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
May ___, 1999
(Date of Report)
(Date of earliest event reported)
JOHN WILEY & SONS, INC.
(Exact name of registrant as specified in its charter)
New York
(State or jurisdiction of incorporation)
0-11507 13-5593032
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Commission File Number IRS Employer Identification Number
605 Third Avenue, New York, NY 10158-0012
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Address of principal executive offices Zip Code
Registrant's telephone number, including area code: (212) 850-6000
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This is the first page of a 3 page document.
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Item 2. Acquisition or Disposition of Assets
On May 10, 1999, the Company acquired certain publishing assets from
Pearson Inc., including college textbooks and instructional packages
in biology/anatomy and physiology, engineering, mathematics,
economics/finance, and teacher education. Pearson's revenues for these
titles were approximately $18 million in 1998.
The purchase price was approximately $58 million in cash and will be
financed through available cash balances.
Item 7. Financial Statements, Pro Forma Financial Information, and Exhibits
(c) Exhibits
2.1 Amendment No. 1 to the Asset Purchase Agreement dated as of
April 15, 1999 between the Company and Pearson Inc.
2.2 Asset Purchase Agreement dated as of April 15, 1999 between
the Company and Pearson Inc.
"Safe Harbor" Statement under the
Private Securities Litigation Reform Act of 1995
This report contains certain forward-looking statements concerning the Company's
operations, performance and financial condition. Reliance should not be placed
on forward-looking statements, as actual results may differ materially from
those in any forward-looking statements. Any such forward-looking statements are
based upon a number of assumptions and estimates that are inherently subject to
uncertainties and contingencies, many of which are beyond the control of the
Company, and are subject to change based on many important factors. Such factors
include, but are not limited to: (i) the pace, acceptance, and level of
investment in emerging new electronic technologies and products; (ii) subscriber
renewal rates for the Company's journals; (iii) the consolidation of the retail
book trade market; (iv) the seasonal nature of the Company's educational
business and the impact of the used book market; (v) the ability of the Company
and its customers and suppliers to satisfactorily resolve the year 2000 and Euro
issues in a timely manner; (vi) worldwide economic and political conditions; and
(vii) other factors detailed from time to time in the Company's filings with the
Securities and Exchange Commission. The Company undertakes no obligation to
update or revise any such forward-looking statements to reflect subsequent
events or circumstances.
<PAGE>
Signature
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.
John Wiley & Sons, Inc.
/S/ Robert D. Wilder
----------------
Robert D. Wilder
Executive Vice President and
Chief Financial Officer
Date: May 10, 1999
AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT
DATED AS OF APRIL 15, 1999
BETWEEN
PEARSON INC.
AND
JOHN WILEY & SONS, INC.
<PAGE>
AMENDMENT NO. 1, dated as of May 10, 1999 (this "Amendment"), to the Asset
Purchase Agreement, dated as of April 15, 1999 (the "Asset Purchase Agreement"),
between Pearson Inc., a Delaware corporation ("Pearson"), and John Wiley & Sons,
Inc., a New York corporation ("Buyer"). Capitalized terms, unless otherwise
defined in the context of their first use, shall have the meanings given in the
Asset Purchase Agreement.
WHEREAS, Pearson and Buyer desire to amend the Asset Purchase Agreement in
certain respects to provide for, among other things, the retention by Pearson of
Jordan-Bychkov/Domosh, The Human Mosaic: A Thematic Introduction to Cultural
Geography, which was contemplated to be sold to Wiley pursuant to such Asset
Purchase Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Amendments to Asset Purchase Agreement.
(a) Section 2.1 of the Asset Purchase Agreement is hereby amended by
deleting the phrase "$59,300,000," and substituting therefor the
phrase "$58,094,000," in the third line thereof.
(b) Section 3.1 of the Asset Purchase Agreement is hereby amended and
restated in its entirety to be and to read as follows:
Section 3.1. Time and Place. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the
offices of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, New
York 10178 at such time and on such date as Buyer and Pearson may
agree (the "Closing Date"), but in no event later than eight Business
Days following receipt of the approval described in Section 3.4(ii).
(c) The definition of "Final Transfer Date" in Section 11.2 of the Asset
Purchase Agreement is hereby amended and restated in its entirety to
be and to read as follows:
"Final Transfer Date" means May 21, 1999.
(d) The definition of "Inventory Target Amount" in Section 11.2 of the
Asset Purchase Agreement is hereby amended and restated in its
entirety to be and to read as follows:
"Inventory Target Amount" means $1,300,000 reduced by the value of all
Inventory (as of the Closing Date) that relates to a Title that is a
Retained Title after the Outside Consent Date, and further reduced by
the value (determined using the same policies, practices and estimates
described in Section 2.3) of all inventory (as of the Closing Date)
relating to Jordan-Bychkov/Domosh, The Human Mosaic: A Thematic
Introduction to Cultural Geography and its related ancillary materials
(collectively, the "Retained Geography Title"), including, but not
limited to, all assembled and salable inventory of the Retained
Geography Title, all free-with-order and sample materials, all
materials and supplies, and all work in process solely relating to the
Retained Geography Title and owned by any Seller or its Affiliates as
of the Closing Date.
(e) The definition of "Outside Consent Date" in Section 11.2 of the Asset
Purchase Agreement is hereby amended and restated in its entirety to
be and to read as follows:
"Outside Consent Date" means May 19, 1999.
(f) Schedules 1.1(a), 1.1(b), 2.2, 4.6, 4.13 and 6.12 to the Asset
Purchase Agreement are hereby deleted in their entirety and replaced
with the corresponding schedules attached hereto.
Section 2. Effect of Amendments. Except as and to the extent expressly
modified by this Amendment, the Asset Purchase Agreement shall remain
in full force and effect in all respects.
Section 3. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York, and
for greater certainty, the provisions set forth in Section 12.9 of the
Asset Purchase Agreement are incorporated herein by reference and made
a part hereof.
Section 4. Counterparts. This Amendment may be executed simultaneously
in any number of counterparts, each of which will be deemed to be an
original, but all of which together shall constitute one and the same
instrument.
[signature page to follow]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and year first above written.
PEARSON INC.
By:___________________________
Name:
Title:
JOHN WILEY & SONS, INC.
By:___________________________
Name:
Title:
ASSET PURCHASE AGREEMENT
dated as of April 15, 1999
between
PEARSON INC.
and
JOHN WILEY & SONS, INC.
<PAGE>
[Wiley]
TABLE OF CONTENTS
Page
ARTICLE I SALE OF ASSETS AND ASSUMPTION OF LIABILITIES...............1
Section 1.1 Sale of Purchased Assets............................1
Section 1.2 Assumption of Liabilities...........................4
ARTICLE II PURCHASE PRICE.............................................4
Section 2.1 Purchase Price......................................4
Section 2.2 Allocation..........................................5
ARTICLE III CLOSING....................................................6
Section 3.1 Time and Place......................................6
Section 3.2 Deliveries by Pearson...............................6
Section 3.3 Deliveries by Buyer.................................6
Section 3.4 Conditions to Closing...............................7
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PEARSON..................7
Section 4.1 Due Incorporation and Qualification.................7
Section 4.2 Authority to Execute and Perform Agreements.........7
Section 4.3 Advances............................................9
Section 4.4 Title and Liens.....................................9
Section 4.5 Brokers'or Finders'Fee..............................9
Section 4.6 Agreements and Contracts............................9
Section 4.7 Consents and Approvals.............................10
Section 4.8 Inventory..........................................10
Section 4.9 Litigation.........................................11
Section 4.10 Copyrights and Trademarks..........................11
Section 4.11 No Infringement....................................11
Section 4.12 Compliance.........................................11
Section 4.13 Sales Information..................................11
Section 4.14 Environmental......................................11
Section 4.15 Exclusivity of Representations.....................12
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER...................12
Section 5.1 Incorporation and Authority of the Buyer...........12
Section 5.2 No Conflict........................................12
Section 5.3 Consents and Approvals.............................13
Section 5.4 Absence of Litigation..............................13
Section 5.5 Financial Ability..................................13
Section 5.6 Brokers............................................13
ARTICLE VI COVENANTS AND AGREEMENTS..................................13
Section 6.1 Access to Information and Materials................14
Section 6.2 Conduct of Business................................14
Section 6.3 Inventory; Manufacturing Materials.................14
Section 6.4 Expenses of Sale...................................15
Section 6.5 Orders.............................................15
Section 6.6 Returns............................................15
Section 6.7 Deliveries.........................................16
Section 6.8 Post-Closing Sales.................................17
Section 6.9 Certain Expenses...................................17
Section 6.10 Payment of Transfer Taxes..........................17
Section 6.11 Employees..........................................17
Section 6.12 Work-in-Process....................................18
Section 6.13 Distribution Rights................................18
Section 6.14 Regulatory and Other Authorizations; Consents......18
Section 6.15 Further Assurances.................................19
Section 6.16 Closing Agreements.................................20
ARTICLE VII LICENSES BETWEEN PEARSON AND BUYER........................20
Section 7.1 Trademark Licenses.................................20
Section 7.2 Artwork, Etc.......................................21
Section 7.3 Websites and Other Media...........................21
ARTICLE VIII CONFIDENTIALITY...........................................22
Section 8.1 Confidentiality....................................22
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER.........................23
Section 9.1 Termination........................................23
Section 9.2 Effect of Termination..............................24
Section 9.3 Waiver.............................................24
ARTICLE X INDEMNIFICATION...........................................24
Section 10.1 Indemnification by the Buyer.......................24
Section 10.2 Indemnification by Pearson.........................25
Section 10.3 Notification of Claims.............................26
Section 10.4 Exclusive Remedies.................................26
Section 10.5 Certain Adjustments................................27
ARTICLE XI GENERAL PROVISIONS........................................27
Section 11.1 Survival of Representations, Warranties, Covenants
and Agreements.................................27
Section 11.2 Certain Defined Terms..............................28
ARTICLE XII MISCELLANEOUS.............................................30
Section 12.1 Notices............................................30
Section 12.2 Announcements......................................31
Section 12.3 Successors and Assigns.............................31
Section 12.4 Amendment, Modification or Waiver..................31
Section 12.5 Entire Agreement...................................31
Section 12.6 Headings...........................................31
Section 12.7 No Third-Party Beneficiaries.......................31
Section 12.8 Sections and Schedules.............................32
Section 12.9 Governing Law; Submission to Jurisdiction,
Waivers........................................32
Section 12.10 No Presumption.....................................32
Section 12.11 Severability.......................................33
Section 12.12 Counterparts.......................................33
EXHIBITS
Exhibit A Bills of Sale
Exhibit B Assignment and Assumption Agreements
Exhibit C Trademark License Agreements
Exhibit D Trademark Sublicense Agreement
Exhibit E Assignment of Copyright
Exhibit F Production Services Agreement
SCHEDULES
Schedule 1.1(a) List of Texts
Schedule 1.1(b) List of ISBN Numbers
Schedule 2.2 Allocation of Purchase Price
Schedule 2.3(b) Purchase Price Adjustments
Schedule 4.3 Advances
Schedule 4.6 Agreements and Contracts
Schedule 4.8 Inventory (post closing)
Schedule 4.9 Litigation
Schedule 4.11 Infringements
Schedule 4.13 Historical Sales Information
Schedule 6.2(a) 1999 Bound Book Dates
Schedule 6.12 Vendors
Schedule 6.14(b) Consents
Schedule 7.2(a) Shared Artwork
Schedule 7.2(b) Shared Content from Titles
<PAGE>
ASSET PURCHASE AGREEMENT
Asset Purchase Agreement, dated as of April 15, 1999 by and between
John Wiley & Sons, Inc., a New York corporation ("Buyer"), and Pearson Inc., a
Delaware corporation ("Pearson"). Capitalized terms, unless otherwise defined in
the context of their first use, shall have the meanings given in Section 11.2.
