<PAGE>
Exhibit 10.4
SERVICE AGREEMENT
THIS AGREEMENT is made _________, _____
BETWEEN
(1) PEARSON plc whose registered office is at 3 Burlington Gardens, London,
W1X 1LE ("Pearson"); and
(2) PEARSON INC., a Delaware Corporation whose executive office is at 30
Rockefeller Plaza, 50th Floor, New York, NY 10112-5095 ("the Company");
and
(3) _______________________________________________________________________
____________.
IT IS AGREED as follows:-
1. DEFINITIONS
In this Agreement:
(a) "Group Company" means any of (i) Pearson and (ii)
any subsidiary or associate for the
time being of Pearson and these
shall have the meanings attributed
to them under the Companies Act 1985
or any amending legislation
thereafter;
(b) "Effective Date" means ______________;
(c) "the Board" means the board of directors of
Pearson;
(d) "the Employment" means the employment established by
this Agreement;
(e) "the Remuneration means the Remuneration Committee
Committee" of the board of directors of
Pearson.
2. EMPLOYMENT
2.1 The Company shall employ the Executive and the Executive shall
serve Pearson with the title of
2.2 The Employment may be terminated by the Executive giving to
the Company not less than 6 months' written notice and by the
Company giving to the Executive not less than 12 months'
written notice.
-1-
<PAGE>
3. DUTIES
3.1 The Executive shall report to _______________ of Pearson on
his conduct of the business or affairs of Pearson providing
such explanations as may be required in connection therewith.
3.2 The Executive shall perform such duties as may from time to
time be assigned to him by or under the authority of the Board
and shall comply with all reasonable directions made by or
under the authority of the Board. The Executive may be
required in pursuance of his Employment to be engaged not only
on work on behalf of Pearson but also on work on behalf of any
other Group Company.
3.3 During the Employment the Executive shall well and faithfully
serve Pearson and use his utmost endeavours to promote its
interests, and shall devote such of his time, attention and
abilities to the affairs of any Group Company on behalf of
which he may be required to be engaged hereunder, as shall be
necessary.
3.4 The Executive shall at all times conduct business in an
ethical manner as approved by Pearson and shall abide by all
internal rules and regulations which Pearson may issue from
time to time to its employees.
3.5 The Executive shall, if called upon to do so and without any
further remuneration other than is herein mentioned, perform
his duties hereunder either at the offices of Pearson plc or
at the offices of any other Group Company inside the United
Kingdom as Pearson may in its reasonable discretion from time
to time require.
4. SALARY
4.1 The Executive's salary during the Employment shall be
(pound)_______ per annum payable monthly in arrears by credit
transfer directly into the Executive's bank account on the
27th day of each month or the last preceding working day. This
salary shall be inclusive of any fees payable to the Executive
either as a director of a Group Company or any other company
or otherwise arising by virtue of the Employment and shall be
deemed to accrue from day to day.
4.2 The Executive's salary will be reviewed by the Remuneration
Committee annually on 1st January, commencing 1st January,
_____.
5. BONUS
5.1 The Executive shall participate in the Pearson executive bonus
plan in its present form or as subsequently amended and
approved by the Remuneration Committee from time to time. As
at the Effective Date, the maximum bonus payable is 50% of
salary.
6. LONG-TERM INCENTIVE PLANS
6.1 The Executive shall be eligible to participate in such
long-term incentive plans as Pearson may establish subject to
the rules applicable to such plans or as
-2-
<PAGE>
amended or varied from time to time at the direction of the
Remuneration Committee.
7. EXPENSES
7.1 Pearson (or another Group Company) shall reimburse the
Executive any reasonable travelling, hotel, entertainment and
other out-of-pocket expenses properly and necessarily incurred
by him on or about the performance of his duties under this
Agreement in accordance with the relevant rules of Pearson
from the time being in force and provided that he provides
reasonable evidence of his expenditure to Pearson.
8. HOLIDAYS
8.1 The Executive shall be entitled in each calendar year to 26
working days holiday with full salary (in addition to
statutory holidays) to be taken at such reasonable time or
times as may be approved by the Managing Director of Pearson.
The entitlement to holiday and, on termination of the
Employment, holiday pay in lieu of holiday shall accrue pro
rata throughout each calendar year of the Employment.
