Exhibit 10.1

EXECUTED COPY

 

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STOCK PURCHASE AGREEMENT

among

HOUGHTON MIFFLIN COMPANY,

PROMISSOR, INC.,

NCS PEARSON, INC.

and

PEARSON AUTUMN ACQUISITION, INC.

Dated as of January 23, 2006

 

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TABLE OF CONTENTS

 

               Page

1.

   DEFINITIONS    1    1.1.   

Certain Matters of Construction

   1    1.2.   

Certain Definitions

   2

2.

   ACQUISITION    11 3.    PAYMENT AND CLOSING    11    3.1.   

Purchase Price

   11    3.2.   

Time and Place of Closing

   11    3.3.   

Deliveries

   11    3.4.   

Cash Adjustment

   11    3.5.   

Guarantee by Guarantor

   13

4.

   REPRESENTATIONS AND WARRANTIES OF THE SELLER    13    4.1.   

Organization and Authority

   13    4.2.   

Authorization and Enforceability

   13    4.3.   

Non-Contravention, etc.

   13    4.4.   

Title to Shares

   14    4.5.   

Brokers, etc.

   14

5.

   REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY    14    5.1.   

Corporate Matters, etc.

   14    5.2.   

Financial Statements, etc.

   16    5.3.   

Change in Condition Since Balance Sheet Date

   16    5.4.   

Environmental Matters, etc.

   19    5.5.   

Real and Personal Property

   19    5.6.   

Intellectual Property Rights, etc.

   20    5.7.   

Material Contracts

   22    5.8.   

Litigation, etc.

   24    5.9.   

Compliance with Laws, etc.

   24    5.10.   

Tax Matters

   24    5.11.   

Employee Benefit Plans

   25    5.12.   

Distributors, Customers and Suppliers

   27    5.13.   

Relationships with Related Parties

   27    5.14.   

Accounts Receivable

   27    5.15.   

Brokers, etc.

   27    5.16.   

Proposals

   27    5.17.   

Debt

   28    5.18.   

Insurance

   28    5.19.   

Intercompany Liabilities

   28    5.20.   

Sufficiency of Assets

   28    5.21.   

Escheatment

   28    5.22.   

Cash Accounts

   28

 

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6.    REPRESENTATIONS AND WARRANTIES OF THE GUARANTOR    28    6.1.   

Corporate Matters, etc.

   28    6.2.   

Ownership and Control of Buyer

   29 7.    REPRESENTATIONS AND WARRANTIES OF THE BUYER    30    7.1.   

Corporate Matters, etc.

   30    7.2.   

Financial Condition, etc.

   31    7.3.   

Investment Intent, Related Matters

   31    7.4.   

Litigation

   31    7.5.   

Brokers, etc.

   31    7.6.   

Knowledge

   31    7.7.   

No Additional Representations; No Reliance

   31 8.    CERTAIN AGREEMENTS OF THE PARTIES    32    8.1.   

Payment of Transfer Taxes and Other Charges

   32    8.2.   

Regulatory Compliance

   32    8.3.   

Consents, etc.

   32    8.4.   

Tax Agreements

   33    8.5.   

Confidentiality

   37    8.6.   

Guarantees

   38    8.7.   

Seller Non-Compete, Non-Solicitation and Non-Interference

   38    8.8.   

Surety Bonds/Letters of Credit

   39    8.9.   

Banking Offset Release

   40    8.10.   

Further Assurances

   40    8.11.   

Transfer of Seller Intellectual Property

   40    8.12.   

Insurance

   40 9.    EMPLOYMENT AND EMPLOYEE BENEFITS ARRANGEMENTS    40    9.1.   

Salary and Benefits

   40    9.2.   

Certain Liabilities

   41    9.3.   

Welfare Claims

   41    9.4.   

Prior Service Credit

   41    9.5.   

Employees on Disability Leave

   41    9.6.   

WARN

   42    9.7.   

Third-Party Rights

   42    9.8.   

Employee Indemnity

   42 10.    INDEMNIFICATION    42    10.1.   

Buyer’s Indemnification

   42    10.2.   

Seller’s Indemnification

   43    10.3.   

Monetary Limitations

   43    10.4.   

Time Limitations

   45    10.5.   

Certain Other Indemnity Matters

   45    10.6.   

Third Party Claims

   46 11.    CONSENT TO JURISDICTION; JURY TRIAL WAIVER    47    11.1.   

Consent to Jurisdiction

   47    11.2.   

Service of Process

   48    11.3.   

WAIVER OF JURY TRIAL

   48

 

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12.    MISCELLANEOUS    48    12.1.   

Entire Agreement; Waivers

   48    12.2.   

Amendment or Modification

   49    12.3.   

Severability

   49    12.4.   

Successors and Assigns

   49    12.5.   

Notices

   49    12.6.   

Public Announcements

   50    12.7.   

Headings, etc.

   51    12.8.   

Disclosure

   51    12.9.   

Third Party Beneficiaries

   51    12.10.   

Counterparts

   51    12.11.   

Governing Law

   51    12.12.   

Expenses

   51    12.13.   

Specific Performance

   51    12.14.   

Negotiation of Agreement

   52

 

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SCHEDULES

 

Schedule 1.2.20

   Capitalized Leases

Schedule 1.1.66

   Net Cash

Schedule 3.4(b)

   Accounting Principles

Schedule 4.3(a)/(b)

   Seller’s Exceptions to Non-Contravention

Schedule 5.1.1

   Jurisdictions of Qualification

Schedule 5.1.3

   Company Exceptions to Non-Contravention

Schedule 5.1.4

   Capitalization

Schedule 5.1.5

   Subsidiaries

Schedule 5.2.2(a)

   Financial Statements

Schedule 5.2.2(b)

   Liabilities

Schedule 5.3

   Changes in Condition Since Balance Sheet Date

Schedule 5.4

   Environmental Matters

Schedule 5.5.1

   Title to/Leasehold Interests in Material Personal Property; Liens on Personal
Property; Leases/Licenses for Personal Property

Schedule 5.5.2

   Leased Real Property

Schedule 5.6

   Intellectual Property and Licenses

Schedule 5.7

   Material Contracts

Schedule 5.8

   Litigation Matters

Schedule 5.9

   Compliance with Laws

Schedule 5.10

   Tax Matters

Schedule 5.11

   Employee Benefit Plans

Schedule 5.12

   Significant Customers and Suppliers

Schedule 5.13

   Related Parties

Schedule 5.14

   Accounts Receivable

Schedule 5.16

   Customer Proposals

Schedule 5.18

   Insurance

Schedule 5.19

   Intercompany Liabilities

Schedule 5.20

   Sufficiency of Assets

Schedule 5.21

   Escheatment

Schedule 8.3

   Consents

Schedule 8.10

   Further Assurances

Schedule 8.11

   Seller Intellectual Property

Schedule 9.2

   Certain Liabilities

EXHIBITS

  

Exhibit A

   Trademark Assignment Form

 

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STOCK PURCHASE AGREEMENT

This STOCK PURCHASE AGREEMENT (this “Agreement”) is made as of January 23, 2006
among Promissor, Inc., a Delaware corporation (the “Company”), Houghton Mifflin
Company, a Massachusetts corporation and the holder of all of the outstanding
capital stock of the Company (the “Seller”), Pearson Autumn Acquisition, Inc., a
Delaware corporation (the “Buyer”) and NCS Pearson, Inc. a Minnesota Corporation
(the “Guarantor”).

Recitals

1. The Seller owns all of the outstanding shares of capital stock of the Company
(the “Shares”).

2. The Seller desires to sell and transfer the issued and outstanding Shares to
the Buyer and the Buyer desires to acquire such Shares from the Seller, all upon
the terms and subject to the conditions set forth in this Agreement.

Agreement

Therefore, in consideration of the foregoing and the mutual agreements and
covenants set forth below, the parties hereto hereby agree as follows:

1. DEFINITIONS. For purposes of this Agreement:

1.1. Certain Matters of Construction. In addition to the definitions referred to
or set forth below in this Section 1:

(a) The words “hereof”, “herein”, “hereunder” and words of similar import shall
refer to this Agreement as a whole and not to any particular Section or
provision of this Agreement, and reference to a particular Section of this
Agreement shall include all subsections thereof;

(b) The words “party” and “parties” shall refer to the Seller, the Company and
the Buyer;

(c) Definitions shall be equally applicable to both the singular and plural
forms of the terms defined, and references to the masculine, feminine or neuter
gender shall include each other gender;

(d) Accounting terms used herein and not otherwise defined herein are used
herein as defined by GAAP (as defined below) in effect as of the date hereof;

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(e) All references in this Agreement to any Exhibit or Schedule shall, unless
the context otherwise requires, be deemed to be a reference to an Exhibit or
Schedule, as the case may be, all of which are made a part of this Agreement;
and

(f) The word “including” shall mean including without limitation.

1.2. Certain Definitions. The following terms shall have the following meanings:

1.2.1. “2004 Financials” is defined in Section 5.2.1(a).

1.2.2. “2005 Financials” is defined in Section 5.2.1(b).

1.2.3. “Action” shall mean any claim, action, cause of action or suit (in
contract, tort or otherwise), inquiry, proceeding or investigation by or before
any Governmental Authority, other than any Tax Dispute.

1.2.4. “Accounting Principles” is defined in Section 3.4(b).

1.2.5. “Affected Employees” shall mean all current employees of any of the
Target Companies as of the Closing Date, including any such person who is on an
approved leave of absence.

1.2.6. “Affiliate” shall mean, as to the Company (or other specified Person),
each Person directly or indirectly controlling or controlled by the Company (or
such specified Person); provided that, no Person shall be deemed an Affiliate of
the Company (or other specified Person) if such Person is an investment fund, an
entity investing solely on behalf of such investment fund, or an entity that is
directly or indirectly wholly-owned by one or more of such investment funds. For
purposes of this definition, the term “control” (including the terms
“controlling,” “controlled by” and “under common control with”) means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through ownership of voting
securities or otherwise.

1.2.7. “Affiliated Group” means any affiliated group within the meaning of Code
section 1504(a) or any similar affiliated, combined or unitary group defined
under a similar provision of state, local or foreign law.

1.2.8. “Agreement” is defined in the Preamble.

1.2.9. “Balance Sheet” is defined in Section 5.2.1(b).

1.2.10. “Balance Sheet Date” shall mean December 31, 2005.

1.2.11. “Benefit Plans” is defined in Section 5.11(a).

 

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1.2.12. “Business” shall mean the business activities of the Target Companies,
which consist of developing and providing testing services and products for
professional certification and licensing to regulatory entities, professional
associations and corporations, including psychometric services, exam
development, full examination and licensing administration services and overall
certification and licensing program management and fingerprinting as such
business activities are currently conducted.

1.2.13. “Business Day” shall mean any day that is not a Saturday, a Sunday or
any other day on which banks are required or authorized to be closed in Boston,
Massachusetts or New York City, New York.

1.2.14. “Buyer” is defined in the Preamble.

1.2.15. “Buyer Confidential Information” is defined in Section 8.10(b).

1.2.16. “Buyer Indemnitees” is defined in Section 10.2.

1.2.17. “Buyer Plans” is defined in Section 9.4.

1.2.18. “Buyer Transaction Documents” is defined in Section 7.1.1.

1.2.19. “By-laws” shall mean the corporate by-laws of a corporation, as from
time to time in effect.

1.2.20. “Capitalized Leases” means those leases listed on Schedule 1.2.20.

1.2.21. “Cash Accounts” is defined in the definition of Net Cash.

1.2.22. “Cash Shortfall” is defined in Section 3.4(c).

1.2.23. “Cash Statement” is defined in Section 3.4(b).

1.2.24. “Charter” shall mean the certificate or articles of incorporation,
organization or formation or other charter or organizational documents of any
Person (other than an individual), each as from time to time in effect.

1.2.25. “Closing” is defined in Section 3.2.

1.2.26. “Closing Date” is defined in Section 3.2.

1.2.27. “Closing Statements” is defined in Section 3.4(a).

1.2.28. “Code” shall mean the federal Internal Revenue Code of 1986, as amended
and as in effect as of the date hereof.

1.2.29. “Company” is defined in the Preamble.

 

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1.2.30. “Company Intellectual Property Rights” has the meaning given to it in
Section 5.6(a).

1.2.31. “Company Plans” is defined in Section 5.11(a).

1.2.32. “Company Transaction Documents” is defined in Section 5.1.1.

1.2.33. “Confidentiality Agreement” is defined in Section 8.5(a).

1.2.34. “Confidential Information” is defined in Section 8.5(c).

1.2.35. “Contractual Obligation” shall mean, with respect to any Person, any
material written contract, agreement, deed, mortgage, lease, license, indenture,
note, bond, or other material document or instrument (including any document or
instrument evidencing or otherwise relating to any Debt but excluding the
Charter and By-laws of such Person) to which or by which such Person is legally
bound.

1.2.36. “Debt” shall mean, with respect to any Person, all obligations of such
Person (i) for borrowed money, (ii) evidenced by notes, bonds, debentures or
similar instruments, but in no event including operating leases, (iii) in
respect of purchase money obligations for the acquisition of equipment and fixed
assets, but in no event including trade payables or accrued liabilities, and
(iv) in the nature of guarantees of obligations of the types described in
clauses (i), (ii) and (iii) above of any other Person.

1.2.37. “Deductible” is defined in Section 10.3(a).

1.2.38. “Enforceable” shall mean, with respect to any Contractual Obligation,
that such Contractual Obligation is the legal, valid and binding obligation of
the Person in question, enforceable against such Person in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or other laws affecting creditors’ rights generally and general
principles of equity (whether considered in a proceeding at law or in equity).

1.2.39. “Environmental Laws” shall mean any federal, state or local law as in
effect as of the date hereof relating to (i) releases or threatened releases of
Hazardous Substances, and (ii) the manufacture, handling, transport, use,
treatment, storage or disposal of Hazardous Substances.

1.2.40. “ERISA” shall mean the federal Employee Retirement Income Security Act
of 1974 or any successor statute, as amended and as in effect as of the date
hereof.

1.2.41. “Excess Cash” is defined in Section 3.4(c).

1.2.42. “Extended Insurance Policy” is defined in Section 8.12(a).

 

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1.2.43. “Extension Period” is defined in Section 8.12(a).

1.2.44. “Financial Statements” is defined in Section 5.2.1(b).

1.2.45. “GAAP” shall mean generally accepted accounting principles in the United
States as in effect as of, and as consistently applied by the Company in, the
preparation of the Financial Statements.

1.2.46. “Governmental Authority” shall mean any United States federal, state or
local government, regulatory or administrative agency (or any department, bureau
or division thereof) or any foreign government or regulatory or administrative
agency (or any department, bureau or division thereof).

1.2.47. “Governmental Order” shall mean any material decree, stipulation,
determination or award entered by any Governmental Authority.

1.2.48. “Guarantor” is defined in the Preamble.

1.2.49. “Guarantor Transaction Documents” is defined in Section 6.1.1.

1.2.50. “Hazardous Substances” shall mean (i) substances defined in or regulated
as toxic or hazardous under the following federal statutes and their state
counterparts, as well as these statutes’ implementing regulations, in each case,
as amended and as in effect as of the Closing Date: the Hazardous Materials
Transportation Act, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the Clean
Water Act, the Safe Drinking Water Act, the Asbestos Hazard Emergency Response
Act, the Atomic Energy Act, the Toxic Substances Control Act, the Federal
Insecticide, Fungicide, and Rodenticide Act, and the Clean Air Act;
(ii) petroleum and petroleum products, including crude oil and any fractions
thereof; (iii) natural gas, synthetic gas and any mixtures thereof; (iv) PCBs
and (v) asbestos.

1.2.51. “Indemnified Party” is defined in Section 10.6.

1.2.52. “Indemnifying Party” is defined in Section 10.6.

1.2.53. “Independent Accounting Firm” means an independent accounting firm of
nationally recognized standing reasonably satisfactory to the Seller and the
Buyer (who shall not have any material relation with the Seller, the Target
Companies, the Buyer, or their Affiliates).