WHEREAS, Pearson desires to cause certain of its affiliates (each a
"Seller") to sell to Buyer certain of the assets, properties and rights owned by
such Seller and used by such Seller exclusively in connection with the Titles
(as such term is defined in Section 1.1 below); and
WHEREAS, Buyer desires to purchase such assets, properties and rights
and is willing to assume those certain liabilities with respect thereto as
hereinafter defined, all upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
SALE OF ASSETS AND ASSUMPTION OF LIABILITIES
Section I.1 Sale of Purchased Assets. Subject to the terms and
conditions hereinafter stated, Pearson hereby agrees to cause each Seller to
sell, assign, transfer and deliver to Buyer and Buyer hereby agrees to purchase
and accept from each Seller, effective as of the Closing Date (as such term is
defined in Section 3.1 below), all right, title and interest of such Seller in
and to the Purchased Assets; provided, however, that all Purchased Assets
relating to any Title that is a Retained Title (as defined in Section 11.2) at
the Closing Date shall be sold, assigned and transferred to Buyer only if that
Title ceases to be a Retained Title on or prior to the Outside Consent Date (as
defined in Section 11.2) and shall be sold, assigned and transferred to Buyer
promptly following the time the corresponding Title ceases to be a Retained
Title. All Purchased Assets relating to any Title that is a Retained Title after
the Outside Consent Date shall be retained by the corresponding Seller and shall
not be sold to Buyer pursuant to this Agreement. For all purposes of this
Agreement, "Purchased Assets" means all of the following items owned by a Seller
and used by such Seller exclusively in connection with the Titles, in each case
as in effect on the Closing Date:
(a) all licenses, permits and authorizations issued by any
governmental or private organization solely related to the Titles;
(b) all contracts, teaming arrangements, agreements, leases,
commitments and understandings and their associated intangible rights
solely related to the Titles, including, but not limited to, author,
editor, contributor and work-made-for-hire agreements, software
development agreements, software licenses, author permissions and
other similar agreements, agreements with purchasers, distribution
agreements solely related to the Titles, and vendor or supply
agreements or other agreements solely related to the Titles
(collectively, the "Assigned Contracts");
(c) all original and digital artwork, film plates, film,
camera-ready copy, master tapes, CD-ROM masters, source code, object
code, documentation and other reproductive materials solely related to
the Titles, including, but not limited to, all manuscripts and
illustrations and any other content and any revisions or revision
plans thereof in print or digital form;
(d) all sales support and promotional materials, advertising
materials and production, sales and marketing files (whether in print
or electronic media), in each case solely related to the Titles;
(e) all existing customer lists and credit records, adoption
lists or similar records of all sales and potential sales of the
Titles, and all other records maintained solely in connection with the
Titles;
(f) all intangible assets solely related to the Titles,
including, but not limited to, all patents, copyrights and trademarks
(registered and unregistered) and any registrations therefor, other
than the Pearson Trademarks (as such term is defined in Section 7.1(b)
hereof), common law trademark rights, licenses and sublicenses,
contract rights, intellectual property, maskwork rights, technical
information, know how, trade secrets, drawings, blueprints, designs,
design protocols, specifications for materials, quality assurance and
control procedures, design tools and all manuals and technical
information, in each case solely related to the Titles and provided to
employees, customers, suppliers, agents or licensees but not, in any
event, any corporate trademarks or trade names of such Seller,
Pearson, Pearson plc, Viacom or any of their respective affiliates;
(g) all manuscripts and electronic files in such Seller's
possession or control solely relating to the Titles, specifically
excluding, however, the computer hardware or other equipment on which
such files reside;
(h) all prepaid expenses and author advances paid by such Seller
prior to the Closing Date in respect of the Titles;
(i) the entire inventory of the Titles, including, but not
limited to, all assembled and salable inventory of the Titles, all
free-with-order and sample materials, all materials and supplies, and
all work in process solely relating to the Titles and owned by such
Seller and its Affiliates as of the Closing Date (collectively, the
"Inventory");
(j) all research data concerning historic and current research
and development efforts solely related to the Titles;
(k) all editorial, sales, promotion, royalty, manufacturing,
production and permissions and rights files and records and other
files and records to the extent relating specifically to any of the
Titles, whether in print or electronic media;
(l) all of the right, title and interest in any license,
sub-license, subsidiary rights and translation rights agreements
solely relating to the Titles and which are owned by the respective
Sellers owning the United States English language rights to the
Titles, including, without limitation, all compensation for subsidiary
rights payable to such Sellers after the Closing Date; and
(m) any other assets, properties and/or rights of any Seller
solely related to the Titles.
For purposes of this Agreement, "Titles" means (i) all of the textbooks
identified in Schedule 1.1(a) attached hereto (the "Texts") and (ii) all items
constituting ancillary materials that are owned and sold by a Seller exclusively
in connection with one or more Texts (the "Ancillaries"); provided, that the
terms "Title", "Text" and "Ancillary" shall not include any items that are
Retained Titles after the Outside Consent Date. Schedule 1.1(b) attached hereto
contains a list of ISBN numbers for all of the Titles.
Notwithstanding the foregoing, to the extent that any of the Purchased
Assets is not assignable without the consent, waiver or approval of another
Person, this Agreement shall not constitute an assignment or an attempted
assignment of such Purchased Asset if such assignment or attempted assignment
would constitute a breach with respect to such Purchased Asset. Pearson shall
use commercially reasonable efforts to obtain such consents as contemplated by
Section 6.14(b) hereof and Buyer shall cooperate with and assist Pearson to this
end. If any such consent, waiver or approval shall not be obtained, Pearson
shall cause the relevant Seller to cooperate with Buyer in any reasonable
arrangement designed to provide for the Buyer the benefits intended to be
assigned to the Buyer under the relevant Purchased Asset including, in the case
of any Assigned Contract, enforcement at the cost and for the account of the
Buyer of any and all rights of any Seller against the other party thereto
arising out of the breach or cancellation thereof by such other party or
otherwise; provided, that Buyer shall undertake to pay or satisfy the
corresponding liabilities with respect to such Purchased Asset for the enjoyment
of such benefit to such Purchased Asset to the extent that Buyer would have been
responsible for such liabilities hereunder if such consent, waiver or approval
had been obtained. Notwithstanding the foregoing provisions of this paragraph,
the parties agree that from and after the Closing, the Purchased Assets relating
to each Retained Title shall be held by its respective Seller and shall continue
to be operated by such Seller (unless or until transferred to Buyer pursuant to
the next succeeding sentence) and such operation will be (i) for the benefit of
the Buyer if such Title ceases to be a Retained Title on or prior to the Outside
Consent Date, or (ii) for the benefit of Pearson, if such Title is still a
Retained Title after the Outside Consent Date. If such Title ceases to be a
Retained Title on or prior to the Outside Consent Date, then promptly after such
cessation, but in any event by the Final Transfer Date (as defined in Section
11.2), the parties will execute and deliver documents of conveyance, assignment
and assumption corresponding to those specified in Section 3.2 and 3.3 hereof
with respect to all Purchased Assets relating to those Titles which have ceased
to be Retained Titles on or prior to the Outside Consent Date.
<PAGE>
Section I.2 Assumption of Liabilities. Buyer hereby assumes and agrees to
pay, discharge, perform, or otherwise satisfy in due course in accordance with
their respective terms all of the following: (a) all liabilities and obligations
of any Seller, Pearson, Viacom or any of their respective Affiliates for all
royalties due authors and other proprietors under the Assigned Contracts and
applicable to shipments made on or after the Closing Date and all other
obligations under such contracts arising on or after the Closing Date, and (b)
all liabilities and obligations of any Seller, Pearson, Viacom or any of their
respective Affiliates with respect to all other Purchased Assets (including,
without limitation, development, production and manufacturing costs and costs of
services and materials) arising on or after the Closing Date. Notwithstanding
the foregoing, it is understood that Sellers shall be liable to the providers
thereof for all services actually performed and for all deliveries of materials
and Inventory for the Titles actually received, in each case prior to the
Closing Date and that Buyer shall be liable to the providers thereof for all
services actually performed and for all deliveries of materials and Inventory
for the Titles actually received, in each case on or after the Closing Date. For
the avoidance of doubt, where production materials are produced pursuant to a
third party production agreement and the resulting materials are delivered on or
after the Closing Date, the Sellers shall remain liable for the underlying
services performed prior to the Closing Date and the Buyer shall be liable for
the underlying services performed on or after the Closing Date. Except as
expressly set forth in this Section 1.2, Buyer shall not assume, or in any way
be responsible for: (i) any liabilities or obligations of Pearson, Viacom, any
Seller or any of their respective Affiliates under any Assigned Contract that
(1) is not listed on Schedule 4.6 and should have been so listed pursuant to the
terms of Section 4.6, or is not a permission, and (2) requires payments by Buyer
in any given year in excess of $5,000 and cannot be cancelled by Buyer without
penalty or further payment; or (ii) any liability or obligation arising out of a
breach or default by a Seller, Viacom, Pearson or any of their respective
Affiliates under any Assigned Contract that arises prior to the Closing Date; or
(iii) any liability or obligation relating to any Retained Title that does not
cease to be a Retained Title on or prior to the Outside Consent Date.