9. TERMINATION
9.1 The Employment may be terminated by either party by notice
given in accordance with clause 2.2 or the Company may, at its
sole discretion, terminate the Employment forthwith at any
time by paying salary and any other entitlements accruing to
the Executive in lieu of any required period of notice or part
thereof.
9.2 Notwithstanding the other provisions of this Agreement, the
Company shall be entitled to terminate the Employment
forthwith (but without prejudice to the rights and remedies of
the Company for any breach of this Agreement and to the
Executive's continuing obligations under sub-clause 9.5 and
clause 10) in any of the following cases, namely:-
(a) if the Executive is guilty of dishonesty or serious
or persistent misconduct, in all cases whether or not
in connection with or referable to the Employment; or
(b) if the Executive becomes bankrupt or has a receiving
order made against him or makes any general
composition with his creditors.
In the event of the Employment being terminated by the Company
pursuant to this sub-clause 9.2, the Executive shall not be
entitled to receive any payment from the Company in respect of
any part of his annual holiday entitlement hereunder which he
may not have taken prior to the date of such termination, nor
to receive any other payment from the Company except in
respect of salary and bonus accrued to the date of such
termination.
9.3 Without prejudice to any rights or remedies available to the
Executive under the general law in relation to any breach by
the Company of this Agreement it is
-3-
<PAGE>
understood and agreed that if the Company commits any material
breach of the provisions of this Agreement, the Executive
shall be entitled to treat himself as discharged from further
performance of the Agreement. For the purposes of this clause
9.3, material breach shall include:-
(a) the termination by the Company of the Agreement other
than in accordance with clause 9.2 or 9.4;
(b) the failure by the Company to provide work for the
Executive which is consistent with the duties
described in clause 3.1.
9.4 If the Executive (owing to illness or otherwise) becomes
unable to perform his duties hereunder for a period or periods
totalling six calendar months in any period of twelve
consecutive calendar months, the Company shall (without
prejudice to any other provisions hereof) be entitled by
written notice to the Executive (given at the expiry of such
period or periods or at any time thereafter during such
inability):-
(a) to terminate the Employment forthwith; or
(b) to suspend or reduce any bonus payable under clause 5
with effect from the date of such notice (or such
later date as may be specified in such notice) and
for so long as such illness or disability shall
continue.
9.5 Upon termination of the Employment the Executive shall deliver
to Pearson all books, documents, papers, materials, credit
cards and other property relating to the business of or
belonging to Pearson (or any other Group Company) which may
then be in his possession or under his power or control.
9.6 If the Company terminates this Agreement forthwith or by
notice otherwise than in accordance with clause 9.1 or 9.4 and
in circumstances where the Executive has grounds for making a
contractual claim for damages against the Company the Company
shall reimburse any reasonable legal costs incurred by the
Executive in connection either with the pursuit of a
successful claim against the Company in respect of such action
by the Company or with any negotiation and settlement of such
a claim, subject to the Company's maximum liability under this
clause 9.6 not exceeding (pound)15,000.
10. RESTRAINT ON ACTIVITIES OF EXECUTIVE
10.1 During the period of Employment, the Executive shall not
(without Pearson's prior written consent, which will not be
unreasonably withheld in the case of an engagement, concern or
interest which is not of a similar nature to nor competitive
with the business of Pearson or any Group Company and which
does not require the Executive's time or attention during
Pearson's normal working hours) be directly or indirectly
engaged or interested in any capacity in any other business,
trade or occupation whatsoever otherwise than in the
performance of his duties hereunder.
-4-
<PAGE>
10.2 The Executive shall keep secret and shall not at any time
(whether during the Employment or after the termination of the
Employment) use for his own or another's advantage, or reveal
to any person, firm, company or organisation, and shall use
his best endeavours to prevent the publication or disclosure
of, any of the trade secrets, business methods, computer
systems or information which the Executive knew or ought
reasonably to have known to be confidential concerning the
business or affairs of (i) Pearson, or (ii) any other Group
Company, (iii) any joint venture in which it or they may
participate or (iv) any of its or their customers, so far as
they shall have come to his knowledge during the Employment.
The restrictions contained in this clause shall not apply:-
(a) to any disclosure or use authorised by the Board or
required by law or by the Employment; or
(b) so as to prevent the Executive from using his own
personal skill in any business in which he may be
lawfully engaged (subject to sub-clause 10.6 below)
after the Employment is ended.
