, to the Knowledge of the
Seller, any other party to any Real Property Lease is in default thereunder. The
Company has not sublet all or any portion of any Leased Real Property except as
set forth on Section 3.18(c) of the Disclosure Schedule.
SECTION 1.29. Undisclosed Liabilities. To the Seller's Knowledge, the
Company has no material liabilities of any kind or nature, whether direct,
accrued, absolute, contingent or otherwise, other than (a) those that are
reflected or disclosed in the Disclosure Schedule or the 1998 Pro Forma
Financial Statements, (b) those incurred in the ordinary course of business or
as otherwise permitted under this Agreement after December 31, 1998 and (c)
Assumed Liabilities (as defined in the Transfer Agreement) and liabilities which
the Seller has expressly agreed hereunder to incur or assume.
SECTION 1.30. Insurance. Section 3.20 of the Disclosure Schedule
contains a summary (including the names of the insurers, the expiration dates
thereof, a brief description and the basis, whether claims made or occurrence,
of the interests insured thereby and any deductibles or self-insurance amounts
associated with such interests) of all liability, property, workers'
compensation, media perils, products liability and other insurance policies
currently in effect that insure any of the Assets or the Business Employees or
the Business or affect or relate to the ownership, use or operation of any of
the Assets and that have been issued to the Seller, the Company or any of their
Affiliates. Each policy listed in Section 3.20 of the Disclosure Schedule is
valid and binding and in full force and effect, no premiums due thereunder have
not been paid, and none of the Seller, the Company or any of their Affiliates
has received any notice or reduction, cancellation or termination in respect of
any such policy or is in default thereunder.
SECTION 1.31. Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of the Company.
SECTION 1.32. Related-Party Transactions. Except as set forth in
Section 3.22 of the Disclosure Schedule, neither the Seller nor any Affiliate of
the Seller is currently a
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party to any material transaction or Contract with the Company or a party to any
material transaction or Contract with another Affiliate of the Seller (other
than the Company) relating to the Business.
SECTION 1.33. EXCLUSIVITY OF REPRESENTATIONS.
THE REPRESENTATIONS AND WARRANTIES MADE BY THE SELLER IN THIS AGREEMENT
ARE IN LIEU OF AND ARE EXCLUSIVE OF ALL OTHER REPRESENTATIONS AND WARRANTIES,
INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES. THE SELLER HEREBY DISCLAIMS
ANY SUCH OTHER OR IMPLIED REPRESENTATIONS OR WARRANTIES, NOTWITHSTANDING THE
DELIVERY OR DISCLOSURE TO THE PURCHASER OR ITS OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS OR REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION (INCLUDING
ANY FINANCIAL PROJECTIONS OR OTHER SUPPLEMENTAL DATA). THE PARTIES HERETO AGREE
THAT NO INVESTIGATION BY OR ON BEHALF OF THE PURCHASER INTO THE BUSINESS AND THE
COMPANY PRIOR TO THE CLOSING SHALL DIMINISH IN ANY WAY THE EFFECT OF ANY
REPRESENTATIONS OR WARRANTIES MADE BY THE SELLER IN THIS AGREEMENT OR SHALL
RELIEVE THE SELLER OF ANY OF ITS OBLIGATIONS UNDER THIS AGREEMENT.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller as follows:
SECTION 1.34. Incorporation and Authority of the Purchaser. The
Purchaser is a corporation duly incorporated, validly existing and in good
standing under the laws of Delaware and has all necessary corporate power and
authority to enter into this Agreement and the Ancillary Agreements to which it
is a party, to carry out its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and such Ancillary Agreements by the Purchaser, the
performance by the Purchaser of its obligations hereunder and thereunder and the
consummation by the Purchaser of the transactions contemplated hereby and
thereby have been duly authorized by all requisite corporate action on the part
of the Purchaser. This Agreement has been, and upon their execution such
Ancillary Agreements will be, duly executed and delivered by the Purchaser, and
(assuming due authorization, execution and delivery by the Seller or its
Affiliates) this Agreement constitutes, and upon their execution such Ancillary
Agreements will constitute, legal, valid and binding obligations of the
Purchaser enforceable against the Purchaser in accordance with their respective
terms.
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SECTION 1.35. No Conflict. Assuming all consents, approvals,
authorizations and other actions described in Schedule 4.03 have been obtained,
and except as may result from any facts or circumstances related to the Seller
or any of its Affiliates or as described in Schedule 4.02, the execution,
delivery and performance by the Purchaser of this Agreement and the Ancillary
Agreements to which the Purchaser is a party do not and will not (a) violate or
conflict with the certificate of incorporation, other constitutive documents or
by-laws of the Purchaser, (b) conflict with or violate any Law or Governmental
Order applicable to the Purchaser or (c) result in any breach of, or constitute
a default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, or give to any Person any rights of termination,
amendment, acceleration or cancellation of, or give to any Person any additional
rights or entitlement to increased, additional, accelerated or guaranteed
payments under, or result in the creation of any Lien on any of the material
assets of the Purchaser pursuant to, any Contract, License or other instrument
to which the Purchaser or any of its Affiliates is a party or by which any of
their respective assets is bound or affected, except as would not materially
impair the ability of the Purchaser to consummate the purchase of the Shares
from the Seller as contemplated by this Agreement.
SECTION 1.36. Consents and Approvals. The execution and delivery by the
Purchaser of this Agreement and each Ancillary Agreement to which the Purchaser
is a party do not, and the performance of this Agreement and each such Ancillary
Agreement by the Purchaser will not, require any consent, approval,
authorization or other action by, or filing with or notification to, any
Governmental Authority, except (a) the notifications required by the HSR Act and
applicable filings under foreign antitrust and competition laws, (b) where
failure to obtain such consent, approval, authorization or action, or to make
such filing or notification, would not prevent the Purchaser from performing any
of its material obligations under this Agreement and the Ancillary Agreements
and (c) as may be necessary as a result of any facts or circumstances relating
solely to Seller or its Affiliates.
SECTION 1.37. Absence of Litigation. No Action is pending or, to the
knowledge of the Purchaser, threatened before any Governmental Authority which
seeks to delay or prevent the consummation of the transactions contemplated
hereby or which would materially impair the ability of the Purchaser to
consummate the purchase of the Shares from the Seller as contemplated by this
Agreement.
SECTION 1.38. Securities Matters. The Purchaser understands that the
offering and sale of the Shares hereunder is intended to be exempt from the
registration requirements of the Securities Act pursuant to Section 4(2)
thereof. The Shares are being acquired by the Purchaser for its own account and
without a view to the public distribution of the Shares or any interest therein.
The Purchaser has sufficient knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of its investment
in the Shares, and the Purchaser is capable of bearing the economic risks of
such investment, including a complete loss of its investment in the Shares. In
evaluating the suitability of an investment in the Shares, the Purchaser has
relied solely upon the
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representations, warranties, covenants and agreements made by the Seller herein
and the Purchaser has not relied upon any other representations or other
information (whether oral or written and including any projections or
supplemental data) made or supplied by or on behalf of the Seller or any
Affiliate, employee, agent or other representative of the Seller. The Purchaser
understands and agrees that it may not sell or dispose of any of the Shares
other than pursuant to a registered offering under the Securities Act or in a
transaction exempt from the registration requirements of the Securities Act.
SECTION 1.39. Financial Ability.
(1) At the Closing, the Purchaser will obtain cash under its
then-existing credit facilities in an amount sufficient to enable it to
consummate the transactions contemplated by this Agreement, and as of the date
hereof, the Purchaser has obtained a firm and binding commitment for such credit
facilities. The Purchaser has provided a true and correct copy of such
commitment to the Seller. The financing required by the Purchaser to consummate
the transactions contemplated by this Agreement is collectively referred to
herein as the "Financing". The conditions to the Financing will each be
satisfied and the Financing will be available on a timely basis for the
transactions contemplated by this Agreement.
(2) The Purchaser has a net worth that is greater than $50 million.
SECTION 1.40. Brokers. Except for fees and commissions which will be
paid by the Purchaser, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement and the Ancillary Agreements based
upon arrangements made by or on behalf of the Purchaser.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 1.41. Conduct of Business Prior to the Closing.
(1) Unless the Purchaser otherwise agrees in writing and except as
otherwise set forth in this Agreement, the Transfer Agreement or Section 5.01 of
the Disclosure Schedule, between the date of this Agreement and the Closing
Date, the Seller and the Company will (i) conduct the Business only in the
ordinary course, and (ii) use commercially reasonable efforts to maintain,
preserve and protect the Assets and the Business, including preserving the
goodwill of the Business, and to keep available to the Company the services of
the key employees of the Business (except for retirements in the ordinary course
and except for individuals who are used in the Business and also in other
business units operated by Seller or any of its Affiliates, including the
individuals identified in Section 5.01(a) of the Disclosure Schedule); provided,
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however, that neither the Seller nor the Company shall be required to increase
the compensation of, or provide any other retention incentive to, any such key
employee beyond that currently provided.
(2) Except as expressly provided in this Agreement, the Transfer
Agreement or Section 5.01(b) of the Disclosure Schedule, between the date of
this Agreement and the Closing Date, the Seller will not permit the Company to
do any of the following in connection with the Business without the prior
written consent of the Purchaser:
(1) except in the ordinary course of business, grant any Lien
(other than a Permitted Lien) on any Asset (whether tangible or
intangible);
(2) establish or increase benefits under any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing,
stock option (including the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards),
stock purchase or other employee benefit plan, or otherwise increase
the compensation or benefits payable to or to become payable to any
Business Employees by the Seller or the Company, except, in any case
described above, (A) for the establishment of any such benefits in the
ordinary course of business for newly-hired employees, (B) as may be
necessary to preserve the services of key employees, after due
consultation with the Purchaser, or (C) as may be required by Law, by
applicable employment agreement or collective bargaining agreement or
by the terms of any Pearson Plan;
(3) except (A) in the case of newly-hired key employees, after
due consultation with the Purchaser, or (B) as may be necessary to
preserve the services of key employees, after due consultation with the
Purchaser, enter into any employment or severance agreement with any of
the Business Employees;
(4) except for (A) sales of inventory in the ordinary course
of business or (B) cash dividends by the Company to the Seller, sell,
assign, transfer, lease or otherwise dispose of any of the Assets of
the Company having a value individually exceeding $5,000, or an
aggregate value exceeding $25,000;
(5) (A) acquire (by merger, consolidation, acquisition of
stock or assets or otherwise) any Person or division thereof or (B)
other than trade payables incurred in the ordinary course of business,
incur any indebtedness for borrowed money (other than to the Seller) or
issue any debt securities or assume, grant, guarantee or endorse, or
otherwise as an accommodation become responsible for, the obligations
of any Person, or make any loans, cash advances or distributions of
cash (other than by the Company to the Seller);
(6) issue or sell any additional shares of the capital stock
of, or other equity interests in, the Company or any securities
convertible into or exchangeable for such
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shares or equity interests, or issue or grant any options, warrants,
calls, subscription rights or other rights of any kind to acquire
additional shares of such capital stock, such other equity interests,
or such securities;
(7) amend the certificate of incorporation, other constitutive
documents or by-laws of the Company;
(8) except to the extent that the Company is contesting the
same in good faith by appropriate proceedings, fail to pay or discharge
when due its liabilities or obligations;
(9) make any commitments or Contracts for capital expenditures
in excess of $10,000 individually (or $25,000 in the aggregate);
(10) except as required by GAAP, make any material change in
any method of accounting or accounting practice;
(11) redeem, purchase or otherwise acquire any shares of its
capital stock;
(12) enter into any Contract with an author or other content
provider under which aggregate advances (excluding, for purposes of
this clause (xii), amounts payable as royalties other than as a
guarantee or minimum) in excess of $50,000 are payable over the term of
the Contract;
(13) except for Contracts with respect to cooperative
advertising entered into in the ordinary course of business, enter into
any Contract with respect to marketing, promotion or advertising of the
Imprints or Works involving payments in excess of $50,000 or exceeding
one year in duration, or, unless in the ordinary course of business,
enter into any special promotions and discounts (such as back-to-school
promotions and discounts) and similar arrangements under which the
Company provides its customers with special or extraordinary terms of
sale;
(14) enter into any international licensing Contract or any
domestic licensing Contract involving payments in excess of $50,000
over the term of the Contract;
(15) enter into, amend, extend, otherwise modify or terminate
any Contract with the Seller or any of its Affiliates (other than any
such Contract which (A) has been entered into on or prior to the date
hereof and will be terminated at or prior to the Closing pursuant to
Section 8.02(g) or (B) is entered into after the date hereof and is
terminated at or prior to the Closing without further liability on the
part of the Company); or
(16) enter into any commitment or Contract to do any of the
foregoing.
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SECTION 1.42. Access to Information.
(1) From the date hereof until the Closing (upon reasonable notice to
and approval of the Seller, which shall not be unreasonably withheld) during
normal business hours with the purpose that an uninterrupted and efficient
transfer of the Business may be accomplished, the Seller shall, and shall cause
the officers, directors, employees, auditors and agents of the Company to (i)
afford the officers, employees and authorized agents and representatives of the
Purchaser reasonable access to the offices, Assets, Business Employees, books
and records of the Company and (ii) furnish to the officers, employees and
authorized agents and representatives of the Purchaser such additional financial
and operating data and other information regarding the Company as the Purchaser
may from time to time reasonably request; provided, however, that such
investigation shall not unreasonably interfere with any of the businesses or
operations of the Seller or any Affiliate of the Seller, including the Company
and the Business; and provided, further, that the Seller shall not be required
to provide (or cause to be provided) any such information or access to the
extent that such information or access would cause the Seller or the Company to
be in breach of any confidentiality restrictions applicable to it.
(2) The Seller shall, and shall cause its officers, employees and
representatives to, provide reasonable access for the Purchaser and the
Purchaser's independent auditors to the financial books and records of the
Company in connection with the Purchaser's preparation of such audited and
unaudited financial statements of the Company as the Purchaser may reasonably
determine are necessary to satisfy the requirements of its financing sources,
the Securities Act or the Exchange Act applicable to the Purchaser and its
Affiliates, including access to historical accounting records, records
pertaining to the pools from which costs are allocated or allocable to financial
statements and records pertaining to purchase price accounting entries which are
allocated or allocable to the financial statements. Under no circumstances shall
the Seller or any such officer, employee or representative have any liability
whatsoever (other than as expressly provided in this Agreement, it being
understood that nothing in this Section 5.02 shall affect the Purchaser's rights
to indemnification as expressly provided in this Agreement) to the Purchaser,
the Purchaser's independent auditors or otherwise to any Person or Governmental
Authority, including under the Securities Act or the Exchange Act, in connection
with such financial statements or the preparation or use thereof, and the
Purchaser shall indemnify, defend and hold harmless the Seller and each such
Person against and reimburse the Seller and each such Person for any and all
such liability and all related Losses. The Purchaser shall pay all expenses in
connection with the preparation of such financial statements, including any
expenses incurred by the Seller or the Company.
(3) The Seller shall deliver to the Purchaser no later than 30 days
after the end of each fiscal month prior to the Closing Date (commencing with
June 1999), the monthly management financial statements of the Company for such
month, prepared in a manner consistent with such statements as currently
generated on a monthly basis for the Company's management.
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(4) Without limiting the generality of Section 5.02(a), from the date
hereof until the Closing Date (upon reasonable notice to and approval of the
Seller, which shall not be unreasonably withheld) during normal business hours
and with the purpose that an uninterrupted and efficient transfer of the
Business may be accomplished, the Seller shall, and shall cause the officers,
directors, employees and agents of the Company to, provide to the Purchaser, in
each case as the Purchaser may from time to time reasonably request:
(1) (x) information regarding the Business Employees,
including census and benefit status information, historical payroll
records (including the compensation paid to each Business Employee
during the period commencing January 1, 1999 and ending on the Closing
Date) and tax withholding and other necessary tax-related data and (y)
assistance in obtaining from each Business Employee such information as
is necessary in order to enroll such Business Employee in the
Purchaser's benefit plans; and
(2) assistance with (A) developing procedures for the proper
allocation of misdirected cash receipts and the sharing of
claims/deductions information, (B) testing the information systems
interfaces specified in Schedule 5.10, (C) developing procedures for
processing returns from customers of the Business in accordance with
Section 5.05 and (D) any necessary transition of electronic ordering
procedures for customers of the Business;
provided, however, that the Seller shall not be required to provide any such
assistance or information if doing so would unreasonably interfere with any of
the businesses or operations of the Seller or any Affiliate of the Seller,
including the Company and the Business; and provided, further, that the Seller
shall not be required to, provide (or cause to be provided) any such information
or assistance to the extent that such information or assistance would cause the
Seller or the Company to be in breach of any confidentiality restrictions
applicable to it.
(5) During the period commencing on the Closing Date and ending 120
days after the Closing Date (upon reasonable notice to and approval of the
Seller, which shall not be unreasonably withheld) and during normal business
hours, the Seller shall, and shall cause the officers, directors, employees and
agents of the Seller to, continue to provide the assistance described in Section
5.02(d) and clause (ii) of Section 5.02(a); provided, however, that the Seller
shall not be required to provide any such assistance or information if so doing
would interfere with any of the businesses or operations of the Seller or any
Affiliate of the Seller; and provided; further however, that the Seller shall
not be required to provide (or cause to be provided) any such assistance to the
extent that such assistance would cause the Seller to be in breach of any
confidentiality restrictions applicable to it.
(6) Notwithstanding anything in this Section 5.02 to the contrary, (i)
neither the Seller nor any of its directors, officers, employees, auditors or
agents shall have any liability to the Purchaser or any Affiliate thereof in
respect of any inaccuracy or omission in any of the
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information provided to the Purchaser pursuant to this Section 5.02 (except as
otherwise expressly provided in this Agreement), and (ii) regardless of whether
the Seller provides all particular information or assistance reasonably
requested by the Purchaser pursuant to Sections 5.02(d) and (e), the Seller
shall be deemed to have complied with its obligation to provide such information
or assistance if it uses commercially reasonable efforts to do so.
(7) For a period to extend from the Closing Date through ninety days
after the Closing Date, the Seller shall, and shall cause its Affiliates to, for
each Work or Imprint displayed, listed or featured on the MacmillanUSA.com or
the Macmillanonline.com websites (the "Seller's Websites") on the Closing Date,
(i) retain the content of such Work or Imprint on the Seller's Websites, except
that Seller shall have no obligation to update such content and (ii) provide a
reasonably prominent hyperlink (consistent with other hyperlinks on such
websites) on the web page featuring such Work or Imprint through standard
Internet protocols to the MGR.com website homepage. Notwithstanding the
foregoing, the Seller shall not be precluded from discontinuing either of the
aforesaid websites in its sole discretion at any time, and upon any such
discontinuation the Seller's obligations under this paragraph with respect to
the discontinued website(s) shall terminate.
SECTION 1.43. Confidentiality.
(1) The terms of the letter agreement dated as of February 12, 1999
(the "Confidentiality Agreement") between the Seller and the Purchaser are
hereby incorporated herein by reference and shall continue in full force and
effect until the Closing, at which time the obligations of the Purchaser under
this Section 5.03(a) and the Confidentiality Agreement shall terminate but only
in respect of that portion of the Evaluation Material (as defined in the
Confidentiality Agreement) exclusively relating to the transactions contemplated
by this Agreement and to the Business. If this Agreement is, for any reason,
terminated prior to the Closing, the Confidentiality Agreement shall nonetheless
continue in full force and effect in all respects.
(2) From and after the Closing Date, the Seller shall, and shall cause
its Affiliates and their respective officers, directors, employees and advisors
(collectively, the "Recipients") to, keep confidential any information relating
to the Business, except for any such information that (i) is available to the
public on the Closing Date, (ii) thereafter becomes available to the public
other than as a result of a disclosure by the Seller or any of its Recipients,
or (iii) is or becomes available to Seller or any of its Recipients after the
Closing Date on a non-confidential basis from a source that to the Seller's or
such Recipient's knowledge is not prohibited from disclosing such information to
Seller or such Recipient by a legal, contractual or fiduciary obligation to any
other Person; provided, however, that nothing contained in this Section 5.03(b)
shall prohibit Seller from disclosing any information in connection with any
Action involving the Seller or any of its Affiliates that relates to (w) the
Agreement Relating to Names and Marks dated November 8, 1993 by and between
Macmillan Inc. and Macmillan Limited, (x) the Viacom Stock Purchase Agreement or
any of the transactions contemplated
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thereby, (y) the Stock Purchase Agreement dated July 2, 1998 among Pearson Inc.,
Pearson plc, and Hicks, Muse Books LLC or any of the transactions contemplated
thereby or (z) any matter in respect of which indemnification or any other
remedy is being sought from the Seller or any Affiliate thereof in respect of
this Agreement or any Ancillary Agreement. If Seller or any of its Recipients is
required to disclose any such information in connection with any Action (other
than an Action referred to in clause (w), (x), (y) or (z) above) in response to
a court order or as otherwise required by Law or administrative process, the
Seller shall inform the Purchaser in writing of such obligation as soon as
possible after it is informed of it and, if possible, before any information is
disclosed, and shall cooperate with Purchaser as reasonably requested thereby,
so that a protective order or other appropriate remedy may be obtained by the
Purchaser or any Person designated by the Purchaser which then owns the
Business. If the Seller or a Recipient is obligated to make the disclosure, it
shall only make the disclosure to the extent to which it is so obligated, but
not further or otherwise.