ARTICLE II
PURCHASE PRICE
Section II.1 Purchase Price. Buyer shall pay Pearson and Pearson shall
accept on behalf of each Seller in full payment for the Purchased Assets, at the
Closing (as such term is defined in Section 3.1 below) an aggregate purchase
price (the "Purchase Price") of $59,300,000, to be paid by Buyer at the Closing
by means of a wire transfer of immediately available funds to one or more
accounts, which account or accounts shall be designated by Pearson to Buyer at
least one Business Day prior to the Closing Date.
Section II.2 Allocation. Schedule 2.2 attached hereto contains an
allocation of the Purchase Price to the Purchased Assets for use by the Buyer,
Pearson and the Sellers in accordance with all applicable laws and regulations.
Such allocation shall be subject to adjustment as provided in Section 2.3 below.
Section II.3 Adjustments to Purchase Price. (a) Promptly following Buyer's
receipt of Schedule 4.8, Buyer and Pearson will verify the quantity of Inventory
(i) shipped to Buyer and (ii) held by third parties. If the value of the
Inventory is less than the Inventory Target Amount, then the Purchase Price
shall be reduced by the amount of such deficiency. For purposes of this
Agreement, Inventory shall be valued at the lower of cost or market value, in
accordance with generally accepted accounting principles; provided, that all
Inventory that is not saleable or usable and all obsolete Inventory shall be
written down to realizable market value. Inventory costing shall be consistent
with prior year's methods (recognizing, however, that use of the same methods
may result in different values when applied to identical Inventory items this
year and last year), and determined using the FIFO (first-in, first-out) method
of inventory accounting. Cost components shall include all direct printing,
manufacturing, inbound freight charges (except for Inventory consisting of
Addison Wesley Longman titles for which such charges shall not apply), reprint
plates, assembly costs and purchase costs when completed books are purchased
from third parties. Inventory costs shall not include the cost of plant
activity, such as artwork, composition, typesetting, plate on first printings,
and other non-recurring pre-reproduction costs. In the case of Inventory held by
third parties, such as depositories, Pearson will provide Buyer with the most
recent depository settlement report and related detailed reconciliation to the
Sellers' perpetual records, and activity reports from the date of such
depository report to the Closing Date. Within five Business Days of completion
of verification of Inventory shipped to Buyer and verification of the value of
Inventory held by third parties, Pearson will pay to Buyer the amount of any
shortfall, as and to the extent required by this Section 2.3(a). The amount of
any such shortfall shall be treated as a reduction in the Purchase Price. If the
amount of the total Inventory valuation differs from the aggregate allocation to
Inventory determined according to Section 2.2 above (ignoring the inventory
valuation breakdown by category for these purposes), then the amount of such
allocation to Inventory shall be adjusted accordingly.
(b) If on or prior to the Outside Consent Date Pearson has not secured all
of the required consents to the assignment to Buyer of any Retained Title, then,
with respect to each such Retained Title for which such consent has not been
obtained, Pearson shall pay Buyer the amount set forth with respect to such
Retained Title on Schedule 2.3(b) hereto. Any such amount shall be treated as a
reduction in the Purchase Price and shall be paid by Pearson to the Buyer within
five Business Days following final determination that any such amount is due.
Pearson and Buyer shall promptly adjust the allocation of the Purchase Price to
the Purchased Assets to reflect any such payment.
ARTICLE III
CLOSING
Section III.1 Time and Place. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Morgan,
Lewis & Bockius LLP, 101 Park Avenue, New York, New York 10178 at such time and
on such date as Buyer and Pearson may agree (the "Closing Date"), but in no
event later than two Business Days following receipt of the approval described
in Section 3.4(ii); provided, however, that if such second Business Day would be
prior to April 23, 1999, and if on such second Business Day there are still any
Retained Titles for which a required consent has not been obtained, then the
Closing Date shall be postponed until the earlier of April 23, 1999 or the first
Business Day after all such consents have been obtained.
Section III.2 Deliveries by Pearson. At the Closing, Pearson
shall deliver to Buyer the following:
(i) With respect to the Purchased Assets to be sold by a
particular Seller, a Bill of Sale, substantially in the form of
Exhibit A hereto, that has been executed by such Seller;
(ii) With respect to the Purchased Assets to be sold by a
particular Seller, an Assignment and Assumption Agreement,
substantially in the form of Exhibit B hereto, that has been executed
by such Seller;
(iii) Trademark License Agreements, substantially in the form of
Exhibit C hereto, that have been executed by Pearson and certain of
its Affiliates;
(iv) A Trademark Sublicense Agreement, substantially in the form
of Exhibit D hereto, that has been executed by Pearson;
(v) With respect to the Purchased Assets to be sold by a
particular Seller, an Assignment of Copyright, substantially in the
form of Exhibit E, that has been executed by such Seller; and
(vi) A Production Services Agreement, substantially in the form
of Exhibit F hereto, that has been executed by Pearson.
Section III.3 Deliveries by Buyer. At the Closing, Buyer shall
deliver to Pearson the following:
(i) The payment of the Purchase Price as provided for in Section
2.1 hereof;
(ii) Counterparts to each of the Assignment and Assumption
Agreements contemplated by clause (ii) of Section 3.2, substantially
in the form of Exhibit B hereto, that have been executed by Buyer;
(iii) Counterparts to each of the Trademark License Agreements
contemplated by clause (ii) of Section 3.2, substantially in the form
of Exhibit C hereto, that have been executed by Buyer;
<PAGE>
(iv) A Trademark Sublicense Agreement, substantially in the form
of Exhibit D hereto, that has been executed by Buyer; and
(v) A Production Services Agreement, substantially in the form of
Exhibit F hereto, that has been executed by Buyer.
Section III.4 Conditions to Closing. The obligations of Buyer and
Pearson to consummate the transactions contemplated hereby are subject
to the following conditions:
(i) No restraining order or injunction shall have been issued by
any governmental authority that prevents the transactions contemplated
by this Agreement;
(ii) The United States Department of Justice shall have approved
this Agreement and the transactions contemplated hereby, all as
contemplated by the Final Judgment in United States of America v.
Pearson plc et al. (D.D.C., Case No. 98 2836); and
(iii) Each party shall have delivered to the other party all of
the items specified to be delivered by such first party in Sections
3.2 and 3.3, above.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PEARSON
Section IV.1 Due Incorporation and Qualification. Pearson is a corporation
duly incorporated, validly existing, and in good standing under the laws of the
State of Delaware. Each Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of the state of its incorporation.
Each of Pearson and each Seller has all necessary corporate power and authority
to own its assets, properties and rights and to carry on its business as now
being conducted.
Section IV.2 Authority to Execute and Perform Agreements.
(a) As of the Closing Date, Pearson will have all necessary power,
authority and approval to enter into this Agreement and the Closing Agreements
to which it is a party, to carry out its obligations hereunder and thereunder
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery by Pearson of this Agreement and the Closing Agreements
to which Pearson is a party, the performance by Pearson of its obligations
hereunder and thereunder and the consummation by Pearson of the transactions
contemplated hereby and thereby have been duly authorized by all requisite
corporate action on the part of Pearson. This Agreement has been, and upon their
execution such Closing Agreements will be, duly executed and delivered by
Pearson, and assuming the due authorization, execution and delivery of this
Agreement and each of the Closing Agreements by Buyer, this Agreement
constitutes, and upon execution by Pearson, each such Closing Agreement will
constitute, the legal, valid and binding obligation of Pearson enforceable
against Pearson in accordance with its terms. Assuming all consents, approvals,
authorizations and other actions described in Section 4.7 and Schedule 6.14(b)
have been obtained, and except as may result from any facts or circumstances
relating solely to Buyer or its Affiliates, the execution, delivery and
performance by Pearson of this Agreement and the Closing Agreements to which it
is a party, do not and will not: (i) violate or conflict with Pearson's
Certificate of Incorporation or By-Laws; (ii) violate any material law, statute,
rule or regulation to which Pearson is subject or any material writ, injunction,
judgment or decree applicable to Pearson; or (iii) 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 result in the
creation or imposition of (or the obligation to create or impose) any lien,
security interest, or charge or encumbrance upon any of the Purchased Assets,
pursuant to any contract, license or other instrument to which Pearson or any of
its Affiliates is a party or by which any of such Purchased Assets is bound or
affected, except in any such case in (ii) or (iii) above as would not have a
material adverse effect on any particular Text and its related Ancillaries taken
as a whole. From the date hereof through the Closing Date, Pearson shall control
each of the Sellers.
(b) As of the Closing Date, each Seller will have all necessary power,
authority and approval to enter into the Closing Agreements to which it is a
party, to carry out its obligations thereunder and to consummate the
transactions contemplated thereby. The execution and delivery by each Seller of
the Closing Agreements to which it is a party, the performance by such Seller of
its obligations thereunder and the consummation by such Seller of the
transactions contemplated thereby have been duly authorized by all requisite
corporate action on the part of such Seller. Upon their execution, such Closing
Agreements will be duly executed and delivered by such Seller, and assuming the
due authorization, execution and delivery of each of the Closing Agreements by
Buyer, upon execution by such Seller, each such Closing Agreement will
constitute a legal, valid and binding obligation of such Seller enforceable
against such Seller in accordance with its terms. Assuming all consents,
approvals, authorizations and other actions described in Section 4.7 and
Schedule 6.14(b) have been obtained, and except as may result from any facts or
circumstances relating to Buyer or its Affiliates, the execution, delivery and
performance by each Seller of the Closing Agreements to which it is a party do
not and will not: (i) violate or conflict with such Seller's Certificate of
Incorporation or By-Laws; (ii) violate any material law, statute, rule or
regulation to which such Seller is subject or any material writ, injunction,
judgment or decree applicable to such Seller; or (iii) 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 result in the
creation or imposition of (or the obligation to create or impose) any lien,
security interest, or charge or incumbence upon any of the Purchased Assets,
pursuant to any contract, license or other instrument to which Pearson or any of
its Affiliates is a party or by which any of such Purchased Assets is bound or
affected, except in any such case in (ii) or (iii) above as would not have a
material adverse effect on any particular Text and its related Ancillaries taken
as a whole.
