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                                                                   Exhibit 10.13


                                 [PEARSON LOGO]








                                  RULES OF THE

                                   PEARSON PLC

                                 1988 EXECUTIVE

                               SHARE OPTION SCHEME






                  Incorporating amendments up to 27 August 1997


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THE PEARSON PLC 1988 EXECUTIVE SHARE OPTION SCHEME

The Scheme was adopted on 6th May 1988 and approved by the Inland Revenue on
28th July 1988 under Schedule 9 to the Taxes Act 1988.

1. DEFINITIONS

(1) In this Scheme unless the context otherwise requires the following words and
expressions shall have the following meanings, namely:

"THE ADOPTION DATE" The date of the adoption of the Scheme by the Company in
general meeting.

"THE APPROPRIATE LIMIT" (pound)30,000 or such other amount as is the amount for
the time being contained in paragraph 28(1) of Schedule 9.

"ASSOCIATED SCHEME" Any share option scheme other than the Scheme approved under
Schedule 9 (but excluding any savings-related share option scheme) and
established by the Company or an associated company of the Company within the
meaning of section 416 of the Income and Corporation Taxes Act 1988.

"THE AUDITORS" The Auditors for the time being of the Company (acting as experts
and not as arbitrators).

"THE BOARD" The Board of Directors of the Company or a duly appointed committee
thereof.

"CERTIFIED PROVISION" Provision for Option Holders which the Auditors shall have
reported to the Board to be in their opinion fair and reasonable, having regard
(inter alia) to the tax position of Option Holders.

"THE COMPANY" Pearson plc

"CONTROL" The meaning given to that word by section 840 of the Income and
Corporation Taxes Act 1988.

"THE DATE OF GRANT" In relation to an Option, the day on which the Board
resolves to grant the Option.

"EXERCISE PRICE" The price per Share payable on the exercise of an Option.

"EXECUTIVE" Any employee or director of any company within the Group:

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         (i) whose terms of service require him to work for substantially the
         whole of his time for the Group and in any event in the case of a
         director not less than 25 hours per week (excluding meal breaks) and in
         the case of an employee who is not a director as aforesaid 20 hours per
         week (excluding meal breaks); and

         (ii) who is not excluded from participation by paragraph 8 of
         Schedule 9.

"EXECUTIVE SCHEME" Any share option scheme under which shares may be or have
been issued (other than a savings-related share option scheme approved under
Schedule 9).

"THE GROUP" The Company and the Subsidiaries.

"NORMAL RETIREMENT DATE" In relation to an Executive, the date on which he is
bound to retire under his contract of employment.

"OPTION" A right to acquire Shares granted under the Scheme.

"OPTION HOLDER" Any individual who holds a subsisting Option and who is not
excluded from participation by paragraph 8 of Schedule 9 (or, where the context
permits, the legal personal representatives of a deceased Option Holder).

"OPTION PERIOD" The period commencing on the Date of Grant of an Option and
expiring ten years thereafter.

"REORGANISATION" A "reorganisation" for the purposes of sections 78 to 81 of the
Capital Gains Tax Act 1979.

"SCHEDULE 9" Schedule 9 to the Income and Corporation Taxes Act 1988.

"THE SCHEME" This Scheme as amended from time to time.

"SHARES" Fully paid and irredeemable Ordinary Shares of 25p each in the Company
which comply with the conditions in paragraphs 10 to 14 of Schedule 9.

"SUBSIDIARY" Any subsidiary of the Company within the meaning of section 736 of
the Companies Act 1985 over which the Company has Control (and any company being
a company in which the Company directly or indirectly beneficially owns not less
than 50 per cent of the equity share capital and which has received the prior
approval of the Inland Revenue to participate in the Scheme).

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"TRUSTEES" The trustee or trustees of any employee benefit trust for the benefit
of beneficiaries including all or substantially all of the Executives.

"YEAR OF ASSESSMENT" A period commencing on 6th April in any year and ending on
5th April in the following year.

