CONFORMED COPY
AMENDMENT TO EXCHANGE AGREEMENT
THIS AMENDMENT TO EXCHANGE AGREEMENT (the "Amend-
ment"), dated as of October 15, 1996, is made by and among The
Times Mirror Company, a Delaware corporation, Mosby-Year Book,
Inc., a Missouri corporation, and The McGraw-Hill Companies,
Inc., a New York corporation.
WHEREAS, the parties hereto entered into an Exchange
Agreement, dated as of July 3, 1996 (the "Agreement"); and
WHEREAS, the parties hereto desire to amend certain
provisions of the Agreement;
NOW, THEREFORE, in consideration of the foregoing,
and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to
be legally bound hereby, the parties hereto hereby agree as
follows:
1. Definitions. Capitalized terms not otherwise
defined herein shall have the meaning ascribed to them in the
Agreement.
2. Amendments to the Agreement.
(a) Notwithstanding any provision of the Agreement
to the contrary, the parties have agreed that Times Mirror will
cause the title to the International Assets to be transferred
to, and the International Liabilities (as set forth in Sched-
ules 2.02(a)(ii) and 2.02(b), respectively, along with any
increases and decreases therein in the ordinary course of busi-
ness of the TMIP Entities, as further reflected in the state-
ment of assets conveyed and liabilities assumed related to the
International Assets and the International Liabilities deliv-
ered pursuant to Section 7.01(a)(iii) as of June 30, 1996, and
such further increases and decreases therein in the ordinary
course of business that have occurred since June 30, 1996) to
be assumed by, TMHE prior to the Closing Date. For purposes of
the Post-Closing Adjustment described in Section 9.01(a), this
transfer shall be deemed to occur on the Closing Date and shall
have no impact upon such Post-Closing Adjustment.
(b) The definition of "College Publishing Business
Employee" is hereby amended to insert the words "on family
leave," after the phrase "on any authorized leave of absence,"
in subpart (ii) thereof.
(c) The definition of "Shepard's Employee" is hereby
amended to insert the words "on family leave," after the phrase
"on any authorized leave of absence," in subpart (ii) thereof.
(d) Section 2.03 is hereby amended as set forth in
the separate letter agreement concerning James H. Higby dated
October 14, 1996.
(e) The introductory paragraph to Section 3.01 is
hereby amended to read as follows:
The closing (the "Closing") of the purchase and
sale of the Shepard's Shares, the TMHE Shares and the
Mosby Assets and the assumption of the Mosby Liabil-
ities shall be effective immediately prior to 12:00
midnight on October 15, 1996. The date on which the
Closing shall be effective is hereinafter referred to
as the "Closing Date." The Closing shall be held at
the offices of Wachtell, Lipton, Rosen & Katz, 51
West 52nd Street, New York, New York.
(f) Section 3.01(a) is hereby amended by deleting
the words "and the TMIP entities" from the parenthetical clause
and by deleting the words "and the International Liabilities."
(g) The first sentence of Section 3.01(e) is hereby
amended to read as follows:
Title to the International Assets shall be trans-
ferred to TMHE, and the International Liabilities
shall be assumed by TMHE, prior to the Closing Date,
but any tangible International Assets will be in pos-
session or control of the TMIP Entities on the Clos-
ing Date.
(h) Section 4.02(a)(ii) is hereby amended to read as
follows:
McGraw-Hill shall have received from Times Mirror and
Mosby certificates issued by the appropriate govern-
mental authority of the jurisdiction of incorporation
or organization, as the case may be, of each of Times
Mirror, TMHE, Mosby and, except to the extent that
any has been dissolved prior to the Closing, the cor-
porations or other entities set forth on Schedule
5.08, evidencing its good standing in its respective
jurisdiction of incorporation or organization as of a
date not more than ten days prior to the Closing
Date, or to the extent that any of the corporations
or other entities set forth on Schedule 5.08 has been
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dissolved prior to the Closing, evidence reasonably
satisfactory to McGraw-Hill and its counsel of such
dissolution.