Section IV.3 Advances. Schedule 4.3 completely and correctly lists, as of
the date hereof, all outstanding unrecouped advances made to authors or other
parties under the Assigned Contracts. Except as set forth on Schedule 4.3, there
are no advances or other similar payments due or to become due to any authors or
other parties (other than royalties based upon the number of units actually
sold) under any of the Assigned Contracts, in any case in excess of $5,000 per
author or other party, as the case may be.
Section IV.4 Title and Liens. A Seller owns outright and has good title to
all of the assets, properties and rights included in the Purchased Assets, in
each case free and clear of any lien or other encumbrance, other than Permitted
Liens and other than liens or encumbrances that do not have a material adverse
effect on the Title or Titles that are subject to such lien or encumbrance.
Section IV.5 Brokers' or Finders' Fee. Except for fees and commissions
which will be paid by Pearson or the Sellers, 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 Closing
Agreements based upon arrangements made by or on behalf of Pearson or the
Sellers.
Section IV.6 Agreements and Contracts. Schedule 4.6 attached hereto
contains a complete list, as of the date hereof, of each Assigned Contract
(other than Assigned Contracts that are permissions): (a) by which a Seller is
bound or to which a Seller is a party and which is either (i) an author contract
for a Text, (ii) a contract granting subsidiary foreign language rights with
respect to a Text, (iii) a royalty bearing contract with respect to a Text or an
Ancillary, (iv) an English language adaptation contract for a Text or (v) any
other contract (including, without limitation, software development contracts)
with respect to a Text or an Ancillary; and (b) under the terms of which a
Seller (assuming the Closing did not occur) would be required to pay or
otherwise give consideration of more than $5,000 during the calendar year ended
December 31, 1999 or more than $20,000 in the aggregate over the remaining term
of such Assigned Contract (excluding amounts payable as royalties other than as
a guarantee or minimum). Notwithstanding the foregoing, Schedule 4.6 does not
(and will not when revised in accordance with the next succeeding sentence) list
all outstanding production purchase orders or other production contracts for
production work that will be furnished by Pearson or Sellers to the Buyer under
the Production Services Agreement, and such purchase orders or other contracts
not so listed shall not be deemed to be Assigned Contracts but shall remain the
obligation of the respective Seller which entered into them, such purchase
orders and other contracts to be dealt with as provided in the Production
Services Agreement. Within 15 Business Days following the Closing Date, Seller
will deliver to Buyer a revised Schedule 4.6 that contains a complete list, as
of the Closing Date, of all of the Assigned Contracts (other than Assigned
Contracts that are permissions) by which a Seller is bound or to which a Seller
is a party under the terms of which a Seller (assuming the Closing did not
occur) would be required to pay or otherwise give consideration of more than
$5,000 during the calendar year ended December 31, 1999 or more than $20,000 in
the aggregate over the remaining term of such Assigned Contract (excluding
amounts payable as royalties other than as a guarantee or minimum). Except as
would not have a material adverse effect on the Title or Titles that are the
subject of such Assigned Contract, each Assigned Contract is valid and binding
on such Seller and is in full force and effect and such Seller is not in breach
or default under any such contract. Except as listed on Schedule 6.14(b), there
are no Assigned Contracts that are reasonably necessary to publish the Titles
and that contain a prohibition on assignment by the Seller, other than
prohibitions in certain author contracts that apply in circumstances that
Pearson and Buyer agree are not applicable to this transaction. Notwithstanding
the foregoing, there is no representation or warranty as to any assignment of
permissions to use materials from the works of third parties that are contained
in the Titles.
<PAGE>
Section IV.7 Consents and Approvals. Other than (i) the approval of the
United States Department of Justice contemplated by Section 3.4(ii) above, (ii)
where failure to obtain such consent, approval, authorization or action or to
make such filing or notification would not prevent Pearson from performing any
of its material obligations under this Agreement or any other agreement or
instrument to be executed or delivered by Pearson or a Seller hereunder, or
(iii) as may be necessary as a result of any facts or circumstances relating
solely to Buyer or its Affiliates, no order, permission, consent, approval,
license, authorization, registration or validation of, or filing with, or
exemption by, any governmental agency, commission, board or public authority (a
"Governmental Authority") is required to authorize, or is required in connection
with, the execution, delivery and performance by Pearson of this Agreement, or
any other agreement or instrument to be executed or delivered by Pearson or a
Seller hereunder.
Section IV.8 Inventory. Promptly, but in no event more than fifteen
Business Days, after the Closing Date, Pearson will cause each Seller to deliver
to Buyer a Schedule 4.8, containing a complete and accurate list of the
Inventory by location, including the unit cost of each of the Titles, as of the
Closing Date, and an indication of the provision for reserves by Title;
provided, that information with respect to Inventory held by a third party shall
be provided within fifteen Business Days after receipt by such Seller of such
information. Other than the Inventory subject to write down pursuant to Section
2.3(a), the finished Inventory is salable or usable in the ordinary course of
business and is not materially in excess of the normal purchasing patterns of
Pearson or the Sellers as they relate to the Titles.
Section IV.9 Litigation. Except as set forth on Schedule 4.9, there is no
litigation or judicial, administrative or arbitration proceeding pending or, to
the Knowledge of Pearson, threatened in writing against or affecting Pearson (or
any Affiliate of Pearson) with respect to the Purchased Assets or that would
materially impair the ability of the Sellers to sell the Purchased Assets to the
Buyer as contemplated by this Agreement.
Section IV.10 Copyrights and Trademarks. Except as contemplated by the next
succeeding sentence and except as may be reserved to authors under the author
contracts for the Texts or Ancillaries, a Seller owns all copyrights (or is the
exclusive copyright licensee throughout the world) and trademarks (other than
the Pearson Trademarks, as such term is defined in Section 7.1(a) below) used
solely and directly with respect to the Titles including the artwork contained
therein, free and clear of any material claim, lien or encumbrance or right of
any third party. With respect to any and all copyrightable material contained in
the Titles, copyright of which is not owned by a Seller, such Seller has
obtained and possesses all necessary consents and permissions from the copyright
proprietors for the publication, sale, distribution and other exploitation of
such material, except where the failure to obtain any such consents or
permissions would not have a material adverse effect upon any particular Text
and its related Ancillaries taken as a whole.
Section IV.11 No Infringement. To the Knowledge of Pearson, none of the
Titles contains (i) any libelous material or infringes any trade name, trademark
or copyright or (ii) any obscene material or injurious formulas (giving due
consideration to the reasonably contemplated uses of the Titles by the intended
readers or users thereof). Except as set forth on Schedule 4.11, to the
Knowledge of Pearson, there is no (i) notice of any claim of any other Person
relating to the infringement of the intellectual property rights of such Person
by any of the Titles or (ii) any basis for any such valid claim.
Section IV.12 Compliance. Pearson has complied in all material respects
with all federal, state, county, local and foreign laws, ordinances,
regulations, orders, judgments, injunctions, awards or decrees applicable to the
Purchased Assets and has not received any notice of violation of any of the
foregoing.
Section IV.13 Sales Information. The Net Sales information contained in
Schedule 4.13 for the fiscal years ending December 31, 1997 and December 31,
1998 for those Titles listed on such Schedule 4.13 was prepared from the books
and records of the Sellers and, to the Knowledge of Pearson, is accurate in all
material respects. For purposes of such Schedule, "Net Sales" as applied to a
particular Title, means total sales of such Title, net of actual returns,
rebates and discounts.
Section IV.14 Environmental. To the Knowledge of Pearson, there are no
Environmental Liabilities or claims under any applicable Environmental Laws with
respect to the Purchased Assets.
Section IV.15 Exclusivity of Representations. THE REPRESENTATIONS AND
WARRANTIES MADE BY PEARSON IN THIS AGREEMENT ARE IN LIEU OF AND ARE EXCLUSIVE OF
ALL OTHER REPRESENTATIONS AND WARRANTIES, INCLUDING, WITHOUT LIMITATION, ANY
IMPLIED WARRANTIES. PEARSON HEREBY DISCLAIMS ANY SUCH OTHER OR IMPLIED
REPRESENTATIONS OR WARRANTIES, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO
BUYER OR ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES OF ANY
DOCUMENTATION OR OTHER INFORMATION (INCLUDING ANY FINANCIAL PREDICTIONS OR
SUPPLEMENTAL DATA).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Pearson as follows:
Section V.1 Incorporation and Authority of the Buyer. The Buyer is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of New York and has all necessary corporate power and
authority to own its assets, properties and rights and to carry on its business
as now being conducted. As of the Closing Date, the Buyer will have all
necessary power, authority and approval to enter into this Agreement and the
Closing Agreements, 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 Closing Agreements by the Buyer, the
performance by the Buyer of its obligations hereunder and thereunder and the
consummation by the Buyer of the transactions contemplated hereby and thereby
have been duly authorized by all requisite corporate action on the part of the
Buyer. This Agreement has been, and upon their execution the Closing Agreements
will be, duly executed and delivered by the Buyer, and (assuming due
authorization, execution and delivery by Pearson or its Affiliates) this
Agreement constitutes, and upon their execution the Closing Agreements will
constitute, legal, valid and binding obligations of the Buyer enforceable
against the Buyer in accordance with their terms.
Section V.2 No Conflict. Assuming all consents, approvals, authorizations
and other actions described in Section 5.3 have been obtained, and except as may
result from any facts or circumstances related solely to Pearson or any of its
Affiliates, the execution, delivery and performance of this Agreement and the
Closing Agreements by the Buyer 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 Buyer, (b) violate any material
law, statute, rule or regulation to which Buyer is subject or any material writ,
injunction, judgment or decree applicable to Buyer 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 result in
the creation or imposition of (or the obligation to create or impose) any lien,
security interest, charge or encumbrance on any of the material assets of the
Buyer pursuant to, any contract, license or other instrument to which the Buyer
or any of its Affiliates is a party or by which any of such assets is bound or
affected, except in any such case in (b) or (c) above as would not materially
impair the ability of the Buyer to consummate the transactions contemplated by
this Agreement or any of the Closing Agreements.