(2) Where the context permits-

         (a) the singular shall include the plural and vice versa and the
         masculine shall include the feminine; and

(b)      references to approval by the Company are references to approval by
         the Company in general meeting. (3) References to any Act shall
         include any statutory  modification, amendment or re-enactment thereof.

2. GRANT OF OPTIONS

(1) The Board may, in its absolute discretion, grant Options to Executives
selected by the Board: Provided that no Executive shall be granted an Option
less than 24 months before Normal Retirement Date. Such grants shall be subject
to the rules of the Scheme and shall be evidenced by option certificates under
the seal of the Company.

(2) In granting Options the Board may, at its discretion, impose such conditions
regarding the exercise of Options as the Board thinks fit (subject only to the
approval of any such condition in advance by the Inland Revenue).

(3) Grants shall be made, if at all, within the period of six weeks from the
date of publication of the Company's interim report or preliminary results for
any period.

(4) Any Executive to whom an Option is granted may, by notice in writing to the
Company given within 30 days after the Date of Grant, renounce in whole or in
part his rights under the Option. In such a case, the Option shall pro tanto be
treated, for all the purposes of the Scheme, as never having been granted and
(if already issued) the option certificate shall be returned to the Company for
cancellation or (in the case of renunciation in part) for amendment. No
consideration shall be payable by the Company for any such renunciation.

3. LIMITS

(1) Subject to adjustment pursuant to rule 6, the number of Shares that may be
issued on the exercise of Options granted under the Scheme shall be limited in
aggregate to the lesser of (a) 20 million Shares

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(representing 9.2 per cent of the ordinary share capital of the Company at the
Adoption Date), and (b) 5 per cent of the ordinary share capital of the Company
from time to time in issue.

(2) No Option shall be granted if the result of that grant would be that-

(a)      the aggregate number of Shares that could be issued on the exercise of
         that Option and any other Options granted at the same time when added
         to the number of Shares that -

             (i)  could be issued on the exercise of any other subsisting share
                  options granted during the preceding ten years under any
                  Executive Scheme, or

            (ii)  have been issued on the exercise of any share option granted
                  during the preceding ten years under any Executive Scheme,
                  would exceed 5 per cent of the ordinary share capital of the
                  Company for the time being in issue;

(b)      the aggregate number of Shares that could be issued on the exercise of
         that Option and any other Options granted at the same time, when added
         to the number of Shares that-

             (i)  could be issued on the exercise of any other subsisting share
                  options granted during the preceding ten years under any share
                  option scheme, or

            (ii)  have been issued on the exercise of any share option granted
                  during the preceding ten years under any share option scheme,
                  or

           (iii)  have been issued during the preceding ten years under any
                  profit sharing or other share incentive scheme (not being a
                  share option scheme), would exceed 10 per cent of the ordinary
                  share capital of the Company for the time being in issue; or

(c)      the aggregate number of Shares that could be issued on the exercise of
         that Option and any other Options granted at the same time when added
         to the number of Shares that-

             (i)  could be issued on the exercise of any other subsisting share
                  options granted after the Adoption Date during the preceding
                  four years under any Executive Scheme, or

            (ii)  have been issued on the exercise of any share option granted
                  after the Adoption Date during the preceding four years under
                  any Executive Scheme, would exceed 2 1/2 per

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                  cent of the ordinary share capital of the Company for the
                  time being in issue.

(3) In determining the limits in rules 3(1) and 3(2) any Shares which are issued
or could be issued to satisfy any Options which the Trustees may agree to
satisfy shall be included.

(4) No Option shall be granted to any Executive if the result of that grant
would be that the aggregate exercise price under all options which are
subsisting under the Scheme or an Associated Scheme, would exceed the
Appropriate Limit.

4. TERMS OF OPTIONS

(1) Exercise Price

The Exercise Price shall be determined by the Board but shall not be less than
the middle market quotation for a Share on The Stock Exchange, as derived from
the Daily Official List, for the last business day before the Date of Grant:
Provided that in relation to an Option under which Shares may be issued upon its
exercise, the Exercise Price shall not be less than the nominal value of a
Share.