(3) From and after the date of this Agreement, the Purchaser shall, and
shall cause its Recipients to, keep confidential any information relating to
Viacom, the Viacom Stock Purchase Agreement and related ancillary agreements and
the Assumed Business (as defined in the Transfer Agreement), except for any such
information that (i) is available to the public on the date of this Agreement,
(ii) thereafter becomes available to the public other than as a result of a
disclosure by the Purchaser or any of its Recipients, or (iii) is or becomes
available to Purchaser or any of its Recipients after the Closing Date on a
non-confidential basis from a source that to the Purchaser's or such Recipient's
knowledge is not prohibited from disclosing such information to the Purchaser or
such Recipient by a legal, contractual or fiduciary obligation to any other
Person; provided, however, that nothing in this Section 5.03(c) shall prohibit
the Purchaser from disclosing any information in connection with any Action
involving the Purchaser that relates to any matter in respect of which
indemnification or any other remedy is being sought from the Purchaser in
respect of this Agreement or any Ancillary Agreement. If the Purchaser or any
such Recipient is required to disclose any such information in connection with
any Action (other than an Action referred to in the immediately preceding
proviso) in response to a court order or as otherwise required by Law or
administrative process, the Purchaser shall inform the Seller in writing of such
obligation as soon as possible after it is informed of it and, if possible,
before any information is disclosed and shall cooperate with Seller, so that a
protective order or other appropriate remedy may be obtained by the Seller or
any Person designated by Seller. If the Purchaser or a Recipient is obligated to
make the disclosure, it shall only make the disclosure to the extent to which it
is so obligated, but not further or otherwise.
SECTION 1.44. Regulatory and Other Authorizations; Consents.
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(1) Each of the Seller and the Purchaser shall use its best efforts to
promptly obtain all authorizations, consents, orders and approvals of all
federal, state, local and foreign regulatory bodies and officials that may be or
become necessary for its execution and delivery of, and the performance of its
obligations pursuant to, this Agreement and the Ancillary Agreements to which it
is a party and the transfer, purchase and sale of the Shares to Purchaser, and
will cooperate with the other in promptly seeking to obtain all such
authorizations, consents, orders and approvals; it being understood that neither
party shall be required to pay any fees or other payments to any such regulatory
bodies or officials in order to obtain any such authorization, consent, order or
approval (other than normal filing fees). Neither the Purchaser nor the Seller
will take any action that would have the effect of delaying, impairing or
impeding the receipt of any required approvals.
(2) Each party hereto agrees to make an appropriate filing of a
notification and report form pursuant to the HSR Act with respect to the
transactions contemplated hereby within ten Business Days after the date hereof
and to supply promptly any additional information and documentary material that
may be requested pursuant to the HSR Act. Each party hereto agrees to use its
best efforts to obtain early termination of the waiting period under the HSR
Act. In addition, each party agrees to promptly make any other filing that may
be required under any antitrust Law or by any antitrust authority. The Purchaser
agrees to take any and all commercially reasonable steps necessary to avoid or
eliminate each and every impediment under any antitrust Law that may be asserted
by any United States or foreign governmental antitrust authority or any other
party so as to enable the parties hereto to expeditiously close the transactions
contemplated hereby. Each party shall bear its respective filing fees associated
with the HSR filings and any other similar filings required in any other
jurisdictions.
(3) Each of the Seller and the Purchaser shall use its best efforts to
obtain all other consents and approvals that may be required to be obtained by
it in connection with the transactions contemplated by this Agreement and the
Ancillary Agreements and shall cooperate with the other in obtaining such other
consents and approvals; provided, however, that (i) neither party shall be
required to compensate any third party to obtain any such consent or approval
and (ii) the Seller shall not be required to obtain any consent or approval that
may be required in connection with the Contracts referred to in items (d)
through (h) of Section 3.04 of the Disclosure Schedule.
SECTION 1.45. Intercompany Arrangements.
(1) Except as expressly set forth in paragraphs (b) and (c) below,
after the Closing, the Seller will have no obligation to the Company with
respect to any accounts receivable, notes, other amounts receivable, financing
charges, reserves and allowances or other similar items that are transferred by
the Company pursuant to the Transfer Agreement. From and after the Closing Date,
the Purchaser shall not, and shall cause the Company not to, accept any returns
in cancellation or adjustment of any such accounts receivable except in the
ordinary
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course of business upon prior notice to the Seller and in accordance with
Sections 5.05(b) and (c), and shall not otherwise cancel or adjust any such
accounts receivable or other items.
(2) Subject to Section 5.05(c), after the Closing Date, the Purchaser
shall cause the Company to accept returns of copies of works published or
produced by the Company in connection with the Business (whether before or after
the Closing) in accordance with the Company's past practices applicable to such
returns and shall pay refunds to customers in connection therewith. Promptly
following the Closing Date, the Purchaser shall give notice to all customers of
the Business that all returns of works produced or published by the Company
shall be made to the Purchaser or the Company and not to the Seller or any of
its Affiliates.
(3) (i) Notwithstanding the provisions of Section 5.05(b), for the
first five months following the Closing Date or, if sooner, until such time as
the Seller has satisfied the Returns Maximum, the Seller shall accept any
returns received by it with respect to the Business (other than returns of "Chek
Chart" products), and the Seller shall pay refunds to (or issue credits to the
accounts of) the Company's customers in connection therewith, in each case
subject to the Returns Maximum and subject to and in accordance with the
Seller's publicized returns policy and provided that such returns are in salable
or usable condition. For any such returns that the Seller accepts prior to the
expiration of such five-month period, or if sooner, prior to the satisfaction of
the Returns Maximum, the Seller shall ship such returns (at the Purchaser's
expense) to the Purchaser and, in consideration therefor, the Purchaser shall
within 30 days pay to the Seller an amount equal to the printing, paper and
binding costs attributable to such returns.
(ii) After such five-month period, or if sooner, after the Seller has
satisfied the Returns Maximum (or at any time after the Closing, in the case of
"Chek Chart" products), the Seller shall accept additional returns received by
it directly from customers with respect to the Business in accordance with
Seller's publicized returns policies and procedures. The Seller shall ship any
such returns to the Purchaser and within 30 days the Purchaser shall pay the
Seller for such returns in an amount equal to the sum of the amount that the
Seller or its Affiliates paid in refunds to (or issued in credits to the
accounts of) customers in connection therewith plus the cost of shipping such
returns to the Purchaser.
(iii) For the first five months following the Closing Date or, if
sooner, until such time as the Seller has satisfied the Returns Maximum, if the
Company or the Purchaser accepts any returns with respect to the Business (other
than returns of "Chek Chart" products) and pays any refunds to (or issues any
credits to the accounts of) customers in respect thereof in compliance with
Section 5.05(b), then, subject to subparagraph (iv) below, the Purchaser shall
bill the Seller for the amount of such refund or credit and the Seller shall
reimburse the Purchaser for such refund or credit.
(iv) Notwithstanding the foregoing provisions of this Section 5.05(c),
the Seller's aggregate liability for all returns with respect to the Business
(those which the Seller and its Affiliates receive directly and those received
by the Purchaser and its Affiliates) shall not
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exceed the dollar amount as of the Closing Date reflected on the books and
records of the Seller (calculated in accordance with the Specified Accounting
Policies and using the same accounting policies, principles and methodologies
employed in preparing the 1998 Pro Forma Financial Statements) of the reserves
for returns for the accounts receivable that are transferred to the Seller
pursuant to the Transfer Agreement, which liability shall be measured by the
amount credited or paid in refunds for such returns (such amount, the "Returns
Maximum").
(v) The Purchaser further agrees that it shall pay the Seller from time
to time amounts equal to the appropriate royalty reversals in respect of any
returns for which the Seller accepts responsibility or is billed pursuant to
this Section 5.05.
(4) (i) After the Closing Date, the Purchaser shall cause the Company
to continue to provide financial credits to customers of the Business in respect
of co-operative marketing expenses and marketing development expenses incurred
by such customers in respect of the promotion of the products of the Business
(such credits, "Reimbursable Amounts"), in each case following the submission by
such customers of itemized descriptions of such Reimbursable Amounts and in
accordance with the Company's customary practice.
(ii) For each fiscal month during the period commencing with the
month in which the Closing Date occurs and ending with the earlier of June 2000
and the fiscal month in respect of which the Seller satisfies the Reimbursable
Amounts Maximum, the Purchaser shall, within twenty Business Days following the
end of each fiscal month, submit to the Seller an itemized list of the
Reimbursable Amounts that the Company has credited to customers of the Business
pursuant to Section 5.05(d)(i) during such month (which Reimbursable Amounts
under no circumstances shall include any amount in respect of "Chek Chart"
products), and subject to Section 5.05(d)(iii), the Seller shall, within ten
Business Days after receiving such list, pay to the Purchaser an amount
representing such Reimbursable Amounts.
(iii) Notwithstanding the foregoing provisions of this Section
5.05(d), the Seller's aggregate liability for all Reimbursable Amounts with
respect to the Business shall not exceed the dollar amount as of the Closing
Date reflected on the books and records of the Company for the Business,
excluding any portion thereof attributable to "Chek Chart" products and
otherwise calculated in accordance with the Specified Accounting Policies and
using the same accounting policies, principles and methodologies employed in
preparing the 1998 Pro Forma Financial Statements, of the accrued liabilities
for co-operative marketing and marketing development expenses (such amount, the
"Reimbursable Amounts Maximum"), which liability shall be measured by the
amounts paid by the Seller pursuant to Section 5.05(d)(ii).
(5) From and after the Closing Date, the Purchaser shall accept returns
received by it directly from customers with respect to the Assumed Business (as
defined in the Transfer Agreement) in accordance with the Company's past
practices applicable to such returns and shall pay appropriate refunds to such
customers in connection therewith. The Purchaser shall ship such returns to the
Seller and within 30 days the Seller shall pay the Purchaser for such
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returns in an amount equal to the sum of the amount that the Purchaser paid in
refunds to customers in connection therewith plus the cost of shipping such
returns to the Seller.
(6) Immediately prior to the Closing, the Seller will cause the Company
to transfer all of its cash balances to the Seller. In addition, immediately
prior to the Closing, (i) there shall be no amounts owing from the Company to
the Seller or any of its Affiliates, and (ii) there shall be no amounts owing
from the Seller or any of its Affiliates to the Company, in each case other than
as expressly contemplated by this Agreement.
SECTION 1.46. Insurance.
(1) Effective 12:01 a.m. on the Closing Date or, if earlier, the
effective time of the Closing, the Company and the Business shall cease to be
insured by the Seller's or its Affiliates' insurance policies. With respect to
events or circumstances covered by insurance coverage written on an "occurrence
basis", except as otherwise expressly provided in the Transfer Agreement, the
Seller and its Affiliates will have no liability for occurrences or Losses that
take place on or after 12:01 a.m. on the Closing Date or, if earlier, the
effective time of the Closing; provided, however, that with respect to insurance
coverage written on an "occurrence basis" and for which the Company was an
insured under such policies, (i) for the first 90 days following the Closing
Date, the Company shall continue to have rights under such policies to the
extent the events giving rise to a claim under such policies occurred prior to
12:01 a.m. on the Closing Date or, if earlier, the effective time of the
Closing, and (ii) the Seller agrees to cooperate with the Company for the first
90 days following the Closing Date in making claims under the Seller's or its
Affiliates' insurance policies in connection with insurable events that occurred
prior to 12:01 a.m. on the Closing Date (or, if earlier, the effective time of
the Closing) and shall promptly remit any recoveries that the Seller receives
with respect thereto to the Company. Purchaser acknowledges and agrees that the
Seller and its Affiliates shall have no liability with respect to any failure by
any carrier under such insurance policies to make payment with respect to any
such claim. Furthermore, the Purchaser acknowledges and agrees that neither the
Seller nor any of its Affiliates shall have any liability to Purchaser or the
Company with respect to deductibles and the failure of any claim to be covered
as a result of such deductibles under any insurance coverage with respect to the
Company or the Business. Except as otherwise expressly provided in the Transfer
Agreement, with respect to events or circumstances covered by insurance coverage
written on a "claims made basis", the Seller and its Affiliates will have no
liability for claims made on or after 12:01 a.m. on the Closing Date (or, if
earlier, the effective time of the Closing).
(2) Notwithstanding the provisions of Section 5.06(a), from and after
the Closing Date, neither the Seller nor Viacom nor any of their respective
Affiliates shall have any liability for workers' compensation claims (whether
insured or self-insured) with respect to the Business Employees arising from any
event or circumstance taking place or existing (A) on or subsequent to the
Closing Date, (B) prior to the Closing Date, provided that if a claim in respect
of such event or circumstance is duly made by a Business Employee or Former
Business
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Employee during the period commencing on the Closing Date and ending 270 days
after the Closing Date, the Purchaser shall assume liability for all such claims
until the aggregate amount paid by it in respect of such claims exceeds
$100,000, after which the Seller shall be fully liable for such claims, and (C)
prior to the Closing Date, provided that a claim in respect of such event or
circumstance is made by a Business Employee or Former Business Employee more
than 270 days after the Closing Date. As between the Company and the Purchaser,
on the one hand, and the Seller, on the other hand, the Seller shall assume
liability on the Closing Date for workers' compensation claims with respect to
the Business Employees and Former Business Employees arising from any event or
circumstance taking place or existing prior to the Closing Date, provided that a
claim in respect of such event or circumstance has been duly made by a Business
Employee or Former Business Employee prior to the Closing Date. The Purchaser
shall take all steps necessary under any applicable Law to assume liability for
workers' compensation claims to the extent contemplated by this Section 5.06.
The Purchaser shall cooperate with the Seller, Viacom and their respective
Affiliates in order to obtain the return or release of bonds or securities or
indemnifications given by the Seller, Viacom or any of their respective
Affiliates to any state in connection with workers' compensation claims with
respect to the Business; and, in order to effectuate such return or release, the
Purchaser shall, to the extent required by any state, post its own bonds,
letters of credit, indemnifications or other securities in substitution
therefor.
SECTION 1.47. Non-Competition.
(1) The Seller acknowledges that reasonable limits on its ability to
engage in activities competitive with the Purchaser are warranted to protect the
Purchaser's initial investment in acquiring the Shares, the Assets and the
Business.
(2) The Seller hereby covenants and agrees that during the period
commencing on the Closing Date and ending on the third anniversary of the
Closing Date, it shall not, and it shall cause its Affiliates not to, for its
own account or jointly with any other Person, publish (or grant any other Person
a license or sublicense to publish) books or other products in any media
whatsoever (collectively, "Products") anywhere in the world under the imprints,
series, brands, colophons or trade dress (taken as a whole) of The Lazy Way or
the Complete Idiot's Guide in the pet ownership, travel, dictionary, test
preparation (other than in the areas of certification and testing for the
technology and computer programming industries), taxes, automotive maintenance
and repair, cooking, dieting and gardening lines (collectively, the "Non-Compete
Lines"); provided, however, that the foregoing shall not be breached as a result
of (i) the sale by the Seller or any of its Affiliates of any Products which are
included in its inventory on the Closing Date after giving effect to the
Transfer, which inventory has been printed in accordance with past practices and
(ii) the publishing by the Seller or any of its Affiliates (or the granting by
the Seller or any such Affiliate of a license or sublicense to any other Person
to permit the publishing) of Products, anywhere in the world, the content of
which Products relates primarily to the use of computer software or of the
internet (and not primarily to the underlying subject matter to which such
computer software or the internet is applied).
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(3) The Seller further covenants that it shall cause any purchaser or
assignee of the Complete Idiot's Guide or The Lazy Way imprints to assume the
obligation described in paragraph (b) above (it being understood that the Seller
shall not have responsibility or liability for such purchaser's or assignee's
compliance with such assumed obligation; provided, however, that the Seller
shall cause the Purchaser to be contractually designated as a direct or third
party beneficiary of any such assumption).
(4) The Seller hereby covenants and agrees that during the period
commencing on the Closing Date and ending on the third anniversary of the
Closing Date, it shall not, and shall cause its Subsidiaries not to, for its own
account or jointly with any other Person, publish or produce Products in any
Non-Compete Lines anywhere in the United States (a "Competing Business");
provided, however, that the foregoing shall not be breached as a result of (l)
the ownership or other right to acquire by the Seller or any such Subsidiary of
not more than an aggregate of 5% of any class of stock of any Person engaged,
directly or indirectly, in a Competing Business, (m) the acquisition, holding or
operation of any Competing Business held or operated by any acquired Person
(whether acquired by means of stock, assets or otherwise) on the date of such
acquisition and which at such time generated no more than 30% of the
consolidated net revenues of such acquired Person during its last full fiscal
year, (n) the publishing by the Seller or any such Subsidiary (or the granting
by the Seller or any such Subsidiary of a license or sublicense to any other
Person to permit the publishing) of Products, anywhere in the world, the content
of which Products relates primarily to the use of computer software or of the
internet (and not primarily to the underlying subject matter to which such
computer software or the internet is applied); and (o) the publishing by the
Seller or any such Subsidiary (or the granting by the Seller or any such
Subsidiary of a license or sublicense to any other Person to permit the
publishing) of any Products that are published for and distributed primarily
through education or direct marketing sales channels.
(e) Notwithstanding anything in this Agreement to the contrary, the
Seller and its Affiliates shall be permitted to engage in development activities
with respect to any Products that are or would be subject to the limitations set
forth in this Section 5.07, provided that such Products are not actually
marketed or sold prior to the third anniversary of the Closing Date.
SECTION 1.48. Financing. The Purchaser covenants and agrees not to take
any action between the date of this Agreement and the Closing Date that would
reasonably be expected to make the Financing unavailable for any reason.
SECTION 1.49. Further Action.
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(1) From and after the Closing Date, each of the parties hereto shall
execute and deliver such assignments, recordations, documents and other papers
and take such further actions as may be reasonably required to carry out the
provisions of this Agreement and the Ancillary Agreements and give effect to the
transactions contemplated hereby and thereby. Without limiting the foregoing,
from and after the Closing, (i) the Seller shall do all things necessary, proper
or advisable under applicable Laws as requested by the Purchaser to put the
Purchaser (or the Company, in the case of the Assets) in effective possession,
ownership and control of the Shares and the Assets, and the Purchaser shall
cooperate with the Seller for that purpose and (ii) the Purchaser shall do all
things necessary, proper or advisable under applicable Laws as requested by the
Seller to put the Seller (or such other Person as the Seller shall indicate) in
effective possession, ownership and control of all assets transferred to the
Seller or an Affiliate thereof pursuant to the Transfer Agreement, and the
Seller shall cooperate with the Purchaser for that purpose. In furtherance of
the foregoing, on the Closing Date, the Seller shall cause its Affiliates to
convey to the Purchaser all saleable inventory located outside of the United
States and Canada relating to the Business then owned by them and, in
consideration therefor, the Purchaser shall pay to the Seller the "landed cost"
in respect of such inventory. From and after the Closing Date, all cash and
other remittances not intended to be for the account of the Seller and its
Affiliates pursuant to this Agreement or the Transfer Agreement, and all mail
and other communications relating to the Assets or the Business received by the
Seller, shall be promptly turned over to the Purchaser by the Seller. From and
after the Closing Date, all cash and other remittances not intended to be for
the account of the Company pursuant to this Agreement or the Transfer Agreement,
and all mail and other communications relating to any of the businesses or
assets transferred to the Seller and its Affiliates pursuant to the Transfer
Agreement, received by the Purchaser, shall be promptly turned over to the
Seller (or such other Person as the Seller shall indicate) by the Purchaser. In
connection with the Closing, the Seller shall cooperate and take such action as
the Purchaser shall reasonably request to effect the transfer and delivery to
the Company of any tangible Assets of the Company then held by the Seller,
including delivering electronic Assets on reasonably acceptable media and using
its reasonable efforts to transfer to the Company's name, on the books and
records of any third parties, Assets held for the Company by such third parties.