Section V.3 Consents and Approvals. The execution and delivery of this
Agreement and each Closing Agreement by the Buyer do not, and the performance of
this Agreement and each Closing Agreement by the Buyer will not, require any
consent, approval, authorization or other action by, or filing with or
notification to, any Governmental Authority, except (a) the approval of the
United States Department of Justice contemplated by Section 3.4(ii) above, (b)
where failure to obtain such consent, approval, authorization or action, or to
make such filing or notification, would not prevent the Buyer from performing
any of its material obligations under this Agreement and the Closing Agreements
and (c) as may be necessary as a result of any facts or circumstances relating
solely to Pearson or its Affiliates.
<PAGE>
Section V.4 Absence of Litigation. No action, litigation, claim or
proceeding is pending or, to the knowledge of the Buyer, threatened before any
Governmental Authority which seeks to delay or prevent or which would materially
impair the ability of the Buyer to consummate the transactions contemplated by
this Agreement or any of the Closing Agreements.
Section V.5 Financial Ability.
(a) The Buyer has cash or has existing borrowing facilities or
unconditional, binding firm commitments that are sufficient to enable it to
consummate the transactions contemplated by this Agreement. The Buyer has
provided true and correct copies of any such facilities and commitments to the
Seller. The financing required to consummate the transactions contemplated by
this Agreement is collectively referred to as the "Financing". The conditions to
the Financing have each been satisfied and the Financing will be available on a
timely basis to enable Buyer to consummate the transactions contemplated by this
Agreement.
(b) The Buyer has a net worth that is greater than $100 million.
Section V.6 Brokers. Except for fees and commissions which will be paid by
the Buyer, 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 Closing Agreements based upon
arrangements made by or on behalf of the Buyer.
ARTICLE VI
COVENANTS AND AGREEMENTS
The parties covenant and agree as follows:
Section VI.1 Access to Information and Materials. Between the date of this
Agreement and the Closing Date, Pearson shall cause each Seller to give Buyer
and its attorneys, accountants and other representatives and agents access,
during normal business hours and on reasonable notice, to the Editorial and
Production Employees (as such terms is defined below) and to all books and
business, editorial and financial records, reports and documents of such Seller
relating to the Titles as Buyer may request, all for the purpose of effecting an
orderly transfer at the Closing of the Purchased Assets. Buyer and Pearson
acknowledge and agree that no Seller shall be required to provide any such
access to people, information and/or materials and Pearson shall not be in
breach of this Agreement to the extent that such access would: (i) materially
interfere in the operation of the business of producing, publishing, selling and
distributing the Titles; or (ii) cause Pearson or any Seller to be in breach of
any confidentiality restrictions applicable to it.
Section VI.2 Conduct of Business. (a) Except as otherwise provided in this
Agreement or as consented to by Buyer in writing, between the date of this
Agreement and the Closing Date, Pearson shall cause each Seller to operate its
business relating to the Titles only in the ordinary course of business,
including, without limitation, making significant customers aware, all in
accordance with Sellers' past practices, of any new editions of the Titles that
are forthcoming. Between the date of this Agreement and the Closing Date,
Pearson shall cause each Seller to use commercially reasonable efforts to cause
all work on the Titles listed on Schedule 6.2(a) that are currently scheduled
for publication in 1999 to continue on schedule to meet their scheduled bound
book dates as set forth with respect to each such Title on Schedule 6.2(a).
(b) Pearson shall cause each Seller to use commercially reasonable efforts
to preserve its existing relationships with all parties to the Assigned
Contracts, including without limitation authors, vendors, suppliers and
customers, and to preserve the good will and value of the Titles.
(c) Buyer and Pearson acknowledge and agree that in fulfilling Pearson's
obligations under this Section 6.2, neither Pearson nor any Seller shall be
required to make any special payment to any party, including, without
limitation, any of the Editorial and Production Employees or any party to any of
the Assigned Contracts.
Section VI.3 Inventory; Manufacturing Materials. Promptly following the
Closing Date, Pearson shall use commercially reasonable efforts to cause, and in
any event within 15 Business Days following the Closing Date Pearson shall
cause, each Seller to provide to Buyer a list of printers, typesetters, prep
houses, art studios and other vendors used by such Seller in the storage,
production and manufacture of the Titles, identifying with reasonable
specificity all film, plates, typesetting files, art files, photoscans, custom
publishing files and similar materials included in the Purchased Assets that are
transferred to Buyer on the Closing Date and that are in the possession of such
printers and vendors. Within 15 Business Days following the Closing Date,
Pearson shall cause each Seller to notify in writing, with a copy to Buyer, each
printer or other party who has custody of any Inventory or any other materials
included in the Purchased Assets transferred to Buyer on the Closing Date that
ownership of such Inventory and materials has been transferred to Buyer and that
such Inventory and materials are to be held subject to the direction of Buyer.
Section VI.4 Expenses of Sale. Each of the parties shall bear its own
direct and indirect expenses incurred in connection with the negotiation and
preparation of this Agreement and the consummation and performance of the
transactions contemplated hereby except as provided in Section 6.10.
Section VI.5 Orders. As of the Closing Date, each Seller and its Affiliates
will cease to ship copies of the Titles to its customers (except as contemplated
by the first sentence of Section 6.8) and will forward or refer to Buyer all
orders for the Titles received thereafter. Promptly after the Closing Date, each
Seller will provide Buyer with a list of all unshipped orders and all back
orders, as of the Closing Date. Except as to orders for Titles that are still
Retained Titles after the Outside Consent Date (which orders shall be solely for
Pearson's account), each Seller's orders for Titles from customers that are
unshipped as of the Closing Date shall become Buyer's orders and any income or
profit relating thereto shall be for the account of Buyer. All amounts received
by either party for sales of Titles that are shipped before the Closing Date
shall be for the account of the appropriate Seller and if received by Buyer
shall be promptly paid to Pearson on such Seller's behalf. Except as to orders
for Titles that are still Retained Titles after the Outside Consent Date (which
orders shall be solely for Pearson's account), all amounts received by either
party for Titles that are shipped on or after the Closing Date shall be for the
account of Buyer and if received by Pearson or any Seller shall be promptly paid
over to the Buyer. For a period of one year from the Closing Date, Pearson shall
cause the Sellers to place a customer notification message into those order
processing systems managed by Pearson or any of its Affiliates on behalf of such
Sellers such that (i) all customers inquiring about the Titles via telephone or
mail order will be notified that such Titles may be ordered from Buyer and (ii)
customers shall be given ordering instructions provided by Buyer. Except as to
orders for Titles that are still Retained Titles after the Outside Consent Date
(which orders shall be solely for Pearson's account), during such period, any
order received by Pearson or its Affiliates for any Title shall be immediately
forwarded to Buyer.
Section VI.6 Returns. (a) After the Closing Date, Pearson shall cause each
Seller to accept all returns of copies of the Titles and to pay refunds to
customers in connection therewith for all such copies that arose from orders
shipped by Pearson or any Seller prior to the Closing Date, in each case,
subject to and in accordance with Pearson's nationally publicized returns policy
and provided that such returns are in salable or usable condition. Buyer agrees
to purchase all such returns from each Seller, valued using such Seller's
practices in effect on the Closing Date. All such returns that are to be
purchased by Buyer shall be delivered F.O.B. Seller's warehouse. After the
Closing Date, Buyer shall accept all returns of copies of the Titles and shall
pay refunds to customers in connection therewith (and Buyer shall bill Pearson
for the amounts of any such refunds in connection with copies shipped by Pearson
prior to the Closing Date). If any Seller receives any returns of Titles for
which Buyer is responsible pursuant to this Section 6.6, Pearson shall cause
such Seller to ship all such returns, at Buyer's expense, to such destination as
Buyer shall direct or to destroy such returns if Buyer requests destruction in
lieu of such shipment.
<PAGE>
(b) Buyer covenants and agrees that for all orders of Titles shipped on or
after the Closing Date, Buyer shall place an identifying sticker on all of the
Inventory for purposes of determining which sales have been shipped by Pearson
or by any Seller prior to the Closing Date or shipped on or after the Closing
Date. The parties hereto agree that if Buyer has complied at all times with the
covenant contained in this Section 6.6(b), then the presence or absence of such
a sticker on any returns of copies of the Titles after the Closing Date shall be
deemed proof of whether such sales were shipped by Pearson or any Seller prior
to the Closing Date or shipped on or after the Closing Date.
(c) Notwithstanding the provisions of Sections 6.6(a), Buyer shall not be
required to purchase any returns from Pearson (i) for any Title that has been
superseded because a more recent edition of such Title has been published, or
(ii) any return that is not in a saleable or useable condition, in Buyer's
reasonable judgment, or (iii) is overstock under Seller's accounting standards.
(d) Buyer will pay to Pearson from time to time amounts equal to the
appropriate royalty reversals allocable to any returns for which Pearson or any
Seller is responsible pursuant to this Section 6.6.
Section VI.7 Deliveries. Except as otherwise contemplated by the Production
Services Agreement, (a) within 15 Business Days following the Closing Date in
the case of domestic Inventory and within 20 Business Days following the Closing
Date in the case of all other Inventory, Pearson will cause each Seller to ship
to Buyer, at Buyer's expense and in accordance with Buyer's instructions, the
entire Inventory (including Inventory in the possession of Pearson's and
Sellers' Affiliates), other than Inventory located at a third party and other
than Inventory that relates to a Title that is still a Retained Title after the
Outside Consent Date (which Inventory shall be retained by the relevant Seller
for all purposes of this Agreement), and (b) as soon as reasonably practicable
after the Closing Date but in any event within 15 Business Days following the
Closing Date, Pearson will cause each Seller to ship to Buyer, at Buyer's
expense and in accordance with Buyer's instructions, all books and records in
such Seller's possession relating solely to the Titles (excluding Titles that
are still Retained Titles after the Outside Consent Date), including, without
limitation the following items relating to each Title that is not a Retained
Title after the Outside Consent Date: (i) the Assigned Contracts; (ii) any
existing manuscripts of all Titles; (iii) editorial, production (including,
without limitation, photoscans, illustrations files, typesetting files, files
for custom published products and other work-in-process materials),
manufacturing, subsidiary rights, correspondence and permission files; (iv)
computer generated customer lists and recent sales history worldwide; (v)
copyright and trademark registration certificates and any related application
files; and (vi) records and other data exclusively related to sales of the
Titles, including, but not limited to, royalty payments and author advances and
payments due under the Assigned Contracts; provided, that Pearson shall provide
the royalty files to Buyer only after Pearson has completed using such files for
purposes of making royalty payments required to be made by Pearson on or prior
to June 30, 1999 and until Pearson provides such royalty files to Buyer, Pearson
shall provide Buyer with such information contained within such files as Buyer
may reasonably request. Notwithstanding the foregoing, at Buyer's request,
Pearson has agreed to cause the Sellers not to ship any Inventory to Buyer prior
to May 11, 1999, except as follows: (i) Pearson will cause the Sellers to ship
to Buyer 50 copies of each of the Titles (to the extent that there are 50 copies
of each of the Titles within the Inventory) as promptly as reasonably possible
following the Closing, and (ii) Pearson will cause the Sellers to use
commercially reasonable efforts to ship to Buyer prior to May 11, 1999 any other
Inventory which Buyer may identify from time to time. Pearson shall cause each
Seller to comply with such reasonable instructions concerning packaging and
labeling as Buyer may request. Risk of loss with respect to Inventory shall
remain with Pearson until such Inventory is delivered to Buyer or its designated
shipper.