1.2.54. “Intellectual Property Rights” means all tangible and intangible
(i) discoveries and inventions (whether patentable or unpatentable and whether
or not reduced to practice), patents, patent applications (either filed or in
preparation for filing) and statutory invention registrations, including
reissues, divisions, continuations, continuations in part, extensions and
reexaminations thereof, all rights therein provided by international treaties or

 

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conventions, and all improvements thereto, (ii) trademarks, service marks, trade
dress, logos, trade names, corporate names and other source identifiers (whether
or not registered), including all common law rights, and registrations and
applications for registration thereof, all rights therein provided by
international treaties or conventions, and all renewals of any of the foregoing,
(iii) electronic addresses and passwords, including Internet uniform resource
locators, Internet domain names and registrations and applications or
reservations for registration thereof, and any similar rights and all content
embodied in all world wide web sites and world wide web pages found at such
uniform resource locaters, (iv) all copyrightable works, copyrights (whether or
not registered) and registrations and applications for registration thereof,
derivative works, all rights therein provided by international treaties or
conventions and all extensions and renewals of any of the foregoing,
(v) confidential and proprietary information, trade secrets, know-how (whether
patentable or unpatentable and whether or not reduced to practice), models,
algorithms, processes and techniques, and research and development information,
ideas, technical data, designs, drawings and specifications, (vi) Software,
(vii) coded values, formats, data (including data collected from, through or
otherwise by means of the Internet) and historical or current databases, in each
case whether or not copyrightable, (viii) modifications or improvements to any
item described in the immediately preceding clauses (i) through (vii),
(ix) other proprietary rights relating to any item described in the immediately
preceding clauses (i) through (viii), including associated goodwill, remedies
against past and future infringements thereof and rights of protection of an
interest therein under the laws of all jurisdictions, and (x) copies and
tangible embodiments of any item described in the immediately preceding
clauses (i) through (ix), used or held for use by the Target Companies or
necessary to conduct the business of the Target Companies.

1.2.55. “IRS” is defined in Section 5.10(b).

1.2.56. “Insurance Policies” is defined in Section 5.18.

1.2.57. “Inventors” is defined in Section 5.6(g).

1.2.58. “Knowledge of the Company” shall mean the actual knowledge of Steve
Tapp, Jean Francois Hervy, Greg DuMont, Paul Weaver, Art Valentine and Paul
Millhouser.

1.2.59. “Leases” is defined in Section 5.5.2.

1.2.60. “Legal Requirement” shall mean any material United States federal, state
or local or foreign statute, ordinance, code, rule or regulation, or any
material Governmental Order, or any material license, franchise, consent,
approval, permit or similar right granted under any of the foregoing.

1.2.61. “Letter of Credit” means a Contractual Obligation under which the Seller
financially guarantees the performance of any obligation of a Target Company.

 

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1.2.62. “Lien” shall mean any mortgage, pledge, lien, security interest,
attachment or encumbrance, provided, however, that the term “Lien” shall not
include (i) statutory liens for Taxes not yet due and payable, (ii) encumbrances
in the nature of zoning restrictions, easements, rights or restrictions of
record on the use of real property if the same do not materially detract from
the value of the property encumbered thereby or materially impair the use of
such property in the Business as currently conducted or proposed to be
conducted, (iii) liens to secure landlords, lessors or renters under leases or
rental agreements confined to the premises rented, (iv) deposits or pledges made
in connection with, or to secure payment of, worker’s compensation, unemployment
insurance, old age pension programs mandated under applicable Legal Requirements
or other social security, (v) liens in favor of carriers, warehousemen,
mechanics and materialmen, liens to secure claims for labor, materials or
supplies and other like liens, and (vi) restrictions on transfer of securities
imposed by applicable state and federal securities laws.

1.2.63. “Loss” shall mean any loss, liability, claim, damage, expense (including
costs of investigation and defense and reasonable fees of attorneys, accountants
or other experts), whether or not involving a third party claim, and reduced by
the amount of any insurance and Tax Benefit reasonably expected to be received
and/or realized in respect thereof.

1.2.64. “Material Adverse Effect” shall mean any change, effect or circumstance
that is materially adverse to the Business, assets, financial condition or
results of operations of the Target Companies, taken as a whole, or that
materially and adversely affects the ability of the Seller to perform its
obligations under this Agreement and consummate the transactions contemplated
hereby; provided, however, that none of the following shall be deemed in
themselves (either alone or in combination) to constitute, and none of the
following shall be taken into account in determining whether there has been or
may be, a Material Adverse Effect: (i) any change, effect or circumstance that
arises out of or relates to a general deterioration in the economy or in the
industries in which the Target Companies operate (whether in the United States
or in the foreign countries in which the Target Companies operate), (ii) any
change, effect or circumstance that arises out of or relates to the outbreak or
escalation of hostilities involving the United States, the declaration by the
United States of a national emergency or war or the occurrence of any other
calamity or crisis, including an act of terrorism, (iii) any change, effect or
circumstance that arises out of or relates to the disclosure of the fact that
the Buyer is the prospective acquirer of the Target Companies, (iv) any change,
effect or circumstance that arises out of or relates to any action taken by the
Buyer or any of its Affiliates, (v) any change, effect or circumstance that
arises out of or relates to the announcement, pendency or consummation of the
transactions contemplated hereby (including any cancellations of or delays in
customer orders, any reduction in sales, any disruption in supplier,
distributor, partner or similar relationships or any loss of employees),
(vi) any change, effect, event, occurrence, state of facts or development that
arises out of or relates to any change in accounting requirements or principles
imposed upon the Target Companies or any change in applicable laws, rules or
regulations or the interpretation thereof, of (vii) any change, effect, event,
occurrence, state of facts or development that arises out of or relates to
compliance with the terms of, or the taking of any action required by, this
Agreement.

 

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1.2.65. “Material Contracts” is defined in Section 5.7(b).

1.2.66. “Net Cash” means cash in the bank accounts listed on Schedule 1.2.66
(the “Cash Accounts”) plus outstanding checks received but not yet deposited,
including credit card payments having been authorized and cleared by Target
Companies’ credit card processing vendors but not yet deposited minus ACHs in
transit minus outstanding checks written on the Cash Accounts as of the close of
business on the Closing Date.

1.2.67. “Net Cash Amount” is defined in Section 3.4(b).

1.2.68. “Notice of Disagreement” is defined in Section 3.4(e).

1.2.69. “Open Source License” means any license entered into by the Seller or
any Target Company of any Software from a third party in accordance with the
terms and conditions of any version of the GNU General Public License, GNU
Lesser General Public License or any similar license (generally on a “point and
click” download basis from the world wide web) pursuant to which the licensee is
permitted, on a royalty-free basis, to freely distribute, modify, create
derivative works of or otherwise incorporate all or any portion of the relevant
Software into the Intellectual Property Rights but requires the licensee, if it
chooses to distribute the licensed Software or any derivative work of the
licensed Software to third parties, to provide such third parties with access to
the source code for such Software.

1.2.70. “Ordinary Course of Business” shall mean the ordinary course of the
Business, consistent with past practice.

1.2.71. “Permits” is defined in Section 5.9.

1.2.72. “Person” shall mean any individual, partnership, corporation, limited
liability company, association, trust, joint venture, unincorporated
organization or other entity other than any Governmental Authority.

1.2.73. “Personalty Leases” is defined in Section 5.5.1.

1.2.74. “Pre-Closing Straddle Period” is defined in Section 8.4.3(a).

1.2.75. “Pre-Closing Tax Period” is defined in Section 8.4.2.

1.2.76. “Purchase Price” is defined in Section 3.1.

1.2.77. “Real Property” is defined in Section 5.5.2.

1.2.78. “Representatives” is defined in Section 8.5(b).

1.2.79. “Scheduled Intellectual Property” is defined in Section 5.6.

 

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1.2.80. “Securities Act” is defined in Section 7.3.

1.2.81. “Seller” is defined in the Preamble.

1.2.82. “Seller Confidential Information” is defined in Section 8.5(c).

1.2.83. “Seller Guarantee” is defined in Section 8.6.

1.2.84. “Seller Indemnitees” is defined in Section 10.1.

1.2.85. “Seller Intellectual Property” is defined in Section 8.11.

1.2.86. “Seller Plans” is defined in Section 5.11(a).

1.2.87. “Seller Transaction Documents” is defined in Section 4.1.

1.2.88. “Shares” is defined in the Recitals.

1.2.89. “Shrink Wrap Software” means off the shelf, commercially-available
Software that has not been modified by or on behalf of the Company, but
excluding any Software licensed under an Open Source License.

1.2.90. “Significant Customers” is defined in Section 5.12(a).

1.2.91. “Significant Distributors” means any authorized resellers, or other
agents with the right to sell or distribute material levels of products or
services on behalf of the Target Companies.

1.2.92. “Significant Suppliers” is defined in Section 5.12(a).

1.2.93. “Software” means all computer software, including source code, object
code, machine-readable code, HTML, versions (including testing phases), program
listings, comments, user interfaces, menus, buttons and icons, and all files,
data, manuals, design notes and other items and documentation related thereto or
associated therewith.

1.2.94. “Specific Representation” is defined in Section 10.2(c).

1.2.95. “Storage Area Network” means the computer equipment maintained and used
by the Target Companies at the Digex hosting facility.

1.2.96. “Straddle Period” is defined in Section 8.4.3(a).

1.2.97. “Stub Period” is defined in Section 8.4.2.

1.2.98. “Subsidiary” shall mean any Person of which the Company (or other
specified Person) shall own directly or indirectly through a Subsidiary, a
nominee arrangement

 

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or otherwise at least a majority of the outstanding capital stock (or other
shares of beneficial interest) entitled to vote generally.

1.2.99. “Surety Bonds” means Contractual Obligations under which the Seller is
obligated to post or otherwise provide any surety, bond or performance deposit
or otherwise financially guarantee performance of any obligation of any Target
Company.

1.2.100. “Target Companies” shall mean, collectively, the Company and its
Subsidiaries.

1.2.101. “Tax” shall mean any (and in the plural “Taxes” shall mean all)
federal, state, local or foreign income, gross receipts, franchise, estimated,
alternative minimum, add-on minimum, sales, use, transfer, registration, value
added, excise, severance, stamp, occupation, premium, profit, windfall profit,
real property, personal property, capital stock, social security, employment,
unemployment, disability, payroll, license and other taxes of any kind
whatsoever (whether payable directly or by withholding) arising under or imposed
by any Legal Requirement, including all interest, penalties and additions with
respect to any of the foregoing.

1.2.102. “Tax Benefit” shall mean the amount of any Tax benefit actually
realized by any Person, as the context may require, to any specified matter or
event, as reflected by an actual current reduction in Taxes paid or increase in
Tax refund received by such Person (and not by a potential benefit in some later
Tax period), in the Tax period in which such matter or event occurs or in any of
the five Tax years following such Tax period, including any such Tax benefit
actually realized on account of an increase in basis or other correlative
adjustment that would make allowable to such Person or its Affiliated Group a
deduction, amortization, exclusion from income, or other allowance, as
determined, calculated, and described in good faith by such Person, such
determination to be binding on all parties.

1.2.103. “Tax Dispute” is defined in Section 8.4.7.

1.2.104. “Tax Loss” shall mean any Loss relating to Taxes for which a claim may
be brought under Section 8.4.1 or Section 10 of this Agreement.

1.2.105. “Tax Return” shall mean any (and in the plural “Tax Returns” shall mean
all) federal, state, local, and foreign Tax returns, Tax reports, claims for
refund of Tax, and declarations of estimated Tax, and any schedules or
attachments to any of the foregoing or amendments thereto.

1.2.106. “Third-Party Intellectual Property Rights” means the Intellectual
Property Rights owned by Persons other than the Target Companies.

1.2.107. “Trademark Assignment” shall mean the Trademark Assignment in the form
attached hereto as Exhibit A.

 

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1.2.108. “Transition Services Agreement” shall mean the Transition Services
Agreement between the Buyer and the Seller dated as of the date hereof.

1.2.109. “WARN” shall mean the Worker Adjustment and Retraining Notification Act
of 1988.

2. ACQUISITION.

Upon the terms, subject to the conditions, and in reliance on the
representations, warranties and covenants set forth herein, on the Closing Date,
the Seller agrees to sell, transfer and deliver to the Buyer the Shares and the
Buyer agrees to purchase and acquire the Shares from the Seller.

3. PAYMENT AND CLOSING.

3.1. Purchase Price. Subject to the terms and conditions hereof, the aggregate
amount to be paid by the Buyer to the Seller at the Closing shall be $42,000,000
(the “Purchase Price”). The Purchase Price shall be payable by the Buyer by wire
transfer of immediately available funds to an account designated by the Seller
to the Buyer at least three (3) Business Days prior to the Closing Date.

3.2. Time and Place of Closing. The consummation of the transactions described
herein (the “Closing”) shall take place at the offices of Ropes & Gray LLP, One
International Place, Boston, Massachusetts, concurrently with the execution and
delivery of this Agreement on January 23, 2006 (the “Closing Date”). The Closing
will be effective as of the close of business on the Closing Date.

3.3. Deliveries. At the Closing, the Seller shall deliver to the Buyer (i) the
certificate or certificates evidencing all of the Shares together with duly
executed stock powers, all against delivery by the Buyer of the Purchase Price,
(ii) the Trademark Assignment, (iii) the Transition Services Agreement,
(iv) resignations of the directors of each Target Company and (v) the opinion of
the Seller’s General Counsel in the form agreed by the Seller and the Buyer. At
the Closing, the Buyer shall deliver to the Seller (i) the Transition Services
Agreement executed by the Buyer and (ii) the opinion of Guarantor’s General
Counsel in the form agreed by the Seller and the Buyer. At the Closing, each of
the Seller, the Buyer and the Guarantor shall deliver to the other certificates
as to its certificate of incorporation and bylaws, the resolutions of its Board
of Directors approving this Agreement and the transactions contemplated hereby
and the incumbency of its corporate officers executing this Agreement and the
other Seller Transaction Documents, Buyer Transaction Documents or Guarantor
Transaction Documents, as applicable, in the form agreed by the parties.

3.4. Cash Adjustment.

(a) Not later than five (5) Business Days prior to the Closing Date, the Seller
shall notify each bank at which a Target Company has a cash account of the
Closing Date and

 

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request delivery of a statement setting forth such Target Company’s account
balance as of the close of business on the Closing Date (“Closing Statements”).

(b) Not later than twenty (20) Business Days after the Closing Date, the Seller
shall deliver to the Buyer a written statement (the “Cash Statement”) accurately
setting forth the Net Cash position of the Company as of the close of business
on the Closing Date (the “Net Cash Amount”) and supporting documents, including
copies of the original bank statements. The Cash Statement shall be based on the
Closing Statements and prepared in accordance with the accounting principles
outlined on Schedule 3.4(b) (the “Accounting Principles”).

(c) If the Net Cash Amount is greater than $2,000,000 (such difference, the
“Excess Cash”), the Buyer shall pay to the Seller an amount equal to the Excess
Cash. If the Net Cash Amount is less than $2,000,000 (such difference, the “Cash
Shortfall”), the Seller shall pay to the Buyer an amount equal to the Cash
Shortfall.

(d) Any payments required to be made pursuant to Section 3.4(c) shall be made by
wire transfer of immediately available funds to the account or accounts
designated by the Buyer or the Seller, as the case may be, within five
(5) calendar days after final determination of the Net Cash Amount.

(e) If the Buyer disagrees with the Seller’s calculation of the Net Cash Amount,
the Buyer shall notify the Seller in writing (the “Notice of Disagreement”)
within twenty (20) Business Days after delivery of the Cash Statement. The
Notice of Disagreement shall (i) specify those items or amounts as to which the
Seller disagrees and (ii) set forth a reasonably detailed explanation of the
basis for such dispute and the Buyer’s good faith calculation of the Net Cash
Amount.

(f) If the Seller and the Buyer cannot agree upon the Net Cash Amount, during
the fifteen (15) calendar days immediately following delivery of the Notice of
Disagreement, the Seller and the Buyer shall use commercially reasonable efforts
to reach agreement on the disputed items or amounts in order to determine the
Net Cash Amount. If at the end of such fifteen (15) calendar day period the
Seller and the Buyer have been unable to agree upon a Net Cash Amount, Seller
and the Buyer shall submit to the Independent Accounting Firm for review this
Agreement, the Closing Statements, the Cash Statement and the Notice of
Disagreement and the Independent Accounting Firm shall calculate the final Net
Cash Amount. In making such calculation, the Independent Accounting Firm will
review only those items and amounts specifically set forth and objected to in
Notice of Disagreement and will resolve the dispute with respect to each such
item and amount. Such review and resolution shall be based solely on the written
submissions of the parties, the Closing Statements and the Accounting Principles
(and not on any independent review conducted by the Independent Accounting
Firm). The Independent Accounting Firm shall deliver to the Buyer and the
Seller, as promptly as practicable (but in any case no later than thirty
(30) calendar days from the date of engagement of the Independent Accounting
Firm), a report setting forth a calculation of the final Net Cash Amount, which
amount shall not be less than the Net Cash Amount shown in the Seller’s

 

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calculation delivered pursuant to Section 3.4(b) nor more than the amount
thereof shown in the Buyer’s statement delivered pursuant to Section 3.4(e).
Such report shall be final and binding upon the Buyer and the Seller. The cost
of such review and report shall be borne equally by the Buyer, on the one hand,
and the Seller, on the other hand.

