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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
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 12, 1999
INFORMATION HOLDINGS INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-14371 06-1518007
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(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
2777 Summer Street
Stamford, Connecticut 06905
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(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (203) 961-9106
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Item 2. Acquisition or Disposition of Assets.
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On August 12, 1999, Information Holdings Inc. (the "Company") completed its
acquisition of Master Data Center, a Michigan corporation ("MDC") from Pearson
Services Limited, a corporation organized under the laws of the United Kingdom,
as contemplated by a Stock Purchase Agreement, dated as of May 14, 1999, between
Pearson Services Limited and the Company (the "Agreement"), attached hereto as
Exhibit 2.1. Pursuant to the Agreement, the Company acquired all of the
outstanding capital stock of MDC for cash consideration of approximately $33
million. The Company has subsequently transferred all of the outstanding stock
of MDC to Information Ventures LLC, an indirectly wholly owned subsidiary of the
Company, pursuant to a capital contribution.
Item 7. Financial Statements and Exhibits.
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(a) Financial Statements of business acquired.
To be filed pursuant to an amendment to this Current Report on Form
8-K.
(b) Pro Forma financial information.
To be filed pursuant to an amendment to this Current Report on Form
8-K.
(c) Exhibits.
2.1 Stock Purchase Agreement, dated as of May 14, 1999, between
Pearson Services Limited and Information Holdings Inc.
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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.
INFORMATION HOLDINGS INC.
Dated: August 20, 1999 By: /s/ Mason P. Slaine
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Name: Mason P. Slaine
Title: President
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Exhibit Index
Exhibit No. Description
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2.1 Stock Purchase Agreement, dated as of May 14, 1999, between
Pearson Services Limited and Information Holdings Inc.
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STOCK PURCHASE AGREEMENT
dated as of May 14, 1999
between
PEARSON SERVICES LIMITED
and
INFORMATION HOLDINGS INC.
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TABLE OF CONTENTS
Page
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ARTICLE I. DEFINITIONS.........................................................1
SECTION 1.1. Certain Defined Terms........................................1
SECTION 1.2. Other Defined Terms..........................................7
SECTION 1.3. Terms Generally..............................................7
ARTICLE II. PURCHASE AND SALE..................................................8
SECTION 2.1. Purchase and Sale............................................8
SECTION 2.2. Purchase Price; Allocation of Purchase Price.................8
SECTION 2.3. Closing......................................................8
SECTION 2.4. Closing Deliveries by the Seller.............................9
SECTION 2.5. Closing Deliveries by the Purchaser..........................9
SECTION 2.6. Purchase Price Adjustment....................................9
SECTION 2.7. Payments and Computations...................................12
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE SELLER.....................12
SECTION 3.1. Incorporation and Authority of the Seller and its
Affiliates..................................................12
SECTION 3.2. Incorporation and Qualification of the Company..............13
SECTION 3.3. Capital Stock of the Company................................13
SECTION 3.4. No Conflict.................................................13
SECTION 3.5. Consents and Approvals......................................14
SECTION 3.6. Financial Information.......................................14
SECTION 3.7. Absence of Certain Changes or Events........................15
SECTION 3.8. Absence of Litigation.......................................15
SECTION 3.9. Compliance with Laws........................................15
SECTION 3.10. Governmental Licenses and Permits..........................15
SECTION 3.11. The Assets.................................................16
SECTION 3.12. Intellectual Property......................................16
SECTION 3.13. Employee Benefits Matters..................................18
SECTION 3.14. Taxes......................................................20
SECTION 3.15. Environmental Matters......................................21
SECTION 3.16. Material Contracts.........................................21
SECTION 3.17. Brokers....................................................22
SECTION 3.18. Real Property..............................................23
SECTION 3.19. Undisclosed Liabilities....................................23
SECTION 3.20. Insurance..................................................23
SECTION 3.21. Claims Against Viacom......................................24
SECTION 3.22. EXCLUSIVITY OF REPRESENTATIONS.............................24
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER...................24
SECTION 4.1. Incorporation and Authority of the Purchaser................25
SECTION 4.2. No Conflict.................................................25
SECTION 4.3. Consents and Approvals......................................25
SECTION 4.4. Absence of Litigation.......................................26
SECTION 4.5. Securities Matters..........................................26
SECTION 4.6. Financial Ability...........................................26
SECTION 4.7. Brokers.....................................................26
SECTION 4.8. EXCLUSIVITY OF REPRESENTATIONS..............................26
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ARTICLE V. ADDITIONAL AGREEMENTS..............................................27
SECTION 5.1. Conduct of Business Prior to the Closing....................27
SECTION 5.2. Access to Information.......................................29
SECTION 5.3. Confidentiality.............................................30
SECTION 5.4. Regulatory and Other Authorizations; Consents...............32
SECTION 5.5. Intercompany Arrangements...................................33
SECTION 5.6. Insurance...................................................33
SECTION 5.7. Letters of Credit...........................................34
SECTION 5.8. Financing...................................................35
SECTION 5.9. Further Action..............................................35
SECTION 5.10. Ancillary Agreement........................................36
SECTION 5.11. Non-Competition............................................36
SECTION 5.12. Non-Solicitation...........................................37
SECTION 5.13. Closing Deliveries.........................................37
SECTION 5.14. Additional Financial Statements and Information............37
ARTICLE VI. EMPLOYEE MATTERS..................................................38
SECTION 6.1. Employees...................................................38
SECTION 6.2. Health and Welfare Benefits.................................39
SECTION 6.3. Retirement Plans............................................41
SECTION 6.4. Severance Provisions........................................41
SECTION 6.5. Indemnity...................................................41
SECTION 6.6. No Third-Party Beneficiaries................................42
ARTICLE VII. TAX MATTERS......................................................42
SECTION 7.1. Tax Indemnities.............................................42
SECTION 7.2. Refunds and Tax Benefits....................................43
SECTION 7.3. Contests....................................................45
SECTION 7.4. Preparation of Tax Returns..................................46
SECTION 7.5. Cooperation and Exchange of Information.....................46
SECTION 7.6. Conveyance Taxes............................................47
SECTION 7.7. Miscellaneous...............................................47
ARTICLE VIII. CONDITIONS TO CLOSING..........................................47
SECTION 8.1. Conditions to Obligations of the Seller.....................47
SECTION 8.2. Conditions to Obligations of the Purchaser..................48
SECTION 8.3. Fulfillment of Conditions...................................49
ARTICLE IX. TERMINATION, AMENDMENT AND WAIVER.................................49
SECTION 9.1. Termination.................................................49
SECTION 9.2. Effect of Termination.......................................49
SECTION 9.3. Waiver......................................................50
SECTION 9.4. Termination Fee.............................................50
ARTICLE X. INDEMNIFICATION....................................................50
SECTION 10.1. Indemnification by the Purchaser...........................50
SECTION 10.2. Indemnification by the Seller..............................51
SECTION 10.3. Notification of Claims.....................................52
SECTION 10.4. Exclusive Remedies.........................................53
SECTION 10.5. Certain Adjustments........................................54
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ARTICLE XI. GENERAL PROVISIONS................................................54
SECTION 11.1. Survival...................................................54
SECTION 11.2. Expenses...................................................54
SECTION 11.3. Notices....................................................55
SECTION 11.4. Public Announcements.......................................56
SECTION 11.5. Headings...................................................56
SECTION 11.6. Severability...............................................56
SECTION 11.7. Entire Agreement...........................................56
SECTION 11.8. Assignment.................................................56
SECTION 11.9. No Third-Party Beneficiaries...............................57
SECTION 11.10. Amendment.................................................57
SECTION 11.11. Sections and Schedules....................................57
SECTION 11.12. Governing Law; Submission to Jurisdiction, Waivers........57
SECTION 11.13. Counterparts..............................................58
SECTION 11.14. No Presumption............................................58
SECTION 11.15. Guarantee.................................................58
SECTION 11.16. Recovery of Litigation Expenses...........................58
EXHIBITS
Exhibit 1.1(a) Form of Viacom Ancillary Agreement
Exhibit 5.13(a) Form of FIRPTA Certificate
Exhibit 5.13(c) Form of Opinion
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STOCK PURCHASE AGREEMENT, dated as of May 14,1999, between PEARSON SERVICES
LIMITED, a corporation organized under the laws of the United Kingdom (the
"Seller"), and INFORMATION HOLDINGS INC., a Delaware corporation (the
"Purchaser").
W I T N E S S E T H:
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WHEREAS, the Seller wishes to sell to the Purchaser, and the Purchaser
wishes to purchase from the Seller, all of the issued and outstanding shares of
the capital stock (the "Shares") of Master Data Center, Inc., a Michigan
corporation (the "Company"), upon the terms and subject to the conditions set
forth 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.
"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 and all
amendments hereto made in accordance with Section 11.10.
"Ancillary Agreement" means the Viacom Ancillary Agreement.
"Assets" means the assets of every type and description (including, without
limitation, rights under Contracts) that are owned, leased or licensed by the
Company, any Affiliate of the Company and any Affiliate of the Seller in
connection with the Business.
"Base Price" means $33,000,000.
"Business" means the business conducted on the date hereof by the Company
directly and indirectly through its Affiliates.
"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 Modified Working Capital" means the Modified Working Capital as of
the close of business on the Closing Date.
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"Code" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations thereunder.
"Contract" means any agreement, lease, 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.
"Environmental Law" means any Law or common law duty relating to pollution
or protection of human health or the environment, including but not limited to
the use, handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Materials.
"Environmental Liability" means any claim or demand, order, suit,
obligation, request for information, 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 matter or condition and related in any way to the Company, the
Business or this Agreement or its subject matter, in each case whether arising
or incurred before, on or after the Closing Date.
"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 MWC Statement" means the determination of the Closing Modified
Working Capital 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 2.6.
"Governmental Authority" means any United States federal, state or local or
any foreign government, governmental, regulatory or administrative authority,
agency or commission or any court, tribunal or judicial or arbitral body.
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"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 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.
"HSR Date" means that day on which any waiting period (or extension
thereof) under the HSR Act applicable to the purchase of the Shares contemplated
by this Agreement shall have expired or shall have been terminated.
"Independent Accounting Firm" means (a) one of the nationally-recognized
"big-five" public accounting firms 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 such firm, in which event "Independent Accounting Firm" shall
mean such third firm (but in no event shall such third firm be the firm
providing the certification under Section 2.6(a)).
"Intellectual Property" means: (i) trademarks and service marks, trade
dress, trade names and other names and slogans embodying business or product
goodwill or indications of origin, including common law rights and all
applications or registrations in any jurisdiction pertaining to the foregoing
and all goodwill associated therewith, and all renewals of any of the foregoing;
(ii) patentable inventions, discoveries, improvements, ideas, know-how, formula
methodology, processes, technology and computer programs, software and databases
(including source code, object code, development documentation, programming
tools, drawings, specifications and data) and all applications or patents in any
jurisdiction pertaining to the foregoing, including all reissues, continuations,
divisions, continuations-in-part, renewals, extensions or reexaminations thereof
and improvements thereto; (iii) trade secrets, including confidential and other
non-public information, customer and supplier lists, pricing and cost
information and business and marketing plans and proposals, and the right in any
jurisdiction to limit the use or disclosure thereof; (iv) copyrights in
writings, designs, mask works or other works, and applications or registrations
in any jurisdiction for the foregoing; (v) database rights; (vi) Internet Web
sites, domain names and registrations or applications for registration thereof;
(vii) claims or causes of action arising out of or related to past, present or
future infringement or misappropriation of any of the foregoing; (viii)
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all other proprietary rights; and (ix) all rights in any of the foregoing
including rights provided by international treaties or conventions.
"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.
"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 William Oldsey, Mark Clinton and Salvatore
Caruso, in each case based upon due inquiry and reasonable investigation, unless
otherwise expressly noted.
"Law" means any federal, state, local or foreign statute, law, ordinance,
regulation, rule, code, order, other requirement or rule of law.