(2) Exercise of Option

(a) Save as provided in rules 4(3) and 5, an Option shall be exercisable in
whole or in part only after the third anniversary of the Date of Grant and not
later than the expiry of the Option Period.

(b) If an Option Holder ceases to be employed within the Group for any reason
whatsoever, any Option .granted to him shall, save as provided in rule 4(3),
lapse and not be exercisable.


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(c) An Option may be exercised only by the Option Holder's giving notice to the
Company in the form for the time being prescribed by the Board, specifying the
number of shares in respect of which the Option is being exercised and
accompanied by payment in full of the aggregate Exercise Price of those shares.
Notice must be delivered to or sent by pre-paid post to the Company at its
registered office or at such other place as the Company shall from time to time
prescribe.

(d) Notwithstanding any other provision of the Scheme an Option may not be
exercised by an individual who is excluded from participation by paragraph 8 of
Schedule 9.

(3) Option Holders leaving employment

(a) If an Option Holder dies whilst in service and before the expiry of the
Option Period, his legal personal representatives shall (notwithstanding rule
4(2) (a)) be entitled to exercise his Options during the period ending twelve
months after the date of death.

(b) If an Option Holder ceases to be employed within the Group before the expiry
of the Option Period owing to:-

         (i)  injury or disability (as determined by the Board); or

         (ii) retirement at or after Normal Retirement Date or the date when he
         becomes entitled to an immediate pension under any pension scheme
         operated by a company within the Group of which he is a director or
         employee (or would have the right to such a pension if he was a member
         of such a scheme, but has exercised his right not to belong to the
         relevant scheme),

he shall be entitled to exercise his Options (notwithstanding rule 4(2) (a))
during the period ending on the later of (i) twelve months from the date of
cessation and (ii) 42 months from the Date of Grant or (if later) the date on
which he last exercised any option granted under the Scheme or under any other
share option granted under the Scheme or under any other share option scheme
approved under Schedule 9 in circumstances in which section 185(5) (a) and (b)
of the Income and Corporation Taxes Act 1988 applied: Provided that he shall not
in any event be entitled to exercise his Options after the end of the Option
Period.

(c) The Board may, at its discretion, allow an Option Holder who has ceased to
be employed within the Group for any reason other than those referred to in
paragraphs (a) and (b) above to exercise his Options during the period ending on
the later of (i) twelve months from the date of cessation and (ii) 42 months
from the Date of Grant or (if later) the

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date on which he last exercised any option granted under the Scheme or under any
other share option scheme approved under Schedule 9 in circumstances in which
section 185(5) (a) and (b) of the Income and Corporation Taxes Act 1988 applied:
Provided that he shall not in any event be entitled to exercise his Options
after the end of the Option Period.

(d) For the purposes of rule 4(2) (b) and rule 4(3) (b) and (c) an Option Holder
shall not be treated as ceasing to be employed within the Group until (i) he
ceases to hold an office or employment in the Company or any company over which
the Company has Control or any associated company of the Company within the
meaning of section 416 of the Income and Corporation Taxes Act 1988 or (ii)
being a female employee who is absent from work wholly or partly because of
pregnancy or confinement, she ceases to be entitled to exercise her right to
return to work.

(4) Inalienability of Options

Every Option granted hereunder shall be personal to the Option Holder and,
except to the extent necessary (a) to enable a personal representative to
exercise the Option following the death of an Option Holder, or (b) to effect
the grant of a New Right under rule 5, neither the Option nor the benefit
thereof may be transferred, assigned, charged or otherwise alienated.

(5) Overriding Lapse of Options

(a) Save as provided in rule 4(3) (a), no Option shall be capable of being
exercised after the expiry of the Option Period.

(b) If a bankruptcy order is made in respect of an Option Holder, all Options
held by him shall lapse forthwith.