Section VI.8 Post-Closing Sales. Buyer will use commercially reasonable
efforts to provide to Pearson the gross and net unit and dollar sales
information (on a monthly basis for domestic sales; and quarterly, if available,
for international sales, or otherwise for international sales, as soon as
possible after September 30, 1999 (and in any event prior to November 30,
1999)), in each case broken down by Title and customer (including, if
applicable, by account, with respect to wholesalers, bookstores and other
institutional customers; and identifying the educational institution to which
each sale was attributable, if such information is then known to Buyer), for
sales of Titles made during each month, or portion thereof, occurring on or
after the Closing Date through September 30, 1999. Pearson acknowledges that all
such information shall be subject to the confidentiality provisions of Article
VIII hereof and shall be used by Pearson and the Sellers solely for the purposes
of calculating sales commissions to be paid to their respective employees and,
if applicable, independent sales representatives.
Section VI.9 Certain Expenses. Except as provided in Section 1.1 above,
Buyer shall have no liability for and Seller shall pay all amounts with respect
to (i) development, production and manufacturing work and/or services that have
been actually performed before the Closing Date, whether or not Seller has
received invoices for such work and/or services and (ii) all royalties that have
been incurred from the sale of any Titles that are shipped before the Closing
Date.
Section VI.10 Payment of Transfer Taxes. Any and all taxes resulting from
the sale, assignment, transfer and delivery hereunder of the Purchased Assets
shall be paid by the party upon whom the law imposes primary liability for the
taxes.
Section VI.11 Employees. At the Closing, Pearson shall cause each of the
Sellers to identify to Purchaser those employees of the Seller primarily
responsible for the editorial content of any of the Titles or the production,
design, layout, sale or marketing of any of the Titles ("Editorial and
Production Employees"). Buyer is and shall be under no obligation to extend
employment offers to any Editorial and Production Employees or other employees
of Pearson and Sellers. For a period of six months following the Closing,
Pearson will cause the Sellers to use commercially reasonable efforts to make
any Editorial and Production Employee who remains employed by such Sellers
available to Buyer for consultation at such mutually convenient times and places
as may be agreed by the parties. Buyer shall reimburse Pearson for all out of
pocket expenses incurred by Pearson or such Editorial and Production Employees
in connection therewith. Buyer and Pearson acknowledge and agree that in
fulfilling Pearson's obligations under this Section 6.11, neither Pearson nor
any Seller shall be required to make any special payment to any party, including
any of the Editorial and Production Employees.
Section VI.12 Work-in-Process. Schedule 6.12 sets forth the name of each
vendor and other supplier who was engaged in performing work in connection with
the Titles as of March 15, 1999, along with a brief description of the nature of
such work. Promptly following the Closing Date, Pearson will cause each Seller
to request all vendors or other suppliers who are currently performing or who
have performed work of any kind in connection with the Titles, in each case for
which Pearson and the Sellers will remain liable pursuant to Section 1.2, to
submit bills to each Seller for the amounts payable by such Seller pursuant to
Section 1.2.
Section VI.13 Distribution Rights. Promptly following the execution of this
Agreement, Pearson will cause the relevant Seller or Sellers to enter into an
agreement for the distribution by Buyer of: (a) the multimedia software program
Marieb (ADAM) ISBN 0805396489, which Buyer shall be entitled to distribute
through September 30, 2000 but only on a bundled basis with Titles by Gerard
Tortora and (b) Microbiology Perspectives: A Color Atlas by Wistoreich which
Buyer shall be entitled to distribute through September 30, 2000 but only on a
bundled basis with Titles by Black. Buyer agrees to pay to Seller $20.25 per
item for the Marieb (ADAM) product, out of which Seller shall pay any royalties.
(In this regard, the distribution agreement will provide that Buyer may purchase
from Seller copies of the Interactive Physiology Instructors' Guide CD that
relates to the Marieb (ADAM) Product, at unit cost plus shipping and handling,
or a total per copy price of approximately $5.00; there is currently no Seller
ISBN for this item.) The distribution agreement also shall provide (in keeping
with Seller's obligations to ADAM) that the Buyer may not distribute the Marieb
(ADAM) product other than to the higher education market (excluding Allied
Health, and graduate schools other than nursing schools) and the secondary
school science market (grades 7-12). ("Allied Health" means those academic
disciplines encompassed by and associated with, but not limited to, medical
and/or dental technology careers and therapeutic careers; examples would include
medical records technology, dental hygiene, dental assistants, occupational
therapy and radiology technology.) Buyer agrees to pay to Seller for each copy
of the Wistoreich product an amount equal to Seller's per unit inventory cost
plus not less than $1.52 per copy for author's royalty; provided, that if Buyer
shall at any time sell that product for more than an attributed bundled price of
$15.24, then (i) Buyer shall promptly notify Seller of same and of all
subsequent price changes by Buyer, (ii) Seller shall then notify Buyer of any
higher per copy royalty owing to the author, and (iii) Buyer shall thereafter
pay to Seller such increased per copy amount with respect to author royalties.
<PAGE>
Section VI.14 Regulatory and Other Authorizations; Consents.
(a) The Buyer shall use 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 Closing Agreements and the
transfer and sale of the Purchased Assets to Buyer, and Pearson will and will
cause each of the Sellers to cooperate with the Buyer in promptly seeking to
obtain all such authorizations, consents, orders and approvals; it being
understood that neither Pearson nor any Seller shall be required to pay any fees
or other payments to any such regulatory bodies or officials in order to obtain
any such authorization, consent, order or approval (other than normal filing
fees). None of Pearson, the Sellers or Buyer will take any action that would
have the effect of delaying, impairing or impeding the receipt of any required
approvals.
(b) Pearson agrees to use commercially reasonable efforts to obtain all
required consents to the assignment to Buyer of the contracts listed on Schedule
6.14(b) hereto; provided, that Pearson shall not be obligated to pay any
compensation or give any other consideration to obtain any such consent. If
requested to do so by Pearson, Buyer will assist Pearson in those efforts by
making Buyer's staff (including, without limitation, editorial, production and
sales and marketing personnel) available to consult with authors and by
appropriate written communications with authors. The Buyer agrees to use
commercially reasonable efforts to obtain all other consents and approvals that
Pearson and the Buyer agree are required in connection with the transactions
contemplated by this Agreement and the Closing Agreements and Pearson shall
cause each Seller to cooperate with the Buyer in obtaining such other consents
and approvals; provided, however, that neither Pearson nor any Seller shall be
required to compensate any third party to obtain any such consent or approval.
Prior to Closing, Buyer shall not communicate, orally or in writing, with any
author of any of the Titles without obtaining the prior approval of Pearson,
which approval shall not be unreasonably withheld or delayed. Pearson shall be
entitled to participate in all such communications. Pearson and Buyer shall use
all commercially reasonable efforts to obtain the consent of the United States
Department of Justice to the transactions contemplated hereby in connection with
the Final Judgment in United States of America v. Pearson plc et al. (D.D.C.,
Case No. 98 2836) as promptly as possible following the date hereof and in any
event no later than the Final Transfer Date. Pearson and Buyer agree to be bound
by the terms thereof.
Section VI.15 Further Assurances.
(a) From and after the Closing Date, each of the parties hereto shall, and
shall cause its Affiliates to, 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 Closing Agreements and give effect to
the transactions contemplated hereby and thereby. Without limiting the
foregoing, from and after the Closing, (i) Pearson shall and shall cause each of
the Sellers to do all things necessary, proper or advisable under applicable
Laws as requested by Buyer to put the Buyer in effective possession, ownership
and control of the Purchased Assets and the Buyer shall cooperate with Pearson
and the Sellers for that purpose and (ii) the Buyer shall do all things
necessary, proper or advisable under applicable Laws as requested by Pearson to
put Pearson (or such other Person as Pearson shall indicate) in effective
possession, ownership and control of all assets not included within the
Purchased Assets (including, without limitation, all assets relating to (i) any
of Pearson's or any of its Affiliates' titles other than the Titles or (ii) any
Retained Title that does not cease to be a Retained Title on or prior to the
Outside Consent Date) and Pearson shall cooperate with the Buyer for that
purpose. All cash and other remittances, mail and other communications relating
to the Purchased Assets received by Pearson or any Seller shall be promptly
turned over to the Buyer by Pearson or such Seller. All cash and other
remittances, mail and other communications relating to any business of Pearson,
any Seller or Viacom not included within the Purchased Assets that are received
by the Buyer shall be promptly turned over to Pearson (or such other Person as
Pearson shall indicate) by the Buyer.
(b) Pearson shall have the right to retain copies of all books and records
relating to the Titles and the Purchased Assets for all periods ending on or
prior to the Closing Date. For a period of ten years from the date hereof, the
Buyer shall maintain all books and records of the Titles and the Purchased
Assets 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 Pearson as may be requested by Pearson from
time to time, including, without limitation, in connection with any action, case
or proceeding by or against Pearson. If at any time after the Closing, Pearson
requires a copy of any such book or record, it shall have the right to promptly
obtain a copy thereof (at Pearson's cost) from the Buyer. Buyer also shall make
such books, records and individuals available to Viacom to enable Pearson to
comply with its obligations to Viacom under the Viacom Stock Purchase Agreement.