"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 or trust, pledge, hypothecation, security
interest, encumbrance, claim, lien or charge of any kind.
"Material Adverse Effect" means any event, change, effect, occurrence or
state of facts that has had or is reasonably expected to have a material adverse
effect on the business, results of operations or the financial condition 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.
"Modified Working Capital" means, for the Business as of a particular date
of determination, total assets minus total liabilities (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) to the extent such accounts
receivable are commingled with accounts of Seller, Viacom or any of their
respective Affiliates, (iii) property, plant and
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equipment, net, (iv) intangible assets and goodwill, net, (v) other non-current
assets, net, (vi) bonus accruals (including annual performance and sales related
bonuses, retention bonuses and change of control management bonuses), (vii)
long-term liabilities of any nature, (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
(other than with respect to amounts payable to third parties that have been
processed centrally by the Seller or its Affiliates on behalf of the Company and
limited to amounts so processed)), calculated pursuant to "hard close"
procedures as of the close of business on the Closing Date on the basis and
using the same accounting policies, principles, methodologies and estimates used
in preparing the 1998 Pro Forma Financial Statements and the Statement of
Modified Working Capital set forth in Schedule 2.6 and using the Specified
Accounting Policies referred to in Schedule 2.6, which are more fully described
in the Notes to the 1998 Pro Forma Financial Statements included in Section 3.6
of the Disclosure Schedule.
"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, 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 with worker's compensation,
unemployment insurance or other types of social security; (d) minor defects of
title, easements, rights-of-way, restrictions and other similar charges or
encumbrances not materially detracting from the value of the property or
interfering with the ordinary conduct of the Business; (e) Liens not created by
or through the Seller or the Company which affect the underlying fee interest of
any Leased Real Property that do not materially interfere with the conduct of
the Business as currently conducted; and (f) Liens incurred in the ordinary
course of business of the Business consistent with past practice securing
obligations or liabilities which are not individually or in the aggregate
material to the relevant property excluding, however, in each instance any Lien
imposed pursuant to Environmental Law.
"Person" means any natural person, general or limited partnership,
corporation, limited liability company, firm, association or other legal entity.
"Pre-Closing Tax Period" shall mean any taxable period ending on or before
the Closing Date and the portion ending on and including the Closing Date of any
taxable period ending after the Closing Date.
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"Purchase Price" means the Base Price, as such amount may be adjusted after
the Closing pursuant to Section 2.6 hereof.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Subsidiary" of any Person means any corporation, partnership, joint
venture, limited liability company, trust or estate 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 (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 foreign, federal, state or local income, excise,
gross receipts, ad valorem, sales, use, service, capital stock, license, social
security, workers compensation, utilities, excise, occupation, premium,
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 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, including any
amended returns required as a result of examination adjustments by a Tax
authority.
"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., Pearson Inc. and Viacom, which shall be assumed by
the Purchaser at Closing in the form attached hereto as Exhibit 1.1(a).
"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 p1c, a
corporation organized under the laws of the United Kingdom.
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SECTION 1.2. Other Defined Terms. The following terms have the meanings
defined for such terms in the Sections set forth below:
Term Section
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Audited Financial Statements 5.14(a)
Board 5.2(b)
Business Employees 3.13(a)
Closing 2.3
Closing Date 2.3
COBRA 6.2(d)
Company Recitals
Competing Business 5.11(a)
Confidentiality Agreement 5.3(a)
Contest 7.3(b)
ERISA Affiliate 3.13(b)
Financing 4.6(a)
Former Business Employees 3.13(a)
GAAP 3.6
Indemnified Party 10.3(a)
Indemnifying Party 10.3(a)
Initial MWC Statement 2.6(a)
Leased Real Property 3.18(b)
Leased Real Property Permitted Exceptions 3.18(b)
Licensed Intellectual Property 3.12(a)
Losses 10.1(a)
Material Contracts 3.16(a)
1998 Pro Forma Financial Statements 3.6
Notice of Disagreement 2.6(b)
Owned Intellectual Property 3.12(a)
Pearson ERISA Plans 3.13(a)
Pearson Plans 3.13(a)
Post-Closing Date Tax Benefit 7.2(b)
Pre-Closing Date NOL 7.2(a)
Pre-Closing Taxes 7.1(a)
Purchaser Preamble
Purchaser Indemnified Parties 10.2(a)
Purchaser's Representative 5.2(b)
PwC 5.14(b)
Real Property Leases 3.18(b)
Recipients 5.3(b)
Seller Preamble
Seller Indemnified Parties 10.1(a)
Seller LOCs 5.7
Shares Recitals
Straddle Period 6.1(a)
Viacom Indemnified Parties 10.4(b)
Welfare Type Plans 6.2(a)
Year 2000 Problem 3.12(i)
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"
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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, (c) the word "including" and words of similar import when
used in this Agreement shall mean "including, without limitation", unless
otherwise specified, and (d) provisions shall apply, when appropriate, to
successive events and transactions.
ARTICLE II.
PURCHASE AND SALE
SECTION 2.1. Purchase and Sale. On the terms and subject to the conditions
set forth in this Agreement, at the Closing, the Seller shall sell, convey,
assign, transfer and deliver to the Purchaser, and the Purchaser shall purchase,
acquire and accept from the Seller, all of the Seller's right, title and
interest in and to the Shares.
SECTION 2.2. Purchase Price; Allocation of Purchase Price.
(a) The Purchaser shall pay the Purchase Price in cash to the Seller at the
Closing, as provided in Section 2.5(a). The Purchase Price shall be subject to
adjustment after the Closing as set forth in Section 2.6 hereof.
(b) All of the Purchase Price shall be allocated to the Shares. The Seller
and the Purchaser shall report the federal, state, 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.
SECTION 2.3. 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 or before the second Business Day following the satisfaction or waiver of the
conditions to the obligations of the parties set forth in Sections 8.1 and 8.2,
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 in writing (the day on which
the Closing takes place being the "Closing Date"). The Closing shall be deemed
effective as of the close of business on the Closing Date. The parties
acknowledge that time is of the essence and agree to use their commercially
reasonable efforts to cause the Closing Date to occur within the first 90 days
following the date hereof.
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SECTION 2.4. Closing Deliveries by the Seller. At the Closing, the Seller
shall deliver or cause to be delivered to the Purchaser:
(a) stock certificates evidencing the Shares, duly endorsed in blank or
accompanied by stock powers duly executed in blank;
(b) a receipt for the Purchase Price;
(c) an executed copy of the Ancillary Agreement required to be delivered by
the Seller pursuant to Section 8.2(c);
(d) any required stock transfer tax stamps; and
(e) the documents required to be delivered by the Seller pursuant to
Section 5.13.
SECTION 2.5. Closing Deliveries by the Purchaser. At the Closing, the
Purchaser shall deliver to the Seller:
(a) the Purchase Price (exclusive of the post-Closing adjustment, if any,
provided for in Section 2.6) 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; and
(b) an executed copy of the Ancillary Agreement required to be delivered by
the Purchaser pursuant to Section 8.1(c).
SECTION 2.6. Purchase Price Adjustment.
(a) As promptly as practicable, but no later than 90 days after the Closing
Date, the Purchaser shall prepare and deliver to the Seller a statement of
Modified Working Capital (including the related notes and schedules thereto) as
of the close of business on the Closing Date, which shall set forth the
Purchaser's determination of the Closing Modified Working Capital and shall set
forth in detail the amounts underlying such calculation in the same format and
detail as in Schedule 2.6 (the "Initial MWC Statement"). Purchaser shall cause
Ernst & Young LLP (or another independent certified public accounting firm in
the United States of international recognition) to examine and certify to the
Seller at the time of delivery of the Initial MWC Statement that the Modified
Working Capital set forth on the Initial MWC Statement was prepared on the basis
and using the same accounting policies, principles, methodologies and estimates
used in preparing the 1998 Pro Forma Financial Statements and the Statement of
Modified Working Capital as of December 31, 1998 as set forth in Schedule 2.6
and using the Specified Accounting Policies referred to in Schedule 2.6, which
are more fully described in the Notes to the 1998 Pro Form Financial Statements
included in Section 3.6 of the Disclosure Schedule. At all times during the 45
Business Days immediately following the Seller's receipt of the Initial MWC
Statement, the Seller and its
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representatives will be permitted to review at the Seller's offices in New York,
New York the Purchaser's working papers (including work papers of accountants
and other advisors) relating to the Initial MWC 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 Closing Date, and the Purchaser
shall make reasonably available at the Seller's offices the individuals
responsible for the preparation of the Initial MWC Statement (including, without
limitation, accountants, lawyers and other advisors) in order to respond to the
reasonable inquiries of the Seller related thereto.
(b) The Seller shall notify the Purchaser in writing (the "Notice of
Disagreement") within 30 Business Days after receiving the Initial MWC Statement
if the Seller disagrees with the Purchaser's calculation of the Closing Modified
Working Capital, 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 Modified Working Capital. If the
Seller does not deliver a Notice of Disagreement to the Purchaser within such 30
Business Day period, then the Initial MWC Statement shall be deemed to have been
accepted by the Seller, shall become final and binding upon the parties and
shall be the Final MWC Statement.
(c) During the 30 Business Days immediately following the delivery of a
Notice of Disagreement, 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 the Notice of Disagreement. If at the end of such 30 Business Day period the
Seller and the Purchaser have been unable to agree upon a Final MWC Statement,
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 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 Modified Working Capital within 30 Business Days from
such submission, and such final determination shall be the Final MWC Statement.
The cost of the Independent Accounting Firm's review and determination shall be
split between and paid by the Seller and the Purchaser on a proportionate basis,
based upon the relative amount by which each such party's determination of
Closing Modified Working Capital differed from the Closing Modified Working
Capital on the Final MWC Statement. 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 records as may be reasonably required by the
Independent Accounting Firm to make its final determination.
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(d) (i) If the Closing Modified Working Capital (as set forth in the Final
MWC Statement) exceeds the Modified Working Capital as of December 31, 1998, as
reflected on Schedule 2.6 hereto, then the Purchaser shall pay to the Seller an
amount equal to such excess; or (ii) if the Modified Working Capital as of
December 31, 1998, as reflected on Schedule 2.6 hereto, exceeds the Closing
Modified Working Capital (as set forth in the Final MWC Statement), then the
Seller shall pay to the Purchaser an amount equal to such excess; in either case
within five Business Days after the Final MWC Statement becomes final and
binding on the parties hereto and, in either case, together with interest on the
amount of such excess from the Closing Date until the date of payment at the
Interest Rate. If the Closing Modified Working Capital (as set forth in the
Final MWC Statement) is equal to the Modified Working Capital as of December 31,
1998, as reflected on Schedule 2.6 hereto, then neither the Purchaser nor the
Seller shall owe any amount to the other party pursuant to this Section 2.6.
(e) The Purchaser agrees that following the Closing through the date on
which payment if any, is made by either party pursuant to Section 2.6(d) or if
the Final MWC Statement indicates that no such payment is required, then through
the date on which the Final MWC Statement becomes effective, the Purchaser will
not take any actions with respect to any accounting books, records, policies or
procedures on which the Initial MWC Statement or the Final MWC Statement is to
be based that would make it impossible or impracticable to calculate the Closing
Modified Working Capital 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 2.6(b) of the Viacom Stock
Purchase Agreement (notice of which the Seller shall provide to the Purchaser),
the Purchaser will not take any actions with respect to any accounting books,
records, policies or procedures of the Company or the Business that are
inconsistent with past practices of Viacom, to the extent such practices are
known to the Purchaser, or that would make it impossible or impracticable to
calculate the Closing Net Assets (as such term is defined in the Viacom Stock
Purchase Agreement) with respect to the Business in the manner and utilizing the
methods required by the Viacom Stock Purchase Agreement.