(g) The Buyer and the Seller shall, and shall cause their respective
representatives to, and the Buyer shall cause the Target Companies to, cooperate
and assist in the preparation of the Cash Statement, the calculation of the Net
Cash Amount and the Notice of Disagreement and in the conduct of the review
referred to in this Section 3.4, including, without limitation, the making
available to the extent reasonably necessary of books, records, work papers and
personnel.

3.5. Guarantee by Guarantor. Guarantor agrees to cause Buyer, subject to the
terms and conditions set forth in this Agreement, to perform any and all of its
obligations under this Agreement, and irrevocably guarantees to Seller the
performance by Buyer of any and all such obligations.

4. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller hereby represents
and warrants to the Buyer that except as set forth in the Schedules to this
Agreement:

4.1. Organization and Authority. The Seller is a corporation duly formed,
legally existing and in good standing under the laws of the Commonwealth of
Massachusetts and the Seller has full power and authority to enter into this
Agreement and each other document or instrument to be entered into by the Seller
in connection herewith (the “Seller Transaction Documents”), to carry out and
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby.

4.2. Authorization and Enforceability. This Agreement and the Seller Transaction
Documents have been duly authorized by all requisite corporate action on the
part of the Seller and have been duly executed and delivered by, and are
Enforceable against, the Seller.

4.3. Non-Contravention, etc. Except as set forth in Schedule 4.3(a), the
execution and delivery of this Agreement by the Seller and the consummation by
the Seller of the Closing hereunder in accordance with the terms and conditions
of this Agreement and the Seller Transaction Documents do not conflict with or
result in the breach of any of the terms or provisions of, or constitute a
default under, any Contractual Obligation to which Seller is a party or by which
Seller is, or the Shares are, bound or any Legal Requirement applicable to
Seller or to the Shares. No consent is required to be obtained by Seller in
connection with the execution, delivery and performance of this Agreement by
Seller or the sale of the Shares as contemplated hereby, except as set forth in
Schedule 4.3(b), and other than any consent where the failure of Seller to
obtain such consent would not materially and adversely affect Seller’s ability
to consummate the Closing hereunder in accordance with the terms and conditions
of this Agreement and the Seller Transaction Documents and would not prevent
Seller from performing in all material respects its obligations under this
Agreement or the Seller Transaction Documents.

 

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4.4. Title to Shares. Seller is the record and beneficial owner of and has good
and valid title to the Shares which will be sold by Seller as contemplated
hereby, free and clear of any Liens except for restrictions on transfer imposed
by applicable securities laws.

4.5. Brokers, etc. No broker, finder, investment bank or similar agent is
entitled to any brokerage or finder’s fee from the Company in connection with
the transactions contemplated by this Agreement based upon agreements or
arrangements made by or on behalf of Seller or any of its Affiliates.

5. REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY. The Seller hereby
represents and warrants to the Buyer that, except as set forth in the Schedules
to this Agreement:

5.1. Corporate Matters, etc.

5.1.1. Organization, Power and Standing of the Company. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware. The Company has full power and authority to enter
into this Agreement and each other document or instrument to be entered by the
Company in connection herewith (the “Company Transaction Documents”) and the
Company has the corporate power and authority to own, operate or lease its
properties and to carry on its Business in all material respects as currently
conducted. The Company is duly qualified as a foreign corporation and is in good
standing in each jurisdiction where it owns or leases Real Property and in each
other jurisdiction in which the failure to so qualify would be reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect. Each
jurisdiction in which the Company is qualified as a foreign corporation is set
forth on Schedule 5.1.1.

5.1.2. Authorization and Enforceability. This Agreement and the Company
Transaction Documents have been duly authorized by all requisite corporate
action on the part of the Company and have been duly executed and delivered by,
and are Enforceable against, the Company.

5.1.3. Non-Contravention, etc. Except for items listed on Schedule 5.1.3,
neither the execution, delivery or performance of this Agreement by the Company
or the Seller nor the consummation by the Company or the Seller of the Closing
hereunder in accordance with the terms and conditions of this Agreement
constitutes, results in or gives rise to (a) a breach, violation or default
under any Legal Requirement applicable to any Target Company, (b) a breach of or
default under any Charter or By-laws provision of any Target Company, (c) the
imposition of any Lien upon any asset of any Target Company (including any
shares of capital stock of any Subsidiary of the Company) or (d) a breach of or
default under (or the acceleration of the time for performance of any material
obligation under) any Contractual Obligation of any Target Company, other than,
in the case of clauses (a), (c) and (d), any breach, violation, default or
imposition of Lien that would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect. Assuming satisfaction of any
foreign antitrust Legal

 

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Requirements and except as set forth in Schedule 5.1.3, no approval, consent,
waiver, authorization or other order of, and no declaration, filing,
registration, qualification or recording with, any Governmental Authority or
Person is required to be obtained or made by or on behalf of any Target Company
in connection with the execution, delivery or performance of this Agreement or
any Company Transaction Document and the consummation of the Closing hereunder
in accordance with the terms and conditions of this Agreement, except (a) for
those which shall have been obtained or made on or prior to, and are in full
force and effect on the date hereof, or (b) where the failure to obtain such
approval, consent, waiver, authorization or other order, or to make such
declaration, filing, registration, qualification or recording would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.

5.1.4. Capitalization.

(a) The Company is authorized to issue 100 shares of common stock, par value
$.01 per share, of which 100 are issued and outstanding. The Shares constitute
all of the issued and outstanding shares of capital stock of the Company. The
Shares are duly authorized, validly issued, fully paid and nonassessable. All of
the Shares of capital stock are held of record and beneficially by the Seller.
None of the Shares have been issued in violation of any applicable federal or
state law or any preemptive rights or rights to subscribe for or purchase
securities of the Company.

(b) Except as set forth in this Agreement and as set forth on Schedule 5.1.4,
there is no Contractual Obligation pursuant to which the Seller or any Target
Company has granted any option, warrant, convertible security or other right or
Contractual Obligation of any Person (i) to acquire the Shares or any other
securities of, or equity interests in any Target Company or (ii) requiring any
Target Company to issue, transfer, deliver or sell any additional equity
securities. Except as set forth on Schedule 5.1.4, (i) no Target Company has any
outstanding stock appreciation rights, phantom stock, performance-based equity
rights or similar rights or obligations and (ii) there are no voting trusts,
stockholder agreements, proxies or other agreements in effect with respect to
voting or transfer of the Shares or the equity securities any Target Company.

5.1.5. Subsidiaries. Schedule 5.1.5 sets forth a true and complete list of the
name and jurisdiction of organization of each Subsidiary of the Company. Each
Subsidiary listed on Schedule 5.1.5 is a corporation or other entity duly formed
and validly existing under the laws of its jurisdiction of organization, has the
power and authority to own, operate or lease the properties and assets now
owned, operated or leased by such Subsidiary and to carry on its business in all
material respects as currently conducted, and is duly qualified as a foreign
corporation or other entity and is in good standing in each jurisdiction where
it owns or leases Real Property and in each other jurisdiction in which the
failure to so qualify would be reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect. Schedule 5.1.5 sets forth a list of each
foreign jurisdiction in which each Subsidiary is qualified to do business. Each
Subsidiary listed on Schedule 5.1.5 is wholly-owned by the Company

 

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(either directly or indirectly by way of ownership through another Subsidiary
listed on Schedule 5.1.5).

5.1.6. Charter and By-laws. The Company has heretofore delivered or made
available to the Buyer true and complete copies of the Charter and By-laws of
each Target Company, in each case as in effect on the date hereof.

5.2. Financial Statements, etc.

5.2.1. Financial Information. The Buyer has been furnished with each of the
following:

(a) The unaudited consolidated balance sheet of the Company and its consolidated
Subsidiaries as of December 31, 2004 and the related consolidated unaudited
statements of operations and of cash flows (collectively, the “2004
Financials”).

(b) The unaudited consolidated balance sheet of the Company and its consolidated
Subsidiaries as of the Balance Sheet Date (the “Balance Sheet”) and the related
unaudited consolidated statements of operations and of cash flows (collectively,
the “2005 Financials” and together with the 2004 Financials the “Financial
Statements”).

5.2.2. Character of Financial Information.

(a) The Financial Statements were prepared in accordance with GAAP consistently
applied throughout the periods specified therein and present fairly, in all
material respects, the consolidated financial position and results of operations
of the Company and its Subsidiaries as of the dates and for the periods
specified therein, subject to the absence of footnotes and, in the case of the
2005 Financials, to normal year-end adjustments, in each case, except as set
forth on Schedule 5.2.2(a). Each of the Target Companies maintains a system of
internal accounting controls sufficient to provide reasonable assurance that
(a) transactions are executed in accordance with management’s general or
specific authorizations and (b) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP.

(b) Except as (i) set forth on Schedule 5.2.2(b) or (ii) has not had,
individually or in the aggregate, a Material Adverse Effect, the Target
Companies have no liabilities or obligations of any kind (whether known, or
unknown and whether absolute, accrued, contingent or otherwise) except for
liabilities or obligations reflected or reserved against in the 2005 Financials
and liabilities incurred in the Ordinary Course of Business since the Balance
Sheet Date.

5.3. Change in Condition Since Balance Sheet Date. Except for matters set forth
in Schedule 5.3 or as required hereby and except for any change resulting from
general economic, financial or market conditions or circumstances generally
affecting the Business or arising from

 

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compliance with the terms of, or the taking of any action required by, this
Agreement or the Company Transaction Documents, since the Balance Sheet Date:

(a) other than transactions between or among the Company and its Subsidiaries,
neither the Company nor any of its Subsidiaries has:

(i) entered into any Contractual Obligation other than this Agreement relating
to (A) the sale of any capital stock or equity interest in any Target Company,
(B) the purchase of assets constituting a business or (C) any merger,
consolidation or other business combination;

(ii) mortgaged, pledged or subjected to any Lien any of their assets other than
(A) conditional sales or similar security interests granted in connection with
the lease or purchase of equipment or supplies in the Ordinary Course of
Business, (B) Liens disclosed on Schedule 5.5.1 and (C) Liens that have not had,
individually or in the aggregate, a Material Adverse Effect;

(iii) sold, leased, transferred or exchanged any material property for less than
the fair value thereof;

(iv) entered into, or relinquished any rights under, any Contractual Obligation
having a value in excess of $100,000 per year and which cannot be canceled by
such entity within thirty (30) calendar days;

(v) entered into any Contractual Obligation relating to employment providing for
annual compensation over $75,000, any new employee benefit, deferred
compensation or other similar employee benefit arrangement, any new consulting
arrangement, any grant of severance or termination rights to any director,
officer or employee of any Target Company or any increase in benefits payable
under existing severance or termination pay policies or Contractual Obligations
relating to employment, in each case, outside of the Ordinary Course of
Business;

(vi) amended the terms of any Contractual Obligations with customers of the
Target Companies which have an aggregate annual impact on the Target Companies’
estimated net revenue of $400,000 or more in a manner which would have an
adverse annual impact of $100,000 or more on the Target Companies’ actual net
revenue or amended the term of any Contractual Obligations with suppliers of the
Companies which have an aggregate annual impact on the Target Companies’
estimated net revenue of $400,000 or more in a manner which would have an
adverse annual impact of $100,000 or more on the Target Companies’ actual net
revenue;

 

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(b) no Target Company has increased or permitted the increase of compensation,
bonus or other benefits payable by any Target Company to any of its directors,
officers or employees in excess of $10,000 over the prior year’s compensation,
bonus or other payment for any such individual;

(c) no Target Company has made any material change in its accounting, pricing,
investment, financial reporting, inventory, credit or allowance practices or
settled or compromised any material separate-company Tax liability, except as
required by any change in GAAP or an applicable Legal Requirement occurring
after the date hereof;

(d) no Target Company has incurred or cancelled any material Debt or capital
lease, materially modified the terms of any existing Debt or waived any claims
or rights of substantial value, in each case, except in the Ordinary Course of
Business;

(e) no Target Company has made any loan or advance to any stockholder, officer,
director, employee or consultant of any Target Company, or any material loan or
advance to any other Person, in each case, other than in the Ordinary Course of
Business;

(f) no Target Company has failed to pay or satisfy when due any obligation
related to the Business equal to or in excess of $15,000 individually or in
excess of $50,000 in the aggregate, such $50,000 excluding any individual item
equal to or in excess of $15,000, delayed or postponed the payment of any such
liability or taken any other action that would have the effect of delaying or
postponing the payment of any such liability, in each case, outside of the
Ordinary Course of Business;

(g) there has not been any (i) acquisition by or on behalf of any Target Company
of any material assets, properties, capital stock or business of any other
Person or (ii) sale, abandonment or other disposition of any material asset or
properties of any Target Company, in each case, other than in the Ordinary
Course of Business;

(h) there has not been any destruction of, damage to or loss of any material
assets of the Business;

(i) there has been no discharge of any material liability owed to a Target
Company outside of the Ordinary Course of Business;

(j) there has not been any material re-valuation of any assets, properties or
rights of any Target Company;

(k) no Target Company has provided any discounts or special incentives to any
customer or of such Target Company or taken any other action to accelerate sales
of products or services offered by such Target Company, in each case, outside of
the Ordinary Course of Business;

 

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(l) there has been no action taken to accelerate the payment date of any
accounts receivable of the Target Companies in excess of $15,000 or to encourage
any customers of the Target Companies to make payments on such accounts earlier
than due, in each case, outside of the Ordinary Course of Business;

(m) the Business has been conducted only in the Ordinary Course of Business
(except as otherwise required or permitted by the terms of this Agreement);

(n) there have not been any events or occurrences which have had or could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect; or

(o) none of the Target Companies has entered or agreed to enter into any
Contractual Obligation to do any of the foregoing.

5.4. Environmental Matters, etc. To the Knowledge of the Company, except as set
forth on Schedule 5.4 or as has not had, individually or in the aggregate, a
Material Adverse Effect, (a) each of the Target Companies is as of the date
hereof in compliance with all Environmental Laws and (b) there is, as of the
date hereof, no Action pending or, threatened against any Target Company in
respect of (i) noncompliance by any Target Company with any Environmental Laws
or (ii) the release or threatened release into the environment of any Hazardous
Substance by any Target Company or (iii) the handling, storage, use,
transportation or disposal of any Hazardous Substance by any Target Company.

5.5. Real and Personal Property.

5.5.1. Except as set forth on Schedule 5.5.1, each Target Company has valid
title to, or a valid leasehold interest in, all of its material tangible
personal property, and such material tangible personal property is not subject
to any Lien except as set forth on Schedule 5.5.1. Except as has not had,
individually or in the aggregate, a Material Adverse Effect, (a) all leases and
licensing agreements for material tangible personal property (“Personalty
Leases”) leased or licensed by any of the Target Companies are valid and in full
force and effect and are listed on Schedule 5.5.1; (b) the Target Companies have
performed all obligations required to be performed by them under such leases;
and (c) no event or condition exists which constitutes or, with the giving of
notice or the passage of time or both, would constitute a default by any of the
Target Companies as lessee or licensee under such leases.

5.5.2. None of the Target Companies owns any real property. Schedule 5.5.2 sets
forth a list of all real property leased to the Target Companies (collectively,
the “Real Property”). Except as has not had, individually or in the aggregate, a
Material Adverse Effect (a) all leases (the “Leases”) of Real Property leased to
the Target Companies are valid and in full force and effect; (b) the Target
Companies have performed all obligations required to be performed by them under
such Leases and (c) no event or condition exists which constitutes or, with the
giving of notice or passage of time or both, would constitute a default by any
of the Target Companies as lessee under such Lease.

 

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5.6. Intellectual Property Rights, etc. Schedule 5.6 sets forth a list
identifying (A) all Software programs that are owned by the Target Companies and
are material to the Business, and (B) all Intellectual Property Rights owned by
the Target Companies that are (i) patents and patent applications, (ii) federal
or state registered trademarks and service marks and applications therefor,
(iii) material unregistered trademarks or service marks, (iv) domain name
registrations, or (v) copyright applications and registrations ((A) and
(B) collectively “Scheduled Intellectual Property”). Schedule 5.6 also
identifies all Contractual Obligations under which the Target Companies (1) are
licensed or otherwise authorized to use Third-Party Intellectual Property Rights
other than licenses to Shrink-Wrap Software or (2) have granted to any Person
any rights under any material Intellectual Property Right.