(2) The Seller shall have the right to retain copies of all books and
records of the Company relating to periods ending on or prior to the Closing
Date. For a period of ten years from the date hereof, the Purchaser shall
maintain all books and records of the Company relating to periods ending on or
prior to the Closing Date and shall make them, and any individuals responsible
for the preparation and maintenance of such books and records, available to the
Seller as may be requested by Seller from time to time, including in connection
with any Action by or against Seller or any of its Affiliates. If, at any time
after the Closing, the Seller requires a copy of any such book or record, it
shall have the right to promptly obtain a copy thereof (at the Seller's cost)
from the Purchaser. Purchaser also shall make such books, records and
individuals available to Viacom to enable Seller to comply with its obligations
to Viacom under the Viacom Stock Purchase Agreement.
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(3) From the date hereof until the Closing Date, the Seller shall use
commercially reasonable efforts to submit to the United States Copyright Office
(the "Copyright Office") (i) applications for copyright registration in respect
of all the Works published on or after December 31, 1997 that would be so
submitted prior to the Closing Date in accordance with the Company's customary
business practices, and (ii) such amendments, modifications, revisions or
corrections as may be necessary in order to correct the corporate name in which
copyright is claimed in any copyright applications submitted in an improper
corporate name by the Seller or its Affiliates in respect of the Works during
the period commencing March 16, 1999 and ending June 25, 1999. Notwithstanding
anything herein to the contrary, the Seller's obligations under this Section
5.09(c) shall be satisfied and discharged if, as of the Closing Date, no greater
than 100 applications or amendments described in clauses (i) and (ii) above
(taken in the aggregate) remain to be filed with the Copyright Office. To the
extent that the number of such applications or amendments remaining to be filed
as of the Closing Date exceeds 100, the Seller shall, at its election, (x)
submit such excess applications or amendments to the Copyright Office at its own
expense, or (y) notify the Purchaser that the Purchaser shall submit such excess
applications or amendments, with the Seller bearing the reasonable expenses of
preparing and filing such excess applications or amendments, it being understood
that this sentence contains the sole and exclusive remedies of the Purchaser in
respect of the applications referred to in clauses (i) and (ii) above.
SECTION 1.50. Ancillary Agreements; Transitional Services.
(1) On the Closing Date, the Seller and the Purchaser shall execute and
deliver (or, in the case of the Seller, shall cause one or more of its
Affiliates to execute and deliver) each of the Ancillary Agreements to which it
is a party.
(2) From and after the Closing Date, the Seller shall provide such
occupancy rights, warehousing and distribution services as the Purchaser shall
reasonably request in order to assist in an orderly transition of ownership of
the Business, all subject to the fees, terms, conditions and parameters
described on Schedule 5.10.
(3) For a period of 30 days following the Closing Date, the Purchaser
shall permit the Seller to occupy, without charge, that certain space at the
offices of the Business at 1633 Broadway, New York, New York and 201 West 103rd
Street, Indianapolis, Indiana which has been occupied by the Company prior to
the date hereof in respect of the Persons whose employment services are being
transferred from the Company to Ahsuog pursuant to the Transfer Agreement. In
connection therewith, the Purchaser shall for such period provide without charge
the necessary and incidental office services associated with such occupancy,
except that the Seller shall pay (or reimburse the Purchaser for any) telephone
and facsimile long-distance toll charges incurred by such transferred Persons
during such period.
SECTION 1.51. Use of Macmillan Name and Mark. Effective as of the
Closing, until the time of expiration or termination of the Amended and Restated
Trademark
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License Agreement dated as of March 1, 1999, by and between Macmillan, Inc. and
the Company (the "Trademark License Agreement"), the Purchaser shall (and shall
cause the Company and its other Affiliates to) fully comply with Section 8.2 of
the Trademark License Agreement, including by changing all corporate names,
trade names and fictitious names to eliminate the Macmillan name and mark.
Effective as of the Closing, the Purchaser agrees to comply, and to cause the
Company and its other Affiliates to comply, with all of the provisions of the
Agreement Relating to Names and Marks, dated November 8, 1993 (the "Macmillan
Limited Agreement"), between Macmillan Limited and Macmillan Inc. as though each
of the Purchaser, the Company and their respective Affiliates were a party
thereto and were charged with the responsibilities and obligations of Macmillan
Inc. thereunder. The Purchaser further agrees not to use the Macmillan mark in
connection with the marketing or sale of any product directed at the market for
library reference products.
ARTICLE VI
EMPLOYEE MATTERS
SECTION 1.52. Employees.
(1) On the Closing Date, the Seller shall provide the Purchaser with a
true and complete list showing the names and current annual salary rates of all
of the Business Employees as of the Closing Date. From and after the Closing,
the Purchaser shall assume responsibility for all salary obligations and bonus
obligations under the bonus plan listed in item 1 of Section 3.13(a) of the
Disclosure Schedule (the "Bonus Plan") with respect to the Business Employees;
provided, however, that the Seller shall reimburse the Purchaser for an amount
equal to the lesser of (i) and (ii), multiplied by (iii) and reduced by (iv),
where: (i) equals the aggregate bonuses paid by the Purchaser and its
Subsidiaries to Business Employees in respect of calendar year 1999 (or any
portion thereof); (ii) equals the aggregate amount that would have been payable
by the Seller to Business Employees under the Bonus Plan as in effect on the
date hereof assuming the consummation of the transactions contemplated by this
Agreement had not occurred and the Bonus Plan had remained in effect until
December 31, 1999, or, if earlier, until actually terminated by Purchaser; (iii)
equals a fraction, the numerator of which is the number of days from January 1,
1999 to the Closing Date, and the denominator of which is the lesser of (x) 365
and (y) the number of days from January 1, 1999 to the date the Purchaser
terminates the Bonus Plan; and (iv) equals the tax benefit available to the
Purchaser (or any Subsidiary thereof) in connection with its payment of any
amount required to be reimbursed by the Seller pursuant to this proviso without
regard to this clause (iv).
(2) Immediately following the Closing, the Purchaser shall provide the
Business Employees with employee benefits that are no less favorable than those
made available by the Purchaser to its similarly situated employees. To the
extent that service is relevant for eligibility and vesting (and with respect to
benefit accruals, solely for purposes of calculating
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entitlement to vacation and sick days) under any retirement plan, employee
benefit plan, program or arrangement established or maintained by the Purchaser
or any of its Subsidiaries for the benefit of Business Employees, such plan,
program or arrangement shall credit such Business Employees for service on or
prior to the Closing Date with the Company, the Seller, Viacom or any Affiliate
or predecessor of any of such entities and with respect to vacation, shall give
Business Employees credit for vacation accrued prior to the Closing in
accordance with the Purchaser's vacation policy.
(3) The Purchaser shall assume responsibility for all payroll
obligations (including the satisfaction of all payroll withholding tax
obligations) for the Business for all payroll periods ending on or after the
Closing Date. If the Closing takes place on a day such that a payroll period
begins prior to the Closing Date and ends on or after the Closing Date (such
payroll period, a "Straddle Period"), then the Seller shall reimburse the
Purchaser for the Seller's proportionate share of the salaries, wages and
payroll taxes (reduced by all amounts that Seller or its Affiliates otherwise
would have withheld for benefit plan coverages for Seller's portion of such
Straddle Period) for the Business Employees for such Straddle Period, such
proportionality to be determined on the basis of the number of working days
occurring from the start of such Straddle Period to and including the day prior
to the Closing Date relative to the total number of working days in such
Straddle Period. After the Purchaser has satisfied all such payroll obligations
with respect to the Straddle Period, the Purchaser shall notify Seller of the
aggregate amount of such payroll obligations. Promptly after its receipt of such
notice, Seller shall pay to Purchaser the amount due to Purchaser pursuant to
this Section 6.01(c).
SECTION 1.53. Health and Welfare Benefits.
(1) The Purchaser shall assume responsibility from and after the
Closing Date for all amounts payable by reason of, or in connection with, any
and all medical, dental and disability claims made by Business Employees under
the Purchaser's medical, dental or disability plans but solely to the extent
that such claims are incurred subsequent to the Closing; provided, however, that
(i) the Purchaser shall assume responsibility for providing short-term
disability benefits to any Business Employee who is receiving such benefits on
the Closing Date and (ii) the Seller shall be responsible for providing
long-term disability benefits under its long-term disability plan to any such
Business Employee who becomes entitled thereto upon cessation of short-term
disability benefits (it being understood that any such individual shall
thereupon cease to be a Business Employee). Prior to the Closing, Seller shall
take such action as may be necessary to cause the Company to cease to
participate in all plans of such nature maintained by the Seller and its
Affiliates.
(2) The Purchaser shall waive limitations on benefits (to the extent
not applicable prior to the Closing) relating to any pre-existing conditions and
recognize, for purposes of annual deductible and out-of-pocket limits under its
medical and dental plans, deductible and out-of-pocket expenses paid by Business
Employees and their respective
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dependents under the Seller's medical and dental plans for the calendar year in
which the Closing Date occurs.
(3) Following the Closing Date, the Seller shall provide continuation
health care coverage to all Business Employees and Former Business Employees and
their qualified beneficiaries who incur a qualifying event on or prior to the
Closing Date in accordance with the continuation health care coverage
requirements of Section 4980B of the Code and Title I, Subtitle B, Part 6 of
ERISA ("COBRA").
(4) Following the Closing, the Seller and the Purchaser will cooperate
with each other in order to effectuate, in accordance with applicable law, the
transfer to similar plans maintained by the Purchaser of unused amounts credited
to the Business Employees' accounts under the Seller's dependent care flexible
spending programs in order to prevent the forfeiture of any such amounts by the
Business Employees and upon any such transfer of unused amounts credited to a
Business Employee's account, the Purchaser shall assume all obligations under
the Seller's flexible spending account plan with respect to such Business
Employee's account.
SECTION 1.54. Retirement Plans. From and after the Closing Date, the
Seller or one of its Affiliates shall retain or, to the extent that such
entities do not have such responsibility prior to the Closing Date, assume
responsibility for all benefits of the Business Employees accrued as of the
Closing under the Pearson Inc. Pension Plan, the Pearson Inc. Savings and
Investment Plan and the Pearson, Inc. Excess Savings and Investment Plan. Prior
to the Closing, the Seller shall take any action necessary to cause the Business
Employees to cease to accrue any additional benefits under such plans as of the
Closing Date, and if such cessation results in a partial termination of any such
plan under Section 411(d)(3) of the Code, the Seller shall cause all affected
participants to be fully vested in their benefits thereunder.
SECTION 1.55. Severance Provisions. The Purchaser shall assume, or
cause one of its Affiliates to assume, the obligations of the Seller and its
Affiliates to provide severance payments and benefits to Business Employees as
and when required with respect to termination of employment following the
Closing under the agreements or arrangements listed on Section 6.04 of the
Disclosure Schedule, except to the extent that such obligations arise upon and
solely by reason of the consummation of the transactions contemplated hereby,
and not by reason of the termination of their employment with the Company, the
Purchaser or any Affiliate thereof by the Purchaser or any of its Affiliates.
The Seller or one of its Affiliates shall assume or retain (as applicable) the
obligation to provide stay bonuses under such agreements and arrangements or
under any other agreements or arrangements with respect to stay bonuses entered
into or established by the Seller or any such Affiliate prior to the Closing.
SECTION 1.56. Other Benefits Obligations. Except as otherwise
specifically assumed or retained by the Purchaser or the Company under Sections
6.01(a) (as it relates to certain bonus obligations), 6.02(a) (as it relates to
short-term disability), 6.02(d) and 6.04 (as it relates to certain severance
obligations), none of the Company, the Purchaser or any of
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their Affiliates shall have responsibility for the administration and payment of
any and all claims of whatever nature arising under or in connection with any
Pearson Plan or other employee benefit plan (within the meaning of Section 3(3)
of ERISA) sponsored, maintained or contributed to by the Seller or any of its
Affiliates, and, effective upon the Closing, the Seller and its Affiliates shall
retain and/or assume (as applicable) sole responsibility therefor.
SECTION 1.57. No Third-Party Beneficiaries. Nothing in this Article VI
or elsewhere in this Agreement shall be deemed to make any present or future
Business Employees or Former Business Employees third-party beneficiaries of
this Agreement.
ARTICLE VII
TAX MATTERS
SECTION 1.58. Tax Indemnities.
(1) From and after the Closing Date, the Seller shall be responsible
for, shall pay or cause to be paid, and shall indemnify, defend and hold
harmless the Purchaser and the Company against and reimburse the Purchaser and
the Company for any and all Taxes that may be imposed upon or assessed against
the Company or the assets thereof: (i) arising from any disposition or transfer
out of the Company on or prior to the Closing Date of any assets not included
within the Assets; (ii) with respect to any Pre-Closing Period; (iii) arising by
reason of any breach or inaccuracy of the representations contained in Section
3.14 hereof; (iv) with respect to any and all Taxes of any member of an
affiliated group of which the Company (or any predecessor) is or was a member on
or prior to the Closing Date, including any Taxes for which the Company may be
liable under Section 1.1502-6 of the Treasury regulations promulgated under the
Code (or any similar provision of state, local or foreign law); (v) by reason of
being a successor-in-interest or transferee of another entity on or prior to the
Closing Date; and (vi) arising as a result of any Section 338(h)(10) election or
similar election under state, local or foreign law referred to in Section 7.07.
Notwithstanding the foregoing, no indemnity shall be provided by the Seller
under this Agreement for any Tax resulting from any transaction of the Company
occurring on the Closing Date but after the Closing that is not in the ordinary
course of business.
(2) From and after the Closing Date, the Purchaser and the Company
shall, jointly and severally, be responsible for, shall pay or cause to be paid,
and shall indemnify, defend and hold harmless the Seller, Viacom and their
respective Affiliates against and reimburse the Seller, Viacom and their
respective Affiliates for all Taxes that the Seller, Viacom and their respective
Affiliates may at any time suffer or incur, or become subject to, as a result
of, or in connection with, the Company that are not subject to indemnification
pursuant to paragraph (a) of this Section 7.01, including, but not limited to,
Taxes resulting from any
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transaction of the Company occurring on the Closing Date but after the Closing
that is not in the ordinary course of business.
(3) Payment by the indemnitor of any amount due to the indemnitee under
this Section 7.01 shall be made within 10 days following written notice by the
indemnitee that payment of such amount to the appropriate Tax authority is due
by the indemnitee; provided, that the indemnitor shall not be required to make
any payment earlier than two Business Days before it is due to the appropriate
Tax authority. In the case of a Tax that is contested in accordance with the
provisions of Section 7.03, payment of the Tax to the appropriate Tax authority
will not be considered to be due earlier than the date that a final
determination to such effect is made by such Tax authority or a court.
(4) For purposes of this Agreement, "Pre-Closing Period" shall mean a
taxable period or portion thereof that ends on or prior to the Closing Date. If
a taxable period begins on or prior to the Closing Date and ends after the
Closing Date, then the portion of the taxable period that ends on (and
including) the Closing Date shall constitute a Pre-Closing Period. In the case
of any Tax that is imposed on a periodic basis and is payable for a period that
begins before the Closing Date and ends after the Closing Date, the portion of
such Taxes payable for the Pre-Closing Period shall be (i) in the case of any
Tax other than a Tax based upon or measured by income, the amount of such Tax
for the entire period multiplied by a fraction, the numerator of which is the
number of days in the period ending on the Closing Date and the denominator of
which is the number of days in the entire period and (ii) in the case of any Tax
based upon or measured by income, the amount which would be payable if the
taxable year ended on the Closing Date. Any credit shall be prorated based upon
the fraction employed in clause (i) of the next preceding sentence. In the case
of any Tax based upon or measured by capital (including net worth or long-term
debt) or intangibles, any amount thereof required to be allocated under this
Section 7.01(d) shall be computed by reference to the level of such items on the
Closing Date.
SECTION 1.59. Refunds and Tax Benefits.
(1) Any refunds or credits (except to the extent accrued as a
receivable on the books and records of the Company) of Taxes received or
credited to the Company attributable to a Pre-Closing Period shall be for the
benefit of the Seller ("Seller Refunds"), and the Purchaser shall cause Company
to pay over to Seller such refunds; provided, however, that no Seller Refunds
shall arise as a result of a carryback of a tax attribute from a taxable period
ending after the Closing Date to a Pre-Closing Period. All payments required
pursuant to this Section 7.02(a) shall be made within ten days after the receipt
of such refund, and shall be net of any cost to Purchaser attributable to their
receipt of such refund, including, without limitation, Taxes payable with
respect to such refund. All other refunds received by the Company shall be for
the benefit of the Purchaser. The Purchaser shall, if the Seller so requests and
at the Seller's expense, cause the Company to file for and obtain any refund
determined by the Seller to be due to the Seller. The Purchaser shall permit the
Seller to control (at the Seller's expense) the
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prosecution of any such refund claimed, and shall cause the Company to authorize
by appropriate power of attorney such Persons as the Seller shall designate to
represent the Company with respect to such refund claimed. In the event that any
refund or credit of Taxes for which a payment has been made pursuant to this
Section 7.02(a) is subsequently reduced or disallowed, the Seller shall
indemnify, defend and hold harmless the Company against and reimburse the
Company for any Tax liability, including interest and penalties, assessed
against the Company by reason of the reduction or disallowance.
(2) If, as a result of (x) any payment by the Seller, the Company or
their Affiliates on or prior to the Closing Date of any amounts with respect to
which the timing of any available deduction would be determined under Section
404 of the Code, or (y) any adjustment, pursuant to an audit or examination by a
Tax authority or any resolution thereof by settlement, judicial determination or
otherwise, to the taxable income or loss reported by any of the Seller, the
Company or their Affiliates on the Tax Returns for any period or portion thereof
ending on or prior to the Closing, the Purchaser or the Company becomes entitled
to any deductions or tax credits in any Tax period or portion thereof ending
after the Closing Date or any Tax period ending after the Closing Date with
respect to which the Purchaser is entitled to indemnification pursuant to the
third proviso of the second sentence of Section 7.03(b) (a "Post-Closing Date
Tax Benefit"), then the Purchaser shall pay the Seller an amount equal to the
Tax savings resulting from such Post-Closing Date Tax Benefit to the extent the
Seller is not able to otherwise reduce an amount payable to Purchaser pursuant
to Section 7.01(a). The amount of any such Tax savings for any Tax period or
periods shall be the amount of the reduction in Taxes reflected on any Tax
Returns for such Tax period or periods as compared to the Taxes that would have
been reflected on such Tax Returns in the absence of such Post-Closing Date Tax
Benefit. All payments to the Seller pursuant to this Section 7.02(b) shall be
made within 30 days after the filing of a Tax Return for each Tax period in
which a Post-Closing Date Tax Benefit results in a reduction in the Taxes paid
by the Purchaser. At the Seller's request, the Purchaser shall certify as to the
amount, if any, due to Seller pursuant to this Section 7.02(b) as to any year,
and provide such information as Seller may reasonably request regarding such
certification.
(3) Purchaser agrees that it will not carry back to any Tax period
ending on or before the Closing Date any net operating loss or other Tax
attribute that arose in a Tax period beginning after the Closing Date if such
net operating loss or Tax attribute would be carried back to a consolidated,
combined or unitary Tax Return that includes the Seller, Viacom or their
respective Affiliates.
SECTION 1.60. Contests.
(1) After the Closing, the Purchaser and the Seller shall promptly
notify each other in writing of any demand or claim received by the Seller, the
Purchaser or the Company from any Tax authority or other party with respect to
Taxes for which the Seller is liable pursuant to Section 7.01(a). Such notice
shall contain factual information (to the extent known) describing the asserted
Tax liability in reasonable detail and shall include copies of any notice or
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other document received from any Tax authority in respect of any such asserted
Tax liability. If the Purchaser fails to give the Seller prompt notice of an
asserted Tax liability as required by this Section 7.03, then (a) if the Seller
(or its designee) is precluded by the failure to give prompt notice from
contesting the asserted Tax liability in both the administrative and judicial
forums, then the Purchaser shall have sole responsibility for such Tax liability
or (b) if the Seller (or its designee) is not precluded from contesting but such
failure to give prompt notice results in a detriment to the Seller (or its
designee), then any amount that the Seller is otherwise required to pay to the
Purchaser pursuant to Section 7.01 with respect to such liability shall be
reduced by the amount of such detriment.