(f) The parties acknowledge and agree that the purchase price adjustment
contemplated by this Section 2.6 is intended to reflect the change in Modified
Working Capital solely as a result of operations and activities of the Business
in the ordinary course of business between December 31, 1998 and the Closing
Date. The parties also acknowledge and agree that the adjustment, if any,
contemplated by this Section 2.6 can only be properly determined if the Closing
Modified Working Capital is prepared consistent with and using the same
principles, policies, practices, procedures, methods and estimates as those used
in calculating the Modified Working Capital as of December 31, 1998.
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SECTION 2.7. Payments and Computations. Each party shall make each payment
due to the other party hereunder as soon as practicable on the day when due in
U.S. dollars by wire transfer in immediately available funds. All computations
of interest shall be made by the party entitled to receive payment 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 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 as follows:
SECTION 3.1. Incorporation and Authority of the Seller and its Affiliates.
(a) 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, to carry
out its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery by the Seller of this Agreement, the
performance by the Seller of its obligations hereunder and the consummation by
the Seller of the transactions contemplated hereby have been duly authorized by
all requisite corporate action on the part of the Seller. This Agreement has
been duly executed and delivered by the Seller, and (assuming due authorization,
execution and delivery by the Purchaser) this Agreement constitutes a legal,
valid and binding obligation of the Seller, enforceable against the Seller in
accordance with its terms.
(b) Each Affiliate of the Seller that is a party to the Ancillary Agreement
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
Agreement, to carry out its obligations thereunder and to consummate the
transactions contemplated thereby. The execution and delivery by each such
Affiliate of the Ancillary Agreement, the performance by each such Affiliate of
its respective obligations thereunder and the consummation by each 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 each such Affiliate. Upon execution, the Ancillary Agreement will be
duly executed and delivered by each such Affiliate that is a party thereto, and
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(assuming due authorization, execution and delivery by any party that is not the
Seller or an Affiliate of the Seller) will constitute legal, valid and binding
obligations of each such Affiliate that is a party thereto, enforceable against
each such Affiliate in accordance with its terms.
SECTION 3.2. Incorporation and Qualification of the Company. The Company is
a corporation duly incorporated, validly existing and, to the extent legally
applicable, in good standing under the laws of its jurisdiction of incorporation
and has the corporate power and authority to own, operate or lease its assets.
The Company is duly qualified as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of its properties owned,
operated or leased or the nature of its activities makes such qualification
necessary, except for where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect.
SECTION 3.3. Capital Stock of the Company. The Shares of the Company
consist solely of 3,000 shares of common stock, 2,029 of which shares are issued
and outstanding. 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 options, pre-emptive rights, warrants, subscriptions, calls
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. The Seller
beneficially owns the Shares, 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 agreements in effect with respect to
the voting or transfer of the Shares.
SECTION 3.4. No Conflict. Assuming all consents, approvals, authorizations
and other actions described in Section 3.5 have been obtained, and except as may
result from any facts or circumstances relating to the Purchaser or its
Affiliates or as described in Section 3.4 of the Disclosure Schedule, the
execution, delivery and performance of this Agreement by the Seller do not and
will not (a) violate or conflict with the Certificate of Incorporation, other
constitutive documents or by-laws of the Seller or the Company, (b) conflict
with or violate any material Law or Governmental Order applicable to the Seller
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 additional rights or entitlement to
increased, additional, accelerated or guaranteed payments under, or give to any
Person any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of any Lien on any Shares or on any of the Assets
pursuant to, any note, bond,
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Contract, License or other instrument to which the Seller or the Company is a
party or by which any of such Shares or any 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, or Liens as would not, individually or in the aggregate, (A) have
a Material Adverse Effect or (B) materially impair the ability of the Seller to
consummate the sale of the Shares to the Purchaser as contemplated by this
Agreement.
SECTION 3.5. Consents and Approvals. The execution and delivery of this
Agreement and the Ancillary Agreement by the Seller and those of its Affiliates
that are parties to the Ancillary Agreement do not, and the performance of this
Agreement and the Ancillary Agreement by the Seller and such Affiliates 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 3.5 of the Disclosure Schedule, (b) the notification requirements of 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 3.6. Financial Information. Section 3.6 of the Disclosure Schedule
sets forth 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 Seller's books and records. Except as described in the Notes to
the 1998 Pro Forma Financial Statements, the Specified Accounting Policies
conform, in all material respects, with generally accepted accounting principles
("GAAP"). 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 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. The 1998 Pro Forma
Financial Statements do not include that certain Promissory Note in the
principal amount of $33,000,000, dated as of November 27, 1998, by the Company,
as successor by merger to Pearson Reference Acquisition 2, Inc., in favor of
Pearson plc and the second, third and fourth sentences
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of this Section 3.6 are, accordingly, qualified by this exception.
SECTION 3.7. Absence of Certain Changes or Events. Since December 31, 1998,
except (i) as disclosed in the 1998 Pro Forma Financial Statements or in Section
3.6 or 3.7 of the Disclosure Schedule, (ii) for transfers of assets not
constituting Assets (as hereinafter defined) 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 (a) there has not occurred any
event which, individually or in the aggregate, has had a Material Adverse Effect
or that would materially impair the ability of the Seller to consummate the sale
of the Shares to the Purchaser as contemplated by this Agreement, or (b) any
reversal of reserves on the financial statements of the Company except as a
result of payment of the full amount specifically attributable to such reserve.
For purposes of this Agreement, "payment of the full amount" shall include
reserve reductions for actual returns, bad debt write-offs, inventory write-offs
and accounts receivable deductions taken by customers and approved by the
Company, in each case consistent with past practice of the Company.
SECTION 3.8. Absence of Litigation. Except as set forth in Section 3.8 of
the Disclosure Schedule, there are no Actions pending or, to the Knowledge of
the Seller, threatened in writing 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 or that would
materially impair the ability of the Seller to consummate the sale of the Shares
to the Purchaser and the transactions as contemplated by this Agreement.
SECTION 3.9. Compliance with Laws. To the Knowledge of the Seller, neither
the Seller nor the Company is in violation of any Laws or Governmental Orders
applicable to the Business, the Shares or any material Asset, or by which any of
them is bound, except (a) as set forth in Section 3.9 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 3.10. Governmental Licenses and Permits. The Company holds all
governmental qualifications, registrations, filings, privileges, franchises,
licenses, permits, approvals or authorizations material to the operation of the
Business as currently operated by the Company. Except as set forth in Section
3.10 of the Disclosure Schedule, all of such licenses, permits, approvals and
authorizations are in full force and effect and the Company is in material
compliance with each such license, permit, approval and authorization except as
would not, individually or in the aggregate, have a Material Adverse Effect.
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SECTION 3.11. The Assets.
(a) Except (i) as set forth in Section 3.11(a) of the Disclosure Schedule,
(ii) for the assets to be transferred pursuant to Section 5.5 and (iii) for
certain 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
Agreement, will, as of the Closing Date, constitute all of the assets (other
than people resources) necessary to conduct the Business in all material
respects as conducted on the date of this Agreement.
(b) Except (i) as disclosed in Section 3.11(b) of the Disclosure Schedule,
(ii) for Permitted Liens, or (iii) for Liens created by or through the Purchaser
or any of its Affiliates, the material Assets are owned or leased by the
Company, free and clear of all Liens.
SECTION 3.12. Intellectual Property.
(a) The Seller or the Company owns or has the right to use all Intellectual
Property that is material to the operation of the Business as currently operated
by the Company ("Owned Intellectual Property" or "Licensed Intellectual
Property", as applicable). The Seller's and the Company's ownership or right to
use trademarks and service marks is subject to the rights of third parties who
may have begun using such trademarks or service marks before the Seller or the
Company, and the Seller's and the Company's ownership or right to use common law
trademarks and service marks is subject to the capability of such trademarks or
service marks to serve as a trademark or service mark. Except as disclosed in
Section 3.12(a) of the Disclosure Schedule, 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 of this Agreement. Schedule 3.12(a) sets
forth a complete list of registrations/patents and applications pertaining to
the Owned Intellectual Property.
(b) Except for such infringements as would not, individually or in the
aggregate, have a Material Adverse Effect, to the Knowledge of the Seller, (i)
neither the Owned Intellectual Property nor the Seller's or the Company's use of
the Licensed Intellectual Property infringes upon the Intellectual Property
rights of any third party and (ii) no written claim has been asserted to the
Seller or the Company which is currently pending that the use of such Owned
Intellectual Property or Licensed Intellectual Property in a manner consistent
with past or current practice does or may infringe upon the Intellectual
Property rights of any third party.
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(c) Subject to the exceptions described in Section 3.12(a) and (b), the
Company is entitled to use the Owned Intellectual Property in a manner
consistent in all material respects with current practice of the Business.
(d) Subject to the exceptions described in Section 3.12(a) and (b), the
Company has the right to use all Licensed Intellectual Property in a manner
consistent in all material respects with current practice of the Business and
subject to the terms of the respective license agreements and permissions.
(e) To the Knowledge of the Seller, no Person is engaging in any activity
that infringes in any material respect upon the Owned Intellectual Property.
Except 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 any license or sublicense of the Licensed Intellectual Property
or the Owned Intellectual Property.
(f) Except in any such case as would not, individually or in the aggregate,
have a Material Adverse Effect, (i) neither the Seller nor the Company is in
material breach of, or material default under, any material term of any license
or sublicense of the Licensed Intellectual Property or the Owned Intellectual
Property and (ii) to the Knowledge of the Seller no other party to such license
or sublicense is in material breach thereof or material default thereunder.
(g) With respect to any Owned Intellectual Property 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 authority in the United States or
foreign jurisdictions, as the case may be, for the purpose of maintaining the
registrations or applications for registration of such Owned Intellectual
Property except where failure to be valid and in full force and effect or to
make such payment or filing would not have a Material Adverse Effect.
(h) Except (i) as described in Section 3.12(a), (ii) as set forth in
Section 3.12 of the Disclosure Schedule and (iii) for licenses, options,
consents and permissions granted to use Owned Intellectual Property or Licensed
Intellectual Property, the Owned Intellectual Property is, and at Closing will
be, subject to no Lien other than Permitted Liens, and neither the Seller nor
any of its Affiliates has, or at the Closing will have, assigned, transferred,
conveyed or otherwise encumbered any right, title or
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interest in the Owned Intellectual Property or the Licensed Intellectual
Property.
(i) The Seller warrants that it 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 and perform properly date-sensitive
functions involving certain dates prior to and any date on or after December 31,
1999), (ii) developed a plan and time line 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(e) of the Disclosure
Schedule, except in any such case as would not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 3.13. Employee Benefits Matters.
(a) 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,
hereafter "Pearson ERISA Plans") and all bonus, stock option, stock purchase,
restricted stock, incentive, deferred compensation, supplemental retirement,
severance or other benefit plans, programs or arrangements (collectively, the
"Pearson Plans") and all employment, termination, severance 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 the Seller,
the Company or any of their Affiliates for the benefit of (i) any current
employee of the Seller, the Company or any of their Affiliates who is employed
in the Business (collectively, the "Business Employees") or (ii) any former
employee of the Seller, the Company, Viacom or any of their respective
Affiliates who was previously employed in the Business (collectively, the
"Former Business Employees"). Except as disclosed in Section 3.13(a) of the
Disclosure Schedule, each Pearson ERISA Plan is in writing and the Seller has
previously made available to the Purchaser a true and complete copy of each
Pearson ERISA Plan and the most recently received IRS determination letter for
each Pearson ERISA Plan that is intended to be tax-qualified pursuant section
401(a) of the Code.