(a) Except as set forth on Schedule 5.6, the Target Companies own the Scheduled
Intellectual Property and own or have the right to use all Intellectual Property
Rights used in the conduct of the Business (the “Company Intellectual Property
Rights”) free and clear of all Liens and encumbrances. Except as set forth on
Schedule 5.6 or as provided in the Contractual Obligations identified on
Schedule 5.6, the Target Companies are entitled to unrestricted use of the
Scheduled Intellectual Property.

(b) Except as would not be reasonably expected to have, individually or in the
aggregate, a Material Adverse Effect:

(i) Neither the execution, delivery, nor performance of this Agreement by the
Target Companies nor the consummation of the transactions contemplated hereby
will result in a breach or violation of any Contractual Obligation to which any
Target Company is a party and pursuant to which such Target Company is
authorized to use any Third-Party Intellectual Property Rights, excluding any
Shrink Wrap Software;

(ii) The Target Companies have obtained all rights necessary to utilize the
Third-Party Intellectual Property Rights, excluding any Shrink Wrap Software,
currently utilized in the operation of the Business; and

(iii) All agreements relating to Third-Party Intellectual Property Rights,
excluding any Shrink Wrap Software, are in full force and effect, and no event
has occurred that constitutes a default or breach by a Target Company of such
agreements, or to the Knowledge of the Target Companies, by the other party
thereto.

(c) The Target Companies have not received any written or, to the Knowledge of
the Target Companies, oral notice of any defect with respect to the ownership,
enforceability, or validity of the Company Intellectual Property Rights or any
Third-Party Intellectual Property Right that the Target Companies have licensed
on an exclusive basis.

 

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(d) Except as set forth on Schedule 5.6, to the Knowledge of the Target
Companies the conduct of the Business as currently conducted and as conducted in
the past two (2) years does not and did not infringe upon the intellectual
property rights of any Person. The Target Companies have not (A) received any
written, or to the Knowledge of the Target Companies, oral notice that a Target
Company has been sued or charged as a defendant or potential defendant in any
Action that involves the Company Intellectual Property Rights or any Third-Party
Intellectual Property Rights that the Target Companies have licensed on an
exclusive basis, or (B) received any written claim of infringement or notice of
any Action involving a claim of infringement by any Target Company of the
intellectual property rights of any other Person.

(e) There are no settlements, forebearances to sue, consent judgments or orders,
or similar obligations other than license agreements in the Ordinary Course of
Business that restrict the Target Companies’ rights to use the Company
Intellectual Property Rights.

(f) To the Knowledge of the Target Companies, no Person is engaging in any
activity that infringes upon the Company Intellectual Property Rights.

(g) (i) All Software included in the Scheduled Intellectual Property and all
works registered by copyright registrations or applications included in the
Scheduled Intellectual Property and any other copyrightable work not licensed by
written agreement and material to the Business included in the Company
Intellectual Property Rights were created by employees of the Target Companies
in the scope of employment, were otherwise works made for hire, or were created
by individuals or entities that executed valid and effective assignments
granting all right, title and interest in such works to the Target Companies and
(ii) the Target Companies have obtained assignments from employees, former
employees, independent contractors, and former independent contractors
(collectively, the “Inventors”) of all such Inventors’ rights in any Scheduled
Intellectual Property Rights developed by such Inventors.

(h) Except as would not be reasonably likely to have a Material Adverse Effect,
all necessary registration, maintenance, and renewal fees in connection with
registered trademarks included in the Scheduled Intellectual Property (including
any maintenance fees that are subject to a surcharge if paid during a grace
period) have been paid and all necessary documents and certificates in
connection therewith have been filed with the relevant trademark authority in
the United States or in foreign jurisdictions, as the case may be, for the
purpose of maintaining such trademark registrations or applications for
registration.

(i) To the Knowledge of the Target Companies, no product, service, publication,
advertising, marketing, or promotional materials of the Target Companies
includes any libelous statement or material that violates any publicity or
privacy rights of any Person.

(j) Except as would not be reasonably likely to have a Material Adverse Effect,
the Target Companies have taken reasonable security measures to protect and
preserve the confidentiality and value of its proprietary information and trade
secrets.

 

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(k) Except as provided in the Contractual Obligations listed on Schedule 5.6,
there are no royalties, fees, honoraria, or other payments payable by any Target
Company to any Person by reason of the ownership, development, license, sale,
disposition, or use in any manner of the Intellectual Property Rights, other
than salaries and sales commissions paid to employees and sales agents in the
Ordinary Course of Business and license fees payable in respect of Shrink Wrap
Software.

(l) The Software products distributed by the Target Companies are not based on
and do not include any Software obtained by the Target Companies pursuant to an
Open Source License.

(m) Except as disclosed on Schedule 5.6 or Schedule 5.7, there is no license or
other Contractual Obligation under which any Target Company is a licensor with
respect to any Intellectual Property Right.

(n) Except for the Seller Intellectual Property, which is to be transferred to
the Company pursuant to Section 8.11 (Transfer of Seller Intellectual Property),
the Seller and its Affiliates (other than the Target Companies) do not have any
rights, title, or interest in any Company Intellectual Property Right.

5.7. Material Contracts.

(a) Set forth on Schedule 5.7 is a true and complete list of all of the
following Contractual Obligations of any Target Company:

(i) All collective bargaining agreements and all written employment or
consulting agreements pursuant to which services are rendered to the Target
Companies (other than the Company Plans), under which any Target Company is
required to make salary or consulting fee payments in excess of $100,000 per
year;

(ii) All Contractual Obligations under which any Target Company is or will after
the Closing be restricted in any material respect from carrying on any Business
activities anywhere in the world (other than use restrictions contained in any
of the Leases, Personalty Leases or the intellectual property licenses listed in
Schedule 5.6);

(iii) All Contractual Obligations to sell or otherwise dispose of any assets
having a fair market value in excess of $100,000, other than those entered into
in the Ordinary Course of Business or for the grant to any Person of any
options, rights of first refusal or preferential or similar rights to purchase
any such assets or properties;

 

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(iv) All Contractual Obligations between any Target Company on the one hand and
any Affiliate of any Target Company (other than the Target Companies) on the
other hand;

(v) All Contractual Obligations (including partnership and joint venture
agreements) under which (A) any Target Company has any liability or obligation
for Debt or constituting or giving rise to a guarantee of any liability or
obligation of any Person (other than any Target Company) or (B) any Person has
any liability or obligation constituting or giving rise to a guarantee of any
liability or obligation of any Target Company, in either case involving any Debt
or the guarantee of a liability or obligation in excess of $100,000
individually;

(vi) All Contractual Obligations entered into since the Balance Sheet Date
pursuant to which any Target Company incurred an obligation to pay any amounts
in excess of $100,000 in respect of indemnification obligations, purchase price
adjustment or otherwise in connection with any (A) acquisition or disposition of
assets constituting a business or securities representing a controlling interest
in any Person, (B) merger, consolidation or other business combination, or
(C) series or group of related transactions or events of a type specified in
subclauses (A) and (B);

(vii) All Contractual Obligations pursuant to which any Target Company may be
expected to perform services or receive payments with a value in excess of
$100,000 per year and which cannot be canceled by such Target Company within
thirty (30) calendar days, except for customer purchase orders received in the
Ordinary Course of Business;

(viii) All Contractual Obligations pursuant to which any Target Company may be
obligated to pay for goods and services to be delivered or performed or
otherwise make payments in excess of $100,000 per year and which cannot be
canceled by such Target Company within thirty (30) calendar days, except for
customer purchase orders received in the Ordinary Course of Business;

(ix) All Contractual Obligations constituting a brokerage, distribution or sales
representative agreement or appointing any agent pursuant to which any Target
Company is obligated to make payments in excess of $100,000 per year and which
cannot be canceled by such Target Company within thirty (30) calendar days;

(x) All outstanding Surety Bonds provided on behalf of any Target Company, which
will not be satisfied prior to the Closing Date; and

(xi) All outstanding Letters of Credit issued on behalf of any Target Company,
which will not be satisfied prior to the Closing Date.

 

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(b) Each of the Contractual Obligations listed on Schedule 5.7, as in effect on
the date hereof, shall be referred to herein collectively as the “Material
Contracts”. Except as set forth on Schedule 5.7, the Seller has made available
to the Buyer true, accurate and complete copies of each Material Contract in
each case as amended or otherwise modified or in effect.

(c) Each Material Contract is valid, in full force and effect and binding upon
the applicable Target Company and, to the Knowledge of the Target Companies, the
other parties thereto in accordance with its terms.

(d) No breach or default in performance by any Target Company under any of the
Material Contracts has occurred and is continuing, and no event has occurred
which with notice or lapse of time or both would constitute such a breach or
default, other than any breach or default which has not had, individually or in
the aggregate, a Material Adverse Effect. To the Knowledge of the Company, no
material breach or default by any other Person under any of the Material
Contracts has occurred and is continuing, and no event has occurred which with
notice or lapse of time or both would constitute such a material breach or
default, except a breach or default which has not had and is not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect.

5.8. Litigation, etc. Except as set forth on Schedule 5.8, there is no material
Action against any Target Company pending or, to the Knowledge of the Company,
threatened. There is no Action pending or, to the Knowledge of the Company,
threatened which seeks rescission of or seeks to enjoin the consummation of this
Agreement or any of the transactions contemplated hereby.

5.9. Compliance with Laws, etc. (a) The operations of the Business are in
compliance as of the date hereof with applicable Legal Requirements and
Governmental Orders, except as set forth in Schedule 5.9 or as would not be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect, (b) the Target Companies have been granted all licenses,
permits, consents, approvals, franchises and other authorizations under any
Legal Requirement and from any Governmental Authority necessary for and material
to the conduct of the Business (collectively, the “Permits”), except where the
failure to obtain such Permits has not had and would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect, and
(c) the Company has not received any notice that any Governmental Authority or
other licensing authority will revoke, cancel, rescind, materially modify or
refuse to renew in the ordinary course any of the Permits or of a material
citation, fine or penalty imposed against any Target Company for the violation
of any applicable Legal Requirement.

5.10. Tax Matters.

Except as set forth on Schedule 5.10:

(a) Each of the Target Companies has duly and timely filed or has had filed on
its behalf all material Tax Returns that it was required to file on or before
the date hereof (or

 

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the Closing Date) and such Tax Returns are (or will be, as the case may be)
accurate, complete and correct in all material respects insofar as they reflect
the current Taxes due. All Taxes shown to be payable on such material Tax
Returns have been timely paid or will be timely paid;

(b) with respect to any of the Tax Returns referred to in clause (a), any
material deficiencies asserted by the Internal Revenue Service (“IRS”) or the
applicable state, local or foreign taxing authority and received in writing have
been paid in full;

(c) none of the Target Companies has received any written notice of any audit,
claim, deficiency or assessment that is pending or proposed as of the date
hereof with respect to material Taxes of any of the Target Companies;

(d) none of the Target Companies is party to any written agreements or waivers
extending the statutory period of limitation applicable to any material Taxes of
the Target Companies;

(e) notwithstanding anything in this Agreement to the contrary, neither the
Seller nor the Company makes any representation, nor provides any warranty, nor
shall have any liability with respect to the current existence or amount, or
future existence or amount or availability, of any Tax attribute of any Target
Company (including, without limitation, any net operating losses, credits or Tax
basis) for Tax purposes);

(f) except as set forth on Schedule 5.10, none of the Target Companies is liable
for Taxes for any other Person as transferee or successor or pursuant to the
terms of a tax-sharing, indemnity or similar agreement, in each case outside of
the Ordinary Course of Business; and

(g) none of the Target Companies has participated within the meaning of Treasury
Regulations Section 1.6011-4(c) in any “listed transaction” within the meaning
of Treasury Regulations Section 1.6011-4(b)(2).

5.11. Employee Benefit Plans.

(a) Schedule 5.11 lists each material plan, program, policy, agreement or
arrangement providing for compensation or benefits, including each “employee
benefit plan” within the meaning of section 3(3) of ERISA, deferred
compensation, severance, vacation, leave of absence, health, accident, other
disability or other insurance plan, fringe benefit, stock, bonus, incentive
plan, program, policy, agreement or arrangement, whether written or oral,
whether existing at the Closing date or prior thereto, or whether for the
benefit of a single individual or more than one individual (excluding Material
Contracts), that is maintained or otherwise contributed to by or on behalf of
the Target Companies or under which any employee, former employee, director,
agent or independent contractor of the Target Companies is covered, is eligible
for coverage or has benefit rights (the “Benefit Plans”) and for which the
Target Companies has any material liability. Schedule 5.11 specifically
identifies those Benefit Plans

 

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that Seller or its Affiliates, other than the Target Companies, sponsor,
contribute to or are a party to (the “Seller Plans”) and those Benefit Plans
that only the Target Companies sponsor, contribute to, or are a party to and for
which the Target Companies will have any material liability following the
Closing (the “Company Plans”).

(b) Seller has provided or made available to Buyer with a true and complete copy
of all material documentation relating to the Company Plans (including copies of
the plan documents, summary plan descriptions, trust agreements, IRS
determination letters and the most recent annual reports and actuarial
valuations). Seller has provided or made available Buyer with a summary plan
description, actuarial valuation and IRS determination letter, if applicable,
for all Seller Plans.

(c) Each Company Plan has been maintained in form and operation in material
compliance with its terms and with the applicable provisions of law.

(d) No direct, contingent or secondary liability has been incurred or is
expected to be incurred by the Target Companies under Title IV of ERISA, or
Sections 4971 through 4980G to any party with respect to any Benefit Plan or
with respect to any other plan presently or heretofore maintained or contributed
to by any employer that would be considered to be a single employer with any of
the Target Companies under Section 412(n)(6)(B) of the Code.

(e) Except as set forth in Schedule 5.11, no benefit under any Benefit Plan,
including, without limitation, any severance, retention or parachute payment
plan or agreement, will be established or become accelerated, vested or payable
by reason of any transaction contemplated under this Agreement either alone or
in conjunction with another event (e.g., termination of employment) with respect
to which the Target Companies will have any material liability.

(f) There are no pending or, to the Knowledge of the Seller, the Company or the
Subsidiaries, threatened claims or controversies with respect to any Company
Plan, other than routine claims for benefits in the normal course.

(g) A true and correct detailed list of all officers, directors, and employees
of the Target Companies with annual salaries of more than $100,000, including
without limitation names, positions and salaries is set forth in Schedule 5.11.

(h) All contributions to Company Plans that were required to be made under such
Company Plans have been made, and all benefits accrued under any unfunded
Company Plans (including, but not limited to, incentive, commission, bonus and
vacation plans) have been paid, accrued or otherwise adequately reserved in
accordance with GAAP.

(i) The Target Companies are in compliance with all notice and other
requirements under WARN and any similar state or local laws relating to plant
closing and layoffs. Except as set forth on Schedule 5.11, none of the employees
of the Target Companies

 

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have suffered an “employment loss” (as defined in WARN) during the 90-day period
prior to the date of this Agreement.

5.12. Distributors, Customers and Suppliers.

(a) The Target Companies have no Significant Distributors. Schedule 5.12 sets
forth a complete and accurate list of (i) all customers of the Target Companies
during the 2005 calendar year that have individually provided revenues to the
Target Companies in excess of $100,000 (“Significant Customers”) and (ii) all
suppliers from whom the Target Companies have purchased (individually or
collectively) products or services in an amount exceeding $100,000 during the
2005 calendar year (the “Significant Suppliers”).

(b) Except as set forth on Schedule 5.12(b), to the Knowledge of the Company, no
Significant Customer, Significant Supplier or Significant Distributor, has
provided a Target Company written notification of (i) termination or
cancellation of its relationship with such Target Company, (ii) any intention to
terminate or cancel such relationship, or (iii) any other adverse modification
to such relationship having an annual value of greater than $100,000 per
Significant Customer or Significant Supplier.

5.13. Relationships with Related Parties. Except as set forth in Schedule 5.13
or as contemplated hereby, neither the Seller nor its Affiliates: (a) has any
interest in any material property (whether real, personal or mixed and whether
tangible or intangible) used in or pertaining to the Business, (b) is, or since
January 1, 2002 has, owned a material equity or any other material financial
interest in, a Person that has had material business dealings or a material
financial interest in any transaction with any Target Company or (c) is a party
to any material contract or arrangement with, or has any material claim or right
against any Target Company.

5.14. Accounts Receivable. Subject to the allowances for doubtful accounts with
respect to accounts receivable set forth on the Balance Sheet, all accounts
receivable reflected on the Balance Sheet and all accounts receivable arising
subsequent thereto (but prior to the Closing Date), have arisen in the Ordinary
Course of Business and, to the Knowledge of the Company, (i) represent valid and
enforceable obligations due to the applicable Target Company and (ii) except as
set forth on Schedule 5.14, are subject to no setoff, counterclaim or future
performance obligation on the part of any Target Company, in each case, other
than in the Ordinary Course of Business.

5.15. Brokers, etc. No broker, finder, investment bank or similar agent is
entitled to any brokerage or finder’s fee from the Company in connection with
the transactions contemplated by this Agreement based upon agreements or
arrangements made by or on behalf of the Company.

5.16. Proposals. Schedule 5.16 sets forth a list of each outstanding customer
proposal of each Target Company proposing terms which would result in receipt by
any Target Company of amounts equal to or in excess of $500,000 annual revenue
for such proposal. The Company

 

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has delivered true, complete and correct copies of each such proposal (including
all amendments, modifications and extensions thereof) to Buyer, in each case,
unless the terms of such proposal prevent such delivery.

5.17. Debt. On the Closing Date, the Target Companies shall have no Debt.

5.18. Insurance. Schedule 5.18 sets forth a list of all insurance polices or
binders which are currently in effect insuring the Business (the “Insurance
Policies”). Each such policy is legal, valid, binding and in full force and
effect. The Seller has maintained since January 2003 in full force and effect
with financially sound and reputable insurers insurance policies for the
Business in such amounts and against such losses and risks as is customarily
carried by Persons engaged in the same or similar business and as is required
under the terms of the applicable Leases or other Contractual Obligations. All
premiums due under the Insurance Policies have been paid in full or, with
respect to premium not yet due, accrued. Except as disclosed on Schedule 5.18,
no insurer (a) has questioned, denied or disputed (or otherwise reserved its
rights with respect to) the coverage of any claim pending under any Insurance
Policy or (b) has given written notice of cancellation of any such Insurance
Policy. Except as disclosed on Schedule 5.18, after Closing the Target Companies
will continue to have coverage under the Insurance Polices with respect to
covered events occurring prior to the Closing.

5.19. Intercompany Liabilities. Except as set forth on Schedule 5.19, there are
no liabilities owed by any of the Target Companies to the Seller or any other
member (other than another Target Company) of the Affiliated Group of which the
Seller is the parent entity.

5.20. Sufficiency of Assets. As of the Closing Date, except as set forth on
Schedule 5.20 or as provided for in the Transition Services Agreement, the
tangible assets of the Target Companies are sufficient for the continued conduct
of the Business in substantially the same manner as conducted prior to the
Closing, except as to items that would not have an individual cost to the Target
Companies of greater than $50,000.

5.21. Escheatment. Except as (i) set forth on Schedule 5.21 or (ii) has not,
individually or in the aggregate, had a Material Adverse Effect, to the
Knowledge of the Company, no Target Company has any escheatment liability or any
liability related to unclaimed or abandoned property.

5.22. Cash Accounts. The Cash Accounts are the only bank accounts against which
checks or other drafts may be written for which any Target Company would be
liable.

6. REPRESENTATIONS AND WARRANTIES OF THE GUARANTOR. The Guarantor hereby
represents and warrants to the Seller that:

6.1. Corporate Matters, etc.

6.1.1. Organization, Power and Standing of the Guarantor. The Guarantor is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State

 

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of Minnesota and the Guarantor has full power and authority to enter into this
Agreement and each other document or instrument to be entered into by the Buyer
in connection herewith (the “Guarantor Transaction Documents”), to carry out and
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby

6.1.2. Authorization and Enforceability. This Agreement and the Guarantor
Transaction Documents have been duly authorized by all requisite corporate
action on the part of the Guarantor and have been or at the Closing will be duly
executed and delivered by, and are Enforceable against, the Guarantor.

6.1.3. Non-Contravention, etc. Neither the execution, delivery and performance
of this Agreement by the Guarantor nor the consummation by the Guarantor of the
Closing hereunder in accordance with the terms and conditions of this Agreement
constitutes, results in or gives rise to (a) a breach, violation or default
under any Legal Requirement applicable to the Guarantor, (b) a breach of or
default under any Charter or By-laws provision of the Guarantor, or (c) a breach
of or default under (or the acceleration of the time for performance of any
material obligation under) any Contractual Obligation of the Guarantor, other
than, in the case of clauses (a) and (c), any breach, violation or default that
would not reasonably be expected to, individually or in the aggregate,
materially and adversely affect the ability of the Guarantor to perform its
obligations under this Agreement. Assuming satisfaction of any foreign antitrust
Legal Requirements, no approval, consent, waiver, authorization or other order
of, and no declaration, filing, registration, qualification or recording with,
any Governmental Authority or Person is required to be obtained or made by or on
behalf of the Guarantor in connection with the execution, delivery or
performance of this Agreement or any Guarantor Transaction Document and the
consummation of the Closing hereunder in accordance with the terms and
conditions of this Agreement except (a) for items which shall have been obtained
or made on or prior to, and shall be in full force and effect at the Closing and
(b) where failure to obtain such approval, consent, waiver, authorization or
other order, or to make such declaration, filing, registration, qualification or
recording would not materially and adversely affect the Guarantor’s ability to
consummate the Closing hereunder in accordance with the terms and conditions of
this Agreement or any Guarantor Transaction Document and would not prevent the
Guarantor from performing in all material respects any of its obligations under
this Agreement and the Guarantor Transaction Documents.

6.2. Ownership and Control of Buyer. Guarantor is the indirect owner of all of
the outstanding shares of Buyer. All of the shares of Buyer are held free and
clear of any Liens except for restrictions on transfer imposed by applicable
securities laws. Buyer is an Affiliate of Guarantor.

 

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7. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer hereby represents and
warrants to the Seller that:

7.1. Corporate Matters, etc.

7.1.1. Organization, Power and Standing of the Buyer. The Buyer is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and the Buyer has full power and authority to enter into this
Agreement and each other document or instrument to be entered into by the Buyer
in connection herewith (the “Buyer Transaction Documents”), to carry out and
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The Buyer was organized solely for
the purpose of consummating the transaction contemplated by this Agreement, and
other than as expressly contemplated by Section 7.2 hereof, has no material
assets or liabilities.

7.1.2. Authorization and Enforceability. This Agreement and the Buyer
Transaction Documents have been duly authorized by all requisite corporate
action on the part of the Buyer and have been or at the Closing will be duly
executed and delivered by, and are Enforceable against, the Buyer.

7.1.3. Non-Contravention, etc. Neither the execution, delivery and performance
of this Agreement by the Buyer nor the consummation by the Buyer of the Closing
hereunder in accordance with the terms and conditions of this Agreement
constitutes, results in or gives rise to (a) a breach, violation or default
under any Legal Requirement applicable to the Buyer, (b) a breach of or default
under any Charter or By-laws provision of the Buyer, or (c) a breach of or
default under (or the acceleration of the time for performance of any material
obligation under) any Contractual Obligation of the Buyer, other than, in the
case of clauses (a) and (c), any breach, violation or default that would not
reasonably be expected to, individually or in the aggregate, materially and
adversely affect the ability of the Buyer to perform its obligations under this
Agreement. Assuming satisfaction of any foreign antitrust Legal Requirements, no
approval, consent, waiver, authorization or other order of, and no declaration,
filing, registration, qualification or recording with, any Governmental
Authority or Person is required to be obtained or made by or on behalf of the
Buyer in connection with the execution, delivery or performance of this
Agreement or any Buyer Transaction Document and the consummation of the Closing
hereunder in accordance with the terms and conditions of this Agreement except
(a) for items which shall have been obtained or made on or prior to, and shall
be in full force and effect at the Closing and (b) where failure to obtain such
approval, consent, waiver, authorization or other order, or to make such
declaration, filing, registration, qualification or recording would not
materially and adversely affect the Buyer’s ability to consummate the Closing
hereunder in accordance with the terms and conditions of this Agreement or any
Buyer Transaction Document and would not prevent the Buyer from performing in
all material respects any of its obligations under this Agreement and the Buyer
Transaction Documents.

 

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7.2. Financial Condition, etc. The Buyer has as of the date hereof funds in an
aggregate amount sufficient to pay the Purchase Price.

7.3. Investment Intent, Related Matters. The Buyer is purchasing the Shares for
its own account and has the present intention of holding the Shares for
investment purposes and not with a view to, or for sale in connection with, any
distribution thereof in violation of any federal or state securities laws. The
Buyer is an “accredited investor” within the definition set forth in Rule 501(a)
of the Securities Act of 1933, as amended (the “Securities Act”).

7.4. Litigation. As of the date hereof, there is no Action pending or, to the
knowledge of the Buyer, threatened (a) against the Buyer or any of its
Affiliates which has had or could reasonably be expected to have a material
adverse effect on the ability of the Buyer to perform its obligations under this
Agreement or (b) which seeks rescission of or seeks to enjoin the consummation
of this Agreement or any of the transactions contemplated hereby.

7.5. Brokers, etc. No broker, finder, investment bank or similar agent is
entitled to any brokerage or finder’s fee in connection with the transactions
contemplated by this Agreement based upon agreements or arrangements made by or
on behalf of the Buyer or any of its Affiliates.

7.6. Knowledge. Buyer and Guarantor have conducted an independent investigation
into the Business and the Target Companies and has been furnished with or given
adequate access to such information about the Business or the Target Companies
as it has requested and, as a result of such investigation, Buyer has no
knowledge of any inaccuracy, misstatement or omission in any representation,
warranty or covenant set forth in this Agreement. For this purpose, knowledge of
the Buyer shall mean the actual knowledge of Philip Hoffman, Cordell Jung,
Douglas Kennedy, Robert Whelan, Clive Hay-Smith, Darlene Feldick and Dennis
Palkert.

7.7. No Additional Representations; No Reliance. The Buyer acknowledges that the
Seller and the Company have not made nor shall any of them be deemed to have
made any representation, warranty, covenant or agreement, express or implied,
with respect to the Target Companies, the Business or the transactions
contemplated by this Agreement, other than those explicitly set forth herein or
in any document, agreement, certificate or other instrument delivered in
connection herewith. The Buyer will not assert, except to the extent provided in
Section 10, any claim against the Seller or any of their respective partners,
directors, officers, employees, advisors, agents, stockholders, consultants,
investment bankers, brokers, representatives or controlling persons, or any
Affiliate of any of the foregoing, or hold the Seller or any such persons
liable, for any inaccuracies, misstatements or omissions with respect to
information furnished by the Company, the Seller, or such persons concerning the
Business, the Target Companies, this Agreement or the transactions contemplated
hereby.

 

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8. CERTAIN AGREEMENTS OF THE PARTIES.

8.1. Payment of Transfer Taxes and Other Charges. The Buyer and the Seller shall
be responsible for and the Buyer and the Seller shall each pay one-half of the
aggregate amount of all stock transfer Taxes, real property transfer Taxes,
sales Taxes, documentary stamp Taxes, recording charges and other similar Taxes,
if any, arising in connection with the transactions contemplated by this
Agreement. Each of the parties hereto shall prepare and file, and shall fully
cooperate with each other party with respect to the preparation and filing of,
any Tax Returns and other filings relating to any such Taxes or charges as may
be required.

8.2. Regulatory Compliance. Promptly upon execution and delivery of this
Agreement, each applicable party will prepare and file, or cause to be prepared
and filed, with the appropriate Governmental Authorities, a notification with
respect to the transactions contemplated by this Agreement pursuant to any
filing required by any applicable foreign antitrust Legal Requirements, supply
all information requested by Governmental Authorities in connection with any
foreign antitrust Legal Requirements and cooperate with each other in responding
to any such request. The parties will use their respective reasonable efforts
and will cooperate fully with one another to comply as promptly as practicable
with all governmental requirements applicable to the transactions contemplated
by this Agreement and to obtain promptly all approvals, orders, permits or other
consents of any applicable Governmental Authorities necessary for the
consummation of the transactions contemplated by this Agreement. Each of the
parties will furnish to the other parties and, upon request, to any Governmental
Authorities, such information and assistance as may be reasonably requested in
connection with the foregoing, including by responding promptly to and complying
fully with any request for additional information or documents under any foreign
antitrust Legal Requirements. The parties will use their respective best efforts
to resolve favorably any review or consideration of the antitrust aspects of the
transactions contemplated hereby by any Governmental Authority with jurisdiction
over the enforcement of any applicable antitrust laws, including the defense of
any Action brought by any Governmental Authority or other Person seeking to
enjoin, prevent or delay the consummation of the transactions contemplated
hereby. In connection with any such approvals, the parties shall accept, and use
reasonable efforts to satisfy, all conditions to the consummation of the
transactions contemplated by this Agreement imposed by any Governmental
Authority. The Buyer on the one hand, and Seller and the Company on the other
hand, shall share equally all fees required to be paid in connection with
compliance with this Section 8.2 until the Seller and the Company have together
paid, in the aggregate, $67,500 of such costs, after which all such costs shall
be paid by the Buyer.

8.3. Consents, etc. Upon the Buyer’s request, the Seller shall use reasonable
efforts (but the Seller shall have no obligation to pay any fees to, or incur
any expenses on behalf of, any third party) to assist the Buyer in securing such
written consents or waivers set forth on Schedule 8.3. If requested by the
Seller in connection with any such attempts to obtain such consents, the Buyer
shall execute and deliver an agreement of assignment, assumption and attornment
with respect to and/or guarantee of the obligations under such Contract. The
Buyer,

 

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on the one hand, and the Seller on the other hand, shall each bear their own
expenses in securing such consents.

8.4. Tax Agreements.

8.4.1. Tax Indemnities.

(a) From and after the Closing Date until thirty (30) calendar days following
the expiration of the applicable statute of limitations (taking into account any
tolling periods and other extensions), and subject to Section 8.4.9 and
8.4.1(c), the Seller shall be responsible for, shall pay or cause to be paid,
and shall indemnify, defend and hold harmless the Buyer and the Target Companies
against and reimburse the Buyer and the Target Companies for all Losses
attributable to Taxes (i) imposed on the Target Companies with respect to any
Tax period or portion thereof that ends on or before the Closing Date, in excess
of the amount, if any, for current Taxes (as opposed to deferred Taxes) taken
into account in the Target Companies’ books and records, (ii) imposed or payable
under Treasury Regulation 1.1502-6 (or any similar provision of state, local or
foreign law) by reason of any of the Target Companies being included in any
Affiliated Group at any time on or before the Closing Date, in excess of the
amount, if any, for current Taxes (as opposed to deferred Taxes) taken into
account in the Target Companies’ books and records, (iii) attributable to any
breach of a representation made in Section 5.10 or (iv) attributable to federal
income taxes for tax periods ending after the Closing Date actually paid by the
Target Companies(or an affiliated group of which the Target Companies and the
Buyer or its Affiliates are members) on or before the fifth anniversary of the
Closing Date (or, in the case of any such payment made with the filing of the
federal income Tax Return for the Tax year ending December 31, 2010, the date of
the filing of such federal income Tax Return, but no later than September 15,
2011) and that would not have been paid (even after use of all other available
Tax attributes) if the Target Companies had available in such tax periods for
use by the Target Companies (or an affiliated group of which they and the Buyer
or its Affiliates are members) at least $7,500,000 in federal net operating loss
carryforwards from the tax years of 2003 and 2004 collectively, but subject to
applicable limitations under the Code and the regulations thereunder, including
Section 382 of the Code (other than a change of ownership under Section 382 of
the Code that occurs prior to the Closing Date).

(b) Payment by the Seller of any amount due to the Company or the Buyer under
this Section 8.4.1 shall be made within ten (10) Business Days following written
notice by the Company or the Buyer that payment of such amounts to the
appropriate Tax authority is due by the Company or the Buyer; provided, that the
Seller shall not be required to make any payment earlier than five (5) Business
Days before it is due to the appropriate Tax authority. In the case of a Tax
that is contested in accordance with the provisions of Section 8.4.7, payment of
the Tax to the appropriate Tax authority will not be considered to be due
earlier than the date that a final determination to such effect is made by such
Tax authority or a court.

(c) The aggregate liability of the Seller to indemnify the Buyer and the Target
Companies for Losses shall in no event exceed the Purchase Price. For the
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any Loss for which indemnity is available under this Section 8.4.1 shall not
also be subject to the indemnity provided by Section 10.2.

8.4.2. Consolidated Income Tax Returns. Seller shall include the income of the
Target Companies (including any deferred items triggered into income by Treas.
Reg. section 1.1502-13 and any excess loss account taken into income under
Treas. Reg. section 1.1502-19) on Seller’s consolidated federal income Tax
Returns or any other consolidated Tax Returns for all taxable periods ending
prior to the Closing Date (a “Pre-Closing Tax Period”) and any taxable periods
ending on the Closing Date (a “Stub Period”) and pay any income Taxes
attributable to such income.

8.4.3. Other Tax Returns.

(a) With respect to any taxable period that includes but does not end on the
Closing Date (a “Straddle Period”), (i) the income of the Target Companies shall
be apportioned to the period up to and including the Closing Date (“Pre-Closing
Straddle Period”) and the period after the Closing Date by closing the books of
the Target Companies as of the end of the Closing Date, and (ii) with respect to
non-income Taxes for a Straddle Period, the amount of Taxes for the Pre-Closing
Straddle Period shall be determined by multiplying the total amount of such
Taxes for the Straddle Period by a fraction equal to the number of days in such
Pre-Closing Straddle Period divided by the total number of days in the Straddle
Period. The parties agree that if a Target Company is permitted, but not
required, under applicable state, local or foreign income or franchise tax laws
to treat the Closing Date as the last day of a Tax period, they will treat the
Tax period as ending on the Closing Date.

(b) With respect to any jurisdiction requiring separate-company reporting, the
Seller will prepare or cause to be prepared separate-company Tax Returns for the
Target Companies for any Pre-Closing Tax Period or Stub Period that are filed
after the Closing Date, and such Tax Returns as so prepared shall be filed by
the Target Companies. The Buyer shall prepare all Straddle Period Tax Returns of
the Target Companies. Tax Returns that are prepared by the Seller or the Buyer
pursuant to the preceding two sentences shall be prepared by treating items on
such Tax Returns in a manner consistent with the past practices and customs of
the Target Companies with respect to such items, to the extent permitted by
applicable law. At least thirty (30) calendar days prior to the due date of any
such Tax Return, the party preparing such Tax Return shall deliver such Tax
Return to the other party for review and comment. Such other party shall provide
any comments on such Tax Return within fifteen (15) calendar days of its receipt
of such Tax Return, and Seller and Buyer shall reach agreement on any
appropriate modifications to such Tax Return based on such comments, following
which such Tax Return shall be filed by the applicable Target Company.

8.4.4. Amendments to Tax Returns. Following the Closing, neither the Buyer nor
the Company shall (and the Company shall not permit any of the Subsidiaries to)
amend, refile, or otherwise modify any Tax Return of any Target Company or of
any Affiliated Group of which a Target Company was a member for a Pre-Closing
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Period, or waive any limitation period with respect to any such Tax Return,
except in connection with the settlement or other resolution of a Tax
investigation, audit, proceeding, examination, contest or claim pursuant to the
terms of Section 8.4.7 hereof.

8.4.5. Tax Refunds and Benefits. Any Tax refunds that are received by any Target
Company or the Buyer, and any amounts credited against any Tax to which any
Target Company or the Buyer become entitled, that relate to a Pre-Closing Tax
Period, Stub Period or Pre-Closing Straddle Period, in each case net of any
Taxes actually paid by the Target Companies or the Buyer that are attributable
to such Tax refunds or credits, shall be for the account of the Seller, and the
Company or the Buyer shall pay over to the Seller the net amount of any such
refund or credit as soon as practicable after receipt thereof.

8.4.6. No Code Section 338 Election. The Buyer shall not make, or permit to be
made, any election under Section 338 of the Code with respect to the
transactions contemplated by this Agreement.

8.4.7. Tax Disputes. The Buyer shall notify the Seller promptly (and in all
cases within twenty-five (25) calendar days) after receiving notice of any
audit, examination, investigation, or proceeding by or before a tax authority,
or any claim or portion thereof raised in any court of law to the extent that it
may give rise to a Tax Loss (“Tax Dispute”). The Seller shall have the right and
authority to control and direct the nature of any and all action to be taken in
the defense of any such Tax Dispute, at its own expense. If the Seller elects to
control a Tax Dispute, it shall within thirty (30) calendar days of receipt of
the notice of a Tax Dispute notify the Buyer of its intent to do so, the Seller
shall have all rights to settle, compromise and/or concede such asserted
liability and the Buyer shall cooperate and shall cause the Target Companies or
any of their respective successors to cooperate, at the reasonable expense of
the Seller, in each phase of such Tax Dispute; provided, however, that the
Seller shall not concede, settle or compromise any Tax Dispute without the
consent of the Company, which consent shall not be unreasonably withheld. If the
Seller elects not to control a Tax Dispute, fails to notify the Buyer of its
election as herein provided or contests its obligation to indemnify under
Section 8.4.1, the Buyer or the Target Companies may pay, compromise or contest,
at the Seller’s expense (and subject to reimbursement by Seller for reasonable
third party expenses), such asserted liability. However, in such case, neither
the Buyer nor the Target Companies may settle or compromise any asserted
liability over the objection of the Seller; provided, however, that the Seller
shall not unreasonably object to such settlement or compromise.

8.4.8. Tax Sharing Agreements/Powers of Attorney. Except with respect to any Tax
sharing or similar agreements which do not include a Person other than a Target
Company, the Seller will cause all Tax sharing or similar agreements and all
powers of attorney with respect to or involving any Target Company to be
terminated prior to the Closing and, after the Closing, the Target Companies
will not be bound thereby, except to the extent necessary to control a Tax
Dispute pursuant to Section 8.4.7 hereof.

 

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8.4.9. Post-Closing Transactions not in Ordinary Course. The Buyer agrees to
cause all transactions not in the ordinary course of business occurring on the
Closing Date after the Buyer’s purchase of a Target Company’s stock to be
reported on the Buyer’s or applicable Target Company’s separate or consolidated
federal income Tax Return relating to a period following the Closing to the
extent permitted by Treas. Reg. section 1.1502-76(b)(1)(ii)(B). The Buyer agrees
to indemnify the Seller for any additional tax owed by the Seller or the
Affiliated Group of which the Seller is a member resulting from any such
transaction.

8.4.10. Carrybacks. The Seller agrees that it will take (or cause to be taken)
all steps required by Treas. Reg. section 1.1502-21T(b)(3)(ii)(B) to relinquish,
for federal income tax purposes, with respect to all net operating losses
attributable to the Target Companies, the portion of the carryback period for
which the Target Companies were members of the Affiliated Group of which the
Seller is a member, and, for any other Tax jurisdiction, to take all necessary
steps to similarly relinquish such portion of the carryback period for such
losses (if permitted under the laws of such jurisdiction). To the extent that
the laws of a given Tax jurisdiction do not permit such a relinquishment, the
net benefit of any actual Tax refund (or actual reduction in net Tax liability)
resulting from such a carryback shall be divided (after taking into account any
net Tax liability attributed thereto) equally between the Buyer and the Seller,
and the Seller’s share of any such refund or reduction, if received by either
party shall promptly be divided with the other party as provided in this
sentence; provided that the decision to take such refund (or reduction in Tax
liability) will be at the sole discretion of Seller.

8.4.11. Cooperation on Tax Matters. The Buyer, the Seller, and the Company will
cooperate fully, as and to the extent reasonably requested by any other party,
in connection with any Tax matters relating to the Target Companies (including
by the provision of reasonably relevant records or information). The party
requesting such cooperation will pay the reasonable out-of-pocket expenses of
the other party. Each such party shall make its employees available on a
mutually convenient basis to provide explanations of any documents or
information provided hereunder. Each such party will retain all material Tax
Returns and other material documents relating to Tax matters of the Target
Companies in accordance with such party’s normal record retention policy for Tax
records, which require retention of such records at least until the expiration
of the applicable statute of limitations. Any information obtained under this
Section 8.4.11 shall be kept confidential, except as may be otherwise necessary
in connection with the filing of Tax Returns or claims for refund or in
conducting an audit or other proceeding.

8.4.12. Governing Provisions Regarding Taxes. Except as expressly provided
otherwise and except for the representations contained in Section 5.10 and the
covenants contained in Section 8.1 of this Agreement, this Section 8.4 shall be
the sole provision governing Tax matters and indemnities therefor under this
Agreement.

 

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8.5. Confidentiality.

(a) The Confidentiality Agreement dated August 19, 2004, as amended through the
date hereof (the “Confidentiality Agreement”), by and between Pearson Education
Inc. and the Company is terminated as of the Closing.

(b) From and after the Closing Date, the Seller shall, and the Seller shall
cause its Affiliates and its directors, officers and employees (the
“Representatives”) to, keep confidential all confidential and proprietary
information relating to the Business possessed by the Seller, its Affiliates and
Representatives on the Closing Date ( the “Buyer Confidential Information”),
except for any such information that (i) is available to the public on the
Closing Date; (ii) thereafter becomes available to the public (other than as a
result of a disclosure by the Seller or any of its Affiliates or Representatives
in violation hereof); or (iii) is or becomes available to the Seller or any of
its Affiliates or Representatives on a non-confidential basis from a source that
is not prohibited from disclosing such information to the Seller or any of its
Affiliates or Representatives by a Legal Requirement or a contractual
obligation. Should the Seller or any of its Representatives be required to
disclose any Buyer Confidential Information in response to a court order, a
Legal Requirement or an administrative process, such Person shall inform the
Buyer in writing of such requirement as soon as possible after such Person is
informed of it and, if possible, before any information is disclosed, so that a
protective order or other appropriate remedy may be requested by the Buyer or
the Company, as applicable. If the Seller or any of its Affiliates or
Representatives is required to make such disclosure, such Person shall only make
such disclosure to the extent to which it is so required, but not further or
otherwise. The provisions of this Section 8.5 shall not prohibit disclosure made
in connection with the enforcement of any right or remedy relating to this
Agreement or the transaction contemplated hereby.

(c) From and after the Closing Date, the Buyer shall, and the Buyer shall cause
its Affiliates and Representatives to, keep confidential all confidential and
proprietary information relating to the Seller, its Affiliates (other than the
Target Companies) and Representatives possessed by the Buyer, its Affiliates and
Representatives on the Closing Date that was acquired by the Buyer, its
Affiliates or Representatives in connection with the negotiation of the
transactions contemplated by this Agreement and the Transition Services
Agreement ( the “Seller Confidential Information” and, together with the Buyer
Confidential Information, the “Confidential Information”), except for any such
information that (i) is available to the public on the Closing Date;
(ii) thereafter becomes available to the public (other than as a result of a
disclosure by the Buyer or any of its Affiliates or Representatives in violation
hereof); or (iii) is or becomes available to the Buyer or any of its Affiliates
or Representatives on a non-confidential basis from a source that is not
prohibited from disclosing such information to the Buyer or any of its
Affiliates or Representatives by a Legal Requirement or a contractual
obligation. Should the Buyer or any of its Representatives be required to
disclose any Seller Confidential Information in response to a court order, a
Legal Requirement or an administrative process, such Person shall inform the
Seller in writing of such requirement as soon as possible after such Person is
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protective order or other appropriate remedy may be requested by the Seller. If
the Buyer or any of its Affiliates or Representatives is required to make such
disclosure, such Person shall only make such disclosure to the extent to which
it is so required, but not further or otherwise. The provisions of this
Section 8.5 shall not prohibit disclosure made in connection with the
enforcement of any right or remedy relating to this Agreement or the transaction
contemplated hereby.

(d) From and after the Closing, neither the Buyer nor the Seller shall, and each
of the Buyer and the Seller shall cause its Affiliates and Representatives to
not, make use of any of the Confidential Information in a manner that is adverse
to the other party hereto.

8.6. Guarantees. The Buyer hereby acknowledges that the Seller has entered into
a Contractual Obligation with the City and Guilds of London Institute whereby
the Seller guaranteed certain obligations of one or more Target Companies
thereunder (the “Seller Guarantee”). The Buyer shall use commercially reasonable
efforts to enter into arrangements reasonably satisfactory to Seller to release
or replace the Seller as guarantor under the Seller Guarantee. If Buyer does not
enter into such release or arrangement, Buyer shall indemnify the Seller and its
Affiliates and defend and hold the Seller and its Affiliates harmless from and
against any and all Losses relating to or arising after the Closing Date from
the Seller Guarantee.

8.7. Seller Non-Compete, Non-Solicitation and Non-Interference.

(a) The Seller acknowledges that reasonable limits on its ability to engage in
activities competitive with the Target Companies and the Business are warranted
to protect the Buyer’s investment in acquiring the Target Companies and the
Business. Accordingly, the Seller covenants and agrees that, for a period of
three (3) years following the Closing, the Seller shall not engage in, invest in
or participate in any activity that competes with the Business as constituted on
the Closing Date in the United States, whether directly or through any
subsidiary, partnership, joint venture or other affiliated entity (provided
that, no Person shall be deemed an affiliated entity if such Person is an
investment fund, an entity investing solely on behalf of such investment fund,
or an entity that is directly or indirectly wholly-owned by one or more of such
investment funds); provided, however, that ownership of less than five percent
(5%) of the securities of any publicly traded corporation will not be deemed to
be a violation of this Section 8.7. Nothing contained in this Section 8.7 shall
be deemed to restrict or prevent the Seller from continuing to engage in any
business or activity in which the Seller is engaged on the Closing Date (other
than through the Target Companies).

(b) The Seller hereby agrees that, for a period of one (1) year following the
Closing, the Seller shall not directly or indirectly solicit for employment any
Affected Employee. The term “solicit for employment” shall be deemed to not
include any general solicitation of employment not specifically directed towards
any of the employees referred to in this Section 8.7 or the employment of any
Affected Employee working for an unaffiliated staffing or temporary employment
agency.

 

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(c) The Seller hereby agrees that, for a period of one (1) year following the
Closing, the Seller shall not directly or indirectly, enter into, initiate,
maintain or continue discussions with any Significant Customer of the Target
Companies as of the Closing Date with respect to the products or services
covered by the Contractual Obligations existing between any Target Company and
such Significant Customer as of the Closing Date, or the performance of any
Target Company under such Contractual Obligation.

(d) The Seller hereby agrees that the covenants set forth in this Section 8.7
are reasonable under the circumstances and will not interfere with its ability
to meet its financial obligations. The Seller hereby acknowledges and agrees
that it has received sufficient consideration and other benefits hereunder and
in connection with the transactions contemplated by this Agreement to clearly
justify the restrictions contained in this Section 8.7. The Seller has carefully
considered the nature and extent of the restrictions placed upon it by this
Agreement, and hereby acknowledges and agrees that such restrictions are
reasonable in time and territory and do not confer a benefit upon the Buyer
disproportionate to the detriment of the Seller. The parties recognize that the
Legal Requirements and public policies of various jurisdictions may differ as to
the validity and enforceability of covenants similar to those set forth in this
Section 8.7. It is the intention of the parties that the provisions of this
Section 8.7 be enforced to the fullest extent permissible under the Legal
Requirements and policies of each jurisdiction in which enforcement may be
sought, and that the unenforceability (or the modification to conform to such
Legal Requirements or policies) of any provisions of this Section 8.7 shall not
render unenforceable, or impair, the remainder of the provisions of this
Section 8.7. Accordingly, if at the time of enforcement of any provision of this
Section 8.7 a court of competent jurisdiction holds that the restrictions stated
herein are unreasonable under the circumstances then existing, the parties agree
that the maximum period, scope or geographic area reasonable under such
circumstances will be substituted for the stated period, scope or geographical
area and that such court shall be allowed to revise the restrictions contained
herein to cover the maximum period, scope and geographical area permitted by
law.

8.8. Surety Bonds/Letters of Credit. Prior to and after the Closing, the Seller
shall, and shall cause its Affiliates to, take all actions and execute all
documents and instruments reasonably requested by the Buyer or the Target
Companies and otherwise fully cooperate with the Buyer and the Target Companies
in order to enable the replacement of all Surety Bonds and Letters of Credit
that were posted by Persons other than the Target Companies as may be requested
by the Buyer or the Target Companies and otherwise to facilitate a smooth
transition with regard to such Surety Bonds and Letters of Credit. In
furtherance and not in limitation of the foregoing, to the extent that the
Seller or an Affiliate thereof has posted any Surety Bond or Letter of Credit,
the Seller hereby agrees to, and to cause its Affiliates to, keep such Surety
Bond or Letter of Credit in place until it is replaced in accordance with the
preceding sentence, provided that, in no event shall such period exceed thirty
(30) calendar days. The Buyer agrees that it shall (a) reimburse the Seller and
its Affiliates for any and all costs or expenses incurred by any of them in
complying with this provision and (b) indemnify the Seller and its Affiliates
and defend and hold the Seller and its Affiliates harmless from and against any
and all Losses incurred or suffered by the Seller Indemnitees relating to or
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compliance herewith. The specific indemnity provided in this Section 8.8 shall
not be subject to the limitations or thresholds set forth in Section 10 and
shall not be included for purposes of calculating such limitations or
thresholds.