Section VI.16 Closing Agreements. On the Closing Date, Pearson and Buyer
shall execute and deliver (or, in the case of Pearson, shall cause one or more
of its Affiliates to execute and deliver) each of the Closing Agreements to
which it is a party.
ARTICLE VII
LICENSES BETWEEN PEARSON AND BUYER
Section VII.1 Trademark Licenses.
(a) At the Closing, one or more Affiliates of Pearson and Buyer shall enter
into trademark license agreements substantially in the form of Exhibit C hereto
(the "Trademark License Agreements") with respect to the trademarks and trade
names to be licensed pursuant to such Trademark License Agreements (the "Seller
Trademarks").
(b) At the Closing, Pearson and Buyer shall enter into a sublicense
agreement substantially in the form of Exhibit D hereto (the "Sublicense
Agreement") with respect to the trademarks and trade names to be sublicensed
pursuant to such Sublicense Agreement (the "Corporate Trademarks" and, together
with the Seller Trademarks, the "Pearson Trademarks").
Section VII.2 Artwork, Etc.
(a) To the extent that any artwork or other materials owned by any Seller
are incorporated in the Titles, but are not being used exclusively in connection
with the Titles and therefore are not part of the Purchased Assets, Pearson
shall cause such Seller to enter into such non-exclusive, royalty-free licenses
or other agreements as may be necessary and appropriate to permit the continued
use by Buyer of such materials in the current and all future editions of the
Titles, in each case as and to the extent now used therein. All such materials
owned by Seller and incorporated in the current published editions of the Titles
are either acknowledged in those editions as being used by permission (and, in
any case, such permissioned materials that are owned by a Seller do not
constitute a material part of any Title), or such materials are listed on
Schedule 7.2(a).
(b) Buyer agrees that following the Closing, the appropriate Seller of the
Titles listed on Schedule 7.2(b) or one or more of its Affiliates, as the case
may be, hereto may continue to use, in the current edition (including all
unpublished editions that are in production on the Closing Date) and, except as
stated to the contrary on Schedule 7.2(b), all future editions of the other
respective publications of the Seller or such Affiliate, as the case may be,
that are listed on such Schedule 7.2(b), the materials generally described on
Schedule 7.2(b) that are part of the Titles listed thereon but are also used in
said other respective publications of the Seller or such Affiliate, as the case
may be. At the Closing, and from time to time thereafter as may be reasonably
requested by any Seller, Buyer and the Sellers (or their respective Affiliates)
will enter into such confirmatory non-exclusive, royalty free licenses or other
agreements as may be necessary and appropriate to permit such continued use by
any such Seller (or its Affiliates).
<PAGE>
Section VII.3 Websites and Other Media. Pearson and Buyer agree that all
content of Titles that is included in any Seller's websites or CD/Rom or other
software Ancillaries is part of the Purchased Assets, and that such content
shall therefore be provided to Buyer. Buyer acknowledges and agrees that no part
of any such website or CD/Rom or other software Ancillary that is not used
solely in connection with the Title pertaining to that website or CD/Rom or
other software Ancillary shall be part of the Purchased Assets, including in
such exclusion, without limitation, any computer programming that is proprietary
to a Seller, Pearson, their respective Affiliates or any third party.
Notwithstanding the foregoing, Pearson agrees that (i) if solely because a Title
has been written in such a way that it references a so-called Prentice Hall
Companion Website and it is not reasonably practical for the Buyer to substitute
its own website for such Companion Website within a reasonable time after the
Closing and without material loss of functionality of the website to customers
for the Title, then Pearson will cause the Seller to continue to maintain that
Companion Website and allow access thereto by Buyer's customers who purchase
that Title, for the life of the current edition of that Title and (ii) if a
computerized test bank has been marketed or supplied in connection with a Title
and it is not reasonably practical for the Buyer to substitute its own
computerized test bank within a reasonable time after the Closing and without
material loss of functionality to customers, then Pearson will cause the Seller
to license Buyer to distribute such computerized test bank for the life of the
current edition of that Title.
ARTICLE VIII
CONFIDENTIALITY
Section VIII.1 Confidentiality.
(a) For a period of three years after the date of this Agreement, Buyer
shall, and shall cause its Affiliates and their respective officers, directors,
employees and advisors (collectively, "Recipients") to, keep confidential any
information relating to the Titles, the Retained Titles that do not cease to be
Retained Titles on or prior to the Outside Consent Date, Pearson and the
Sellers, in each case except for any such information that (i) is available to
the public on the date hereof, (ii) thereafter becomes available to the public
other than as a result of a disclosure by Buyer or any of its Recipients, or
(iii) is or becomes available to Buyer or any of its Recipients on a
non-confidential basis from a source that to Buyer's or such Recipient's
knowledge is not prohibited from disclosing such information to Buyer or such
Recipient by a legal, contractual or fiduciary obligation to any other Person.
Notwithstanding the foregoing, after the Closing Date, Buyer's obligation of
confidentiality under this Section 8.1(a) shall be limited only to information
relating to Pearson and the Sellers other than as such information directly and
solely relates to the Purchased Assets; provided, that Buyer shall be entitled
to use and disclose any such information in connection with any action, case or
proceeding by or against Buyer or any of its Affiliates.
(b) From and after the date of this Agreement, Buyer 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 hereof, (ii)
thereafter becomes available to the public other than as a result of a
disclosure by Buyer or any of its Recipients or (iii) is or becomes available to
Buyer or any of its Recipients on a non-confidential basis from a source that to
Buyer's or Recipient's knowledge is not prohibited from disclosing such
information to Buyer or such Recipient by a legal, contractual or fiduciary
obligation to any other Person.
(c) For a period of three years after the Closing Date, Pearson shall, and
shall cause the Sellers and their respective Affiliates and their respective
Recipients to, keep confidential any information relating to the Titles and the
Purchased Assets, except for any such information that (i) is available to the
public on the Closing Date, (ii) thereafter become available to the public other
than as a result of a disclosure by Pearson, the Sellers or any of their
respective Recipients or (iii) is or becomes available to Pearson, the Sellers
or any of their respective Recipients on a non-confidential basis from a source
that to Pearson's, such Seller's or such Recipient's knowledge is not prohibited
from disclosing such information to Pearson, such Seller or such Recipient by a
legal, contractual or fiduciary obligation to any other Person; provided, that
Pearson or any Seller shall be entitled to use and disclose any such information
in connection with any action, case or proceeding by or against Pearson, any
Seller or any of their respective Affiliates.
(d) Should Pearson, Buyer, any Seller or any of their respective Recipients
be required to disclose any such information in response to a court order or as
otherwise required by law or administrative process, such entity shall (i) prior
to the Closing Date, inform Pearson or (ii) subsequent to the Closing Date,
inform Pearson in the case of information relating to Viacom, the Viacom Stock
Purchase Agreement or any related ancillary agreements or inform Buyer in the
case of information relating to the Titles or the Purchased Assets, in each case
in writing, of such request or obligation as soon as possible after such entity
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 party then
entitled to the benefit of these confidentiality provisions.
(e) Notwithstanding the foregoing, each of Buyer and Pearson acknowledges
that the other is in the business of providing books similar to those included
in the Titles and that the other party's use of general industry expertise,
consultants, suppliers, producers, and technology, and such other party's
knowledge of customers, suppliers, producers and consultants, shall not be a
violation of the terms of this Section 8.1.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section IX.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 Pearson and the Buyer;
(b) by either party if the Closing shall not have occurred prior
to the Final Transfer Date; provided, however, that the right to
terminate this Agreement under this Section 9.1(b) shall not be
available to a party 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 either party in the event a condition set forth in Section
3.4 becomes incapable of being fulfilled;
(d) by either party in the event of the issuance of a final,
nonappealable governmental order materially restraining or prohibiting
the transactions contemplated herein; or
(e) by Buyer in the event of a breach by Pearson of a
representation or warranty or covenant contained herein where (i) such
breach has a material adverse effect on the Purchased Assets taken as
a whole or prevents Pearson from performing any of its material
obligations under this Agreement and (ii) Pearson fails to cure such
breach within five Business Days after notice thereof by Buyer to
Pearson.
Section IX.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 Section 6.4 and in Articles VIII, XI and XII; provided, however, that
nothing herein shall relieve either Pearson or the Buyer from liability for any
breach of this Agreement or failure to perform hereunder.
Section IX.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.
<PAGE>
ARTICLE X
INDEMNIFICATION
Section X.1 Indemnification by the Buyer.
(a) Subject to Section 11.1 hereof, the Buyer shall indemnify, defend and
hold harmless Pearson, the Sellers, their respective Affiliates and any other
Person that is party to any of the Closing Agreements and their respective
employees, officers, agents and directors (collectively, the "Seller Indemnified
Parties") against and reimburse each Seller Indemnified Party for, any and all
losses, damages, costs, expenses, liabilities, obligations and claims of any
kind (including any action brought by any Governmental Authority or 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:
(i) the inaccuracy of any representations and warranties made by
the Buyer or any of its Affiliates in this Agreement or any of the
Closing Agreements; (ii) any failure by the Buyer or any of its
Affiliates to perform any of its covenants or agreements under this
Agreement or any of the Closing Agreements; or
(iii) any claim or cause of action by any party arising on or
after the Closing Date against any Seller Indemnified Party with
respect to the Purchased Assets, except for any claims with respect to
which the Seller is obligated to indemnify the Buyer Indemnified
Parties under Section 10.2 hereof.
(b) Notwithstanding any other provision to the contrary, the
Buyer 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), (i) with respect to any claim, unless such claim involves
Losses in excess of $5,000 (nor shall such item be applied to or
considered for purposes of calculating the aggregate amount of the
Seller Indemnified Parties' Losses for purposes of clause (iii)
hereof), (ii) unless Pearson has notified the Buyer 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 and (iii) until the aggregate amount of the
Seller Indemnified Parties' Losses exceeds $100,000, after which Buyer
shall be obligated for all Losses of the Seller Indemnified Parties
only in excess of such amount.
Section X.2 Indemnification by Pearson.