(b) Except as otherwise disclosed in Section 3.13(b) of the Disclosure
Schedule, none of the Pearson ERISA Plans (i) is a "multi employer 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, or (ii) provides or
promises to provide retiree medical or life insurance benefits. Neither the
Company nor or any trade or business (whether or not incorporated) which is
treated as a single employer with the Company under Section 414(b) or (c) of the
Code (an "ERISA Affiliate") has incurred any liability due to a complete or
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partial withdrawal from a multiemployer plan or due to the termination or
reorganization of a multiemployer plan, except for any such liability which has
been satisfied in full, and no events have occurred and no circumstances exist
that would reasonably be expected to result in any such liability to the
Company. With respect to each single-employer plan that is sponsored by, or to
which contributions are required of, the Company or any ERISA Affiliate, there
does not exist any accumulated funding deficiency within the meaning of Section
412 of the Code or Section 302 of ERISA, whether or not waived. Neither the
Company nor any ERISA Affiliate has any outstanding liability under Section 4062
of ERISA to the PBGC or to a trustee appointed under Section 4042 of ERISA, and
no events have occurred and no circumstances exist that could reasonably be
expected to result in any such liability to the Company or any ERISA Affiliate.
(c) There are no pending actions, claims or lawsuits which have been
asserted or instituted against the Pearson Plans, the assets of any of the
trusts under such plans or the plan sponsor or the plan administrator, or
against any fiduciary of the Pearson Plans with respect to the operation of such
plans (other then routine benefit claims), except for such actions, claims or
lawsuits as would not, individually or in the aggregate, have a Material Adverse
Effect.
(d) The Pearson Plans have been maintained, in all material respects, in
accordance with their terms and with all provisions of ERISA and the Code
(including rules and regulations thereunder) and other applicable federal and
state laws and regulations, except for such failures as would not, individually
or in the aggregate, have a Material Adverse Effect. No "party in interest" or
"disqualified person" with respect to the Pearson Plans has engaged in a
"prohibited transaction" within the meaning of Section 406 of ERISA or 4975 of
the Code except for such transactions as would not, individually or in the
aggregate, have a Material Adverse Effect.
(e) Except as provided in the agreements disclosed in Section 6.04 of the
Disclosure Schedule, a change in ownership or control of the Company or the
consummation of any transaction contemplated by this Agreement, either alone or
in combination with another event, has not or will not (i) entitle any Business
Employee to receive any separation, severance or similar-type compensation or
benefits or any other payments, or (ii) result in any Pearson Plan or other
arrangement applicable to Business Employees paying or otherwise providing any
enhanced or supplemental, separation, severance or similar-type compensation or
benefits.
(f) Except as disclosed in Section 3.13(c) 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,
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there is no labor strike, slowdown or work stoppage against the Seller or the
Company pending or, to the Knowledge of the Seller, threatened, which may
interfere in any material respect with the business activities of the Business.
There are no complaints, charges or claims against the Company pending or, to
the Knowledge of Seller, threatened to be brought or filed with any public or
governmental authority, arbitrator or court based on, arising out of, in
connection with, or otherwise relating to the employment or termination of
employment by the Company of any individual. The Company is in compliance with
all laws, regulations and orders relating to the employment of labor, including
all such laws, regulations and orders relating to wages, hours, collective
bargaining, discrimination, civil rights, safety and health, workers'
compensation and the collection and payment of withholding and/or social
security taxes and any similar employment tax, except for such noncompliance as
would not, individually or in the aggregate, have a Material Adverse Effect.
(g) As of the date hereof, Mark Clinton is the only individual eligible for
any bonus payable to the President of the Company under the Pearson Executive
Incentive Plan.
SECTION 3.14. Taxes.
(a) Except as otherwise disclosed in Section 3.14 of the Disclosure
Schedule, (i) the Company has filed (or joined in the filing of) when due all
Tax Returns required by applicable law to be filed with respect to the Company
and all Taxes shown to be due on such Tax Returns have been paid; (ii) all Taxes
relating to periods ending on or before the Closing Date owed by the Company
(whether or not shown on any Tax Return) or to which the Company may be liable
under Treasury Regulations ss. 1.1502-6 (or analogous state or foreign
provisions) by virtue of having been a member of any "affiliated group" (or
other group filing on a combined or unitary basis) at any time on or prior to
the Closing Date, if required to have been paid, have been paid (except for
Taxes which are being contested in good faith); (iii) there is no action, suit,
proceeding, investigation, audit or claim now pending against, or with respect
to, the Company in respect of any Tax or assessment, nor is any claim for
additional Tax or assessment asserted by any Tax authority; (iv) there is no
outstanding request for any extension of time within which to pay any Taxes or
file any Tax Returns; (v) there has been no waiver or extension of any
applicable statute of limitations for the assessment or collection of any Taxes
of the Company; (vi) the Company has not filed any agreement or consent under
Section 341(f) of the Code; (vii) the Company is not a party to any agreement,
whether written or unwritten, providing for the payment of Taxes, payment for
Tax losses, entitlements to refunds or similar Tax matters; (viii) no ruling
with respect to Taxes (other than a request for determination of the status of a
qualified pension plan) has been requested by or on behalf of the Company; (ix)
the Company has not been a United States real
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property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(A)(ii) of the Code; and
(x) the Company has withheld and paid all materials Taxes required to be
withheld in connection with any amounts paid or owing to any employee, creditor,
independent contractor or other third party.
(b) Except as disclosed in Section 3.14 of the Disclosure Schedule, (i) any
amount that could be received (whether in cash or property or the vesting of
property) as a result of any of the transactions contemplated by this Agreement
by any employee, officer or director of the Company who is a "disqualified
individual" (as such term is defined in proposed Treasury Regulation Section
1.280G(b)(1) of the Code); and (ii) the disallowance of a deduction under
Section 162(m) of the Code for employee remuneration will not apply to any
amount paid or payable by the Company under any contract, benefit plan, program,
arrangement or understanding currently in effect.
SECTION 3.15. Environmental Matters. Except as disclosed in Section 3.15 of
the Disclosure Schedule and except as would not, individually or in the
aggregate, have a Material Adverse Effect:
(a) the Company and the Business are in compliance in all material respects
with all applicable Environmental Laws and have obtained and are in compliance
in all material respects with all required Environmental Permits;
(b) there are no pending or, to the Seller's Knowledge, threatened
Environmental Liabilities against the Company or its Affiliates in connection
with the Business;
(c) except for Hazardous Materials used in the ordinary course of business
and in compliance in all material respects with Environmental Law, there are no
Hazardous Materials at, in, on, beneath or migrating towards any Leased Real
Property;
(d) neither the Company nor any Affiliate of the Company has, in connection
with the Business, generated, disposed of or arranged for the disposal of any
Hazardous Material except in compliance with Environmental Law; and
(e) there are no (i) underground storage tanks, active or abandoned, (ii)
polychlorinated biphenyl containing equipment, or (iii) friable
asbestos-containing material at any Leased Real Property.
SECTION 3.16. Material Contracts.
(a) Section 3.16(a) of the Disclosure Schedule lists each of the following
Contracts of the Company (such Contracts being "Material Contracts"):
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(i) 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
to the Business or the Company (A) under the terms of which the Company (I) paid
more than $50,000 during the calendar year ended December 31, 1998 or is likely
to pay or otherwise give consideration of more than $50,000 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 (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;
(ii) 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)
paid more than $50,000 during the calendar year ended December 31, 1998 or is
likely to involve consideration of more than $50,000 in the aggregate during the
calendar year ended 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;
(iii) each Contract relating to indebtedness for borrowed money of the
Company; and
(iv) all Contracts that limit or purport to limit the ability of the Seller
(insofar as it relates to the Business) or 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.
(b) 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 is valid and binding on the Company and is in
full force and effect. Except as would not, individually or in the aggregate,
have a Material Adverse Effect, to the Seller's Knowledge, the Company is not in
material breach of, or material default under, any Material Contract.
SECTION 3.17. 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 Agreement based
upon arrangements made by or on behalf of the Seller or its Affiliates.
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SECTION 3.18. Real Property.
(a) The Seller and its Affiliates own no real property in connection with
the Business.
(b) Section 3.18(b) of the Disclosure Schedule contains a list of all real
property leased or subleased by Seller or any Affiliate thereof in connection
with the Business or the Company (the "Leased Real Property"). All leases and
subleases for the Leased Real Property (including all modifications, extensions
or amendments thereto) (the "Real Property Leases") are subject to no Liens
except as set forth on Section 3.18(b) of the Disclosure Schedule or Permitted
Liens (collectively, the "Leased Real Property Permitted Exceptions").
(c) True and complete copies of the material Real Property Leases have been
made available to the Purchaser by the Seller. Subject to the terms of the
respective Real Property Leases and the Leased Real Property Permitted
Exceptions, the Company has a valid and subsisting leasehold estate in each
parcel of Leased Real Property. The Real Property Leases are in full force and
effect. Each of the Seller or an Affiliate and 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. Subject to the terms of the respective Real Property
Leases, the Seller or an Affiliate and the Company is in possession of the
Leased Real Property. To the Knowledge of the Seller, there are no material
defaults by any tenant or landlord under the Real Property Leases, and no event
has occurred or failed to occur which, with the giving of notice or the passage
of time, or both, would constitute a material default under any Real Property
Lease, except as would not have a Material Adverse Effect.
SECTION 3.19. Undisclosed Liabilities. To the Knowledge of the Seller, as
of December 31, 1998, the Company had no material liabilities of any kind or
nature, whether direct, accrued, absolute, contingent or otherwise, other than
those that are reflected or disclosed in the Disclosure Schedule or the 1998 Pro
Forma Financial Statements. In addition, to the Knowledge of the Seller, since
December 31, 1998, the Company has no material obligations or liabilities that
have not been incurred in the ordinary course of business consistent with past
practices except as set forth in the Disclosure Schedule and except as otherwise
permitted under the terms of this Agreement.
SECTION 3.20. Insurance. Section 3.20 of the Disclosure Schedule contains a
true and complete list (including the names of the insurers, the expiration
dates thereof, a brief description of the interests insured thereby and any
deductibles or self insurance amounts associated with such interests) of all
liability, property, worker's compensation, directors' and officers' liability
and other insurance policies currently in effect that insure the Assets or the
business, operations, property or employees of the Business, or affect or relate
to the
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ownership, use or operation of any of Assets and that have been issued to the
Seller, any of its Affiliates or the Company. Each policy listed in Section 3.20
of the Disclosure Schedule is valid and binding and in full force and effect,
except as set forth in Section 3.20 of the Disclosure Schedule no premiums due
thereunder have not been paid, and none of the Seller, any of its Affiliates or
the Company has received any written notice of reduction, cancellation or
termination in respect of any policy or is in default thereunder. Except as set
forth in Section 3.20 of the Disclosure Schedule, no written notice of any
termination, threatened termination or denial of any material claim under any of
such policies has been received and such policies are in full force and effect.
SECTION 3.21. Claims Against Viacom. As of the date hereof, neither Pearson
plc nor Pearson Inc. has asserted or filed against Viacom under the Viacom Stock
Purchase Agreement any Action relating to the Company and/or the Business.
SECTION 3.22. EXCLUSIVITY OF REPRESENTATIONS.
(a) 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).
(b) The Purchaser acknowledges that (i) the representations and warranties
contained in Sections 3.12, 3.13, 3.14, 3.15 and 3.18 are the only
representations and warranties being made with respect to (A) Intellectual
Property, (B) compliance with or liability under ERISA, (C) Taxes, (D)
compliance with or liability under Environmental Laws and (E) real property,
respectively, or with respect to any Intellectual Property, employee benefit,
Tax, environmental, health or safety or real property matter related in any way
to the Company's assets, the Business, the Company, the Seller and its
Affiliates or to this Agreement or its subject matter, and (ii) no other
representation or warranty contained in this Agreement shall apply to any such
matters and no other representation or warranty, express or implied, is being
made with respect thereto.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller as follows:
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SECTION 4.1. 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 Agreement, 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 the Ancillary
Agreement 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 its execution the Ancillary Agreement 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
its execution the Ancillary Agreement will constitute, legal, valid and binding
obligations of the Purchaser enforceable against the Purchaser in accordance
with their terms.