5. TAKEOVER OFFERS AND LIQUIDATION

(1) If any other company ("the Acquirer"):-

(a)      obtains Control of the Company as a result of making:

             (i)  a general offer to acquire the whole of the issued share
                  capital of the Company which is made on a condition such that
                  if it is satisfied the person making the offer will have
                  control of the Company, or

            (ii)  a general offer to acquire all the shares in the Company
                  which are of the same class as the Shares, or

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(b)      obtains Control of the Company in pursuance of a compromise or
         arrangement sanctioned by the court under section 425 of the Companies
         Act 1985., or

(c)      becomes bound or entitled to acquire shares in the Company under
         sections 428 to 430 of the Companies Act 1985;

any Option Holder may, at any time within the appropriate period defined in
paragraph 15(2) of Schedule 9 ("the Appropriate Period"), by agreement with the
Acquirer release his Option in consideration of the grant to him of a right
which is equivalent to the Option but relates to shares in the Acquirer or some
other company falling within paragraph (b) or (c) of paragraph 10 of Schedule 9
("the New Right").

(2) The New Right shall not be regarded for the purposes of this rule 5 as
equivalent to the Option unless:

(a)      the shares to which it relates ("the Replacement Shares") satisfy the
         conditions specified, in relation to scheme shares, in paragraphs 10 to
         14 of Schedule 9; and

(b)      the New Right will be exercisable in the same manner as the Option and
         subject (mutatis mutandis) to the provisions of the Scheme as it had
         effect immediately before the exchange; and

(c)      the total market value, as defined for the purposes of Schedule 9,
         immediately before the exchange, of the Shares which were subject to
         the Option is, as nearly as may be, equal to, but is not less than, the
         total market value (defined as aforesaid), immediately after the
         exchange, of the Replacement Shares; and

(d)      the total amount payable by the Option Holder for the acquisition of
         the Replacement Shares is, as nearly as may be, equal to, but is not
         less than, the total Exercise Price of the Shares which were subject to
         the Option immediately before the exchange.

(3) For the purposes of Schedule 9 and rule 5(2) (b) any New Right granted shall
be deemed to have been granted on the date on which the equivalent Option was
granted.

(4) In the application of the Scheme to the New Right:

(i)      references to the Shares (other than in rules 1, 2, 3, 4(1), 12, 13
         and 14) shall be read as if they were references to the Replacement
         Shares;

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(ii)     references to the Company (other than in rules 1, 2, 3, 4(1), 12, 13
         and 14) shall be read as if they were references to the company to
         whose shares the New Right relates;

(iii)    rules 5(1), 5(2), 5(3), 5(4), 5(5) and 5(6) shall apply in respect of
         any change of circumstance within the terms of rule 5(1) above
         affecting the company to whose shares the New Right relates as if
         references to the Option were references to the New Right as it related
         to the shares in that company and as if references to the Shares were
         references to the Replacement Shares in respect of which that New Right
         was granted.

(5) Subject to rule 5(6), if for any reason whatsoever any Option Holder does
not release an Option within the Appropriate Period in accordance with and
pursuant to rule 5(1), following the occurrence of any of the events specified
in rule 5(1) (a), (b) and (c), an Option Holder may exercise such Option within
either (i) 6 months after the expiry of the Appropriate Period or (ii) within
the Appropriate Period with the consent in writing of the Acquirer except that
where such period elapses before the third anniversary of the Date of Grant of
the Option, the Option may also be exercised within 6 months of such third
anniversary (and, if the Option is not released or exercised by the expiry of
the last applicable time limit, it shall thereupon lapse).

(6) Notwithstanding the foregoing provisions of this rule 5, the Acquirer may,
subject to receiving the prior written consent of the Board given prior to the
Acquirer obtaining Control of the Company, elect to permit the Scheme to
continue following his general offer. If he does so, having received the Board's
written consent as aforesaid, the Board shall forthwith inform Option Holders;
outstanding Options which are not otherwise exercisable shall not become
exercisable merely by virtue of the general offer being made or of Control of
the Company having been obtained or by virtue of the Offeror becoming bound or
entitled to acquire shares in the Company under section 428 of the Companies Act
1985; nor shall they lapse at the expiry of the period referred to in rule 5(1)
and (5). Instead, they will be exercisable subject to the other rules imposed by
the Scheme. If the Acquirer so agrees, any Option Holder may release his Option
in consideration for a New Right in accordance with and pursuant to rule 5(1),
notwithstanding this rule 5(6).

(7) If notice is duly given of a resolution for the voluntary winding up of the
Company then, unless the winding up is for the purposes of a reorganisation or
reconstruction which makes Certified Provision outside the terms of the Scheme
for the compensation of the Option Holders or the grant of new Options to them,
the Option Holder (or where permitted his personal representatives) may
forthwith and until

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the commencement of the winding up (or if earlier the day before the tenth
anniversary of the date of grant of the relevant Option) exercise an Option, but
any Option exercised pursuant to the provisions of this rule 5(7) shall be of no
effect unless the said resolution is duly passed. Upon commencement of the
winding up all Options shall lapse and cease to be exercisable except insofar as
is necessary to give effect to the provisions of this rule 5(7).

(8) Save as mentioned in rule 5(7), all Options shall automatically lapse and
cease to be exercisable in the event of an effective resolution being passed or
order being made for the winding up of the Company and, subject to rule 5(6), to
the extent Options are not released under rule 5(1) within the Appropriate
Period nor duly exercised under rule 5(5) within any of the periods provided for
under rule 5(5), Options shall automatically lapse and cease to be exercisable
on the expiry of such period.

6. ADJUSTMENT OF OPTION

In the event of any Reorganisation of the share capital of the Company, the
total number of Shares which may be issued under the Scheme, the Exercise Price,
the definition of "Shares" and the number of Shares comprised in an Option may
be adjusted in such manner as the Board may determine and such decision of the
Board shall be final and binding on the Option Holder and the Company: Provided
always that:-

(a) in relation to an Option under which Shares may be acquired on its exercise,
no adjustment to the Exercise Price shall be made pursuant to the provisions of
this rule which would result in the Shares subject to any Option being issued at
a price lower than their nominal value and if in the case of any Shares such an
adjustment would, but for this proviso, have so resulted, the Exercise Price of
such Shares shall be the nominal amount thereof,

(b) no adjustment shall be made pursuant to this rule unless and until the
Auditors shall have reported in writing to the Board that such adjustment is in
their opinion fair and reasonable;

(c) no adjustment shall be made pursuant to this rule without the prior approval
of the Board of Inland Revenue;

(d) no adjustment shall be made pursuant to this rule which would increase the
aggregate Exercise Price.

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7. ISSUE OR TRANSFER OF SHARES ON EXERCISE OF OPTION

Subject to any necessary consents to payment being made for the Shares and to
compliance by the Option Holder with the terms of the Scheme, the Company shall
as soon as practicable and in any event not later than 28 days after receipt of
any notice of exercise in accordance with rule 4(2) (c) issue or procure the
transfer to the Option Holder (or his nominee) the number of Shares specified in
the notice at the Exercise Price and shall, unless the Shares are to be issued
in uncertificated form, deliver to the Option Holder (or his nominee) a
definitive share certificate in respect thereof together with, in the case of a
partial exercise of an Option, an option certificate in respect of (or the
original option certificate endorsed so as to show) the unexercised part of the
Option.

8. RIGHTS ATTACHING TO SHARES ALLOTTED OR TRANSFERRED PURSUANT TO OPTION

All Shares allotted or transferred pursuant to the exercise of any Option shall,
as to voting, dividend, transfer and other rights, including those arising on a
liquidation of the Company, rank pari passu in all respects and as one class
with the Shares in issue at the date of such exercise save as regards any rights
attaching to such Shares by reference to a record date prior to the date of such
exercise.

9. AVAILABILITY OF SHARES

The Company shall (a) in relation to Shares which may be issued hereunder, at
all times keep available sufficient authorised but unissued Shares to permit the
exercise of all outstanding options, and (b) procure that sufficient Shares are
available for transfer to satisfy all options under which Shares may be acquired
by way of transfer.

10. LISTING

The Company shall, at its expense, make application for, and use its best
endeavours to obtain listing for, and permission to deal on The Stock Exchange
in, Shares allotted pursuant to the exercise of any Option.

11. LOSS OF OFFICE

If any Option Holder ceases to be an Executive for any reason he shall not be
entitled by way of compensation for loss of office or otherwise howsoever to any
sum or other benefit to compensate him for the loss of any rights under the
Scheme and by accepting an Option he shall be deemed irrevocably to have waived
any right or entitlement to any such sum or other benefit.

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12. POWERS OF THE BOARD

The decision of the Board shall be final and binding in all matters relating to
the Scheme and it may at any time discontinue the grant of further Options or
amend any of the provisions of the Scheme in any way it thinks fit. Provided
that:-

(a) no amendment may be made for the benefit of Option Holders to rules 1, 2, 3,
4, 5, 6, 8, 12 or 14 without the prior approval of the Company in general
meeting except in the case of an amendment which is necessary or desirable in
order to obtain or maintain Inland Revenue approval of the Scheme under Schedule
9 or any other enactment, or to take advantage of new legislative provisions
relating to option schemes;

(b) the Board may not cancel an Option except where the Option Holder shall have
agreed in writing to such cancellation;

(c) except as herein provided, the Board shall not make any amendment (not being
an amendment that it may make by virtue of (a) above) that would materially
prejudice the interests of existing Option Holders except with such prior
consent or sanction of Option Holders as would be required under the provisions
for the alteration of class rights contained in the Articles of Association of
the Company for the time being if the shares to be allotted on the exercise of
the outstanding Options constituted a separate but single class of shares (or
two or more classes of shares according to their respective Dates of Grant, as
the Board may consider appropriate) and such shares were entitled to such
rights;

(d) no amendment may be made at a time when the Scheme is approved by the Inland
Revenue without the prior approval of the Inland Revenue.

13. PROVISION OF INFORMATION

The Company shall provide to the Inland Revenue, within such rime as the Inland
Revenue may direct, information requested by the Inland Revenue under paragraph
6 of Schedule 9 and an Option Holder shall:-

(a) provide to the Company in timely fashion such information as the Company
shall reasonably request; and

(b) consent to the Company's providing information concerning him to the Inland
Revenue, for the purpose of complying with such a request from the Inland
Revenue.

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14. DURATION OF THE SCHEME

Notwithstanding any other provision in the Scheme no Option may be granted under
the Scheme later than ten years after the approval of the Scheme by the Company.

<PAGE>


SCHEDULE

(This Schedule, which was adopted by the Board on 7th August 1996 and
subsequently amended on 11th April 1997, does not form part of the Scheme
approved by the Inland Revenue under Schedule 9. This Schedule applies to
Options granted after the date on which the Finance Act 1996 is enacted where
the Board wishes to categorise those Options as unapproved.)

GRANT OF UNAPPROVED OPTIONS

1. Save as provided in paragraphs 2 and 3 below, the provisions of the Scheme
shall apply to Executives to whom Options are granted under this Schedule.

2.       With effect from the date on which the Finance Act 1996 is enacted:

(a)      Rule 3(4) (as amended on 7th August 1996 to reflect the (pound)30,000
         individual limit imposed via section 105(2) and (3) of the Finance Act
         1996 in the Rules) shall not apply for the purposes of grants of
         Options under this Schedule.