(2) The Seller (or its designee) may elect to control the conduct,
through counsel of its own choosing and at its own expense, of any audit, claim
for refund and administrative or judicial proceeding involving any asserted
liability with respect to which indemnity may be sought under Section 7.01(a)
(any such audit, claim for refund or proceeding relating to an asserted Tax
liability is referred to herein as a "Contest"). If the Seller (or its designee)
elects to control a Contest, it shall within 20 calendar days of receipt of the
notice of asserted Tax liability notify the Purchaser of its intent to do so,
the Seller (or its designee) shall have all rights to settle, compromise and/or
concede such asserted liability and the Purchaser shall cooperate and shall
cause the Company or any of its successors to cooperate, at the reasonable
expense of the Seller, in each phase of such Contest; provided, however, that
Purchaser shall have the right to consult with Seller regarding any Contest that
may affect the Company for any period after the Closing Date and provided
further, that any settlement or other disposition of any such Contest that would
cause a Tax cost for the Company for any period after the Closing Date may only
be made by the Seller in good faith based upon the merits; provided, further,
that the Seller shall indemnify and hold harmless the Purchaser and the Company
against, and shall reimburse the Purchaser and the Company for, any such Tax
cost for any period after the Closing Date solely resulting from any such
settlement or other disposition, unless the Purchaser has consented to such
settlement or other disposition (which consent shall not be unreasonably
withheld) or has declined an offer by the Seller to control the Contest of such
matter at its own expense (subject to reimbursement by the Seller for reasonable
third party expenses), but only if the substitution of the Purchaser's counsel
for the Seller's counsel as the counsel of record in such Contest prior to any
such settlement or other disposition would have been possible at the time of
such offer. The amount of any such Tax cost for any period or periods shall be
the amount of the increase in Taxes reflected on any Tax Returns for such period
or periods as compared to the Taxes that would have been reflected on such Tax
Returns in the absence of such settlement or disposition. If the Seller elects
not to control the Contest or fails to notify the Purchaser of its election as
herein provided, the Purchaser or the Company may pay, compromise or contest, at
its own expense (subject to reimbursement by the Seller for reasonable third
party expenses), such asserted liability, subject to the Seller's
indemnification obligations under Section 7.01(a). However, in such case,
neither the Purchaser nor the Company may settle or compromise any asserted
liability over the objection of the Seller; provided, however, that consent to
settlement or compromise shall not be unreasonably withheld. In any event, the
Seller (or its designee) may participate, at its own expense, in the Contest. If
the Seller (or its designee)
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chooses to control the Contest, the Purchaser shall promptly empower and shall
cause the Company or any of its successors promptly to empower (by power of
attorney and such other documentation as may be appropriate) such
representatives of the Seller (or its designee) as it may designate to represent
the Purchaser, the Company or any of their successors in the Contest insofar as
the Contest involves an asserted Tax liability for which the Seller would be
liable under Section 7.01(a).
SECTION 1.61. Preparation of Tax Returns. The Seller shall prepare and
file or shall cause to be prepared and filed all U.S. federal, state, local and
foreign income and franchise Tax Returns relating to the Company for any Tax
period ending on or prior to the Closing Date and which are required to be filed
after the Closing Date (including any consolidated, combined or unitary Tax
Returns of the Seller or its Affiliates which include the Company, and any Tax
Returns reflecting the Tax liability, if any, attributable to the Elections
under Section 7.07 hereof), and shall pay any and all Taxes due with respect to
such Tax Returns. The parties agree that if the Company is permitted, but not
required, under applicable state, local or foreign income or franchise tax laws
to treat the Closing Date as the last day of a Tax period, they will treat the
Tax period as ending on the Closing Date. The Seller or its designee shall
prepare and file all other Tax Returns of or which include the Company that are
required to be filed on or prior to the Closing Date, and shall pay any and all
Taxes due with respect to such Tax Returns. The Purchaser shall prepare and
timely file or cause the Company to prepare and timely file all Tax Returns for
which the Seller is not responsible pursuant to this Section 7.04. The Purchaser
will deliver to the Seller (or its designee) for its review and approval a
complete and accurate copy of each Tax Return required to be filed by the
Purchaser or the Company under this Section 7.04 for Tax periods that include
the Closing Date, and any amendment to such Tax Return, at least 30 days prior
to the date such Tax Return is filed with the appropriate Tax Authority.
SECTION 1.62. Cooperation and Exchange of Information. The Seller, the
Purchaser and the Company will provide each other (and in the case of the
Purchaser and the Company, shall provide any Person designated by the Seller)
with such cooperation and information as any of them reasonably may request of
another in filing any Tax Return, amended Tax Return or claim for refund,
determining a liability for Taxes or a right to a refund of Taxes or
participating in or conducting any audit or other proceeding in respect of
Taxes. Such cooperation and information shall include the preparation of tax
packages for the Seller (or its designee) in substantially the same form and at
the same time in which such information customarily was provided to the Seller
or Viacom in previous Tax periods and providing copies of relevant Tax Returns
or portions thereof, together with accompanying schedules and related work
papers and documents relating to rulings or other determinations by Tax
authorities. Each such party shall make its employees available on a mutually
convenient basis to provide explanations of any documents or information
provided hereunder. Each such party will retain all Tax Returns, schedules and
work papers and all material records or other documents relating to Tax matters
of the Company for the Tax period first ending after the Closing Date and for
all prior Tax periods until the later of (a) the expiration of the statute of
limitations of the Tax
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periods to which such Tax Returns and other documents relate, without regard to
extensions except to the extent notified by another party in writing of such
extensions for the respective Tax periods, or (b) eight years following the due
date (without extension) for such Tax Returns. Any information obtained under
this Section 7.05 shall be kept confidential, except as may be otherwise
necessary in connection with the filing of Tax Returns or claims for refund or
in conducting an audit or other proceeding.
SECTION 1.63. Conveyance Taxes. Except with respect to the matters
contemplated by clause (i) of Section 7.01(a), each of the Purchaser and the
Seller agrees to assume liability for and to pay 50% of all sales, value added,
transfer, stamp, registration, real property transfer or gains and similar Taxes
incurred as a result of the transactions contemplated hereby and to file all
required change of ownership and similar statements. In addition, each of the
Purchaser and the Seller agrees to indemnify the other party and its Affiliates
for any and all liabilities, losses, damages, claims, costs, expenses, interest,
awards, judgments and penalties (including attorneys' and consultants' fees and
expenses) incurred by the other party and its Affiliates arising out of such
party's failure to make timely or full payments of its share of such Taxes.
SECTION 1.64. Section 338(h)(10) Election and Allocations.
(1) The Seller (or Ahsuog, as appropriate) and the Purchaser shall
jointly make the election provided for by Section 338(h)(10) of the Code and any
corresponding elections under state, local or foreign tax law (the "Elections")
with respect to the Shares. The Seller and the Purchaser shall cooperate and
shall provide to the other all necessary information to permit the Elections to
be made. The Seller and the Purchaser shall, as promptly as practicable
following the Closing Date, take all actions necessary and appropriate
(including filing IRS Form 8023 and other such forms, returns, elections,
schedules, attachments, and other documents as may be required (together, the
"Forms")) to effect timely Elections. Notwithstanding the foregoing, if the
failure to make an Election under a state, local or foreign tax law would not
have an adverse effect on the Seller, as determined by the Seller in good faith,
the Seller and the Purchaser may, at the option of the Purchaser, agree not to
make an Election under such state, local or foreign tax law; provided, that
notwithstanding Section 7.01(a)(iii), the Seller shall have no obligation to
indemnify the Purchaser for the breach or inaccuracy of any representation
contained in Section 3.14 if such breach or inaccuracy would not have occurred
had such Election been made. Notwithstanding the preceding sentence, the
Purchaser shall have no right to examine any Tax Returns or records of the
Seller.
(2) In connection with such Elections, the Purchaser shall make the
initial determination of (i) the amount of the modified aggregate deemed sales
price ("MADSP") of the Shares (within the meaning of Treas. Reg. Section
1.338(h)(10)-1(f)) and (ii) the proper allocations of the MADSP among the assets
of the Company in accordance with Treas. Reg. Section 1.338(h)(10)-1(f) (the
"Election Allocations"). If any increase or decrease in MADSP occurs, as a
result of an adjustment to the Purchase Price under the provisions of Section
2.06
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or otherwise, then the amount of such increase or decrease and the allocation
thereof among the assets of the Company (collectively, the "Adjustment
Allocation") shall be set forth on a statement prepared by the Purchaser. The
Seller will calculate the gain or loss, if any, in a manner consistent with the
Election Allocations and any Adjustment Allocation and will not take any
position with respect to Taxes that is inconsistent with the Election
Allocations or any Adjustment Allocation in any Tax Return or otherwise, except
as may be required by Law. The Purchaser will allocate the Purchase Price
consistently with the Election Allocations and any Adjustment Allocation and
will not take any position with respect to Taxes that is inconsistent with the
Election Allocations or any Adjustment Allocation in any Tax Return or
otherwise, except as may be required by Law.
(c) The Seller and the Purchaser agree that the Forms shall be timely
filed with the appropriate Tax authorities not earlier than 60 days before the
latest date for the filing thereof. At least 120 days prior to the latest date
for the filing of each Form, the Purchaser shall prepare and submit to the
Seller a draft of each Form setting forth the Election Allocations and any
Adjustment Allocation. No party hereto shall file any Form unless it shall have
obtained the consent of the other party hereto, which consent shall not be
unreasonably withheld. On or prior to the 30th day after the Seller's receipt of
a draft Form, the Seller shall either (i) consent to such filing or (ii) notify
the Purchaser that it disagrees with the Election Allocations or any Adjustment
Allocation as set forth on the draft Forms. If the Purchaser and the Seller have
been unable to resolve their differences within 30 days after the Purchaser has
been notified with respect to the Seller's disagreement with the Election
Allocations or any Adjustment Allocation as set forth on the draft Forms, then
any remaining disputed issues shall be submitted to an Independent Accounting
Firm to resolve in a final binding manner after hearing the views of both
parties. If the parties or the Independent Accounting Firm are unable to resolve
any such conflict prior to the due date of filing the Forms, the Purchaser shall
file the Forms on a timely basis and shall promptly file amended Forms to the
extent the final Forms, as determined by the parties or the Independent
Accounting Firm, differ from the Forms filed by the Purchaser pursuant to this
sentence. The fees and expenses of the Independent Accounting Firm shall be
shared equally by the Seller and the Purchaser.
SECTION 1.65. Miscellaneous.
(1) The parties agree to treat all payments made under Article II,
Article X and this Article VII as adjustments to the Purchase Price for Tax
purposes.
(2) Except as expressly provided otherwise herein and except for the
representations contained in Section 3.14 of this Agreement, this Article VII
shall be the sole provision governing Tax matters and indemnities therefor under
this Agreement.
(3) For purposes of this Article VII, all references to the Purchaser
or the Seller include successors thereto.
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ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 1.66. Conditions to Obligations of the Seller. The obligation
of the Seller to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment or waiver, at or prior to the Closing, of
each of the following conditions:
(1) HSR Act; Other Governmental Consents and Approvals. Any waiting
period (and any extension thereof) under the HSR Act applicable to the purchase
of the Shares contemplated hereby shall have expired or shall have been
terminated;
(2) No Governmental Order. There shall be no Governmental Order in
existence which prohibits the transactions contemplated by this Agreement and
the Ancillary Agreements or which would make the consummation of such
transactions unlawful and no Action shall have been instituted (other than by or
on behalf of the Seller) and remain pending before a Governmental Authority to
restrain or prohibit the transactions contemplated by this Agreement and the
Ancillary Agreements;
(3) Representations and Warranties Accurate. All representations and
warranties of Purchaser set forth in Sections 4.01, 4.05, 4.06 and 4.07 of this
Agreement shall be true and correct in all material respects on and as of the
Closing Date, with the same force and effect as though such representations and
warranties were made on and as of the Closing Date;
(4) Certificate. The Seller shall have received a certificate of the
Purchaser, dated the Closing Date, signed by an authorized officer of the
Purchaser, to the effect that the condition set forth in paragraph (c) above has
been satisfied;
(5) Incumbency; Resolutions. The Seller shall have received a
certificate attesting to the incumbency of the Purchaser's officers and the
authenticity of the resolutions authorizing the Purchaser to enter into the
transactions contemplated by this Agreement; and
(6) Ancillary Agreements. The Purchaser shall have executed and
delivered (or caused its relevant Affiliates to execute and deliver) to the
Seller each of the Ancillary Agreements to which the Purchaser or any of its
Affiliates is a party.
SECTION 1.67. Conditions to Obligations of the Purchaser. The
obligations of the Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment or waiver, at or prior to the
Closing, of each of the following conditions:
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(1) HSR Act; Other Governmental Consents and Approvals. Any waiting
period (and any extension thereof) under the HSR Act applicable to the purchase
of the Shares contemplated hereby shall have expired or shall have been
terminated;
(2) No Governmental Order. There shall be no Governmental Order in
existence which prohibits the transactions contemplated by this Agreement and
the Ancillary Agreements or which would make the consummation of such
transactions unlawful and no Action shall have been instituted (other than by or
on behalf of the Purchaser) and remain pending before a Governmental Authority
to restrain or prohibit the transactions contemplated by this Agreement and the
Ancillary Agreements;
(3) Representations and Warranties Accurate. All representations and
warranties of Seller set forth in Sections 3.01, 3.02 (first sentence only), and
3.17 of this Agreement shall be true and correct on and as of the Closing Date,
with the same force and effect as though such representations and warranties
were made on and as of the Closing Date, except for any such failures to be true
and correct as would not, individually or in the aggregate, have a Material
Adverse Effect, and the representations and warranties of the Seller set forth
in Section 3.03 (other than the last sentence thereof) shall be true and correct
in all respects;
(4) Performance by Seller. As of the Closing Date, the Seller shall be
in compliance, in all material respects, with the covenants contained in Section
5.01 of this Agreement;
(5) Certificate. The Purchaser shall have received a certificate of the
Seller, dated the Closing Date, signed by an authorized officer of the Seller,
to the effect that the conditions set forth in paragraphs (c) and (d) above have
been satisfied;
(6) Incumbency; Resolutions. The Purchaser shall have received a
certificate attesting to the incumbency of the Seller's officers and the
authenticity of the resolutions authorizing the Seller to enter into the
transactions contemplated by this Agreement;
(7) Intercompany Arrangements; Notifications. The Seller shall have (i)
terminated the intercompany Contracts indicated as items 6, 11, 15 and 19 in
Section 3.22 of the Disclosure Schedule and (ii) delivered the notifications
described in Schedule 8.02(g); and
(8) Ancillary Agreements. The Seller shall have executed and delivered
(or caused its relevant Affiliates to execute and deliver) to the Purchaser each
of the Ancillary Agreements to which the Seller or any of its Affiliates is a
party.
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ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 1.68. Termination. This Agreement may be terminated at any time
prior to the Closing (except as limited as to time in paragraph (b) below):
(1) by the mutual written consent of the Seller and the Purchaser;
(2) by the Seller or the Purchaser, if the Closing shall not have
occurred prior to the 120th day following the date hereof; provided, however,
that the right to terminate this Agreement under this Section 9.01(b) shall not
be available to either party if such party's breach of any representation or
warranty, or failure to fulfill any obligation, under this Agreement shall have
been the cause of, or shall have resulted in, the failure of the Closing to
occur prior to such date;
(3) by the Seller in the event a condition set forth in Section 8.01
(other than Section 8.01(c)) becomes incapable of being fulfilled or, in the
case of Section 8.01(c), in the event that Purchaser shall have breached, in any
material respect, any of the representations or warranties referred to therein,
which breach cannot be or has not been cured within 10 days after the giving of
written notice thereof by the Seller to the Purchaser; or
(4) by the Purchaser in the event a condition set forth in Section 8.02
(other than Section 8.02(c) or (d)) becomes incapable of being fulfilled or in
the case of Section 8.02(c) or (d), in the event that Seller shall have breached
any of the representations, warranties or covenants referred to therein, which
breach (i) if not cured prior to the Closing, would result in a failure to
fulfill the condition set forth in Section 8.02(c) or (d), as applicable, and
(ii) cannot be or has not been cured within 10 days after the giving of written
notice thereof by the Purchaser to the Seller.
SECTION 1.69. Effect of Termination. In the event of the termination of
this Agreement as provided in Section 9.01, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto,
except as set forth in Sections 5.03, 9.04 and 11.02; provided, however, that
nothing herein shall relieve either the Seller or the Purchaser from liability
for any breach of this Agreement or failure to perform hereunder occurring prior
to such termination.
SECTION 1.70. Waiver. At any time prior to the Closing, any party may
(a) extend the time for the performance of any of the obligations or other acts
of any other party hereto, (b) waive any inaccuracies in the representations and
warranties of any other party contained herein or in any document delivered
pursuant hereto or (c) waive compliance by any other party with any of the
agreements or conditions contained herein. Any such extension or waiver shall be
valid only if set forth in an instrument in writing signed by the party to be
bound thereby.
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SECTION 1.71. Payment of Expenses under Certain Circumstances. If (i)
this Agreement is terminated by the Seller pursuant to Section 9.01(b) or (c),
(ii) this Agreement is terminated by the Purchaser pursuant to Section 9.01(b)
or (d) or (iii) the conditions to the obligations of the Purchaser set forth in
Sections 8.02(a) and 8.02(b) are satisfied or waived but the Closing does not
occur as a result of a breach of any representation, warranty, covenant or
agreement on the part of the Purchaser contained herein, then notwithstanding
anything in this Agreement to the contrary, in addition to any other rights or
remedies which the Seller (in the case of clause (i) or (iii) above) or the
Purchaser (in the case of clause (ii) above) may have under this Agreement,
applicable Law or otherwise in connection with such termination or failure to
close, the Purchaser (in the case of clause (i) or (iii) above) or the Seller
(in the case of clause (ii) above) shall reimburse the other party hereto for
all of the reasonable out-of-pocket fees and expenses (including the fees and
disbursements of counsel, financial advisors and accountants) incurred by such
other party prior to such termination (or, in the case of clause (iii) above,
the 120th day after the date hereof) in connection with this Agreement, the
Ancillary Agreements and the transactions contemplated hereby or thereby up to a
maximum amount, in the case of the reasonable out-of-pocket fees and expenses of
the Purchaser, of $1,100,000 and in the case of the reasonable out-of-pocket
fees and expenses of the Seller, of $1,500,000.
ARTICLE X
INDEMNIFICATION
SECTION 1.72. Indemnification by the Purchaser.
(1) Subject to Section 11.01 in the case of subclauses (i) and (ii)
below, the Purchaser shall indemnify, defend and hold harmless the Seller, its
Affiliates and any other Person that is party to any of the Ancillary Agreements
(other than the Purchaser and its Affiliates) and their respective employees,
officers and directors (collectively, the "Seller Indemnified Parties") against,
and reimburse any Seller Indemnified Party for, any and all losses, damages,
costs, expenses, liabilities, obligations and claims of any kind (including in
respect of any Action brought by any Governmental Authority or any other Person)
including reasonable attorneys' and consultants' fees and expenses and other
legal costs and expenses reasonably incurred in prosecution, investigation,
remediation, defense or settlement (collectively, "Losses"), that such Seller
Indemnified Party may at any time suffer or incur, or become subject to, as a
result of or in connection with:
(1) the inaccuracy of any representations and warranties made
by the Purchaser or any of its Affiliates in this Agreement or any of
the Ancillary Agreements, subject to Section 10.01(c) below;
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(2) any failure by the Purchaser or any of its Affiliates to
perform any of its covenants or agreements under this Agreement or any
of the Ancillary Agreements (other than the last sentence of Section
1.02(b) of the Transfer Agreement);
(3) any Retained Liability (as defined in the Transfer
Agreement); provided, however, that this subclause (iii) shall not
apply to any Retained Liability which arises out of or relates to any
matter with respect to which the Seller would be required to indemnify
the Purchaser under Section 10.02 or Article VII (assuming, for
purposes of this proviso, that the limitations on the Seller's
indemnification obligations set forth in subparagraphs (ii) and (iv)
of, and in the proviso to, Section 10.02(b) are not applicable).
(4) any claim or cause of action by any Person arising before,
on or after the Closing Date against any Seller Indemnified Party with
respect to the conduct of the Business or any other operations of the
Company after the Closing, except in the case of any claim or cause of
action as to which the Seller has expressly agreed hereunder or under
any Ancillary Agreement to incur or assume the liability therefor;
(5) any claim or cause of action by or on behalf of any
Business Employee against any Seller Indemnified Party for (x)
employment discrimination, including discrimination in the hiring or
termination of such individual, or (y) wrongful discharge (including
constructive discharge).