(i) Section 4.02(a)(iv) is hereby amended by delet-
ing the words "The TMIP Entities shall have executed and deliv-
ered the instruments of sale and assignment referred to in Sec-
tion 3.01(b) and."
(j) Section 4.02(a)(vi) is hereby amended by delet-
ing the words "and Times Mirror shall have caused TMIP to ex-
ecute and deliver the TMIP Transition Services Agreement."
(k) Section 4.03(a)(iv) is hereby amended by delet-
ing the words "and the International Liabilities."
(l) The final clause of Section 5.09(e) is hereby
amended by replacing the words "last paragraph of Section
9.01(a)(ii)" with the words "the paragraph in Section 9.01(a)
that begins with the words `The accrual of additional
reserves.'"
(m) The last sentence of the first paragraph of Sec-
tion 5.12 is hereby amended by adding the words "and as of the
Closing Date TMHE will have good title to the International
Assets," immediately before the words "except for inventory."
(n) Section 5.15(c) is hereby amended by deleting
the comma and adding the word "or" after the words "TMHE Sub-
sidiaries" and deleting the words "or any of the TMIP Entities
(with respect to the International Assets)."
(o) Section 5.15(d) is hereby amended by adding the
word "or" immediately before the word "Mosby" each time it oc-
curs, by deleting the words "or the TMIP Entities, with respect
to the International Assets and International Liabilities" and
by deleting the words "or any of the TMIP Entities."
(p) Section 5.15(f) is hereby amended by adding the
word "or" immediately before the word "Mosby" and by deleting
the words "or any of the TMIP Entities (with respect to the
International Assets)."
(q) Section 5.15(h) is hereby amended by adding the
word "or" immediately before the first occurrence of the word
"Mosby" and by deleting the words "or any of the TMIP Entities,
with respect to the International Liabilities."
(r) Section 5.15(i) is hereby amended by adding the
word "or" immediately before the word "Mosby" and by deleting
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the words "or any of the TMIP Entities (with respect to the
International Assets)."
(s) Section 5.15(j) is hereby amended by adding the
word "or" immediately before the word "Mosby" and by deleting
the words "or any of the TMIP Entities (with respect to the
International Assets)."
(t) Section 5.15(l) is hereby amended by adding the
word "or" immediately before the first occurrence of the word
"Mosby," by deleting the words "or any of the TMIP Entities
(with respect to the International Assets)" and by deleting the
words "or any of the International Assets" and the comma pre-
ceding such phrase.
(u) Section 5.19(a) is hereby amended by adding the
words "and affecting" prior to the words "the International
Assets."
(v) Clauses (b) through (e) of Section 5.20 are
hereby amended by adding the word "or" immediately before the
word "Mosby" each time it appears and by deleting the words "or
any of the TMIP Entities (with respect to the International
Assets)" each time it appears.
(w) Section 5.22(a) is hereby amended to read as
follows:
Except as set forth on Schedule 5.22(a), the Inter-
national Assets do not include nor is any Interna-
tional Asset affected by any exclusive distribution
agreement or arrangement having a term exceeding one
year, whether written or oral, with any entity or
individual. With respect to any such distribution
agreement or arrangement, whether written or oral,
Schedule 5.22(a) sets forth the term thereof, the
territory and the works covered thereby.
(x) The first sentence of Section 7.01(a) is hereby
amended by replacing the reference to "August 31, 1996" by "Au-
gust 15, 1996."
(y) Section 7.01(b) is hereby amended by replacing
the reference to "45" with "60."
(z) The first sentence of Section 7.01(c) is hereby
amended to read as follows:
As soon as practicable and in any event not later
than 60 days after the Closing Date, Times Mirror
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shall deliver to McGraw-Hill an unaudited balance
sheet for each of (1) TMHE and the TMHE Subsidiaries
that exist on the Closing Date, on a consolidating
basis, (2) the International Assets and International
Liabilities, by legal entity that transferred the
International Assets and International Liabilities to
TMHE pursuant to Section 3.01(e), included in the
TMHE balance sheet under Section 7.01(c)(1), and (3)
the Mosby Assets and the Mosby Liabilities, in each
case as of the Closing Date (the "College Publishing
Business Closing Date Balance Sheets").
(aa) Section 7.03(n) of the Agreement is hereby
amended to read as follows:
(n) Material Agreements. Enter into (i) any
agreement, whether or not in the ordinary course of
business, that calls for payments in excess of
$500,000 and will not be fully performed within 12
months, (ii) any author contract calling for advances
or pre-publication costs in excess of $500,000 or
(iii) any royalty guarantees; provided, however, that
this Section 7.03(n) shall not be deemed to prohibit
TMHE from entering into the agreement previously dis-
closed to McGraw-Hill by Times Mirror between Richard
D. Irwin and Pennsylvania State University, the ex-
ecution and performance of which agreement is hereby
specifically consented to by McGraw-Hill.
(bb) Clause (d) of Section 7.03 is hereby amended by
inserting the words "College Publishing Business" immediately
before the word "Plan."
(cc) Clause (o) of Section 7.03 is hereby amended by
replacing the words "last paragraph of Section 9.01(a)(ii)"
with the words "the paragraph in Section 9.01(a) that begins
with the words `The accrual of additional reserves.'"
(dd) Section 7.13(b) is hereby amended to read as
follows:
In the event that the sale to Times Mirror of the
Partnership Interest pursuant to paragraph (a) of
this Section 7.13 takes place, Times Mirror will pay
to McGraw-Hill at the closing of such purchase $3
million in immediately available funds.
(ee) The first sentence of Section 8.01(a) is hereby
amended by replacing the reference to "August 31, 1996" with
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"August 15, 1996" and by adding the words "shareholder's equity
and cashflows" immediately after the word "operations."
(ff) The first sentence of each of Sections 8.01(b)
and 8.01(c) is hereby amended by replacing the reference to
"45" with "60."
(gg) Clause (d) of Section 8.03 is hereby amended to
read as follows:
(d) Employee Matters. Adopt or amend in any
material respect, with respect to Shepard's, any
McGraw-Hill Plan or collective bargaining agreement,
except as required by law;
(hh) Section 8.05 of the Agreement is hereby amended
by inserting the words "and all of the officers" immediately
after the words "Board of Directors."
(ii) Section 8.12 of the Agreement is hereby de-
leted.
(jj) Section 9.01(a) is hereby amended further by
adding the following immediately after the third paragraph:
Any cash on the books of TMHE at the close of busi-
ness on June 30, 1996 and reflected as such on the
June 30 Financial Statements shall be considered, on
that date, a debit to the intercompany account with
Times Mirror on the books of TMHE; any cash on the
books of TMHE on the Closing Date and reflected as
such on the Closing Date Balance Sheet shall be con-
sidered a debit on that date to the intercompany
account with Times Mirror on the books of TMHE and
shall be paid by McGraw-Hill to Times Mirror in
addition to any amount determined under Section
9.01(a)(ii) or 9.01(b)(i).
(kk) Section 9.01(b) is hereby amended further by
adding the following immediately after the third paragraph:
Any cash on the books of Shepard's at the close of
business on June 30, 1996 and reflected as such on
the June 30 Financial Statements shall be considered,
on that date, a debit to the intercompany account
with McGraw-Hill on the books of Shepard's; any cash
on the books of Shepard's on the Closing Date and
reflected as such on the Closing Date Balance Sheet
shall be considered a debit on that date to the in-
tercompany account with McGraw-Hill on the books of
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Shepard's and shall be paid by Times Mirror to
McGraw-Hill in addition to any amount determined un-
der Section 9.01(a)(i) or 9.01(b)(ii).
(ll) Section 9.02(a) is hereby amended by inserting
the following immediately after the first sentence:
In addition, Mosby grants to McGraw-Hill and TMHE the
right to use Mosby's name on packaging materials, if
any, included in the Mosby Assets in the form it ap-
pears thereon on the Closing Date, and to continue to
use such packaging materials until all current sup-
pliers of such materials have been exhausted.
(mm) Section 9.02(b) is hereby amended by inserting
the following immediately after the first sentence:
In addition, Times Mirror grants to McGraw-Hill and
TMHE the right to use Times Mirror's name on packag-
ing materials included in the College Publishing
Business in the form it appears thereon on the Clos-
ing Date, and to continue to use such packaging mate-
rials until all current supplies of such materials
have been exhausted.
(nn) Section 9.02(c) is hereby amended by inserting
the following immediately after the first sentence:
In addition, McGraw-Hill grants to Times Mirror and
Shepard's the right to use McGraw-Hill's name on
packaging materials included in the assets of Shep-
ard's in the form it appears thereon on the Closing
Date, and to continue to use such packaging materials
until all current supplies of such materials have
been exhausted.
(oo) Clause (i) of Section 9.06(a) is hereby amended
to read as follows:
Mosby may retain Records until the Termination Date
of the Mosby Transition Services Agreement (as such
term is defined therein) to the extent necessary or
convenient for the performance of its obligations
thereunder;
(pp) Section 9.08 is hereby amended by adding the
words "and unaudited" immediately after the word "audited" each
time it appears.
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(qq) A new Section 9.09 is hereby added to read as
follows:
Section 9.09 TMIP Returns Procedures.
(a) Processing of English-Language Returns. After
the Closing Date, returns of English-language publications
published by the College Publishing Business of TMHE or
any of the TMHE Subsidiaries or by Mosby's College Text
Business that were sold out of consigned inventory by the
TMIP Entities prior to the Closing Date will be processed
by McGraw-Hill in accordance with the following proce-
dures:
(i) McGraw-Hill will process all returns of
all such publications through McGraw-Hill affiliates lo-
cated in the United Kingdom, Canada, Singapore, Spain and
Australia. Shortly after the Closing Date, McGraw-Hill
will issue instructions to all customers who have pur-
chased such publications through TMIP to the effect that
all returns shall be made to and processed by McGraw-Hill.
Times Mirror agrees that McGraw-Hill may establish any
commercially reasonable guidelines for acceptance of re-
turns as McGraw-Hill determines. All such returned publi-
cations shall be the property of McGraw-Hill.
(ii) If and to the extent that there is an out-
standing account receivable associated with any of such
returned publications, McGraw-Hill shall issue to the cus-
tomer a credit document for the amount to be credited to
TMIP's customer's account.
(iii) If and to the extent that there is no out-
standing account receivable associated with any of such
returned publications, (A) McGraw-Hill shall issue to the
customer a credit document for the amount to be refunded
to the customer (or credited to the customer's account
with respect to other publications of McGraw-Hill or any
of its subsidiaries) and (B) a receivable from the TMIP
Entity that sold the returned publications shall be estab-
lished on the books of McGraw-Hill in the amount of the
customer credit, less the statutory price of the returned
publications previously paid to TMHE or Mosby. Times Mir-
ror or the relevant TMIP Entity shall pay such receivable
to McGraw-Hill within 30 days of invoicing by McGraw-Hill.
(b) Processing of Other Returns.
(i) After the Closing Date, returns of adapta-
tions, translations or indigenous works included in the
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International Assets will be processed by McGraw-Hill and
credits for such returned publications shall be issued by
McGraw-Hill to the customer.
(ii) If and to the extent that there is an out-
standing account receivable associated with any of such
returned publications, McGraw-Hill shall issue to the cus-
tomer a credit document for the amount to be credited to
TMIP's customer's account.
(iii) If and to the extent that there is no out-
standing account receivable associated with any of such
returned publications, (A) McGraw-Hill shall issue to the
customer a credit document for the amount to be refunded
to the customer (or credited to the customer's account
with respect to other publications of McGraw-Hill or any
of its subsidiaries) and (B) a receivable from the TMIP
Entity that sold the returned publications shall be estab-
lished on the books of McGraw-Hill in the amount of the
customer credit. Times Mirror or the relevant TMIP Entity
shall pay such receivable to McGraw-Hill within 30 days of
invoicing by McGraw-Hill.
(iv) McGraw-Hill shall report to Times Mirror
not later than 30 days after the end of each month the
quantity and title of such publications returned to
McGraw-Hill during the proceeding month and will identify
any such returned publications that McGraw-Hill intends to
retain for resale. A receivable shall be established on
the books of Times Mirror in the amount of the paper,
printing and binding cost of such returned publications as
McGraw-Hill intends to retain for resale and all other
such returned publications shall be destroyed. McGraw-
Hill or the relevant McGraw-Hill subsidiary shall pay such
receivable to the relevant TMIP Entity within 30 days af-
ter invoicing by the TMIP Entity.
(v) After the Closing Date, returns of any
publications of Mosby other than publications of Mosby's
College Text Business received by McGraw-Hill or any of
its affiliates will not be processed by McGraw-Hill and
will be forwarded to Mosby or to another Person designated
by Mosby at Mosby's sole expense and risk.
(c) Returns Received by Times Mirror or any of the
TMIP Entities. After the Closing Date, returns of the
English-language publications published by the College
Publishing Business of TMHE or any of the TMHE Subsid-
iaries or by Mosby's College Text Business that were sold
out of consigned inventory by the TMIP Entities prior to
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the Closing Date that are received by Times Mirror or any
of the TMIP Entities shall be forwarded to McGraw-Hill at
McGraw-Hill's sole expense and risk.
(d) General Matters Regarding Returns. Times Mirror
shall cause each of the TMIP Entities to provide to
McGraw-Hill or to the McGraw-Hill affiliate designated by
McGraw-Hill, within 30 days after the Closing Date, all
original customer billing and account status information
as reasonably requested by McGraw-Hill. Times Mirror
shall designate certain employees of the TMIP Entities
and/or Mosby to be the primary contact for McGraw-Hill
with respect to returns.
(e) Offsets. Each of the parties may offset amounts
owed to any other party pursuant to this Section 9.09
against amounts owed by such other party pursuant to this
Section 9.09.
(rr) A new Section 9.10 is hereby added to read as
follows:
Section 9.10 Costs of TMIP Receivables Collection.
McGraw-Hill shall reimburse Times Mirror, within 90
days after invoice therefor, for costs incurred by
Times Mirror or the TMIP Entities in connection with
the collection by Times Mirror or by any of the TMIP
Entities of any accounts receivable with respect to
english-language publications published by the Col-
lege Publishing Business of TMHE or any of the TMHE
Subsidiaries or by Mosby's College Text Business that
were sold out of consigned inventory by the TMIP En-
tities prior to the Closing Date. For purposes of
this Section, costs shall not exceed 2% of the share
of such receivables actually collected and paid over
to McGraw-Hill or TMHE.
(ss) The first four sentences of Section 10.01 are
hereby amended to read as follows:
Schedule 10.01(a), as updated to the Closing Date,
contains a complete and accurate list of each Mosby's
College Text Business employee who will be offered
employment by McGraw-Hill on the Closing Date (the
"Mosby College Text Business Employees"). On the
Closing Date, McGraw-Hill shall offer employment to
(or cause TMHE to offer employment to) each Mosby's
College Text Business Employee. Except as otherwise
provided herein, on the Closing Date, all College
Publishing Business Employees (but excluding any
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Mosby's College Text Business Employee who has not
accepted the aforementioned offer of employment or
any employee in Mosby's College Text Business who is
not listed on Schedule 10.01(a)) who are then (i)
actively employed or (ii) carried on the payroll as a
result of being on an authorized leave of absence
(other than a short-term or long-term disability
leave), family leave or vacation leave (hereinafter,
an "Employee-on-Leave") shall be employees of TMHE
and McGraw-Hill (collectively, the "College Publish-
ing Business Transferred Employees"). College Pub-
lishing Business Employees (but excluding any em-
ployee of Mosby's College Text Business who is not
listed on Schedule 10.01(a)) who are on short-term or
long-term disability leave on the Closing Date shall
be offered employment with McGraw-Hill or TMHE fol-
lowing the expiration of the leave of absence only to
the extent that Times Mirror, TMHE, a TMHE Subsidiary
or Mosby was obligated to offer employment to any
such employee upon return to work following such
leave, and, as of the date of such employee's accep-
tance of such offer of employment, such employee
shall be deemed a College Publishing Business Trans-
ferred Employee for purposes of this Agreement, sub-
ject to the terms and conditions set forth in this
Article 10; provided, however, that McGraw-Hill and
TMHE shall have no obligation to employ any employee
described in this sentence whose leave of absence
does not end prior to the first anniversary of the
Closing Date. Times Mirror shall retain the obliga-
tion to provide worker's compensation, short-term
disability, long-term disability and other benefits
to any employee described in the previous sentence
until such time as such employee becomes a College
Publishing Business Transferred Employee.
(tt) The sixth sentence of Section 10.01(a) is here-
by amended by deleting the first word thereof and replacing it
with "Except as provided above with respect to College Publish-
ing Business Employees on short-term or long-term disability
leave on the Closing Date, for."
(uu) The proviso in Section 10.07(b) is hereby
amended to read as follows:
provided, however, that, in order for any College
Publishing Business Transferred Employee to be eli-
gible to participate in any College Publishing Busi-
ness Post-Retirement Plan, such employee must ex-
pressly elect in writing to participate therein
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within 31 days following the Closing Date and must
elect in writing to commence coverage thereunder
either effective as of the Closing Date or effective
as of the date of such employee's retirement under
the TM Pension Plan, if later.
(vv) The first three sentences of Section 10A.01 are
hereby amended to read as follows:
Except as otherwise provided herein, on the Closing
Date, all Shepard's Employees who are then (i) ac-
tively employed or (ii) carried on the payroll as a
result of being on an authorized leave of absence
(other than a short-term or long-term disability
leave), family leave or vacation leave (hereinafter,
an "Employee-on-Leave") shall be employees of Shep-
ard's and Times Mirror (collectively, the "Shepard's
Transferred Employees"). Shepard's Employees who are
on short-term or long-term disability leave on the
Closing Date shall be offered employment with Times
Mirror and Shepard's following the expiration of the
leave of absence only to the extent that Shepard's or
McGraw-Hill was obligated to offer employment to any
such employee upon return to work following such
leave, and, as of the date of such employee's accep-
tance of such offer of employment, such employee
shall be deemed a Shepard's Transferred Employee for
purposes of this Agreement, subject to the terms and
conditions set forth in this Article 10A; provided,
however, that Times Mirror or Shepard's shall have no
obligation to employ any employee described in this
sentence whose leave of absence does not end prior to
the first anniversary of the Closing Date. McGraw-
Hill shall retain the obligation to provide worker's
compensation, short-term disability, long-term dis-
ability and other benefits to any employee described
in the previous sentence until such time as such em-
ployee becomes a Shepard's Transferred Employee.
(ww) Section 10A.01 is further amended by inserting
the following at the end thereof:
McGraw-Hill shall pay and process the regular payroll
for each Shepard's Transferred Employee on the sched-
uled payment date for the bi-weekly or monthly pay-
roll period that includes the Closing Date (the
"Transition Payroll Period"). Times Mirror shall
promptly reimburse McGraw-Hill, within five days af-
ter receipt of invoice from McGraw-Hill, for the por-
tion of the gross employer payroll for the Transition
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Payroll Period that relates to periods after the
Closing Date, and McGraw-Hill shall promptly remit to
Times Mirror, in the manner to be agreed by the par-
ties, employee-paid payroll tax withholdings in re-
spect of such Shepard's Transferred Employees attri-
butable to the portion of the Transition Payroll
Period occurring after the Closing Date, which shall
be remitted when due by Times Mirror to the appropri-
ate governmental taxing authority. For purposes of
the previous sentence, "gross employer payroll" means
all gross wages, employer-paid payroll taxes and any
other employer-paid amounts. The portion of the
Transition Payroll Period amount that relates to pe-
riods after the Closing Date and that is paid by
Times Mirror to McGraw-Hill shall be ignored for pur-
poses of the Post-Closing Adjustment and shall not be
included in the change in the intercompany balance
between Shepard's and McGraw-Hill for the period from
July 1, 1996 through the Closing Date.