8.9. Banking Offset Release. Effective as of the Closing Date, Seller hereby
agrees to, and to cause its Affiliates to, (a) fully and finally release each
Target Company from all banking offset arrangements, account sweep arrangements
and other similar banking arrangements to which such Target Company is subject,
and (b) take all actions and execute all documents and instruments required to
fully effect the foregoing.

8.10. Further Assurances. Each party, upon the request from time to time of any
other party hereto after the Closing, and at the expense of the requesting party
but without further consideration, will do each and every act and thing as may
be necessary or reasonably requested to consummate the transactions contemplated
hereby in an orderly fashion. Without limitation of the foregoing, (i) the
Seller shall cause the Storage Area Network to be transferred to the Company as
soon as practicable following the Closing at no cost to the Buyer or the Target
Companies; provided that Buyer shall bear the expense, if any, of such transfer
and (ii) the Company shall assume the assets and liabilities set forth on
Schedule 8.10.

8.11. Transfer of Seller Intellectual Property. The Seller hereby acknowledges
that the Seller and/or Affiliates thereof are the owners and/or holders of
right, title and interest in and to the trademarks identified on Schedule 8.11
(the “Seller Intellectual Property”) used in the conduct of the Business. The
Seller shall deliver to the Buyer on the Closing Date the Trademark Assignment
and such other documents or instruments as may be required to effect the
assignment and transfer of all right, title and interest in and to the Seller
Intellectual Property to the Company. The Seller shall cooperate with and assist
the Buyer to the extent any further actions, documents or instruments are
reasonably required after the Closing Date to complete the recordal of the
assignment of Seller Intellectual Property to the Company. The Seller and Buyer
shall split any fee charged by a patent or trademark office (or equivalent
Governmental Authority) for such recordals. The Buyer, on the one hand, and the
Seller and the Company on the other hand, shall each bear their own expenses in
securing such recordals.

8.12. Insurance. Except as disclosed on Schedule 5.18, after Closing the Target
Companies will continue to be covered under the Insurance Policies with respect
to covered events occurring prior to the Closing in accordance with the terms of
such Insurance Policies. Following the Closing, the Seller shall use reasonable
efforts to recover under such Insurance Policies any Losses incurred by a Target
Company with respect to such covered events, and shall deliver any proceeds
thereby recovered to such Target Company net of any third-party costs or
expenses incurred by Seller in such recovery.

9. EMPLOYMENT AND EMPLOYEE BENEFITS ARRANGEMENTS.

9.1. Salary and Benefits. Subject to Section 9.5, immediately after the Closing,
Buyer shall (i) cause the Target Companies to continue the employment of each
Affected Employee

 

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initially at the same annual base salary or base hourly wage rate as in effect
for such employee immediately prior to the Closing Date, and (ii) establish
bonus opportunities for 2006 consistent with the Target Company’s 2005 bonus
plan. In addition, for at least the period commencing on the Closing Date and
ending on the first anniversary thereof, Buyer shall cause the Affected
Employees who continue employment with the Target Companies to receive (i) at
least the same annual salary or base hourly wage rate as in effect for such
employee immediately prior to the Closing Date and (ii) employee benefits that
shall be in the aggregate not less than the benefits provided to other similarly
situated employees of Buyer on the Closing Date.

9.2. Certain Liabilities. Except as set forth on Schedule 9.2, the Seller shall
assume or retain, and neither the Buyer nor any of the Target Companies shall
have any responsibility for, any liabilities that have arisen or may arise with
respect to any Seller Plan.

9.3. Welfare Claims. Without limiting the scope of Section 9.2, Seller shall
retain or assume liability for claims for workers compensation or for the type
of benefits described in Section 3(1) of ERISA (whether or not covered by ERISA)
that are incurred on or prior to the Closing Date by Affected Employees. For
purposes of the foregoing, a medical/dental claim shall be considered incurred
when the medical services are rendered or medical supplies are provided, and not
when the condition arose; provided that claims relating to a hospital
confinement that commences on or prior to the Closing Date but continues
thereafter shall be treated as incurred on or prior to the Closing Date. A
disability or workers compensation claim shall be considered incurred on or
prior to the Closing Date if the injury or condition giving rise to the claim
occurs on or prior to the Closing Date, even if the application for benefits
with respect thereto is filed after the Closing Date.

9.4. Prior Service Credit. The Buyer shall cause the period of the Affected
Employees’ service with the Target Companies prior to the Closing Date to be
treated as service with the Buyer and its Affiliates for purposes of determining
the Affected Employees’ eligibility for coverage, vesting and accrual (except
defined benefit plans) under all employee benefit plans maintained by Buyer and
in which Affected Employees participate (the “Buyer Plans”). The Buyer will
(a) waive all limitations as to preexisting conditions and waiting periods with
respect to participation and coverage requirements applicable to the Affected
Employees under any group welfare plan that such employees may be eligible to
participate in after the Closing, other than limitations on waiting periods that
are already in effect with respect to such employees and that have not been
satisfied as of the Closing under any welfare plan maintained for the Affected
Employees immediately prior to the Closing and (b) provide each Affected
Employee with credit for any co-payments and deductibles paid prior to the
Closing to satisfy any applicable deductible or out-of-pocket requirements under
any welfare plans that such employees are eligible to participate in after the
Closing to the same extent as if those deductibles or co-payments had been paid
under the welfare plans for which such employees are eligible after the Closing.

9.5. Employees on Disability Leave. As to any Affected Employee who, on the
Closing Date, is either (a) on disability leave, or (b) is absent from work due
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and such absence continues for more than five (5) days beyond the Closing Date,
Seller shall retain all obligations with respect to such Affected Employee until
the date on which the Affected Employee is available to return to active
employment; provided, that, Buyer shall, or shall cause one of its Affiliates
to, assume all obligations with respect to such Employee and offer employment to
any such Affected Employee upon such Affected Employee’s availability to return
to active employment.

9.6. WARN. The Buyer shall indemnify the Seller and its Affiliates and defend
and hold each of them harmless from and against any Losses which may be incurred
by any of them under WARN or under any state or local law with respect to plant
closing, layoff or relocation or the like or with respect to any obligation to
provide notice, payment or any other benefit as a result of or arising out of
any termination of employment other than any Losses arising from the breach by
the Seller of any covenant, agreement, representation or warranty made by the
Seller in this Agreement or any certificate, instrument or other document
delivered by the Seller pursuant hereto. The specific indemnity provided in this
Section 9.6 shall not be subject to the limitations or thresholds set forth in
Section 10 and shall not be included for purposes of calculating such
limitations or thresholds.

9.7. Third-Party Rights. No provision of this Section 9 shall create any
third-party beneficiary rights in any Affected Employee or other Person
(including without limitation any heir, beneficiary, executor, administrator or
representative of an Affected Employee or any other Person claiming through an
Affected Employee) or the Company or any of the Subsidiaries of the Company with
respect to employment or any term or condition thereof. Nothing in this
Section 9, express or implied, shall be construed to prevent Buyer from
terminating any Affected Employee’s employment with Buyer or its Affiliates,
altering the term of such employment, or modifying any compensation or benefit
plan that Buyer or its Affiliates may establish or maintain in any manner
beneficial to an Affected Employee.

9.8. Employee Indemnity. Buyer agrees to indemnify the Seller and its Affiliates
and defend and hold the Seller and its Affiliates harmless from and against any
and all Losses arising out of any claims by or in respect of any Affected
Employee (or any heir, beneficiary, executor, administrator or representative of
any Affected Employee or any other Person claiming through an Affected Employee)
with respect to any of the obligations or liabilities assumed by Buyer or
retained by the Company hereunder or any other events arising on or after the
Closing Date other than any Losses arising from the breach by the Seller of any
covenant, agreement, representation or warranty made by the Seller in this
Agreement or any certificate, instrument or other document delivered by the
Seller pursuant hereto. The specific indemnity provided in this Section 9.8
shall not be subject to the limitations or thresholds set forth in Section 10
and shall not be included for purposes of calculating such limitations or
thresholds.

10. INDEMNIFICATION.

10.1. Buyer’s Indemnification. Subject to the limitations set forth in this
Section 10, the Buyer shall indemnify and hold harmless, to the fullest extent
permitted by law, the Seller

 

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and each of its respective direct and indirect partners, stockholders, members,
officers, directors, employees, agents and Affiliates (collectively, the “Seller
Indemnitees”) from, against and in respect of Losses arising from or related to
any of the following:

(a) any breach or default in performance by the Buyer or the Guarantor of any
covenant or agreement of the Buyer or the Guarantor contained in this Agreement;
or

(b) any breach of, or inaccuracy in, any representation or warranty made by the
Buyer or the Guarantor in this Agreement or in any certificate, instrument or
other document delivered by the Buyer or the Guarantor pursuant hereto.

10.2. Seller’s Indemnification. Subject to the limitations set forth in this
Section 10, the Seller shall indemnify and hold harmless, to the fullest extent
permitted by law, the Buyer and each of its direct and indirect partners,
stockholders, members, officers, directors, employees, agents and Affiliates
(collectively, the “Buyer Indemnitees”) from, against and in respect of Losses
arising from or related to any of the following:

(a) any breach or default in performance by the Seller of any covenant or
agreement of the Seller contained in this Agreement (other than in
Section 8.4.1(a));

(b) any breach of, or any inaccuracy in, any representation or warranty made by
the Seller in this Agreement (other than any representation or warranty relating
to Taxes) or in any certificate, instrument or other document delivered by the
Seller pursuant hereto; or

(c) any breach or default in performance by the Company of any covenant or
agreement of the Company contained in this Agreement.

(d) Anything herein to the contrary notwithstanding, if a Buyer Indemnitee
(i) would be entitled to seek indemnification pursuant to Section 10.2(b) hereof
for a Loss due to a breach of, or inaccuracy in, the Sufficiency of Assets
representation set forth in Section 5.20, and (ii) could also state a claim for
indemnification for such Loss pursuant to Section 10.2(b) or (c) hereof due to a
breach of, or any inaccuracy in, any other representation or warranty made by
the Seller or the Company (each a “Specific Representation”) if such Specific
Representation was read without regard to and without giving effect to any
“materiality”, “Material Adverse Effect” or “Knowledge” qualifier contained in
such Specific Representation (but would not be entitled to indemnification for
such Loss if such Specific Representation was read with regard to or giving
effect to any such qualifier), then Buyer Indemnitee shall not be entitled to
indemnification for such Loss due to a breach of, or inaccuracy in, the
representation set forth in Section 5.20.

10.3. Monetary Limitations.

(a) (i) Except as provided in clause (ii) of this Section 10.3(a), the Seller
shall not have any obligation to indemnify any Buyer Indemnitee pursuant to
Section 10.2 unless and until, and only to the extent that the aggregate of all
such individual Losses incurred or sustained by all Buyer Indemnitees with
respect to which Buyer Indemnitees

 

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are entitled to indemnification under Section 10.2 exceeds $420,000 (the
“Deductible”). Except as provided in clause (ii) of this Section 10.3(a), the
aggregate liability of the Seller to indemnify the Buyer Indemnitees for Losses
under Section 10.2 shall in no event exceed Ten Million Dollars ($10,000,000.00)
from the date hereof until the nine (9) month anniversary of the Closing Date
and Six Million Dollars ($6,000,000.00) thereafter.

(ii) Notwithstanding the foregoing, no minimum or maximum dollar limitation
(including the Deductible) shall apply to Losses arising from (A) any claim with
respect to the representations and warranties contained in Sections
4.1 (Organization and Authority), 4.2 (Authorization and Enforceability),
4.4 (Title to Shares), 4.5 (Brokers, etc.), 5.1.1 (Organization, Power and
Standing), 5.1.2 (Authorization and Enforceability) and
5.1.4(b) (Capitalization), 5.10 (Tax Matters), 5.11 (Employee Benefit Plans),
5.15 (Brokers), 5.17 (Debt) or 5.19 (Intercompany Liabilities) or (B) any claim
based upon fraud or intentional misrepresentation, or (C) any Taxes; provided,
however, that the maximum liability with respect to such Losses arising as
described in clauses (A) and (B) above shall not exceed the Purchase Price.

(b) (i) Except as provided in clause (ii) of this Section 10.3(b), the Buyer
shall not have any obligation to indemnify any Seller Indemnitee pursuant to
Section 10.1 unless and until, and only to the extent that the aggregate of all
individual Losses incurred or sustained by all Seller Indemnitees with respect
to which Seller Indemnitees are entitled to indemnification under Section 10.1
exceeds the Deductible. Except as provided in clause (ii) of this
Section 10.3(b), the aggregate liability of the Buyer to indemnify the Seller
Indemnitees for Losses under Section 10.1 shall in no event exceed Ten Million
Dollars ($10,000,000.00) from the date hereof until the nine (9) month
anniversary of the Closing Date and Six Million Dollars ($6,000,000.00)
thereafter.

(ii) Notwithstanding the foregoing, no minimum or maximum dollar limitation
(including the Deductible) shall apply to Losses arising from (A) any claim with
respect to the representations and warranties contained in Sections 6.1.1
(Organization, Power and Standing), 6.1.2 (Authorization and Enforceability),
6.2 (Ownership and Control of Buyer), 7.1.1 (Organization, Power and Standing),
7.1.2 (Authorization and Enforceability) and 7.5 (Brokers), (B) any claim for
indemnification pursuant to Sections 8.4.9 (Post- Closing Transactions not in
the Ordinary Course), 8.6 (Seller Guarantee), 8.8 (Surety Bonds/Letters of
Credit), 9.6 (WARN), 9.8 (Employee Indemnity), and (C) any claim based upon
fraud or intentional misrepresentation, provided, however, that the maximum
liability with respect to such Losses arising as described in clauses (A) and
(C) above shall not exceed the Purchase Price.

(c) Anything herein to the contrary notwithstanding, no party shall be entitled
to indemnification for any Loss pursuant to this Section 10 to the extent (but
only to the extent) an adjustment has already been made for such Loss pursuant
to Section 3.4.

 

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10.4. Time Limitations.

(a) Regardless of any investigation made at any time by or on behalf of any
party hereto or of any information any party may have in respect thereof:

(i) except as set forth in clause (ii) or (iii) of this Section 10.4(a), no
claim may be made or suit instituted pursuant to Sections 10.1 or 10.2 after the
close of business on the eighteen (18) month anniversary of the Closing Date;
and

(ii) notwithstanding the foregoing, there shall be no limitation as to time for
claims with respect to the representations and warranties contained in Sections
4.1 (Organization and Authority), 4.2 (Authorization and Enforceability),
4.4 (Title to Shares), 4.5 (Brokers), 5.1.1 (Organization, Power and Standing),
5.1.2 (Authorization and Enforceability), 5.1.4(b) (Capitalization),
5.15 (Brokers), 6.1.1 (Organization, Power and Standing), 6.1.2 (Authorization
and Enforceability), 6.2 (Ownership and Control of Buyer), 7.1.1 (Organization,
Power and Standing), 7.1.2 (Authorization and Enforceability) and 7.5 (Brokers);
and

(iii) notwithstanding the foregoing, a claim may be brought under
Section 10.2(b) with respect to the inaccuracy of the representations and
warranties contained in Section 5.10 (Tax Matters), at any time prior to thirty
(30) calendar days after the expiration of the applicable statute of limitations
(taking into account any tolling periods and other extensions),

(b) For purposes of this Section 10, any claim for indemnification shall be duly
made by delivering written notice of such claim describing with reasonable
specificity (in light of the facts then known) the amount and basis of such
claim to the Buyer or the Seller, as applicable, prior to the applicable
limitation date specified in Section 10.4(a) above.