(2) Notwithstanding any other provision in this Agreement to the
contrary, the Purchaser shall not be required to indemnify, defend or hold
harmless any Seller Indemnified Party against or reimburse any Seller
Indemnified Party for any Losses pursuant to Section 10.01(a) unless:
(1) such Seller Indemnified Party has notified the Purchaser
in writing in accordance with Section 10.03(a) of a pending or
threatened claim with respect to such matters within the applicable
survival period set forth in Section 11.01; and
(2) with respect to any claim for indemnification pursuant to
subclause (i) of Section 10.01(a), such claim involves Losses in excess
of $10,000 (it being understood that the Losses attributable to any
such claim involving Losses of $10,000 or less shall not be applied to,
or considered when calculating, the aggregate amount of the Seller
Indemnified Parties' Losses for purposes of subclause (iii) below); and
(3) with respect to any claim for indemnification pursuant to
subclause (i) of Section 10.01(a), the aggregate amount of the Seller
Indemnified Parties' Losses in respect of all such claims then exceeds
1% of the Purchase Price, after which the Purchaser shall be obligated
for all such aggregate Losses of the Seller Indemnified Parties in
respect of such claims only in excess of such amount;
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provided, however, that the cumulative indemnification obligations of the
Purchaser under this Article X in respect of subparagraphs (i) and (ii) of
Section 10.01(a) shall in no event exceed 75% of the Purchase Price.
Notwithstanding anything herein to the contrary, the provisions of this
Section 10.01 shall not apply to the failure of the Purchaser or any of its
Affiliates to perform any of their respective covenants or agreements under
Article VII.
(c) For purposes of determining whether or not there has been any
inaccuracy of any representation or warranty made by the Purchaser or any of its
Affiliates in this Agreement or any Ancillary Agreement for purposes of Section
10.01(a)(i), such determination shall be made as though such representations and
warranties had been made, in the case of the representations and warranties made
(i) in Article IV, as of the date hereof and as of the Closing Date, and (ii) in
any Ancillary Agreement, as of the date of such Ancillary Agreement.
SECTION 1.73. Indemnification by the Seller.
(1) Subject to Section 11.01 hereof in the case of subclauses (i) and
(ii) below, the Seller shall indemnify, defend and hold harmless the Purchaser,
its Affiliates and their respective employees, officers and directors
(collectively, the "Purchaser Indemnified Parties") against, and reimburse any
Purchaser Indemnified Party for, any and all Losses that such Purchaser
Indemnified Party may at any time suffer or incur, or become subject to, as a
result of or in connection with:
(1) the inaccuracy of any representations and warranties made
by the Seller or any of its Affiliates in this Agreement or any of the
Ancillary Agreements, subject to Sections 10.02(c) and (d) below;
(2) any failure by the Seller or any of its Affiliates to
perform any of its covenants or agreements under this Agreement or any
of the Ancillary Agreements (other than the last sentence of Section
1.02(a) of the Transfer Agreement);
(3) any Assumed Liability (as defined in the Transfer
Agreement); provided, however, that this subclause (iii) shall not
apply to any Assumed Liability which arises out of or relates to any
matter with respect to which the Purchaser would be required to
indemnify the Seller under Section 10.01 or Article VII (assuming, for
purposes of this proviso, that the limitations on the Purchaser's
indemnification obligations set forth in subparagraphs (ii) and (iii)
of, and in the proviso to, Section 10.01(b) are not applicable).
(4) any Loss arising out of or relating to the Actions set
forth in items 1, 3, 4, 5, 8 and 10 of Section 3.08 of the Disclosure
Schedule; or
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(5) any claim or cause of action by or on behalf of any
Business Employee or Former Business Employee against any Purchaser
Indemnified Party for retiree medical or dental benefits under any
Pearson Plan disclosed in Section 3.13(b) of the Disclosure Schedule or
under any other employee benefit plan maintained by the Seller or any
of its Affiliates on or prior to the Closing Date.
(2) Notwithstanding any other provision in this Agreement to the
contrary, the Seller shall not be required to indemnify, defend or hold harmless
any Purchaser Indemnified Party against or reimburse any Purchaser Indemnified
Party for any Losses pursuant to Section 10.02(a):
(1) if such claim or demand for indemnification otherwise was
resolved in connection with the Purchase Price adjustment procedures
set forth in Section 2.06; or unless:
(2) with respect to any claim for indemnification (x) pursuant
to subclause (i) of Section 10.02(a) (other than claims for
indemnification for Losses arising as a result of breaches of the
representations and warranties contained in Sections 3.01, 3.03 and
3.13(d)) or (y) pursuant to subclause (ii) of Section 10.02(a) for
Losses arising as a result of a breach of any covenant or agreement
contained in Section 5.01, such claim involves Losses in excess of
$10,000 (it being understood that the Losses attributable to any such
claim involving Losses of $10,000 or less shall not be applied to, or
considered when calculating, the aggregate amount of the Purchaser
Indemnified Parties' Losses for purposes of subclause (iv) below); and
(3) such Purchaser Indemnified Party has notified the Seller
in writing in accordance with Section 10.03(a) of a pending or
threatened claim with respect to such matters within the applicable
survival period set forth in Section 11.01; and
(4) with respect to any claim for indemnification pursuant to
subclause (i) of Section 10.02(a) (other than claims for
indemnification for Losses arising as a result of breaches of the
representations and warranties contained in Sections 3.01, 3.03 and
3.13(d)), the aggregate amount of the Purchaser Indemnified Parties'
Losses in respect of all such claims then exceeds 1% of the Purchase
Price, after which the Seller shall be obligated for all such aggregate
Losses of the Purchaser Indemnified Parties in respect of such claims
only in excess of such amount;
provided, however, that the cumulative indemnification obligation of the Seller
under this Article X in respect of subparagraphs (i) and (ii) of Section
10.02(a) shall in no event exceed 75% of the Purchase Price.
Notwithstanding anything herein to the contrary, the provisions of this
Section 10.02 shall not apply to the breach of any representations or warranties
contained in Section 3.14 or to
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the failure of the Seller or any of its Affiliates to perform any of their
respective covenants or agreements under Article VII.
(c) For purposes of determining whether or not there has been any
inaccuracy of any representation or warranty made by the Seller or any of its
Affiliates in this Agreement or any Ancillary Agreement for purposes of Section
10.02(a)(i), such determination shall be made as though such representations and
warranties had been made, in the case of the representations and warranties made
(i) in Sections 3.06, 3.07, 3.16(a) and 3.20 hereof, only as of the date hereof,
(ii) in all other Sections of Article III hereof, as of the date hereof and as
of the Closing Date, and (iii) in any Ancillary Agreement, as of the date of
such Ancillary Agreement.
(d) In all cases (except with respect to the representations and
warranties set forth in Section 3.07), in determining whether there has been a
breach of a representation and warranty by the Seller for the purposes of
Section 10.02(a), or in determining the amount of any indemnifiable Losses in
connection therewith, such representation and warranty shall be deemed to have
been made without any "Material Adverse Effect" qualifier therein.
SECTION 1.74. Notification of Claims.
(1) A party that may be entitled to be indemnified pursuant to Section
10.01 or 10.02 (the "Indemnified Party") shall promptly notify the party liable
for such indemnification (the "Indemnifying Party") in writing of any pending or
threatened claim or demand which the Indemnified Party has determined has given
or could give rise to a right of indemnification under this Agreement (including
a pending or threatened claim or demand asserted by a third party against the
Indemnified Party), describing in reasonable detail, to the extent known by the
Indemnified Party, the facts and circumstances with respect to the subject
matter of such claim or demand; provided, however, that the failure to provide
such notice shall not release the Indemnifying Party from any of its obligations
under this Article X except and only to the extent the Indemnifying Party is
materially prejudiced by such failure. Subject to the Indemnifying Party's right
to defend in good faith third party claims as hereinafter provided, the
Indemnifying Party shall satisfy its obligations under this Article X within 30
days after the receipt of written notice thereof from the Indemnified Party.
(2) If the Indemnified Party shall notify the Indemnifying Party of any
claim or demand pursuant to Section 10.03(a), and if such claim or demand
relates to a pending or threatened claim or demand asserted by a third party
against the Indemnified Party which the Indemnifying Party acknowledges is a
claim or demand as to which it must indemnify, defend and hold harmless the
Indemnified Party against or reimburse the Indemnified Party for under Section
10.01 or 10.02, the Indemnifying Party shall have the right to defend such claim
or demand and if it elects to defend such claim or demand, it shall employ
counsel reasonably acceptable to the Indemnified Party to defend such claim or
demand asserted against the Indemnified Party. The Indemnified Party and the
Indemnifying Party shall each have the right to participate in the defense of
any claim or demand for which it is not controlling the defense, at
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its own expense; provided, that the reasonable fees and expenses of counsel for
the Indemnified Party shall be borne by the Indemnifying Party if (i) the
Indemnified Party has been advised by counsel that there may be one or more
legal defenses available to it which are different from or in addition to those
available to any other party defending such claim or demand and (ii) counsel
have advised that a conflict of interests exists between the Indemnifying Party
and another party. The Indemnifying Party shall notify the Indemnified Party in
writing, as promptly as possible (but in any case before the due date for the
answer or response to a claim) after the date of the notice of claim given by
the Indemnified Party to the Indemnifying Party under Section 10.03(a), of its
election to defend in good faith any such third party claim or demand. So long
as the Indemnifying Party is actively and diligently defending in good faith any
such claim or demand asserted by a third party against the Indemnified Party,
the Indemnified Party shall not settle or compromise such claim or demand and,
in any event, shall not enter into any such settlement or compromise without
giving at least five Business Days' prior written notice thereof to the
Indemnifying Party. The Indemnified Party shall make available to the
Indemnifying Party or its agents all records and other materials in the
Indemnified Party's possession reasonably required by the Indemnifying Party for
its use in defending any third party claim or demand. Whether or not the
Indemnifying Party elects to defend any such claim or demand, the Indemnified
Party shall have no obligations to do so. The Indemnifying Party shall not
settle or compromise any such claim or demand, unless the Indemnified Party is
given a full, complete and unconditional release of any and all liability by all
relevant parties relating thereto.
(3) Notwithstanding anything herein to the contrary, the parties hereto
hereby acknowledge that the Seller has or shall assume the defense of the
pending or threatened Actions referred to in subclause (iv) of Section 10.02(a).
SECTION 1.75. Exclusive Remedies.
(1) Following the Closing, except for specific performance of the
obligations set forth in Article II and Sections 5.03, 5.07, 5.09 and 5.11 and
except for the indemnification obligations specified in Section 5.02(b) (it
being understood that the provisions of Section 10.03 shall apply to any claim
for indemnification made pursuant to Section 5.02(b) and in Article VII, the
Seller and the Purchaser acknowledge and agree that the indemnification
provisions of Sections 10.01 and 10.02 shall be the sole and exclusive remedies
of the Seller and the Purchaser, respectively, for any breach of the
representations or warranties herein or nonperformance of any covenants and
agreements herein of the other party and in respect of the other matters for
which indemnification is provided in such Sections.
SECTION 1.76. Certain Adjustments. For all purposes of this Article X,
"Losses" shall be net of (i) any insurance benefits actually paid to the
Indemnified Party from insurance policies in connection with the facts giving
rise to the right of indemnification and (ii) the value of any Tax benefits
actually realized by the Indemnified Party, and if subsequent to receiving any
indemnification payment as provided in this Article X, any Indemnified Party
receives any insurance benefits or realizes any Tax benefits in connection with
the relevant
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Losses, it shall promptly pay to the Indemnifying Party either the amount of
such insurance benefits, or the amount of such Tax benefits, as the case may be,
but in any event not exceeding the amount of such indemnification payment.
ARTICLE XI
GENERAL PROVISIONS
SECTION 1.77. Survival. The representations, warranties, covenants and
agreements of the Seller and the Purchaser and their respective Affiliates
contained in or made pursuant to this Agreement and the Ancillary Agreements or
in any certificate furnished pursuant hereto or thereto shall terminate at the
Closing, except that (a) the representations and warranties made in Article III
and Article IV (except as specifically set forth below) shall survive in full
force and effect until the date that is eighteen months after the Closing Date,
(b) the representations and warranties contained in Section 3.03 (other than the
last sentence thereof) and in Sections 3.13, 3.14 and 4.05 shall survive until
the expiration of the applicable statute of limitations, (c) the representations
and warranties contained in Sections 3.01 and 4.01 shall survive until the sixth
anniversary of the Closing Date, (d) the covenants and agreements made in this
Agreement or any of the Ancillary Agreements that are to be performed in whole
or in part subsequent to the Closing Date and that do not, by their terms,
expire on a date certain, shall survive in full force and effect until 60 days
following the expiration of any applicable statute of limitations and otherwise,
indefinitely, (e) the covenants and agreements made in Article II shall survive
in full force and effect until such time as fully complied with and (f) the
covenants and agreements made in this Agreement or any of the Ancillary
Agreements that are to be performed in whole or in part subsequent to the
Closing Date and that, by their terms, expire on a date certain, shall survive
until such date certain.
SECTION 1.78. Expenses. Except as may be otherwise specified in Section
9.04 or elsewhere herein, all costs and expenses, including fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses, whether or not the Closing
shall have occurred, and any such costs and expenses incurred by the Company
during the period prior to the Closing shall, to the extent not paid on or prior
to the Closing Date, be paid by the Seller.
SECTION 1.79. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by overnight courier service, by facsimile (followed by delivery of a
copy via overnight courier service) or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 11.03):
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(1) if to the Seller:
Pearson Education, Inc.
One Lake Street
Upper Saddle River, New Jersey 07458
Attention: Robert Dancy, Esq.
Telecopier: (201) 818-8749
with copies to:
Pearson Inc.
30 Rockefeller Plaza
50th Floor
New York, New York 10112
Attention: President
Telecopier: (212) 641-2500
Pearson plc
3 Burlington Gardens
London W1X 1LE
Attention: Company Secretary
Telecopier: 011-44-171-411-2390
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Attention: Charles Engros, Esq.
Telecopier: (212) 309-6273
(2) if to the Purchaser:
IDG Books Worldwide, Inc.
919 E. Hillsdale Blvd., Suite 400
Foster City, California 94404
Attention: Chief Financial Officer
Telecopier: (650) 655-3294
with a copy to:
Fulbright & Jaworski L.L.P.
666 Fifth Avenue, 31st Floor
New York, New York 10103
Attention: Warren Nimetz, Esq.
Telecopier: (212) 752-5958
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SECTION 1.80. Public Announcements. Except as may be required by Law or
stock exchange rules, no party to this Agreement shall make any public
announcements or otherwise communicate with any news media in respect of this
Agreement or the Ancillary Agreements or the transactions contemplated hereby or
thereby without the consent of the other party (such consent not to be
unreasonably withheld). With respect to any such public announcement or other
communication, the parties shall cooperate as to the timing (giving preference
to timing considerations warranted by the listing of Seller's corporate parent
on the London Stock Exchange) and contents thereof.
SECTION 1.81. Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 1.82. Severability. If any term or other provision of this
Agreement is held invalid, illegal or incapable of being enforced by any Law or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated hereby be consummated as originally
contemplated to the greatest extent possible.
SECTION 1.83. Entire Agreement. This Agreement and the Ancillary
Agreements constitute the entire agreement of the parties hereto with respect to
the subject matter hereof and thereof, and supersede all prior agreements and
undertakings, both written and oral, other than the Confidentiality Agreement,
between the Seller and the Purchaser with respect to the subject matter hereof
and thereof, except as otherwise expressly provided herein.
SECTION 1.84. Assignment. This Agreement shall not be assigned by
operation of Law or otherwise, except that the Seller may assign any or all of
its rights and obligations under this Agreement to any of its Affiliates, the
Purchaser may assign any or all of its rights and obligations under this
Agreement to a wholly-owned Subsidiary of the Purchaser, and either the
Purchaser or any Subsidiary thereof may grant a security interest in its rights
hereunder to any financial institution extending credit to the Purchaser or such
Subsidiary; provided, however, that no such assignment or grant of a security
interest shall release the Seller, the Purchaser or any such Subsidiary, as
applicable, from any liability hereunder.
SECTION 1.85. No Third-Party Beneficiaries. Except as provided in
Article X and in Sections 5.02(b) and 7.01(b), this Agreement is for the sole
benefit of the parties
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hereto and their permitted assigns and nothing herein, express or implied, is
intended to or shall confer upon any other Person or entity any legal or
equitable right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
SECTION 1.86. Amendment. This Agreement may not be amended or modified
except by an instrument in writing signed by the Seller and the Purchaser.
SECTION 1.87. Governing Law; Submission to Jurisdiction, Waivers. This
Agreement shall be governed by, and construed in accordance with, the Laws of
the State of New York. Each of the Seller and the Purchaser agrees that any
dispute relating to or arising from this Agreement or the transactions
contemplated hereby shall be resolved only in the Courts of the State of New
York sitting in the County of New York or the United States District Court for
the Southern District of New York and the appellate courts having jurisdiction
of appeals in such courts. In that context, and without limiting the generality
of the foregoing, each of the Seller and the Purchaser hereby irrevocably and
unconditionally:
(1) submits for itself and its property in any Action relating to this
Agreement or any of the Ancillary Agreements or the transactions contemplated
hereby or thereby, or for recognition and enforcement of any judgment in respect
thereof, to the exclusive jurisdiction of the Courts of the State of New York
sitting in the County of New York, the United States District Court for the
Southern District of New York, and appellate courts having jurisdiction of
appeals from any of the foregoing, and each of the parties hereto irrevocably
and unconditionally agrees that all claims in respect of any such Action shall
be heard and determined in such New York State court or, to the extent permitted
by law, in such Federal court;
(2) consents that any such Action may and shall be brought in such
courts and waives any objection that it may now or hereafter have to the venue
or jurisdiction of any such Action in any such court or that such Action was
brought in an inconvenient court and agrees not to plead or claim the same;
(3) agrees that service of process in any such Action may be effected
by mailing a copy thereof by registered or certified mail (or any substantially
similar form of mail), postage prepaid, to such party at its address as provided
in Section 11.03; and
(4) agrees that nothing herein shall affect the right to effect service
of process in any other manner permitted by New York law.
SECTION 1.88. Recovery of Litigation Expenses. In connection with any
Action between Seller, Purchaser and their respective Affiliates arising out of
or related to this Agreement or any of the Ancillary Agreements, the prevailing
party in such Action shall be entitled to recover all of its costs and expenses
in connection with such Action or proceeding, including all costs and expenses
in investigating and prosecuting or defending such Action including the
reasonable fees and expenses of counsel, auditors and other consultants.
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SECTION 1.89. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of a signature page to this Agreement by telecopier shall
be effective as delivery of a manually executed counterpart of this Agreement.
SECTION 1.90. No Presumption. This Agreement shall be construed without
regard to any presumption or rule requiring construction or interpretation
against the party drafting or causing any instrument to be drafted.
[signature page to follow]
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<PAGE> 74
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
PEARSON EDUCATION, INC.
By:_________________________________
Name:
Title:
IDG BOOKS WORLDWIDE, INC.
By:_________________________________
Name:
Title:
The undersigned agrees to be bound by the provisions of Section
5.07(b), (c) and (e) hereof as if it were the Seller hereunder.
PEARSON INC.
By:_________________________________
Name:
Title:
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<PAGE> 75
EXHIBIT 1.01(a)
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement (this "Assignment") is made and
entered into immediately prior to the Closing (as hereinafter defined) on this
___ day of ______, 1999, by and between Pearson Inc., a Delaware corporation
("Assignor"), and IDG Books Worldwide, Inc., a Delaware corporation
("Assignee").
WHEREAS, pursuant to the terms of that certain Trademark License Agreement,
dated as of November 27, 1998 (the "Trademark License Agreement"), among Simon &
Schuster, Inc. and Viacom International, Inc. (collectively, "Licensors"), and
Assignor, Licensors granted to Assignor and its affiliates certain limited
rights with respect to the Licensed Marks (as defined therein); and
WHEREAS, pursuant to the terms of that certain Stock Purchase Agreement,
dated as of June__, 1999 (the "Stock Purchase Agreement"), between Pearson
Education, Inc., a Delaware corporation, and Assignee, Assignee has agreed to
purchase (such purchase, the "Transaction") all of the issued and outstanding
capital stock of Macmillan General Reference USA Inc., which is engaged in the
Business (as defined in the Stock Purchase Agreement); and
WHEREAS, the Transaction is to be completed effective as of the Closing on
the Closing Date, each as defined in the Stock Purchase Agreement; and
WHEREAS, the Business is using the Licensed Marks; and
WHEREAS, in connection with the Transaction, Assignor wishes to assign to
Assignee, and Assignee wishes to accept the assignment from Assignor of, all of
Assignor's rights under the Trademark License Agreement that relate to the use
of the Licensed Marks in the Business (the "Assigned Rights"), and all of
Assignor's liabilities and obligations under the Trademark License Agreement
relating to the Assigned Rights (the "Assumed Liabilities").