10.3 None of the restrictions in this clause 10 shall prevent the
Executive from having an interest (as defined by the
provisions of the Companies Act 1985) in any securities (such
term to include any stocks, shares and debentures) unless they
are securities to which both conditions (a) and (b) below
apply, namely:-
(a) the company which issued the securities carries on,
or is the holding company of a company carrying on, a
business which is similar to or competitive with any
business for the time being carried on by the Company
or any Group Company; and
(b) the securities were acquired at a cost greater than
(pound)50,000 and are not listed or quoted on a Stock
Exchange (excluding, for the avoidance of doubt, the
Unlisted Securities Market or any over-the-counter
market) or, if they are so listed or quoted, they
exceed 3 per cent in nominal value or (in the case of
securities not having a nominal value) in number of a
class of securities which are so listed or quoted.
10.4 For a period of 6 months after termination of the Employment,
the Executive shall not endeavour (whether on his own account
or for any other person, firm, company or organisation) to
entice away from Pearson or any other Group Company situated
in the United Kingdom or elsewhere, any employee employed in
an executive capacity at the date of termination of the
Employment or at any time within a period of six months prior
to that date and with whom the Executive has worked or with
whom he has had personal contact as part of the Employment.
10.5 For a period of 6 months after termination of the Employment,
the Executive shall not directly or indirectly (and whether on
his own account or for any other person, firm, company or
organisation) solicit or endeavour to entice away from
Pearson, or any other Group Company any person, firm, company
or organisation who or which in the preceding 12 months shall
have been a customer of or in the habit
-5-
<PAGE>
of dealing with (i) Pearson, or (ii) any other Group Company,
and with whom the Executive has had direct dealings or
personal contact as part of the Employment, so as to harm the
goodwill of Pearson or any other Group Company or so as to
compete with Pearson or any other Group Company.
10.6 For a period of 6 months after termination of the Employment,
the Executive shall not be engaged or interested (whether as
principal, servant, agent, consultant or otherwise) in any
trade or business in which the Executive has been involved or
with which the Executive has been concerned as part of the
Employment and which is similar to, and by virtue of its
location competes with, any trade or business being carried on
at the date of termination of the Employment by (i) Pearson or
(ii) any other Group Company.
10.7 The covenants given by the Executive in this clause 10 are
given by the Executive to Pearson on its own behalf and as
agent for each of the other Group Companies.
10.8 The Executive shall not, at any time after termination of the
Employment for whatever reason, represent himself as being in
any way connected with the business of the Company or that of
any other Group Company.
11. INTELLECTUAL PROPERTY
11.1 The Executive shall not, during the Employment use
intellectual property to which any former employer or third
party has or may have an interest and the Executive agrees to
indemnify Pearson in respect of any breach of this provision.
11.2 Any discovery, invention, improvement, design or other
copyright work discovered, invented, developed or devised by
the Executive during the Employment (and whether or not in
conjunction with a third party) relating to the business of
Pearson or any other Group Company, or capable of being used
or adapted for use by Pearson (or any other Group Company),
shall be disclosed to Pearson and, subject to such rights as
the Executive may have under the Patents Act 1977, shall
belong to and be the absolute property of Pearson or the
relevant Group Company.
11.3 The Executive hereby assigns to Pearson or the relevant Group
Company all rights in the works referred to in 11.1 above free
of charge.
11.4 The Executive will at the expense of Pearson (whether during
or after cessation of the Employment) apply for and execute
all such documents as may be necessary to vest all rights,
title and interest in the works referred to in 11.2 above in
Pearson or the relevant Group Company absolutely.
11.5 The Executive irrevocably appoints Pearson to nominate an
attorney in the Executive's name and on his behalf, to execute
any documents and generally to act and use the Executive's
name for the purpose of giving the Company or any other Group
Company the full benefit of the provisions of this clause 11.
-6-
<PAGE>
12. MISCELLANEOUS
12.1 This Agreement and the Schedule hereto constitute the entire
agreement and understanding between the parties as to its
subject matter and the Executive acknowledges that he has not
entered into this Agreement in reliance upon any
representation, warranty or undertaking which is not set out
in this Agreement or referred to in this Agreement as forming
part of the contract of employment of the Executive.