(a) Subject to Section 11.1 hereof, Pearson shall indemnify,
defend and hold harmless the Buyer, its Affiliates and their
respective employees, officers, agents and directors (collectively,
the "Buyer Indemnified Parties") against, and reimburse any Buyer
Indemnified Party for, any and all Losses that such Buyer 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
Pearson or any of its Affiliates in this Agreement or any of the
Closing Agreements; or
(ii) any failure by Pearson or any of its Affiliates to perform
any of its covenants or agreements under this Agreement or any of the
Closing Agreements.
(b) Notwithstanding any other provision of Section 10.2(a) to the
contrary, Pearson shall not be required to indemnify, defend or hold
harmless any Buyer Indemnified Party against or reimburse any Buyer
Indemnified Party for any Losses pursuant to Section 10.2(a), (i) with
respect to any claim, unless such claim involves Losses in excess of
$5,000 (nor shall such item be applied to or considered for purposes
of calculating the aggregate amount of the Buyer Indemnified Parties'
Losses for purposes of clause (iii) hereof), (ii) unless the Buyer has
notified Pearson 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, and (iii) until
the aggregate amount of the Buyer Indemnified Parties' Losses exceeds
$400,000, after which Pearson shall be obligated for all Losses of the
Buyer Indemnified Parties only in excess of such amount; provided,
however, that the cumulative indemnification obligation of Pearson
under this Article X in respect of Section 10.2(a) shall in no event
exceed the Purchase Price.
Section X.3 Notification of Claims.
(a) A party that may be entitled 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
that 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 45 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 to the Indemnified
Party 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, then 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 that has been asserted against the Indemnified Party. The
Indemnified Party and the Indemnifying Party shall each have the right to
participate in the defense of any claim or demand for which it is not
controlling the defense, at 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 10.03(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 and complete release of any
and all liability by all relevant parties relating thereto.
Section X.4 Exclusive Remedies.
(a) Following the Closing, except for performance of the obligations set
forth in Sections 3.2, 3.3, 7.2 and 8.1, the Seller and the Buyer 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 Buyer, 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 Buyer's right to indemnification pursuant to Section
10.2, from and after the Closing Date, (i) the Buyer shall fully release 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 Buyer, its parents, Subsidiaries,
divisions and Affiliates, their predecessors, successors and assigns, and their
officers, directors, employees and agents; and (ii) the Buyer 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 similar federal or state law, whether or not in existence on the date
hereof.
<PAGE>
Section X.5 Certain Adjustments. For all purposes of this Article X,
"Losses" shall be net of the estimated present value of any tax benefits
received by or accruing to the Indemnified Party.
ARTICLE XI
GENERAL PROVISIONS
Section XI.1 Survival of Representations, Warranties, Covenants and
Agreements. The representations, warranties, covenants and agreements of Pearson
and the Buyer contained in or made pursuant to this Agreement and the Closing
Agreements or in any certificate furnished pursuant hereto or thereto shall
terminate at the Closing, except that (a) the representations and warranties
made in Article IV and Article V shall survive in full force and effect until
December 31, 2000, except for the representations and warranties made in Section
4.4, which shall survive indefinitely, (b) the covenants and agreements made in
this Agreement or any of the Closing Agreements that are to be performed in
whole or in part subsequent to the Closing Date and that do not, by their terms,
expire on a date certain, and in Section 6.15 and in Article VIII 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 Sections 3.2 and 3.3 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 any of the Closing Agreements
that are to be performed in whole or in part subsequent to the Closing Date and
that, by their terms, expire on a date certain, shall survive until such date
certain.
Section XI.2 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"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.
"Assignments of Copyright" means each of the assignments of copyright to be
executed by the Sellers at Closing substantially in the form of Exhibit E
hereto.
"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 Agreements" means the Bills of Sale, the Assignment and Assumption
Agreements, the Trademark License Agreements, the Trademark Sublicense
Agreement, the Production Services Agreement and the Assignments of Copyright.
"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.
"Environmental Law" means any Law relating to pollution or protection of
the environment, including the use, handling, transportation, treatment,
storage, disposal, release or discharge of Hazardous Materials.
"Environmental Liability" means any claim or demand, order, suit,
obligation, 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 Purchased Assets, the Titles or this
Agreement or its subject matter, in each case whether arising or incurred
before, on or after the Closing Date.
"Final Transfer Date" means the later of (i) April 23, 1999, or (ii) if the
Department of Justice has granted a request by Pearson for an extension of time
beyond April 23, 1999 during which to divest the Titles pursuant to the terms of
the Stipulation and Order in the case referred to in Section 3.4(ii) of this
Agreement, such later extended date.
"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.
"Inventory Target Amount" means $1,300,000 minus the value of all Inventory
that relates to a Title that is a Retained Title after the Outside Consent Date.
"Knowledge of Pearson" or "Pearson's Knowledge" means the actual knowledge
of the managerial employees (either operational or financial) or in-house
counsel of Pearson and/or its Affiliates responsible for the relevant discipline
in the relevant publishing unit.
"Law" means any federal, state, local or foreign statute, law, ordinance,
regulation, rule, code, order, other requirement or rule of law.
"Lien" means any mortgage, deed or trust, pledge, hypothecation, security
interest, encumbrance, claim, lien or charge of any kind.
"Outside Consent Date" means April 22, 1999; provided, that if the Final
Transfer Date is extended beyond April 23, 1999, then "Outside Consent Date"
means the date which is the later of April 22, 1999 or the date that is one week
before the Final Transfer Date.
"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 in
connection with worker's compensation, unemployment insurance or other types of
social security; and (d) Liens incurred in the ordinary course of business
securing obligations or liabilities which are not individually or in the
aggregate material to the relevant asset.
"Person" means any natural person, general or limited partnership,
corporation, limited liability company, firm, association or other legal entity.
"Production Services Agreement" means the Production Services Agreement to
be executed by Pearson and Buyer at the Closing substantially in the form of
Exhibit F hereto.
"Retained Title" means a Title for which a consent to the assignment to
Buyer is required as listed on Schedule 6.14(b) if that consent has not been
obtained by the Closing; provided, that any such Title shall cease to be a
Retained Title if such consent is obtained by the Outside Consent Date.
"Tax" or "Taxes" means all income, excise, gross receipts, ad valorem,
sales, use, employment, franchise, profits, gains, property, transfer, payroll,
intangibles or other taxes, fees, stamp taxes, duties, charges, levies or
assessments of any kind whatsoever (whether payable directly or by withholding),
together with any interest and any penalties, additions to tax or additional
amounts imposed by any Tax authority with respect thereto.
"Viacom" means Viacom International Inc., a Delaware corporation.
"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 plc, a corporation organized under the laws of
the United Kingdom, and Pearson.
<PAGE>
ARTICLE XII
MISCELLANEOUS
Section XII.1 Notices. Any notice, request, instruction, demand, waiver or
other document deemed by either Pearson or Buyer to be necessary or desirable to
be given to the other hereunder must be in writing and will be deemed given when
received if such notice, request, instruction, demand, waiver or other document
is delivered in person or by overnight courier service or is mailed by certified
or registered mail, postage prepaid, with return receipt requested, or sent by
facsimile transmission with receipt confirmed, to the following persons and
addresses:
(a) If to Buyer: John Wiley & Sons, Inc.
605 Third Avenue
New York, NY 10158
Attention: Timothy B. King
Fax: 212-850-6307
with a copy to: John Wiley & Sons, Inc.
605 Third Avenue
New York, NY 10158
Attention: Judith Aisen
Fax: 212-850-6500
(b) If to Pearson: Pearson Inc.
c/o Pearson Education, Inc.
One Lake Street
Upper Saddle River, NJ 07458
Attention: Robert Dancy
Fax: 201-818-8749
with a copy to: Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Attention: Charles E. Engros, Jr.
Fax: 212-309-6273
Pearson or Buyer, as the case may be, may change the persons and addresses set
forth above at any time by a notice forwarded in accordance with the provisions
of this Section 12.1.
Section XII.2 Announcements. Any announcements or press releases by either
party relating to this Agreement and the Closing Agreements and the transactions
contemplated hereby and thereby shall be approved in advance by the other party.
Section XII.3 Successors and Assigns. This Agreement shall not be assigned
by operation of law or otherwise except that Pearson 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 Pearson from any liability or
obligation to perform hereunder.
Section XII.4 Amendment, Modification or Waiver. Except as otherwise
specifically provided herein, this Agreement may not be amended, modified, or
terminated in any manner except by an instrument in writing executed by both
Pearson and Buyer. A waiver of any of the terms or provisions of this Agreement
may be effected only by an instrument in writing, executed by the party to be
bound by such waiver. No waiver of a breach of, or default under, any term or
provision contained herein will be deemed to be a waiver of such term or
provision or of any subsequent breach or default of the same or a similar
nature.
Section XII.5 Entire Agreement. This Agreement (including the Schedules and
Exhibits hereto) and the Closing Agreements constitute the entire agreement
between Pearson and Buyer with respect to its subject matter and supersede any
and all prior agreements, arrangements or understandings between Pearson and
Buyer.
Section XII.6 Headings. The headings contained herein are for convenience
of reference only, do not form a part hereof and in no way modify, interpret, or
construe the intentions of Pearson and Buyer.
Section XII.7 No Third-Party Beneficiaries. Except as provided in Article
X, 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 any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
Section XII.8 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 XII.9 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 Pearson and the Buyer agrees that any dispute
relating to or arising from this Agreement or any of the Closing Agreements or
the transactions contemplated hereby or thereby 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 Pearson and the Buyer
hereby irrevocably and unconditionally:
(i) submits for itself and its property in any legal suit, action
or proceeding relating to this Agreement or any of the Closing
Agreements or the transactions contemplated hereby or thereby, or for
recognition and enforcement of any judgment in respect thereof, to the
exclusive jurisdiction of the Courts of the State of New York sitting
in the County of New York, the 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;
(ii) 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;
(iii) agrees that service of process in any such suit, action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such party at its address as provided in Section 12.1; and
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by New York law.
Section XII.10 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 XII.11 Severability. If any term or other provision of this
Agreement is 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 XII.12 Counterparts. This Agreement may be executed simultaneously
in any number of counterparts, each of which will be deemed to be an original,
but all of which together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
PEARSON INC.
By:_________________________________
Name:
Title:
JOHN WILEY & SONS, INC.
By:_________________________________
Name:
Title:
