Document:

Exhibit
4.3

 

 

 

REGISTRATION RIGHTS AGREEMENT

 

Dated as of February 14,
2007

 

Among

 

PGS SOLUTIONS, INC.

 

and

 

THE GUARANTORS NAMED HEREIN

 

as Issuers,

 

and

 

WACHOVIA CAPITAL MARKETS, LLC

 

and

 

GOLDMAN, SACHS & CO.,

as Initial Purchasers

 

 

95/8% Senior Subordinated Notes due 2015

 

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Exchange Offer

  	
  5

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Shelf Registration

  	
  9

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Additional Interest

  	
  11

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Registration Procedures

  	
  13

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Registration Expenses

  	
  22

  
	
   

  	
   

  	
   

  
	
  7.

  	
  Indemnification and Contribution

  	
  23

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Rules 144 and 144A

  	
  27

  
	
   

  	
   

  	
   

  
	
  9.

  	
  Underwritten Registrations

  	
  27

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Miscellaneous

  	
  27

  

 

i

 

REGISTRATION RIGHTS AGREEMENT

 

This REGISTRATION RIGHTS AGREEMENT dated February 14,
2007 (this “Agreement”) is entered into by and among PGS Solutions, Inc.,
a Delaware corporation (the “Company”), the guarantors listed in Schedule 1
hereto (the “Guarantors”), and Wachovia Capital Markets, LLC, and
Goldman Sachs & Co. (the “Initial Purchasers”).

 

This Agreement is entered into in connection
with the Purchase Agreement by and among PGS Holding Corp., the Company, the
Guarantors and the Initial Purchasers, dated as of February 7, 2007 (the “Purchase
Agreement”), which provides for, among other things, the sale by the
Company to the Initial Purchasers of $190,000,000 aggregate principal amount of
its 95/8% Senior Subordinated Notes due
2015 (the “Notes”), which will be guaranteed by the Guarantors (the “Guarantees).  In order to induce the Initial Purchasers to
enter into the Purchase Agreement, the Issuers have agreed to provide the
registration rights set forth in this Agreement for the benefit of the Initial
Purchasers and any subsequent holder or holders of the Securities.  The execution and delivery of this Agreement
is a condition to the Initial Purchasers’ obligation to purchase the Securities
under the Purchase Agreement.

 

References herein to “Securities” shall mean,
collectively, the Notes and, when issued, the Guarantees.  References herein to “Issuer” shall mean the
Company and the Guarantors.

 

The parties hereby agree as follows:

 

1.             Definitions

 

As used in this Agreement, the following
terms shall have the following meanings:

 

Additional Interest:  See Section 4(a) hereto.

 

Advice:  See the last paragraph of Section 5
hereto.

 

Agreement:  See the introductory paragraphs hereto.

 

Applicable Period:  See Section 2(b) hereto.

 

Application:  See Section 7(a)(i) hereto.

 

Blackout Period:  See Section 3(d) hereto.

 

Business Day:  Any day that is not a Saturday, Sunday or a
day on which banking institutions in New York are authorized or required by law
to be closed.

 

 

Company:  See the introductory paragraphs hereto.

 

Effectiveness Date:  With respect to (i) the Exchange Offer
Registration Statement, the 270th day after the Issue Date and (ii) any
Shelf Registration Statement, the 150th day after the Filing Date with respect
thereto; provided, however, that if the Effectiveness Date would
otherwise fall on a day that is not a Business Day, then the Effectiveness Date
shall be the next succeeding Business Day.

 

Effectiveness Period:  See Section 3(a) hereto.

 

Event Date:  See Section 4 hereto.

 

Exchange Act:  The Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.

 

Exchange Notes:  See Section 2(a) hereto.

 

Exchange Offer:  See Section 2(a) hereto.

 

Exchange Offer Registration Statement:  See Section 2(a) hereto.

 

Filing Date:  (A) With respect to the Exchange Offer
Registration Statement, the 180th day after the Issue Date; and (B) in any
other case (which may be applicable notwithstanding the consummation of the
Exchange Offer), the 60th day after the delivery of a Shelf Notice as required
pursuant to Section 2(c) hereto; provided, however,
that if the Filing Date would otherwise fall on a day that is not a Business
Day, then the Filing Date shall be the next succeeding Business Day.

 

Guarantees:  See the introductory paragraphs hereto.

 

Guarantors:  See the introductory paragraphs hereto.

 

Holder:  Any holder of a Registrable Note or
Registrable Notes.

 

Indenture:  The Indenture, dated as of February 14,
2007, by and among the Company, the Guarantors and The Bank of New York, as
Trustee, pursuant to which the Notes are being issued, as amended or
supplemented from time to time in accordance with the terms thereto.

 

Information:  See Section 5(n) hereto.

 

Initial Purchasers:  See the introductory paragraphs hereto.

 

2

 

Initial Shelf Registration:  See Section 3(a) hereto.

 

Inspectors:  See Section 5(n) hereto.

 

Issue Date:  February 14, 2007, the date of original
issuance of the Notes.

 

Issuer or Issuers:  See the introductory paragraphs hereto.

 

Issuer FWP:  See Section 7(a)(iii) hereto.

 

NASD:  See Section 5(r) hereto.

 

Notes:  See the introductory paragraphs hereto.

 

Participant:  See Section 7(a) hereto.

 

Participating Broker-Dealer:  See Section 2(b) hereto.

 

Person:  An individual, trustee, corporation,
partnership, limited liability company, joint stock company, trust,
unincorporated association, union, business association, firm or other legal
entity.

 

Private Exchange:  See Section 2(b) hereto.

 

Private Exchange Notes:  See Section 2(b) hereto.

 

Prospectus:  The prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement or “free-writing
prospectus” (as defined in Rule 405 under the Securities Act), including a
prospectus supplement or free-writing prospectus with respect to the terms of
the offering of any portion of the Registrable Securities covered by a Shelf
Registration Statement, and by all other amendments and supplements to such
prospectus, and in each case including any document incorporated by reference
therein.

 

Purchase Agreement:  See the introductory paragraphs hereto.

 

Records:  See Section 5(n) hereto.

 

Registrable Notes:  Each Note (and the related Guarantees) upon
its original issuance and at all times subsequent thereto, each Exchange Note
(and the related guarantees) as to which Section 2(c)(iv) hereto is
applicable upon original issuance and at all times subsequent thereto and each
Private Exchange Note (and the related guarantees) upon original issuance
thereof and at all times subsequent thereto, until, in each case, the earliest
to occur of 

 

3

 

(i) a Registration Statement (other than, with respect to any
Exchange Note as to which Section 2(c)(iv) hereto is applicable, the
Exchange Offer Registration Statement) covering such Note, Exchange Note or
Private Exchange Note (and the related guarantees) has been declared effective
by the SEC and such Note, Exchange Note or such Private Exchange Note (and the
related guarantees), as the case may be, has been disposed of in accordance
with such effective Registration Statement, (ii) such Note has been
exchanged pursuant to the Exchange Offer for an Exchange Note or Exchange Notes
(and the related guarantees) that may be resold without restriction under state
and federal securities laws, (iii) such Note, Exchange Note or Private
Exchange Note (and the related guarantees), as the case may be, ceases to be
outstanding for purposes of the Indenture or (iv) such Note, Exchange Note
or Private Exchange Note (and the related guarantees), as the case may be, may
be resold without restriction pursuant to Rule 144(k) (as amended or
replaced) under the Securities Act.

 

Registration Statement:  Any registration statement of the Issuers that
covers any of the Notes, the Exchange Notes or the Private Exchange Notes (and
the related Guarantees or guarantees, as the case may be) filed with the SEC
under the Securities Act, including the Prospectus, amendments and supplements
to such registration statement, including post-effective amendments, all
exhibits, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.

 

Rule 144:  Rule 144 under the Securities Act.

 

Rule 144A:  Rule 144A under the Securities Act.

 

Rule 405:  Rule 405 under the Securities Act.

 

Rule 415:  Rule 415 under the Securities Act.

 

Rule 424:  Rule 424 under the Securities Act.

 

SEC:  The United States Securities and Exchange
Commission or any successor agency thereto.

 

Securities:  See the introductory paragraphs hereto.

 

Securities Act:  The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.

 

Shelf Notice:  See Section 2(c) hereto.

 

Shelf Registration:  See Section 3(b) hereto.

 

4

 

Shelf Registration Statement:  Any Registration Statement relating to a
Shelf Registration.

 

Subsequent Shelf Registration:  See Section 3(b) hereto.

 

TIA:  The Trust Indenture Act of 1939, as amended.

 

Trustee:  The trustee under the Indenture and the
trustee (if any) under any indenture governing the Exchange Notes and Private
Exchange Notes (and the related guarantees).

 

Underwritten registration or underwritten
offering:  A
registration in which securities of one or more of the Issuers are sold to an
underwriter for reoffering to the public.

 

Except as otherwise specifically provided,
all references in this Agreement to acts, laws, statutes, rules, regulations,
releases, forms, no-action letters and other regulatory requirements
(collectively, “Regulatory Requirements”) shall be deemed to refer also
to any amendments thereto and all subsequent Regulatory Requirements adopted as
a replacement thereto having substantially the same effect therewith; provided
that Rule 144 shall not be deemed to amend or replace Rule 144A.

 

2.             Exchange Offer

 

(a)           Unless the Exchange Offer would violate
applicable law or any applicable interpretation of the staff of the SEC, the
Issuers shall file with the SEC, no later than the Filing Date, a Registration
Statement (the “Exchange Offer Registration Statement”) on an
appropriate registration form with respect to a registered offer (the “Exchange
Offer”) to exchange any and all of the Registrable Notes for a like aggregate
principal amount of debt securities of the Issuer (the “Exchange Notes”),
guaranteed by the Guarantors, that are identical in all material respects to
the Securities, except that (i) the Exchange Notes shall contain no
restrictive legend thereon and (ii) interest thereon shall accrue from the
last date on which interest was paid on the Notes or, if no such interest has
been paid, from the Issue Date, and which are entitled to the benefits of the
Indenture or a trust indenture which is identical in all material respects to
the Indenture (other than such changes to the Indenture or any such other trust
indenture as are necessary to comply with the TIA) and which, in either case,
has been qualified under the TIA.  The
Exchange Offer shall comply with all applicable tender offer rules and
regulations under the Exchange Act and other applicable laws.  The Issuers shall use their commercially
reasonable efforts to (x) cause the Exchange Offer Registration Statement
to be declared effective under the Securities Act on or before the
Effectiveness Date; (y) keep the Exchange Offer open for at least 30 days
(or longer if required by applicable law) after the date that notice of the
Exchange Offer is mailed to Holders; and (z) consummate the Exchange 

 

5

 

Offer on or prior to the 45th day following effectiveness of the
Exchange Offer Registration Statement or the Shelf Registration Statement, as
applicable.

 

Each Holder (including, without limitation,
each Participating Broker-Dealer) who participates in the Exchange Offer will
be required to represent to the Issuers in writing (which may be contained in
the applicable letter of transmittal) that: 
(i) any Exchange Notes acquired in exchange for Registrable Notes
tendered are being acquired in the ordinary course of business of the Person
receiving such Exchange Notes, whether or not such recipient is such Holder
itself; (ii) at the time of the commencement or consummation of the
Exchange Offer neither such Holder nor, to the actual knowledge of such Holder,
any other Person receiving Exchange Notes from such Holder has an arrangement
or understanding with any Person to participate in the distribution of the
Exchange Notes in violation of the provisions of the Securities Act; (iii) neither
the Holder nor, to the actual knowledge of such Holder, any other Person
receiving Exchange Notes from such Holder is an “affiliate” (as defined in Rule 405)
of the Issuers or, if it is an affiliate of the Issuers, it will comply with
the registration and prospectus delivery requirements of the Securities Act to
the extent applicable and will provide information to be included in the Shelf
Registration Statement in accordance with Section 5 hereto in order to
have their Notes included in the Shelf Registration Statement and benefit from
the provisions regarding Additional Interest in Section 4 hereto; (iv) neither
such Holder nor, to the actual knowledge of such Holder, any other Person
receiving Exchange Notes from such Holder is engaging in or intends to engage
in a distribution of the Exchange Notes; and (v) if such Holder is a
Participating Broker-Dealer, such Holder has acquired the Registrable Notes as
a result of market-making activities or other trading activities and that it
will comply with the applicable provisions of the Securities Act (including,
but not limited to, the prospectus delivery requirements thereunder).

 

Upon consummation of the Exchange Offer in
accordance with this Section 2, the provisions of this Agreement shall continue
to apply solely with respect to Registrable Notes that are Private Exchange
Notes, Exchange Notes as to which Section 2(c)(iv) is applicable and
Exchange Notes held by Participating Broker-Dealers, and the Issuers shall have
no further obligation to register Registrable Notes (other than Private
Exchange Notes and Exchange Notes as to which clause 2(c)(iv) hereto
applies) pursuant to Section 3 hereto.

 

No securities other than the Exchange Notes
shall be included in the Exchange Offer Registration Statement.

 

(b)           The Issuers shall include within the
Prospectus contained in the Exchange Offer Registration Statement a section entitled
“Plan of Distribution,” reasonably acceptable to the Initial Purchasers, which
shall contain a summary statement of the positions taken or policies made by
the staff of the SEC with respect to the potential “underwriter” status of any
broker-dealer that is the “beneficial owner” (as defined in Rule 13d-3
under the 

 

6

 

Exchange Act) of Exchange Notes received by such broker-dealer in the
Exchange Offer (a “Participating Broker-Dealer”), whether such positions
or policies have been publicly disseminated by the staff of the SEC or such
positions or policies represent the prevailing views of the staff of the
SEC.  Such “Plan of Distribution” section shall
also expressly permit, to the extent permitted by applicable policies and
regulations of the SEC, the use of the Prospectus by all Persons subject to the
prospectus delivery requirements of the Securities Act, including, to the
extent permitted by applicable policies and regulations of the SEC, all
Participating Broker-Dealers, and include a statement describing the means by
which Participating Broker-Dealers may resell the Exchange Notes in compliance
with the Securities Act.

 

The Issuers shall use their commercially
reasonable efforts to keep the Exchange Offer Registration Statement effective
and to amend and supplement the Prospectus contained therein in order to permit
such Prospectus to be lawfully delivered by all Persons subject to the
prospectus delivery requirements of the Securities Act for such period of time
as is necessary to comply with applicable law in connection with any resale of
the Exchange Notes; provided, however, that such period shall not
be required to exceed 90 days or such longer period if extended pursuant to the
last paragraph of Section 5 hereto (the “Applicable Period”).

 

If, prior to consummation of the Exchange
Offer, the Initial Purchasers hold any Notes acquired by them that have the
status of an unsold allotment in the initial distribution, the Issuers upon the
request of the Initial Purchasers shall simultaneously with the delivery of the
Exchange Notes issue and deliver to the Initial Purchasers, in exchange (the “Private
Exchange”) for such Notes held by any such Holder, a like principal amount
of notes (the “Private Exchange Notes”) of the Issuers, guaranteed by
the Guarantors, that are identical in all material respects to the Exchange
Notes except for the placement of a restrictive legend on such Private Exchange
Notes.  The Private Exchange Notes shall
be issued pursuant to the same indenture as the Exchange Notes and bear the
same CUSIP number as the Exchange Notes.

 

In connection with the Exchange Offer, the
Issuers shall:

 

(1)           mail, or cause to be
mailed, to each Holder of record entitled to participate in the Exchange Offer
a copy of the Prospectus forming part of the Exchange Offer Registration
Statement, together with an appropriate letter of transmittal and related
documents;

 

(2)           use their commercially
reasonable efforts to keep the Exchange Offer open for not less than 30 days
after the date that notice of the Exchange Offer is mailed to Holders (or
longer if required by applicable law);

 

7

 

(3)           utilize the services of
a depositary for the Exchange Offer with an address in the Borough of
Manhattan, The City of New York;

 

(4)           permit Holders to
withdraw tendered Securities at any time prior to the close of business, New
York time, on the last Business Day on which the Exchange Offer remains open;
and

 

(5)           otherwise comply in all
material respects with all applicable laws, rules and regulations.

 

As soon as practicable after the close of the
Exchange Offer and the Private Exchange, if any, the Issuers shall:

 

(1)           accept for exchange all
Registrable Notes validly tendered and not validly withdrawn pursuant to the
Exchange Offer and the Private Exchange, if any;

 

(2)           deliver to the Trustee
for cancellation all Registrable Notes so accepted for exchange; and

 

(3)           cause the Trustee to
authenticate and deliver promptly to each Holder of Securities, Exchange Notes
or Private Exchange Notes, as the case may be, equal in principal amount to the
Securities of such Holder so accepted for exchange; provided that, in
the case of any Securities held in global form by a depositary, authentication
and delivery to such depositary of one or more replacement Securities in global
form in an equivalent principal amount thereto for the account of such Holders
in accordance with the Indenture shall satisfy such authentication and delivery
requirement.

 

The Exchange Offer and the Private Exchange
shall not be subject to any conditions, other than that (i) the Exchange
Offer or Private Exchange, as the case may be, does not violate applicable law
or any applicable interpretation of the staff of the SEC; (ii) no action
or proceeding shall have been instituted or threatened in any court or by any
governmental agency which might materially impair the ability of the Issuers to
proceed with the Exchange Offer or the Private Exchange, and no material
adverse development shall have occurred in any existing action or proceeding
with respect to the Issuers; and (iii) all governmental approvals shall
have been obtained, which approvals the Issuers deem necessary for the
consummation of the Exchange Offer or Private Exchange.

 

The Exchange Notes and the Private Exchange
Notes shall be issued under (i) the Indenture or (ii) an indenture
identical in all material respects to the Indenture and which, in either case,
has been qualified under the TIA or is exempt from such qualification and shall
provide that the Exchange Notes shall not be subject to the transfer
restrictions set forth in the Indenture. 
The Indenture or such indenture shall provide that the Exchange Notes, 

 

8

 

the Private Exchange Notes and the Notes shall vote and consent
together on all matters as one class and that none of the Exchange Notes, the
Private Exchange Notes or the Notes will have the right to vote or consent as a
separate class on any matter.

 

(c)           If, (i) because of any change in law or
in currently prevailing interpretations of the staff of the SEC, the Issuers
are not permitted to effect the Exchange Offer, (ii) the Exchange Offer is
not consummated within 45 days after the date of the effectiveness of the
Exchange Offer Registration Statement or the Shelf Registration Statement, as
applicable (iii) the Initial Purchasers or any holder of Private Exchange
Notes so requests in writing to the Issuer at any time after the consummation
of the Exchange Offer, or (iv) in the case of any Holder that participates
in the Exchange Offer, such Holder does not receive Exchange Notes on the date
of the exchange that may be sold without restriction under state and federal
securities laws (other than due solely to the status of such Holder as an
affiliate of the Issuers within the meaning of the Securities Act) and so
notifies the Issuer within 30 days after such Holder first becomes aware of
such restrictions, in the case of each of clauses (i) to and including (iv) of
this sentence, then the Issuers shall promptly deliver to the Holders and the
Trustee written notice thereto (the “Shelf Notice”) and shall file a
Shelf Registration pursuant to Section 3 hereto.

 

3.             Shelf Registration

 

If at any time a Shelf Notice is delivered as
contemplated by Section 2(c) hereto, then:

 

(a)           Shelf Registration.  The Issuers shall as promptly as practicable
file with the SEC a Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415 covering all of the Registrable
Notes (the “Initial Shelf Registration”).  The Issuers shall use their commercially
reasonable efforts to file with the SEC the Initial Shelf Registration on or
prior to the applicable Filing Date.  The
Initial Shelf Registration shall be on Form S-1 or another appropriate
form permitting registration of such Registrable Notes for resale by Holders in
the manner or manners designated by them (including, without limitation, one or
more underwritten offerings).  The
Issuers shall not permit any securities other than the Registrable Notes and
the Guarantees to be included in the Initial Shelf Registration or any
Subsequent Shelf Registration (as defined below).

 

The Issuers
shall use their commercially reasonable efforts to cause the Shelf Registration
to be declared effective under the Securities Act on or prior to the
Effectiveness Date and, subject to Section 3(d), to keep the Initial Shelf
Registration continuously effective under the Securities Act until the date
that is two years from the Issue Date or such shorter period ending when all
Registrable Notes cease to be Registrable Notes, or all Registrable Notes
covered by the Initial Shelf Registration have 

 

9

 

been sold in the manner set forth and as
contemplated in the Initial Shelf Registration or, if applicable, a Subsequent
Shelf Registration (as may be extended pursuant to the last paragraph of Section 5
hereto, the “Effectiveness Period”); provided, however,
that the Effectiveness Period in respect of the Initial Shelf Registration
shall be extended to the extent required to permit dealers to comply with the
applicable prospectus delivery requirements of Rule 174 under the
Securities Act and as otherwise provided herein and shall be subject to
reduction to the extent that the applicable provisions of Rule 144(k) are
amended or revised to reduce the two year holding period set forth therein.

 

(b)           Withdrawal of Stop Orders; Subsequent
Shelf Registrations.  If the Initial
Shelf Registration or any Subsequent Shelf Registration ceases to be effective
for any reason at any time during the Effectiveness Period (other than because
of the sale of all of the Notes registered thereunder), the Issuers shall use
their commercially reasonable efforts to obtain the prompt withdrawal of any
order suspending the effectiveness thereto, and in any event shall within 30 days
of such cessation of effectiveness amend such Shelf Registration Statement in a
manner to obtain the withdrawal of the order suspending the effectiveness
thereto, or file an additional Shelf Registration Statement pursuant to Rule 415
covering all of the Registrable Notes covered by and not sold under the Initial
Shelf Registration or an earlier Subsequent Shelf Registration (each, a “Subsequent
Shelf Registration”).  If a
Subsequent Shelf Registration is filed, the Issuers shall use their
commercially reasonable efforts to cause the Subsequent Shelf Registration to
be declared effective under the Securities Act as soon as practicable after
such filing and to keep such subsequent Shelf Registration continuously
effective for a period equal to the number of days in the Effectiveness Period
less the aggregate number of days during which the Initial Shelf Registration
or any Subsequent Shelf Registration was previously continuously
effective.  As used herein the term “Shelf
Registration” means the Initial Shelf Registration and any Subsequent Shelf
Registration.

 

(c)           Supplements and Amendments.  The Issuers shall promptly supplement and
amend the Shelf Registration if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration, if required by the Securities Act, or if reasonably requested by
the Holders of a majority in aggregate principal amount of the Registrable
Notes (or their counsel) covered by such Registration Statement with respect to
the information included therein with respect to one or more of such Holders,
or by any underwriter of such Registrable Notes with respect to the information
included therein with respect to such underwriter.

 

(d)           Blackout Period.  Notwithstanding anything to the contrary in
this Agreement, the Company, upon notice to the Holders of Registrable Notes,
may suspend 

 

10

 

the use of the Prospectus included in any
Shelf Registration Statement in the event that and for a period of time (a “Blackout
Period”) not to exceed an aggregate of 60 days in any twelve month period
if (1) the Board of Directors of the Company determines, in good faith,
that the disclosure of an event, occurrence or other item at such time could
reasonably be expected to have a material adverse effect on the business,
operations or prospects of the Company or (2) the disclosure otherwise
relates to a material business transaction which has not been publicly
disclosed and the Board of Directors of the Company determines, in good faith,
that any such disclosure would jeopardize the success of such transaction or
that disclosure of the transaction is prohibited pursuant to the terms thereto;
provided, that, upon the termination of such Blackout Period, the
Company promptly shall notify the Holders of Registrable Notes that such
Blackout Period has been terminated.

 

4.             Additional Interest

 

(a)           The Issuers and the Initial Purchasers agree
that the Holders will suffer damages if the Issuers fail to fulfill their
obligations under Section 2 or Section 3 hereto and that it would not
be feasible to ascertain the extent of such damages with precision.  Accordingly, the Issuers agree to pay,
jointly and severally, as liquidated damages, additional interest on the Notes
(“Additional Interest”) under the circumstances and to the extent set
forth below (each of which shall be given independent effect):

 

(i)            if (A) neither
the Exchange Offer Registration Statement nor the Initial Shelf Registration
has been filed on or prior to the Filing Date applicable thereto or (B) notwithstanding
that the Issuers have consummated or will consummate the Exchange Offer, the
Issuers are required to file a Shelf Registration and such Shelf Registration
is not filed on or prior to the Filing Date applicable thereto, then,
commencing on the day after any such Filing Date, Additional Interest shall
accrue on the principal amount of the Notes at a rate of 0.50% per annum for
the first 90 days immediately following such applicable Filing Date, and such
Additional Interest rate shall increase by an additional 0.50% per annum at the
beginning of each subsequent 90-day period; or

 

(ii)           if (A) neither the
Exchange Offer Registration Statement nor the Initial Shelf Registration is
declared effective by the SEC on or prior to the Effectiveness Date applicable
thereto or (B) notwithstanding that the Issuers have consummated or will
consummate the Exchange Offer, the Issuers are required to file a Shelf
Registration and such Shelf Registration is not declared effective by the SEC
on or prior to the Effectiveness Date applicable to such Shelf Registration,
then, commencing on the day after such Effectiveness Date, Additional Interest
shall accrue on the principal amount of the Notes at a rate of 0.50% per annum
for the first 90 days immediately following 

 

11

 

the day after such Effectiveness Date, and
such Additional Interest rate shall increase by an additional 0.50% per annum
at the beginning of each subsequent 90-day period; or

 

(iii)          if (A) the Issuers
have not exchanged Exchange Notes for all Notes validly tendered in accordance
with the terms of the Exchange Offer on or prior to the 45th day after the date
of the effectiveness of the Exchange Offer Registration Statement or the Shelf
Registration Statement, as applicable, or (B) if applicable, a Shelf
Registration has been declared effective and such Shelf Registration ceases to
be effective at any time during the Effectiveness Period (other than during any
Blackout Period relating to such Shelf Registration), then Additional Interest
shall accrue on the principal amount of the Notes at a rate of 0.50% per annum
for the first 90 days commencing on the (x) 46th day after the date of the
effectiveness of the Exchange Offer Registration Statement or the Shelf
Registration Statement, as applicable, or (y) the day such Shelf Registration
ceases to be effective in the case of (B) above, and such Additional
Interest rate shall increase by an additional 0.50% per annum at the beginning
of each such subsequent 90-day period;

 

provided, however,
that (1) the Additional Interest rate on the Notes may not accrue under
more than one of the foregoing clauses (i) - (iii) at any one time
and at no time shall the aggregate amount of additional interest accruing
exceed in the aggregate 1.5% per annum and (2) Additional Interest shall
not accrue under clause (iii)(B) above during the continuation of a
Blackout Period; provided, further, however, that (1) upon
the filing of the applicable Exchange Offer Registration Statement or the
applicable Shelf Registration as required hereunder (in the case of clause (i) above
of this Section 4), (2) upon the effectiveness of the Exchange Offer
Registration Statement or the applicable Shelf Registration Statement as
required hereunder (in the case of clause (ii) of this Section 4), or
(3) upon the exchange of the Exchange Notes for all Notes tendered (in the
case of clause (iii)(A) of this Section 4), or upon the effectiveness
of the applicable Shelf Registration Statement which had ceased to remain
effective (in the case of (iii)(B) of this Section 4), Additional
Interest on the Notes in respect of which such events relate as a result of
such clause (or the relevant subclause thereto), as the case may be, shall
cease to accrue.

 

(b)           The Issuers shall notify the Trustee within
two Business Days after each and every date on which an event occurs in respect
of which Additional Interest is required to be paid (an “Event Date”).  Any amounts of Additional Interest due
pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section 4 will
be payable in cash semiannually on each February 15 and August 15 (to
the holders of record on February 1 and August 1 immediately
preceding such dates), commencing with the first such date occurring after any
such Additional Interest commences to accrue. 
The amount of Additional Interest will be determined by multiplying the
applicable Additional Interest rate by the principal amount of the Registrable 

 

12

 

Notes, multiplied by a fraction, the numerator of which is the number
of days such Additional Interest rate was applicable during such period
(determined on the basis of a 360 day year comprised of twelve 30 day
months and, in the case of a partial month, the actual number of days elapsed),
and the denominator of which is 360.  No
Additional Interest shall accrue with respect to Notes that are not Registrable
Notes.

 

(c)           The parties hereto agree that the Additional
Interest provided for in this Section 4 constitutes the sole damages that
will be suffered by Holders of Registrable Notes by reason of the occurrence of
any of the events described in Section 4(a)(i)-(iii) hereto.

 

5.             Registration Procedures

 

In connection with the filing of any
Registration Statement pursuant to Section 2 or 3 hereto, the Issuers
shall effect such registrations to permit the sale of the securities covered
thereby in accordance with the intended method or methods of disposition
thereto, and pursuant thereto and in connection with any Registration Statement
filed by the Issuers hereunder each of the Issuers shall:

 

(a)           Prepare and file with the SEC prior to the
applicable Filing Date a Registration Statement or Registration Statements as
prescribed by Section 2 or 3 hereto, and use their commercially reasonable
efforts to cause each such Registration Statement to become effective and
remain effective as provided herein; provided, however, that if (1) such
filing is pursuant to Section 3 hereto or (2) a Prospectus contained
in the Exchange Offer Registration Statement filed pursuant to Section 2
hereto is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period relating thereto from whom any Issuer has received written
notice that it will be a Participating Broker-Dealer in the Exchange Offer,
before filing any Registration Statement or Prospectus or any amendments or
supplements thereto, the Issuers shall furnish to and afford the Holders of the
Registrable Notes covered by such Registration Statement (with respect to a
Registration Statement filed pursuant to Section 3 hereto) or each such
Participating Broker-Dealer (with respect to any such Registration Statement),
as the case may be, their counsel and the managing underwriters, if any, a
reasonable opportunity to review copies of all such documents (including copies
of any documents to be incorporated by reference therein and all exhibits
thereto) proposed to be filed (in each case at least five Business Days prior
to such filing).  The Issuers shall not
file any Registration Statement or Prospectus or any amendments or supplements
thereto if the Holders of a majority in aggregate principal amount of the Registrable
Notes covered by such Registration Statement, their counsel, or the managing
underwriters, if any, shall reasonably object on a timely basis.

 

13

 

(b)           Prepare and file with the SEC such
amendments and post-effective amendments to each Shelf Registration Statement
or Exchange Offer Registration Statement, as the case may be, as may be
necessary to keep such Registration Statement continuously effective for the
Effectiveness Period, the Applicable Period or until consummation of the
Exchange Offer, as the case may be; cause the related Prospectus to be
supplemented by any Prospectus supplement required by applicable law, and as so
supplemented to be filed pursuant to Rule 424; and comply with the
provisions of the Securities Act and the Exchange Act applicable to it with
respect to the disposition of all securities covered by such Registration
Statement as so amended or in such Prospectus as so supplemented and with
respect to the subsequent resale of any securities being sold by a
Participating Broker-Dealer covered by any such Prospectus; provided
that, to the extent relating to a Shelf Registration Statement, none of the
foregoing shall be required during a Blackout Period.  Other than during any Blackout Period with
respect to a Shelf Registration Statement, the Issuers shall be deemed not to
have used their commercially reasonable efforts to keep a Registration
Statement effective if any Issuer voluntarily takes any action that would
result in selling Holders of the Registrable Notes covered thereby or
Participating Broker-Dealers seeking to sell Exchange Notes not being able to
sell such Registrable Notes or such Exchange Notes during that period unless
such action is required by applicable law or permitted by this Agreement.

 

(c)           If (1) a Shelf Registration is filed
pursuant to Section 3 hereto, or (2) a Prospectus contained in the
Exchange Offer Registration Statement filed pursuant to Section 2 hereto
is required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period
relating thereto from whom any Issuer has received written notice that it will
be a Participating Broker-Dealer in the Exchange Offer, notify the selling Holders
of Registrable Notes (with respect to a Registration Statement filed pursuant
to Section 3 hereto), or each such Participating Broker-Dealer (with
respect to any such Registration Statement), as the case may be, their counsel
and the managing underwriters, if any, promptly (but in any event within one
Business Day), and confirm such notice in writing, (i) when a Prospectus
or any Prospectus supplement or post-effective amendment has been filed, and,
with respect to a Registration Statement or any post-effective amendment, when
the same has become effective under the Securities Act (including in such
notice a written statement that any Holder may, upon request, obtain, at the
sole expense of the Issuers, one conformed copy of such Registration Statement or
post-effective amendment including financial statements and schedules,
documents incorporated or deemed to be incorporated by reference and exhibits),
(ii) of the issuance by the SEC of any stop order suspending the
effectiveness of a Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus or the initiation of any
proceedings for that purpose, (iii) if at any time when a 

 

14

 

prospectus is required by the Securities Act
to be delivered in connection with sales of the Registrable Notes or resales of
Exchange Notes by Participating Broker-Dealers the representations and
warranties of the Issuers contained in any agreement (including any
underwriting agreement) contemplated by Section 5(m) hereto cease to be
true and correct, (iv) of the receipt by any Issuer of any notification
with respect to the suspension of the qualification or exemption from
qualification of a Registration Statement or any of the Registrable Notes or
the Exchange Notes to be sold by any Participating Broker-Dealer for offer or
sale in any jurisdiction, or the initiation or threatening of any proceeding
for such purpose, (v) of the happening of any event, the existence of any
condition or any information becoming known that makes any statement made in
such Registration Statement or related Prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any material
respect or that requires the making of any changes in or amendments or
supplements to such Registration Statement, Prospectus or documents so that, in
the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the Prospectus, it will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and (vi) of the
Issuers’ determination that a post-effective amendment to a Registration
Statement would be appropriate.

 

(d)           Use their commercially reasonable efforts to
prevent the issuance of any order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use of a
Prospectus or suspending the qualification (or exemption from qualification) of
any of the Registrable Notes or the Exchange Notes to be sold by any
Participating Broker-Dealer, for sale in any jurisdiction, and, if any such
order is issued, to use their commercially reasonable efforts to obtain the
withdrawal of any such order at the earliest practicable moment.

 

(e)           Subject to Section 3(d), if a Shelf
Registration is filed pursuant to Section 3 and if requested during the
Effectiveness Period by the managing underwriter or underwriters (if any), the
Holders of a majority in aggregate principal amount of the Registrable Notes
being sold in connection with an underwritten offering or any Participating
Broker-Dealer, (i) as promptly as practicable incorporate in a prospectus
supplement or post-effective amendment such information as the managing underwriter
or underwriters (if any), such Holders, any Participating Broker-Dealer or
counsel for any of them reasonably request to be included therein, (ii) make
all required filings of such prospectus supplement or such post-effective
amendment as soon as practicable after the Issuer has received notification of
the matters to be incorporated in 

 

15

 

such prospectus supplement or post-effective
amendment, and (iii) supplement or make amendments to such Registration
Statement.

 

(f)            If (1) a Shelf Registration is filed
pursuant to Section 3 hereto, or (2) a Prospectus contained in the
Exchange Offer Registration Statement filed pursuant to Section 2 hereto
is required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period,
furnish to each selling Holder of Registrable Notes (with respect to a
Registration Statement filed pursuant to Section 3 hereto) and to each
such Participating Broker-Dealer who so requests (with respect to any such
Registration Statement) and to their respective counsel and each managing
underwriter, if any, at the sole expense of the Issuers, one conformed copy of
the Registration Statement or Registration Statements and each post-effective
amendment thereto, including financial statements and schedules, and, if
requested, all documents incorporated or deemed to be incorporated therein by
reference and all exhibits.

 

(g)           If (1) a Shelf Registration is filed pursuant
to Section 3 hereto, or (2) a Prospectus contained in the Exchange
Offer Registration Statement filed pursuant to Section 2 hereto is
required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period,
deliver to each selling Holder of Registrable Notes (with respect to a
Registration Statement filed pursuant to Section 3 hereto), or each such
Participating Broker-Dealer (with respect to any such Registration Statement), as
the case may be, their respective counsel, and the underwriters, if any, at the
sole expense of the Issuers, as many copies of the Prospectus or Prospectuses
(including each form of preliminary prospectus) and each amendment or
supplement thereto and any documents incorporated by reference therein as such
Persons may reasonably request; and, subject to the last paragraph of this Section 5,
the Issuers hereby consent to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders of Registrable Notes or each
such Participating Broker-Dealer, as the case may be, and the underwriters or
agents, if any, and dealers, if any, in connection with the offering and sale
of the Registrable Notes covered by, or the sale by Participating
Broker-Dealers of the Exchange Notes pursuant to, such Prospectus and any
amendment or supplement thereto.

 

(h)           Prior to any public offering of Registrable
Notes or any delivery of a Prospectus contained in the Exchange Offer
Registration Statement by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, use their commercially reasonable
efforts to register or qualify, and to cooperate with the selling Holders of
Registrable Notes or each such Participating Broker-Dealer, as the case may be,
the managing underwriter or underwriters, if any, and their respective counsel
in connection with the registration or qualification (or exemption from such 

 

16

 

registration or qualification) of such
Registrable Notes for offer and sale under the securities or Blue Sky laws of
such jurisdictions within the United States as any selling Holder,
Participating Broker-Dealer, or the managing underwriter or underwriters
reasonably request in writing; provided, however, that where Exchange Notes held by
Participating Broker-Dealers or Registrable Notes are offered other than
through an underwritten offering, the Issuers agree to cause their counsel to
perform Blue Sky investigations and file registrations and qualifications
required to be filed pursuant to this Section 5(h), keep each such
registration or qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be kept effective and do any
and all other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Exchange Notes held by Participating
Broker-Dealers or the Registrable Notes covered by the applicable Registration
Statement; provided, however, that no Issuer shall be required to
(A) qualify generally to do business in any jurisdiction where it is not
then so qualified, (B) take any action that would subject it to general
service of process in any such jurisdiction where it is not then so subject or (C) subject
itself to taxation in excess of $1,000 in any such jurisdiction where it is not
then so subject.

 

(i)            If a Shelf Registration is filed pursuant
to Section 3 hereto, cooperate with the selling Holders of Registrable
Notes and the managing underwriter or underwriters, if any, to facilitate the
timely preparation and delivery of certificates representing Registrable Notes
to be sold, which certificates shall not bear any restrictive legends and shall
be in a form eligible for deposit with The Depository Trust Company; and enable
such Registrable Notes to be in such denominations (subject to applicable
requirements contained in the Indenture) and registered in such names as the
managing underwriter or underwriters, if any, or Holders may request.

 

(j)            If (1) a Shelf Registration is filed
pursuant to Section 3 hereto, or (2) a Prospectus contained in the
Exchange Offer Registration Statement filed pursuant to Section 2 hereto
is required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period,
upon the occurrence of any event contemplated by paragraph 5(c)(v) or
5(c)(vi) hereto, as promptly as practicable (except, in the case of a
Shelf Registration, during a Blackout Period) prepare and (subject to Section 5(a) hereto)
file with the SEC, at the sole expense of the Issuers, a supplement or
post-effective amendment to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable Notes being sold
thereunder (with respect to a Registration Statement filed pursuant to Section 3
hereto) or to the purchasers of the Exchange Notes to whom such Prospectus will
be delivered by a Participating Broker-Dealer (with respect to any such
Registration Statement), 

 

17

 

any such Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.

 

(k)           Use their commercially reasonable efforts to
cause the Registrable Notes covered by a Registration Statement or the Exchange
Notes, as the case may be, to be rated with the appropriate rating agencies
(unless such Notes are already so rated), if so requested by the Holders of a
majority in aggregate principal amount of Registrable Notes covered by such
Registration Statement or the Exchange Notes, as the case may be, or the
managing underwriter or underwriters, if any.

 

(l)            Prior to the effective date of the first
Registration Statement relating to the Registrable Notes, (i) provide the
Trustee with certificates for the Registrable Notes in a form eligible for
deposit with The Depository Trust Company and (ii) provide a CUSIP number
for the Registrable Notes.

 

(m)          In connection with any underwritten offering
of Registrable Notes pursuant to a Shelf Registration, enter into an
underwriting agreement as is customary in underwritten offerings of debt
securities similar to the Securities, and take all such other actions as are reasonably
requested by the managing underwriter or underwriters in order to expedite or
facilitate the registration or the disposition of such Registrable Notes and,
in such connection, (i) make such representations and warranties to, and
covenants with, the underwriters with respect to the business of the Issuers
(including any acquired business, properties or entity, if applicable), and the
Registration Statement, Prospectus and documents, if any, incorporated or
deemed to be incorporated by reference therein, in each case, as are
customarily made by issuers to underwriters in underwritten offerings of debt
securities similar to the Securities, and confirm the same in writing if and
when requested; (ii) obtain the written opinions of counsel to the Issuers,
and written updates thereto in form, scope and substance reasonably
satisfactory to the managing underwriter or underwriters, addressed to the
underwriters covering the matters customarily covered in opinions reasonably
requested in underwritten offerings; (iii) obtain “cold comfort” letters
and updates thereto in form, scope and substance reasonably satisfactory to the
managing underwriter or underwriters from the independent certified public
accountants of the Issuers (and, if necessary, any other independent certified
public accountants of the Issuers, or of any business acquired by the Issuers,
for which financial statements and financial data are, or are required to be,
included or incorporated by reference in the Registration Statement), addressed
to each of the underwriters, such letters to be in customary form and covering
matters of the type customarily covered in “cold comfort” letters in connection
with underwritten offerings of debt securities similar to the Securities; and (iv) if
an underwriting agreement is entered into, the same shall contain
indemnification provisions 

 

18

 

and procedures no less favorable to the
sellers and underwriters, if any, than those set forth in Section 7 hereto
(or such other provisions and procedures reasonably acceptable to Holders of a
majority in aggregate principal amount of Registrable Notes covered by such
Registration Statement and the managing underwriter or underwriters or agents,
if any).  The above shall be done at each
closing under such underwriting agreement, or as and to the extent required
thereunder.

 

(n)           If (1) a Shelf Registration is filed
pursuant to Section 3 hereto, or (2) a Prospectus contained in the
Exchange Offer Registration Statement filed pursuant to Section 2 hereto
is required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period,
make available for inspection by any Initial Purchaser, any selling Holder of such
Registrable Notes being sold (with respect to a Registration Statement filed
pursuant to Section 3 hereto), or each such Participating Broker-Dealer,
as the case may be, any underwriter participating in any such disposition of
Registrable Notes, if any, and any attorney, accountant or other agent retained
by any such selling Holder or each such Participating Broker-Dealer (with
respect to any such Registration Statement), as the case may be, or underwriter
(any such Initial Purchasers, Holders, Participating Broker-Dealers,
underwriters, attorneys, accountants or agents, collectively, the “Inspectors”), upon written request, at the
offices where normally kept, during reasonable business hours, all pertinent
financial and other records, pertinent corporate documents and instruments of
the Issuers and subsidiaries of the Issuers (collectively, the “Records”), as shall be reasonably necessary to
enable them to exercise any applicable due diligence responsibilities, and
cause the officers, directors and employees of the Issuers and any of their
respective subsidiaries to supply all information (“Information”) reasonably requested by any such Inspector in
connection with such due diligence responsibilities.  Each Inspector shall agree in writing that it
will keep the Records and Information confidential and that it will not
disclose any of the Records or Information that any Issuer determines, in good
faith, to be confidential and notifies the Inspectors in writing are
confidential unless (i) the release of such Records or Information is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction, (ii) disclosure of such Records or Information is necessary
or advisable, in the opinion of counsel for any Inspector, in connection with
any action, claim, suit or proceeding, directly or indirectly, involving or
potentially involving such Inspector and arising out of, based upon, relating
to, or involving this Agreement or the Purchase Agreement, or any transactions
contemplated hereby or thereby or arising hereunder or thereunder, or (iii) the
information in such Records or Information has been made generally available to
the public other than by an Inspector or an “affiliate” (as defined in Rule 405)
thereto; provided, however, that prior notice shall be provided as soon as practicable
to any Issuer of the potential disclosure of any information by such Inspector
pursuant to clause (i) of this sentence and such Inspector shall
allow the Issuers to undertake appropriate 

 

19

 

action to prevent disclosure of such Records
or Information at the Issuers’ expense.

 

(o)           Provide an indenture trustee for the
Registrable Notes or the Exchange Notes, as the case may be, and cause the
Indenture or the trust indenture provided for in Section 2(a) hereto,
as the case may be, to be qualified under the TIA not later than the effective
date of the first Registration Statement relating to the Registrable Notes; and
in connection therewith, cooperate with the trustee under any such indenture
and the Holders of the Registrable Notes, to effect such changes (if any) to
such indenture as may be required for such indenture to be so qualified in
accordance with the terms of the TIA; and execute, and use their commercially reasonable
efforts to cause such trustee to execute, all documents as may be required to
effect such changes, and all other forms and documents required to be filed
with the SEC to enable such indenture to be so qualified in a timely manner.

 

(p)           Comply with all applicable rules and
regulations of the SEC and make generally available to their securityholders
with regard to any applicable Registration Statement, a consolidated earnings
statement satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder (or any similar rule promulgated
under the Securities Act) no later than 45 days after the end of any
fiscal quarter (or 90 days after the end of any 12-month period if such
period is a fiscal year) (i) commencing at the end of any fiscal quarter
in which Registrable Notes are sold to underwriters in a firm commitment or
best efforts underwritten offering and (ii) if not sold to underwriters in
such an offering, commencing on the first day of the first fiscal quarter of
the Issuer, after the effective date of a Registration Statement, which
statements shall cover said 12-month periods.

 

(q)           Upon consummation of the Exchange Offer or a
Private Exchange, if so requested by the Trustee, obtain an opinion of counsel
to the Issuers, in a form customary for underwritten transactions, addressed to
the Trustee for the benefit of all Holders of Registrable Notes participating
in the Exchange Offer or the Private Exchange, as the case may be, that the
Exchange Notes or Private Exchange Notes, as the case may be, the related
guarantee and the related indenture constitute legal, valid and binding
obligations of the Issuers, enforceable against the Issuers in accordance with
their respective terms, subject to customary exceptions and qualifications.  If the Exchange Offer or a Private Exchange
is to be consummated, upon delivery of the Registrable Notes by Holders to the
Issuer (or to such other Person as directed by the Issuer), in exchange for the
Exchange Notes or the Private Exchange Notes, as the case may be, the Issuers
shall mark, or cause to be marked, on such Registrable Notes that such
Registrable Notes are being cancelled in exchange for the Exchange Notes or the

 

20

 

Private Exchange Notes, as the case may be;
in no event shall such Registrable Notes be marked as paid or otherwise
satisfied.

 

(r)            Cooperate with each seller of Registrable
Notes covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Notes and their respective
counsel in connection with any filings required to be made with the National
Association of Securities Dealers, Inc. (the “NASD”).

 

(s)           Use their commercially reasonable efforts to
take all other steps necessary to effect the registration of the Exchange Notes
and/or Registrable Notes covered by a Registration Statement contemplated
hereby.

 

The Issuers may require each seller of
Registrable Notes as to which any registration is being effected to furnish to the
Issuers such information regarding such seller and the distribution of such
Registrable Notes as the Issuers may, from time to time, reasonably
request.  The Issuers may exclude from
such registration the Registrable Notes of any seller so long as such seller
fails to furnish such information within a reasonable time after receiving such
request.  Each seller as to which any
Shelf Registration is being effected agrees to furnish promptly to the Issuers
all information required to be disclosed in order to make the information
previously furnished to the Issuers by such seller not materially misleading.

 

If any such Registration Statement refers to
any Holder by name or otherwise as the holder of any securities of the Issuer,
then such Holder shall have the right to require (i) the insertion therein
of language, in form and substance reasonably satisfactory to such Holder, to
the effect that the holding by such Holder of such securities is not to be
construed as a recommendation by such Holder of the investment quality of the
securities covered thereby and that such holding does not imply that such
Holder will assist in meeting any future financial requirements of the Issuer,
or (ii) in the event that such reference to such Holder by name or
otherwise is not required by the Securities Act or any similar federal statute
then in force, the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.

 

Each Holder of Registrable Notes and each
Participating Broker-Dealer agrees by its acquisition of such Registrable Notes
or Exchange Notes to be sold by such Participating Broker-Dealer, as the case
may be, that, upon actual receipt of any notice from any Issuer (i) of the
happening of any event of the kind described in Section 5(c)(ii),
5(c)(iv), 5(c)(v), or 5(c)(vi) hereto or (ii) of the commencement of
a Blackout Period, such Holder will forthwith discontinue disposition of such
Registrable Notes covered by such Registration Statement (other than any
Exchange Offer Registration Statement in the case of a Blackout Period) or
Prospectus or Exchange Notes to be sold by such Holder or Participating
Broker-Dealer, as the case may be, until (x) in the case of the immediately
preceding clause (i), such Holder’s or 

 

21

 

Participating Broker-Dealer’s receipt of the copies of the supplemented
or amended Prospectus contemplated by Section 5(j) hereto, or until it is
advised in writing (the “Advice”) by the Issuers that the use of the
applicable Prospectus may be resumed, and has received copies of any amendments
or supplements thereto or (y) in the case of the immediately preceding clause (ii) the
earlier of (A) 60 days of after the commencement of such Blackout Period
and (B) receipt of notice from the Issuer that such Blackout Period has
ended.  In the event that any Issuer
shall give any such notice, each of the Applicable Period and the Effectiveness
Period shall be extended by the number of days during such periods from and
including the date of the giving of such notice to and including the date when
the requirements of the immediately preceding clause (x) or (y), as the case
may be, shall have been met.

 

6.             Registration Expenses

 

All fees and expenses incident to the
performance of or compliance with this Agreement by the Issuers (other than any
underwriting discounts or commissions) shall be borne by the Issuers, whether
or not the Exchange Offer Registration Statement or any Shelf Registration
Statement is filed or becomes effective or the Exchange Offer is consummated,
including, without limitation, (i) all registration and filing fees
(including, without limitation, (A) fees with respect to filings required
to be made with the NASD in connection with an underwritten offering and (B) fees
and expenses of compliance with state securities or Blue Sky laws (including,
without limitation, fees and disbursements of counsel in connection with Blue
Sky qualifications of the Registrable Notes or Exchange Notes and determination
of the eligibility of the Registrable Notes or Exchange Notes for investment
under the laws of such jurisdictions (x) where the holders of Registrable
Notes are located, in the case of the Exchange Notes, or (y) as provided
in Section 5(h) hereto, in the case of Registrable Notes or Exchange
Notes to be sold by a Participating Broker-Dealer during the Applicable
Period)), (ii) printing expenses, including, without limitation, expenses
of printing certificates for Registrable Notes or Exchange Notes in a form
eligible for deposit with The Depository Trust Company and of printing
prospectuses if the printing of prospectuses is requested by the managing
underwriter or underwriters, if any, by the Holders of a majority in aggregate
principal amount of the Registrable Notes included in any Registration
Statement or in respect of Registrable Notes or Exchange Notes to be sold by
any Participating Broker-Dealer during the Applicable Period, as the case may
be, (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Issuers and, in the case of a Shelf
Registration, reasonable fees and disbursements of one special counsel for all
of the sellers of Registrable Notes (exclusive of any counsel retained pursuant
to Section 7 hereto), (v) fees and disbursements of all independent
certified public accountants referred to in Section 5(m)(iii) hereto
(including, without limitation, the expenses of any “cold comfort” letters
required by or incident to such performance), (vi) Securities Act
liability insurance, if the Issuers desire such insurance, (vii) fees and
expenses of all other Persons retained by the Issuers, (viii) internal
expenses of the Issuers (including, without limitation, all salaries and
expenses of officers and 

 

22

 

employees of the Issuers performing legal or accounting duties), (ix) the
expense of any annual audit, (x) any fees and expenses incurred in connection
with the listing of the securities to be registered on any securities exchange,
and the obtaining of a rating of the securities, in each case, if applicable,
and (xi) the expenses relating to printing, word processing and
distributing all Registration Statements, underwriting agreements, indentures
and any other documents necessary in order to comply with this Agreement.

 

7.             Indemnification and Contribution

 

(a)           Each of the Issuers agree, jointly and
severally, to indemnify and hold harmless each Holder of Registrable Notes and
each Participating Broker-Dealer selling Exchange Notes during the Applicable
Period, and each Person, if any, who controls such Person or its affiliates
within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act (each, a “Participant”)
against any losses, claims, damages or liabilities to which any Participant may
become subject under the Act, the Exchange Act or otherwise, insofar as any
such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon:

 

(i)            any untrue statement
or alleged untrue statement made by any Issuer contained in any application or
any other document or any amendment or supplement thereto executed by any
Issuer based upon written information furnished by or on behalf of any Issuer
filed in any jurisdiction in order to qualify the Notes under the securities or
“Blue Sky” laws thereto or filed with the SEC or any securities association or
securities exchange (each, an “Application”);

 

(ii)           any untrue statement or
alleged untrue statement of any material fact contained in any Registration
Statement (or any amendment thereto) or Prospectus (as amended or supplemented
if any of the Issuers shall have furnished any amendments or supplements thereto)
or any preliminary prospectus or “issuer free writing prospectus” (as defined
in Rule 405) (an “Issuer FWP”); or

 

(iii)          the omission or alleged
omission to state, in any Registration Statement (or any amendment thereto) or
Prospectus (as amended or supplemented if any of the Issuers shall have
furnished any amendments or supplements thereto) or any preliminary prospectus
or Issuer FWP or any Application or any other document or any amendment or
supplement thereto, a material fact required to be stated therein or necessary
to make the statements therein not misleading;

 

and will reimburse, as incurred, the
Participant for any reasonable legal or other expenses incurred by the
Participant in connection with investigating, defending against or appearing as
a third-party witness in connection with any such loss, claim, damage,
liability or action; provided, however, the Issuers will not be
liable in any such case to 

 

23

 

the extent that any such loss, claim, damage,
or liability arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in any Registration
Statement (or any amendment thereto) or Prospectus (as amended or supplemented
if any of the Issuers shall have furnished any amendments or supplements
thereto) or any preliminary prospectus or Issuer FWP or Application or any
amendment or supplement thereto in reliance upon and in conformity with
information relating to any Participant furnished to the Issuers by such
Participant specifically for use therein. 
The indemnity provided for in this Section 7 will be in addition to
any liability that the Issuers may otherwise have to the indemnified
parties.  The Issuers shall not be liable
under this Section 7 for any settlement of any claim or action effected
without their prior written consent, which shall not be unreasonably withheld.

 

(b)           Each Participant, severally and not jointly,
agrees to indemnify and hold harmless the Issuers, their directors and managers,
as applicable, their officers and each Person, if any, who controls the Issuers
within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act against any losses, claims, damages or liabilities to which the
Issuers or any such director, manager, officer or controlling person may become
subject under the Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereto) arise out of or
are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in any Application, Registration Statement or
Prospectus, any amendment or supplement thereto, or any preliminary prospectus
or Issuer FWP, or (ii) the omission or the alleged omission to state
therein a material fact necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information concerning
such Participant, furnished to the Issuers by the Participant, specifically for
use therein; and subject to the limitation set forth immediately preceding this
clause, will reimburse, as incurred, any legal or other expenses incurred by
the Issuers or any such director, manager, officer or controlling person in
connection with investigating or defending against or appearing as a third
party witness in connection with any such loss, claim, damage, liability or
action in respect thereto.  The indemnity
provided for in this Section 7 will be in addition to any liability that
the Participants may otherwise have to the indemnified parties.  The Participants shall not be liable under
this Section 7 for any settlement of any claim or action effected without
their consent, which shall not be unreasonably withheld.  The Issuers shall not, without the prior
written consent of such Participant, effect any settlement or compromise of any
pending or threatened proceeding in respect of which any Participant is or
could have been a party, or indemnity could have been sought hereunder by any
Participant, unless such settlement (A) includes an unconditional written
release of the Participants from all liability on claims that are the subject
matter of such proceeding and (B) does not include any statement as to an
admission of fault, culpability or failure to act by or on behalf of any
Participant.

 

24

 

(c)           Promptly after receipt by an indemnified party
under this Section 7 of notice of the commencement of any action for which
such indemnified party is entitled to indemnification under this Section 7,
such indemnified party will, if a claim in respect thereto is to be made
against the indemnifying party under this Section 7, notify the
indemnifying party of the commencement thereof in writing; but the omission to
so notify the indemnifying party (i) will not relieve it from any
liability under paragraph (a) or (b) above unless and to the extent
such failure results in the forfeiture by the indemnifying party of substantial
rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraphs (a) and (b) above.  In case any such action is brought against
any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party; provided, however, that if (i) the
use of counsel chosen by the indemnifying party to represent the indemnified
party would present such counsel with a conflict of interest, (ii) the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have been advised by counsel
that there may be one or more legal defenses available to it and/or other
indemnified parties that are different from or additional to those available to
the indemnifying party, or (iii) the indemnifying party shall not have
employed counsel reasonably satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after receipt by the
indemnifying party of notice of the institution of such action, then, in each
such case, the indemnifying party shall not have the right to direct the
defense of such action on behalf of such indemnified party or parties and such
indemnified party or parties shall have the right to select separate counsel to
defend such action on behalf of such indemnified party or parties.  After notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof and
approval by such indemnified party of counsel appointed to defend such action,
the indemnifying party will not be liable to such indemnified party under this Section 7
for any legal or other expenses, other than reasonable costs of investigation,
subsequently incurred by such indemnified party in connection with the defense
thereof, unless (i) the indemnified party shall have employed separate
counsel in accordance with the proviso to the immediately preceding sentence
(it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in addition to one local counsel in any jurisdiction) in any
one action or separate but substantially similar actions in the same
jurisdiction arising out of the same general allegations or circumstances,
designated by Participants who sold a majority in interest of the Registrable
Notes and Exchange Notes sold by all such Participants in the case of paragraph
(a) of this Section 7 or the Issuers in the case of paragraph (b) of
this Section 7, representing the indemnified parties under such
paragraph (a) or paragraph (b), as the case may be, who are
parties to such action or actions) or (ii) the indemnifying party has
authorized in writing the employment of counsel for the indemnified party at
the expense of the indemnifying party.  All 

 

25

 

fees and expenses reimbursed pursuant to this paragraph (c) shall
be reimbursed as they are incurred following receipt of supporting
documentation.  After such notice from
the indemnifying party to such indemnified party, the indemnifying party will
not be liable for the costs and expenses of any settlement of such action
effected by such indemnified party without the prior written consent of the
indemnifying party (which consent shall not be unreasonably withheld), unless
such indemnified party waived in writing its rights under this Section 7,
in which case the indemnified party may effect such a settlement without such
consent.

 

(d)           In circumstances in which the indemnity
agreement provided for in the preceding paragraphs of this Section 7 is
unavailable to, or insufficient to hold harmless, an indemnified party in
respect of any losses, claims, damages or liabilities (or actions in respect
thereof), each indemnifying party, in order to provide for just and equitable
contribution, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
(i) the relative benefits received by the indemnifying party or parties on
the one hand and the indemnified party on the other from the offering of the
Notes or (ii) if the allocation provided by the foregoing clause (i) is
not permitted by applicable law, not only such relative benefits but also the
relative fault of the indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the statements or omissions
or alleged statements or omissions that resulted in such losses, claims,
damages or liabilities (or actions in respect thereof).  The relative benefits received by the Issuers
on the one hand and such Participant on the other shall be deemed to be in the
same proportion as the total proceeds from the offering (before deducting
expenses) of the Notes received by the Issuers bear to the total gain (if any)
excluding expenses received by such Participant in connection with the sale of
the Notes.  The relative fault of the
parties shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Issuers on the one hand, or the Participants on the other, the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission or alleged statement or omission, and any
other equitable considerations appropriate in the circumstances.  The parties agree that it would not be
equitable if the amount of such contribution were determined by pro rata or per
capita allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the first sentence of this
paragraph (d).  Notwithstanding any other
provision of this paragraph (d), no Participant shall be obligated to make
contributions hereunder that in the aggregate exceed the total gain (if any)
received by such Participant in connection with the sale of the Notes, less the
aggregate amount of any damages that such Participant has otherwise been
required to pay by reason of the untrue or alleged untrue statements or the
omissions or alleged omissions to state a material fact, and no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. 
For purposes of this paragraph (d), each person, if any, 

 

26

 

who controls a Participant within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act shall have the same rights to
contribution as the Participants, and each director of any Issuer, each officer
of any Issuer and each person, if any, who controls any Issuer within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act,
shall have the same rights to contribution as the Issuers.

 

8.             Rules 144 and 144A

 

Each of the Issuers covenants and agrees that
it will file the reports required to be filed by it under the Securities Act
and the Exchange Act and the rules and regulations adopted by the SEC
thereunder in a timely manner in accordance with the requirements of the
Securities Act and the Exchange Act and, if at any time such Issuer is not
required to file such reports, such Issuer will, upon the request of any Holder
or beneficial owner of Registrable Notes, make available such information
necessary to permit sales pursuant to Rule 144A.  Each of the Issuers further covenants and
agrees, for so long as any Registrable Notes remain outstanding that it will
take such further action as any Holder of Registrable Notes may reasonably
request, all to the extent required from time to time to enable such holder to
sell Registrable Notes without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144(k) under the Securities
Act and Rule 144A.

 

9.             Underwritten Registrations

 

If any of the Registrable Notes covered by
any Shelf Registration are to be sold in an underwritten offering, the investment
banker or investment bankers and manager or managers that will manage the
offering will be selected by the Holders of a majority in aggregate principal
amount of such Registrable Notes included in such offering and shall be
reasonably acceptable to the Issuers.

 

No Holder of Registrable Notes may
participate in any underwritten registration hereunder unless such Holder (a) agrees
to sell such Holder’s Registrable Notes on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements.

 

10.           Miscellaneous

 

(a)           No Inconsistent Agreements.  The Issuers have not, as of the date hereof,
and the Issuers shall not, after the date of this Agreement, enter into any
agreement with respect to any of their securities that is inconsistent with the
rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. 
The rights granted to the Holders hereunder do not in any way conflict
with and are not inconsistent 

 

27

 

with the rights granted to the holders of the Issuers’ other issued and
outstanding securities under any such agreements.  The Issuers will not enter into any agreement
with respect to any of their securities which will grant to any Person
piggy-back registration rights with respect to any Registration Statement.

 

(b)           Adjustments Affecting Registrable Notes.  Except in compliance with Section 10(c),
the Issuers shall not, directly or indirectly, take any action with respect to
the Registrable Notes as a class that would adversely affect the ability of the
Holders of Registrable Notes to include such Registrable Notes in a
registration undertaken pursuant to this Agreement.

 

(c)           Amendments and Waivers.  The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of (I) the Issuer, and (II)(A) the Holders of not less than a
majority in aggregate principal amount of the then outstanding Registrable
Notes and (B) in circumstances that would adversely affect the
Participating Broker-Dealers, the Participating Broker-Dealers holding not less
than a majority in aggregate principal amount of the Exchange Notes held by all
Participating Broker-Dealers; provided, however, that Section 7 and this Section 10(c) may
not be amended, modified or supplemented without the prior written consent of
each Holder and each Participating Broker-Dealer (including any person who was
a Holder or Participating Broker-Dealer of Registrable Notes or Exchange Notes,
as the case may be, disposed of pursuant to any Registration Statement)
affected by any such amendment, modification or supplement.  Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereto with respect to a matter that
relates exclusively to the rights of Holders of Registrable Notes whose
securities are being sold pursuant to a Registration Statement may be given by
Holders of at least a majority in aggregate principal amount of the Registrable
Notes being sold pursuant to such Registration Statement.

 

(d)           Notices.  All notices and other communications
(including, without limitation, any notices or other communications to the
Trustee) provided for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, next-day air courier or facsimile:

 

(i)            if to a Holder of the
Registrable Notes or any Participating Broker-Dealer, at the most current
address of such Holder or Participating Broker-Dealer, as the case may be, set
forth on the records of the registrar under the Indenture, with a copy in like
manner to the Initial Purchasers as follows:

 

Wachovia Capital Markets, LLC

One Wachovia Center

301 South College Street

Charlotte, NC 28288

Attention:  Jay Braden

 

 

28

 

with a copy to:

 

Cahill Gordon & Reindel LLP

80 Pine Street

New York, New York  10005

Facsimile No.:  (212) 269-5420

Attention:  Luis R. Penalver, Esq.

 

(ii)           if to the Initial Purchasers,
at the address specified in Section 10(d)(i);

 

(iii)          if to the Company, at
the address as follows:

 

PGS Solutions, Inc.

4520 North Fairfax Drive

Suite 1200

Arlington,
Virginia 22203

Attention: 
Chief Financial Officer

 

with a copy to:

 

Schulte Roth & Zabel LLP

919 Third Avenue

New York, New York  10022

Facsimile No.:  (212) 593-5955

Attention:  Michael R. Littenberg, Esq.

 

All such notices and communications shall be
deemed to have been duly given:  when
delivered by hand, if personally delivered; five Business Days after being
deposited in the mail, postage prepaid, if mailed; one Business Day after being
timely delivered to a next-day air courier; and when receipt is acknowledged by
the addressee, if sent by facsimile.

 

Copies of all such notices, demands or other
communications shall be concurrently delivered by the Person giving the same to
the Trustee at the address and in the manner specified in such Indenture.

 

(e)           Successors and Assigns.  This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties hereto,
the Holders and the Participating Broker-Dealers; provided, however, that nothing
herein shall be deemed to 

 

29

 

permit any assignment, transfer or other disposition of Registrable
Notes in violation of the terms of the Purchase Agreement or the Indenture.

 

(f)            Counterparts.  This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

 

(g)           Headings.  The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereto.

 

(h)           Governing
Law.  THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
AS APPLIED TO CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW
YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW THAT WOULD REQUIRE THE
APPLICATION OF ANY OTHER LAW.

 

(i)            Severability.  If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction.  It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be hereafter declared invalid, illegal, void or unenforceable.

 

(j)            Securities Held by the Issuers or Their
Affiliates.  Whenever the consent or
approval of Holders of a specified percentage of Registrable Notes is required
hereunder, Registrable Notes held by the Issuers or their affiliates (as such
term is defined in Rule 405 under the Securities Act) shall not be counted
in determining whether such consent or approval was given by the Holders of
such required percentage.

 

(k)           Third-Party Beneficiaries.  Holders of Registrable Notes and
Participating Broker-Dealers are intended third-party beneficiaries of this
Agreement, and this Agreement may be enforced by such Persons.

 

(l)            Entire Agreement.  This Agreement, together with the Purchase
Agreement and the Indenture, is intended by the parties as a final and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained 

 

30

 

herein and therein and any and all prior oral or written agreements,
representations, or warranties, contracts, understandings, correspondence,
conversations and memoranda between the Holders on the one hand and the Issuers
on the other, or between or among any agents, representatives, parents,
subsidiaries, affiliates, predecessors in interest or successors in interest
with respect to the subject matter hereto and thereto are merged herein and replaced
hereby.

 

31

 

IN WITNESS WHEREOF, the parties have executed
this Agreement as of the date first written above.

 

	
   

  	
  PGS SOLUTIONS, INC.

  
	
   

  
	
   

  
	
   

  	
  By:

  	
  /s/ John M. Curtis

  
	
   

  	
  Name: John M. Curtis

  
	
   

  	
  Title: President & CEO

  
	
   

  	
   

  
	
   

  
	
   

  	
  PEARSON ANALYTIC SOLUTIONS, INC.

  
	
   

  	
   

  
	
   

  
	
   

  	
  By:

  	
  /s/ Christine Bailey

  
	
   

  	
  Name: Christine Bailey

  
	
   

  	
  Title: SVP/CFO

  
	
   

  	
   

  
	
   

  
	
   

  	
  BLUEPRINT TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  
	
   

  	
  By:

  	
  /s/ John M. Curtis

  
	
   

  	
  Name: John M. Curtis

  
	
   

  	
  Title: President & CEO

  

 

S-1

 

	
  The foregoing Agreement is hereby

  confirmed and accepted as of the date

  first above written.

  
	
   

  
	
   

  
	
  WACHOVIA CAPITAL MARKETS, LLC

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Rit N. Amin

  	
   

  
	
   

  	
  Name: Rit N. Amin

  
	
   

  	
  Title: Director

  
	
   

  
	
   

  
	
  GOLDMAN, SACHS & CO.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Goldman Sachs & Co.

  	
   

  
	
   

  	
  Name: Michael Ronen

  
	
   

  	
  Title: Managing Director

  

 

 

S-2

 

Schedule I 

Guarantors

 

Blueprint Technologies, Inc.

Pearson Analytic Solutions, Inc.

 

S-1Exhibit
10.1

 

EXECUTION
COPY

 

 

STOCK PURCHASE
AGREEMENT

 

dated as of
December 8, 2006

 

among

 

Pearson Inc.,

 

 

the other Seller entities listed on Attachment A,

 

PGS Holding Corp.,

 

and

 

The Veritas Capital Fund III, L.P.

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Definitions

  	
  1

  
	
  1.2

  	
  Construction

  	
  13

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  PURCHASE AND SALE

  	
  13

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Purchase and Sale of the Equity Interests

  	
  13

  
	
  2.2

  	
  Closing Date

  	
  14

  
	
  2.3

  	
  Transactions to be Effected at the Closing

  	
  14

  
	
  2.4

  	
  Closing Net Assets

  	
  14

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  REPRESENTATIONS AND WARRANTIES RELATING TO THE
  SELLERS AND THE EQUITY INTERESTS

  	
  17

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Organization and Good Standing

  	
  18

  
	
  3.2

  	
  Authority and Enforceability

  	
  18

  
	
  3.3

  	
  No Conflicts; Consents

  	
  18

  
	
  3.4

  	
  The Equity Interests

  	
  19

  
	
  3.5

  	
  Section 338(h)(10) Election

  	
  19

  
	
  3.6

  	
  Acquisition for Investment

  	
  19

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  REPRESENTATIONS AND WARRANTIES
  RELATING TO THE COMPANIES

  	
  19

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Organization and Good Standing

  	
  20

  
	
  4.2

  	
  Capitalization

  	
  20

  
	
  4.3

  	
  Subsidiaries of the Companies

  	
  20

  
	
  4.4

  	
  No Conflicts; Consents

  	
  21

  
	
  4.5

  	
  Financial Statements

  	
  22

  
	
  4.6

  	
  Taxes

  	
  22

  
	
  4.7

  	
  Compliance with Law; Authorizations

  	
  23

  
	
  4.8

  	
  Real Property

  	
  24

  
	
  4.9

  	
  The Assets

  	
  25

  
	
  4.10

  	
  Intellectual Property

  	
  25

  
	
  4.11

  	
  Absence of Certain Changes or Events

  	
  26

  
	
  4.12

  	
  Contracts

  	
  27

  
	
  4.13

  	
  Litigation

  	
  29

  
	
  4.14

  	
  Employee Benefits

  	
  29

  

 

i

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  4.15

  	
  Labor and Employment Matters

  	
  30

  
	
  4.16

  	
  Environmental

  	
  31

  
	
  4.17

  	
  Insurance

  	
  31

  
	
  4.18

  	
  Brokers

  	
  32

  
	
  4.19

  	
  No Undisclosed Liabilities

  	
  32

  
	
  4.20

  	
  Security Clearance

  	
  32

  
	
  4.21

  	
  Government Contracts

  	
  32

  
	
  4.22

  	
  Export/Foreign Corrupt Practices Act

  	
  34

  
	
  4.23

  	
  Government Furnished Equipment

  	
  35

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  REPRESENTATIONS AND WARRANTIES
  OF THE PURCHASER

  	
  35

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Organization and Good Standing

  	
  35

  
	
  5.2

  	
  Authority and Enforceability

  	
  35

  
	
  5.3

  	
  No Conflicts; Consents

  	
  36

  
	
  5.4

  	
  Litigation

  	
  36

  
	
  5.5

  	
  Purchase for Investment

  	
  36

  
	
  5.6

  	
  Availability of Funds

  	
  36

  
	
  5.7

  	
  Brokers

  	
  37

  
	
  5.8

  	
  Due Diligence

  	
  37

  
	
  5.9

  	
  Capitalization

  	
  37

  
	
  5.10

  	
  Securities Act

  	
  38

  
	
  5.11

  	
  No Other Representations

  	
  38

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  COVENANTS OF THE SELLERS

  	
  38

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Conduct of Business

  	
  38

  
	
  6.2

  	
  Access to Information

  	
  41

  
	
  6.3

  	
  Resignations

  	
  41

  
	
  6.4

  	
  Non-Compete

  	
  41

  
	
  6.5

  	
  Notification

  	
  42

  
	
  6.6

  	
  Permitted Reorganization

  	
  42

  
	
  6.7

  	
  Non-Solicit

  	
  43

  

 

ii

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  6.8

  	
  Indebtedness

  	
  43

  
	
  6.9

  	
  Exclusive Dealing

  	
  43

  
	
  6.10

  	
  Confidentiality

  	
  43

  
	
  6.11

  	
  Financial Statements; Financing Assistance

  	
  44

  
	
  6.12

  	
  Leased Real Property

  	
  46

  
	
  6.13

  	
  Insurance Policies

  	
  46

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  COVENANTS OF THE PURCHASER

  	
  46

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Confidentiality

  	
  45

  
	
  7.2

  	
  Support Services

  	
  46

  
	
  7.3

  	
  Financing

  	
  46

  
	
  7.4

  	
  Credit Support Arrangements

  	
  47

  
	
  7.5

  	
  Joint Defense Agreement

  	
  47

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  COVENANTS OF THE PURCHASER AND
  THE SELLERS

  	
  48

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Commercially Reasonable Efforts

  	
  48

  
	
  8.2

  	
  Third Party Consents and Notices

  	
  49

  
	
  8.3

  	
  Public Announcements

  	
  49

  
	
  8.4

  	
  Tax Matters

  	
  49

  
	
  8.5

  	
  Procedures Relating to Tax Claims

  	
  52

  
	
  8.6

  	
  Section 338 Election; Election Allocations

  	
  53

  
	
  8.7

  	
  Employment Matters

  	
  54

  
	
  8.8

  	
  Further Action

  	
  58

  
	
  8.9

  	
  No Use of Certain Names

  	
  59

  
	
  8.10

  	
  TSA Contract Matters

  	
  60

  
	
  8.11

  	
  Novation

  	
  62

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  CONDITIONS TO CLOSING

  	
  62

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Conditions to Obligations of the Purchaser and the
  Sellers

  	
  62

  
	
  9.2

  	
  Conditions to Obligation of the Purchaser

  	
  62

  
	
  9.3

  	
  Conditions to Obligation of the Sellers

  	
  64

  
	
   

  	
   

  	
   

  

 

iii

 

	
   

  	
   

  	
  Page

  
	
  ARTICLE X

  	
  TERMINATION

  	
  65

  
	
  10.1

  	
  Termination

  	
  65

  
	
  10.2

  	
  Effect of Termination

  	
  66

  
	
  10.3

  	
  Other Remedies

  	
  66

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  INDEMNIFICATION

  	
  67

  
	
   

  	
   

  	
   

  
	
  11.1

  	
  Survival

  	
  67

  
	
  11.2

  	
  Indemnification by Pearson

  	
  67

  
	
  11.3

  	
  Indemnification by the Purchaser

  	
  68

  
	
  11.4

  	
  Indemnification Procedure for Third Party Claims

  	
  68

  
	
  11.5

  	
  Indemnification Procedures for Non-Third Party
  Claims

  	
  69

  
	
  11.6

  	
  Limitations on Indemnification

  	
  70

  
	
  11.7

  	
  Exclusive Remedy

  	
  72

  
	
  11.8

  	
  Characterization of Indemnification Payments

  	
  72

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII

  	
  MISCELLANEOUS

  	
  72

  
	
   

  	
   

  	
   

  
	
  12.1

  	
  Notices

  	
  72

  
	
  12.2

  	
  Amendments and Waivers

  	
  74

  
	
  12.3

  	
  Expenses

  	
  74

  
	
  12.4

  	
  Successors and Assigns

  	
  74

  
	
  12.5

  	
  Governing Law

  	
  74

  
	
  12.6

  	
  Consent to Jurisdiction

  	
  74

  
	
  12.7

  	
  Counterparts

  	
  75

  
	
  12.8

  	
  No Third Party Beneficiaries

  	
  75

  
	
  12.9

  	
  Entire Agreement

  	
  75

  
	
  12.10

  	
  Captions

  	
  75

  
	
  12.11

  	
  Severability

  	
  75

  
	
  12.12

  	
  Specific Performance

  	
  76

  
	
  12.13

  	
  Interpretation

  	
  76

  

 

iv

 

STOCK PURCHASE
AGREEMENT

 

This STOCK PURCHASE
AGREEMENT is dated as of December 8, 2006 (this “Agreement”), among
Pearson Inc., a Delaware corporation (“Pearson”), the other entities
designated as selling entities on Attachment A (Pearson and each
such entity is referred to individually as a “Seller” and collectively
as the “Sellers”), PGS Holding Corp., a Delaware corporation (the “Purchaser”),
and, solely for purposes of Section 10.2(b) and Article XII of this
Agreement, The Veritas Capital Fund III, L.P., a Delaware limited partnership
(the “Parent”).

 

WHEREAS, the Sellers of
each entity designated as an entity being sold on Attachment A
(each such entity is referred to individually as a “Company” and
collectively as the “Companies”) own all of the issued and outstanding
shares of capital stock or other similar equity interests (the “Equity
Interests”) of such Company as set forth in Section 4.2 of the Seller
Disclosure Schedule;

 

WHEREAS, the Sellers
desire to sell the Equity Interests of the Companies to the Purchaser, and the
Purchaser desires to purchase such Equity Interests from the Sellers, upon the
terms and subject to the conditions set forth in this Agreement;

 

WHEREAS, prior to
the Closing, the Parent will form a Delaware limited liability company (“Holdco
LLC”) for the purpose of holding all of the issued and outstanding shares
of common stock of the Purchaser; and

 

WHEREAS, prior to the
Closing, the Purchaser will authorize a senior series of preferred stock (“Purchaser
Senior Preferred Stock”) and a junior series of preferred stock (“Purchaser
Junior Preferred Stock”) pursuant to a Certificate of Designations in
accordance with the term sheet attached hereto as Exhibit A.

 

NOW, THEREFORE, in
consideration of the foregoing, the representations, warranties and covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:

 

ARTICLE I

 

DEFINITIONS

 

1.1           Definitions. When used in this
Agreement, the following terms shall have the meanings assigned to them in this
Section 1.1.

 

“Acquisition” has the meaning set forth in Section 2.1.

 

“Action”
has the meaning set forth in Section 4.13.

 

“Actuary’s
Letter” has the meaning set forth in Section 8.7.

 

 

 

“ADSP” has the meaning set forth in
Section 8.6(c).

 

“Affiliate” means,
with respect to any Person, any other Person directly or indirectly
controlling, controlled by or under common control with such Person.

 

“Agreement” has the meaning set forth in the preamble hereto.

 

“Ancillary
Agreements” means, collectively, the Services Agreement and any other
documents executed and delivered in connection with the Acquisition.

 

“Assets” means the
assets of every type and description (including, without limitation, rights
under Contracts) that are used, owned, leased or licensed by any Seller or any
Affiliate of such Seller (including any of the Companies and their
Subsidiaries) principally in connection with the Business, other than Excluded
Assets.

 

“Audited Financial
Statements” has the meaning set forth
in Section 4.5(a).

 

“Authorization”
means any authorization, approval, consent, certificate, license, permit or
franchise of or from any Governmental Entity or pursuant to any Law.

 

“Benefit Plan” means any bonus, incentive compensation,
deferred compensation, pension, profit sharing, retirement, stock purchase,
stock option, stock ownership, stock appreciation rights, phantom stock, leave
of absence, layoff, vacation, day or dependent care, legal services, cafeteria,
life, health, accident, disability, workers compensation or other insurance,
severance, separation or other employee benefit plan, policy or arrangement of
any kind, including, without limitation, any employee benefit plan within the
meaning of Section 3(3) of ERISA
(whether or not subject thereto), existing at the Closing Date,
maintained or contributed to by the Sellers, the Companies or any of their
Affiliates, or to which any of them are a party, for the benefit of employees
of the Companies, other than any such benefit plan, policy or arrangement
maintained, contributed to or established solely to comply with applicable Law.

 

“Business” means,
collectively, on the date hereof, the consulting, systems integration and
business process outsourcing businesses (including designing, building and
operating clients’ technology based systems) operated by the “Pearson
Government Solutions” operating unit of the Sellers, including the Pearson
Government Solutions, Inc., Civilian Agency Services, Pearson Analytic
Solutions, Inc., Public
Health Care, Pearson Performance Solutions, Blueprint Technologies and
International divisions of such business unit, other than the business
activities set forth on Schedule 1.1(b).

 

“Business Day”
means a day other than a Saturday, Sunday or other day on which banks located
in New York, New York are authorized or required by Law to close.

 

“Business Employees”
has the meaning set forth in Section 8.7(a).

 

“Business
Licenses” has the meaning set forth in Section 4.10(b).

 

2

 

“Business Material
Adverse Effect” has the meaning set forth in Section 4.1.

 

“Business Intellectual
Property” has the meaning set forth in
Section 4.10(a).

 

“Cap” has the
meaning set forth in Section 11.7(b).

 

“Cash Component”
has the meaning set forth in Section 2.1.

 

“Claim Notice” has
the meaning set forth in Section 11.4(a).

 

“Closing” has the meaning set forth in Section 2.2.

 

“Closing Date” has the meaning set forth in Section 2.2.

 

“Closing Net Assets”
has the meaning set forth in Section 2.4(a).

 

“Closing Net Assets
Statement” has the meaning set forth in
Section 2.4(a).

 

“Code” means the
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder.

 

“Company”
and “Companies” have the meaning set forth in the recitals hereto.

 

“Company
Benefit Plans” has the meaning set forth in Section 4.14(a).

 

“Computer Hardware”
means any computer hardware, equipment and peripherals of any kind and of any
platform, including desktop and laptop personal computers, handheld
computerized devices, servers, mid-range and mainframe computers, process
control and distributed control systems, and all network and other
communications and telecommunications equipment.

 

“Computer Software”
means any and all computer programs (except for the Mirage computer program),
including operating system and applications software, implementations of
algorithms, and program interfaces, whether in source code or object code form
(including, but not limited to, all of the foregoing that is installed on the
Computer Hardware) and all documentation, including user manuals relating to
the foregoing.

 

“Confidentiality
Agreement” has the meaning set forth in
Section 7.1.

 

“Contract” means
any written agreement, contract, commitment or arrangement, including, but not
limited to, purchase, sale or other commitments, Government Contracts,
distributorship, franchise or similar agreements, patent or trademark licensing
agreements (either as licensor or licensee), lease or sublease agreements
(either as lessor or lessee), equipment leases, employment agreements,
consulting agreements and union or collective bargaining agreements,
guarantees, loan agreements, non-competition 

 

3

 

agreements, severance
agreements, letters of credit, joint venture or partnership agreements, and
supply or requirements contracts.

 

“Credit Support
Arrangements” mean (a) the letters of credit, guarantees, performance bonds
and other credit support arrangements entered into or issued by or on behalf of
the Sellers or any of their Affiliates outstanding as of the date of this
Agreement in connection with or for the benefit of any of the Companies or the
Business and set forth in Section 4.12 of the Seller Disclosure Schedule and
(b) subject to the provisions of Section 6.1, any letters of credit,
guarantees, performance bonds and other credit support arrangements entered
into or issued by or on behalf of the Sellers or any of their Affiliates in
connection with or for the benefit of any of the Companies or the Business on
or after the date of this Agreement and prior to the Closing Date.

 

“Current Commitment
Letter” means the Initial Commitment Letter or, if the Purchaser obtains
alternate financing to the financing contemplated by the Initial Commitment
Letter, in lieu of the Initial Commitment Letter, the one or more commitment
letters pursuant to which the financing sources identified therein have agreed,
subject to the conditions set forth therein, to provide the alternate financing
specified therein to the Purchaser or an Affiliate thereof for the purpose,
among other things, of consummating the transactions contemplated by this
Agreement.

 

“DB Members” has the meaning set forth in Section 8.7(h).

 

“DC Members” has the meaning set forth in Section 8.7(h).

 

“Delaware LLC Act”
means the Delaware Limited Liability Company Act, Del. Code Ann. tit. 6.
§§18-101 to 18-1109, as amended from time to time.

 

“Designated Purchaser
Entities” has the meaning set forth in Section 2.1.

 

“Election Allocations”
has the meaning set forth in Section 8.6(c).

 

“Election
Notice” has the meaning set forth in Section 8.5(b).

 

“Environmental Laws”
means all federal, state, local or foreign laws, statutes, ordinances,
regulations, rules, judgments, orders, notice requirements, court decisions,
agency guidelines or principles of law, restrictions and licenses, in each case
in effect on the Closing Date, which (a) regulate or relate to the protection
or clean-up of the environment; the use, treatment, storage, transportation,
handling, disposal or Release of Hazardous Substances, the preservation or
protection of waterways, groundwater, drinking water, air, wildlife, plants or
other natural resources; or (b) impose liability with respect to any of the
foregoing, including without limitation, the Federal Water Pollution Control
Act (33 U.S.C. § 1251 et seq.), Resource Conservation & Recovery Act (42
U.S.C. § 6901 et seq.), Safe Drinking Water Act ( 42 U.S.C. §§ 300f et seq.),
Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), Clean Air Act (42
U.S.C. § 7401 et seq.), Comprehensive Environmental Response, Compensation and
Liability Act (42 

 

4

 

U.S.C. § 9601 et seq.),
and any other federal, state, local or municipal laws, statutes, regulations, rules
or ordinances imposing liability or establishing standards of conduct for
protection of the environment.

 

“Equity Interests”
has the meaning set forth in the recitals
hereto.

 

“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended, and the rules and
regulations promulgated thereunder.

 

“Excluded Assets”
means (a) any rights to any of the Names, (b) books, data, documents, and
records, whether in paper or electronic form, and including all items,
documents and records identified in Fed. R. Civ,. P. 34 (a) (1) effective
December 1, 2006, relating to the TSA Contract, the subpoenas issued to NCS
Pearson, Inc. and Pearson Government Solutions, Inc. by the United States
Department of Homeland Security Inspector General regarding the TSA Contract,
any Action relating thereto or any review, analysis or investigation conducted
by or on behalf of the Sellers, the Companies or their Affiliates, or any
agency or entity of the United States Government, relating thereto and (c) the
assets set forth in Section 1.1(a) of the Seller Disclosure Schedule.

 

“Final Net Assets”
means the Closing Net Assets (a) as shown in the Closing Net Assets
Statement delivered by the Purchaser to Pearson pursuant to
Section 2.4(a), if no Notice of Objection with respect thereto is timely
delivered by Pearson to the Purchaser pursuant to Section 2.4(b); or
(b) if a Notice of Objection is so delivered, (i) as agreed by the
Purchaser and Pearson pursuant to Section 2.4(c) or (ii) in the
absence of such agreement, as shown in the Independent Accounting Firm’s
calculation delivered pursuant to Section 2.4(c).

 

“Financial
Statements” has the meaning set forth in Section 4.5(b).

 

“Foreign
Company Benefit Plans” has the meaning set forth in Section 4.14(a).

 

“GAAP” means United
States generally accepted accounting principles consistently applied.

 

“Government Bid”
means any offer, quotation, bid or proposal to sell products or services
primarily relating to the Business made by the Sellers and their Affiliates
(including the Companies and their Subsidiaries) to any Governmental Entity or
any prime contractor prior to the Closing Date which, if accepted, would result
in a Government Contract.

 

“Government Contract”
means any prime contract, subcontract, teaming agreement or arrangement, joint
venture, basic ordering agreement, letter contract, purchase order, delivery
order, task order, grant, cooperative agreement, Government Bid, change order,
arrangement or other commitment or funding vehicle of any kind primarily
relating to the Business that is between any Seller or any of its Affiliates 

 

5

 

(including the Companies
and their Subsidiaries), on the one hand, and (a) a Governmental Entity,
(b) any prime contractor to a Governmental Entity or (c) any
subcontractor with respect to any contract described in clause (a) or (b), on
the other hand.

 

“Governmental Entity”
means any entity or body exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to United States
federal, state or local government or foreign, international, multinational or
other government, including any department, commission, board, agency, bureau,
official or other regulatory, administrative or judicial authority thereof.

 

“Hazardous Substances”
means any quantity of PCBs, radon gas, crude oil or any fraction thereof, all
forms of natural gas, petroleum products or by-products, any radioactive
substance, any toxic, infectious, reactive, corrosive, ignitable or flammable chemical
or chemical compound, asbestos containing materials, lead-based paint as well
as any chemical or chemical compound identified, listed or otherwise classified
as a contaminant, pollutant, toxic pollutant, hazardous or toxic substance,
hazardous material, extremely hazardous substance or chemical, hazardous or
special waste under Environmental Laws, whether solid, liquid or gas.

 

“Holdco Equity
Component” has the meaning set forth in Section 2.1.

 

“Holdco LLC” has
the meaning set forth in the recitals hereto.

 

“Holdco LLC Agreement”
has the meaning set forth in Section 2.3(a).

 

“HSR Act” means
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

 

“IFRS” means
International Financial Reporting Standards as adopted by the International Accounting
Standards Board consistently applied.

 

“Indebtedness”
means, with respect to any Person, (a) any indebtedness for borrowed money
of such Person, (b) any synthetic lease obligations or any other similar
lease obligations of such Person, (c) any obligations of such Person under
any derivative agreements or any other similar agreements (including
interest-rate, exchange-rate, commodity and equity-linked agreements),
(d) any obligations of such Person in respect of off-balance-sheet
agreements or transactions that are in the nature of, or in substitution of,
financings, and (e) any indebtedness or other obligations of any other
Person of the type specified in clauses (a), (c) or (d) of this
definition, the payment or collection of which such Person has guaranteed or in
respect of which such Person is liable, contingently or otherwise, including
liable by way of agreement to purchase products or securities, to provide funds
for payment, to maintain working capital or other balance sheet conditions or otherwise
to assure a creditor against loss.

 

6

 

“Indemnitee” means
any Person that is seeking indemnification from an Indemnitor pursuant to the
provisions of Article XI of this Agreement.

 

“Indemnitor” means
any party hereto from which any Indemnitee is seeking indemnification pursuant
to the provisions of Article XI of this Agreement.

 

“Independent
Accounting Firm” has the meaning set
forth in Section 2.4(c).

 

“Initial Commitment
Letter” has the meaning set forth in Section 5.6.

 

“Initial Financing
Source” has the meaning set forth in Section 5.6.

 

“Intellectual Property”
means (a) all foreign and domestic inventions and discoveries (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissues, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof, (b) all foreign and domestic
trademarks, service marks, trade dress, logos, trade names, brand names,
Internet domain names, corporate names, and other indicia of origin and
including all goodwill associated therewith and symbolized thereby, and all
applications, registrations, and renewals in connection therewith, (c) all
foreign and domestic published and unpublished works of authorship, whether
copyrightable or not (including, but not limited to, Computer Software), all
copyrights therein and thereto, all rights to database information, and all
applications, registrations, restorations, reversions, and renewals in
connection therewith, together with all translations, adaptations, derivations,
and combinations thereof (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) other intellectual property or proprietary rights, all
rights, including rights of privacy, and (g) all claims or causes of action
arising out of or relating to any infringement, misappropriation or other
violation of any of the foregoing, including, but not limited to, rights to
recover for past, present and future violations thereof.

 

“IT Systems” means
Computer Hardware and Computer Software; electronic data processing,
recordkeeping, communications, telecommunications, networking, and account,
inventory, and database management systems operated on or by the Computer
Hardware or Computer Software; and Internet websites and related content.

 

“Joint Defense
Agreement” has the meaning set forth in
Section 7.5.

 

“Jointly Controlled
Tax Claim” has the meaning set forth in Section 8.5(d).

 

7

 

“Knowledge of the
Sellers”, “Sellers’ Knowledge” and words of similar import mean,
with respect to any Seller, the actual knowledge of the persons identified on Schedule 1.1(c).

 

“Law” means any
statute, law, ordinance, rule or regulation of any Governmental Entity.

 

“Leased Real Property”
has the meaning set forth in Section
4.8(b).

 

“Leases” has the meaning set forth in Section
4.8(b).

 

“Lien” means any
mortgage, lien, pledge, charge, security interest or other encumbrance.

 

“Losses”
has the meaning set forth in Section 11.2.

 

“Material
Contract” has the meaning set forth in Section 4.12.

 

“Member Employees” has the meaning set forth in Section 8.7(i).

 

“Names” means “Pearson”,
“NCS”, any name, logo, domain name or trademark that includes “Pearson”, “NCS”,
any variations and derivatives thereof, and any other logos or trademarks of
the Sellers or their Affiliates (other than the Companies and their
Subsidiaries).

 

“Net Assets” as of
any date means, with respect to the Business: 
(a) cash; plus (b) accounts receivable, net, inventory, prepaid
expenses, property, plant and equipment, net, and lease deposits; minus (c)
accounts payable, accrued expenses, and income Taxes, and shall be calculated
in accordance with the same accounting principles, practices, methodologies and
policies used in the preparation of the balance sheet included in the Unaudited
Financial Statements; provided that, Net Assets shall not include assets
or liabilities in respect of the Advanced Training Center business of Pearson
Analytic Solutions, Inc.

 

“Notice
of Objection” has the meaning set forth in Section 2.4(b).

 

“Order” means any
award, injunction, judgment, decree, order, ruling, subpoena or verdict or
other decision issued, promulgated or entered by or with any Governmental
Entity of competent jurisdiction.

 

“Other Antitrust Laws”
means the antitrust and competition Laws of all jurisdictions other than those
of the United States and any foreign investment Laws.

 

“Other Financing”
has the meaning set forth in Section 6.11.

 

“Outside Date” has
the meaning set forth in Section 10.1(a)(ii).

 

8

 

“Parent”
has the meaning set forth in the preamble hereto.

 

“Payment
Date” has the meaning set forth in Section 8.7(j).

 

“Pearson Plan” has
the meaning set forth in Section 8.7(h).

 

“Pearson Plan Debt”
has the meaning set forth in Section 8.7(j).

 

“Permitted Liens”
means (a) Liens for Taxes that are not yet due and payable or that may
hereafter be paid without material penalty or that are being contested in good
faith and for which appropriate reserves have been established, (b) Liens of
landlords and workers’, carriers’, materialmen’s, suppliers’ and mechanics’ or
other like Liens incurred in the ordinary course of business, that are not yet
due and payable or that may hereafter be paid without material penalty or that are
being contested in good faith and for which appropriate reserves have been
established, (c) Liens that will be released prior to or as of the Closing, (d)
zoning and building restrictions, easements, covenants, rights-of-way and
similar restrictions (which are not materially violated by the existing usage
of and improvements on such property), and (e) those Liens and other matters
listed on Schedule 1.1(d).

 

“Permitted
Reorganization” means a reorganization of assets owned by the Sellers and
their Affiliates to be completed on or prior to the Closing Date to effect
(a) any one or more transfers, upon terms and conditions reasonably
satisfactory to the Purchaser, (i) of Assets and liabilities relating to
the Business to the Companies or their Subsidiaries from the Sellers or
Affiliates of the Sellers (other than the Companies or their Subsidiaries) and
(ii) of other assets and liabilities not relating to the Business from the
Companies or their Subsidiaries to the Sellers or Affiliates of the Sellers
(other than the Companies or their Subsidiaries), (b) the lease or
sublease to a Company or any of its Subsidiaries, upon terms and conditions
reasonably satisfactory to the Purchaser, of Leased Real Property that is
currently leased by or to an entity other than such Company or Subsidiary, (c) the
transfer of the Excluded Assets to the Sellers or Affiliates of the Sellers
(other than the Companies or their Subsidiaries) and (d) (i) the repayment of
Indebtedness between the Companies and their Subsidiaries and their Affiliates
and (ii) the sweeping to accounts of the Sellers funds in the bank accounts of
the Companies and their Subsidiaries or otherwise transferring, or causing
to be transferred, to the Sellers all cash and cash equivalents of the Companies
and their Subsidiaries, including without limitation by issuing capital stock
or other equity interests in the Companies and their Subsidiaries to the
Sellers and the Companies, respectively (it being understood and agreed that
any such stock or interest issued to the Sellers shall constitute Equity
Interests to be sold to the Purchaser upon the terms and subject to the
conditions set forth in this Agreement), so that, upon the consummation of such
one or more transfers or transactions pursuant to clauses (a), (b), (c) and
(d) above, the Companies and their Subsidiaries will own all of the Assets
(including, without limitation, rights under Contracts) free and clear of all
Liens, other than Permitted Liens, Liens affecting the fee ownership of any
Leased Real Property or as otherwise disclosed in this Agreement or
Section 4.9 of the Seller Disclosure Schedule.

 

9

 

“Person” means any
individual, corporation, partnership, limited liability company, trust,
unincorporated association, Governmental Entity or other legal entity.

 

“PGS” means
Pearson Government Solutions, Inc., a Delaware corporation.

 

“Post-Closing Period”
means any taxable period or portion thereof beginning after the Closing Date
or, as the context may require, all such periods. If a taxable period begins on
or before the Closing Date and ends after the Closing Date, then the portion of
the taxable period that begins on the day following the Closing Date shall
constitute a Post-Closing Period.

 

“Pre-Closing Period”
means any taxable period or portion thereof ending on or before the Closing
Date or, as the context may require, all such periods. If a taxable period
begins on or before the Closing Date and ends after the Closing Date, then the
portion of the taxable period that ends at the end of the Closing Date shall
constitute a Pre-Closing Period.

 

“Preferred Stock
Component” has the meaning set forth in Section 2.1.

 

“Purchase Price” has the meaning set forth in Section 2.1.

 

“Purchaser” has the meaning set forth in the preamble
hereto.

 

“Purchaser Disclosure
Schedule” has the meaning set forth in
preamble to Article V.

 

“Purchaser Group
Member” means the Purchaser and any Designated Purchaser Entities and their
respective directors, officers, employees, agents, attorneys and consultants,
and their respective successors and assigns.

 

“Purchaser Junior
Preferred Stock” has the meaning set forth in the recitals hereto.

 

“Purchaser Material
Adverse Effect” has the meaning set forth in Section 5.1.

 

“Purchaser Senior
Preferred Stock” has the meaning set forth in the recitals hereto.

 

“Purchaser’s Plan” has the meaning set forth in Section
8.7(h).

 

“Purchaser’s 401(k)
Plan” has the meaning set forth in Section 8.7(d).

 

“Release” means
any spilling, leaking, pumping, emitting, emptying, discharging, injecting,
escaping, leaching, migrating, dumping or disposing of Hazardous Substances
(including the abandonment or discarding of barrels, containers or other closed
receptacles containing Hazardous Materials) into or through the environment
(including, without limitation, ambient air, surface water, groundwater and
surface or subsurface 

 

10

 

strata) or into or out of
any real property, including the movement of Hazardous Substances through or in
the air, soil, surface water, groundwater or property.

 

“Restricted Business”
means the Business in the United States of America conducted by the
Sellers and their Affiliates (including the Companies and their Subsidiaries); provided
that, Restricted Business shall not include (a) any business that
Pearson plc or any of its Affiliates (not including the Companies and their
Subsidiaries) engage in prior to the Closing, (b) any business engaged in
by the assessments and testing business of Pearson plc and their Affiliates
(not including the Companies and their Subsidiaries), (c) any business
engaged in by Knowledge Analysis Technologies, LLC or (d) any business
that Pearson plc or any of its Affiliates (not including the Companies and their
Subsidiaries) engage in at the request of the Companies or their Subsidiaries.

 

“Retention/Severance
Agreements” has the meaning set forth in Section 8.7(c).

 

“Review Period”
has the meaning set forth in Section 2.4(b).

 

“Rule 144A Offering” has the meaning
set forth in Section 6.11.

 

“Section 338(h)(10)
Election” has the meaning set forth in Section 8.6(a).

 

“Section 338
Forms” has the meaning set forth in Section 8.6(b).

 

“Securities Act”
means the Securities Act of 1933, as
amended.

 

“Seller” and “Sellers”
have the meaning set forth in the preamble
hereto.

 

“Seller Benefit Plans”
has the meaning set forth in Section 4.14(a).

 

“Seller Disclosure
Schedule” has the meaning set forth in
the preamble to Article III.

 

“Seller Group Member”
means the Sellers and their directors, officers, employees, agents, attorneys
and consultants, and their successors and assigns.

 

“Seller Indemnified
Parties” has the meaning set forth in Section 11.3.

 

“Seller Material
Adverse Effect” has the meaning set forth in Section 3.1.

 

“Seller’s 401(k) Plan”
has the meaning set forth in Section 8.7(d).

 

“Services Agreement”
means the services agreement between the
Sellers and the Purchaser, to be dated as of the Closing Date, in the form
attached hereto as Exhibit B.

 

“Straddle Period”
means any taxable period that begins on or before the Closing Date and ends
after the Closing Date.

 

11

 

“Subsidiary”
means, with respect to any Person, any corporation, partnership, limited
liability company, joint venture or other legal entity of any kind of which
such Person (either alone or through or together with one or more of its other
Subsidiaries), owns, directly or indirectly, more than 50% of the capital stock
or other equity interests the holders of which are (a) generally entitled to
vote for the election of the board of directors or other governing body of such
legal entity or (b) generally entitled to share in the profits or capital of
such legal entity.

 

“Tax” or “Taxes”
means any and all federal, state, local or foreign net or gross income, gross
receipts, net proceeds, sales, use, ad valorem, value added, franchise,
withholding, payroll, employment, excise, property, deed, stamp, alternative or
add-on minimum, occupation, severance, unemployment, social security, workers’
compensation, capital, premium and other taxes, including any interest,
penalties or additions to tax attributable to the foregoing.

 

“Tax
Claim” means (a) any written claim with respect to Taxes made by any Taxing
Authority or other Person that, if pursued successfully, could serve as the
basis for a claim for indemnification of the Purchaser or Sellers under this
Agreement, or (b) a rejection by a Taxing Authority of a claim for a Tax refund
with respect to a taxable period of each Company or the Business ending on or
before the Closing Date.

 

“Tax Returns”
means any return, declaration, report, claim for refund or information return
or statement relating to Taxes, including any schedule or attachment thereto
and any amendment thereof.

 

“Taxing
Authority” means any Governmental Entity having jurisdiction with respect
to any Tax.

 

“Tax
Deductible” has the
meaning set forth in Section 11.6(a).

 

“Termination
Fee” has the meaning set forth in Section 10.2(b).

 

“Third Party Claim”
has the meaning set forth in Section 11.4(a).

 

“Third Party Licenses”
has the meaning set forth in Section
4.10(b).

 

“Transfer Taxes”
means sales, use, transfer, real property transfer, recording, documentary,
stamp, registration and stock transfer Taxes
and any similar Taxes.

 

“TSA Action” has the meaning set forth in Section 8.10(a).

 

“TSA Contract”
means Transportation Security Administration Contract No. DTSA20-02-C-00400,
with an effective date of February 25, 2002, which was initially awarded as
Contract No. DTSA59-02-C-00400.

 

“TSA Contract
Indemnitee” has the meaning set forth
in Section 8.10.

 

12

 

“UK Business Employees” has the meaning set forth in Section 8.7(g).

 

“Unaudited Financial
Statements” has the meaning set forth
in Section 4.5(b).

 

“9/30 Calculation” has the meaning set forth in Section 2.4(a).

 

“9/30 Net Assets” has the meaning set forth in Section 2.4(a).

 

1.2           Construction. For the purposes
of this Agreement, except as otherwise expressly provided herein or unless the
context otherwise requires: 
(a) words using the singular or plural number also include the
plural or singular number, respectively, and the use of any gender herein shall
be deemed to include the other genders; (b) references herein to “Articles,”
“Sections,” “subsections” and other subdivisions, and to Exhibits, Schedules,
Annexes, Attachments and other attachments, without reference to a document are
to the specified Articles, Sections, subsections and other subdivisions of, and
Exhibits, Schedules, Annexes, Attachments and other attachments to, this
Agreement; (c) a reference to a subsection or other subdivision without
further reference to a Section is a reference to such subsection or subdivision
as contained in the same Section in which the reference appears; (d) the
words “herein”, “hereof”, “hereunder”, “hereby” and other words of similar
import refer to this Agreement as a whole and not to any particular provision;
(e) the words “include”, “includes” and “including” are deemed to be
followed by the phrase “without limitation”; and (f) all accounting terms
used and not defined herein have the respective meanings given to them under
GAAP.

 

ARTICLE II

 

PURCHASE AND SALE

 

2.1           Purchase and Sale of the Equity
Interests. Upon the terms and subject to the conditions of this Agreement,
at the Closing the Sellers shall sell the Equity Interests of each Company to
the Purchaser (or such one or more Affiliates of the Purchaser as may be
designated by the Purchaser in writing to the Sellers at or prior to the
Closing and joined as parties to this Agreement in accordance with
Section 12.4 (the “Designated Purchaser Entities”)) with respect to
each Company on Attachment A, and the Purchaser (or, in lieu thereof,
the one or more Designated Purchaser Entities) shall so purchase such Equity
Interests from the Sellers. The purchase price for the Equity Interests shall
be (a) $570,000,000 in cash (the “Cash Component”), (b) a number of
shares of Purchaser Senior Preferred Stock having an aggregate original stated
value of $35,000,000 and a number of shares of Purchaser Junior Preferred Stock
having an aggregate original stated value of $5,000,000 (collectively, the “Preferred
Stock Component”) and (c) a 10% interest in the same class of securities of
Holdco LLC as is issued to the Parent in accordance with the term sheet
attached hereto as Exhibit B (the “Holdco Equity Component”) (the items
referred to in clauses (a), (b) and (c) being, collectively, the “Purchase
Price”). The Purchase Price shall be paid as provided in Section 2.3
and shall be subject to adjustment as provided in Section 2.4. The
Purchase Price shall be 

 

13

 

allocated among
the Companies in accordance with Section 8.6(c) of this Agreement. The purchase
and sale of the Equity Interests is referred to herein as the “Acquisition”.

 

2.2           Closing Date. The closing of
the Acquisition (the “Closing”) shall take place at such date, time and
place after satisfaction (or waiver as provided herein) of the conditions set
forth in Article IX (other than those conditions that by their nature will
be satisfied at the Closing) as shall be agreed in writing by Pearson and the
Purchaser, which shall be no later than the Outside Date. The date on which the
Closing occurs is referred to herein as the “Closing Date.”  Subject to the provisions of
Section 10.1(a)(ii), the Purchaser and the Sellers shall use commercially
reasonable efforts to schedule a Closing on or before February 15, 2007.

 

2.3           Transactions to be Effected at the
Closing.

 

(a)       At the
Closing, the Purchaser shall deliver to Pearson, for itself and as agent for
the other Sellers, (i) the Cash Component Price by wire transfer of
immediately available funds to an account or accounts designated in writing by
Pearson to the Purchaser no later than two Business Days prior to the Closing
Date, (ii) stock certificates (in such denominations and registered in
such name(s) as Pearson shall request (the “Preferred Stock Certificates”))
representing the Preferred Stock Component and (iii) a limited liability
company operating agreement of Holdco LLC (the “Holdco LLC Agreement”)
evidencing the issuance to Pearson of the Holdco Equity Component. In addition,
at the Closing, the Purchaser shall deliver to the Sellers all agreements,
certificates and other documents necessary to satisfy any condition referred to
in Section 9.3.

 

(b)       At the
Closing, the Sellers shall deliver, or cause to be delivered, to the Purchaser
(i) the original certificates representing all of the Equity Interests of
the Companies, which certificates shall be either duly endorsed for transfer
to, or accompanied by stock powers duly endorsed in blank in favor of, the
Purchaser (or the one or more Designated Purchaser Entities), as applicable,
with respect to each Company on Attachment A and otherwise in form
acceptable for transfer on the books of the Companies and (ii) $10,000,000
in cash to provide for deferred revenue of the Business. In addition, at the
Closing, the Sellers shall deliver to the Purchaser all agreements,
certificates and other documents necessary to satisfy any condition referred to
in Section 9.2.

 

2.4           Closing Net Assets.

 

(a)       Within
90 days after the Closing Date, the Purchaser will prepare, or cause to be
prepared, and deliver to Pearson (i) an unaudited statement (the “Closing
Net Assets Statement”), which shall set forth the Purchaser’s calculation
of Net Assets as of the close of business on the Closing Date (“Closing Net
Assets”), and (ii) an unaudited statement (the “9/30 Calculation”),
which shall set forth the Purchaser’s calculation of Net Assets as of the close
of business on September 30, 2006 (the “9/30 Net Assets”). The Closing
Net Assets Statement and 9/30 Calculation shall 

 

14

 

be
prepared in accordance with the accounting principles, methodologies and
policies used in the preparation of the balance sheet included in the Unaudited
Financial Statements, with the components thereof calculated in accordance with
IFRS in the manner specified in the second sentence of Section 4.5(b), and,
notwithstanding anything to the contrary in this Agreement, the Closing Net
Assets and the 9/30 Net Assets shall not reflect (i) any assets currently used
by the Business but not reflected on the Financial Statements that are
transferred to the Business pursuant to the Permitted Reorganization or (ii)
any assets not currently used by the Business but reflected on the Financial
Statements that are transferred from the Companies or their Subsidiaries
pursuant to the Permitted Reorganization.

 

(b)       Upon
receipt from the Purchaser, Pearson shall have 30 days to review the
Closing Net Assets Statement and the 9/30 Calculation (the “Review Period”).
The Purchaser shall assist, and shall cause the Companies and their
Subsidiaries to assist, the Sellers and their respective representatives in
their review of the Closing Net Assets Statement and the 9/30 Calculation,
shall provide the Sellers and their respective representatives with any
information reasonably requested by them and shall give them access, during
normal business hours and upon reasonable notice, to the personnel, properties,
books and records of the Companies and their Subsidiaries for such purpose. If
Pearson disagrees with the Purchaser’s computation of the Closing Net Assets
and 9/30 Net Assets, Pearson may, on or prior to the last day of the Review
Period, deliver a notice to the Purchaser (the “Notice of Objection”),
which sets forth its objection to the Purchaser’s calculation of Closing Net
Assets or 9/30 Net Assets, provided, however, that the Notice of
Objection shall include only objections based on (i) non-compliance with
the standards set forth in Section 2.4(a) for the preparation of the
Closing Net Assets Statement and the 9/30 Calculation and
(ii) mathematical errors in the computation of Closing Net Assets or 9/30
Net Assets. Any Notice of Objection shall specify those items or amounts with
which Pearson disagrees, together with a detailed written explanation of the
reasons for disagreement with each such item or amount, and shall set forth
Pearson’s calculation of Closing Net Assets or 9/30 Net Assets based on such
objections. To the extent not set forth in the Notice of Objection, Pearson
shall be deemed to have agreed with the Purchaser’s calculation of all other
items and amounts contained in the Closing Net Assets Statement and 9/30
Calculation. The parties hereto acknowledge
that (x) the sole purpose of the determination of Closing Net Assets and
9/30 Net Assets is to adjust the Purchase Price so as to reflect the change in
Net Assets, as determined in accordance with Section 2.4(a), from September 30,
2006  to
the Closing Date, and (y) the change referred in clause (x) above is to be
measured on a completely consistent basis so that the calculation is to be done
using the same accounting principles, practices, methodologies and policies
used in the preparation of the balance sheet included in the Unaudited
Financial Statements, with the components thereof calculated in accordance with
IFRS in the manner specified in the second sentence of Section 4.5(b).

 

(c)       Unless
Pearson delivers the Notice of Objection to the Purchaser within the Review
Period, the Sellers shall be deemed to have accepted the Purchaser’s 

 

15

 

calculation
of Closing Net Assets, 9/30 Net Assets, the Closing Net Assets Statement, and
the 9/30 Calculation shall be final, conclusive and binding on all parties
hereto. If Pearson delivers the Notice of Objection to the Purchaser within the
Review Period, the Purchaser and Pearson shall, during the 30 days following
such delivery or any mutually agreed extension thereof, use their commercially
reasonable efforts to reach agreement on the disputed items and amounts in
order to determine the amount of Closing Net Assets and 9/30 Net Assets. If, at
the end of such period or any mutually agreed extension thereof, the Purchaser
and Pearson are unable to resolve their disagreements, they shall jointly retain
and refer their disagreements to a nationally recognized independent public
accounting firm mutually acceptable to the Purchaser and Pearson (the “Independent
Accounting Firm”). If the Purchaser and Pearson are unable so to agree,
each shall select a nationally recognized independent accounting firm and those
two firms shall select a third such firm, in which event “Independent
Accounting Firm” shall mean the third such firm. The parties shall instruct
the Independent Accounting Firm promptly to review this Section 2.4 and to
determine solely with respect to the disputed items and amounts so submitted
whether and to what extent, if any, the Closing Net Assets or 9/30 Net Assets
set forth in the Closing Net Assets Statement or 9/30 Calculation, respectively,
require adjustment. The Independent Accounting Firm shall base its
determination solely on written submissions by the Purchaser and Pearson and
not on an independent review. The Purchaser and the Sellers shall make
available to the Independent Accounting Firm all relevant books and records and
other items reasonably requested by the Independent Accounting Firm. As
promptly as practicable, but in no event later than 45 days after its
retention, the Independent Accounting Firm shall deliver to the Purchaser and
Pearson a report which sets forth its resolution of the disputed items and
amounts and its calculation of Closing Net Assets and 9/30 Net Assets to the
extent such items were in dispute; provided, however, that in no
event shall (i) Closing Net Assets as determined by the Independent Accounting
Firm be less than the Purchaser’s calculation of Closing Net Assets set forth
in the Closing Net Assets Statement nor more than Pearson’s calculation of
Closing Net Assets set forth in the Notice of Objection or (ii) 9/30 Net Assets
as determined by the Independent Accounting firm be less than the Purchaser’s
calculation of 9/30 Net Assets set forth in the 9/30 Calculation nor more than
Pearson’s calculation of 9/30 Net Assets as set forth in the Notice of Objection.
The decision of the Independent Accounting Firm shall be final, conclusive and
binding on the parties. After the final
determination of Closing Net Assets and 9/30 Net Assets, the Sellers shall have
no further right to make any claims against the Purchaser in respect of any
element of Closing Net Assets or 9/30 Net Assets that Pearson raised or could
have raised in the Notice of Objection. The Purchaser and the Sellers
shall each pay their own costs and expenses incurred under this
Section 2.4. The Independent Accounting Firm shall allocate its fees,
costs and expenses in accordance with the percentage which the portion of the
contested amount not awarded to the Purchaser, on the one hand, and the
Sellers, on the other hand, bears to the amount actually contested by or on
behalf of such parties.

 

16

 

(d)       Adjustments
to Purchase Price.

 

(i)            Net Assets Adjustment. The Purchase Price shall be
increased by the amount by which Final Net Assets exceeds 9/30 Net Assets, as
finally determined pursuant to this Section 2.4, and the Purchase Price shall
be decreased by the amount by which Final Net Assets is less than 9/30 Net
Assets, as finally determined pursuant to this Section 2.4.

 

(ii)           Collar. Any adjustment to the
Purchase Price to be made pursuant to Section 2.4(d)(i) shall be made in
favor of the Sellers or the Purchaser, as the case may be, only to the extent
that the adjustment called for by Section 2.4(d)(i) (whether positive or
negative) exceeds $3,000,000.

 

(iii)          Payment of Adjustment to Purchase
Price. Any adjustment payments required pursuant to Section 2.4(d)(i)
after applying the provisions of Section 2.4(d)(ii) shall be made by the
Purchaser or the Sellers, as the case may be, within five Business Days after
the determination of the Final Net Assets and the 9/30 Net Assets, by wire
transfer in immediately available funds, together with interest thereon at a
rate equal to the rate of interest from time to time announced publicly by
Citibank, N.A. as its prime rate, calculated on the basis of the actual
number of days elapsed divided by 365, from the Closing Date to the date of
payment.

 

(e)       Except
for the consummation of the Acquisition and the other transactions contemplated
hereby, the Purchaser and the Sellers agree that on the Closing Date the
Companies and their Subsidiaries shall conduct their business in the ordinary
course in a manner substantially consistent with past practice. Following the
Closing and through the resolution of an adjustment to the Purchase Price
pursuant to this Section 2.4, the Purchaser shall not take any action with
respect to the accounting books and records of the Companies and their
Subsidiaries on which the Closing Net Assets and 9/30 Net Assets are to be
based that are not consistent with the past practices of the Companies and
their Subsidiaries or which would make impossible or impracticable the
calculation of any adjustment to the Purchase Price contemplated by this
Section 2.4. Without limiting the generality of the foregoing, no changes shall
be made in any reserve or other account existing as of the date of the balance
sheet in the Unaudited Financial Statements except as a result of events
occurring after such date and, in such event, only in a manner consistent with
the past practices of the Companies and their Subsidiaries.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES
RELATING TO THE SELLERS AND THE EQUITY INTERESTS

 

The Sellers,
jointly and severally, represent and warrant to the Purchaser that, subject to
the disclosure set forth in the schedules delivered by the Sellers to the
Purchaser on the date hereof (collectively, the “Seller Disclosure Schedule”),
each statement contained in this Article III is true and correct as of the date
hereof. Notwithstanding anything to the contrary contained herein, each section
of the Seller 

 

17

 

Disclosure
Schedule shall be deemed to incorporate by reference all information disclosed
in any other section of the Seller Disclosure Schedule only to the extent such
disclosure and incorporation by reference is reasonably apparent to a third
party.

 

3.1           Organization and Good Standing.
Each Seller is a legal entity duly organized, validly existing and in good
standing (if such concept is applicable) under the laws of the jurisdiction of
its organization and has all requisite corporate or other similar legal power
to own, lease and operate its properties and to carry on its business as now
being conducted, except where the failure to be so qualified would not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the ability of the Sellers to consummate the Acquisition and
the other transactions contemplated hereby (a “Seller Material Adverse
Effect”).

 

3.2           Authority and Enforceability. Each
Seller has the requisite power and authority to execute and deliver this
Agreement and the Ancillary Agreements to which it is a party and to consummate
the Acquisition and the other transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and such Ancillary Agreements and the
consummation of the Acquisition and the other transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate or other
similar action on the part of such Seller. This Agreement has been, and at the
Closing each Ancillary Agreement to which such Seller is a party will be, duly
executed and delivered by such Seller and, assuming the due authorization,
execution and delivery hereof and thereof by the Purchaser, constitutes, and
when executed will constitute, the valid and binding obligation of such Seller,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to creditors’ rights
generally, and the availability of injunctive relief and other equitable
remedies.

 

3.3           No Conflicts; Consents.

 

(a)       Except
as set forth in Section 3.3(a) of the Seller Disclosure Schedule, the execution
and delivery by each Seller of this Agreement and the Ancillary Agreements to
which it is a party do not or will not, when executed and delivered, and the
consummation by such Seller of the Acquisition and the other transactions
contemplated hereby and thereby will not, (i) violate the provisions of
the charter, articles or certificate of incorporation or any other
organizational document or bylaws or other constitutive document of such
Seller, (ii) violate any Material Contract to which such Seller is a party
or by which properties of such Seller (with respect to the Business) are bound,
(iii) require any consent, approval or waiver from, or notice to, any party to
any Material Contract to which such Seller (with respect to the Business) is a
party or by which properties of such Seller (with respect to the Business) are
bound, or (iv) assuming compliance by such Seller with the matters
referred to in Section 3.3(b), violate any Order or Law applicable to such
Seller, except in the case of clause (iv) above where such violation would
not have a Seller Material Adverse Effect.

 

18

 

(b)       No
Authorization or Order of, registration, declaration or filing with, or notice
to any Governmental Entity is required to be obtained or made by or with
respect to any Seller in connection with the execution and delivery of this
Agreement or the Ancillary Agreements to which such Seller is a party or the
consummation of the Acquisition or the other transactions contemplated hereby
or thereby, except for such Authorizations, Orders, registrations,
declarations, filings and notices (i) as may be required under the HSR Act
and the Other Antitrust Laws, or (ii) as set forth in Section 3.3(b)
of the Seller Disclosure Schedule.

 

3.4           The Equity Interests. Each
Seller has good and valid title to the Equity Interests of the applicable
Company set forth next to such Seller’s name in Attachment A, free and clear of
all Liens except as set forth in Section 3.4 of the Seller Disclosure Schedule.
Where required by Law, each Seller’s ownership of the applicable Equity
Interests has been duly recorded in all applicable Company registers. Assuming
the Purchaser has the requisite power and authority to be the lawful owner of
the Equity Interests, upon delivery to the Purchaser at the Closing of the
certificates representing the Equity Interests, duly endorsed by the applicable
Sellers for transfer to the Purchaser or accompanied by duly endorsed stock
powers pursuant to Section 2.3(b), and upon the Sellers’ receipt of the
Purchase Price pursuant to Section 2.3(a), good and valid title to the Equity
Interests will pass to the Purchaser, free and clear of any Liens, other than
those arising from acts of the Purchaser or its Affiliates. Other than this
Agreement, the Equity Interests are not subject to any voting trust agreement
or other Contract restricting or otherwise relating to the voting, dividend
rights or disposition of the Equity Interests.

 

3.5           Section 338(h)(10) Election.
NCSP Holdings, Inc. is eligible to join with the Purchaser in making the
Section 338(h)(10) Election with respect to the acquisition by the Purchaser of
PGS.

 

3.6           Acquisition
for Investment. The Preferred Stock Component and the Holdco Equity Component
acquired by the Sellers pursuant to this Agreement are being acquired for
investment only and not with a view to any public distribution thereof in
violation of any of the registration requirements of the Securities Act or any
other applicable securities law. Sellers shall not offer to sell or otherwise
dispose of, or sell or otherwise dispose of, the Preferred Stock Component or
the Holdco Equity Component acquired by them, in violation of any of the
registration requirements of the Securities Act or any other applicable
securities law.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES
RELATING TO THE COMPANIES

 

The Sellers,
jointly and severally, represent and warrant to the Purchaser that, subject to
the disclosure set forth in the Seller Disclosure Schedule, each statement
contained in this Article IV is true and correct as of the date hereof. Notwithstanding
anything to the contrary contained herein, each section of the Seller
Disclosure Schedule shall be deemed to incorporate by reference all information
disclosed in any other section 

 

19

 

of the Seller
Disclosure Schedule only to the extent such disclosure and incorporation by
reference is reasonably apparent to a third party.

 

4.1           Organization and Good Standing.
Each Company is a legal entity duly organized, validly existing and in good
standing (if such concept is applicable) under the laws of its jurisdiction of
organization, has all requisite corporate or other similar legal power to own,
lease and operate its properties and to carry on its business as now being
conducted, and is duly qualified to do business and is in good standing in each
jurisdiction in which the conduct or nature of its business or the ownership,
leasing or holding of its properties makes such qualification necessary, except
where the failure to be so qualified would not have a Business Material Adverse
Effect. For purposes of this Agreement the term “Business Material Adverse
Effect” means any change, circumstance or effect that, individually or in
the aggregate, (a) is or is reasonably likely to be materially adverse to
the business, operations, assets, liabilities, condition (financial or
otherwise) or results of operations of the Business (including the Leased Real
Property) or (b) materially impairs, prevents or delays the ability of the
Sellers to consummate the transactions contemplated by this Agreement; provided,
however, that, for purposes of clause (a) above, none of the
following, either alone or in combination, shall be considered in determining
whether there has been a “Business Material Adverse Effect”:  (i) any change affecting general
national, international or regional political, economic, financial or capital
market conditions, including changes in interest or exchange rates;
(ii) any change generally affecting the industries in which the Business
operates, which change does not have a disproportionate adverse impact on the
Business; (iii) any change in Law, GAAP or IFRS, or any interpretation
thereof; (iv) acts of war, sabotage or terrorism, or any escalation or
worsening thereof which do not have a disproportionate adverse impact on the
Business; (v) any change relating to or arising from the execution of this
Agreement or the Ancillary Agreements or the announcement of the transactions
contemplated hereby or thereby; (vi) any breach by the Purchaser of any
provision of this Agreement or the Ancillary Agreements; and (vii) any
action taken at any Purchaser’s request by the Business, the Sellers, the
Companies or any of their respective Affiliates.

 

4.2           Capitalization. The authorized
share capital, capital stock or other equity interests of each Company, the
issued and outstanding capital stock or other equity interests of each Company,
and the owner of record of such issued and outstanding capital stock or other
equity interests of each Company are set forth in Section 4.2 of the
Seller Disclosure Schedule. All issued and outstanding Equity Interests of each
Company are duly authorized, validly issued, fully paid and nonassessable. Other
than the Equity Interests and as set forth in Section 4.2 of the Seller
Disclosure Schedule, the Companies do not have issued and outstanding any
capital stock or other equity interests or any other securities, options,
warrants or other rights exercisable or exchangeable for or convertible into
capital stock or other equity interests of the Companies.

 

4.3           Subsidiaries of the Companies.
Each Subsidiary of the Companies is a legal entity duly organized, validly
existing and in good standing (if such concept is applicable) under the laws of
its jurisdiction of organization, has all requisite corporate or 

 

20

 

other similar
legal power to own, lease and operate its properties and to carry on its
business as now being conducted, and is duly qualified to do business and is in
good standing in each jurisdiction in which the conduct or nature of its
business or the ownership, leasing or holding of its properties makes such
qualification necessary, except where the failure to be so qualified would not
have a Business Material Adverse Effect. Section 4.3 of the Seller Disclosure
Schedule contains a true and complete list of the Subsidiaries of the Companies
and sets forth, with respect to each such Subsidiary, the jurisdiction of
formation, the authorized, issued and outstanding capital stock or other
similar equity interests of such Subsidiary and the owner of record of such
issued and outstanding capital stock or other equity interests. All of the issued
and outstanding capital stock or other equity interests of the Subsidiaries of
the Companies are duly authorized, validly issued, fully paid and nonassessable
and free and clear of all Liens. The capital stock or other similar equity
interests of the Subsidiaries of the Companies are not subject to any voting
trust agreement or other Contract restricting or otherwise relating to the
voting, dividend rights or disposition of such capital stock or equity
interests. Other than such capital stock or equity interests and as set forth
in Section 4.3 of the Seller Disclosure Schedule, the Subsidiaries of the
Companies do not have issued and outstanding any capital stock or other equity
interests or any other securities, options, warrants or other rights exercisable
or exchangeable for or convertible into capital stock or other equity interests
of such Subsidiaries.

 

4.4           No Conflicts; Consents.

 

(a)       Except
as set forth in Section 4.4(a) of the Seller Disclosure Schedule, the execution
and delivery by each Seller of this Agreement and the Ancillary Agreements to
which it is a party do not or will not, when executed and delivered, and the
consummation by such Seller of the Acquisition and the other transactions
contemplated hereby and thereby will not, (i) violate the provisions of
the charter, articles or certificate of incorporation or any other
organizational document or bylaws or other constitutive document of any Company
or any Subsidiary thereof, (ii) result in a breach of, constitute a
default under, or result in the acceleration of material obligations, loss of
material benefit or increase in any material liabilities or fees under, or
create in any party the right to terminate, cancel or modify, any Material
Contract, (iii) require any consent, approval or waiver from, or notice to, any
party to any Material Contract, or (iv)  assuming compliance by the
Sellers with the matters referred to in Section 4.4(b), violate any Law
applicable to any Company or any Subsidiary thereof on the date hereof, except
in the case of clause (iv) above where such violation would not have a
Business Material Adverse Effect.

 

(b)       No
Authorization or Order of, registration, declaration or filing with, or notice
to any Governmental Entity is required to be obtained or made by or with
respect to the Companies or any Subsidiary thereof in connection with the
execution and delivery of this Agreement or the Ancillary Agreements or the
consummation of the Acquisition or the other transactions contemplated hereby
and thereby, except for such Authorizations, Orders, registrations,
declarations, filings and 

 

21

 

notices
(i) as may be required under the HSR Act and the Other Antitrust Laws, or
(ii) as set forth in Section 4.4(b) of the Seller Disclosure Schedule.

 

4.5           Financial Statements.

 

(a)       Set
forth in Section 4.5(a)(1) of the Seller Disclosure Schedule are the audited
combined balance sheet of the Business as of December 31, 2005 and
December 31, 2004 and the audited combined statements of operations, of owner’s
equity and comprehensive income and of cash flows for the years ended
December 31, 2005, December 31, 2004, and December 31, 2003 (collectively,
the “Audited Financial Statements”). Except as set forth in Section
4.5(a)(2) of the Seller Disclosure Schedule, the Audited Financial Statements
have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes
thereto) and on such basis fairly present, in all material respects, the
financial position of the Business as of the respective dates referred to
therein and the results of operations and cash flows for the Business for the
respective periods covered thereby.

 

(b)       Set
forth in Section 4.5(b)(1) of the Seller Disclosure Schedule are the unaudited
combined balance sheet of the Business as of September 30, 2006 and the
unaudited combined statements of operations and of cash flows for the Business
for the nine-month period ended September 30, 2006 (collectively, the “Unaudited
Financial Statements” and, together with the Audited Financial Statements,
the “Financial Statements”). Except as set forth in Section 4.5(b)(2) in
the Seller Disclosure Schedule, the Unaudited Financial Statements have been
prepared in accordance with IFRS applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto) and on such
basis fairly present in all material respects the financial position of the
Business as of September 30, 2006 and the results of operations and cash flows
of the Business for the nine-month period ended September 30, 2006, subject to
normal year-end adjustments (none of which, individually or in the aggregate,
will be material) and the absence of notes.

 

4.6           Taxes.

 

(a)       Except
as set forth in Section 4.6(a) of the Seller Disclosure Schedule, all Tax
Returns required to have been filed by the Companies and their Subsidiaries (including any Tax Return for an “affiliated
group,” as defined in Section 1504 of the Code, which includes the Company
and/or any Subsidiary of the Company), or by each Affiliate of the
Company or their Subsidiaries that holds or has held the Assets or the Business
in respect of such Assets or the Business, have been timely filed, and each
such Tax Return accurately reflects the liability for Taxes in all respects. All
Taxes due (whether or not shown on such Tax Returns) have been paid.

 

(b)       Except
as set forth in Section 4.6(b) of the Seller Disclosure Schedule, there is no
pending or, to the Sellers’ Knowledge, threatened audit or assessment against
the Companies or their Subsidiaries in respect of any Taxes. There 

 

22

 

are
no Liens on any of the assets of the Companies or their Subsidiaries that arose
in connection with any failure (or alleged failure) to pay any Tax, other than
Permitted Liens.

 

(c)       Except
as set forth in Section 4.6(c) of the Seller Disclosure Schedule, the Companies
and their Subsidiaries have withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee or any third party.

 

(d)       Except
as set forth in Section 4.6(d) of the Seller Disclosure Schedule, the Companies
and their Subsidiaries have not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.

 

(e)       No written claim has been made by any
Taxing Authority in a jurisdiction where any of the Companies or their
Subsidiaries does not file Tax Returns that it is or may be subject to Tax in
such jurisdiction.

 

(f)        The
Companies and their Subsidiaries are not a party to any Tax allocation or
sharing agreement, except for any such agreement to be terminated on the date
before the Closing Date pursuant to Section 8.4(b).

 

(g)       None of the Companies is required to include
in income any adjustment pursuant to Section 481 of the Code.

 

(h)       None of the Companies is party to any
agreement that could require it to pay any amount that would not be deductible
under Section 280G of the Code.

 

(i)        None of the Companies has filed with respect
to any item a disclosure statement pursuant to Section 6662 of the Code or
engaged in a “listed” transaction within the meaning of Treasury Regulation
Section 1.6011-4.

 

(j)        During the last five years, none of the
Companies was a distributing or controlled corporation in a transaction
intended to be governed by Section 355 of the Code.

 

(k)       None of the Companies has liability for Taxes
of any other Person under any agreement or understanding, by contract or
indemnity or otherwise.

 

4.7           Compliance with Law;
Authorizations. The Business, including the Leased Real Property, is in
compliance with all Laws to which the Business is subject, except where such
failure to comply would not have a Business Material Adverse Effect. The
Business owns, holds, possesses or lawfully uses in the operation of its
business (and the Leased Real Property) all Authorizations which are necessary
for it to conduct its business as now conducted and to operate the Leased Real
Property, and such 

 

23

 

Authorizations are
valid and in full force and effect, except where any such failure or failure to
so own, hold or possess would not have a Business Material Adverse Effect. The
Sellers and their Affiliates (including the Companies and their Subsidiaries)
are in compliance with the terms of such Authorizations.

 

4.8           Real Property.

 

(a)       The
Sellers or their Affiliates (other than the Companies and their Subsidiaries)
do not own any real property used principally in connection with the Business. The
Companies and their Subsidiaries do not own any real property.

 

(b)       Section
4.8(b) of the Seller Disclosure Schedule contains a list of all leases,
subleases, licenses, contracts and any other agreements of real property under
which the Sellers or their Affiliates (including the Companies and their
Subsidiaries) are either lessor or lessee, sublessor or sublessee, licensor or
licensee, or vendor or vendee, directly or indirectly, relating to real
property that is used principally in connection with the Businesses
(collectively, the “Leases”). The real property demised under any Lease
to the Sellers or their Affiliates (including the Companies and their
Subsidiaries) and which is used principally in connection with the Business is
referred to herein as the “Leased Real Property”. Section 4.8(b) of the
Seller Disclosure Schedule identifies the lessor or lessee, sublessor or
sublessee, licensor or licensee, or vendor or vendee, as the case may be, of
each parcel of Leased Real Property. The Sellers have made available to the
Purchaser a true and complete copy of each Lease, together with any amendments,
extensions, assignments or subleases, supplements, side letters, or other
modifications related thereto, and any notices of any uncured default related
thereto.

 

(c)       (i) Each
Lease is in full force and effect and (ii) there exists no default under
any Lease by any Seller or Affiliate of any Seller (including the Companies and
their Subsidiaries) party to such Lease or, to the Sellers’ Knowledge, by the
other party thereto, except as set forth in Section 4.8(c) of the Seller
Disclosure Schedule or where any such default would not have a Business
Material Adverse Effect. After giving effect to the Permitted Reorganization,
the Companies or their Subsidiaries will be a lessee, sublessee or
sub-sublessee of all of the Leased Real Property.

 

(d)       The
leasehold improvements and fixtures located on the Leased Real Property are, to
the Knowledge of the Sellers, (i) in good operating condition and repair,
subject to ordinary wear and tear, (ii) sufficient for the operation of the
Business as presently conducted and (iii) in conformity with all applicable
Laws, except where failure to be in such condition would not have a Business
Material Adverse Effect.

 

(e)       Except
as disclosed in Section 4.8(b) of the Seller Disclosure Schedule, the Leased
Real Property is not subject to any leases, subleases, licenses, concessions or
other agreements by the Sellers or their Affiliates granting any third 

 

24

 

party
or parties the right of use or occupancy of any portion of the Leased Real
Property.

 

(f)        None
of the Sellers or the Affiliates thereof (including the Companies and their
Subsidiaries) is subject to any contractual obligations to purchase, lease or
otherwise acquire an interest in any real property.

 

(g)       The
representations and warranties contained in this Section 4.8 are the
Sellers’ sole representations and warranties with respect to real property and
interests therein.

 

4.9           The Assets. Except as set
forth in Section 4.9 of the Seller Disclosure Schedule, the Assets
(including rights under Contracts) constitute and will, as of the Closing Date,
constitute all of the assets used and necessary to conduct the Business in
substantially the same manner as used and as conducted on the date hereof by
the Sellers and their Affiliates (including the Companies and their
Subsidiaries) except for the Excluded Assets. As of the Closing Date, the
Companies and their Subsidiaries will own all of the Assets (including, without
limitation, rights under Contracts) free and clear of all Liens, other than
Permitted Liens, Liens affecting the fee ownership of any Leased Real Property
or as otherwise disclosed in this Agreement or Section 4.9 of the Seller
Disclosure Schedule. All of the Assets, as a whole, are in good condition and
repair (subject to ordinary wear and tear), except where failure to be in such
condition would not have a Business Material Adverse Effect.

 

4.10         Intellectual Property.

 

(a)       Section 4.10(a)(1) of the Seller Disclosure Schedule sets
forth a list that includes all material Intellectual Property owned by the
Sellers or their Affiliates (including the Companies and their Subsidiaries)
relating to the Business that is registered or subject to an application for
registration, including, the jurisdictions where registered or where
applications have been filed, and all registration or application numbers. Except
as set forth in Section 4.10(a)(2) of the Seller Disclosure Schedule, the
Business owns or has the right to use all material Intellectual Property
necessary to operate the Business as presently conducted (“Business
Intellectual Property”). To the Sellers’ Knowledge, no Person is infringing
or otherwise violating any Business Intellectual Property owned by the
Business.

 

(b)       Except
as set forth in Section 4.10(b) of the Seller Disclosure Schedule or where such
default would not have a Business Material Adverse Effect, the Business is not
in default in the performance, observance or fulfillment of any obligation,
covenant or condition contained in any Material Contract pursuant to which any
third party is authorized to use any Business Intellectual Property owned by
the Business (“Business Licenses”) or pursuant to which the Business is
licensed to use Business Intellectual Property owned by a third Person (“Third
Party Licenses”).

25

 

(c)       As of
the date hereof, there are no claims pending nor, to the Sellers’ Knowledge,
threatened in writing, against the Business alleging that the Business as
currently conducted infringes or otherwise violates the Intellectual Property
rights of any Person.

 

(d)       Except
as set forth in Section 4.10(d) of the Seller Disclosure Schedule, the Sellers
and their Affiliates (including the Companies and their Subsidiaries) have
taken commercially reasonable measures, as appropriate, to maintain in
confidence all trade secrets and confidential information of the Business.

 

(e)       IT
Systems of the Business are adequate in all material respects for their
intended use and the operation of the Business as conducted on the date hereof,
and are in good working condition (normal wear and tear excepted). There has
not been any material malfunction with respect to any of Company’s IT Systems
since January 1, 2005 that has not been remedied in all material respects.
Nothing in this Section 4.10 shall apply to the Mirage computer program, which
is addressed in the Services Agreement.

 

(f)        The
representations and warranties contained in this Section 4.10 are the Sellers’
sole representations and warranties with respect to Intellectual Property
matters.

 

4.11         Absence of Certain Changes or Events.
Except as set forth in Section 4.11 of the Seller Disclosure Schedule,
since December 31, 2005 to the date hereof, (i) the Business has been
conducted in the ordinary course of business consistent with past practice and
(ii) there has been no Business Material Adverse Effect. Since
September 30, 2006, except as set forth in Section 4.11 of the Seller
Disclosure Schedule, with respect to the Business, the Sellers and their
Affiliates (including the Companies and their Subsidiaries) have not:

 

(a)       Sold,
leased (as lessor or lessee), transferred or otherwise disposed of any Assets,
except in the ordinary course of business consistent with past practice;

 

(b)       Undertaken
or committed to undertake capital expenditures exceeding $250,000 in the
aggregate per calendar quarter, other than capital expenditures included in the
Detailed Capital Expenditure Plan 2006-2008 of the Business (a copy of which
has been provided to the Purchaser);

 

(c)       Instituted
any material increases in any compensation of any Business Employee other than
salary or hourly increases in the ordinary course of business consistent with
past practices or pursuant to employment or collective bargaining agreements,
or instituted any material increase in any existing, or instituted any new,
profit sharing, bonus, incentive, deferred compensation, severance, termination
arrangement, insurance, pension, retirement, medical, hospital, disability,
welfare or other benefits, except as required to comply with applicable Law;

 

26

 

(d)       Suffered
any damage, destruction or casualty loss (except where such damage, destruction
or casualty loss has been fully repaired or restored) with respect to any
property (whether or not covered by insurance) which has had, or reasonably can
be expected to have a Business Material Adverse Effect;

 

(e)       Made
any payment of payables or collection of receivables, other than in the
ordinary course of business consistent with past practice;

 

(f)        Made
any direct or indirect loans or other extensions of credit to any current or
former directors, officers, employees, independent contractors, agents or
consultants of the Business;

 

(g)       Granted
any Lien (other than Permitted Liens) on the Assets;

 

(h)       Settled
any Action pending or threatened against the Business in excess of $250,000;

 

(i)        Adopted
a plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization or convert or otherwise
change its form of legal entity with respect to any of the Companies or their
Subsidiaries;

 

(j)        Agreed
to any material limitations on the Business from engaging or competing in any
line of business or in any geographic area or location or otherwise with any
Person or from soliciting or hiring any Person;

 

(k)       Made any
material Tax election;

 

(l)        Authorized,
approved, agreed or committed to do any of the foregoing; or

 

(m)      Acquired
or disposed of any undertaking or part of one or transferred the employment of
any Business Employee such that the transfer of undertakings (protection of
employment) regulations 2006 (or any other domestic implementation of council
directive 2001/23/EC) applied or may apply thereto.

 

4.12         Contracts.

 

(a)       Section
4.12(a) of the Seller Disclosure Schedule sets forth a list of each Contract to
which the Sellers or their Affiliates (including the Companies and their
Subsidiaries) relating to the Business is party or by which it is bound (each,
a “Material Contract”):

 

(i)            for the purchase of materials,
supplies, goods, services, equipment or other assets (other than Leases,
purchase orders or Contracts for services in the ordinary course of business)
which (A) provides for annual payments by the Business

 

27

 

of $1,000,000 or more and (B) has a residual term
as of the date hereof of more than six months;

 

(ii)           for the sale by the Business of
materials, supplies, goods, services, equipment or other assets (other than
Leases), and which (A) provides for a specified annual minimum dollar
sales amount by the Business of $1,000,000 or more and (B) has a residual
term as of the date hereof of more than six months;

 

(iii)          that is a note, debenture, surety or
other bond, equipment trust, letter of credit, loan or other Contract for the
borrowing or lending of money (other than to employees for travel expenses in
the ordinary course of business) or agreement or arrangement for a line of
credit or guarantee, pledge or undertaking of the indebtedness of any other
Person, in any such case which is in excess of $1,000,000;

 

(iv)          that is a reimbursement agreement for
surety or other bonds;

 

(v)           that contains a covenant not to
compete that materially limits the conduct of the business of the Business as
presently conducted or materially limits the freedom to engage in any other
line of business or from competing in any other line of business or with any
Person in any geographical area;

 

(vi)          (A) that relates to (x) the
acquisition, merger or purchase of all or substantially all of the assets or
business of any Person involving aggregate consideration of $1,000,000 or more,
(y) the purchase or sale of assets, or a series of purchases and sales of
assets, involving aggregate consideration of $1,000,000 or more, or (z) the
grant to any Person of any preferential rights to purchase any material asset
or assets and (B) under which the Business may have any continuing
indemnification obligation or any other contingent liability that could reasonably
be expected to exceed $1,000,000 in the aggregate (other than under any Leases);

 

(vii)         that is a collective bargaining
agreement or other similar Contract;

 

(viii)        that is an employment or consulting
Contract for any individual with total annual compensation of at least $100,000
(or £75,000 (for UK Business Employees));

 

(ix)           that provides for indemnification of
any officer or director;

 

(x)            that grants a power of attorney,
agency or similar authority to another Person other than in the ordinary course
of business;

 

(xi)           that relates to a material joint
venture, partnership, limited liability company, teaming or other Contracts
involving a sharing of profits, losses, costs,

 

28

 

or liabilities, relating to any ownership or equity
interest in the Business or of any of the Companies or their Subsidiaries;

 

(xii)          that constitutes a Credit Support
Arrangement; and

 

(xiii)         that is not otherwise described in any
of clauses (i) through (xii) above and is material to the Business, taken as a
whole (other than under any Leases).

 

(b)       Each Material
Contract required to be listed in Section 4.12(a) of the Seller Disclosure
Schedule is valid, binding and in full force and effect, and the Business is
not in default in the performance, observance or fulfillment of any obligation,
covenant or condition contained in any such Contract, except in each case (i)
where any failure to be valid, binding or in full force and effect or any such
default would not have a Business Material Adverse Effect or (ii) as otherwise
disclosed in this Agreement or in Section 4.12(b) of the Seller Disclosure
Schedule.

 

4.13         Litigation. Except as set forth
in Section 4.13 of the Seller Disclosure Schedule or as may be instituted
or threatened after the date of this Agreement, there is no action, suit,
proceeding, claim, investigation, arbitration or litigation, other than any
EEOC or similar employment-related claim in which the claimant seeks damages of
less than $250,000 (each, an “Action”), pending (provided that the
foregoing representation is made only to the Seller’s Knowledge with respect to
any investigation) or, to the Sellers’ Knowledge, threatened in writing against
the Business or any of the Companies and their Subsidiaries or otherwise
relating to the Business. Except as set forth in Section 4.13 of the
Seller Disclosure Schedule, there is no unsatisfied Order outstanding against
the Business, any of the Companies and their Subsidiaries or any of the Assets.

 

4.14         Employee Benefits.

 

(a)       Section
4.14(a) of the Seller Disclosure Schedule includes a list of all of the Benefit
Plans that are maintained or contributed to solely by the Companies or their
Subsidiaries or to which solely the Companies or their Subsidiaries are a party
(the “Company Benefit Plans”) and a list of all material Benefit Plans,
other than the Company Benefit Plans, that are maintained or contributed to by
the Sellers or their Affiliates or to which the Sellers or their Affiliates are
a party (the “Seller Benefit Plans”). Such list also identifies those
Company Benefit Plans that are maintained or contributed to solely for the
benefit of employees of the Companies or its Subsidiaries who are not resident
in the United States (the “Foreign Company Benefit Plans”).

 

(b)       The Sellers have delivered or made
available to the Purchaser current, accurate and complete copies of
(i) summaries of each material Seller Benefit Plan, (ii) each Company
Benefit Plan, (iii) the most recent summary plan description for each
Benefit Plan for which such a summary plan description is required, (iv) the
most recent determination letter from the Internal Revenue Service, if
applicable, with respect to each Benefit Plan, and (v) with respect to each
Company Benefit Plan, for the most

 

29

 

recent year, (A) the
Form 5500 and attached schedules, if applicable, (B) the audited financial
statements (if required to be filed with the Form 5500), and (C) the
actuarial valuation reports, if any.

 

(c)       Each Benefit Plan has been maintained and
operated in all material respects in accordance with its terms and the Seller’s
401(k) Plan has received a favorable determination letter from the IRS, and no
event has occurred and no condition or circumstance existed or exists that
reasonably may be expected to result in the disqualification of the Seller’s
401(k) Plan or any Benefit Plan subject to Title IV of ERISA. Each Foreign
Company Benefit Plan is in material compliance with all applicable provisions
of Laws of the applicable foreign jurisdiction. No non-exempt “prohibited
transaction” (as such term is defined in Section 406 of ERISA and Section 4975
of the Code) has occurred with respect to any Company Benefit Plan. There are
no investigations by any Governmental Entity, termination proceedings or other
claims (except routine claims for benefits payable under the Company Benefit
Plans) or Actions pending against or involving any Company Benefit Plan or
asserting any rights to or claims for benefits under any Company Benefit Plan.

 

(d)       No Company Benefit Plan is subject to
Title IV of ERISA and except for the benefit plans set forth on Section 4.14(d)
of the Seller Disclosure Schedule, neither the Companies nor their Subsidiaries
nor any member of their Controlled Group (defined as any organization which is
a member of a controlled group of organizations within the meaning of Sections
414(b) or (c) of the Code) has within the last five years, sponsored or
contributed to, or has or had any liability or obligation in respect of, any
plan subject to Title IV of ERISA.

 

(e)       Except as set forth in Section 4.14(e) of
the Seller Disclose Schedule, neither the Companies nor any of their
Subsidiaries have incurred any current or projected liability in respect of
post-employment or post-retirement health, medical or life insurance benefits
for current, former or retired employees of the Companies nor any of their
Subsidiaries, except as required to avoid an excise Tax under
Section 4980B of the Code or otherwise except as may be required pursuant
to any other applicable Law.

 

(f)        Except as set forth in Section 4.14(f)
of the Seller’s Disclosure Schedule, no Benefit Plan exists that, as a result
of the execution of this Agreement, stockholder approval (if any) of this
Agreement, or the transactions contemplated by this Agreement (whether alone or
in connection with any subsequent event(s)), could result in (i)  severance
pay or any increase in severance pay upon any termination of employment after
the date of this Agreement, (ii) accelerate the time of payment or vesting
or result in any payment or funding (through a grantor trust or otherwise) of
compensation or benefits under, increase the amount payable or result in any
other material obligation pursuant to, any of the Benefit Plans, or
(iii) result in payments which would not be deductible under Section 280G
of the Code.

 

4.15         Labor and Employment Matters. Except
as set forth in Section 4.15 of the Seller Disclosure Schedule, neither the
Companies nor their Subsidiaries are a party or

 

30

 

subject to any labor union or collective bargaining
Contract. To the Sellers’ Knowledge, there are no pending or threatened labor
disputes, work stoppages, demands for recognition or certification,
representation or certification proceedings, requests for representation,
pickets, work slow-downs due to labor disagreements or any Actions which
involve the labor or employment relations of the Business, including, but not
limited to, any Actions relating to unfair labor practice charges, grievances
or complaints. No event giving rise to the requirement that notice be given to
any employee of the Business under the Worker Adjustment and Retraining
Notification Act or under any similar state or local Law has occurred or been
announced during the 90-day period ending on the date of this Agreement or any
longer period required by any local Law. The Companies and their Subsidiaries
are in material compliance will all applicable Laws governing the employment of
labor, including, but not limited to, all such applicable Laws relating to wages,
hours, collective bargaining, consultation, discrimination, civil rights,
safety and health, workers’ compensation and the collection and payment of
withholding and/or Social Security Taxes and similar Taxes.

 

4.16         Environmental. Except as set
forth in Section 4.16 of the Seller Disclosure Schedule and except for any
matter that would not have a Business Material Adverse Effect, (a) the Business
is in compliance with all Environmental Laws in effect as of the Closing Date,
(b) the Business possesses and is in compliance with all Authorizations
required under any Environmental Law for its conduct and the operations
conducted at the Leased Real Property, (c) there are no Actions pending or, to
the Knowledge of the Sellers, threatened against the Business alleging a
violation of any Environmental Law, (d) to the Knowledge of the Sellers, in
each case, there has been no Release at any real property currently or formerly
operated by the Sellers or a predecessor in interest, or at any disposal or
treatment facility which received Hazardous Substances generated by the
Business or any predecessor in interest. The representations and warranties
contained in this Section 4.16 are the Sellers’ sole representations and
warranties with respect to environmental matters and Environmental Laws.

 

4.17         Insurance.
Section 4.17 of the Seller Disclosure Schedule sets forth a complete and
correct list of each material insurance policy which covers the Business or its
businesses, properties (including the Leased Real Property), assets, directors
or employees. Such list specifies, with respect to each policy, the class of
insurance, the name of the insurer, the insurance company policy number, the
period of insurance, the policy limit and deductible. Such policies are legally
valid, binding and enforceable on a Seller or the applicable Affiliate thereof
and, to the Knowledge of the Sellers, the insurers, and are in full force and
effect in all material respects, all premiums with respect to such policies are
currently paid, and the Business is not in material default with respect to its
obligations under any such policy. The Business has timely filed clams with its
insurance carriers with respect to all material matters and occurrences for
which it has coverage. To the Sellers’ Knowledge, (a) there is no claim pending
under any of the material policies relating to the Business for which coverage
has been questioned, denied or disputed by an insurance carrier and all
litigation covered by such policies has been properly reported to and accepted by
the applicable insurer, in each case other than

 

31

 

customary reservations of rights; (b) no insurance
policy limits have been exhausted or materially reduced with respect to any such
insurance policy; and (c) there have been no gaps in professional liability
coverage for the Business since January 1, 2004. The Purchaser acknowledges that all such
insurance policies will terminate with respect to the Business effective as of
the close of business on the Closing Date, other than those material insurance
policies identified in Section 4.17 of the Seller Disclosure Schedule as
not terminating on the Closing Date, and that such termination shall not
constitute a breach of this Section 4.17 or Section 6.1.

 

4.18         Brokers. Except for fees and
commissions of Goldman Sachs & Co., which will be paid by the Sellers, no
broker, finder or investment banker is entitled to any brokerage, finder’s or
other fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Sellers or
the Companies.

 

4.19         No Undisclosed Liabilities. The
Business does not have any material liabilities or obligations of a nature
required by GAAP to be reflected on or disclosed in the footnotes to a balance
sheet of the Business except for (i) liabilities disclosed, reflected or
reserved against on the Unaudited Financial Statements, (ii) liabilities
incurred after September 30, 2006 in the ordinary course of business, (iii) the
matters disclosed in or arising out of matters set forth in Section 4.19 of the
Seller Disclosure Schedule, and (iv) liabilities and obligations incurred in
connection with this Agreement and the transactions contemplated hereby.

 

4.20         Security Clearance. Except as
may be prohibited by the Industrial Security Manual or applicable foreign
security regulations, Section 4.20 of the Seller Disclosure Schedule sets forth
a list of all material facility security clearances and all material personnel
security clearances held by any officer, director, employee, consultant or
agent of the Sellers and their Affiliates (including the Companies and their
Subsidiaries), solely relating to the Business. To the Knowledge of the
Sellers, there is no proposed or threatened termination of any such facility or
personnel security clearances.

 

4.21         Government Contracts.

 

(a)   Except as
set forth in Section 4.21(a) of the Seller Disclosure Schedule, with
respect to each Government Contract entered into since January 1, 2003 or each Government
Bid submitted since January 1, 2006 with respect to the Business,
(i) the Sellers and their Affiliates (including the Companies and their
Subsidiaries) are in compliance with all material terms and conditions and all
applicable Laws whether incorporated expressly, by reference or by operation of
Law; (ii) the Sellers and their Affiliates (including the Companies and
their Subsidiaries) are in compliance with all requirements of all material
Laws or agreements pertaining to such Government Contract or Bid (including,
without limitation, (A) the Truth in Negotiations Act of 1962, as amended, (B)
the Service Contract Act of 1965, as amended, (C) the Contract Disputes Act of
1978, as

 

32

 

amended,
(D) the Office of Federal Procurement Policy Act, as amended, (E) the Federal
Acquisition Regulations or any applicable agency supplement thereto, (F) the
Cost Accounting Standards, (G) the Defense Industrial Security Manual (DOD
5220.22-M), and (H) the Defense Industrial Security Regulation (DOD 5220.22-R)
or any related security regulations); (iii) all representations and
certifications executed, acknowledged or set forth in or pertaining to such
Government Contract or Government Bid were current, accurate and complete as of
their effective date, and the Sellers and their Affiliates (including the
Companies and their Subsidiaries) are, to the extent required, presently in
compliance in all material respects with all such representations and certifications;
(iv) no written or, to the Sellers’ Knowledge, oral notice has been
received by the Sellers and their Affiliates (including the Companies and their
Subsidiaries) (and, to the Knowledge of the Sellers, none has been threatened)
alleging that any of the Sellers and their Affiliates (including the Companies
and their Subsidiaries), or any director, officer or employee of the Business,
is in breach or violation of any Law or contractual requirement pertaining to
such Government Contract or Government Bid; (v) excluding incurred costs
submissions for open years, no material cost incurred by any of the Sellers and
their Affiliates (including the Companies and their Subsidiaries) pertaining to
such Government Contract or Government Bid has been formally questioned,
challenged, or disallowed, nor, to the knowledge of the Sellers, is any such
cost the subject of any investigation, by a Governmental Entity; (vi) no
money due to any of the Sellers and their Affiliates (including the Companies
and their Subsidiaries) pertaining to such Government Contract or Government
Bid has been withheld or offset nor has any claim been made to withhold or
offset money, and, subject to applicable rate approvals, the Sellers and their
Affiliates (including the Companies and their Subsidiaries) are entitled to all
progress payments received with respect thereto; and (vii) there are no
current notices filed under the Assignment of Claims Act, as amended, with
respect to such Government Contract.

 

(b)   Except as
set forth in Section 4.21(b) of the Seller Disclosure Schedule, to the
Knowledge of the Sellers, since January  1, 2002, neither any
United States Governmental Entity or any foreign Governmental Entity nor
any prime contractor, subcontractor or other Person has asserted, in writing,
any claim or initiated any dispute proceeding against the Sellers and their
Affiliates (including the Companies and their Subsidiaries) relating to
Government Contracts or Government Bids of the Business, nor is any Seller or
any of the Sellers’ Affiliates (including the Companies and their Subsidiaries)
asserting any claim or initiating any dispute proceeding directly or indirectly
against any such party concerning any Government Contract or Government Bid
relating to the Business. To the Sellers’ Knowledge, Section 4.21(b) of
the Seller Disclosure Schedule identifies each Government Contract of the
Business which is currently under audit by a United States Governmental Entity
or any foreign Governmental Entity that is a party to such Government Contract.

 

33

 

(c)   If required
for Contracts with the United States Federal government, the Business’s cost
accounting system is in compliance with applicable regulations (including the
Federal Acquisition Regulations) and, to the Sellers’ Knowledge, has not been
determined by any United States Governmental Entity not to be in
compliance with the requirements of the Federal Cost Accounting Standards in
any material respect. The rates and rate schedules and other information
submitted by any of the Sellers and their Affiliates (including the Companies
and their Subsidiaries) or their subcontractors with respect to the Business in
support of the negotiation of Government Contracts or Government Bids, or
modifications thereto, or in support of requests for payments thereunder, was,
as of the date of price agreement or payment submission current, accurate and
complete in all material respects.

 

(d)   None of the
Sellers and their respective Affiliates (including the Companies and their
Subsidiaries), nor any directors or officers of the Business, nor, as of
March 1, 2006, any other employees of the Business, was suspended or
debarred from doing business with a United States Governmental Entity or
has been declared nonresponsible or ineligible for United States
Governmental Entity contracting or subject to administrative, civil or criminal
investigation or indictment. To the Sellers’ Knowledge, there are no matters
pending with respect to the Business that are believed reasonably likely to
lead to the institution of suspension or debarment proceedings against any of
the Sellers and their Affiliates (including the Companies and their
Subsidiaries).

 

4.22         Export/Foreign Corrupt Practices Act.
With respect to the Business, except as set forth in Section 4.22 of the Seller
Disclosure Schedule:

 

(a)   the Sellers
and their Affiliates (including the Companies and their Subsidiaries) are in
compliance with all export control Laws;

 

(b)   the Sellers
and their Affiliates (including the Companies and their Subsidiaries) have all
necessary authority under the export control Laws to conduct the Business as
currently conducted, in all material respects, including, but not limited to,
all (i) necessary Authorizations for any export transactions, (ii) necessary
Authorizations and clearances for the disclosure of information to foreign
Persons and (iii) necessary registrations with any Governmental Entity with
authority to implement applicable export control Laws;

 

(c)   the Sellers
and their Affiliates (including the Companies and their Subsidiaries) have not
during the last five years participated directly or indirectly in any boycotts
or other similar practices in violation of the regulations of the Export
Administration Act (50 U.S.C. App. Section 2401 et seq.) or
Section 999 of the Code; and

 

(d)   neither any
of the Sellers or any their Affiliates (including the Companies and their
Subsidiaries) and, to the Knowledge of the Sellers, any director,

 

34

 

officer,
agent or employee of the Business has during the last five years made, directly
or indirectly, any payment or promise to pay, or gift or promise to give or
authorized such a promise or gift, of any money or anything of value, in
violation of the Foreign Corrupt Practices Act of 1977, as amended.

 

4.23         Government Furnished Equipment. The
most recent schedules delivered to any Governmental Entity which identify by
description or by inventory number Government Furnished Equipment loaned,
bailed or otherwise furnished to or held by the Business by or on behalf of any
Governmental Entity are maintained in the files of the respective facilities of
the Business and were accurate and complete in all material respects when
delivered to such Governmental Entity and, as of the Closing Date, will contain
only those additions and omit only those deletions of equipment and fixtures
that have occurred in the ordinary course of business, except for such
inaccuracies that would not, individually or in the aggregate, have a Business
Material Adverse Effect.

 

ARTICLE
V

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

 

The Purchaser represents and warrants to the Sellers
that subject to the disclosure set forth in the schedules delivered by the
Purchaser to the Sellers on the date hereof (collectively, the “Purchaser
Disclosure Schedule”), each statement contained in this Article V is true
and correct as of the date hereof.

 

5.1           Organization and Good Standing.
The Purchaser is a legal entity  duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, has all requisite corporate or other legal
power to own, lease and operate its properties and to carry on its business as
now being conducted, and is duly qualified to do business and is in good
standing in each jurisdiction in which the conduct of its business or the
ownership, leasing or holding of its properties makes such qualification
necessary, except where the failure to be so qualified would not reasonably be
expected to have a material adverse effect on the ability of the Purchaser to
consummate the Acquisition and the other transactions contemplated hereby (a “Purchaser
Material Adverse Effect”).

 

5.2           Authority and Enforceability. The
Purchaser has the requisite power and authority to execute and deliver this
Agreement and the Ancillary Agreements to which it is a party and to consummate
the Acquisition and the other transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and such Ancillary Agreements and the
consummation of the Acquisition and the other transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate or other
similar action on the part of the Purchaser. This Agreement has been, and at the
Closing each Ancillary Agreement to which the Purchaser is a party will be,
duly executed and delivered by the Purchaser and, assuming the due
authorization, execution and delivery hereof and thereof by the Sellers,
constitutes, or when executed will constitute, the valid and binding obligation
of the Purchaser, enforceable against it in accordance with its terms, except
as such enforceability may be limited by bankruptcy,

 

35

 

insolvency, reorganization, moratorium or other
similar laws affecting or relating to creditors’ rights generally, and the
availability of injunctive relief and other equitable remedies.

 

5.3           No Conflicts; Consents.

 

(a)       The
execution and delivery by the Purchaser of this Agreement and the Ancillary
Agreements to which it is a party do not or will not, when executed and
delivered, and the consummation by the Purchaser of the Acquisition and the
other transactions contemplated hereby and thereby will not, (i) violate
the provisions of the charter, articles or certificate of incorporation or any
other organizational document or bylaws or other constitutive document of the
Purchaser, (ii) violate any Contract to which the Purchaser is a party, or
(iii) assuming compliance by the Purchaser with the matters referred to in
Section 5.3(b), violate any Law of any Governmental Entity applicable to
the Purchaser on the date hereof, except in each such case under clause (iii)
above where such violation would not have a Purchaser Material Adverse Effect.

 

(b)       No
Authorization, Order of, registration, declaration or filing with, or notice to
any Governmental Entity is required to be obtained or made by or with respect
to any Purchaser in connection with the execution and delivery of this
Agreement or the Ancillary Agreements to which the Purchaser is a party or the
consummation of the Acquisition or the other transactions contemplated hereby
or thereby, except for such Authorizations, Orders, registrations,
declarations, filings and notices (i) as may be required under the HSR Act
and the Other Antitrust Laws, or (ii) as set forth in Section 5.3 of
the Purchaser Disclosure Schedule.

 

5.4           Litigation. There is no Action
pending or, to the knowledge of the Purchaser, threatened against the Purchaser
which (a) challenges or seeks to enjoin, alter or materially delay the
consummation of the Acquisition or the other transactions contemplated hereby
or (b) would have a Purchaser Material Adverse Effect.

 

5.5           Purchase for Investment. The
Equity Interests purchased by the Purchaser pursuant to this Agreement are
being acquired for investment only and not with a view to any public
distribution thereof in violation of any of the registration requirements of
the Securities Act or any other applicable securities law. The Purchaser shall
not offer to sell or otherwise dispose of, or sell or otherwise dispose of, any
Equity Interests so acquired by it, in violation of any of the registration
requirements of the Securities Act or any other applicable securities law.

 

5.6           Availability of Funds. The
Purchaser will have, at the Closing, sufficient financial resources available
to enable it to consummate the Acquisition and the other transactions
contemplated hereby. Attached in Section 5.6 of the Purchaser Disclosure
Schedule is, as of the date of this Agreement, a true and complete copy of the
commitment letter, dated as of December 8, 2006 (the “Initial Commitment
Letter”), between the Purchaser, on the one hand, and Wachovia Bank,
National Association, Wachovia Investment Holdings, LLC and Wachovia Capital
Markets, LLC, on the other

 

36

 

hand (collectively, the “Initial Financing Source”),
pursuant to which the Initial Financing Source has agreed, subject to the
conditions set forth therein, to lend the amount set forth in the Initial
Commitment Letter to the Purchaser for the purpose, among other things, of
consummating the transactions contemplated by this Agreement. As of the date of
this Agreement, the Initial Commitment Letter is in full force and effect, the
commitments set forth therein have not been withdrawn or rescinded in any
respect, all commitment fees required to be paid thereunder have been paid in
full, and the Initial Commitment Letter has not been amended, modified or
terminated. There are no conditions to the consummation of the transactions
contemplated by the Initial Commitment Letter that are not set forth therein,
and the Purchaser has no reason to believe that any condition to the Initial
Commitment Letter will not be satisfied or waived prior to the Closing Date. The
Initial Commitment Letter is a valid and binding obligation of the Purchaser
and, to the Purchaser’s knowledge, each other party thereto. The Purchaser has
provided to Pearson true, complete and correct copies of the Initial Commitment
Letter (excluding the fee and sponsor letters referenced therein in which fees,
indemnification and other customary economic arrangements are set forth which
the Purchaser is prohibited from disclosing by the Initial Financing Source).

 

5.7           Brokers. No broker, finder or
investment banker is entitled to any brokerage, finder’s or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Purchaser or any Affiliate
of the Purchaser.

 

5.8           Due Diligence. The
Purchaser acknowledges that (a) it has had the opportunity to visit with
the Sellers and their Affiliates and meet with officers and other
representatives of the Business to discuss the business, assets, liabilities,
financial condition, cash flows and operations of the Business, and
(b) all materials and information requested by the Purchaser have been
made available to its reasonable satisfaction.

 

5.9           Capitalization. The authorized
share capital of the Purchaser as of the date hereof consists of 500,000 shares
of common stock, $0.01 par value, and 500,000 shares of preferred stock, $0.01
par value. All of the Purchaser’s issued and outstanding capital stock is (and,
upon the Closing, the Preferred Stock Component will be) duly authorized,
validly issued, fully paid and nonassessable and free and clear of any and all
Liens and preemptive rights (and no such capital stock has been or will have
been issued in violation of preemptive or other similar rights). Upon the
Closing, (a) all of Holdco LLC’s issued and outstanding equity interests
will be duly authorized and validly issued and, except as may be set forth in
the Holdco LLC Agreement, free and clear of any and all Liens and preemptive
rights (and no such interests have been or will have been issued in violation
of preemptive or other similar rights), and (b) the holders of such
interests will not be subject to any obligation to make any capital
contributions to Holdco LLC, except that such holders will be liable for the
amount of any respective distributions made to them (or any predecessor in
interest) in violation of Section 18-607 of the Delaware

 

37

 

LLC
Act to the extent the same is required under such provision to be returned to,
or for the account of, Holdco LLC, potentially with interest.

 

5.10         Securities Act. Assuming the
veracity of the representations and warranties of the Sellers set forth in
Article III, the issuances of the Preferred Stock Component and the equity
interests in Holdco LLC are not required to be registered under the
Securities Act or applicable state securities Laws.

 

5.11         No
Other Representations. The
Purchaser acknowledges and agrees that the Sellers are not making any
representation or warranty whatsoever, express or implied, except those
representations and warranties of the Sellers explicitly set forth in this
Agreement or in any certificate contemplated hereby and delivered by the
Sellers in connection herewith. Without limiting the generality of the
foregoing, the Sellers make no representation or warranty to the Purchaser with
respect to:  (a) any projections,
estimates, forecasts or budgets heretofore delivered to or made available to
the Purchaser of future revenues, expenses or expenditures or future results of
operations; or (b) except as expressly covered by a representation or
warranty contained in Article III or IV, any other information or
documents (financial or otherwise) made available to the Purchaser, any
Affiliate thereof or their respective counsel, accountants or advisers,
including in certain “data rooms”, management presentations, offering memoranda
or in any other form in contemplation of the Acquisition and the other
transactions contemplated hereby.

 

ARTICLE
VI

 

COVENANTS
OF THE SELLERS

 

6.1           Conduct of Business. Except as
set forth on Schedule 6.1 or otherwise contemplated by this
Agreement (including, without limitation, in respect of the Permitted
Reorganization) or required by applicable Law, during the period from the date
hereof and continuing until the earlier of the termination of this Agreement
and the Closing Date, except with the consent of the Purchaser (which shall not
be unreasonably withheld or delayed), the Sellers shall cause the Companies and
each Subsidiary thereof to maintain its corporate existence and shall use their
commercially reasonable efforts to carry on the Business in a manner consistent
with past practice during the 12 months immediately preceding the date hereof,
to preserve intact the material relationships of the Business with customers,
suppliers and distributors, and to keep available the services of key employees
of the Business. Notwithstanding any other provision of this Agreement, the
Sellers may, on or prior to the Closing Date, (y) sweep, or cause to be
swept, to accounts of the Sellers funds in the bank accounts of the Companies
and their Subsidiaries or (z) otherwise transfer, or cause to be
transferred, to the Sellers all cash and cash equivalents of the Companies and
their Subsidiaries.

 

Without limiting the generality of the foregoing,
except for matters set forth on Schedule 6.1 or otherwise
contemplated by this Agreement (including, without limitation, in respect of
the Permitted Reorganization), without the consent of the Purchaser (which
shall not unreasonably be withheld, delayed or conditioned), the Sellers

 

38

 

shall not with respect to the Business and shall not
permit the Companies or any Subsidiary thereof to:

 

(a)   sell any
property or assets having a value individually exceeding $75,000 or an
aggregate exceeding $200,000, except (i) in the ordinary course of
business or (ii) transfers pursuant to the Permitted Reorganization;

 

(b)   mortgage, pledge
or subject to Liens, other than Permitted Liens, any properties or assets,
including any of the Leased Real Property, except pursuant to existing
Contracts;

 

(c)   amend the
charter, articles or certificate of incorporation or any other organizational
document or bylaws or other constitutive document of any of the Companies or
any Subsidiary thereof;

 

(d)   issue any
additional capital stock or other equity interests or amend the terms of the
existing capital stock or other equity interests of any of the Companies or any
Subsidiary thereof;

 

(e)   (i) increase
the wages, salaries, compensation, severance, pension or other benefits payable
to any employee, (ii) pay any bonus or other amount to any employee, or
(iii) enter into or modify in any material respect any employment,
deferred compensation, severance, retirement or other agreement or arrangement
providing for additional or different benefits with any employee than those
payable on the date hereof, in each case other than pursuant to existing
Contracts or Benefit Plans, in connection with the Permitted Reorganization or
in the ordinary course of business;

 

(f)    adopt or
amend in any material respect any Company Benefit
Plan, except as required by applicable Law or in connection with the Permitted
Reorganization;

 

(g)   except as
may be required as a result of a change in Law, GAAP or IFRS, make any material
changes in its accounting methods, principles or practices;

 

(h)   except
pursuant to the Permitted Reorganization, be party to any merger, acquisition,
consolidation, recapitalization, liquidation, dissolution or similar
transaction involving the Business, the Assets, the Companies or any of their
Subsidiaries;

 

(i)    enter into
any Contract solely in relation to the Business for the purchase, except
pursuant to the Permitted Reorganization or in the ordinary course of business,
or lease (as lessor or lessee) of real property or, except pursuant to the
Permitted Reorganization or in the ordinary course of business, or exercise any
option to extend a Lease (except on then current market terms or better);

 

39

 

(j)    create,
incur, assume, or agree to create, incur, or assume or guarantee, any material
Indebtedness with respect or relating to the Business other than (i) draws
under existing loan agreements, (ii) money borrowed or advanced from any
Affiliate of the Sellers or the Companies in the ordinary course of business
and (iii) pursuant to the Permitted Reorganization;

 

(k)   authorize
for issuance, issue, sell, deliver, grant any options, warrants, calls,
subscriptions or other rights for, or enter into any other agreement or
commitment to issue, sell, deliver or grant, any equity securities of any
Company or Subsidiary thereof or any securities convertible or exchangeable or
exercisable into equity securities of any Company or Subsidiary thereof;

 

(l)    except
pursuant to the Permitted Reorganization or as otherwise provided for in this
Agreement, make any declaration, setting aside or payment of any non-cash
dividend or distribution in respect of any equity securities of the Companies
and their Subsidiaries or any redemption, purchase or other acquisition for
other than cash of any equity securities of the Companies and their
Subsidiaries;

 

(m)  make any
payment of payables or collection of receivables, other than in the ordinary
course of business consistent with past practice;

 

(n)   make
capital expenditures or commitments therefore in excess of $250,000 in the
aggregate for any 3 consecutive month period, except to the extent specified in
the Detailed Capital Expenditure Plan 2006-2008 of the Business (a copy of
which has been provided to the Purchaser), a copy of which was heretofore
provided to the Purchaser;

 

(o)   settle any
Action pending or threatened against the Business or the Companies and their
Subsidiaries in excess of $500,000;

 

(p)   except
pursuant to the Permitted Reorganization, adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization or convert or otherwise change its
form of legal entity with respect to the Companies and their Subsidiaries;

 

(q)   agree to
any material limitations on the Business or any of Companies and their
Subsidiaries from engaging or competing in any line of business or in any
geographic area or location or otherwise with any Person or from soliciting or
hiring any Person;

 

(r)    file any amended Tax Return, enter
into any closing agreement, settle any Tax claim or assessment, make or change
any Tax election, surrender any right to claim a Tax refund or consent to any
extension or waiver of the limitation period applicable to any Tax claim or
assessment; provided, however, that any of the above actions may
be taken to the extent such actions would not reasonably be

 

40

 

expected to result in a material Tax cost
to the Purchaser or, following the Closing, the Companies or their
Subsidiaries;

 

(s)   except in
the ordinary course of business, (i) amend, modify, terminate, waive, release
or assign or sublease any rights under any Lease, (ii) enter into any lease
which, if in effect on the date hereof, would have been required to be set
forth in Section 4.8(b) of the Seller Disclosure Schedule as a Lease, or (iii)
enter into any contractual obligations to purchase or otherwise acquire an
interest in any real property;

 

(t)    do
anything (other than file bona fide claims) which would reasonably be expected
to (i) make an insurance policy of the Business void or voidable or (ii) result
in an increase in the premium payable under an insurance policy of the
Business;

 

(u)   transfer
any employees of any Sellers, other than those employees listed in Schedule
6.1(u), to the Companies; or

 

(v)   agree,
whether orally or in writing, to do any of the foregoing.

 

6.2           Access to Information. The
Sellers shall cause the Business to
afford to the Purchaser and its accountants, counsel and other representatives
access, upon reasonable notice during normal business hours prior to the
Closing, to the personnel, properties, books, Contracts and records of the Business; provided, however,
that (a) such access does not disrupt the normal operations of the Business, (b) the Purchaser shall not
have access to individual performance or evaluation records, medical histories
or other information that in the Sellers’ opinion is sensitive or the
disclosure of which could subject the Sellers or the Business to risk of liability, (c) the Purchaser shall not
conduct any invasive sampling or testing with respect to the properties of any
Person, (d) such access does not jeopardize the attorney-client or work
product privileges of the Sellers or any of their Affiliates or the Companies
or any of their Subsidiaries, and (e) such access complies with applicable
Law, Permitted Liens and Leases.

 

6.3           Resignations. On the Closing
Date, the Sellers shall cause to be delivered to the Purchaser duly signed
resignations, effective as of the Closing, of all directors of their position
as a director of the Companies and each Subsidiary thereof; provided, however,
that no such resignation by any individual shall be a resignation from
employment with the Business if such
individual is so employed.

 

6.4           Non-Compete. The Sellers agree
that, commencing on the Closing Date and ending on the second anniversary
thereof, they shall not, and shall cause Pearson plc and their greater than 80%
owned Subsidiaries not to, (a) engage in the Restricted Business in the
United States of America or (b) engage in the Restricted Business outside
of the United States of America with respect to either existing international
business or those projects identified in Section 6.4 of the Seller Disclosure
Schedule. Notwithstanding the foregoing, this Section 6.4 shall not
restrict the Sellers or

 

41

 

Pearson plc or their Subsidiaries from
(i) acquiring (and continuing to operate) any business or Person that is
engaged, directly or indirectly, in the Restricted Business, provided, however,
that, at the time of such acquisition, the Restricted Business of such business
or Person accounts for less than 10% of such business’s or Person’s
consolidated annual revenues, (ii) owning less than 20% of any class of
stock of a Person engaged, directly or indirectly, in the Restricted Business,
or (iii) marketing and selling Pearson OCR form scanners in Canada and Mexico.

 

6.5           Notification. Pearson shall
give prompt notice to the Purchaser, and the Purchaser shall give prompt notice
to Pearson, of (a) any notice or other communication received by such party
from any Governmental Entity in connection with the Acquisition and the other
transactions contemplated under this Agreement or from any Person alleging that
the consent of such Person is or may be required in connection with the
Acquisition and the other transactions contemplated under this Agreement, if
the subject matter of such communication or the failure of such party to obtain
such consent could be material to the Companies or the Purchaser, (b) any
material Action commenced or, to such party’s knowledge, threatened against,
relating to or involving or otherwise affecting such party or any of its
Subsidiaries which relate to the Acquisition and the other transactions
contemplated under this Agreement, (c) the occurrence, or non-occurrence, of
any event the occurrence or non-occurrence of which would reasonably likely to
cause (i) any representation or warranty of such party contained in this
Agreement to be untrue or inaccurate in any material respect, (ii) any covenant
or agreement of such party contained in this Agreement not to be complied with
or satisfied in any material respect, or (iii) any condition (to the extent set
forth in Article IX) to the obligation of another party to effect the
Acquisition and the satisfaction of which requires performance or
nonperformance by such notifying party not to be satisfied, and (d) any failure
of such party to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this Section 6.5
shall not have any effect for the purpose of determining the satisfaction of
the conditions set forth in Article IX or otherwise limit or affect the
remedies available hereunder to any party.

 

6.6           Permitted Reorganization. On
or prior to the Closing Date, the Sellers shall effect the Permitted
Reorganization. To the extent that the assignment of any Government Contract or
Government Bid by the Sellers or any of their Affiliates (other than the
Companies or any of their Subsidiaries) to one or more of the Companies
pursuant to the Permitted Reorganization requires a novation, the Sellers shall
use commercially reasonable efforts to obtain or complete all such novations
prior to the Closing Date. The Sellers will reasonably consult with the
Purchaser with respect to effecting the Permitted Reorganization and shall keep
the Purchaser generally informed about the status of the Permitted
Reorganization. The Sellers shall be responsible for all out-of-pocket
costs and expenses arising out of or related to the Permitted Reorganization. Notwithstanding
the foregoing, the failure to transfer Assets (other than Material Contracts) with
an aggregate net book value on the December 31, 2005 balance sheet of the
Audited Financial Statements of up to $7,500,000 in accordance with clause

 

42

 

(a)(i) or (b) of the definition of Permitted
Reorganization prior to the Closing Date will not be deemed to be a violation
of this Section 6.6; provided  that, the Sellers and their
Affiliates shall use commercially reasonable best efforts to effectuate any such
actions as promptly as is reasonably practicable after the Closing Date and, if
requested by the Sellers, the Purchaser shall, and shall cause the Companies
and their Subsidiaries to, assist and cooperate with the Sellers in
effectuating such actions, the reasonable out-of-pocket costs and expenses of
such cooperation and assistance to be reimbursed promptly by the Sellers.

 

6.7           Non-Solicit. The Sellers agree
that they shall not, for a period of two years immediately following the
Closing Date, directly or indirectly through a Subsidiary that is greater than
80% owned by any Seller, alone or with another Person: (i) employ or otherwise
engage, or offer to employ or otherwise engage, or solicit, entice or induce
for himself or itself or any other Person, the services or employment of any
Person who was an employee of the Business on the Closing Date; provided,
however, that advertisements by way of newspapers, magazines, trade
publications, internet or general media or non-directed executive search shall
not constitute a violation of this provision; and (ii) request, induce or
attempt to influence any Person who is or was a customer or client of the
Business to limit, curtail or cancel its business with the Companies and their
Subsidiaries or any successor thereto or solicit the business of any Person who
is or was a customer or client of the Business for business constituting the
Restricted Business.

 

6.8           Indebtedness. The Companies
shall pay, and the Sellers shall cause the Companies to pay, all outstanding
Indebtedness of the Business on or prior to the Closing Date.

 

6.9           Exclusive Dealing. Between the
date of this Agreement and the Closing Date, or, if earlier, the date this
Agreement is terminated pursuant to Section 10.1, the Sellers will not, and
will cause their Affiliates (including the Companies and their Subsidiaries)
and their respective representatives not to, solicit, encourage or initiate
proposals, inquiries or offers from, participate in negotiations with, or
provide any material information to, any Person (other than the Purchaser or
its representatives or Governmental Entities with respect to the transactions
contemplated by this Agreement) concerning any purchase of the Equity Interests
or any merger of any of the Companies, sale of any substantial portion of the
Business or the Assets (other than sales of inventory and other assets in the
ordinary course of business) or similar transaction involving the Companies,
the Business or the Assets; provided, however, that this Section
shall not apply to any proposal, inquiry, offer or transaction to acquire all
or substantially all of the equity securities or assets of Pearson plc.

 

6.10         Confidentiality. During a period
of three years following the Closing Date, each Seller will, and will use
commercially reasonable efforts to cause its greater than 80% owned
Subsidiaries and their respective representatives to, hold in confidence all
confidential information relating to the Business, the Assets and the Companies
and their Subsidiaries; provided, that such obligation shall not extend
to any such confidential

 

43

 

information that, during such period, (a) is or
becomes generally available to the public other than as a result of a
disclosure by such Seller or its greater than 80% owned Subsidiaries and their
respective representatives after the Closing Date or (b) becomes available to
such Seller or any of its greater than 80% owned Subsidiaries and their
respective representatives on a non-confidential basis from a source other than
any Seller or any of its greater than 80% owned Subsidiaries and their
respective representatives. Notwithstanding the foregoing, each Seller will be
deemed to have satisfied its obligations under this Section 6.10 with respect
to any confidential information if it exercises the same care with regard to
such information as it takes to preserve confidentiality for its own similar
information.

 

6.11         Financial Statements; Financing
Assistance.

 

(a)   (i) On
or prior to December 22, 2006, the Sellers shall provide the Purchaser
with the unaudited combined balance sheet of the Business as of
September 30, 2006 and the unaudited combined statements of operations, of
owner’s equity and comprehensive income and of cash flows for the Business for
the nine-month periods ended September 30, 2005 and September 30,
2006 prepared in accordance with GAAP and in each case with a review conducted
in accordance with Auditing
Standards Board’s Statement on Auditing Standards 100 applicable to
interim financial statements, (ii) on or prior to January 5, 2007, the
Sellers shall provide the Purchaser with the unaudited combined balance sheet
of the Business as of September 30, 2006 and the unaudited combined
statements of operations, of owner’s equity and comprehensive income and of
cash flows for the Business for the nine-month periods ended September 30,
2005 and September 30, 2006 prepared in accordance with GAAP and meeting the
requirements of Regulation S-X and in each case with a review conducted in
accordance with Auditing Standards
Board’s Statement on Auditing Standards 100 applicable to interim
financial statements,  (iii) on
or prior to December 29, 2006, the Sellers shall provide the Purchaser
with the unaudited combined balance sheet of the Business as of September 30,
2006 and the unaudited combined statements of operations, of owner’s equity and
comprehensive income and of cash flows for the Business for the four-quarter
period ended September 30, 2006, (iv) on or prior to January 5, 2007, the
Sellers shall provide the Purchaser with the pro forma combined balance sheet
of the Business as of December 31, 2005 and September 30, 2006, and pro forma
combined statements of operations, of owner’s equity and comprehensive income
and of cash flows for the Business for the 12-month period ended December 31,
2005 and the nine-month period ended September 30, 2006, in each case giving
pro forma effect to the Acquisition and any historical acquisitions
contemplated by Regulation S-X to be given such effect, prepared in accordance
with Regulation S-X, and (v) on or prior to January 5, 2007, the Sellers shall
provide the Purchaser with the pro forma combined balance sheet of the Business
as of September 30, 2005 and pro forma combined statements of operations, of
owner’s equity and comprehensive income and of cash flows for the Business for
the nine-month period ended September 30, 2005, in each case giving

 

44

 

pro
forma effect to the Acquisition and any historical acquisitions contemplated by
Regulation S-X to be given such effect, prepared in accordance with Regulation
S-X.

 

(b)   On or prior
to February 26, 2007, the Sellers shall provide the Purchaser with (i) the
combined balance sheet of the Business as of December 31, 2006 and the
combined statements of operations, of owner’s equity and comprehensive income
and of cash flows for the Business for the 12-month period ended
December 31, 2006 prepared in accordance with GAAP and meeting the
requirements of Regulation S-X and in each case accompanied by an opinion
of PriceWaterhouseCoopers LLP or other independent public accountants of
recognized national standing reasonably satisfactory to the Purchaser (which
opinion shall not be qualified as to scope or contain any going concern or
other qualification) stating that such financial statements fairly present, in
all material respects, the financial position of the Business as of December
31, 2006 and the results of operations and cash flows for the Business for the
12-month period ended December 31, 2006 specified in accordance with GAAP and
(ii) the pro forma consolidated balance sheet of the Business as of December
31, 2006 and pro forma combined statements of operations, of owner’s equity and
comprehensive income and of cash flows for the Business for the 12-month period
ended December 31, 2006, giving pro forma effect to the Acquisition and any
historical acquisitions contemplated by Regulation S-X to be given such effect,
prepared in accordance with Regulation S-X.

 

(c)   The Sellers
shall take, or cause the Business to take, all such other action as shall be
reasonably requested by the Purchaser and is necessary or customary in order to
enable the Purchaser and, if applicable, one or more of its Affiliates as of
the Closing to consummate, simultaneously with the Closing, (x) a “high
yield” debt offering (the “Rule 144A Offering”) to “qualified
institutional buyers” within the meaning of Rule 144A under the Securities
Act and (y) such other financing to be obtained by the Purchaser in
connection with the transactions contemplated hereby, if any (the “Other Financing”).
Without limiting the foregoing, the Sellers shall (i) together with the
Purchaser, use commercially reasonable efforts to assist in the preparation of
an offering memorandum for the Rule 144A Offering, including, without
limitation, any pro forma financial statements and the “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” section to be
included therein, and other information memoranda in connection with the Other
Financing, (ii) deliver such statistical information relating to the
Business as may be reasonably requested in connection with such financings and
reasonably promptly respond to any diligence inquiries of the underwriters of,
or investment banks engaged for, the Rule 144A Offering and/or the lenders
of the Other Financing, (iii) make the officers and employees of the
Business reasonably available to participate in diligence sessions, drafting
sessions and the road show for the Rule 144A Offering, (iv) make the
Businesses officers and employees reasonably available to participate in
diligence sessions and presentations for the Other Financing and
(v) request their independent auditors to issue customary comfort letters
and

 

45

 

provide
consents and other services that are reasonably required to the investment
banks engaged for the Rule 144A Offering.

 

6.12         Leased Real Property. The
Sellers shall cause the Leased Real Property, together with all leasehold
improvements and fixtures located thereon, to be operated and maintained in
materially the same state of repair, order and condition as they are on the
date hereof, reasonable wear and tear excepted, until the Closing.

 

6.13         Insurance Policies. The Sellers
shall cause any material insurance policies currently in effect with respect to
the Leased Real Property to be maintained in full force and effect up to (and
including) the Closing.

 

ARTICLE VII

 

COVENANTS OF THE
PURCHASER

 

7.1           Confidentiality. The Purchaser
acknowledges that the information being provided to it in connection with the
consummation of the Acquisition is subject to the terms of a confidentiality
agreement dated July 24, 2006, between Veritas Capital Fund Management, L.L.C.
and Pearson, as amended (the “Confidentiality Agreement”), the terms of
which are incorporated herein by reference. Effective upon the Closing, the
Confidentiality Agreement shall terminate with respect to information relating
solely to the Companies and their Subsidiaries. The Purchaser acknowledges that
all other information provided to them by the Sellers or any Affiliate thereof
or their respective representatives concerning the Sellers or any of their
Affiliates (other than the Business, Companies and their Subsidiaries) shall
remain subject to the terms and conditions of the Confidentiality Agreement
after the Closing Date.

 

7.2           Support Services. Except
as set forth in the Services Agreement or otherwise provided for in this
Agreement, the Purchaser agrees that as of the Closing Date, the Sellers and
their respective Affiliates shall have no obligation to provide any support or
other services to the Companies or any of their Subsidiaries (including any of the services for which
allocations were previously paid by the Business).

 

7.3           Financing. The Purchaser
hereby agrees to use its reasonable best efforts to arrange the
financing in respect of the Acquisition provided for in the Current Commitment
Letter on the terms set forth therein, including, without limitation, using its
reasonable best efforts (i) to satisfy the terms, conditions, representations
and warranties set forth in the Current Commitment Letter, (ii) enter into
definitive agreements with respect thereto on the terms and conditions
contemplated by the Current Commitment Letter and (iii) enforcing its rights under
the Current Commitment Letter and any such definitive agreements. The Purchaser
shall provide Pearson as promptly (but in any event within two Business Days of
the execution thereof) as possible true, complete and correct copies of any
Current Commitment Letters and any amendments thereto and any such definitive
agreements. For the avoidance of doubt, in the event (a) all or any portion of
the financing contemplated by the Current Commitment Letter structured as a
high yield

 

46

 

financing has
not been consummated, (b) alternative financing on terms not materially less
beneficial to the Purchaser than the terms set forth in the Current Commitment
Letter is not available to the Purchaser, (c) all conditions to Closing set
forth in Sections 9.1 and 9.2 (other than those conditions set forth in Section
9.2 that by their nature will be satisfied at the Closing, including, for
purposes of this clause, the conditions set forth in Sections 9.2(d) and
9.2(j), provided that the Sellers are ready, willing and able to satisfy those
conditions) have been satisfied or waived, and (d) the bridge facilities
contemplated by the Current Commitment Letter are available on the terms and
conditions set forth therein, then the Purchaser shall use the proceeds of such
bridge financing to replace such high yield financing. The Purchaser shall keep
Pearson reasonably apprised as to the status of the financing arrangements for
the Acquisition, and shall promptly notify the Sellers if it becomes aware of
any fact or circumstance that could make the contemplated financing unavailable
for any reason.

 

7.4           Credit Support Arrangements. The Purchaser shall assume all obligations of
reimbursement under each Credit Support Arrangement and use its commercially
reasonable efforts to obtain from the applicable creditor, on the basis of a
Purchaser guarantee, a full release of all parties liable, directly or
indirectly, for reimbursement to the creditor in connection with amounts drawn
under a Credit Support Arrangement under the existing terms of a Credit Support
Arrangement. The Purchaser further agrees that to the extent the beneficiary
under any Credit Support Arrangement refuses to accept any such substitute
Credit Support Arrangement, the Purchaser shall indemnify, defend and hold
harmless the Sellers or their Affiliates, as the case may be, against and
reimburse the Sellers or their Affiliates, as the case may be, for any and all
costs or expenses in connection with such Credit Support Arrangement, including
the expenses in maintaining such Credit Support Arrangement whether or not any
such Credit Support Arrangement is drawn upon, and shall in any event promptly
reimburse the Sellers or their Affiliates, as the case may be, to the extent any
Credit Support Arrangement is called upon and any of the Sellers or their
Affiliates, as the case may be, makes any payment thereunder or is obligated to
reimburse the party issuing the Credit Support Arrangement.

 

7.5           Joint Defense Agreement. At
the Closing, the Purchaser shall, and shall cause the applicable Companies and
their Subsidiaries to, enter into a joint defense agreement (the “Joint
Defense Agreement”) with NCS Pearson, Inc. in the form attached hereto as Exhibit C
addressing cooperation, the availability of and preservation of personnel and
documents, the preservation of attorney-client or work product privileges and
other matters set forth therein relating to the TSA Contract and any Actions
relating thereto.

 

47

 

ARTICLE VIII

 

COVENANTS OF THE
PURCHASER AND THE SELLERS

 

8.1           Commercially Reasonable Efforts.

 

(a)   Upon the
terms and subject to the conditions hereof, each of the Purchaser and the
Sellers shall use its commercially reasonable efforts to (i) take or cause
to be taken all actions, and to do or cause to be done all other things,
necessary, proper or advisable to consummate the Acquisition by February 15,
2007 or otherwise as promptly as practicable, and (ii) obtain in a timely manner
all necessary waivers, consents and approvals and effect all necessary
registrations and filings.

 

(b)   The Sellers and the Purchaser shall, as promptly as reasonably
practicable and before the expiration of any relevant legal deadline, (i) file
(but in no event later than ten Business Days following the date hereof) with
the United States Federal Trade Commission and the United States
Department of Justice the notification and report form required for the
Acquisition and any supplemental information requested in connection therewith
pursuant to the HSR Act, which forms shall specifically request early
termination of the waiting period prescribed by the HSR Act, and (ii) file
with any other Governmental Entity, any other filings, reports, information and
documentation required for the transactions contemplated hereby pursuant to any
Other Antitrust Laws. Each of the Sellers and the Purchaser shall furnish to
each other’s counsel such necessary information and reasonable assistance as
the other may request in connection with its preparation of any filing or
submission that is necessary under the HSR Act and any Other Antitrust Laws. The
Purchaser shall be responsible for all filing fees payable in connection with
such filings.

 

(c)   The Sellers and the Purchaser shall use their
respective reasonable best efforts promptly to obtain any clearance required
under the HSR Act and any Other Antitrust Laws for the consummation of the
Acquisition and the other transactions contemplated hereby and shall keep each
other apprised of the status of any communications with, and any inquiries or
requests for additional information from, any Governmental Entity and shall
comply promptly with any such inquiry or request. The Sellers and the
Purchaser (i) shall take any and all commercially reasonable steps
necessary to avoid or eliminate every impediment under any Law that may be
asserted by any Governmental Entity or any other party so as to enable the
parties expeditiously to close the Acquisition and (ii) shall take any and all commercially reasonable steps to
contest, administratively or in court, any ruling, order or other action of any
Governmental Entity or any other Person respecting the transactions
contemplated by this Agreement.

 

(d)   The parties hereto shall instruct their respective
counsel to cooperate with each other and use commercially reasonable efforts to
facilitate and expedite the identification and resolution of any issues arising
under the HSR Act and the any Other Antitrust Laws at the earliest practicable
dates. Such commercially reasonable efforts and cooperation include such
counsel’s undertaking (i) promptly to inform the other parties hereto of
any oral communication with, and provide copies of written communications with,
any Governmental Entity regarding any filings, applications, investigations or
other inquiries, and (ii) to confer with each other

 

48

 

regarding appropriate contacts with and response to
personnel of such Governmental Entity. No party hereto shall independently
participate in any meeting or discussion with any Governmental Entity in
respect of any such filings, applications, investigation or other inquiry
without giving the other party hereto prior notice of the meeting and, to the
extent permitted by the relevant Governmental Entity, the opportunity to attend
and participate (which, at the request of any of the parties, shall be limited
to outside antitrust counsel only).

 

8.2           Third Party Consents and Notices.
Prior to the Closing, the Sellers shall, and shall cause the Companies and
their Subsidiaries to, use their reasonable best efforts to obtain any consent,
waiver or approval from third parties required, and give all such notices to
third parties, that are required for the consummation of the Acquisition and
the other transactions contemplated under this Agreement; provided that,
(a) no Indebtedness shall be repaid, (b) no right under any Contract shall be
waived, and (c) Sellers, the Companies or any of its or their Affiliates shall
not be required to commence, defend or participate in any litigation or offer
or grant any accommodation (financial or otherwise) to any third party, to
obtain any such consent, waiver or approval. The Purchaser shall cooperate,
upon the request of the Sellers, in any commercially reasonable manner in
connection with the Sellers obtaining any such consents, waivers or approvals,
and giving any such notices; provided that, such cooperation by the
Purchaser shall not include any requirement of the Purchaser to commence,
defend or participate in any litigation or offer or grant any accommodation
(financial or otherwise) to any third party. The Purchaser shall bear the first
$500,000 of costs and expenses in obtaining any such consents, and the Sellers
shall bear any such costs and expenses in excess of $500,000.

 

8.3           Public Announcements. Neither
the Purchaser nor the Sellers nor any of their respective Affiliates shall,
without the approval of the other party, issue any press releases or otherwise
make any public statements with respect to the transactions contemplated
hereby, except as may be required by applicable Law or by obligations pursuant
to any listing agreement with any national securities exchange or stock market,
in which case the party required to make the release or announcement shall
allow the other party reasonable time to comment on such release or
announcement in advance of such issuance; provided, however, that
each party may make internal announcements to its employees that are consistent
with the parties’ prior public disclosures regarding the Acquisition and the
other transactions contemplated hereby.

 

8.4           Tax Matters.

 

(a)   The Purchaser, on the one hand, and the Sellers, on the other hand,
shall each pay 50% of the Transfer Taxes arising out of or in connection with
the transactions effected pursuant to this Agreement, and shall indemnify,
defend and hold harmless each other and their respective Affiliates with
respect to such Transfer Taxes to such extent; provided, however, that the
Sellers shall pay and be solely responsible for any such Taxes that are
attributable to the Permitted Reorganization. The Sellers shall file all
necessary documentation and Tax Returns with respect to

 

49

 

such Transfer Taxes and the Purchaser shall cooperate therewith. The
Sellers and the Purchaser shall
at least ten days prior to Closing reasonably allocate the Purchase Price among
Assets constituting Leased Real Property to the extent required to complete any
Transfer Tax return or reports and to compute the amount of any Transfer Taxes.

 

(b)   The Sellers shall terminate any and
all Tax allocation or sharing agreements binding the Companies or any
Subsidiary thereof as of the day
before the Closing Date.

 

(c)   The Sellers shall be responsible
for (i) the preparation and filing of all Tax Returns required by Law to be
filed by the Companies and their Subsidiaries, or which include the Companies
and their Subsidiaries, for taxable periods ending on or before the Closing
Date, and shall pay all Tax liabilities due
with respect to the periods covered by such Tax Returns (other than any
such liabilities to the extent
taken into account in the determination of Final Net Assets pursuant to Section
2.4) and (ii) any Tax arising from the Permitted Reorganization. The Sellers
shall have the sole right to file amended Tax Returns with respect to the
Companies and their Subsidiaries relating to taxable periods ending on or
before the Closing Date. The Sellers shall retain any refunds received for
Taxes paid for Pre-Closing Periods with respect to the Companies and their
Subsidiaries, along with any interest related thereto, except to the extent taken into account in the determination of Final Net
Assets pursuant to Section 2.4, and any such refunds received by the
Companies and their Subsidiaries after the Closing shall be paid promptly to
the Sellers, along with any interest related thereto. The Purchaser and the Companies shall
retain all other refunds received for Taxes with respect to the Companies and
their Subsidiaries, along with any interest related thereto.

 

(d)   The Purchaser shall file or cause to be filed all Tax Returns of, or
that include, the Companies or their Subsidiaries that are not described in
Section 8.4(c) and shall pay all Tax liabilities shown by such Tax Returns
to be due. The Purchaser shall
provide a substantially complete and accurate draft of each Straddle Period Tax
Return to the Sellers no later than 20 Business Days prior to the due date for
such Tax Return (including any extension thereof) for the review and approval
of the Sellers, such approval not to be unreasonably withheld. Not later than
five Business Days before the due date for any Straddle Period Tax Return
(including any extension thereof), the Sellers shall pay to the Purchaser the portion of the Taxes set
forth on such Tax Return that are allocable to the Pre-Closing Period (under
principles set forth in Sections 8.4(e) and (f)), net of any payments made
prior to the Closing Date in respect of such Taxes, whether as estimated Taxes
or otherwise, and other than any such Taxes to the extent taken into account in the determination of Final Net
Assets pursuant to Section 2.4.

 

(e)   If the Companies or any of their
Subsidiaries are permitted but not required under applicable Tax Laws to treat
the Closing Date as the last day of a

 

50

 

taxable period for any applicable Tax,
then the parties hereto shall cause the Companies or their Subsidiaries, as
applicable, to treat that day as the last day of a taxable period. In the case
of Taxes arising in a taxable period of the Companies or their Subsidiaries
that includes but does not end on the Closing Date, except as provided in
Section 8.4(f), the allocation of such Taxes between the Pre-Closing
Period and the Post-Closing Period shall be made on the basis of an interim
closing of the books as of the end of the Closing Date.

 

(f)    In the case of (i) franchise Taxes
based on capitalization, debt or shares of stock authorized, issued or
outstanding and (ii) ad valorem Taxes, in either case attributable to any
taxable period that includes but does not end on the Closing Date, the portion
of such Taxes attributable to the Pre-Closing Period shall be the amount of
such Taxes for the entire taxable period, multiplied by a fraction the
numerator of which is the number of calendar days in such taxable period ending
on and including the Closing Date and the denominator of which is the entire
number of calendar days in such taxable period.

 

(g)   Each party hereto shall, and shall
cause its Subsidiaries and Affiliates to, provide to each of the other parties
hereto such cooperation and information as any of them reasonably may request
in filing any Tax Return, amended Tax Return or claim for refund, determining a
liability for Taxes or a right to refund of Taxes or in conducting any audit or
other proceeding in respect of Taxes. Such cooperation and information shall
include providing copies of all relevant portions of relevant Tax Returns,
together with relevant accompanying schedules and relevant work papers,
relevant documents relating to rulings or other determinations by taxing
authorities and relevant records concerning the ownership and Tax basis of
property, which any such party may possess. Each party shall make its employees
reasonably available on a mutually convenient basis at its cost to provide
explanation of any documents or information so provided.

 

(h)   The Purchaser shall not make an election under Section 338(g) of the
Code with respect to its purchase of the stock of the Companies or its indirect
acquisition of the Subsidiaries of the Company by reason of its purchase of the
stock of the Companies except with respect to Pearson Government Solutions,
Ltd., Pearson Canada Solutions Limited and any of the Companies or their
Subsidiaries that are “controlled foreign corporations” for purposes of the
Code as of the Closing Date. The Purchaser
shall not, with respect to any Companies or Subsidiaries of the Companies that
are “controlled foreign corporations” for purposes of the Code as of the
Closing Date and for which Purchaser is not making an election under Section
338(g) of the Code, declare or pay, or permit to be declared or paid, any
dividends prior to the first day of the calendar year following the year in the
which the Closing Date occurs. The Purchaser shall promptly notify Pearson, in
writing, as to any election made under Section 338(g) of the Code pursuant to
this Section 8.4(h). The Purchaser
will be responsible for any Taxes attributable to any action taken by the

 

51

 

Purchaser or its Affiliates or the Companies or
their Subsidiaries following the time of the Closing outside the ordinary
course of business.

 

(i)    Pearson Government Solutions Ltd. and an
Affiliate of Pearson that is not a Company shall, on the Closing Date, make an
election under Section 179A of
the Taxation of Chargeable Gains Act 1992 pursuant to which any “degrouping
charge” under United Kingdom Tax
law attributable to Pearson Government Solutions Ltd. is allocated to such
Pearson Affiliate.

 

8.5           Procedures Relating to Tax Claims.

 

(a)   If any Taxing Authority or other
Person makes a Tax Claim, then the party hereto first receiving notice of such
Tax Claim promptly shall provide written notice of such Tax Claim to the other
party hereto. Such notice shall specify in reasonable detail the basis for such
Tax Claim and shall include a copy of any relevant correspondence received from
the Taxing Authority or other Person.

 

(b)   Except as provided in paragraphs
(c) or (d) of this Section 8.5, the Sellers shall have the right to
defend, object to or prosecute, at their sole cost and expense, those Tax
Claims relating to any Taxable period
ending on or prior to the Closing Date. In order to defend, object to or prosecute any such Tax
Claim, the Sellers shall notify the Purchaser
that they elect to defend, object to or prosecute such Tax Claim (such notice,
an “Election Notice”) within 30 days after (i) the date on which the
Sellers receive notice of any such Tax Claim from the Purchaser (with respect to Tax Claims as to which the Purchaser first received notice from a
Taxing Authority or any other Person), or (ii) the date on which the Sellers
delivered to the Purchaser
notice of any such Tax Claim (with respect to Tax Claims as to which the
Sellers first received notice from a Taxing Authority or any other Person). The
Sellers may in their discretion settle or compromise any Tax Claim as to which
the Sellers have provided an Election Notice to the Purchaser; provided, however, that if the results of
such Tax Claim could reasonably be expected to have a material Tax cost to the Purchaser, the Companies or their
Subsidiaries for any Tax period including or ending after the Closing Date,
then the Sellers shall not settle or compromise such Tax Claim without the prior written consent of the
Purchaser, such consent not to be unreasonably withheld or delayed. The
Purchaser shall be entitled, at the expense of the Purchaser, to attend, but not
participate in or control, all proceedings relating to such Tax Claim.

 

(c)   If, (i) Sellers have the right
to control any Tax Claim pursuant to paragraph (b) of this Section 8.5, (ii)
paragraph (d) of this Section 8.5 is inapplicable and (iii) the Sellers fail to deliver an Election Notice to the Purchaser within the period provided in Section 8.5(b), then the Purchaser shall have the right to
defend or prosecute such Tax Claim, at its sole cost and expense (or, if the Purchaser incurs a Loss with respect
to the matter in question for which the Purchaser
is entitled to indemnification pursuant to clause (c) of Section 11.2, at the
expense of the Sellers). The Purchaser
shall have full control of such defense or prosecution and 

 

52

 

such proceedings, except that the Sellers (i)
shall have the right to participate in the defense or prosecution, and such
proceedings, at their sole cost and expense and (ii) shall not be obligated to
indemnify the Purchaser
hereunder for any settlement entered into or any judgment consented to without
the Sellers’ prior written consent, such consent not to be unreasonably
withheld or delayed.

 

(d)   With respect to any Tax Claim that
relates to (i) a Straddle Period or (ii) non-income Taxes and a Taxable period
ending on or prior to the Closing Date and for which it is unclear at the time
the Tax Claim arises whether Sellers will be required pursuant to this
Agreement to indemnify Purchaser, in whole or in part, for Losses related to
such Tax Claim (such Tax Claims described in subparagraph (i) and (ii), “Jointly
Controlled Tax Claims”), Purchaser and Sellers shall jointly control any
defense or prosecution of such Jointly Controlled Tax Claims. If Purchaser and
Sellers disagree as to the appropriate forum for the contest of any Jointly
Controlled Tax Claim or disagree as to any other action proposed to be taken
with respect to such Jointly Controlled Tax Claim, Purchaser and Sellers shall,
acting in reasonable good faith, strive to reach agreement regarding such
action as soon as reasonably practicable. If Purchaser and Sellers can not
reach agreement with respect to any such action, the party that is more
reasonably likely to be liable for the greater amount of Losses that are the
subject of the Jointly Controlled Tax Claim shall determine the appropriate
course with respect to such action. No party shall settle or compromise any
Jointly Controlled Tax Claim without the other party’s prior written consent
(not to be unreasonably withheld or delayed).

 

8.6           Section 338 Election; Election
Allocations.

 

(a)   The Sellers will join with the Purchaser in making an election under
Section 338(h)(10) of the Code (and any corresponding elections under state,
local, or foreign Law) with respect to PGS (the “Section 338(h)(10) Election”).
No election under Section 338(h)(10) of the Code will be made with respect
to any other Company or any Subsidiary of any Company. The Sellers will pay any
Taxes that result from the
Section 338(h)(10) Election.

 

(b)   As requested from time to time by
the Purchaser (whether before, at or after the Closing), the Sellers shall
assist the Purchaser in, and
shall provide the necessary information to the Purchaser, in connection with the preparation of any form or
document required to effect the Section 338(h)(10) Election, including IRS Form
8023, IRS Form 8883, any similar forms under state, local or other Law and any
schedules or attachments thereto (collectively, “Section 338 Forms”). Upon
delivery of any Section 338 Form by the Purchaser
to the Sellers, the Sellers shall cause such Section 338 Form to be duly and
promptly executed and shall deliver such executed Section 338 Form to the Purchaser. If the Purchaser determines that any change
is to be made in a Section 338 Form previously executed and delivered to the Purchaser, then the Purchaser may prepare a new Section
338 Form and deliver such new Section 338 Form to the Sellers, and the Sellers
shall 

 

53

 

cause such Section 338 Form to be duly and
promptly executed and shall deliver such executed Section 338 Form to the Purchaser.

 

(c)   The allocation of the Purchase Price among
the Equity Interests shall be agreed to by the parties, acting in good faith,
prior to the Closing Date. The portion of the Purchase Price so allocated to
PGS shall be further allocated in the manner hereinafter described in this
Section 8.6(c). As soon as practicable after the Closing Date and in any
event no later than 90 days prior to the latest date for filing of the
first Section 338 Form that is due for filing, the Purchaser shall initially determine (A) the aggregate deemed sales
price at which the Companies and their Subsidiaries is deemed to have sold
their assets for Tax purposes as a result of such Section 338(h)(10) Election (“ADSP”)
and (B) the allocation of ADSP among the assets of the Companies and their
Subsidiaries as applicable (collectively, the “Election Allocations”),
and shall deliver a copy of its initial determination of the Election
Allocations, together with such Section 338 Form setting forth, to the extent
required therein, the Election Allocations. The Sellers shall, within 30 days
of receipt of the Purchaser’s
initial Election Allocations, or if later at least 60 days prior to the latest
date for the filing of the first Section 338 Form, either (i) consent in
writing to such initial Election Allocations or (ii) notify the Purchaser that they disagree with the Purchaser’s initial Election
Allocations. If the Purchaser
and the Sellers have been unable to resolve their differences within 30 days
after the Purchaser has been
notified with respect to the Sellers’ disagreement with the Election
Allocations, then any remaining disputed issues shall be submitted to an
Independent Accounting Firm, selected in the manner provided in
Section 2.4(c), which shall resolve the disagreement in a final binding
manner after hearing the views of both parties. The fees and expenses of the
Independent Accounting Firm shall be shared equally between the Sellers and the
Purchaser. The Election
Allocations shall be determined in accordance with Section 338 of the Code and
the applicable Treasury regulations thereunder. Except as may be required by
Law, the Sellers will (i) file or cause to be filed all Tax Returns in a manner
consistent with Attachment A and the Election Allocations (as determined
pursuant to this Section 8.6(c)) and (ii) not take any action inconsistent
therewith. For purposes of the allocations of Purchase Price under this Section
8.6(c), the payment made by the Sellers to the Purchaser under Section
2.3(b)(ii) shall be treated as a reduction to the Purchase Price.

 

8.7           Employment Matters.

 

(a)   As to
employees of the Companies or their Subsidiaries who are employed immediately
prior to the Closing (whether salaried or hourly, and full-time or part-time),
whether or not actively employed on the date hereof, e.g., including employees
on vacation and leave of absence, including maternity, family, sick, military
or short-term disability leave but excluding any employees on long-term
disability or employees on leave without a designated date of return (the “Business
Employees”), the Purchaser agrees: 
(i) for the 12-month period following the Closing Date, to provide,
cash compensation levels and employee benefits that, in the 

 

54

 

aggregate,
shall be comparable to the cash compensation levels and employee benefits made
available to Business Employees immediately prior to the Closing but only to
the extent such comparable employee benefits can be established pursuant to the
Services Agreement; (ii) to waive any limitations regarding pre-existing
conditions, exclusions and waiting periods under any plan that provides for
medical benefits maintained by the Purchaser or any of their Affiliates for the
benefit of such Business Employee to the same extent waived under comparable
Benefit Plans; (iii) for all purposes under all benefit plans of the
Purchaser or its Affiliates in which such Business Employee is eligible to
participate, to treat all service by the Business Employee with the Sellers or
their Affiliates before the Closing Date as service with the Purchaser and its
Affiliates, excluding benefit accruals under defined benefit pension plans and
all benefit accruals under the Pearson Group Pension Plan (the “Pearson Plan”);
and (iv) to recognize any unused accrued sick, vacation or personal leave
days that such Business Employee has accrued as of the Closing Date for
purposes of the vacation plan or policies of the Purchaser or its Affiliates. To
the extent required by applicable Law, the Purchaser shall cause the Companies
to hire any former employee of the Companies or their Subsidiaries who return
to work following long-term disability leave or another leave without a
designated date of return.

 

(b)   Without
limiting the scope of Section 8.7(a), should the employment of any
Business Employee be terminated by the Purchaser or its Affiliates during the
12-month period following the Closing, the Purchaser shall provide such
Business Employee severance payments and benefits in an amount no less than
that to which the Business Employee would have been entitled pursuant to the
terms of the severance pay plan applicable to such employee (taking into
account both pre-Closing and post-Closing service performed by such Business
Employee, and without regard to the ability of the plan administrator
thereunder to reduce the severance levels).

 

(c)   The Purchaser acknowledges that PGS has entered into retention/severance agreements
and arrangements (the “Retention/Severance Agreements”) with certain
Business Employees, as listed on Section 8.7(c) of the Seller Disclosure
Schedule, and that such agreements and arrangements shall be deemed part of the
assets and liabilities of the Companies at Closing. The Purchaser agrees
to cause the Companies or their Subsidiaries to satisfy all obligations and
liabilities in respect of the Retention/Severance Agreements in accordance with
the terms thereof. The Purchaser and the Sellers agree that, for the purposes
of the Retention/Severance Agreements, the “Sale Proceeds” (as defined in such
agreements) shall equal six hundred million dollars ($600,000,000).

 

(d)   Upon or as
soon as practicable after the Closing, the Purchaser shall cause to be
maintained for the benefit of the Business Employees a defined contribution
plan intended to be qualified under Section 401(a) of the Code which includes a
qualified cash or deferred arrangement within the meaning of Section 

 

55

 

401(k)
of the Code (the “Purchaser’s 401(k) Plan”). As soon as practicable
thereafter, and if requested by a Business Employee, the Sellers or one of
their Affiliates shall take all actions necessary to initiate a transfer of
eligible rollover distributions as defined in section 401(a)(31) of the Code,
from the tax-qualified 401(k) plan maintained by the Sellers or their
Affiliates in which the Business Employees participate (the “Seller’s 401(k)
Plan”), to the Purchaser’s 401(k) Plan, and the Purchaser shall cause the
Purchaser’s 401(k) Plan to accept such rollover. Individual account balances
shall be valued as of the date of transfer, and the transfer shall be in cash,
except that outstanding loan balances shall be transferred in the form of notes
or other documentation evidencing such loans.

 

(e)   The Sellers
and their Affiliates (excluding the Companies and their Subsidiaries) shall
retain responsibility for and continue to pay all medical, life insurance,
disability, and other welfare plan expenses and benefits for each Business
Employee with respect to claims incurred by such Business Employees or their
covered dependents prior to the Closing Date. Purchaser shall cause the
Companies or their Subsidiaries to be responsible for all health, disability
and workers compensation claims in respect of the Business Employees (or their
beneficiaries and dependents) with respect to claims incurred on or following
the Closing Date. For purposes of this paragraph, a claim is deemed incurred
when the services that are the subject of the claim are performed, provided
that a claim shall be deemed to be incurred when the death occurs in the case
of life insurance, and when the disability occurs in the case of disability
benefits. Notwithstanding the foregoing, with respect to any Business Employee
who is receiving short-term disability benefits prior to Closing, Purchaser
shall be responsible for providing such benefits, including salary
continuation, following the Closing.

 

(f)    Without
limiting the scope of Section 8.7(a), the Purchaser shall cause the Companies
or their Subsidiaries to assume the 2006 Annual Incentive Plan in respect of
the Business Employees and pay bonuses thereunder in respect of the full calendar
year 2006 in the amounts and manner that such bonuses would have been payable
had the transactions contemplated by this Agreement not occurred.

 

(g)   Notwithstanding
anything herein to the contrary, with respect to Business Employees of Pearson
Government Solutions Limited (the “UK Business Employees”) the Purchaser
shall maintain, for at least 12 months after the Closing Date employee benefits
which are comparable to current employee benefits and further shall maintain
cash compensation levels which are no less favorable than the cash compensation
levels provided to UK Business Employees immediately prior to the Closing (or,
if current employee benefits cannot reasonably be continued for practical
reasons, the Purchaser shall provide comparable benefits of equal or greater
value). The Purchaser agrees that, following the expiration of the 12-month
period commencing as of the Closing Date, any change to the terms and
conditions of employment enjoyed by the UK Business Employees will be made in
accordance 

 

56

 

with
the appropriate information and consultation process required under English
common law and statute.

 

(h)   With
respect to the UK Business Employees, the Purchaser will establish or nominate
a pension scheme (or more than one scheme so long as the schemes together meet
the following requirements) (the “Purchaser’s Plan”), which (i) is a
registered scheme for the purposes of the Finance Act 2004 and is
contracted-out of the UK State Second Pension, (ii) provides benefits on a
defined benefit basis for those Business Employees who were accruing benefits
on this basis (A) under the Public Services Section of the Pearson Plan
immediately before the Closing, and (B) under the Final Pay Section of the
Pearson Plan but only to the extent that the UK Business Employees in the Final
Pay Section of the Pearson Plan have a contractual entitlement to a
continuation of their pension rights in respect of future service under their
terms of employment immediately prior to the Closing (“DB Members”),
and  on a defined benefit or defined
contribution basis for those employees who were accruing benefits under the
Pearson Plan on a defined contribution basis immediately before the Closing (“DC
Members”), (iii) provides benefits which are at least broadly equivalent in
value overall for each employee to those they were accruing under the Pearson
Plan immediately before Closing, and (iv) ensures that death in service
benefits will be continued for each of the UK Business Employees which are
broadly equivalent in value and provided on the same terms for each such
employee to the death in service benefits they were accruing immediately before
the Closing.

 

(i)    The
Purchaser will ensure that each of the UK Business Employees who were members
of the Pearson Plan immediately before the Closing (“Member Employees”)
will be invited to become members of the Purchaser’s Plan with effect from the
Closing, and will be invited to transfer their accrued rights to benefits under
the Pearson Plan to the Purchaser’s Plan. The transfer basis to be used in
respect of any transfer of the accrued pension rights of the DB Members from
the Pearson Plan to any arrangement provided for the DB Members by the
Purchaser will be on written terms to be agreed by an actuary nominated by the
Purchaser and an actuary nominated by the Sellers (the “Actuary’s Letter”).
In the event of the actuaries being unable to agree on the terms of the Actuary’s
Letter within 14 days following the signing of this Agreement, the terms of the
Actuary’s Letter will be determined by an independent actuary nominated by the
President of the Institute of Actuaries, the costs of such actuary will be
borne equally by the Purchaser and the Sellers, and whose determination will be
binding on all the parties to this Agreement. For each Member Employee for whom
such a transfer payment is made from the Pearson Plan to the Purchaser Plan,
the Purchaser will ensure that the Purchaser’s Plan provides benefits for and
in respect of that Member Employee which are equal in value to the transfer
value received by the Purchaser’s Plan, and which are provided on a defined
benefit basis for DB Members will on a defined benefit or defined contribution
basis for DC Members.

 

57

 

(j)    Immediately
upon receiving the certificate from the actuary to the trustee of the Pearson
Plan setting out the amount due from Pearson Government Solutions Limited under
sections 75 and 75A of the Pensions Act 1995 in connection with the
transactions contemplated hereby (the “Pearson Plan Debt”), Pearson
Government Solutions Limited will forward such certificate to Pearson. Within 5
Business Days of receiving such certificate, Pearson shall pay or cause to be
paid to the Purchaser (or its designated Affiliate) as a Purchase Price
adjustment, an amount equal to the Pearson Plan Debt. Purchaser will ensure
that Pearson Government Solutions Limited will pay the Pearson Plan Debt within
5 Business Days of receipt by the Purchaser (or its designated Affiliate) of
the amount from Pearson equal to the Pearson Plan Debt. Thereafter, Purchaser
(or its designated Affiliate) shall pay or cause to be paid to Pearson, as a
Purchase Price adjustment, an amount equal to the tax benefit received and
utilized as a result of the amount of any United Kingdom tax deduction taken by
Pearson Government Solutions Limited (or, by group relief, by any other company
that is a member of the same group as Pearson Government Solutions Limited)
with respect to the Pearson Plan Debt, with each such payment to be made within
14 Business Days of tax relief being utilized by Pearson Government Solutions
Limited (or any company which is a member of the same group as Pearson
Government Solutions Limited). For the purposes of this clause, a tax benefit
is received and utilized on the date that a company is relieved of an
obligation to pay an amount of Tax which would otherwise be payable but for a
tax deduction or relief arising from the Pearson Plan Debt amount (such date,
the “Payment Date”). The Purchaser shall act reasonably and in good
faith in calculating and taking into account such United Kingdom tax
deductions, and shall provide to Pearson a statement, on or prior to the
Payment Date, describing in reasonable detail the amount of such tax deduction,
and resulting Purchase Price adjustment, for such year. For purposes of this
clause, Purchaser shall be deemed to act reasonably and in good faith if
Purchaser treats deductions arising from the payment of the Pearson Plan Debt
amount pro-rata and in the same manner as any other Tax deduction or allowance
arising in the same accounting period.

 

(k)   Except as
otherwise provided in this Section 8.7, neither the Purchaser nor any of its
Affiliates shall adopt, become a sponsoring employer of, or have any
liabilities or obligations with respect to the Sellers Benefit Plans.

 

8.8           Further Action.

 

(a)   From and
after the Closing Date each of the Purchaser and the Sellers shall, and shall
cause their respective Affiliates to, execute and deliver such documents and
other papers and take such further actions as may be reasonably required to
carry out the provisions of this Agreement and the Ancillary Agreements and
give effect to the transactions contemplated hereby and thereby. Subject to the
terms of the Services Agreement, all cash and other remittances, mail and other
communications relating to the Assets or the Business received by the Sellers
or their Affiliates shall be promptly turned over to the Purchaser by the
Sellers. Subject to the 

 

58

 

terms
of the Services Agreement, all cash and other remittances, mail and other
communications relating to any business of the Sellers not included within the
Business being purchased by the Purchaser hereunder that are received by the
Purchaser or the Companies shall be promptly turned over to the Sellers by the
Purchaser.

 

(b)   For a period of ten years from the
date hereof, the Purchaser shall
use commercially reasonable efforts to maintain all books and records (including information related to Taxes) of
the Companies and their Subsidiaries relating to periods ending on or prior to
the Closing Date and shall make them, and any individuals responsible for the
preparation and maintenance of such books and records, available to the Sellers
as reasonably requested. If at any time after the Closing, the Sellers require
a copy of any such book or record, it shall have the right to promptly obtain a
copy thereof (at the Sellers’ cost) from the Purchaser.

 

8.9           No Use of Certain Names. The
Purchaser shall cause the Companies and their Subsidiaries promptly, and in any
event within 90 days after the Closing Date, to (a) revise print
advertising and product labeling to delete all references to the Names,
(b) change signage and stationery to delete all reference to the Names,
and (c)  otherwise discontinue use of the Names; provided, however,
that for a period of 150 days after the Closing Date, the Companies and
their Subsidiaries may continue to distribute product literature that uses any
Names and distribute products with labeling that uses any Names to the extent
that such product literature and labeling exists or is in the process of
creation on the Closing Date and the Purchaser has marked, or have caused the
Companies and their Subsidiaries to mark, such product literature and such
labeling to obliterate the Names. In no event shall the Companies and their
Subsidiaries use any Names after the Closing in any manner or for any purpose
different from the use of such Names by the Companies and their Subsidiaries,
as the case may be, during the 90-day period preceding the Closing Date. With
respect to inventory manufactured by the Companies and their Subsidiaries prior
to the Closing, the Companies and their Subsidiaries may continue to sell such
inventory, notwithstanding that it bears one or more of the Names, for a
reasonable time after the Closing Date, which shall in no event exceed 150 days.
As promptly as practicable, but in no event later than 150 days after the
Closing Date, the Purchaser shall cause the Companies and their Subsidiaries to
file applications to amend or terminate any certificate of assumed name, d/b/a,
or foreign filings so as to eliminate the right of the Companies and their
Subsidiaries to use the Names. Immediately prior to the Closing, the Sellers
shall cause the names of the Companies and their Subsidiaries (in each case, to
the extent they make use of the Names) to be changed to names (that do not
include the Names or are confusingly similar to the Names or any portion
thereof) selected by the Purchaser.

 

59

 

8.10         TSA Contract Matters.

 

(a)   Subject to
the other provisions of this Section 8.10, the Sellers shall retain full
responsibility for, and shall, jointly and severally, indemnify and defend, the
Companies and their Subsidiaries and each Purchaser Group Member (collectively,
the “TSA Contract Indemnitees”) against, and shall hold each TSA
Contract Indemnitee harmless from, any Losses (as defined in Section 11.2)
resulting from, arising out of or incurred by such TSA Contract Indemnitee in
connection with the TSA Contract (including, without limitation, in connection
with any Action relating
to the TSA Contract (whether a criminal action or investigation, a claim for
fraud or misrepresentation, a claim under the Contract Disputes Act, the Code
or the False Claims Act, or otherwise) that is brought or threatened against
any TSA Contract Indemnitee (whether commenced by a Governmental Entity or otherwise)
or any subpoena, or any other
information, document or interview request of any Governmental Entity (whether
under compulsion of Law or otherwise), relating to the TSA Contract or
any Action in respect thereof) (collectively, a “TSA Action”).

 

(b)   Notwithstanding
Section 8.10(a), the aggregate Losses of the TSA Contract Indemnitees, on
the one hand, and the Sellers and their Affiliates, on the other hand,
resulting from, arising out of or incurred by them in connection with a TSA
Action from and after the Closing shall be shared equally (i.e., on a 50/50
basis) until such aggregate Losses of the TSA Contract Indemnitees and the
Sellers and their Affiliates equal $20 million, and the Sellers and the
Purchaser agree to cause all such Persons to provide reasonable evidence of
their respective incurrence of any such Losses until $20 million of
aggregate Losses shall have been incurred and promptly to reimburse the other
to the extent required, from time to time, to achieve an equal sharing of all
such Losses up to such aggregate amount.

 

(c)   The Sellers
shall retain and assume full and sole responsibility and authority for and
control and discretion over the investigation, prosecution and defense and
settlement of all existing and future TSA Actions with counsel of their choice
and at their sole cost and expense. At the request of the Purchaser, the
Sellers shall keep the Purchaser reasonably informed with respect to the status
of any such TSA Actions, subject to the requirements of maintaining applicable
attorney-client or work product privileges. The Purchaser may retain separate
counsel for the purpose of advising the Purchaser and the Companies and their
Subsidiaries with respect to any TSA Action; provided, however, that such
counsel shall be at the sole cost and expense of the Purchaser except to the
extent that (i) the Sellers have failed to comply with their obligations
pursuant to this Section 8.10 and failed to cure such non-compliance with
60 days of written notice from the Purchaser or (ii) in respect of any TSA
Action, the Purchaser shall have furnished to the Sellers a written opinion of
independent counsel to the Purchaser identifying a material conflict of
interest between the Sellers and the TSA Contract Indemnitees in respect of
such TSA Action. The TSA Indemnitees shall promptly notify the Sellers in
writing of the commencement or threatening of any TSA Action, identifying such
in reasonable 

 

60

 

detail
and enclosing copies of any papers which may have been served with respect to
such matter and any other documents relating thereto. Without the prior written
consent of the Sellers, no TSA Contract Indemnitee shall file any papers, make
any statement or appearance or consent to the entry of any judgment or enter
into any settlement with respect to any TSA Action. Without limitation of the
provisions of the Joint Defense Agreement, the Purchaser shall, and shall cause
each other TSA Contract Indemnitee to, cooperate with the Sellers in responding
to, defending against, prosecuting, settling or otherwise dealing with any TSA
Action and use commercially reasonable efforts to minimize Losses which may be
indemnifiable pursuant to this Section 8.10. Such cooperation shall
include providing access to and copies of information, data, documents and
records (including all items, documents and records identified in Fed. R. Civ.
P. 34 (a) (1) effective December 1, 2006) 
relating to such matters, making available employees requested by the
Sellers to assist in the investigation, defense and resolution of such matters,
and providing such legal and business assistance as may be reasonably requested
by the Sellers with respect to such matters. No actions taken or not taken by
the Sellers pursuant to this Section 8.10(c) shall limit or otherwise
affect the obligations of the Purchaser pursuant to Section 8.10(b).

 

(d)   Notwithstanding
the foregoing, the Sellers’ obligations pursuant to this Section 8.10
shall be conditioned upon (i) the Purchaser’s compliance with its obligations
under this Section 8.10 and the Purchaser’s and the applicable Companies’
and their Subsidiaries’ compliance with their obligations under the Joint
Defense Agreement and (ii) without limitation of the foregoing, none of
the Purchaser or the Companies or their Subsidiaries having, without the prior
written consent of the Sellers, from and after the Closing waived attorney-client
or work product privileges with respect to any TSA Action.

 

(e)   This
Section 8.10 is the only Section of this Agreement relating to indemnification
or reimbursement in respect of Losses and Actions resulting from, arising out
or incurred by the Company or their Subsidiaries or the parties to this
Agreement from and after the Closing in connection with the TSA Contract or any
TSA Action. Each party acknowledges and agrees that, should the Closing occur,
its sole and exclusive remedy with respect to any and all matters relating to
the TSA Contract and any TSA Action shall be pursuant to the provisions of this
Section 8.10 and that no provision of Article XI of this Agreement
(including, without limitation, Section 11.6) shall be applicable thereto. In
furtherance of the foregoing, each party hereto (on behalf of itself and its
Affiliates (including, in the case of the Purchaser following the Closing, the
Companies and their Subsidiaries)) hereby waives from and after the Closing,
any and all rights, claims and causes of action resulting from, arising out of
or incurred in connection with the TSA Contract or any TSA Action (but not
including any breach of the Joint Defense Agreement) which such party may have
against any other party hereto or any of their Affiliates arising under or
based upon any Law or otherwise, other than pursuant to this Section 8.10.
The amount of any Losses payable under this Section 8.10 shall be reduced
by any amounts actually 

 

61

 

recovered
by the Person claiming indemnification or reimbursement in respect of such
Losses under insurance policies or from any other Person. No party shall be
obligated to indemnify or reimburse any Person with respect to any indirect,
special, incidental, consequential or punitive damages resulting from, arising
out of or incurred in connection with the TSA Contract or any TSA Action.

 

8.11         Novation. The Sellers shall
cooperate and provide such reasonable assistance to the Purchaser and the
Companies, and the Purchaser and the Companies shall cooperate and provide such
reasonable assistance to the Sellers, as may be reasonably required in the
event that any Governmental Entity requires a novation of any Government
Contract at any time following the Closing Date as a result of the transactions
contemplated by this Agreement.

 

ARTICLE IX

 

CONDITIONS TO CLOSING

 

9.1           Conditions to Obligations of the
Purchaser and the Sellers. The obligations of the Purchaser and the Sellers
to consummate the Acquisition are subject to the satisfaction on or prior to
the Closing Date of the following conditions:

 

(a)   HSR Act
and Other Antitrust Laws. The waiting period applicable to the consummation
of the Acquisition under the HSR Act and any applicable waiting periods under
the Other Antitrust Laws shall have expired or been terminated and all other
Authorizations and Orders of, declarations and filings with, and notices to any
Governmental Entity required to permit the consummation of the Acquisition and
the other transactions contemplated hereby shall have been obtained or made.

 

(b)   No Order.
No temporary restraining order, preliminary or permanent injunction or other
Order preventing the consummation of the Acquisition or any of the other
transactions contemplated hereby shall be in effect, and no Law shall have been
enacted or shall be deemed applicable to the Acquisition or any of the other
transactions contemplated hereby which makes the consummation of the
Acquisition or any such transaction illegal.

 

9.2           Conditions to Obligation of the
Purchaser. The obligation of the Purchaser to consummate the Acquisition is
subject to the satisfaction (or waiver by the Purchaser in its sole discretion)
of the following further conditions:

 

(a)   Representations
and Warranties. Each of the representations and warranties of the Sellers
set forth in this Agreement, without taking into account any materiality,
Seller Material Adverse Effect or Business Material Adverse Effect qualifiers
shall be true and correct at and as of the date of this Agreement and at and as
of the Closing Date, as if made at and as of the Closing Date (except, in each
case, to the extent that such representations and warranties expressly relate
to an earlier 

 

62

 

date,
in which case such representations and warranties shall have been true and
correct as of such earlier date), except for such inaccuracies that,
individually or in the aggregate, would not have a Seller Material Adverse
Effect or a Business Material Adverse Effect; provided, however,
that the representations and warranties in Sections 3.1 (Organization and Good
Standing), 3.2 (Authority and Enforceability), 3.4 (The Equity Interests), 4.1
(Organization and Good Standing), 4.2 (Capitalization) and 4.18 (Brokers) shall
be true and correct in all respects and those in Section 4.9 (The Assets) shall
be true and correct in all material respects.

 

(b)   Covenants
and Agreements. The Sellers shall have performed or complied in all
material respects with all covenants and agreements required by this Agreement
to be performed or complied with at or prior to the Closing Date.

 

(c)   Officer’s
Certificate. The Purchaser shall have received a certificate, dated as of
the Closing Date, duly executed by an officer of Pearson and certifying as to
the satisfaction of the conditions set forth in Sections 9.2(a) and (b).

 

(d)   Permitted
Reorganization. The Sellers and their Subsidiaries shall have effected the
Permitted Reorganization in accordance with the terms of Section 6.6
(subject to the last sentence of such Section).

 

(e)   Services
Agreement. The Sellers that are to be parties thereto shall have entered
into the Services Agreement.

 

(f)    Joint
Defense Agreement. NCS Pearson, Inc. shall have entered into the Joint
Defense Agreement.

 

(g)   Required
Consents. Those consents, approvals and waivers of third parties required
in connection with the consummation of the Acquisition and the other
transactions contemplated hereby that are required to be set forth in Sections
3.3(a) and 4.4(a) of the Seller Disclosure Schedules (such that such Sections
of this Agreement are accurate) shall have been obtained, with evidence thereof
delivered to the Purchaser.

 

(h)   No
Business Material Adverse Effect. Since the date of this Agreement, there
shall not have been any change in the business, assets, condition (financial or
otherwise) or operations of the Business and the Companies and their
Subsidiaries, taken as a whole, that has had or would reasonably be expected to
have a Business Material Adverse Effect.

 

(i)    Legal
Opinion. There shall have been delivered to the Purchaser an opinion of
Morgan, Lewis & Bockius LLP, dated as of the Closing Date and addressed to
the Purchaser (and on which its financing sources shall be entitled to rely),
in form and substance reasonably acceptable to the Purchaser.

 

63

 

(j)    Indebtedness.
The Business shall have no Indebtedness. All Liens on the Equity Interest and
Assets securing Indebtedness of the Business shall have been released and
removed.

 

(k)   CMS
Contract. The protest period with respect to the first task order for
services to operate a call center, awarded on October 26, 2006, between PGS and
the Centers for Medicare and Medicaid Services, shall have expired and the
scope of services to be performed by PGS with respect to such task order shall
not have been reduced or modified, except for such reductions or modifications
that would not in the aggregate reduce by more that 10% the projected revenues
under the CMS Contract.

 

(l)    Other
Documents. The Sellers shall have delivered to the Purchaser such other
documents and certificates duly executed as may be reasonably required to be
delivered by the Purchaser pursuant to the terms of this Agreement on or prior
to the Closing Date to effect fully the transactions contemplated under this
Agreement.

 

9.3           Conditions to Obligation of the
Sellers. The obligation of the Sellers to consummate the Acquisition is
subject to the satisfaction (or waiver by the Sellers in their sole discretion)
of the following further conditions:

 

(a)   Representations
and Warranties. Each of the representations and warranties of the Purchaser
set forth in this Agreement without taking into account any materiality or
Purchaser Material Adverse Effect qualifiers, shall be true and correct at and
as of the date of this Agreement and at and as of the Closing Date, as if made
at and as of the Closing Date (except, in each case, to the extent that such
representations and warranties expressly relate to an earlier date, in which
case such representations and warranties shall have been true and correct as of
such earlier date), except for such inaccuracies that, individually or in the
aggregate, would not have a Purchaser Material Adverse Effect; provided,
however, that the representations and warranties in Sections 5.1
(Organization and Good Standing), 5.2 (Authority and Enforceability), and 5.7
(Brokers) shall be true and correct in all respects.

 

(b)   Covenants
and Agreements. The Purchaser shall have performed or complied in all
material respects with all covenants and agreements required by this Agreement
to be performed or complied with at or prior to the Closing Date.

 

(c)   Officer’s
Certificate. Pearson shall have received a certificate, dated as of the
Closing Date, duly executed by an officer of the Purchaser and certifying as to
the satisfaction of the condition set forth in Sections 9.3(a) and (b).

 

(d)   Services
Agreement. The Purchaser shall have entered into the Services Agreement.

 

64

 

(e)   Legal Opinion. There shall have been delivered to the Sellers an opinion of
Schulte Roth & Zabel LLP, dated as of the Closing Date and addressed to the
Sellers, in form and substance reasonably acceptable to the Sellers.

 

(f)    Joint
Defense Agreement. The Purchaser and those of the Companies and their
Subsidiaries which are parties thereto shall have entered into the Joint
Defense Agreement.

 

(g)   Other
Documents. The Purchaser shall have delivered to the Sellers such other
documents and certificates duly executed as may be reasonably required to be
delivered by the Sellers pursuant to the terms of this Agreement on or prior to
the Closing Date to effect fully the transactions contemplated under this
Agreement.

 

ARTICLE X

 

TERMINATION

 

10.1         Termination.

 

(a)   This
Agreement may be terminated and the Acquisition abandoned at any time prior to
the Closing:

 

(i)            by mutual written consent of the
Purchaser and Pearson;

 

(ii)           by Purchaser or Pearson, if the
Closing is not consummated on or before April 16, 2007 (the “Outside Date”),
unless the failure to consummate the Closing is the result of a willful and
material breach of this Agreement by the party seeking to terminate the
Agreement;

 

(iii)          by the Purchaser, if any of the
Sellers breaches or fails to perform in any material respect any of its
representations, warranties, covenants or agreements contained in this
Agreement, which breach or failure to perform (i) would reasonably give
rise to the failure of a condition set forth in Section 9.2(a) or (b) and
(ii) either (x) cannot be cured or (y) has not been cured by the Outside
Date (provided, that the consummation of the transactions contemplated
hereunder is not then being prevented by the willful and material breach by the
Purchaser of any of the representations, warranties or covenants contained in
this Agreement);

 

(iv)          by Pearson, if the Purchaser breaches
or fails to perform in any material respect any of its representations,
warranties, covenants or agreements contained in this Agreement, which breach
or failure to perform (i) would reasonably give rise to the failure of a
condition set forth in Section 9.3(a) or (b), and (ii) either (x) cannot
be cured or (y) has not been cured by the Outside Date (provided, that
the consummation of the transactions contemplated hereunder is not then being
prevented by 

 

65

 

the willful and
material breach by the Sellers of any of the representations, warranties or
covenants contained in this Agreement); or

 

(v)           by the Purchaser or Pearson if a
Governmental Entity shall have issued an Order or taken any other action, in
any case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Acquisition, which Order or other action is final and non-appealable.

 

(b)   The party seeking to terminate this Agreement
pursuant to Section 10.1(a)(ii), (iii), (iv) or (v) shall give written
notice of such termination to the other party hereto.

 

10.2         Effect of Termination.

 

(a)   In the
event of termination of this Agreement as provided in Section 10.1, this
Agreement shall immediately become void and there shall be no liability or
obligation on the part of the Purchaser or the Sellers or their respective
officers, directors, stockholders or Affiliates hereunder or in respect hereof,
except as set forth in Section 10.2(b); provided, however,
that the provisions of Sections 7.1, 8.3, this Section 10.2 and
Article XII shall remain in full force and effect and survive any
termination of this Agreement.

 

(b)   In the event that this Agreement is
terminated by Pearson pursuant to Section 10.1(a)(iv), then the Purchaser
and the Parent shall pay, or shall cause to be paid, to Pearson a fee equal to
$20,000,000 (the “Termination Fee”) as liquidated damages, by wire
transfer of immediately available funds to an account or accounts designated by
Pearson, within two Business Days following such termination. The
parties expressly acknowledge and agree that, in light of the difficulty of
accurately determining actual damages with respect to the foregoing upon such
termination of this Agreement in circumstances where the Termination Fee is
payable in accordance with this Section 10.2(b), the rights to payments
under this Section 10.2(b): 
(i) constitute a reasonable estimate of the damages that will be
suffered by reason of any such termination of this Agreement and
(ii) shall be in full and complete satisfaction of any and all damages
arising as a result of the foregoing. Each of the parties hereto acknowledges
that the agreements contained in this Section 10.2(b) are an integral part
of the transactions contemplated by this Agreement, and that, without these
agreements, the other parties hereto would not enter into this Agreement. The
Sellers hereby agree that, except as otherwise provided in this
Section 10.2(b), if the Closing does not occur, in no event shall the
Purchaser or the Parent have any liability to the Sellers under this Agreement.

 

10.3         Other Remedies. Except as
provided in Section 10.2(b), in no event shall any termination of this
Agreement limit or restrict the rights and remedies of any party hereto against
any other party which has willfully breached any of the agreements or other
provisions of this Agreement prior to termination thereof.

 

66

 

ARTICLE XI

 

INDEMNIFICATION

 

11.1         Survival. The representations
and warranties of the parties hereto contained in this Agreement and any
certificate or other document provided hereunder or thereunder will terminate
at the Closing, except that the representations and warranties made in
Articles III, IV and V shall survive in full force and effect until the
first anniversary of the Closing Date; provided, however, that
the representations and warranties set forth in Sections 3.1 (Organization and
Good Standing), 3.2 (Authority and Enforceability), 3.4 (The Equity Interests),
4.1 (Organization and Good Standing), 4.2 (Capitalization), 4.16
(Environmental), 5.1 (Organization and Good Standing), and 5.2 (Authority and
Enforceability) shall survive in full force and effect until the third
anniversary of the Closing Date; provided, further, that the
representations and warranties set forth in Sections 4.6 (Taxes), 4.14
(Employee Benefits), 4.18 (Brokers) and 5.7 (Brokers) survive the Closing until
the expiration of the statute of limitations applicable to the underlying
claim, including any waiver, mitigation or extension thereof; and further
provided, however, that any representation or warranty that would
otherwise terminate in accordance with this sentence will continue to survive
if a Claim Notice shall have been timely given under this Article XI on or
prior to such termination date until the related claim for indemnification has
been satisfied or otherwise resolved as provided in Article XI, but only
with respect to matters described in such Claim Notice. The covenants and
agreements which by their terms do not contemplate performance after the
Closing shall terminate as of, and not survive, the Closing. The covenants and
agreements which by their terms contemplate performance after the Closing and
expire upon a date certain shall survive until such date certain, and those
which do not expire upon a date certain shall survive the Closing in accordance
with their terms until the expiration of the applicable statute of limitations.

 

11.2         Indemnification by Pearson. Subject to the limitations set
forth herein, following the Closing, Pearson and the other Sellers shall,
jointly and severally, indemnify and defend each Purchaser Group Member
against, and shall hold each Purchaser Group Member harmless from, any loss,
liability, claim, charge, action, suit, proceeding, assessed interest, penalty,
damage, expense or Tax (collectively, “Losses”) resulting from, arising
out of, or incurred by such Purchaser Group Member in connection with (a) any
breach of any representation and warranty of the Sellers contained in this
Agreement; (b) any breach of any covenant
or agreement of the Sellers contained in this Agreement, (c) any income
Tax, or chargeable gains Tax under United Kingdom law, imposed on or with respect to the Companies or
any of their Subsidiaries for any Pre-Closing Period or arising as a result of the Closing (other than any such Tax to the extent taken into account in
the determination of Final Net Assets pursuant to Section 2.4), (d) any
liability of the Companies or any of their Subsidiaries under Treasury
Regulation Section 1.1502-6 or any analogous or similar state, local or foreign
tax law or regulation resulting from an affiliation existing prior to the
Closing Date, (e) any Tax that results
from any Section 338(h)(10) Election, (f) any Tax that results from 

 

67

 

the Permitted
Reorganization, (g) any “degrouping charge” under United Kingdom tax law
attributable to the Acquisition of Pearson Government Solutions Ltd. and (h)
any capital gains Tax under Section 190 of the Mexican Income Tax Law
(including any Tax on net or gross proceeds and any withholding Tax)
attributable to the Acquisition of Soluciones Pearson México, S.A. de C.V. or
NCS Servicios de México, S.A. de C.V. (provided, however, that Purchaser shall,
upon reasonable request by the Sellers, provide documentation related to any
such Tax or exemption or reduction thereof); provided that,
notwithstanding any other provision of this Agreement, including this Section
11.2, Sellers shall not be required to indemnify and defend any Purchaser Group
Member against, and shall not be required to hold any Purchaser Group Member
harmless from, any Losses resulting from, arising out of, or incurred by such
Purchaser Group Member in connection with the TSA Contract, any TSA Action or
any indemnification or hold harmless rights or obligations relating thereto
other than pursuant to Section 8.10.

 

11.3         Indemnification by the Purchaser.
Subject to the limitations set forth herein, following the Closing, the
Purchaser shall indemnify and defend the Sellers and their Affiliates (not
including, after the Closing, the Companies and their Subsidiaries) (the “Seller
Indemnified Parties”) against, and shall hold the Seller Indemnified
Parties harmless from, any Loss resulting from, arising out of, or incurred by
the Seller Indemnified Parties in connection with (a) any breach of any
representation, and warranty of the Purchaser contained in this Agreement, (b)
any breach of any covenant or agreement of the Purchaser contained in this
Agreement, (c) any claim made by any Business Employee or former Business
Employee against any Seller Indemnified Parties for any severance or
termination benefits pursuant to any Business Group Benefit Plan, severance
plan or Law applicable to the Business or (d) any Tax imposed on the Companies
or any of their Subsidiaries for any Post-Closing Period.

 

11.4         Indemnification Procedure for Third
Party Claims.

 

(a)   In the
event that any claim or demand for which an Indemnitor may be liable to an
Indemnitee pursuant to this Article XI is asserted by a third party (a “Third
Party Claim”), the Indemnitee shall promptly notify the Indemnitor in
writing of such Third Party Claim (such notice, a “Claim Notice”). The
Claim Notice shall (i) state that the Indemnitee has paid or properly
accrued Losses or anticipates that it will incur liability for Losses for which
such Indemnitee is entitled to indemnification pursuant to this Agreement, and
(ii) specify in reasonable detail each individual item of Loss included in
the amount so stated, the date such item was paid or properly accrued, the
basis for any anticipated liability and the nature of the breach of
representation, warranty, covenant or agreement to which each such item is
related and the computation of the amount to which such Indemnitee claims to be
entitled hereunder. The Indemnitee shall enclose with the Claim Notice a copy
of all papers served with respect to such Third Party Claim, if any, and any
other documents evidencing such Third Party Claim.

 

68

 

(b)   The Indemnitor shall have 60 days from the date on which the
Indemnitor received the Claim Notice to notify the Indemnitee that the
Indemnitor desires to assume the defense or prosecution of such Third Party
Claim and any litigation resulting therefrom with counsel of its choice and at
its sole cost and expense. If the Indemnitor assumes the defense of such claim
in accordance herewith:  (i) the
Indemnitee may retain separate co-counsel at its sole cost and expense and
participate in the defense of such Third Party Claim, but the Indemnitor shall
control the investigation, defense and settlement thereof; (ii) the
Indemnitee shall not file any papers or consent to the entry of any judgment or
enter into any settlement with respect to such Third Party Claim without the
prior written consent of the Indemnitor; and (iii) the Indemnitor shall
not consent to the entry of any judgment or enter into any settlement with
respect to such Third Party Claim to the extent such judgment or settlement
provides for equitable relief without the prior written consent of the
Indemnitee. The parties shall use commercially reasonable efforts to minimize
Losses from Third Party Claims, act in good faith in responding to, defending
against, settling or otherwise dealing with such claims, and cooperate in any
such defense and give each other reasonable access to and copies of
information, records and documents relevant thereto. Whether or not the
Indemnitor has assumed the defense of such Third Party Claim, the Indemnitor
will not be obligated to indemnify the Indemnitee hereunder with respect to any
settlement entered into or any judgment consented to without the Indemnitor’s
prior written consent.

 

(c)   If the Indemnitor does not assume the defense of such Third Party
Claim within 60 days of receipt of the Claim Notice, the Indemnitee will
be entitled to assume such defense, at its sole cost and expense (or, if the
Indemnitee incurs a Loss with respect to the matter in question for which the
Indemnitee is entitled to indemnification pursuant to Sections 11.2 or 11.3, as
applicable, at the expense of the Indemnitor), upon delivery of notice to such
effect to the Indemnitor; provided, however, that:  the Indemnitor (i) shall have the right
to participate in the defense of the Third Party Claim at its sole cost and
expense, but the Indemnitee shall control the investigation, defense and
settlement thereof; (ii) may at any time thereafter assume defense of the
Third Party Claim, in which event the Indemnitor shall bear the reasonable
fees, costs and expenses of the Indemnitee’s counsel incurred prior to the
assumption by the Indemnitor of defense of the Third Party Claim; and
(iii) shall not be obligated to indemnify the Indemnitee hereunder for any
settlement entered into or any judgment consented to without the Indemnitor’s
prior written consent.

 

(d)   This
Section 11.4 shall not apply to any claim in respect of any Tax the procedures
for which are governed by Section 8.5 of this Agreement.

 

11.5         Indemnification
Procedures for Non-Third Party Claims. The Indemnitee will notify the
Indemnitor in writing promptly of its discovery of any matter for which the
Indemnitor may be liable to the Indemnitee pursuant to this Article XI that
does not involve a Third Party Claim, which Claim Notice shall (a) state
that the Indemnitee has 

 

69

 

paid or properly
accrued Losses or anticipates that it will incur liability for Losses for which
such Indemnitee is entitled to indemnification pursuant to this Agreement, and
(b) specify in reasonable detail each individual item of Loss included in
the amount so stated, the date such item was paid or properly accrued, the
basis for any anticipated liability and the nature of the breach of
representation, warranty, covenant or agreement to which each such item is
related and the computation of the amount to which the Indemnitee claims to be
entitled hereunder. In the event that the Indemnitor
does not notify the Indemnitee that it disputes such claim within 60 days
from receipt of such Claim Notice, the claim specified therein shall be deemed
a liability of the Indemnitor hereunder (subject to the limitations set
forth in this Article XI, as applicable). The Indemnitee shall reasonably cooperate and assist the Indemnitor in
determining the validity of any claim for indemnity by the Indemnitee and in
otherwise resolving such matters. Such assistance and cooperation shall include
providing reasonable access to and copies of information, records and documents
relating to such matters, furnishing employees to assist in the investigation,
defense and resolution of such matters and providing legal and business
assistance with respect to such matters.

 

11.6         Limitations
on Indemnification.

 

(a)   Except as
set forth in Section 11.6(c), no party hereto shall be required to indemnify,
defend or hold harmless any Person pursuant to this Article XI:  (i) unless a Claim Notice is timely
delivered pursuant to this Article XI; (ii) unless and until the
aggregate Losses of (1) the Purchaser Group Member, in the case of
indemnification by the Sellers under Section 11.2(a) with respect to any breach
of any representation and warranty of the Sellers contained in this Agreement
(other than any breach of Section 4.6), or (2) the Sellers in the case of indemnification
by the Purchaser under Section 11.3(a) with respect to any breach of any
representation and warranty of the Purchaser contained in this Agreement,
exceed an amount equal to (A) $9,000,000 minus (B) the aggregate Losses that
are subject to the next succeeding sentence (up to $1,000,000), after which
such party shall be liable only for such Losses in excess of such amount; and
(iii) for any individual items where the Loss relating thereto is less
than $50,000, and such items shall not be aggregated for purposes of the
immediately preceding clause (ii). Notwithstanding the foregoing, the Sellers shall not be required
to indemnify, defend and hold harmless the Purchaser Group Member with
respect to any breach of Section 4.6 with respect to Taxes not involving income
Taxes until such time as the aggregate Losses of the Purchaser Group Member
under Section 11.2(a) relating to a breach of Section 4.6 with respect to Taxes
(other than Taxes for which indemnification is provided under Sections 11.2(c),
(d), (e), (f), (g) or (h)) exceed $1,000,000, provided that the Sellers shall
be liable for such Losses only in excess of such amount (such excess amount,
the “Tax Deductible”).

 

(b)   Except as
set forth in Section 11.6(c), in no event shall the cumulative indemnification
obligations of the Sellers, on the one hand, or the Purchaser, on the other
hand, for Losses of the Purchaser under Section 11.3(a) and 

 

70

 

the
Sellers under Section 11.2(a), respectively, in the aggregate exceed $60,000,000
(the “Cap”).

 

(c)   Notwithstanding the foregoing, the limitations
set forth in Sections 11.6(a)
and (b) shall not apply to a claim relating to (x) any breach of any warranty
or the inaccuracy of any representation set forth in Sections 3.1 (Organization
and Good Standing), 3.2 (Authority and Enforceability), 3.4 (The Equity
Interests), 4.1 (Organization and Good Standing), 4.2 (Capitalization), 4.18 (Brokers), 5.1 (Organization and Good Standing), 5.2 (Authority
and Enforceability) and 5.7 (Brokers), or (y) any breach of any warranty or the
inaccuracy of any representation that constitutes fraud.

 

(d)   The amount of Losses payable under this Article XI
by the Indemnitor shall be reduced by any amounts actually recovered by
the Indemnitee under insurance policies or from any other Person.

 

(e)   No party
hereto shall be obligated to indemnify any other Person with respect to
(i) any covenant or condition waived by the other party on or prior to the
Closing, (ii) any indirect, special, incidental, consequential or punitive
damages, or (iii) any Loss with respect to any matter to the extent that
such matter was raised in the calculation of the adjustment of the Purchase
Price pursuant to Section 2.4.

 

(f)    In
addition to the other limitations set forth in this Article XI, with
respect to any claim for indemnification regarding any breach of any
representation and warranty set forth in Section 4.16:  (i) the Sellers shall have no obligation
to indemnify or defend the Purchaser for any Loss unless the Loss arises out of
a Third Party Claim that is not instigated or encouraged by the Purchaser or
any Affiliate thereof; (ii) the Sellers shall have no obligation to
indemnify or defend the Purchaser for any Loss that would not have arisen but
for any intrusive investigation by the Purchaser or its agents or
representatives or any disclosure to a third party by the Purchaser, except to
the extent such investigation or disclosure was required by applicable
Environmental Laws; and (iii) the Sellers’ indemnification obligation
shall be limited to the cost of the least restrictive standard or remedy
acceptable under Environmental Laws (including engineering or institutional
controls or any lesser standards resulting from any site-specific risk
assessments) based on an industrial use of the relevant facility or property; provided,
however, that in each case, the Sellers shall have no liability for any
such Loss to the extent that the Purchaser or any other Person after Closing
contributed to or exacerbated the condition or circumstance forming the basis
of such Loss.

 

(g)   Unless
expressly covered by a representation or warranty contained in Article III or
IV, the Purchaser shall have no claim or right to indemnification pursuant to
this Article XI or otherwise, and none of the Sellers, the Business or any
other Person shall have or be subject to any liability to the other party
hereto or any other Person, with respect to any information, documents or
materials 

 

71

 

furnished
or made available to the Purchaser or any of their Affiliates, officers,
directors, employees, agents or advisors by the Seller, any Affiliate thereof,
the Business or any of their respective Affiliates, officers, directors,
employees, agents or advisors in certain “data rooms”, management presentations
or any other form in contemplation of the transactions contemplated hereby.

 

(h)   The
Purchaser shall not be entitled to make any claim to the extent that provision
or allowance for the matter or liability which would otherwise give rise to the
claim in question has been made in the most recent Financial Statements of the
Companies or their Subsidiaries, or it is otherwise taken account of, or
reflected, in such Financial Statements of the Companies or their Subsidiaries.

 

11.7         Exclusive
Remedy. Each party hereto
acknowledges and agrees that, should the Closing occur, its sole and exclusive
remedy with respect to any and all matters arising out of, relating to or
connected with this Agreement, the Acquisition and the other transactions
contemplated hereby or thereby, other than matters relating to the TSA Contract
as set forth in Section 8.10, shall be a claim pursuant to the provisions
of this Article XI or Section 8.4; provided  that, the
provisions of this Section 11.7 shall not apply in the case of fraud on the
part of the Sellers or the Purchaser. In furtherance of the foregoing, each
party hereto (on behalf of itself and their Affiliates (including, in the case
of the Purchaser following the Closing, the Companies)) hereby waives, from and
after the Closing, any and all rights, claims and causes of action which such
party may have against the other party hereto or any of their Affiliates
arising under or based upon any Law or otherwise, other than pursuant to this
Article XI.

 

11.8         Characterization of Indemnification
Payments. Except as otherwise required by applicable Law, the parties
hereto shall treat any indemnification payment made under this Article XI as an
adjustment to the Purchase Price and allocable (i) to the Company to which
such payment is attributable, to the extent readily ascertainable, and
(ii) otherwise, to PGS.

 

ARTICLE XII

 

MISCELLANEOUS

 

12.1         Notices. All notices, requests
and other communications hereunder must be in writing and will be deemed to
have been duly given only if (a) delivered personally against written
receipt, (b) sent by facsimile transmission, (c) mailed by registered
or certified mail, postage prepaid, return receipt requested, or
(d) mailed by reputable international overnight courier, fee prepaid, to
the parties hereto at the following addresses or facsimile numbers:

 

72

 

If to the Purchaser and
Parent, to:

 

c/o Veritas Capital Fund
Management, L.L.C.

590 Madison Avenue, 41st Floor

New York, NY 10022

Attention: Robert B. McKeon

Facsimile: (212) 688-9411

 

With a copy to:

 

Schulte Roth & Zabel
LLP

919 Third Avenue

New York, NY 10022

Attention:  Benjamin M. Polk, Esq.

Facsimile:  (212) 593-5955

 

If to the Sellers, to:

 

c/o Pearson Inc. 

1330 Avenue of the Americas

New York, NY  10019

Attention:  Philip J. Hoffman

Facsimile:  (212) 641-2532

 

and

 

c/o Pearson Education,
Inc. 

One Lake Street

Upper Saddle River, NJ  07458

Attention:  Robert L. Dancy

Facsimile:  (201) 236-4675

 

With a copy to:

 

Morgan, Lewis &
Bockius LLP

101 Park Avenue

New York, NY  10178

Attention:  Charles E. Engros, Jr. 

Facsimile:  (212) 309-6001

 

All such notices,
requests and other communications will be deemed given, (w) if delivered
personally as provided in this Section, upon delivery, (x) if delivered by
facsimile transmission as provided in this Section, upon confirmed receipt,
(y) if delivered by mail as provided in this Section, upon the earlier of
the fifth Business Day following mailing and receipt, and (z) if delivered
by overnight courier as provided in this Section, upon the earlier of the
second Business Day following the date sent by such overnight courier and
receipt (in each case regardless of whether such notice, request or other
communication is received by any other Person to whom a copy of such notice is
to be delivered pursuant to this Section). Any party hereto may change the
address to which 

 

73

 

notices, requests and
other communications hereunder are to be delivered by giving the other parties
hereto notice in the manner set forth herein.

 

12.2         Amendments and Waivers. No
amendment of any provision of this Agreement shall be valid unless such
amendment is in writing and signed by the Purchaser and the Sellers. No failure
or delay by any party hereto in exercising any right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.

 

12.3         Expenses. Except as provided in
Section 8.1, the Sellers, on the one hand, and the Purchaser, on the other
hand, shall bear their own costs and expenses in connection with this Agreement
and the transactions contemplated hereby, including all legal, accounting,
financial advisory, consulting and all other fees and expenses of third
parties, whether or not the Acquisition is consummated.

 

12.4         Successors and Assigns. This
Agreement may not be assigned by either party hereto without the prior written
consent of the other party; provided, however, that the Purchaser
may assign this Agreement and its rights and obligations hereunder, in whole or
in part, to any of their Affiliates (including the assignment to one or more
Designated Purchaser Entities of any or all of its rights and obligations under
Section 2.1 with respect to all or any of the Equity Interests of any Company)
without the prior consent of the Sellers; provided, that the Purchaser
shall remain liable for, and any such assignment shall not release, absolve or
relieve the Purchaser of, or modify, limit or extinguish any of, its
obligations hereunder; and further, provided, however,
that the Purchaser (and the Designated Purchaser Entities) may assign or grant
security interests in this Agreement and their rights hereunder, and under the
other agreements and documents delivered pursuant hereto, to lenders, noteholders,
or agents or trustees on their behalf in connection with the Rule 144A Offering
or the Other Financing. Subject to the foregoing sentence, all of the terms and
provisions of this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted assigns.

 

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

 

12.6         Consent
to Jurisdiction. Each party
hereto irrevocably submits to the exclusive jurisdiction of any state or
Federal court located within the County of New York in the State of
New York for the purposes of any suit, action or other proceeding arising
out of this Agreement or any transaction contemplated hereby, and agrees to
commence any such action, suit or proceeding only in such courts. Each party
further agrees that service of any process, summons, notice or document by U.S.
registered mail to such party’s respective address set forth herein shall be
effective service of process for any such action, suit or proceeding. Each
party irrevocably and 

 

74

 

unconditionally
waives any objection to the laying of venue of any action, suit or proceeding
arising out of this Agreement or the transactions contemplated hereby in such
courts, and hereby irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum. EACH PARTY
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF
OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR THE
ACTIONS OF SUCH PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND
ENFORCEMENT HEREOF.

 

12.7         Counterparts. This Agreement may
be executed in one or more counterparts, and by the different parties hereto in
separate counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by facsimile shall be effective as delivery of a manually executed
counterpart to this Agreement.

 

12.8         No Third Party Beneficiaries. No
provision of this Agreement is intended or shall be deemed to confer upon any
Person other than the parties hereto any rights or remedies hereunder.

 

12.9         Entire Agreement. This Agreement
(including the Exhibits and the Schedules hereto) constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes any prior understandings, agreements or representations by or
between the parties hereto, written or oral, with respect to such subject
matter (except for the Confidentiality Agreement, which shall continue in full
force and effect in accordance with its terms). All Exhibits and Schedules
referred to herein are intended to be and hereby are specifically made a part
of this Agreement.

 

12.10       Captions. All captions contained
in this Agreement are for convenience of reference only, do not form a part of
this Agreement and shall not affect in any way the meaning or interpretation of
this Agreement.

 

12.11       Severability. If any provision of
this Agreement is held to be illegal, invalid or unenforceable under any
present or future Law, and if the rights or obligations of any party hereto
under this Agreement will not be materially and adversely affected thereby,
(a) such provision will be fully severable, (b) this Agreement will
be construed and enforced as if such provision had never comprised a part
hereof, (c) the remaining provisions of this Agreement will remain in full
force and effect and will not be affected by such provision or its severance
herefrom and (d) in lieu of such provision, there will be added
automatically as a part of this Agreement a legal, valid and enforceable
provision as similar in terms to such provision as may be possible.

 

75

 

12.12       Specific Performance. The parties
hereto agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed by them in accordance with the
terms hereof and that each party hereto shall be entitled to specific performance
of the terms hereof, in addition to any other remedy at law or equity.

 

12.13       Interpretation. The parties hereto
have participated jointly in the negotiation and drafting of this Agreement,
and any rule of construction or interpretation otherwise requiring this
Agreement to be construed or interpreted against any party by virtue of the
authorship of this Agreement shall not apply to the construction and
interpretation hereof.

 

[Signature page follows.]

 

76

 

IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the date first written above.

 

	
   

  	
  PGS HOLDING CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert B. McKeon

  
	
   

  	
   

  	
  Name: Robert B. McKeon

  
	
   

  	
   

  	
  Title: President

  
	
   

  	
   

  	
   

  
	
   

  	
  Solely for purposes of
  Section 10.2(b) and 

  Article XII of this Agreement:

  
	
   

  	
   

  	
   

  
	
   

  	
  The Veritas Capital
  Fund III, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert B. McKeon

  
	
   

  	
   

  	
  Name: Robert B. McKeon

  
	
   

  	
   

  	
  Title: Authorized
  Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Pearson
  Inc.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Philip J. Hoffman

  	
   

  
	
   

  	
  Name: Philip J. Hoffman

  	
   

  	
   

  	
   

  
	
   

  	
  Title: Executive Vice
  President

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pearson plc

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Philip J. Hoffman

  	
   

  
	
   

  	
  Name: Philip J. Hoffman

  	
   

  	
   

  	
   

  
	
   

  	
  Title: Company
  Secretary

  	
   

  	
   

  	
   

  

 

 

Signature Page to Stock
Purchase Agreement

 

 

 

	
  Pearson Overseas
  Holdings Limited

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Philip J. Hoffman

  	
   

  
	
   

  	
  Name: Philip J. Hoffman

  	
   

  	
   

  	
   

  
	
   

  	
  Title: Authorized
  Signatory

  	
   

  	
   

  	
   

  

 

 

Signature Page to Stock
Purchase Agreement

 

 

 

	
  NCS Pearson, Inc.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Philip J. Hoffman

  	
   

  
	
   

  	
  Name: Philip J. Hoffman

  	
   

  	
   

  	
   

  
	
   

  	
  Title: Authorized
  Signatory

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NCS Assessments Inc.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Philip J. Hoffman

  	
   

  
	
   

  	
  Name: Philip J. Hoffman

  	
   

  	
   

  	
   

  
	
   

  	
  Title: Authorized
  Signatory

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NCSP Holdings, Inc.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Philip J. Hoffman

  	
   

  
	
   

  	
  Name: Phillip J.
  Hoffman

  	
   

  	
   

  	
   

  
	
   

  	
  Title: Authorized
  Signatory

  	
   

  	
   

  	
   

  

 

 

Signature Page to
Stock Purchase Agreement

 

 

 

Attachment
A

 

	
  Selling Entity 

  (“Seller”)

  	
   

  	
  Company Being Sold 

  (“Company”)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  NCSP Holdings, Inc.

  	
   

  	
  Pearson Government
  Solutions, Inc.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  NCSP Holdings, Inc.

  	
   

  	
  Pearson Analytic
  Solutions, Inc.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  NCS Pearson, Inc.

  NCS Assessments Inc.

  	
   

  	
  Soluciones Pearson México, S.A. de C.V.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  NCS Pearson, Inc.

  NCS Assessments Inc.

  	
   

  	
  NCS Servicios de México, S.A. de C.V.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  NCS Pearson, Inc.

  NCS Assessments Inc.

  	
   

  	
  NCS Pearson Venezuela, C.A.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  NCS Pearson, Inc.

  NCS Assessments Inc.

  	
   

  	
  Pearson Soluciones S.A.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  Pearson Overseas 

  Holdings Limited

  	
   

  	
  Pearson Canada
  Solutions Limited

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  Pearson plc

  	
   

  	
  Pearson Government
  Solutions, Ltd.

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