(xx) Clause (i) of the second sentence of Section
10A.07(b) is hereby amended to read as follows:
(i) Shepard's Transferred Employees who, as of the
Closing Date, (a) have either been credited with at
least ten years of service under the applicable Shep-
ard's Post-Retirement Plan and attained at least age
55 or have been credited with at least twenty years
of service under the applicable Shepard's Post-
Retirement Plan and have attained age 50 and (b) are
otherwise eligible for benefits under the terms of
the applicable Shepard's Post-Retirement Plan,
(yy) The proviso in Section 10A.07(b) is hereby
amended to read as follows:
provided, however, that, in order for any Shepard's
Transferred Employee to be eligible to participate in
any Shepard's Post-Retirement Plan, such employee
must expressly elect in writing to participate there-
in within 31 days following the Closing Date and must
elect in writing to commence coverage thereunder ef-
fective as of the Closing Date.
(zz) The final sentence of Section 12.06 is hereby
amended to read as follows:
Times Mirror, McGraw-Hill, Shepard's, TMHE and the
TMHE Subsidiaries shall cooperate with one another in
a manner comparable to that described in Section
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12.04 hereof to effect the purpose of this Section
12.06.
(aaa) The final sentence of Section 12A.06 is hereby
amended to read as follows:
Times Mirror, McGraw-Hill, Shepard's, TMHE and the
TMHE Subsidiaries shall cooperate with one another in
a manner comparable to that described in Section
12A.04 hereof to effect the purpose of this Section
12A.06.
(bbb) The last two paragraphs of Schedule 4.02(a)(v)
are hereby amended to read as follows:
For purposes of computing the Post-Closing Ad-
justments described in Section 9.01(a) hereof, the
adjustment described above with respect to reserves
for uncollectible accounts and returns will be
treated as a pre-June 30, 1996 entry. As a result,
the pro-forma June 30, 1996 unaudited balance sheet
or statement of assets conveyed and liabilities as-
sumed, as the case may be, of TMHE and Mosby College
Text Business will reflect their appropriate share of
this adjustment.
TMIP has other assets which will be transferred
to Buyer under the purchase agreements ("other TMIP
assets"). These assets consist of third party li-
cense agreements, prepaid expenses, and inventory
relating to indigenous works, including work in prog-
ress. There are various liabilities relating to the
other TMIP assets recorded on the books of TMIP, in-
cluding payables and royalties payable. The other
TMIP assets and the related liabilities will be sold
to TMHE prior to the Closing and will therefore be
sold to Buyers upon Closing.
(ccc) Schedule 10A.04 is hereby amended and updated
to read as set forth in Annex A to this Amendment.
(ddd) Schedule 2.02(a)(i) is hereby amended to read
as set forth in Annex B to this Amendment.
(eee) Schedule 5.03 is hereby amended to read as set
forth in Annex C to this Amendment.
(fff) Schedule 5.13(a) is hereby amended to read as
set forth in Annex D to this Amendment.
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(ggg) Schedule 5.15(a) is hereby amended by replac-
ing tabs (A) and (D) thereof with replacement tabs (A) and (D)
as set forth in Annex E to this Amendment.
(hhh) Schedule 5.15(c) is hereby amended to read as
set forth in Annex F to this Amendment.
(iii) Schedule 5.15(k) is hereby amended by replac-
ing tab E thereof with replacement tab E as set forth in Annex
G to this Amendment.
(jjj) Schedule 5.15(l) is hereby amended to replace
the first page thereof to read as set forth in Annex H to this
Amendment.
(kkk) Schedule 5.17(a) is hereby amended by
replacing tabs (A) and (B) as set forth in Annex I to this
Amendment.
(lll) Schedule 5.22(a) is hereby amended to replace
the first page thereof to read as set forth in Annex J to this
Amendment.
(mmm) Schedule 10.01(a) is hereby updated, as pro-
vided in Section 10.01(a), to replace Schedule 10.01(a) to read
as set forth in Annex K to this Amendment.
(nnn) Schedule 10.04 is hereby amended by replacing
tabs (A) and (G) thereof with the replacement tabs (A) and (G)
as set forth in Annex L.
(ooo) The Mosby Transition Services Agreement is
hereby amended to read as set forth in Annex M to this Amend-
ment.
(ppp) Schedule 6.14(a) is hereby amended to read as
set forth in Annex N to this Agreement.