SECTION 4.2. No Conflict. Assuming all consents, approvals, authorizations
and other actions described in Section 4.3 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 4.2, the execution, delivery and
performance of this Agreement and the Ancillary Agreement by the Purchaser do
not and will not (a) violate or conflict with the certificate of incorporation,
other constitutive documents or by-laws (or other similar applicable documents)
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 assets of
the Purchaser pursuant to, any note, bond, Contract, License or other instrument
to which the Purchaser or any of its Affiliates is a party or by which any of
such 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 4.3. Consents and Approvals. The execution and delivery of this
Agreement and the Ancillary Agreement by the Purchaser do not, and the
performance of this Agreement and the 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 notification
requirements of 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
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the Purchaser from performing any of its material obligations under this
Agreement and the Ancillary Agreement and (c) as may be necessary as a result of
any facts or circumstances relating solely to the Seller or its Affiliates.
SECTION 4.4. 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 4.5. 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 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 or in a transaction exempt
from the registration requirements of the Securities Act.
SECTION 4.6. Financial Ability.
(a) The Purchaser has, and as of the Closing will have, cash sufficient to
enable it to consummate the transactions contemplated by this Agreement (such
cash, the "Financing").
(b) The Purchaser has a net worth that is greater than $85 million.
SECTION 4.7. 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 Agreement based
upon arrangements made by or on behalf of the Purchaser.
SECTION 4.8. EXCLUSIVITY OF REPRESENTATIONS. THE REPRESENTATIONS AND
WARRANTIES MADE BY THE PURCHASER IN THIS
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AGREEMENT ARE IN LIEU OF AND ARE EXCLUSIVE OF ALL OTHER REPRESENTATIONS AND
WARRANTIES, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES. THE PURCHASER
HEREBY DISCLAIMS ANY SUCH OTHER OR IMPLIED REPRESENTATIONS OR WARRANTIES,
NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO THE SELLER OR ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER
INFORMATION (INCLUDING ANY FINANCIAL PROJECTIONS OR OTHER SUPPLEMENTAL DATA.)
ARTICLE V.
ADDITIONAL AGREEMENTS
SECTION 5.1. Conduct of Business Prior to the Closing. (a) Unless the
Purchaser otherwise agrees in writing and except as otherwise set forth herein
or in Section 5.1 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 consistent with past practice, and (ii) use
commercially reasonable efforts 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 in other business
units operated by the Seller or any of its Affiliates); provided, 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.
(b) Except as expressly provided in this Agreement or in Section 5.1 or any
other Section 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 without the prior written consent of the Purchaser (which consent
shall not be unreasonably withheld or delayed):
(i) except in the ordinary course of business, grant or knowingly permit
the creating of any Lien (other than a Permitted Lien) on any material Asset
(whether tangible or intangible);
(ii) establish or materially increase 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 materially increase the compensation payable to or to become
payable to any officers or key employees of the Company by the Seller or the
Company, except, in any case described above, in the ordinary course of business
or as may be required by Law or applicable employment agreement or collective
bargaining agreement;
(iii) enter into any material employment or severance agreement with any of
the Business Employees;
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(iv) except (A) in the ordinary course of business, (B) for cash dividends
by the Company to the Seller, (C) for the transfer of assets to the Seller
immediately prior to Closing as contemplated by Section 5.5 or (D) for transfers
to the Seller or its Affiliates of assets relating to businesses of the Seller
or its Affiliates other than the Business, sell, assign, transfer, lease or
otherwise dispose of any of the assets of the Company having a value
individually exceeding $50,000 or an aggregate value exceeding $100,000;
(v) (A) acquire (by merger, consolidation, acquisition of stock or assets
or otherwise) any corporation, partnership or other business organization or
division thereof or (B) 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, advances or distributions of cash (other than by the
Company to the Seller);
(vi) issue or sell any additional shares of the capital stock of, or other
equity interests in, the Company or securities convertible into or exchangeable
for such 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;
(vii) amend the certificate of incorporation, other constitutive documents
or by-laws of the Company;
(viii) except to the extent required by applicable Law, or with respect to
accounting matters, by GAAP or the Specified Accounting Policies, (A) cause the
books and records of the Company to be maintained other than in the usual,
regular and ordinary manner; (B) permit any material change in (1) any
accounting, financial reporting, or Tax practice or policy of the Seller or the
Company, (2) any method of calculating any bad debt, contingency or other
reserve for accounting, financial reporting or Tax purposes of the Seller or the
Company or (3) the fiscal year of the Company; and (C) reverse any reserves set
forth on the financial statements of the Company except as a result of payment
of the full amount specifically attributable to such reserve (for purposes of
this Agreement, "payment of the full amount" shall include reserve reductions
for actual returns, bad debt write-offs, inventory write-offs and accounts
receivable deductions taken by customers and approved by the Company, in each
case consistent with the past practice of the Company);
(ix) except in the ordinary course of business, enter into any amendment,
modification, extension, waiver or termination of any Real Property Lease or
Material Contract;
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(x) make, change or revoke, or permit to be made, changed or revoked any
election or method of accounting with respect to Taxes affecting or relating to
the Company;
(xi) enter into, or permit to be entered into, any closing or other
agreement or settlement with respect to material Taxes affecting or relating to
the Company if such agreement or settlement would result in the imposition of
Taxes on the Company for a Tax period or portion thereof beginning on or after
the Closing Date; provided, however, this clause (xi) shall not apply to any
such agreement or settlements entered into pursuant to the terms of the Viacom
Stock Purchase Agreement; or
(xii) enter into any Contract which is likely to involve payment by the
Company of consideration of more than $50,000 in the aggregate during the
calendar year ended December 31, 1999 or more than $100,000 in the aggregate at
any time after December 31, 1999, other than arrangements with the Seller or an
Affiliate for the provision to the Company of currency to make patent annuity
payments.
SECTION 5.2. Access to Information.
(a) From the date hereof until the Closing (upon reasonable notice to the
Seller) 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, properties,
books and records of the Company (including but not limited to the review of the
Business in connection with the Company's Year 2000 compliance) 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
Seller shall not be required to provide any such information or access to the
extent that such information or access would cause Seller to be in breach of any
confidentiality restrictions applicable to it.
(b) From the HSR Date until the Closing Date, (i) Mason Slaine shall have
the right to attend and observe any meeting of the Board of Directors of the
Company (the "Board") and to receive a copy of any materials distributed to
members of the Board, (ii) an executive officer of the Purchaser (the
"Purchaser's Representative") shall be entitled to be present at the Company's
offices at all reasonable times, (iii) the Seller shall cause the Company to
make an office available to the Purchaser's Representative at the Company's
executive offices,
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together with reasonable office support (including telephone, facsimile and
reasonable secretarial support), (iv) the Purchaser's Representative shall be
entitled to attend all management meetings of the Company and (v) the Seller
shall cause the Company to consult with the Purchaser's Representative in making
material decisions concerning the business of the Company of the type
customarily made by the president or chief financial officer of the Company (or
officers exercising similar authority) and shall in good faith consider the
input of the Purchaser's Representative in making such decisions. In the event
of a dispute between the Purchaser's Representative and the Company as to any
material decision, the dispute shall be resolved by Philip T. Hoffman, Chief
Executive Officer of Pearson Inc. (or, in the event Mr. Hoffman is not then
serving as Chief Executive Officer of Pearson Inc., the Chief Executive Officer
of Pearson Inc.), and William Oldsey, Senior Vice President - Planning and
Market Development of Pearson Education, Inc. (or, in the event Mr. Oldsey is
not then serving as Senior Vice President of Pearson Education, Inc., a Senior
Vice President of Pearson Education, Inc.) who shall make the decision in good
faith based on their opinion of the best long-term interests of the Company.
(c) 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. 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) 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. The
Purchaser shall pay all expenses in connection with the preparation of such
financial statements, including any reasonable expenses incurred by the Seller
or the Company.
SECTION 5.3. Confidentiality.
(a) The terms of the letter agreement dated as of January 28, 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 5.3(a) and the Confidentiality Agreement shall terminate but only in
respect of that portion of the Evaluation Material (as defined
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in the Confidentiality Agreement) exclusively relating to the Assets, Business
or transactions contemplated by this Agreement. 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.
(b) 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 Company or 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 the Seller or any of its
Recipients 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
the Seller or such Recipient by a legal, contractual or fiduciary obligation to
any other Person; provided, that nothing contained in this Section 5.3(b) shall
prohibit the Seller from disclosing any information in connection with any
arbitration, Action or proceeding by or against the Seller or any of its
Affiliates. Should the Seller or Recipient be required to disclose any such
information in response to a court order or as otherwise required by Law or
administrative process, it shall inform the Purchaser in writing of such request
or obligation as soon as possible after it is informed of it and, if possible,
before any information is disclosed, so that a protective order or other
appropriate remedy may be obtained by Purchaser. 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.
(c) 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,
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 the Purchaser or any of its Recipients 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. Should the Purchaser or any such Recipient be required to disclose any
such information in response to a court order or as otherwise required by Law or
administrative process, it shall inform the Seller in writing of such request or
obligation as soon as possible after it is informed of it and, if possible,
before any information is disclosed, so that a protective order or other
appropriate remedy may be obtained by the Seller or any Person designated by the
Seller. If the Purchaser or a Recipient is obligated to make the
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disclosure, it shall only make the disclosure to the extent to which it is so
obligated, but not further or otherwise.
SECTION 5.4. Regulatory and Other Authorizations; Consents.
(a) The Purchaser shall use its commercially reasonable efforts to promptly
obtain all authorizations, consents, orders and approvals of all federal, state
and 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 Agreement and the
transfer, purchase and sale of the Shares to the Purchaser, and the Seller will
cooperate with the Purchaser in promptly seeking to obtain all such
authorizations, consents, orders and approvals; it being understood that the
Seller shall not 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). The Purchaser will
not take any action that would have the effect of delaying, impairing or
impeding the receipt of any required approvals.
(b) 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 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 to expeditiously close the transactions contemplated hereby, including
without limitation, committing to and/or effecting, by consent decree, hold
separate orders, or otherwise, the sale or disposition of such of its assets or
businesses or of the Shares to be acquired by it pursuant hereto as are required
to be divested in order to avoid the entry of, or to effect the dissolution of,
any injunction, temporary restraining order or other order in any suit or
proceeding, which would otherwise have the effect of materially delaying or
preventing the consummation of 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.
(c) Each party hereto agrees to cooperate in obtaining all other consents
and approvals that may be required in connection with the transactions
contemplated by this Agreement and the Ancillary Agreement; provided, however,
that neither party shall
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be required to compensate any third party to obtain any such consent or
approval.
SECTION 5.5. Intercompany Arrangements. 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, there shall be no amounts
owing from the Company to the Seller or any of its Affiliates (other than with
respect to amounts payable to third parties that have been processed centrally
by the Seller or its Affiliates on behalf of the Company and limited to the
amounts so processed), and there shall be no amounts owing from the Seller or
any of its Affiliates to the Company.
SECTION 5.6. Insurance.
(a) Effective 12:01 a.m. on the date following the Closing Date, 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", 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 date following the Closing Date; provided, however,
that with respect to insurance coverage written on an "occurrence basis" and for
which the Company was an insured under such policies, then (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 date following the Closing Date,
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 date following the Closing Date and shall promptly
remit any recoveries that the Seller or any Affiliate 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 the 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. 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 date following the Closing Date. The Purchaser agrees to indemnify, defend
and hold harmless the Seller and its Affiliates against and reimburse the Seller
and its Affiliates for any Losses that the Seller and its Affiliates may at any
time suffer or incur, or become subject to, as a result or in
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connection with any occurrences, Losses or claims occurring on or after 12:01
a.m. on the date following the Closing Date.