(b)      Notwithstanding the alteration by statute of Rule 3(4) referred to
         above (to impose the (pound)30,000 individual limit), the following
         provisions shall apply for the purposes of this Schedule (reflecting
         Rule 3(4) in its unamended form):

             (i)  No Options (but excluding for these purposes any Replacement
                  Option) shall be granted to any Executive if the result of
                  that grant would be that the aggregate exercise price under
                  all options (other than Replacement Options and options
                  granted to him under a savings-related share option scheme
                  approved under Schedule 9) which were granted to him during
                  the preceding 10 years under the Scheme or any other share
                  option scheme established by the Company or a Subsidiary,
                  would exceed four times his total annual emoluments as at the
                  proposed Date of Grant.

            (ii)  A Replacement Option may be granted in excess of the limit in
                  paragraph (i) above provided that the aggregate exercise price
                  under all options (other than options granted to him under a
                  savings-related share option scheme approved under Schedule 9)
                  which are subsisting under the Scheme or any other share
                  option scheme established by the Company or a Subsidiary,
                  would not exceed four times his total annual emoluments as at
                  the proposed Date of Grant.

<PAGE>

           (iii)  For the purposes of this paragraph 2(b), the following words
                  and expressions shall have the following meanings:

REPLACEMENT OPTION means an Option Granted to an Executive who could not be
granted an option (not being a Replacement Option) by reason of the limit
contained in (i) above and who has before the proposed Date of Grant thereof
exercised an Option under any Executive Scheme.

(c)      If a grant of Options has been made under the Inland Revenue approved
         body of the Scheme then such a grant will be taken into account when
         assessing the number of Options which may be granted under this
         Schedule to the Scheme so that the total of grants under both the body
         of the Scheme and this Schedule does not exceed the limits set out in
         paragraphs 2(b)(i) and (ii) above.

3. In the event that a PAYE Liability becomes due on the exercise of an Option
granted on or after lst March 1997, the Option may not be exercised unless:

(a)      a member of the Group is able to deduct an amount equal to the whole
         of the PAYE Liability from the Executive's net pay for the next pay
         period; or

(b)      the Executive has paid to a member of the Group an amount equal to
         the PAYE Liability; or

(c)      the sum of the amount that the Executive has paid to a member of the
         Group in respect of a member of the Group's obligation to satisfy the
         PAYE Liability and the total amount that a member of the Group is able
         to deduct from the Executive's net pay for the next pay period is equal
         to or more than the PAYE Liability; or

(d)      the Executive has given irrevocable instructions to the Company's
         brokers (or any other person acceptable to the Company) for the sale of
         sufficient Shares acquired on the exercise of the Option to realise an
         amount equal to the PAYE Liability and the payment of the PAYE
         Liability to the Company or other member of the Group; or

(e)      the Board determines otherwise.

PAYE Liability means the amount of all taxes and/or primary National Insurance
contributions or other social taxes which a member of the Group would be
required to account to the Inland Revenue or other taxation authority if an
..Executive exercised an Option.


<PAGE>


                 PEARSON PLC 1988 EXECUTIVE SHARE OPTION SCHEME

                NORMALISED EARNINGS PER SHARE PERFORMANCE TARGET

The condition referred to in Rule 2(2) is that, at the Accounts Date of the
Company coincident with, or following the expiry of, a Prescribed Period
relating to an Option, the Company's average annual percentage growth in its
annualised Earnings per Share over that Prescribed Period (comparing the Basis
Year with the Latest Year) is at least 2 per cent per annum greater than the
percentage increase, if any, in the RPI Index, as adjusted (if appropriate)
pursuant to paragraph 2 below, over that Prescribed Period.

The following provisions apply for the purposes of determining whether the
condition set out in this Schedule has been satisfied.