12.2 The various provisions of this Agreement are severable and if
any provision is held to be invalid or unenforceable by any
court of competent jurisdiction then such invalidity or
unenforceability shall not affect the remaining provisions of
this Agreement.
12.3 Notices by either party shall be given in writing and may be
delivered personally or sent by letter addressed to the other
party at its registered office for the time being or the last
known address. Any such notice given by letter shall be deemed
to have been given at the time at which the letter would be
delivered in the ordinary course of post if sent by post and
on the date of delivery if delivered personally.
12.4 Any reference in this Agreement to an Act of Parliament shall
be deemed to include any statutory modification or
re-enactment thereof whenever made. The headings shall be
disregarded in construing this Agreement.
12.5 The Schedule hereto forms an integral part of this Agreement.
AS WITNESS whereof the parties have hereunto set their hands the day and year
first before written.
-7-
<PAGE>
THE SCHEDULE
Particulars of Terms of Employment
In accordance with the Employment Protection (Consolidation) Act 1978 the
following terms of the Employment apply from the Effective Date as provided in
the Agreement:-
(a) JOB TITLE
See clause 2.1
(b) SALARY
See clause 4.
(c) HOURS OF WORK
The Executive shall work such hours as may be necessary or appropriate
from time to time to carry out his duties properly and effectively.
(d) HOLIDAYS
See clause 8.
(e) COMPANY CAR
The Company will provide the Executive with a company car, the type and
model to be agreed by the Managing Director of Pearson, within limits
established by the Remuneration Committee.
(f) SICKNESS OR INJURY
If the Executive is absent from work because of illness or injury his
salary will continue to be paid for at least 180 days in any one
calendar year subject to submission of a doctor's or self-certification
certificate for each period of absence. The Company reserves the right
to seek a separate medical report from the Company's doctor at any
time. If absence exceeds 180 days (or if shorter periods of absence in
total exceed 180 days) within any period of a calendar year, the
Company will consider whether or not circumstances justify the
continued payment of salary in whole or in part. If the Executive is
totally incapacitated, his salary will continue to be paid by the
Company for the first six months of his absence. All the foregoing is
subject to clause 9.4.
(g) MEDICAL INSURANCE
The Company will provide free family coverage for the Executive under
the Pearson Group Health Care Scheme. Coverage will be continued into
retirement.
(h) PENSION AND LIFE ASSURANCE
The Executive will be eligible to join the Pearson Group Pension Plan,
details of which
-8-
<PAGE>
will be advised separately, together with any special arrangements
which may apply.
(i) NOTICE
See clauses 2.2 and 9.1.
(j) DISCIPLINARY PROCEDURES
The Executive will be subject to the disciplinary procedures of the
Company in force from time to time, save in so far as they are modified
by clause 9.2.
The attention of the Executive is drawn to the fact that as a director
of Pearson he is subject to such terms and conditions contained in the
articles of association of Pearson as are applicable to directors and
to the duties and obligations placed on him by the UK Companies Acts
and other legislation and also, where appropriate, Stock Exchange
regulations, including rules governing share dealings by directors and
other employees adopted by the Board (the "Rules"), a copy of which has
been handed to the Executive. The Executive may neither buy nor sell
shares or loan stock of Pearson without first receiving clearance from
another director in accordance with the Rules. The Executive may also
neither buy nor sell securities of any other company the market price
of which, as a result of unpublished information obtained by him by
virtue of his employment with Pearson or the Company, he believes may
be affected by action of Pearson or any of its subsidiaries. These
restrictions are equally applicable to dealings by the Executive's
spouse, children under the age of eighteen and other connected persons.
The attention of the Executive is drawn to the further restrictions on
"insider dealing" contained in the Criminal Justice Act 1993 in
relation to the shares and loan stock of Pearson which apply throughout
his employment and six months thereafter.
(k) GRIEVANCE PROCEDURE
If the Executive has a grievance in connection with his employment he
should raise the matter in the first instance with the Managing
Director of Pearson.
-9-
<PAGE>
SIGNED by )
for and on behalf of Pearson )
plc, in the presence of:- )
SIGNED by )
for and on behalf of Pearson Inc. )
in the presence of:- )
SIGNED by )
in the presence of:- )
-10-