NOW, THEREFORE, the parties hereto agree as follows:
1. Assignor hereby irrevocably assigns, conveys, transfers, sets over,
confirms and delivers to Assignee the Assigned Rights.
2. Assignee hereby assumes all of the Assumed Liabilities, and further
agrees to perform and discharge all of the Assumed Liabilities.
3. Nothing in this Assignment is intended to convey any rights or provide
for any assumption of obligations or liabilities except for the Assigned Rights
and the Assumed
<PAGE> 76
Liabilities. Assignor remains a party to the Trademark License Agreement, and
retains all rights, liabilities and obligations under the Trademark License
Agreement other than the Assigned Rights and the Assumed Liabilities.
4. Assignee shall indemnify, defend and hold harmless Assignor, its
parents, subsidiaries and affiliates and any other person that is a party to the
Trademark License Agreement, and any of their respective officers, directors,
employees, and shareholders (the "Indemnified Parties") against, and shall
reimburse any Indemnified Party for, any and all claims, demands, suits, causes
of action, losses, liabilities, obligations, damages, judgments, costs and
expenses (including reasonable attorneys' and consultants' fees and expenses and
other legal costs and expenses reasonably incurred in prosecution,
investigation, remediation, defense or settlement) that such Indemnified Party
may at any time suffer or incur, or become subject to, as a result of or in
connection with (i) the Assigned Rights and the Assumed Liabilities, (ii)
Assignee's use of the Licensed Marks or (iii) the design, manufacture,
distribution, sale, shipment, provision, advertising, marketing, promotion and
other exploitation by Assignee of any products or services using the Licensed
Marks other than those claims which, if proven, would constitute a breach of
Licensors' warranties set forth in Section 8.1 of the Trademark License
Agreement. Assignor and Assignee shall resolve any indemnification claims
arising from any breach of this Assignment in accordance with the terms of
Article 10.03 of the Stock Purchase Agreement.
5. This Assignment may be executed in any number of counterparts, each of
which will be deemed an original, but all of which together will constitute one
and the same instrument.
6. Each of the parties hereto shall promptly do, make, execute or
deliver, or cause to be done, made, executed or delivered, all such further
acts, documents and things as the party hereto may reasonably require from time
to time for the purpose of giving effect to this Assignment and shall use its
best efforts and take all such steps as may be reasonably within its power to
implement to their full extent the provisions of this Assignment.
7. This Assignment is for the sole benefit of the parties hereto, the
Indemnified Parties and their successors and assigns, and nothing herein,
express or implied, is intended to or shall confer upon any other person or
entity any legal or equitable right, benefit or remedy of any nature whatsoever
under or by reason of this Assignment.
8. This Assignment shall be governed by the laws of the State of New
York.
9. Nothing in this Assignment shall affect or limit in any way the rights
of Assignor or Assignee to indemnification as set forth in the Stock Purchase
Agreement.
[Signature page follows.]
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<PAGE> 77
IN WITNESS WHEREOF, the parties hereto have executed this Assignment as of
the day and year first above written.
PEARSON INC.
By:
-----------------------------------
Name:
Title:
IDG BOOKS WORLDWIDE, INC.
By:
-----------------------------------
Name:
Title:
[Signature page to Assignment and Assumption Agreement]
<PAGE> 78
EXHIBIT 1.01(b) to
STOCK PURCHASE AGREEMENT
TRANSFER AGREEMENT
between
MACMILLAN GENERAL REFERENCE USA INC.
and
AHSUOG INC.
Dated: ____________, 1999
<PAGE> 79
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I..................................................................... 1
TRANSFER OF ASSETS; ASSUMPTION OF LIABILITIES....................... 1
1.01 Transfer of Assets........................................... 1
(a) Assumed Business Assets.................................. 1
(b) Assumed Receivable....................................... 2
1.02 Liabilities.................................................. 3
(a) Assumed Liabilities...................................... 3
(b) Retained Liabilities..................................... 4
1.03 Employee Matters............................................. 4
1.04 Further Assurances; Post-Closing Cooperation................. 4
(a) Further Assurances....................................... 4
(b) Power of Attorney........................................ 5
ARTICLE II.................................................................... 5
EFFECTIVENESS OF AGREEMENT.......................................... 5
ARTICLE III................................................................... 6
DEFINITIONS......................................................... 6
3.01 Definitions.................................................. 7
3.02 Certain Capitalized Terms.................................... 7
ARTICLE IV.................................................................... 7
MISCELLANEOUS....................................................... 7
4.01 Notices...................................................... 9
4.03 Waiver....................................................... 9
4.04 Amendment.................................................... 9
4.05 No Third Party Beneficiary................................... 9
4.06 No Assignment; Binding Effect................................ 9
4.07 Headings..................................................... 10
4.08 Governing Law................................................ 10
4.09 Counterparts................................................. 10
Schedule A Assumed Titles
Schedule B Transferred Employees
</TABLE>
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TRANSFER AGREEMENT
This TRANSFER AGREEMENT (this "Agreement"), dated ___________, 1999,
between MACMILLAN GENERAL REFERENCE USA INC., a Delaware corporation ("MGR"),
and AHSUOG INC., a California corporation ("Ahsuog").
WITNESSETH:
WHEREAS, MGR is engaged in (a) the business of publishing (or licensing or
sublicensing for publication) the Elements Titles and titles published under the
imprints, series, colophons or brands The Complete Idiot's Guides and The Lazy
Way and (b) the library reference publishing business (collectively, the
"Assumed Business");
WHEREAS, Pearson Education, Inc., a Delaware corporation ("Pearson"), and
IDG Books Worldwide, Inc., a Delaware corporation ("IDG"), are parties to that
certain Stock Purchase Agreement dated as of June 29, 1999 (as in effect on the
date hereof, the "Purchase Agreement"), which Purchase Agreement contemplates
that, immediately following the consummation of the transactions contemplated by
this Agreement, IDG will purchase all of the issued and outstanding stock of
MGR; and
WHEREAS, MGR desires to transfer, sell and assign the Assumed Business
Assets, the Assumed Receivables and the Assumed Liabilities (each as herein
defined) to Ahsuog, and Ahsuog desires to accept all of the Assumed Business
Assets and the Assumed Receivables and to assume all of the Assumed Liabilities,
all upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
TRANSFER OF ASSETS; ASSUMPTION OF LIABILITIES
1.01 Transfer of Assets.
(a) Assumed Business Assets. Effective as of the Effective Time, MGR
hereby sells, transfers, conveys and assigns to Ahsuog all of MGR's right, title
and interest in, to and under all of the assets used or held for use primarily
in connection with the Assumed Business including, without limitation, the
following assets (collectively, the "Assumed Business Assets"):
<PAGE> 81
(i) the Elements Titles and all titles published under the
imprints, series, colophons or brands The Complete Idiot's Guides and
The Lazy Way, including without limitation the titles set forth on
Schedule A hereto (collectively, the "Assumed Titles");
(ii) all copyrights, trademarks and other Intellectual Property
relating primarily to any Assumed Title or otherwise to the Assumed
Business;
(iii) all inventories of raw materials, work-in-process,
finished goods, products under research and development and other
supplies, packaging materials and other accessories related thereto
which are used or held for use by MGR primarily in the conduct of the
Assumed Business;
(iv) all Contracts which relate primarily to any Assumed Title
or to the Assumed Business (the "Assumed Contracts");
(v) all accounts receivable and notes, bonds and other
evidences of rights to receive payments arising out of sales
("Accounts Receivable"), to the extent that such sales occurred in the
conduct of the Assumed Business; and
(vi) all rights, claims, privileges and causes of action of MGR
relating primarily to the Assumed Business or any Assumed Business
Asset or relating to any Assumed Liability.
(b) Assumed Receivables. Effective as of the Effective Time, to the
extent that the same do not constitute Assumed Business Assets, MGR hereby
sells, transfers, conveys and assigns to Ahsuog all of MGR's right, title and
interest in, to and under all Accounts Receivable of MGR as of the Effective
Time (determined using the same accounting policies, principles and
methodologies used in preparing the 1998 Pro Forma Financial Statements and the
Statement of Adjusted Assets set forth in Schedule 2.06(a) to the Purchase
Agreement and using the Specified Accounting Policies) (the "Assumed
Receivables"), other than the Excluded Receivables.
(c) Excluded Receivables. Notwithstanding anything in this Agreement
to the contrary, the following Accounts Receivable of MGR (the "Excluded
Receivables") shall be excluded from and shall not constitute Assumed
Receivables:
(i) net Accounts Receivable under MGR's Contracts with Weight
Watchers International, Inc.;
(ii) net Accounts Receivable attributable to the production and
sale of "Chek Chart" products; and
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(iii) net subrights receivables.
1.02 Liabilities.
(a) Assumed Liabilities. In consideration of the sale, transfer,
conveyance and assignment to it of the Assumed Business Assets and the Assumed
Receivables pursuant to this Agreement, effective as of the Effective Time,
Ahsuog hereby assumes and agrees to pay, perform and discharge when due all of
the following liabilities and obligations of MGR (the "Assumed Liabilities"),
and no others:
(i) all liabilities and obligations of MGR that relate
primarily to the conduct of the Assumed Business, including without
limitation (x) all liabilities and obligations of MGR with respect to
accounts payable of MGR that relate primarily to the conduct of the
Assumed Business, (y) all liabilities and obligations of MGR under or
in respect of the Assumed Contracts and (z) the Assumed Business
Employment Liabilities;
(ii) all liabilities and obligations of MGR with respect to all
accounts payable of MGR as of the Effective Time (determined using the
same accounting policies, principles and methodologies used in
preparing the 1998 Pro Forma Financial Statements and the Statement of
Adjusted Assets set forth in Schedule 2.06(a) and using the Specified
Accounting Policies) other than any such accounts payable which
constitute Retained Liabilities (as defined below);
(iii) to the extent not included in subparagraph (i) or (ii)
above, all liabilities and obligations of MGR with respect to accounts
payable for paper, printing, binding and other similar tangible items
received by MGR prior to the Effective Time (whether or not invoices
therefor are received before or after the Effective Time), but only to
the extent that such items were used in preparing products which are
reflected in MGR's inventory as set forth in the Final AA Statement;
(iv) all liabilities and obligations of MGR with respect to the
fees, charges and disbursements of third party providers of marketing,
consulting and other professional services and occupancy services
(whether or not invoices therefor are received before or after the
Effective Time), but only to the extent that such fees, charges and
disbursements are for services rendered prior to the Effective Time;
and
(v) all liabilities and obligations of MGR (including, without
limitation, Tax liabilities) that arise from the sale, transfer,
conveyance and assignment of the Assumed Business Assets to Ahsuog
pursuant hereto.
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From and after the Effective Time, (A) MGR shall have no liability for the
Assumed Liabilities and (B) Ahsuog shall discharge in a timely manner or make
adequate provision for all of the Assumed Liabilities, provided that Ahsuog
shall have the ability to contest, in good faith, any claim of liability
asserted in respect thereof by any Person.
(b) Retained Liabilities. Notwithstanding anything in this Agreement to
the contrary, all liabilities and obligations of MGR other than the Assumed
Liabilities shall be retained by MGR (the "Retained Liabilities") including,
without limitation, the following:
(i) all accounts payable (including, for this purpose, accrued
liabilities and deferred revenues) attributable to the production and
sale of "Chek Chart" products; and
(ii) all obligations and liabilities of MGR under or in respect
of Contracts (other than the Assumed Contracts), including, without
limitation, all obligations to make guaranteed payments under MGR's
Contracts with Weight Watcher's International, Inc.
Ahsuog shall have no liability for the Retained Liabilities. MGR shall
discharge in a timely manner or shall make adequate provision for all of the
Retained Liabilities, provided that MGR shall have the ability to contest, in
good faith, any claim of liability asserted in respect thereof by any Person.
1.03 Employee Matters.
Effective as of the Effective Time, the employment of all employees of MGR
identified on Schedule B hereto shall be transferred to Ahsuog, and Ahsuog shall
assume all liabilities and obligations of MGR (including liabilities and
obligations for compensation and benefits) related to the employment of such
employees by MGR (the "Assumed Business Employment Liabilities").
1.04 Further Assurances; Post-Closing Cooperation.
(a) Further Assurances. At any time or from time to time after the
Closing, at Ahsuog's request and expense, MGR shall, or shall cause its
Affiliates to, execute and deliver to Ahsuog such proper instruments of sale,
transfer, conveyance, assignment and confirmation, provide such materials and
information and take such other actions as Ahsuog may reasonably deem necessary
or desirable in order more effectively to transfer, convey and assign to Ahsuog,
and to confirm Ahsuog's title to, all of the Assumed Business Assets and the
Assumed Receivables, and, to the full extent permitted by Law, to put Ahsuog in
actual possession and operating control of the Assumed Business, the Assumed
Business Assets and the Assumed Receivables and to assist Ahsuog in exercising
all rights with respect thereto, and otherwise to cause MGR to fulfill its
obligations under this Agreement. Following the Closing, IDG and
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Pearson shall each forward to the other any invoices that each receives which
relates to any goods or services provided to MGR for which it is not liable
hereunder, and the other party shall directly pay such invoice or such portion
thereof for which it is liable hereunder, provided that, the party responsible
for such invoice shall be permitted, at its option, to contest such liability in
good faith by appropriate proceedings initiated directly with the creditor in
question.
(b) Power of Attorney. Effective on the Closing Date, MGR constitutes
and appoints Ahsuog the true and lawful attorney of MGR, with full power of
substitution, in the name of MGR, but on behalf of and for the benefit of
Ahsuog, at all times from and after the Effective Time: (i) to demand, receive
and collect from time to time all or any of the Assumed Business Assets and
Assumed Receivables and to make endorsements and give receipts and releases for
and in respect of the same or any part thereof; (ii) to institute, prosecute,
compromise and settle any and all Actions that Ahsuog may deem proper in order
to collect, assert or enforce any claim, right or title of any kind in, to or
under any of the Assumed Business Assets or Assumed Receivables, (iii) to
defend, compromise and settle any and all Actions in respect of any of the
Assumed Business Assets or Assumed Receivables; and (iv) to do all such acts and
things in relation to the matters set forth in the preceding clauses (i) through
(iii) as Ahsuog shall deem desirable. MGR acknowledges that the appointment
hereby made and the powers hereby granted are coupled with an interest and are
not and shall not be revocable by it in any manner or for any reason. MGR shall
execute and deliver to Ahsuog at the Closing an acknowledged power of attorney
to the foregoing effect. Ahsuog shall indemnify and hold harmless MGR from any
and all Losses caused by or arising out of any breach of Law by Ahsuog in its
exercise of such power of attorney.
ARTICLE II
EFFECTIVENESS OF AGREEMENT
On the Closing Date, as of the time (the "Effective Time") immediately
prior to the effective time of the Closing, subject only to (1) the due
execution and delivery of the Purchase Agreement and (2) the prior or
contemporaneous satisfaction (or waiver by the appropriate Person) of all of the
conditions set forth in Article VIII of the Purchase Agreement, this Agreement
shall be deemed to be effective and consummated and shall be binding on and
enforceable against the parties hereto, provided that if the Closing Date shall
for any reason not occur on the date hereof, this Agreement shall be deemed to
be rescinded and shall be void and of no force or effect.
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ARTICLE III
DEFINITIONS
3.01 Definitions.
(a) As used in this Agreement, the following defined terms shall have
the meanings indicated below:
"Agreement" means this Transfer Agreement and the Schedules hereto, as
the same may be amended from time to time.
"Ahsuog" has the meaning ascribed to it in the introductory paragraph
of this Agreement.
"Assumed Business" has the meaning ascribed to it in the recitals to
this Agreement.
"Assumed Business Assets" has the meaning ascribed to it in Section
1.01(a).
"Assumed Contracts" has the meaning ascribed to it in Section 1.01(a).
"Assumed Liabilities" has the meaning ascribed to it in Section
1.02(a).
"Assumed Receivables" has the meaning ascribed to it in Section
1.01(b).
"Assumed Titles" has the meaning set forth in Section 1.01(a).
"Effective Time" has the meaning ascribed to it in Article II.
"Excluded Receivables" has the meaning ascribed to it in Section
1.01(c).
"IDG" has the meaning ascribed to it in the recitals to this
Agreement.
"MGR" has the meaning ascribed to it in the introductory paragraph of
this Agreement.
"Pearson" has the meaning ascribed to it in the recitals to this
Agreement.
"Retained Liabilities" has the meaning ascribed to it in Section
1.02(b).
(b) Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender; (ii) words using the singular or
plural number also include the
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plural or singular number, respectively; (iii) the terms "hereof", "herein",
"hereby" and derivative or similar words refer to this entire Agreement; and
(iv) the terms "Article" or "Section" refer to the specified Article or Section
of this Agreement.
3.02 Certain Capitalized Terms.
Capitalized terms used but not otherwise defined herein shall have the
respective meanings ascribed to them in the Purchase Agreement.
ARTICLE IV
MISCELLANEOUS
4.01 Notices.
All notices, requests and other communications hereunder must be in
writing and will be deemed to have been duly given only if delivered personally
against written receipt or by facsimile transmission or mailed by prepaid first
class certified mail, return receipt requested, or mailed by overnight courier
prepaid, to the parties at the following addresses or facsimile numbers:
If to MGR, to:
IDG Books Worldwide, Inc.
919 E. Hillsdale Blvd., Suite 400
Foster City, California 94404
Attention: Chief Financial Officer
Telecopier: (650) 655-3294
with a copy to:
Fulbright & Jaworski L.L.P.
666 Fifth Avenue, 31st Floor
New York, New York 10103
Attention: Warren Nimetz, Esq.
Telecopier: (212) 752-5958
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If to Ahsuog, to:
Pearson Education, Inc.
One Lake Street
Upper Saddle River, New Jersey 07458
Attention: Robert Dancy, Esq.
Telecopier: (201) 818-8749
with copies to:
Pearson Inc.
30 Rockefeller Plaza
50th Floor
New York, New York 10112
Attention: President
Telecopier: (212) 641-2500
Pearson plc
3 Burlington Gardens
London W1X 1LE
Attention: Company Secretary
Telecopier: 011-44-171-411-2390
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Attention: Charles Engros, Esq.
Telecopier: (212) 309-6273
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 4.01, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section 4.01, be deemed given upon receipt, (iii) if delivered
by mail in the manner described above to the address as provided in this Section
4.01, be deemed given on the earlier of the third Business Day following mailing
or upon receipt and (iv) if delivered by overnight courier to the address as
provided in this Section 4.01, be deemed given on the earlier of the first
Business Day following the date sent by such overnight courier or upon receipt
(in each case regardless of whether such notice, request or other communication
is received by any other Person to whom a copy of such notice is to be delivered
pursuant to this Section 4.01). Any party hereto from time to time may change
its address, facsimile number or other information for the purpose of notices to
that party by giving notice specifying such change to each other party hereto.
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4.02 Entire Agreement.
This Agreement supersedes all prior discussions and agreements between
the parties hereto with respect to the subject matter hereof and contain the
sole and entire agreement between the parties hereto with respect to the subject
matter hereof .
4.03 Waiver.
Any term or condition of this Agreement may be waived at any time by
the party that is entitled to the benefit thereof, but no such waiver shall be
effective unless set forth in a written instrument duly executed by or on behalf
of the party waiving such term or condition. No waiver by any party of any term
or condition of this Agreement, in any one or more instances, shall be deemed to
be or construed as a waiver of the same or any other term or condition of this
Agreement on any future occasion. All remedies, either under this Agreement or
by Law or otherwise afforded, will be cumulative and not alternative.
4.04 Amendment.
This Agreement may be amended, supplemented or modified only by a
written instrument duly executed by or on behalf of each party hereto.
4.05 No Third Party Beneficiary.
The terms and provisions of this Agreement are intended solely for the
benefit of the parties hereto and their respective successors and assigns, and
it is not the intention of the parties to confer third-party beneficiary rights,
and this Agreement does not confer any such rights, upon any other Person.
4.06 No Assignment; Binding Effect.
This Agreement shall not be assigned by operation of law or otherwise,
except that after the Effective Time, either MGR or Ahsuog may assign any or all
of its rights and obligations under this Agreement to any of its Affiliates;
provided, however, that no such assignment shall release MGR or Ahsuog, as the
case may be, from any liability hereunder. Subject to the immediately preceding
sentence, this Agreement is binding upon, inures to the benefit of and is
enforceable by the parties hereto and their respective successors and assigns.