3. The parties agree that a full financial clos-
ing, with appropriate cut-off procedures, is to be planned,
executed and documented. Because the agreed-upon closing date
occurs on a date other than a fiscal month-end, the parties,
acknowledging that certain expenses and revenues are typically
budgeted and recorded on a full-fiscal-month basis, agree to
the following in an effort to facilitate the preparation of the
Closing Date financial statements and to ensure that the finan-
cial statements for Shepard's, TMHE and Mosby are prepared on a
common, consistent basis:
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I. Certain expenses can be prorated for the period Octo-
ber 1 - October 15 as a percentage of the full month October
amounts. The percentage to apply to the full fiscal month Oc-
tober amounts to calculate the amount for the period October 1
- 15 is either of the following two formulas:
Apportionment Method A. The percentage is calculated as:
(Revenues for October 1 - 15) / (October fiscal month revenues)
(revenues for purposes of this apportionment are defined as
operating revenues inclusive of the provision for sale re-
turns);
or
Apportionment Method B. The percentage is calculated as:
(Business days for October 1 - 15) / (October fiscal month
business days).
The parties agree as follows:
Shepard's TMHE and Mosby
Apportionment Apportionment
Method Method
------------- -------------
Prepublication amortization n/a A
Sales returns provision
(on a gross revenue basis) A A
Reserve Provisions A A
(inv. obsolescence,
bad debts, etc.)
Depreciation B B
Amortization of intangible
assets B B
Corporate or segment
allocations B n/a
Rent and occupancy expense B B
Vacation expense B B
Incentive compensation
expense B B
Monthly exempt payroll B B
(All other payrolls -- hourly, weekly, etc. -- will be
cut-off on an actual basis)
II. Revenue for subscription products will be prorated
for the period October 1 - October 15 as a percentage of the
full month revenue amount. The percentage is to be calculated
as: (Business days for October 1 - October 15) / (October fis-
cal month business days).
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III. All cash, intercompany accounts, accounts receiv-
able, accounts payable and other balance sheet account cut-offs
are to be executed and documented on a full closing basis, ex-
cept that balance sheet accounts should reflect apportionment
amounts if called for by paragraph I. For all revenue (other
than revenue for subscription products) and for all expenses
(other than those prorated in accordance with paragraph I),
cut-offs are to be executed and documented on a full closing
basis.
All standard account reconciliations and audit-verifiable docu-
mentation is to be prepared for the mid-month closing. All
revenues and expenses for October, through the Closing, includ-
ing monthly amounts prorated pursuant to paragraphs I and II,
shall be computed in a manner consistent with prior practice
and without regard to any revaluations resulting from the Ex-
change.
4. Times Mirror represents to McGraw-Hill that (i)
notwithstanding the statement to the contrary in the notes to
the TMHE financial statements set forth in Schedule 5.09(a),
such statements did not include incremental editorial and pro-
duction expense of $666,000 and incremental plant amortization
expense of $1,074,000 and (ii) the absence of such amounts was
offset by the overstatement of certain other inventory related
costs.
5. No Effect on Consistent Terms. All terms of the
Agreement not inconsistent with this Amendment shall remain in
place and in full force and effect and shall be unaffected by
this Amendment.
6. Headings. The headings contained in this Amend-
ment are inserted for convenience of reference only and shall
not affect the meaning or interpretation of this Amendment.
7. Counterparts. This Amendment may be executed in
one or more counterparts, all of which shall be considered one
and the same agreement, and shall become effective when one or
more counterparts have been signed by each party hereto and
delivered to the other party.
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IN WITNESS WHEREOF, this Amendment has been signed by
or on behalf of each of the parties hereto as of the day first
above written.
THE TIMES MIRROR COMPANY
By: /s/ Patrick A. Clifford
Name: Patrick A. Clifford
Title: Senior Vice President
MOSBY-YEAR BOOK, INC.
By: /s/ James Imbriaco
Name: James Imbriaco
Title: Secretary
THE MCGRAW-HILL COMPANIES, INC.
By: /s/ Scott L. Bennett
Name: Scott L. Bennett
Title: Senior Vice President
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