10.5. Certain Other Indemnity Matters. The sole and exclusive remedies of each
Seller Indemnitee and Buyer Indemnitee as against any Person from and after the
Closing with respect to any and all claims of any kind whatsoever relating to
the subject matter of this Agreement shall be pursuant to the indemnification
provisions set forth in this Section 10 and in Sections 8.4.1 (Tax Indemnitees),
8.4.9 (Post-Closing Transactions Not in the Ordinary Course), 8.6 (Guarantees),
8.8 (Surety Bonds/Letters of Credit), 9.6 (WARN) and 9.8 (Employee Indemnity)
and the right of specific performance set forth in Section 12.13, other than any
rights, claims or causes of action arising out of fraud or intentional
misrepresentation by a party. In furtherance of the foregoing, after the
Closing, each of the Seller and the Buyer hereby waives, releases and
discharges, to the fullest extent permitted under applicable law, and agrees not
to assert and to cause each of the other Seller Indemnitees and Buyer
Indemnitees not to assert in any action or proceeding of any kind, any and all
rights, claims and causes of action it may now or hereafter have against any
party hereto and any of their respective Affiliates and their respective
members, partners, stockholders, officers, directors, employees, agents and
representatives and their

 

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respective Affiliates relating to the subject matter of this Agreement (and,
with respect to claims by Seller against the Target Companies, all claims
whatsoever arising prior to the Closing Date), other than (a) claims for
indemnification asserted as permitted by and in accordance with the provisions
set forth in this Section 10 and in Sections 8.4.1 (Tax Indemnitees), 8.4.9
(Post-Closing Transactions Not in the Ordinary Course), 8.6 (Seller Guarantees),
8.8 (Surety Bonds/Letters of Credit), 9.6 (WARN) and 9.8 (Employee Indemnity)
(including any such rights, claims or causes of action arising under or based
upon common law or other Legal Requirements), (b) any and all rights, claims and
causes of action based upon fraud or intentional misrepresentation by a party
and (c) any and all rights to specific performance set forth in Section 12.13.
In no event shall any party be liable for loss of profits or consequential or
incidental damages by reason of a breach of any representation, warranty,
covenant or other provision contained in this Agreement or in any Schedule or
certificate delivered pursuant hereto other than with respect to any such
damages that are part of a claim by a third party subject to indemnification
pursuant to Section 10.6. Upon making any payment to an Indemnified Party for
any indemnification claim pursuant to this Section 10, the Indemnifying Party
shall be subrogated, to the extent of such payment, to any rights which the
Indemnified Party may have against other Persons with respect to the subject
matter underlying such indemnification claim. Each Indemnified Party shall take
all reasonable steps to mitigate all such Losses upon and after becoming aware
of any event which could reasonably be expected to give rise to any Losses with
respect to which indemnification may be requested hereunder. The monetary and
time limitations on indemnification set forth in Sections 10.3 and 10.4,
respectively, shall not apply to any breach of any covenant contemplated by this
Agreement to be performed after the Closing. Any insurance proceeds and Tax
Benefits actually received by an Indemnified Party after an indemnification
payment shall have been made to such Indemnified Party hereunder that were not
given effect in determining the amount of the Loss to which such indemnification
payment related, shall promptly be refunded to the Indemnifying Party by the
Indemnified Party. Any and all payments or offsets pursuant to this Agreement
shall be deemed for all purposes to be adjustments to the Purchase Price. After
it has been determined that there is an indemnifiable event pursuant to
Section 10.1 or 10.2, the representation, warranty, covenant or agreement that
is the subject of such indemnifiable event shall be read without regard to and
without giving effect to any “materiality”, or “Material Adverse Effect”
standard or qualification contained in such representation or warranty for the
purposes of determining the amount of any Losses that are the subject matter of
the related indemnification claim.

10.6. Third Party Claims. Promptly after the receipt by any Person entitled to
indemnification pursuant to this Section 10 (the “Indemnified Party”) of notice
of the commencement of any action against such Indemnified Party by a third
party, such Indemnified Party shall, if a claim with respect thereto is to be
made against any party obligated to provide indemnification pursuant to this
Section 10 (the “Indemnifying Party”), give such Indemnifying Party written
notice thereof in reasonable detail in light of the circumstances then known to
such Indemnified Party. The failure to give such notice shall not relieve any
Indemnifying Party from any obligation hereunder except where, and then solely
to the extent that, such failure actually and materially prejudices the rights
of such Indemnifying Party. Such Indemnifying Party shall have the right to
defend such claim, at such Indemnifying Party’s expense and with counsel of its

 

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choice reasonably satisfactory to the Indemnified Party, provided, that, the
Indemnifying Party conducts the defense of such claim actively and diligently.
If the Indemnifying Party assumes the defense of such claim, the Indemnified
Party agrees to reasonably cooperate in such defense so long as the Indemnified
Party is not materially prejudiced thereby. So long as the Indemnifying Party is
conducting the defense of such claim actively and diligently, the Indemnified
Party may retain separate co-counsel at its sole cost and expense and may
participate in the defense of such claim, and neither any Indemnifying Party nor
any Indemnified Party will consent to the entry of any judgment or enter into
any settlement with respect to such claim without the prior written consent of
the other, which consent will not be unreasonably withheld (provided that such
consent shall be granted in connection with any settlement (A) containing a full
release of the party from whom such consent is so requested, and (B) in the case
of a consent from an Indemnified Party, involving only monetary damages, which
are fully indemnified hereunder). In the event the Indemnifying Party does not
or ceases to conduct the defense of such claim actively and diligently, (x) the
Indemnified Party may defend against, and, with the prior written consent of the
Indemnifying Party (which consent shall not be unreasonably withheld), consent
to the entry of any judgment or enter into any settlement with respect to, such
claim, (y) the Indemnifying Party will reimburse the Indemnified Party promptly
and periodically for the costs of defending against such claim, including
reasonable attorneys’ fees and expenses and (z) the Indemnifying Party will
remain responsible for any Losses the Indemnitee may suffer as a result of such
claim to the full extent provided in this Section 10. Regardless of which party
shall assume the defense of such claim, each party shall provide to the other
parties on request all information and documentation reasonably necessary to
support and verify any Losses which give rise to such claim for indemnification
and shall provide reasonable access to all books, records and personnel in their
possession or under their control which would have a bearing on such claim.
Notwithstanding anything herein to the contrary, any action or claim that
relates to a Tax Loss shall be governed by the provisions of Section 8.4.7
rather than the provisions of this section.

11. CONSENT TO JURISDICTION; JURY TRIAL WAIVER.

11.1. Consent to Jurisdiction. Each party to this Agreement, by its execution
hereof, (a) hereby irrevocably submits, and agrees to cause each of its
Subsidiaries to submit, to the exclusive jurisdiction of the state courts of the
State of New York or the United States District Court located in the Southern
District of the State of New York for the purpose of any action, claim, cause of
action or suit (in contract, tort or otherwise), inquiry proceeding or
investigation arising out of or based upon this Agreement or relating to the
subject matter hereof and (b) hereby waives, and agrees to cause each of its
Subsidiaries to waive, to the extent not prohibited by applicable law, and
agrees not to assert, and agrees not to allow any of its Subsidiaries to assert,
by way of motion, as a defense or otherwise, in any such action, any claim of
forum non conveniens, that it is not subject personally to the jurisdiction of
the above-named courts, that its property is exempt or immune from attachment or
execution, that any such proceeding brought in one of the above-named courts is
improper, or that this Agreement or the subject matter hereof may not be
enforced in or by such court, (c) hereby agrees to commence and require any of
its Subsidiaries to commence any action, claim, cause of action or suit (in
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otherwise), inquiry, proceeding or investigation arising out of or based upon
this Agreement or relating to the subject matter hereof exclusively in one of
the courts set forth in the preceding clause (a) of this Section 11.1, and
(d) hereby agrees not to commence, or permit any of its Subsidiaries to
commence, any claim, cause of action or suit (in contract, tort or otherwise),
inquiry, proceeding or investigation arising out of or based upon this Agreement
or relating to the subject matter hereof, other than before on of the courts set
forth in the preceding clause (a) of this Section 11.1, or to make any motion or
take any other action or suit (in contract, tort or otherwise), inquiry,
proceeding or investigation to any court other than one of the above named
courts whether on the grounds of inconvenient forum or otherwise.

11.2. Service of Process. Each party hereby consents to service of process in
any such proceeding in any manner permitted by New York law, and agrees that
service of process by registered or certified mail, return receipt requested, at
its address specified pursuant to Section 13.5 will constitute good and valid
service of process and waives and agrees not to assert (by way of motion, as a
defense, or otherwise) in any such Action any claim that service of process made
in accordance with this Section 11.2 does not constitute good and valid service
of process.

11.3. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH
CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES, AND AGREES TO CAUSE
EACH OF ITS SUBSIDIARIES TO WAIVE, AND COVENANTS THAT NEITHER IT NOR ANY OF ITS
SUBSIDIARIES WILL ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY
RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION CLAIM ,
CAUSE OF ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE), INQUIRY, PROCEEDING OR
INVESTIGATION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER
HEREOF OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS
CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING. THE
BUYER ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE SELLER THAT THIS SECTION
11.3 CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH THE SELLER IS RELYING AND WILL
RELY IN ENTERING INTO THIS AGREEMENT AND ANY OTHER AGREEMENTS RELATING HERETO OR
CONTEMPLATED HEREBY. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY
OF THIS SECTION 11.3 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH
SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

12. MISCELLANEOUS.

12.1. Entire Agreement; Waivers. This Agreement constitutes the entire agreement
among the parties hereto pertaining to the subject matter hereof and supersedes
all prior and contemporaneous agreements, understandings, negotiations and
discussions, whether oral or written, of the parties with respect to such
subject matter. No waiver of any provision of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not
similar), shall constitute a continuing waiver unless otherwise expressly
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effective unless in writing and executed (a) in the case of a waiver by the
Buyer, by the Buyer and (b) in the case of a waiver by the Seller or the
Company, by the Seller.

12.2. Amendment or Modification. The parties hereto may not amend or modify this
Agreement except in such manner as may be agreed upon by a written instrument
executed by the Buyer and the Seller.

12.3. Severability. In the event that any provision hereof would, under
applicable law, be invalid or unenforceable in any respect, such provision shall
(to the extent permitted under applicable law) be construed by modifying or
limiting it so as to be valid and enforceable to the maximum extent compatible
with, and possible under, applicable law. The provisions hereof are severable,
and in the event any provision hereof should be held invalid or unenforceable in
any respect, it shall not invalidate, render unenforceable or otherwise affect
any other provision hereof.

12.4. Successors and Assigns. All of the terms and provisions of this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective permitted transferees and assigns (each of which transferees
and assigns shall be deemed to be a party hereto for all purposes hereof);
provided, however, that (a) no transfer or assignment by any party hereto shall
be permitted without the prior written consent of the other parties hereto and
any such attempted transfer or assignment without consent shall be null and void
and (b) no transfer or assignment by any party shall relieve such party of any
of its obligations hereunder.

12.5. Notices. Any notices or other communications required or permitted
hereunder shall be deemed to have been properly delivered if in writing and
delivered personally or sent by facsimile, Federal Express, or registered or
certified mail, postage prepaid, addressed as follows:

 

  (a) if to the Buyer, to:

Pearson Autumn Acquisition, Inc.

c/o Pearson Assessments & Testing International

190 Holborn

London, WC1V 7BH

Attention: Clive Hay-Smith

Facsimile: 011 44 20 7010 678

with a copy to:

Pearson Education, Inc.

One Lake Street

Upper Saddle River, NJ 07458

Attention: Robert Dancy

Facsimile:(201) 236-4675

 

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with a copy to:

Morgan, Lewis & Bockius LLP

101 Park Avenue

New York, NY 10178

Attention: Charles E. Engros, Jr., Esq.

Facsimile: (212) 309-6001

 

  (b) if to the Seller, to:

Houghton Mifflin Company

222 Berkeley Street

Boston, MA 02116

Attention: General Counsel

Facsimile: (617) 351-1125

with a copy to:

Ropes & Gray LLP

One International Place

Boston, MA 02110

Attention: Jane D. Goldstein, Esq.

Facsimile: (617) 951-7050

Unless otherwise specified herein, such notices or other communications shall be
deemed given and delivered (a) on the date delivered, if delivered personally,
(b) on the date delivered, if sent by overnight courier, (c) one (1) Business
Day after being sent, if sent by facsimile and (d) three (3) Business Days after
being sent, if sent by registered or certified mail. Each of the parties hereto
shall be entitled to specify a different address by delivering notice as
aforesaid to each of the other parties hereto.

12.6. Public Announcements. Except as required by applicable Legal Requirements
or listing standards, no party hereto will issue or make any reports, statements
or releases to the public with respect to this Agreement or the transactions
contemplated hereby without the consent of the other parties hereto, which
consent shall not be unreasonably withheld. If any party hereto is unable to
obtain, after reasonable effort, the approval of its public report, statement or
release from the other parties hereto and such report, statement or release is,
in the opinion of legal counsel to such party, required by law in order to
discharge such party’s disclosure obligations, then such party may make or issue
the legally required report, statement or release and promptly furnish the other
parties with a copy thereof. Each party hereto will also obtain the prior
approval by the other parties hereto of any press release to be issued
announcing the consummation of the transactions contemplated by this Agreement.

 

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12.7. Headings, etc. Section and subsection headings are not to be considered
part of this Agreement, are included solely for convenience, are not intended to
be full or accurate descriptions of the content thereof and shall not affect the
construction hereof.

12.8. Disclosure. Any item listed or referred to in any Schedule pursuant to any
Section of this Agreement shall be deemed to have been listed or incorporated by
reference into each other Schedule where it is reasonably apparent from the
context of the disclosure that such listing or description would be appropriate.

12.9. Third Party Beneficiaries. Nothing in this Agreement is intended or shall
be construed to entitle any Person other than the parties, their respective
transferees and assigns permitted hereby to any claim, cause of action, remedy
or right of any kind, or any Buyer Indemnitee or Seller Indemnitee to the extent
such Indemnitee is entitled to indemnification in accordance with the provisions
of Section 10.

12.10. Counterparts. This Agreement may be executed by facsimile and in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute but one and the same instrument.

12.11. Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic substantive laws of the State of New York, without
giving effect to any choice or conflict of law provision or rule that would
cause the application of the laws of any other jurisdiction.

12.12. Expenses. Except as specifically set forth in Section 8.3 and 8.11, all
costs and expenses incurred by the Company and the Seller in connection with the
negotiation of this Agreement and consummation of the transactions contemplated
hereby shall be paid by the Seller and all costs and expenses incurred by the
Buyer and the Guarantor in connection with the negotiation of this Agreement and
consummation of the transactions contemplated hereby shall be paid by the Buyer
or the Guarantor, whether or not the transactions contemplated hereby are
consummated.

12.13. Specific Performance. Each of the parties hereto acknowledges and agrees
that the other parties would be damaged irreparably in the event any of the
covenants in this Agreement are not performed in accordance with their specific
terms or otherwise are breached or violated. Accordingly, each party hereto
agrees that the other parties hereto shall be entitled to one or more
injunctions enjoining any material breach or requiring specific performance of
such covenant and consents to the entry thereof without the necessity of the
posting of any bond or the furnishing of any other security, in addition to any
other remedies that may be available to the non-breaching party at law or in
equity. Each party further agrees that, in the event of any action for specific
performance in respect of such material breach or violation, it will not assert
the defense that a remedy at law would be adequate.

 

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12.14. Negotiation of Agreement. Each of the Company, the Seller, the Buyer and
the Guarantor acknowledges that it has been represented by independent counsel
of its choice throughout all negotiations that have preceded the execution of
this Agreement and that it has executed the same with consent and upon the
advice of said independent counsel. Each party and its counsel cooperated in the
drafting and preparation of this Agreement and the documents referred to herein,
and any and all drafts relating thereto shall be deemed the work product of the
parties and may not be construed against any party by reason of its preparation.
Accordingly, any rule of law or any legal decision that would require
interpretation of any ambiguities in this Agreement against the party that
drafted it is of no application and is hereby expressly waived. The provisions
of this Agreement shall be interpreted in a reasonable manner to effect the
intentions of the parties and this Agreement.

 

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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby,
have caused this Agreement to be executed as of the date first above written by
their respective officers thereunto duly authorized.

 

THE COMPANY:

    PROMISSOR, INC.       By:   /s/ Stephen Richards         Name: Stephen
Richards        

Title: President

THE SELLER:

    HOUGHTON MIFFLIN COMPANY       By:   /s/ Stephen Richards         Name:
Stephen Richards        

Title: CFO

THE BUYER:

    PEARSON AUTUMN ACQUISITION, INC.       By:   /s/ Robert D. Whelan        
Name: Robert D. Whelan        

Title: President

THE GUARANTOR:

    NCS PEARSON, INC.       By:   /s/ Steven E. Wells         Name: Steven E.
Wells        

Title: Vice President, General Counsel & Secretary

Signature Page – Stock Purchase Agreement