(b) Notwithstanding the provisions of Section 5.6(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 in existence on the
Closing Date or arising from any event or circumstance taking place or existing
prior to, on or subsequent to the Closing Date, all of which shall be assumed by
the Purchaser on the Closing Date; provided, however, the aggregate maximum
liability of the Purchaser for such workers compensation claims with respect to
the Business in existence on the Closing Date shall not exceed $50,000, after
which point the Seller shall assume all liability for all such claims. The
Purchaser shall take all steps necessary under any applicable Law to assume the
liability for workers' compensation claims pursuant to this Section 5.6 and
shall fully indemnify the Seller, Viacom and their respective Affiliates with
respect to any liability, claim, damage, Loss or expense of any kind whatsoever
arising out of or relating to any workers' compensation claim obligations
assumed by the Purchaser hereunder. 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 5.7. Letters of Credit. The Purchaser agrees to use its
commercially reasonable efforts (a) to arrange for substitute letters of credit
and the Purchaser guarantees to replace (i) the letters of credit and guarantees
entered into by or on behalf of the Seller, Viacom or any of their respective
Affiliates (other than the Company) outstanding as of the date of this Agreement
in connection with the Business that are set forth on Section 5.7 of the
Disclosure Schedule and (ii) any letters of credit and guarantees in connection
with the Business entered into by or on behalf of the Seller or any of its
Affiliates (other than the Company) in the ordinary course of business on or
after the date of this Agreement and prior to the Closing with the consent of
the Purchaser, such consent not to be unreasonably withheld (together the
"Seller LOCs") or (b) to assume all obligations of reimbursement under each
Seller LOC, obtaining from the creditor a full release of all parties liable,
directly or indirectly, for reimbursement to the creditor in connection with
amounts drawn under a Seller LOC under the terms of a Seller LOC. The Purchaser
further agrees that to the extent the beneficiary under any Seller LOC refuses
to accept any such substitute letter of credit or Purchaser guarantee proffered
by the Purchaser, the Purchaser shall indemnify, defend and hold
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harmless the Seller, Viacom and their respective Affiliates against and
reimburse them for any and all costs or expenses in connection with such Seller
LOCs, including their expenses in maintaining such Seller LOCs whether or not
any such Seller LOC is drawn upon, and shall in any event promptly reimburse the
Seller, Viacom and their respective Affiliates to the extent any Seller LOC is
called upon and such entity makes any payment thereunder or is obligated to
reimburse the party issuing the Seller LOC.
SECTION 5.8. 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 5.9. Further Action. (a) From and after the Closing Date, each of
the parties hereto shall execute and deliver such 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 Agreement 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 in effective possession, ownership and control of the Assets (other
than those contemplated by Section 5.5) 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 not included within
the Assets (including, without limitation, all assets contemplated by Section
5.5) and the Seller shall cooperate with the Purchaser for that purpose. All
cash and other remittances not intended to be transferred to Seller pursuant to
Section 5.5 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. All cash and other remittances, mail and other communications
relating to any assets not included within the Assets or any business of the
Seller or Viacom not included within the Business being purchased by the
Purchaser hereunder that are received by the Purchaser shall be promptly turned
over to the Seller (or such other Person as the Seller shall indicate) by the
Purchaser.
(b) 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 in its possession 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 reasonably requested by the Seller
from time to time, including,
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without limitation, in connection with any action, case or proceeding by or
against Seller or any of its Affiliates. If, at any time during such ten-year
period, 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. The Purchaser also shall make such books, records and individuals
available to Viacom to enable the Seller to comply with its obligations to
Viacom under the Viacom Stock Purchase Agreement. Notwithstanding the foregoing,
after the fifth anniversary of the date hereof, the Purchaser may, at its
election, deliver (at its cost) to the Seller all such books and records, in
which case the Purchaser shall be relieved of any further obligations under this
Section 5.9(b).
SECTION 5.10. Ancillary Agreement. 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) the Ancillary Agreement to
which it is a party.
SECTION 5.11. Non-Competition.
(a) The Seller acknowledges that reasonable limits on its ability to engage
in activities competitive with the Purchaser are warranted to protect the
Purchaser's substantial investment in acquiring the Company, its Shares, Assets
and Business. Accordingly, the Seller hereby covenants and agrees that during
the period commencing with the Closing Date and ending on the second anniversary
of the Closing Date, the Seller shall not, and shall cause its direct and
indirect Affiliates and Subsidiaries not to, engage in or actively participate
in the business of providing patent annuity payment services, patent and
trademark management software and other intellectual property services relating
to patents and trademarks (a "Competing Business") or own, manage or operate any
such Competing Business; provided, however that the foregoing shall not be
breached as a result of (i) the ownership or other right of the Seller (or any
of its Affiliates or Subsidiaries) to acquire an aggregate of 5% or less of any
class of stock of a Person engaged, directly or indirectly, in a Competing
Business; (ii) the acquisition of, holding by, operation of, or disposition by
the Seller (or any of its Affiliates or Subsidiaries) of an interest in any
Person following the Closing where 25% or less of the revenues of such Person as
of the date of such acquisition derive from a Competing Business; (iii) the
publication by the Seller (or any of its Affiliates or Subsidiaries) of any
publication relating to the subject matter of intellectual property including,
but not limited to, patents and trademarks; or (iv) the Seller (or any of its
Affiliates or Subsidiaries) engaging in, participating in, owning, managing or
operating any Competing Business that is engaged or participated in, owned,
managed or operated by them on the Closing Date.
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(b) For the avoidance of doubt, for purposes of this Section 5.11, The
Economist Group Limited and Lazard Brothers & Co., Limited and their respective
direct and indirect Subsidiaries shall not be deemed to be Affiliates or
Subsidiaries of the Seller.
SECTION 5.12. Non-Solicitation. The Seller shall not, and shall cause each
of its Affiliates not to, during the period beginning at the Closing and ending
on the first anniversary of the Closing Date, solicit or recruit any employee of
the Business or encourage any such employee to leave the employment of the
Business; provided that this Section 5.12 shall not be breached as a result of a
general solicitation that is not directed at the employees of the Business;
provided further that this Section 5.12 shall not be breached unless the
Purchaser shall have notified the Seller in writing that the Purchaser was aware
of the potential breach hereof and, following receipt of such notice, the Seller
shall have failed to use all reasonable efforts to end such soliciting or
recruiting. For the avoidance of doubt, for purposes of this Section 5.12, The
Economist Group Limited and Lazard Brothers & Co., Limited and their respective
direct and indirect Subsidiaries shall not be deemed to be Affiliates of the
Seller.
SECTION 5.13. Closing Deliveries.
(a) FIRPTA. The Seller shall cause the Company to provide to the Purchaser
at the Closing a certificate in the form of Exhibit 5.13(a).
(b) Resolutions. At the Closing, the Seller shall deliver to the Purchaser
a true and complete copy, certified by the secretary or an assistant secretary
of the Seller, of the resolutions duly and validly adopted by the Board of
Directors of the Seller evidencing its authorization of the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby and thereby.
(c) Opinion. At the Closing, the Seller shall deliver to the Purchaser the
legal opinion of Pearson plc in-house counsel, addressed to the Purchaser, in
the form attached hereto as Exhibit 5.13(c).
SECTION 5.14. Additional Financial Statements and Information.
(a) Prior to the Closing Date, the Seller shall have provided to the
Purchaser the audited consolidated balance sheet, statement of income and
statement of cash flows of the Company for the year ended December 31, 1998 (the
"Audited Financial Statements").
(b) The Seller shall engage PricewaterhouseCoopers ("PwC") to perform the
audit of the Audited Financial Statements. PwC's
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audit fees, including actual out-of-pocket expenses, shall be paid by the Seller
and the Purchaser shall reimburse the Seller for the actual amounts paid to PwC
for such audit services; provided, however, that the Purchaser shall not be
required to reimburse the Seller for such amounts in excess of $100,000. Such
reimbursement shall be due to the Seller within 30 days of presentment of the
invoice therefor to the Purchaser. The Audited Financial Statements shall be
presented in accordance with GAAP, consistently applied and in accordance with
Regulation S-X as promulgated by the Securities and Exchange Commission. The
Seller shall use its commercially reasonable efforts to cause PwC to provide, in
connection with the Audited Financial Statements, PwC's unqualified opinion that
the Audited Financial Statements present fairly, in all material respects, the
financial position, results of operations and cash flows of the Business as of
the date indicated and for the periods then ended in conformity with GAAP.
(c) Prior to the Closing Date, the Seller shall deliver to the Purchaser
copies of the monthly management accounts with respect to the Business that are
prepared by the Seller, within 15 days of the end of each month.
ARTICLE VI.
EMPLOYEE MATTERS
SECTION 6.1. Employees.
(a) Following execution of this Agreement, 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 date hereof. Purchaser
shall assume responsibility for all salary and bonus obligations under the bonus
plans listed on Section 3.13(a) of the Disclosure Schedule with respect to the
Business Employees, provided, however, that the Seller or an Affiliate shall
retain responsibility for any bonus payable to the President of the Company by
reason of the performance of Pearson Education, Inc. under the Pearson Executive
Incentive Plan that is attributable to the pre-Closing portion of 1999.
(b) During the 12-month period commencing on the Closing Date, 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 entitlement to vacation and sick days and retiree medical and dental
benefits) 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
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the Closing with the Company, the Seller, Viacom or any Affiliate or predecessor
of any of such entities. Except as provided otherwise in this Article VI, the
terms and conditions of the Business Employees' employment with the Company
shall be upon such terms and conditions as the Company, in its sole discretion,
shall determine, and nothing herein expressed or implied by this Agreement shall
confer upon any Business Employee, or legal representative thereof, any rights
or remedies, including, without limitation, any right to employment, or for any
specified period, of any nature or kind whatsoever, under or by reason of this
Agreement. As of the Closing Date, the Company shall cease to participate in any
and all benefit plans, programs and arrangements that are sponsored by the
Seller and its Affiliates (other than the Company).
(c) The Purchaser shall assume responsibility for all payroll obligations
(including without limitation 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 the Seller or its Affiliates
otherwise would have withheld for benefit plan coverages for the 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 the
Seller of the aggregate amount of such payroll obligations. Promptly after its
receipt of such notice, the Seller shall pay to the Purchaser the amount due to
the Purchaser pursuant to this Section 6.1(c).
SECTION 6.2. Health and Welfare Benefits.
(a) The Seller shall retain responsibility for all medical/dental, life
insurance and disability benefits (collectively referred to herein as "Welfare
Type Plans") in respect of claims covered by such plans that are incurred by
Business Employees and their dependents prior to the Closing Date. The Purchaser
shall be responsible for all covered claims incurred on or after the Closing
Date by Business Employees and their dependents under all Welfare Type Plans
that are maintained by the Purchaser for the Business Employees and their
dependents. For purposes of this Section 6.2(a), claims shall be deemed to have
been incurred: (i) with respect to all death or dismemberment claims, on the
actual date of death or dismemberment; (ii) with respect to all disability
claims, other than short-term disability or salary continuation benefits, on
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the date the claimant became unable to perform his or her regular duties of
employment, in the case of an employee claimant; (iii) with respect to
short-term disability or salary continuation claims, on each day for which
income benefits are payable to the claimant; and (iv) with respect to all
medical/dental claims, on the date the service was received or the supply was
purchased by the claimant; provided, however, a medical claim relating to a
claimant's continuous hospitalization for up to a period of two weeks following
the Closing Date shall be deemed to be incurred prior to the Closing Date if the
claimant was first hospitalized prior to the Closing Date.
(b) The Purchaser shall waive limitations on benefits relating to any
preexisting 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
dependents under the Seller's and its Affiliates' medical and dental plans in
the calendar year in which the Closing Date occurs.
(c) As of the Closing, the Purchaser shall assume, or cause the Company or
one its Affiliates to assume, the obligations of the Seller and its Affiliates
for the provision of retiree medical and dental benefits described on Section
3.13(b) of the Disclosure Schedule (whether through participation in the
Purchaser's equivalent plans or by establishing a new retiree medical and dental
plan) to all Business Employees and their eligible dependents (upon becoming
eligible to begin receiving such benefits). In fulfillment of this obligation,
the Purchaser agrees that for a period of at least 12 months following the
Closing, it will provide such benefits that are substantially equivalent to, and
no less favorable in value than, those provided to retirees by the Seller and
its Affiliates immediately prior to the Closing Date. The Company and the
Purchaser shall have no liability or other obligation to Former Business
Employees or their dependents in respect of any retiree medical or dental
benefit plan maintained by the Seller and its Affiliates.