4.07 Headings.
The headings used in this Agreement have been inserted for convenience
of reference only and do not define or limit the provisions hereof.
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4.08 Governing Law.
This Agreement shall be governed by and construed in accordance with
the Laws of the State of New York, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of New York or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of New York.
4.09 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which will be deemed an original, but all of which together will constitute one
and the same instrument.
[Signature Page Follows]
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties hereto by a duly authorized officer of each such party as of the
date first above written.
MACMILLAN GENERAL REFERENCE USA INC.
By:
---------------------------------
Name: Robert Dancy
Title: Senior Vice President and Secretary
AHSUOG INC.
By:
---------------------------------
Name: Robert Dancy
Title: Senior Vice President and Secretary
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<PAGE> 91
SCHEDULE A
LIST OF TITLES
<PAGE> 92
SCHEDULE B
Gary Krebs
Carl Fischer
Phil Kitchell
Amy Zavatto
Amy Gordon
Randi Ladenheim-Gill
Michelle Reed
David Thomas
Mary Hunt
Angela Calvert
Kelly Cain
<PAGE> 93
EXHIBIT 1.01(c)
INTERNATIONAL DISTRIBUTION AGREEMENT
INTERNATIONAL DISTRIBUTION AGREEMENT (this "Agreement") is made as of ,
1999 (the "Effective Date"), by and between Pearson Education, Inc., a
corporation organized under the laws of the State of Delaware ("Distributor"),
and Macmillan General Reference USA Inc., a corporation organized under the laws
of Delaware ("Publisher").
W I T N E S S E T H:
WHEREAS, Publisher is the owner of rights to, and does and will from time
to time publish, various English language books, series of books and other
titles acquired by Publisher, with which Distributor is familiar by reason of
the sale of Publisher to IDG Books Worldwide, Inc. ("IDGB") pursuant to that
certain Stock Purchase Agreement, dated June ___, 1999 (the "Purchase
Agreement"), including, without limitation, any text, reference and ancillary
materials (including, without limitation, software packaged with books),
revisions and new editions thereof and additional products published by
Publisher (collectively, the "Products"); and
WHEREAS, Publisher desires to appoint Distributor to sell, market and
distribute the Products in the territory described in Exhibit A attached hereto
(the "Territory"), and Distributor desires to accept such appointment.
NOW, THEREFORE, in consideration of the premises and agreements set forth
herein, the parties, each intending to be legally bound hereby, do promise and
agree as follows:
SECTION 1.
APPOINTMENT OF INTERNATIONAL DISTRIBUTOR
1.1 Appointment of International Distributor.
(1) Generally. Subject to the assignment provisions in Section 15.9
hereof, Publisher hereby appoints for the Term (as defined herein) Distributor,
and Distributor hereby accepts the appointment, as Publisher's exclusive
international distributor for the sale, marketing and distribution of the
Products in all markets and channels of distribution in the Territory.
(2) Use of Subdistributors and Representatives. Distributor may
exercise its rights and carry out its obligations hereunder either directly or
indirectly through one or more of its Affiliates or through subdistributors,
sublicensees, commissioned sales representatives and/or
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marketing or other representatives appointed by Distributor from time to time in
its sole discretion.
SECTION 2.
TERM
2.1 Term. This Agreement shall remain in effect from the Effective Date
through December 31, 1999 (the "Term"), unless and until earlier terminated
pursuant to any of the provisions for termination set forth herein. Not later
than October 1, 1999, each party hereto must either (a) begin negotiating in
good faith with the other party hereto the terms of a new international
distribution agreement (the "New Agreement") or (b) notify the other party
hereto of its intention to not enter into a New Agreement.
SECTION 3.
ORDERS AND RETURNS
3.1 Orders and Shipments.
(1) Placement and Acceptance of Orders. All orders placed by
Distributor shall include (i) the quantity of Products ordered, (ii)
identification number (i.e., ISBN) and title of each Product ordered and (iii)
the method, time and place of Product shipment and delivery. Publisher shall
accept and fill all orders received from Distributor and deliver the Products
ordered to the place of delivery specified by Distributor on or before the
required delivery date.
(2) Costs. Distributor shall pay all freight costs (including U.S.
inland shipping costs, overseas air and sea freight costs, shipping costs within
the Territory, customs costs, duties, taxes, insurance and other related freight
costs) for the Products it ordered. Title to the Products (and risk of loss
therefor) shall pass to Distributor upon delivery to Distributor's agent (point
of origin) in the U.S.
3.2 Returns.
(a) During the period commencing on the first day of the Term, and
ending on the Returns Termination Date (as defined below), Distributor shall
accept returns from customers in the ordinary course of business and shall pay
refunds, or issue credits, to customers in respect of such returns in accordance
with Distributor's past practices. Within twenty days following the end of each
month during the Term, Distributor shall ship such returns which are saleable
and not out of print to Publisher, as applicable, and within 20 business days
following receipt of such returns, Publisher shall pay to Distributor, or
otherwise offset such amounts against balances owed by Distributor, the "landed
cost" (unit manufacturing cost plus freight) in respect of such returns.
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(b) Following the date which is five months after the last day of the
Term, (the "Returns Termination Date"), with respect to any returns that
customers attempt to make with Distributor, Distributor shall have the option:
(i) to decline to accept such returns from customers and direct customers to
make returns directly to Publisher or (ii) to accept such returns from customers
without issuing credits to such customers and to ship such returns to Publisher
at Publisher's expense.
SECTION 4.
PRICING AND PAYMENTS
4.1 Pricing, Discounts and Payments.
(1) Purchase Price. The purchase price of the Products sold to
Distributor pursuant to this Agreement shall be the aggregate of:
(1) the unit manufacturing cost of producing the Products (which
shall be paper, printing and binding expenses only and, for greater
certainty, shall exclude any plant or development costs); plus
(2) 28% of Net Sales.
(2) Royalty Payments. Publisher shall be responsible for the payment
of all royalties or other amounts payable to authors (or others whose
intellectual property is included in the Products) in respect of sales of
Products by Publisher to Distributor (or to any person appointed by Distributor
pursuant to Section 1.1(b)) and in respect of sales of Products by Distributor
(or by any person appointed by Distributor pursuant to Section 1.1(b)).
(3) Establishment of Selling Price. Although a U.S. retail price may
be shown on the cover of each Product, Distributor will set the actual selling
price of each Product.
(4) Payment of Purchase Price. Distributor shall pay, in U.S.
currency by wire in immediately available funds, the purchase price for the
Products sold to Distributor pursuant to this Agreement as follows:
(1) with respect to the portion of the purchase price due under
Section 4.1(a)(i), Publisher shall furnish to Distributor at the time
of shipment of a Product an invoice setting forth the unit
manufacturing cost of such Product and Distributor shall pay the
amount shown on such invoice within 90 days after the date of
Publisher's invoice therefor; and
(2) with respect to the portion of the purchase price due under
Section 4.1(a)(ii), Distributor shall provide a written statement to
Publisher within 20 days after
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the end of each month, which statement shall set forth the Net Sales
(in U.S. dollars) applicable to those Products sold during such month.
Distributor shall pay the portion of the purchase price due under
Section 4.1(a)(ii) within 90 days after the date of each such
statement. Distributor agrees to send invoices promptly following
shipment of the Products.
If the invoice price of any Product from Distributor to its customer is stated
in a currency other than U.S. dollars, then, for the purpose of determining Net
Sales, such invoice price shall be converted into U.S. dollars at the exchange
rate between those two currencies quoted by the Federal Reserve Bank in New York
on the last business day of the month in which the sale is deemed to have
occurred.
4.2 Non-Payment. Delinquent payments due under Section 4.1(d)(i) or
4.1(d)(ii), as the case may be, shall begin to accrue interest at the rate of
15% per annum, commencing on the first business day after the payment due date
and Publisher shall promptly notify Distributor of such non-payment. Any dispute
or difference between Publisher and Distributor as a result of or arising out of
the matters specified in this Section 4.2 shall be resolved by an Independent
Arbitrator in accordance with Section 13.1.
SECTION 5.
REPRESENTATIONS, WARRANTIES AND COVENANTS
5.1 Representations, Warranties and Covenants of Publisher. Publisher
represents, warrants and covenants to Distributor, and agrees with Distributor,
that:
(1) Title; No Liens. Publisher has all right, title and interest in
the Products and the Products are free from all liens, security interests and
other similar encumbrances.
(2) Intellectual Property Rights in the Products. Except as Publisher
otherwise may disclose in writing to Distributor from time to time with respect
to particular Products and particular portions of the Territory, to Publisher's
knowledge, Publisher has and will continue to have throughout the Term all
copyright, trademark, trade name and other intellectual property and proprietary
rights in the Products necessary to the performance of this Agreement by
Publisher and Distributor, and Publisher's publication, manufacture,
distribution and sale of the Products and Distributor's distribution and sale of
the Products within the Territory. So long as Distributor acts in accordance
with such written disclosures, to Publisher's knowledge, Distributor's exercise
of the rights granted to it hereunder with respect to all Products furnished
under this Agreement do not and will not infringe or violate any copyright,
trademark, trade name or other intellectual property, proprietary or other right
of any person. Publisher will use Commercially Reasonable Efforts to obtain and
maintain all copyrights, trademarks, trade names and other intellectual property
and proprietary rights in the Products necessary for the performance of this
Agreement by Publisher and Distributor in all portions of
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the Territory, in each case consistent with prior practice or as Distributor
otherwise may reasonably request.
(3) Authority. Publisher has the right and power to enter into this
Agreement and to grant the rights granted hereunder and Publisher has not
granted, and will not grant, rights or licenses to any other person or entity
which infringe upon or conflict with the rights granted to Distributor
hereunder.
(4) No Approvals. Except as Publisher otherwise may disclose in
writing to Distributor from time to time with respect to particular Products and
particular portions of the Territory, to Publisher's knowledge no registration
with or approval of any government agency or commission of any jurisdiction is
necessary for the performance by Publisher of any of the terms of this Agreement
or for the validity and enforceability hereof. Publisher will use Commercially
Reasonable Efforts to make all registrations (not including copyright
registrations) with and shall use Commercially Reasonable Efforts to obtain the
approval of each government agency and commission in each jurisdiction in the
Territory that may be necessary, to be determined by Publisher in its sole
judgment, for the performance by Publisher of this Agreement.
(5) Covenants.
(1) Publisher shall not require Distributor to maintain any
branch, warehouse or distribution facility for the Products in any
particular country within the Territory.
(2) Publisher shall not appoint any other person, nor shall
Publisher itself act, directly or indirectly, as an exclusive or
non-exclusive distributor, subdistributor, commissioned sales
representative and/or marketing or other representative for the
Products (or adaptations of the Products) in the Territory.
(3) Except with respect to Export Sales and Redistribution Sales
(as defined below), Publisher shall forward all inquiries and orders
for the purchase of the Products (or adaptations of the Products) in
the Territory to Distributor within three business days after receipt
thereof.
(4) Publisher shall not sell the Products (or adaptations of the
Products) to persons in the Territory or ship any Products to any
location in the Territory other than as directed by Distributor.
Publisher shall refer any third party requesting such a sale or
shipment to Distributor. In addition, Publisher shall not sell the
Products (or adaptations of the Products) to persons outside the
Territory that Publisher has reason to believe intend to export the
Products (or adaptations of the Products) to the Territory or that
Publisher has reason to believe intend to sell, directly or
indirectly, the Products (or adaptations of the Products) in the
Territory. Notwithstanding the foregoing, Publisher
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shall not be in violation of this Section with respect to any
incidental sales to any person outside the Territory whose primary
business activity with respect to books is as an exporter and who
Publisher has reason to believe intends to export the Products to the
Territory ("Export Sales") that occur within the Term and with respect
to any incidental sales to any person outside the Territory (other
than a person whose primary business activity with respect to books is
as an exporter) that Publisher has reason to believe intends to sell,
directly or indirectly, the Products (or adaptations of the Products)
in the Territory ("Redistribution Sales"). For purposes of this
Agreement, Publisher shall be deemed to have reason to believe sales
are being made into the Territory for any sales by Publisher or any of
its Affiliates to customers having special pricing or other terms
applicable to international sales where Publisher or any of its
Affiliates makes sales to such customers on terms consistent with such
special pricing or other terms.
5.2 Representations, Warranties and Covenants of Distributor. Distributor
represents, warrants and covenants to Publisher, and agrees with Publisher,
that:
(1) Authority. Distributor has the right and power to enter into this
Agreement and to perform its obligations hereunder.
(2) No Violations. Distributor shall not ship any Product to any
location in the Territory that Publisher has previously and timely disclosed in
writing to Distributor would cause a violation of the copyright, trademark,
trade name or other intellectual property, proprietary rights or other rights of
any other person or legal entity.
(3) Commercially Reasonable Efforts. Distributor agrees to use
Commercially Reasonable Efforts (i) to market, advertise and promote the
Products within the Territory and (ii) to make sales of the Products in the
Territory; provided, that the failure to actually achieve any such maximization
shall not in and of itself constitute a breach of this Agreement.
(4) Withholding Tax. Distributor shall deduct and withhold from the
amounts due to Publisher hereunder any amount that Distributor reasonably
determines is required so to be deducted or withheld for or on account of any
tax, levy, impost, duty, assessment or fee imposed by any government or other
taxing authority (a "Tax"). For purposes of this Agreement, any amount of Tax
deducted or withheld by Distributor shall be considered to have been duly paid
by Distributor to Publisher in accordance with the terms hereof. Whenever
Distributor believes it is required by applicable law to withhold any such Tax,
Distributor will notify Publisher of such fact and, if requested by Publisher,
will explore with Publisher commercially reasonable means of minimizing any such
Tax.
5.3 Survival. The foregoing representations and warranties shall be true
as of the date of this Agreement. In addition, the representations and
warranties set forth in Sections 5.1(a), (b) and (c) and 5.2(a) shall remain
true at all times during the term of this Agreement and after the
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term of this Agreement while the parties are exercising any of the rights
granted to them hereunder.
SECTION 6.
ADVERTISING AND PROMOTION
6.1 Promotional Materials. In order for Distributor to better promote the
Products, Publisher shall provide Distributor with:
(1) product information (in electronic or printed format, as
available) on each version of the Products in English, at no charge;
(2) a monthly publication schedule for the Products, at no charge;
(3) such number of copies of catalogs, promotional materials and
display materials for each of the Products as Distributor shall reasonably
request and purchase at the unit manufacturing cost of producing such
catalogues, promotional materials and display materials (which shall be paper,
printing and binding expenses only and, for greater certainty, shall not include
any plant or development costs) plus freight; and
(4) 15 copies of each of the Products for review, in-house use and
promotional distribution to key customers, at no charge (which promotional
copies shall not be resold).
SECTION 7.
INTELLECTUAL PROPERTY RIGHTS
7.1 Right to Use Intellectual Property.
(1) Usage. Distributor may use Publisher's logos, trademarks, service
marks and trade names (the "Intellectual Property Rights") on a non-exclusive
basis (and with respect to the sale of Products in the Territory, on an
exclusive basis) with the right to sublicense to those persons described in
Section 1.1(b) for the duration of the Term solely for promotion, packaging and
advertising purposes in connection with selling and distributing the Products in
the Territory. Such use by Distributor shall include appropriate legal and
marketing notices reasonably required by Publisher from time to time, and shall
be done in a manner so as to preserve the high quality and goodwill associated
with the Products consistent with past practices.
(2) Reservation of Rights. Publisher shall retain all right, title
and interest in the Intellectual Property Rights and Distributor will not obtain
any rights therein (other than the limited license described above). Distributor
agrees, at Publisher's cost, to execute any document reasonably requested by
Publisher to confirm such rights in Publisher.
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7.2 Infringements.
(1) Procedures for Pursuing Claims. Distributor shall notify
Publisher promptly in the event that it becomes aware of any actual or potential
infringement or misappropriation of any of Publisher's intellectual property
rights in any Product. If Publisher owns the intellectual property rights at
issue or, with respect to intellectual property rights Publisher uses by license
from third parties, where Publisher has the ability by agreement to prosecute or
otherwise pursue such infringement or misappropriation, Publisher shall have the
sole right and authority to prosecute and otherwise make a claim with respect to
such infringement or misappropriation. If Publisher elects to prosecute or
otherwise make a claim with respect to such infringement or misappropriation,
all costs and expenses associated with such actions shall be borne by Publisher,
and Publisher shall be entitled to recover any and all amounts as a result of
such infringement or misappropriation. Notwithstanding the foregoing, Publisher
may abandon such activity at any time without liability to Distributor.
Publisher shall have no liability to Distributor in the event that Publisher is
unable to halt the infringement or misappropriation of Publisher's intellectual
property rights by any third party. For the avoidance of doubt, Distributor
shall have no rights or authority to pursue any such infringement or
misappropriation claims.
7.3 Registration of Copyrights.
(1) Procurement. If Distributor desires that a copyright in a Product
be registered in any part or all of the Territory where Publisher has not
procured such registration as provided in Section 5.1(b), then Distributor shall
be entitled to take any action that it deems necessary or desirable to procure
such registration in each case at its expense, but only with the prior written
consent of Publisher.
(2) Consent of Publisher to Disclose Name. Where, in Distributor's
judgment, it is necessary to use Publisher's name to take any of the actions
contemplated by Section 7.3(a), Distributor shall be entitled to do so for such
purpose but only with the prior written consent of Publisher.
7.4 Information. Distributor and Publisher will keep each other reasonably
informed with respect to all actions taken by each of them pursuant to Sections
7.2 and 7.3.
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SECTION 8.
PRODUCT WARRANTY
8.1 Publisher's Product Warranties. Upon receipt of any warranty claim
that is made in a timely and prompt fashion, Publisher shall make reasonable
efforts to correct any significant reproduction error in the Products, provided
such error relates to the proper functioning of the Products and has not been
caused by negligence on the part of Distributor or any third party, computer
malfunction, or other causes external to the Products.
8.2 Distributor's Product Warranties. As between Publisher and
Distributor, Distributor shall be liable for any representations or warranties
made by it, without the approval of Publisher, in its advertising, brochures or
manuals with respect to the Products.
8.3 Limitation on Product Warranties. THE WARRANTIES DESCRIBED IN THIS
AGREEMENT ARE IN LIEU OF ALL OTHER WARRANTIES OR CONDITIONS, EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, THOSE OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
SECTION 9.
CONFIDENTIALITY
9.1 Confidentiality Restrictions. Each party agrees that the other party
has a proprietary interest in any information provided by it, whether in
connection with this Agreement or otherwise, whether in written or oral form,
which is (i) a trade secret, confidential or proprietary information (such as
pre-publication manuscript, title profile, publication plan or schedule,
preliminary interior or cover design, trademark or copyright application, cost
data, customer or supplier list, and/or any other material referring to same),
(ii) not publicly known, or (iii) annotated by a legend, stamp or other written
identification as confidential or proprietary information (hereinafter referred
to as "Proprietary Information"). Each party shall disclose the Proprietary
Information provided by the other party only to those of its agents and
employees to whom it is necessary in order properly to carry out their duties as
limited by the terms and conditions hereof. Both during and after the Term, the
party receiving Proprietary Information shall hold, and shall cause such agents
and employees to hold, such Proprietary Information in strict confidence. During
and after the Term, such receiving party shall not, and shall cause its agents
and employees not to, use the Proprietary Information for any purpose other than
in connection with discharging its duties and exercising its rights pursuant to
this Agreement. The receiving party shall, at its expense, return to the
disclosing party the Proprietary Information provided by such disclosing party
as soon as practicable after the termination or expiration of this Agreement.
During the Term and thereafter, all such Proprietary Information shall remain
the exclusive property of the party which provided it. The rights and
obligations under this Section shall also apply to any subdistributors,
commissioned sales representatives and/or marketing or other representatives
that the receiving party may engage in connection with its obligations under
this Agreement.
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9.2 Permitted Disclosures. Notwithstanding anything contained in this
Agreement to the contrary, each party shall not be liable for a disclosure of
the Proprietary Information of the other party if the information so disclosed:
(i) was in the public domain at the time of disclosure without breach of this
Agreement; (ii) was known to or contained in the records of the receiving party
from a source other than the providing party at the time of disclosure by the
providing party to the receiving party and can be so demonstrated; (iii) was
independently developed and is so demonstrated by the receiving party; or (iv)
becomes known to the receiving party from a source other than the providing
party without breach of any obligation of confidentiality to the providing party
and can be so demonstrated.
SECTION 10.
COMPLIANCE WITH LOCAL LAWS
10.1 Compliance by Distributor. Distributor shall comply with all laws and
regulations in each country in the Territory applicable to the performance of
its obligations under this Agreement.