1. The following expressions have the meanings respectively ascribed to them:

ACCOUNTS means the consolidated accounts of the Company for a Financial Year
drawn up on the historical cost basis modified by the revaluation of certain
fixed assets in accordance with generally accepted accounting principles applied
consistently;

ACCOUNTS DATE means the date on which the Accounts are published;

ANNUALISED EARNINGS PER SHARE means Earnings per Share adjusted proportionately
upwards or downwards in a case where the relevant Financial Year is greater than
one calendar year;

BASIS YEAR means, in relation to the Company, the Financial Year ending
immediately before the start of the Prescribed Period;

EARNINGS PER SHARE means, for any Financial Year of the Company, the earnings
per ordinary share of the Company calculated in accordance with Financial
Reporting Standard No. 3 issued by the Accounting Standards Board Limited or any
modification thereto provided that to ensure comparability of Financial Years of
the Company within a Prescribed Period the Directors (with the approval of the
Auditors) may:

(a)      adjust the figure for earnings per share as calculated in accordance
         with the relevant accounting standard to arrive at a figure which
         reflects the underlying business performance of the Company (and may,
         without limitation, adjust by excluding extraordinary items from the
         earnings per share calculation);

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(b)      adjust the figure for any tax charge to ensure that the deduction for
         taxation in respect of the Latest Year shall be at the average tax
         rate applicable to the Basis Year; and

(c)      ensure that the relevant accounting standard is applied on a consistent
         basis in respect of years falling within any Prescribed Periods;

EXERCISE CONDITION  means the exercise condition set out in this Schedule and
referred to in Rule 2(2) of the Scheme;

FINANCIAL YEAR means an accounting reference period as defined in accordance
with section 224 of the Companies Act 1985;

LATEST YEAR means, in relation to the Company, the latest Financial Year in a
Prescribed Period for which Accounts have been published;

PRESCRIBED PERIOD means any period of three consecutive Financial Years, the
first of which shall not in any event be earlier than the Financial Year
starting immediately before the Date of Grant of the relevant Option; and

RPI INDEX means the Index of RETAIL PRICES (ALL Items) published by H.M.
Government.

2. Where the Latest Year is greater than one calendar year, the percentage
increase in the RPI Index for that Latest Year shall be adjusted proportionately
upwards or downwards as appropriate in order to secure that such percentage
increase is annualised in a manner consistent with the Annualised Earnings per
Share.

3. As at each Accounts Date of the Company following the expiry of a Prescribed
Period, the Company shall procure that the Auditors shall calculate for the
Company the percentage growth between the Annualised Earnings per Share for its
Basis Year and for its Latest Year and shall report whether that percentage
growth is at least 2 per cent per annum above the percentage increase per annum,
if any, in the RPI Index, as adjusted (if appropriate), pursuant to paragraph 2
above and this paragraph, over that Prescribed Period. In making such
calculations the Auditors shall make such adjustments as they may consider
appropriate to take account of any intervening capital reorganisation of the
Company, including, without limitation, any capitalisation issue, rights issue,
sub-division or consolidation of share capital, reduction of capital or demerger
within the meaning of Sections 213 to 218 of the Act and any modifications to
the relevant accounting standard.



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4. If the composition of the RPI Index changes or the RPI Index is replaced by
another similar index, the Auditors may make such adjustments to any
calculations using the RPI Index (or any replacement index) as they consider to
be fair and reasonable.

5. The Auditors shall act hereunder as experts and not as arbitrators and their
calculations shall not be open to question and their determinations hereunder,
and in particular as to whether as at any Accounts Date the Company's percentage
growth in its Annualised Earnings per Share, comparing the Basis Year with the
Latest Year, does or does not exceed by at least 2 per cent per annum the
percentage increase, if any, in the RPI Index over that period, shall be final
and binding on all persons concerned in the absence of fraud. The Auditors shall
be under no liability to any such person by reason thereof or of anything done
or omitted by them for the purposes thereof or in connection therewith.

6. An Option shall be exercisable in full without regard to the Exercise
Condition where the Option is exercisable under the provisions of Rule 4(3)(a)
(death), Rule 4(3)(b)(i) (injury or disability), Rule 4(3)(c) (cessation of
employment in other circumstances) or Rule 5 (various circumstances relating to
the exercise of Options following a take-over, reconstruction or winding-up).
For the avoidance of doubt, the exercise condition shall continue to apply where
the Option is exercisable under Rule 4(3)(b)(ii) (retirement).