(d) Following the Closing Date, (i) the Purchaser shall provide
continuation health care coverage to all Business Employees and their qualified
beneficiaries who incur a qualifying event on and after the Closing Date in
accordance with the continuation health care coverage requirements of Section
4980B of the Code and Title 1, Subtitle B, Part 6 of ERISA ("COBRA") and (ii)
the Seller and its Affiliates shall be responsible for providing COBRA coverage
to Business Employees and their qualified beneficiaries and Former Business
Employees and their qualified beneficiaries to whom the Seller or any of its
Affiliates is, on the Closing Date, providing such continuation coverage or to
whom the Seller or any of its Affiliates is under an obligation to provide such
continuation coverage at the election of such Business Employee, Former Business
Employee or qualified beneficiary.
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SECTION 6.3. Retirement Plans. The Seller or one of its Affiliates shall
retain responsibility for all benefits of the Business Employees under the
Pearson Inc. Pension Equity Plan, the Pearson Inc. Excess Savings and Investment
Plan and the Pearson Inc. Savings and Investment Plan accrued as of the Closing
and the Company and the Purchaser shall have no liability thereunder from and
after the Closing Date.
SECTION 6.4. Severance Provisions. The Purchaser shall assume, or cause the
Company or one of its Affiliates to assume, the obligations of the Seller and
its Affiliates to provide severance payments under the agreements with certain
Business Employees listed on Section 6.04 of the Disclosure Schedule. The Seller
or its Affiliates shall retain responsibility for all stay bonus payments under
the agreements with certain Business Employees listed on Section 6.04 of the
Disclosure Schedule.
SECTION 6.5. Indemnity. Anything in this Agreement to the contrary
notwithstanding (including Section 10.1), the Purchaser hereby agrees to
indemnify, defend and hold harmless the Seller and its Affiliates against and
reimburse the Seller and its Affiliates for any Losses that the Seller and its
Affiliates may at any time suffer or incur, or become subject to, as a result of
or in connection with (a) any claim made by any Business Employee against the
Seller or any of its Affiliates for any severance or termination benefits
pursuant to any Pearson Plan, (b) any suit or claim of violation brought against
the Seller or any of its Affiliates under the Workers Adjustment and Retraining
Notification Act for any actions taken by the Purchaser or its Subsidiaries on
or after the Closing Date with respect to any facility, site of employment or
operating unit, (c) any suit or claim of violation brought against the Seller or
any of its Affiliates under the continuation health care coverage requirements
of COBRA for failure by the Purchaser or the Company to provide such continued
coverage as provided in Section 6.2(d) at the election of the Business
Employees, or qualified beneficiaries, (d) any claim for payments of benefits by
Business Employees or their respective beneficiaries that the Purchaser has
agreed to assume hereunder or with respect to any benefit arrangement that the
Purchaser has agreed hereunder to maintain for such individuals (or in which the
Purchaser has agreed hereunder to permit such individuals to participate), (e)
any claim of employment discrimination or wrongful discharge by the Purchaser or
the Company, including, but not limited to, discrimination in the Purchaser's
hiring or termination of any employees, (f) any claim by any Business Employee
for severance payments under any of the agreements listed on Section 6.4 of the
Disclosure Schedule. Anything in this Agreement to the contrary notwithstanding
(including Section 10.1), the Seller and its Affiliates hereby agree to
indemnify, defend and hold harmless the Company and its Affiliates against and
reimburse the Company and its Affiliates for any Losses that the Company and its
Affiliates may at any time incur, or become subject to, in connection with the
benefit obligations and liabilities provided
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under the Pearson Plans sponsored by the Seller or its Affiliates (other than
the Company), except to the extent that such obligations and liabilities are
expressly assumed by the Purchaser, the Company or their Affiliates under this
Article VI. Without limiting the scope of the preceding sentence, the indemnity
contained therein shall extend to the obligation to pay stay bonuses under the
agreements listed on Section 6.4 of the Disclosure Schedule.
SECTION 6.6. 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 7.1. Tax Indemnities.
(a) 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 all Pre-Closing Taxes. For purposes of this Agreement, "Pre-Closing Taxes"
shall mean (i) all liability for Taxes of the Company for Pre-Closing Tax
Periods; (ii) all liability resulting by reason of the several liability of the
Company pursuant to Treasury Regulations ss. 1.1502-6 or any analogous state,
local or foreign law or regulation or by reason of the Company having been a
member of any consolidated, combined or unitary group on or prior to the Closing
Date; (iii) all liability attributable to any misrepresentation or breach of
warranty made by the Seller in Section 3.14 of this Agreement; (iv) all
liability for Taxes attributable to transactions described in Section 5.5; and
(v) all liability for Taxes of any other Person pursuant to any contractual
agreement entered into by the Seller or the Company before the Closing;
provided, however, that no indemnity shall be provided 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.
(b) From and after the Closing Date, the Company shall 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 7.1, including, but
not limited to, Taxes 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.
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(c) Payment by the indemnitor of any amount due to the indemnitee under
this Section 7.1 shall be made within 10 days following written notice by the
indemnitee that payment of such amounts 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 7.3, 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.
(d) For purposes of this Agreement, 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
period ending on the Closing Date 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
7.1(d) shall be computed by reference to the level of such items on the Closing
Date.
SECTION 7.2. Refunds and Tax Benefits.
(a) The Seller shall be entitled to any refund or credit (including any
interest paid or credited with respect thereto), and the Purchaser shall
promptly pay to the Seller any such refund or credit of Taxes (including any
interest paid or credited with respect thereto) received by the Purchaser or the
Company (i) relating to Tax periods or portions thereof ending on or before the
Closing Date (including, without limitation, any refund or credit attributable
to any net operating loss of the Company arising in any Tax period ending on or
before the Closing Date (a "Pre-Closing Date NOL") that is utilized by the
Purchaser in any Tax period beginning after the Closing Date, provided, however,
that the Purchaser shall have no obligation to the Seller under this clause (i)
with respect to a Pre-Closing Date NOL that arises as a result of the amendment
of a Tax Return or the resolution of any Contest with respect to a Pre-Closing
Tax) or (ii) attributable to an amount for which the Seller is responsible under
Section 7.1(a) hereof. At the Seller's request, the Purchaser shall certify as
to the amount of any refund or credit received by the Purchaser or the Company
as to any year, and provide such information as the Seller may
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reasonably request regarding such certification. The Seller may utilize any
Pre-Closing Date NOL on any Tax Return for any Tax period ending on or before
the Closing Date and shall have no obligation of any nature to indemnify the
Purchaser with respect to the utilization of such Pre-Closing Date NOL. 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 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 7.2(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.
(b) If, as a result of 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 at any time of any amounts pursuant to the Seller's obligations
under Section 6.4, 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 (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 the Purchaser pursuant to Section 7.1(a). The amount of any
such Tax savings for any Tax period shall be the amount of the reduction in
Taxes reflected on any Tax Return for such Tax period as compared to the Taxes
that would have been reflected on such Tax Return in the absence of such
Post-Closing Date Tax Benefit. All payments to the Seller pursuant to this
Section 7.2(b) shall be made within 30 days after the filing of a Tax Return for
the 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 the Seller pursuant to this Section
7.2(b) as to any year, and provide such information as the Seller may reasonably
request regarding such certification.
(c) The 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.
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SECTION 7.3. Contests.
(a) After the Closing, the Purchaser shall promptly notify the Seller in
writing of any demand or claim received by 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 7.1(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 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 7.3, then (i) 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, and the Seller is materially prejudiced
as a result, then the Purchaser shall have sole responsibility for such Tax
liability or (ii) 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 7.1 with respect to such liability
shall be reduced by the amount of such detriment.
(b) 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 7.1(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 30 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
the Seller shall not, other than in good faith based on the merits, enter into
any compromise or settlement of such Contest that would result in any Tax
detriment to the Purchaser or the Company. If the Seller elects not to control
the Contest, fails to notify the Purchaser of its election as herein provided or
contests its obligation to indemnify under Section 7.1(a), the Purchaser or the
Company may pay, compromise or contest, at its own expense (to be reimbursed by
the Seller to the extent of reasonable third-party expenses), such asserted
liability. 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)
chooses to control the Contest,
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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 7.1(a).
SECTION 7.4. 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 shall pay any Taxes due
thereon. 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 for any period ending on or prior to the Closing Date to
the extent the Seller or its designee previously was responsible for the
preparation and filing of such Tax Returns for the immediately preceding Tax
period and shall pay any Taxes due thereon. 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 7.4 and the Seller
shall promptly reimburse the Company for any portion of the Taxes due on such
returns that constitutes a Pre-Closing Tax. 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 7.4 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 7.5. 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
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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 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 7.5 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 7.6. Conveyance Taxes. Except with respect to the matters
contemplated by clause (i) of Section 7.1(a), the Purchaser agrees to assume
liability for and to pay 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, the Purchaser agrees to indemnify the
Seller 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 Seller and its Affiliates
arising out of the Purchaser's failure to make timely or full payments of such
Taxes.
SECTION 7.7. Miscellaneous.
(a) The parties agree to treat all payments made under Article X and the
Articles and Sections listed in Section 10.4(a) as adjustments to the purchase
price for Tax purposes.
(b) Except as expressly provided otherwise 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.
(c) For purposes of this Article VII, all references to the Purchaser or
the Seller include successors thereto.
ARTICLE VIII.
CONDITIONS TO CLOSING
SECTION 8.1. 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:
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(a) 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;
(b) No Governmental Order. There shall be no Governmental Order in
existence which expressly prohibits the transactions contemplated by this
Agreement and the Ancillary Agreement; and
(c) Ancillary Agreement. The Purchaser shall have executed and delivered to
the Seller the Ancillary Agreement.
SECTION 8.2. 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:
(a) 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;
(b) No Governmental Order. There shall be no Governmental Order in
existence which expressly prohibits the transactions contemplated by this
Agreement and the Ancillary Agreement;
(c) Ancillary Agreement. The Seller shall have executed and delivered, or
caused to be executed and delivered, to the Purchaser the Ancillary Agreement;
(d) Financial Statements. The Purchaser shall have received the Audited
Financial Statements together with the unqualified opinion and report thereon of
PwC;
(e) FIRPTA. The Purchaser shall have received the certificate described in
Section 5.13(a);
(f) Resolutions. The Purchaser shall have received the resolutions of the
Seller described in Section 5.13(b);
(g) Opinion. The Purchaser shall have received the legal opinion described
in Section 5.13(c); and
(h) Agreements and Covenants. (i) The representations and warranties of the
Seller set forth in Sections 3.1, 3.2 (first sentence only), 3.3, 3.6, 3.7,
3.12(a) (first and second sentences only), 3.12(b) (subsection (i) only),
3.12(c)-(d), 3.12(e) (second sentence only), 3.12(f) (subsection (i) only),
3.12(g)-(h) and 3.19 of this Agreement shall be true and correct in all material
respects as of the HSR Date as though made on and as of the HSR Date, except (A)
for changes specifically permitted by this Agreement and (B) that those
representations and warranties which address matters only as of a particular
date
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shall remain true and correct in all material respects as of such date
(provided, that any representation or warranty that is qualified by materiality
(including, without limitation, by reference to a Material Adverse Effect) shall
be true in all respects as of the HSR Date, or as of such particular date, as
the case may be), except in any case (other than Section 3.3) for such failures
to be true and correct which would not, individually or in the aggregate, have a
Material Adverse Effect; (ii) the Seller shall be in compliance, in all material
respects, as of the HSR Date with the covenants contained in Section 5.1 of this
Agreement; and (iii) the Seller shall have delivered to the Purchaser a
certificate of the Seller to such effect signed by a duly authorized officer
thereof.