10.2 Compliance by Publisher. Publisher shall comply with all laws and
regulations applicable to the performance of its obligations under this
Agreement including, but not limited to, all U.S. laws and regulations relating
to the control of exports or the transfer of technology. Distributor hereby
acknowledges that some of the Products may be subject to export controls of the
United States and agrees that Publisher shall not be obligated to transfer such
Products, directly or indirectly, to any destination contrary to the
requirements of the export control laws of the United States.
SECTION 11.
TERMINATION
11.1 Termination upon Bankruptcy Event. Either party shall have the right
to terminate this Agreement by giving written notice to the other party in the
event that such other party files a petition in bankruptcy or is adjudicated
bankrupt or insolvent, or makes an assignment for the benefit of creditors, or
an arrangement pursuant to any bankruptcy law, or if such party discontinues or
dissolves its business, or if a receiver is appointed for such party or for such
party's business and such receiver is not discharged or its appointment stayed
within 120 days.
11.2 Termination upon Default. Except as otherwise provided in Section
11.3, either party may terminate this Agreement on 30 days' written notice to
the other party in the event of a breach of any provision of this Agreement by
the other party, provided that, no such termination shall be effective if during
such 30-day period, the breaching party either (i) has cured such breach or (ii)
in the case of any matter incapable of being cured within 30 days, has initiated
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<PAGE> 103
efforts to cure such breach and has completed such cure within 90 days following
delivery of notice of termination. Any party receiving a notice of termination
pursuant to this Section 11.2 that disputes such termination or any matter
relating to such notice of termination may request arbitration pursuant to
Section 13.
11.3 Termination Upon Payment Default. Publisher may terminate this
Agreement on 30 days' written notice to the Distributor in the event that
Distributor has not paid Publisher the amounts then due under Section 4.1(d).
11.4 Termination Following Governmental Restrictions. In the event that any
governmental entity requires material changes to be made to the terms of this
Agreement or the relationship between the parties, either party may terminate
this Agreement upon 120 days' written notice.
SECTION 12.
POST-TERMINATION RIGHTS
12.1 Delivery of Inventory Schedule. Not more than 15 days after the
expiration or termination of this Agreement, Distributor shall provide Publisher
with a schedule of all inventory of Products then on hand, which schedule
Publisher and Distributor acknowledge will be updated by Distributor to reflect
returns subsequent to the expiration or termination of this Agreement and before
the final accounting pursuant to Section 12.2 (the "Inventory"). All of such
Inventory shall be returned by Distributor to Publisher (with Publisher paying
costs for freight) on the same day as Distributor delivers such schedule to
Publisher and accepted for return by Publisher at original unit manufacturing
cost. All arrangements for shipment and delivery are Distributor's
responsibility and all freight and related costs are Publisher's responsibility.
12.2 Final Accounting. Within 120 days after such expiration or
termination, Publisher and Distributor shall complete a final accounting of all
amounts, if any, due and payable by Distributor under Section 4 and all amounts
due and payable by Publisher on account of return of Inventory by Distributor.
If the parties cannot agree on a final accounting, then such issue shall be
submitted to an Independent Accounting Firm to resolve in a binding manner, on
an expedited basis, after hearing the views of Publisher and Distributor. The
cost of the Independent Accounting Firm's review and determination shall be
borne equally by the parties hereto. Within 15 days after such agreement or
determination, the party that owes money pursuant to the accounting shall pay
such sum owed to the other party.
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SECTION 13.
DISPUTE RESOLUTION
13.1 Arbitration. Any dispute or difference between Publisher and
Distributor as a result of or arising out of the matters specified in Sections
4.2, 11.2 or 11.3 or otherwise arising out of the matters set forth in this
Agreement shall be resolved by an Independent Arbitrator. Any party seeking
arbitration pursuant to this Section 13 shall give notice (the "Notice of
Arbitration") to the other party specifying in reasonable detail the items in
dispute. The parties shall seek to cause the appointment of the Independent
Arbitrator as promptly as practicable following delivery of a Notice of
Arbitration. The Independent Arbitrator shall use commercially practicable
efforts to make a final determination (which determination shall be final,
binding and non-appealable on or by the parties hereto) of any matter that is
the subject of such disagreement, within 30 days following the selection of such
Independent Arbitrator. The cost of the Independent Arbitrator's review and
determination shall be paid by the party against which a determination is made
or as the Independent Arbitrator shall otherwise allocate such costs in its sole
discretion. During the 30-day review by the Independent Arbitrator, Publisher
and Distributor will each make available to the Independent Arbitrator
interviews with such individuals and such information, books and records as may
be reasonably required by the Independent Arbitrator to make its final
determination. For the purposes of this Section, the "Independent Arbitrator"
shall be an arbitrator selected in accordance with the rules of the American
Arbitration Association, which shall conduct any arbitration proceeding
hereunder under its commercial rules. The place of any arbitration shall be New
York, New York. During the pendency of any such arbitration proceeding with
respect to a termination pursuant to Section 11.2 or 11.3, Distributor will
continue to have all rights to sell, market and distribute the Products in the
Territory and the effectiveness of any such termination shall be stayed pending
the resolution of such arbitration proceedings. No such stay shall extend beyond
the Term of this Agreement.
SECTION 14.
INDEMNITY
14.1 Indemnification of Distributor. Publisher shall indemnify, defend,
protect and save Distributor harmless from all claims, demands, suits, actions,
damages, losses, deficiencies, liabilities, judgments, costs and expenses
(including, without limitation, reasonable attorneys' fees incurred in
connection therewith) incurred by Distributor, its subdistributors,
sublicensees, commissioned sales representatives and marketing representatives,
arising in connection with (i) any claim of infringement or violation of any
copyright, trademark, trade name, or any other intellectual property,
proprietary or other right of any person as to the Products for which IDGB has a
right of indemnity under the Purchase Agreement, excluding any infringement or
violation by Distributor in violation of any condition or item previously
disclosed by Publisher to Distributor in accordance with Section 5.1(b); and
(ii) any breach of any representation or warranty or nonfulfillment of any
obligation, agreement, commitment, undertaking or covenant of Publisher under
this Agreement including, without limitation, Distributor's inability to perform
obligations owed to its subdistributors, sublicensees, commissioned sales
representatives and marketing or other representatives because of such breach or
nonfulfillment by Publisher.
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14.2 Indemnification of Publisher. Distributor shall indemnify, defend,
protect and save Publisher harmless from all claims, demands, suits, actions,
damages, losses, deficiencies, liabilities, judgments, costs and expenses
(including, without limitation, reasonable attorneys' fees of counsel incurred
in connection therewith) arising in connection with any breach of any
representation or warranty or nonfulfillment of any obligation, agreement,
commitment, undertaking or covenant of Distributor under this Agreement.
SECTION 15.
MISCELLANEOUS
15.1 Force Majeure. Neither Distributor nor Publisher shall be liable in
damages, nor shall either party be subject to termination of this Agreement by
the other party, for any delay or default in performing any obligation hereunder
or thereunder if that delay or default is caused by government orders or
requirements, wars, fires, radioactive fallout, interruption of transportation
facilities, labor troubles, strikes, riots, shortages of raw materials, or any
other cause beyond the reasonable control of that party, and is without fault or
negligence of that party (each, a "Force Majeure Event"); provided, that in
order to excuse its delay or default hereunder, a party shall notify the other
with reasonable promptness of the occurrence, specifying the nature and
particulars thereof and the expected duration thereof; and provided, further,
that within 15 calendar days after the termination of such occurrence, such
party shall give notice to the other party specifying the date of termination
thereof. All obligations of both parties shall return to being in full force and
effect upon the termination of such occurrence.
15.2 Independent Contractor. Distributor's performance of its duties and
obligations under this Agreement is in a capacity as an independent contractor.
Accordingly, nothing contained in this Agreement shall be construed as
establishing an employer/employee, partnership, agency, brokerage or joint
venture relationship between Distributor and Publisher.
15.3 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original, but all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Agreement by telecopier shall be
effective as delivery of a manually executed counterpart of this Agreement.
15.4 Governing Law; Consent to Jurisdiction. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York, excluding the United Nations Convention on Contracts for the International
Sale of Goods, and also excluding the 1974 Convention on the Limitation Period
in the International Sale of Goods (the "1974 Convention") and the Protocol
amending the 1974 Convention (Vienna, April 11, 1980). Except as otherwise
expressly set forth herein, each of the parties hereto agrees that any dispute
relating to or arising from this Agreement or the transactions contemplated
hereby shall be resolved only
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in the Courts of the State of New York sitting in the County of New York or the
United States District Court for the Southern District of New York and the
appellate courts having jurisdiction of appeals in such courts. In that context,
and without limiting the generality of the foregoing, each of the parties hereto
hereby irrevocably and unconditionally:
(1) submits for itself and its property in any legal suit, action or
proceeding relating to this Agreement or the transactions contemplated hereby,
or for recognition and enforcement of any judgment in respect thereof, to the
exclusive jurisdiction of the Courts of the State of New York sitting in the
County of New York, the court of the United States of America for the Southern
District of New York, and appellate courts having jurisdiction of appeals from
any of the foregoing, and each of the parties hereto irrevocably and
unconditionally agrees that all claims in respect of any such suit, action or
proceeding shall be heard and determined in such New York State court or, to the
extent permitted by law, in such Federal court;
(2) consents that any such suit, action or proceeding may and shall
be brought in such courts and waives any objection that it may now or hereafter
have to the venue or jurisdiction of any such action or proceeding in any such
court or that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(3) agrees that service of process in any such suit, action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to such party
at its address as provided in Section 15.5; and
(4) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by New York law.
15.5 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by overnight courier service, by facsimile (followed by delivery of a
copy via overnight courier service) or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section):
(1) if to Distributor: c/o Pearson Inc.
30 Rockefeller Plaza
50th Floor
New York, NY 10112
Attention: Phil Hoffman
Telecopier: 212-641-2500
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<PAGE> 107
with copies to: Pearson Education, Inc.
One Lake Street
Upper Saddle River, NJ 07458
Attention: Robert Dancy, Esq.
Telecopier: 201-818-8749
and to: Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Attention: Charles Engros, Esq.
Telecopier: (212) 309-6273
(2) if to Publisher: IDG Books Worldwide, Inc.
919 East Hillside Boulevard
Foster City, CA 94404
Attention: James Doehrman
Telecopier: (650) 655-3294
with copies to: Fulbright & Jaworski
666 Fifth Avenue, 31st Floor
New York, NY 10103
Attention: Warren Nimetz, Esq.
Telecopier: (212) 752-5958
15.6 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
15.7 Severability. If any term or other provision of this Agreement is held
invalid, illegal or incapable of being enforced by any law or public policy, (a)
all other conditions and provisions of this Agreement shall nevertheless remain
in full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner adverse to any
party and (b) the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated hereby be consummated as originally contemplated to the greatest
extent possible.
15.8 Entire Agreement. This Agreement constitutes the entire agreement of
the parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and undertakings, both written and oral, between and among
Distributor and Publisher with respect to the subject matter hereof.
15.9 Assignment. Except as provided herein, this Agreement shall not be
assigned by either party by operation of law or otherwise, without the consent
of the other party, which consent shall not be unreasonably withheld.
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<PAGE> 108
15.10 No Third-Party Beneficiaries. This Agreement is for the sole benefit
of the parties hereto and their permitted assigns and nothing herein, express or
implied, is intended to or shall confer upon any other person or entity (other
than the Distributor Indemnities, the Publisher Indemnities, and the Affiliates
and the Subsidiaries that publish or distribute the Products) any legal or
equitable right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
15.11 Agreement Binding on Successors. Subject to Section 15.9, this
Agreement shall be binding on and shall inure to the benefit of the parties
hereto, and their heirs, administrators, successors, and assigns. For greater
certainty, the parties agree that any party to a merger, consolidation,
corporate reorganization, sale of substantially all assets, or sale of stock
with a party to this Agreement (or with a Subsidiary or an Affiliate which
publishes or distributes the Products) shall constitute a successor to such
entity's business.
15.12 Amendments. This Agreement may not be amended or modified except by
an instrument in writing signed by each of the parties hereto.
15.13 No Presumption. This Agreement shall be construed without regard to
any presumption or rule requiring construction or interpretation against the
party drafting or causing any instrument to be drafted.
15.14 Remedies Cumulative. Except as expressly set forth herein, the
parties' rights and remedies under this Agreement shall be cumulative, they
shall have all other rights and remedies provided by law or in equity not
inconsistent herewith, and no exercise by a party of one right or remedy shall
be deemed an election.
15.15 Definitions
(1) "Affiliate" means, with respect to any specified person, any
other person that, directly or indirectly through one or more intermediaries,
Controls, is Controlled by or is under common Control with such specified
person. "Control" means, as to any person, the power to direct or cause the
direction of the management and policies of such person, whether through the
ownership of voting securities, by contract or otherwise. The term "Controlled"
shall have a correlative meaning.
(2) "Commercially Reasonable Efforts" means, with respect to a given
party, such party's exercise of all efforts that are commercially reasonable
under the circumstances (it being agreed that such party's exercise of multiple
efforts may, or may not, be commercially reasonable under such circumstances).
(3) "Independent Accounting Firm" means an independent accounting
firm of national reputation mutually appointed by each of the parties hereto.
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(4) "Net Sales" means total sales of Products billed by Distributor
to entities that are not Affiliates and to Affiliates that are retailers or
wholesalers net of (i) actual returns and rebates and customary and reasonable
reserves for returns and (ii) taxes, freight, shipping, transport, handling,
packaging and insurance costs, governmental export fees, duties, discounts, and
similar such charges (as shown on Distributor's invoices).
(5) "Subsidiary" means, with respect to any specified person, any
corporation, partnership, joint venture, limited liability company, trust,
estate or other person of which (or in which) more than 50% of (a) the issued
and outstanding capital stock having ordinary voting power to elect a majority
of the board of directors of such corporation (irrespective of whether at the
time capital stock of any other class or classes of such corporation shall or
might have voting power upon the occurrence of any contingency), (b) the
interest in the capital or profits of such partnership, joint venture or limited
liability company or other person or (c) the beneficial interest in such trust
or estate is at the time directly or indirectly owned or controlled by such
first person, or by such first person and one or more of its other Subsidiaries
or by one or more of such first person's other Subsidiaries.
15.16 Time of Payment. Whenever any amount hereunder is due on a day which
is not a business day, such amount shall be paid on the next such business day.
15.17 Survival. Notwithstanding anything else in this Agreement to the
contrary, the parties agree that Sections 3.2, 4.1, 4.2, 5.3, 7, 8, 9, 12, 13,
14 and 15 shall survive the termination or expiration of this Agreement to the
extent required thereby for the full observation and performance by any or all
of the parties hereto.
15.18 Recovery of Litigation Expenses. Except as otherwise provided in
Section 13, in connection with any action or proceeding between Publisher,
Distributor and their respective Affiliates arising out of or related to this
Agreement, the prevailing party in such action or proceeding shall be entitled
to recover all of its costs and expenses in connection with such action or
proceeding, including, without limitation, all costs and expenses in
investigating and prosecuting or defending such action or proceeding, including,
without limitation, reasonable fees and expenses of counsel, auditors and other
consultants.
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<PAGE> 110
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
PEARSON EDUCATION INC.
By:
---------------------------------
Name:
Title:
MACMILLAN GENERAL REFERENCE USA INC.
By:
---------------------------------
Name:
Title:
<PAGE> 111
EXHIBIT A
TERRITORY
The following shall constitute the Territory:
The world (i) excluding the District of Columbia and the fifty states that
constitute the United States but (ii) including Puerto Rico and the other
territories and possessions of the United States; provided that the Territory
also shall exclude (1) South Africa through the earlier of July 31, 1999 and the
termination of the distribution agreement covering South Africa in existence on
the date hereof and (2) Canada through the termination of the distribution
agreement covering Canada in existence on the date hereof. In connection with
the subsequent inclusion of South Africa or Canada within the Territory,
Publisher and Distributor shall cooperate in effecting the transition from such
distribution agreement to a relationship with Distributor as contemplated
hereby.
<PAGE> 1
EXHIBIT 99.1
PRESS RELEASE
Contact
Brigida Bergkamp
Public Relations
650 655 3246
[email protected]
IDG BOOKS WORLDWIDE COMPLETES $83 MILLION MGR ACQUISITION
PUBLISHER GAINS 3,000 TITLES AND POPULAR BRANDS LIKE FROMMER'S TRAVEL GUIDES
Foster City, Calif. - August 2, 1999 - IDG Books Worldwide, Inc. (Nasdaq: IDGB)
today completed its acquisition of a portfolio of book and online brands from
the Macmillan General Reference Group (MGR) of Pearson Education for $83
million. The acquisition includes such well-known brands as the Frommer's(R)
Travel Guides, Weight Watchers(R) Cookbooks and J.K Lasser(TM) Tax books, as
well as the popular Web site, frommers.com. IDGB is a global knowledge company
whose diverse portfolio includes many best-selling book brands and
computer-based learning tools, including the For Dummies(R) and Cliffs Notes(TM)
brands.
"This acquisition marks a transforming moment for IDG Books," said Chairman and
CEO, John Kilcullen. "IDG Books has built its reputation as one of the leading
computer book publishers in the world with an array of best-selling, branded
series valued for delivering authoritative information in fun and compelling
ways. By adding these 3,000 MGR properties to our lineup of products and online
services, IDGB has become a leading player in consumer publishing."
Included in the acquisition are:
- - Frommer's(R) Travel Guides: one of the leading travel book publishers.
- - frommers.com Web site: 5 million page views/month make this one of the most
popular online travel sites.
- - The Unofficial Guides(R): The Unofficial Guide(R)to Walt Disney World is
the #1 travel book in the U.S.
- - Places Rated(R)Almanac
- - Frommer's(R)From $ a day(TM)Guides for budget-minded travelers
- - J.K. Lasser(TM)Tax Guides, the # 2 selling tax prep series in the world
(IDGB's Taxes For Dummies(R)is #3).
- - Webster's New World(R)Dictionaries
- - Arco(R)Test Preparation Guides for college and career test prep
- - Betty Crocker(R)Cookbooks, one of the oldest brands in the cooking
category.
-MORE-
<PAGE> 2
IDGB Completes $83 Million MGR Acquisition / Page 2
- - Weight Watchers(R) Dieting and Cookbooks
- - Howell House(TM)Pet Books (including The American Kennel Club Complete Dog
Book(TM)plus Best of Breed(TM), The Healthy, Happy Pet(TM)and
Essentials(TM)series)
- - Chek Chart(TM) automotive training guides
- - Dozens of popular individual titles such as the bestseller How to Cook
Everything; Vegetarian Times Complete Cookbook; American Horticultural
Society: Encyclopedia of Gardening; and Organize Yourself!
- - Burpee(R) Gardening series
- - Cassell's(R) bilingual dictionaries
- - Harrap's bilingual dictionaries
- - Audel's books for vocational technicians
"The quality of the brands was the key factor in the acquisition because of the
strong fit with the company's strategic growth plans," said Kilcullen. "We
recognized that these brands have tremendous public acceptance. Our goal is to
build upon their strengths by leveraging our expertise in strategic
brand-building and global marketing. As we work to integrate the people and
product lines represented in the MGR acquisition, we will be looking for
opportunities to expand, enhance their online presence, and create synergies
with our existing brands and product lines."
ABOUT IDG BOOKS WORLDWIDE
IDG Books Worldwide, Inc., headquartered in Foster City, Calif., is a leading
global knowledge company featuring a diverse portfolio of technology, business
and how-to books, and computer-based learning tools, including the best-selling
...For Dummies(R), Secrets(R), Teach Yourself(R) and Cliffs Notes(TM) brands.
IDG Books Worldwide has more than 1,000 active titles plus translations in 36
languages around the world. More information about IDG Books Worldwide is
available from the company's SEC filings (Nasdaq: IDGB) or by visiting its World
Wide Web site, http://www.idgbooks.com. Information about our ...For Dummies and
Cliffs Notes brands can also be found at http://www.dummies.com and
http://www.cliffs.com. IDG Books Worldwide is a subsidiary of International Data
Group, Inc., a leading global provider of information technology media,
research, conferences and expositions.
-MORE-
<PAGE> 3
IDGB Completes $83 Million MGR Acquisition / Page 3
This news release contains forward-looking statements that involve a number of
risks and uncertainties. Among the important factors that could cause actual
results to differ materially from those indicated by such forward-looking
statements are risks in the assimilation of acquired businesses, other risks
associated with acquisitions, risks associated with other competitive pressures,
and the risk factors detailed from time to time in the company's periodic
reports and registration statements filed with the Securities and Exchange
Commission.
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