SECTION 8.3. Fulfillment of Conditions. Provided that the Seller has
delivered to the Purchaser in good faith the certificate described in Section
8.2(h)(iii), the conditions set forth in Section 8.2(h) shall be deemed
fulfilled as of the HSR Date if the Purchaser has not before that date
terminated this Agreement pursuant to Section 9.1(d).
ARTICLE IX.
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1. Termination. This Agreement may be terminated at any time
prior to the Closing (except as limited as to time in paragraph (b) below):
(a) by the mutual written consent of the Seller and the Purchaser;
(b) by the Seller or the Purchaser, if the Closing shall not have occurred
on or prior to the 120th day following the date hereof; provided, however, that
the right to terminate this Agreement under this Section 9.1(b) shall not be
available to the party seeking such termination if such party's 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;
(c) by the Seller in the event a condition set forth in Section 8.1 becomes
incapable of being fulfilled; or
(d) by the Purchaser in the event a condition set forth in Section 8.2
becomes incapable of being fulfilled.
SECTION 9.2. Effect of Termination. In the event of the termination of this
Agreement as provided in Section 9.1, 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 5.3, 5.14(b), 9.2, 9.4 and 11.2; provided, however, that
nothing herein shall relieve either the Seller or the Purchaser
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from liability for any breach of this Agreement or failure to perform hereunder.
SECTION 9.3. 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 contained herein or in any document delivered pursuant hereto or (c)
waive compliance with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party to be bound thereby.
SECTION 9.4. Termination Fee. If the condition to the obligations of the
Purchaser set forth in Section 8.2(d) is satisfied or waived but the Closing
does not occur as a result of a breach of this Agreement by the Purchaser, then
the Purchaser shall pay to the Seller a termination fee of $2,000,000. Such
termination fee shall be payable in cash no later than one Business Day
following the delivery of notice by the Seller to the Purchaser that such
payment is due. To the extent the Purchaser does not make such payment when due,
interest shall accrue thereon at the Interest Rate from the date due until the
date payment of such fee is made. Notwithstanding the foregoing and
notwithstanding any payment of such termination fee, the Purchaser shall remain
liable to the Seller for all of the Seller's Losses arising from or related to
any such termination or failure to close; provided, that the amount of any
Seller Losses shall be reduced by the amount of the termination fee paid by the
Purchaser.
ARTICLE X.
INDEMNIFICATION
SECTION 10.1. Indemnification by the Purchaser.
(a) Subject to Section 11.1 in the case of clauses (i) and (ii) below, the
Purchaser shall indemnify, defend and hold harmless the Seller, its Affiliates
and any other Person that is party to the Ancillary Agreement 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:
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(i) the inaccuracy of any representations and warranties made by the
Purchaser or any of its Affiliates in this Agreement or the Ancillary Agreement;
(ii) any failure by the Purchaser or any of its Affiliates to perform any
of its covenants or agreements under this Agreement or the Ancillary Agreement;
or
(iii) any claim or cause of action by any party arising before, on or after
the Closing Date against any Seller Indemnified Party with respect to the
Assets, the Business or the operations of the Company, except for any claims
with respect to which the Seller is obligated to indemnify the Purchaser
Indemnified Parties under Section 10.2 hereof.
(b) Notwithstanding any other provision 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 subclause (i) or (ii) of Section 10.1(a) unless the Seller
has notified the Purchaser in writing in accordance with Section 10.3(a) of a
pending or threatened claim with respect to such matters within the applicable
survival period set forth in Section 11.1.
SECTION 10.2. Indemnification by the Seller.
(a) Subject to Section 11.1 hereof, 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:
(i) the inaccuracy of any representations and warranties made by the Seller
or any of its Affiliates in this Agreement or the Ancillary Agreement; or
(ii) any failure by the Seller or any of its Affiliates to perform any of
its covenants or agreements under this Agreement or the Ancillary Agreement.
(b) Notwithstanding any other provision to the contrary and except as
provided in Section 7.1(a), 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 10.2(a) above,
(i) if such claim or demand otherwise was raised (whether or not accepted) in
connection with the Purchase Price adjustment procedures set forth in Section
2.6, (ii) unless the Purchaser has notified the Seller in writing in accordance
with Section 10.3(a) of a pending or threatened claim with respect to such
matters within the applicable survival period set forth in
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Section 11.1, (iii) with respect to any claim, unless such claim involves Losses
in excess of $10,000 (nor shall such item be applied to or considered for
purposes of calculating the aggregate amount of the Purchaser Indemnified
Parties' Losses), and (iv) until the aggregate amount of the Purchaser
Indemnified Parties' Losses exceeds $500,000, in which case the Seller shall be
obligated for all of the Purchaser Indemnified Parties' Losses that have
aggregated to such amount; provided, however, that the cumulative
indemnification obligation of the Seller under this Article X in respect of
Section 10.2(a) shall in no event exceed the Purchase Price.
(c) In all cases (except with respect to the representations and warranties
set forth in Sections 3.7 and 3.12(i)), in determining whether there has been a
breach of a representation and warranty by the Seller, or in determining the
amount of any indemnifiable Losses, such representations and warranties shall be
read without regard to any "Material Adverse Effect" qualifier therein.
SECTION 10.3. Notification of Claims.
(a) A party that may been titled to be indemnified pursuant to Section 10.1
or 10.2 (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 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.
(b) If the Indemnified Party shall notify the Indemnifying Party of any
claim or demand pursuant to Section 10.3(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
for which it must indemnify, defend and hold harmless the Indemnified Party
against or reimburse the Indemnified Party for under Section 10.1 or 10.2, 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
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participate in the defense of any claim or demand for which it is not
controlling the defense, at its own expense. 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 10.3(a) of its election to defend in good faith any such third party
claim or demand. So long as the Indemnifying Party is 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. 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.
SECTION 10.4. Exclusive Remedies.
(a) In the absence of a fraudulent or intentional misrepresentation,
omission or breach of this Agreement, following the Closing, except for
performance of the obligations set forth in Article II and Sections 5.3 and 5.9
and except for the indemnification obligations specified in Sections 5.2(b),
5.6, 5.7 and 10.4(b) and in Article VI and Article VII, the Seller and the
Purchaser acknowledge and agree that the indemnification provisions of Sections
10.1 and 10.2 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.
(b) Subject to the Purchaser's right to indemnification pursuant to Section
10.2, from and after the Closing Date, (i) the Purchaser hereby fully releases
the Seller Indemnified Parties and Viacom, its Affiliates and their respective
employees, officers and directors (the "Viacom Indemnified Parties") from any
Environmental Liability incurred by the Purchaser, its parents, Subsidiaries,
divisions and Affiliates, their predecessors, successors and assigns, and their
officers, directors, employees and agents; (ii) the Purchaser hereby waives on
its behalf and on behalf of its parents, Subsidiaries, divisions and Affiliates,
their predecessors, successors and assigns, and their officers, directors,
employees and agents, to the fullest extent permitted under applicable law, any
claim or remedy against the Seller Indemnified Parties or the Viacom Indemnified
Parties now or hereafter available under any applicable Environmental Law,
including the Comprehensive Environmental Response, Compensation and Liability
Act or any
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similar federal or state law, whether or not in existence on the date hereof;
and (iii) the Purchaser shall indemnify, defend and hold harmless the Seller
Indemnified Parties and the Viacom Indemnified Parties against and reimburse the
Seller Indemnified Parties and the Viacom Indemnified Parties for all
Environmental Liabilities that the Seller, Viacom, any of their respective
Subsidiaries, divisions and Affiliates, any of their respective predecessors,
successors and assigns, or any of their respective officers, directors,
employees and agents may at any time suffer or incur, or become subject to, as a
result of or in connection with any Environmental Liability.
SECTION 10.5. Certain Adjustments. For all purposes of this Article X,
"Losses" shall be net of (i) any insurance payable to the Indemnified Party from
its own insurance policies in connection with the facts giving rise to the right
of indemnification and (ii) any actual reduction in Tax to the Indemnified
Party.
ARTICLE XI.
GENERAL PROVISIONS
SECTION 11.1. Survival. The representations, warranties, covenants and
agreements of the Seller and the Purchaser contained in or made pursuant to this
Agreement and the Ancillary Agreement 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 shall survive
in full force and effect until the date that is eighteen months after the
Closing Date, provided, however, that the representations and warranties made in
Sections 3.1, 3.2, 3.3, 3.13, 3.14, 3.15 and 3.17 shall survive in full force
and effect until the expiration of the applicable statute of limitations, (b)
the covenants and agreements made in this Agreement or the Ancillary Agreement
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, and in Sections 5.2(b),
5.3, 5.6, 5.7 and 5.9 and in Article VI, Article VII, Article X and Article XI
of this Agreement shall survive in full force and effect until 60 days following
the expiration of any applicable statute of limitations and otherwise,
indefinitely, (c) the covenants and agreements made in Article II shall survive
in full force and effect until such time as fully complied with and (d) the
covenants and agreements made in this Agreement or the Ancillary Agreement 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 11.2. Expenses. Except as may be otherwise specified 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
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costs and expenses, whether or not the Closing shall have occurred.
SECTION 11.3. 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 11.3):
(a) if to the Seller:
Pearson Services Limited
c/o 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, NY 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
(b) if to the Purchaser:
Information Holdings Inc.
2777 Summer Street
Stamford, Connecticut 06905
Attention: Mason P. Slaine
Telecopier: (203) 961-1431
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with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Attention: Steven J. Gartner, Esq.
Telecopier: (212) 728-8111
SECTION 11.4. Public Announcements. Except as may be required by Law or
stock exchange rules, no party to this Agreement shall make any public
announcements in respect of this Agreement or the Ancillary Agreement or the
transactions contemplated hereby or thereby or otherwise communicate with any
news media without the consent of the other party (such consent not to be
unreasonably withheld). With respect to any such public announcement, 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 of any such announcement.
SECTION 11.5. 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 11.6. 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 11.7. Entire Agreement. This Agreement and the Ancillary Agreement
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof 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 except as
otherwise expressly provided herein.
SECTION 11.8. Assignment. This Agreement shall not be assigned by operation
of Law or otherwise, except that the Purchaser and the Seller may assign any or
all of its rights and obligations under this Agreement to any of its Affiliates;
provided that no such assignment shall release the Purchaser and the Seller from
any liability hereunder.
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SECTION 11.9. No Third-Party Beneficiaries. Except as provided in Article X
and in Sections 5.2(b), 5.6, 5.7 and 7.1(b), 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 any legal or equitable right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.
SECTION 11.10. Amendment. This Agreement may not be amended or modified
except by an instrument in writing signed by the Seller and the Purchaser.
SECTION 11.11. Sections and Schedules. Any disclosure with respect to a
Section or Schedule of this Agreement shall be deemed to be disclosure for all
other Sections and Schedules of this Agreement.
SECTION 11.12. 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:
(a) submits for itself and its property in any legal suit, Action or
proceeding relating to this Agreement or the Ancillary Agreement 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 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;
(b) 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;
(c) 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
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of mail), postage prepaid, to such party at its address as provided in Section
11.3; and
(d) agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by New York law.
SECTION 11.13. 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 11.14. 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.
SECTION 11.15. Guarantee. Pearson Inc. hereby agrees to guarantee
performance by the Seller of its obligations under this Agreement.
SECTION 11.16. Recovery of Litigation Expenses. In connection with any
Action or proceeding between the Seller, the Purchaser and their respective
Affiliates arising out of or related to this Agreement or the Ancillary
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.
[signature page to follow]
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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 SERVICES LIMITED
By /s/ Philip Hoffman
--------------------------------
Name: Philip Hoffman
Title: Attorney in Fact
INFORMATION HOLDINGS INC.
By /s/ Mason P. Slaine
--------------------------------
Name: Mason P. Slaine
Title: President
For purposes of Section 11.15 only:
PEARSON INC.
By /s/ Philip Hoffman
--------------------------------
Name: Philip Hoffman
Title: President
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