Action 1

-- Income from operations for the fourth quarter of fiscal 2008 grew by 39.4% to $10.0 million compared with $7.2 million in the fourth quarter last year. For fiscal 2008, income from operations increased 29.3% to $38.9 million from $30.1 million in fiscal 2007.

-- Net income from continuing operations for the fourth quarter of fiscal 2008 was $5.8 million, or $0.47 per diluted share, compared with net income from continuing operations of $3.3 million, or $0.26 per diluted share, in the year-ago quarter. Income from continuing operations for fiscal 2008 was $19.3 million, or $1.55 per diluted share, compared with $15.9 million, or $1.28 per diluted share for fiscal 2007.

-- Net income for the fourth quarter of fiscal 2008 was $5.4 million, or $0.44 per diluted share, compared with net income of $3.0 million, or $0.24 per diluted share, in the fourth quarter of fiscal 2007. For fiscal 2008, net income decreased to $18.5 million, or $1.49 per diluted share, from $21.2 million, or $1.71 per diluted share, for fiscal 2007. Net income for fiscal 2007 benefitted from the sale of two of the Company's discontinued Consumer Group businesses by approximately $0.43 per diluted share, while net income in fiscal 2008 was affected by a loss of approximately $0.06 per share from discontinued operations.

-- EBITDA (earnings before interest, income taxes, plus depreciation and amortization) increased 32.5% to $15.6 million in the fourth quarter of fiscal 2008 from $11.8 million in the fourth quarter a year ago. For the full year, EBITDA increased 20.5% to $56.4 million from $46.8 million in fiscal 2007.

-- Net working capital (defined as accounts receivable plus inventories less accounts payable) was $124.5 million at the end of the fourth quarter compared with $131.4 million in the prior year. Working capital turns increased to 5.8 turns from 5.2 turns for the fourth fiscal quarter of 2007.

-- Net debt (defined as short-term debt plus long-term debt less cash) decreased by $21.6 million to $106.0 million at June 30, 2008 from $127.6 million at March 31, 2008. The Company's balance sheet leverage ratio of net debt to total capital improved to 32.2% at June 30, 2008, compared with 36.0% at March 31, 2008.

Comments on Fiscal 2008

"Standex delivered solid results in fiscal 2008, led by our Food Service Equipment, Engraving and Spincraft business units," said President and Chief Executive Officer Roger Fix. "We achieved this strong financial performance during the year even though we faced significant headwinds from the severe downturn in housing starts and the slowdown in the off-road heavy construction equipment market. By focusing on market share gains to grow our top-line, execution of cost reductions and productivity improvements throughout the organization and the implementation of price increases, we were able to generate solid year over year improvement in operating income for both the fourth quarter and fiscal 2008. For the full year, we generated a 29% improvement in operating income on 12% revenue growth. Moreover, free cash flow performance for the year was very strong, as we generated more than $52 million and converted EBIT to free cash flow at a rate of 133%."

Comments on the Fourth Quarter and Segment Discussions

"Standex's 39% growth in operating income in the final quarter of the year was driven by at least double-digit increases by three of our five operating groups," said Fix. "Our Engraving Group reported a 216% increase in operating income with strong bottom-line performances by the Food Service Equipment and Engineered Products Groups. The ADP and Hydraulics Groups continue to be affected by poor market conditions."

The Food Service Equipment Group posted fourth-quarter, year-over-year sales growth of 8.1% and 16.1% operating income growth. During fiscal 2008, Food Service recorded an organic revenue growth rate of 9.5% and an increase in operating income of 72.5%.

"Our Food Service Equipment Group concluded the year with another quarter of solid top-line growth in the face of a slowing market," Fix said. "Fourth-quarter revenues were especially strong at our Cooking Solutions Group as we capitalized on established relationships with the YUM! Brands restaurants and dealer buying groups. Additionally, we continued to make progress in diversifying our revenues geographically through expansion in Canada as our Refrigerated Solutions Group increased sales at the largest Canadian quick-serve chain and saw good growth through the representative and dealer sales channels in that country. The walk-in cooler business did experience some softness in the quarter, as several restaurant chains slowed the rate of new store openings. Procon delivered double-digit revenue growth, driven by demand from both the beverage and industrial sides of their business."

"Fourth-quarter operating income growth was 16.1 percent. We did not fully leverage the reported top-line sales growth during the quarter for three reasons," said Fix. "First, material cost inflation negatively affected our operating margins. It is important to note that we were able to substantially offset higher material costs with the realization of an overall 3.6% increase in pricing in the group. In addition, we experienced an unfavorable change in customer mix in the refrigerated solutions portion of the business and we recorded unusually high recruiting costs in the quarter."

The Engraving Group generated sales growth of 18.1% year-over-year in the fourth quarter with strong operating leverage contributing to a 215.8% year-over-year increase in operating income.

"Sales at our Engraving Group were driven by solid demand from our global OEMs as a number of new and retooled automotive platform projects were launched during the quarter, as well as, favorable foreign exchange," said Fix. "We also continued to see steady top-line growth from our recently created Mold Tech texturizing operations in Turkey, Eastern Europe and China. The lean manufacturing initiatives we implemented in the past year, cost reductions and higher sales volume enabled us to generate a threefold increase in operating income in the quarter."

Engineered Products Group revenue for the fourth quarter increased by 25.8% year-over-year and operating income improved by 29.0% year-over-year. "Spincraft is continuing to benefit from healthy demand in all of its end-markets--energy, aerospace and aviation--and as a result, is producing good sales volume and profit growth," said Fix. "Two issues negatively affected operating income performance in the group during the quarter. First, Spincraft negotiated and received a $1.1 million payment related to the cancelation of the Shuttle program that did not result in any profit. Further, as expected, margins were affected by the ramp up of several new programs as well as shop floor inefficiencies associated with the startup of recently installed capital equipment. We have now completed the startup of the new equipment and improved the manufacturing processes, and the majority of these issues are behind us."

"Our electronics business reported good growth from aviation and aerospace and industrial applications, but was offset by softness in other end user markets that are being affected by the downturns in the automotive and housing sectors," added Fix. "During the fourth quarter, we initiated a significant material substitution that will be completed during the first quarter of this fiscal year and we completed the transfer of approximately 50 positions from our manufacturing operations in Canada to Mexico and China. We expect these actions to deliver margin improvements beginning in the first quarter of fiscal 2009 and ramping up throughout the year.1 We will continue to focus on improving margin performance in this business."

Hydraulics Products Group revenues for the quarter decreased 5.0% year-over-year due to continued depressed market conditions and operating income increased by 1.3% year-over-year.

"The Hydraulics Group maintained profitability in the fourth quarter even against a challenging off-road heavy construction vehicle market backdrop," said Fix. "Although the U.S. market will likely remain challenging in the near term, we are encouraged by the long-term potential for this business both domestically and abroad.1 We recently committed to creating a manufacturing capability in Tianjin, China, to produce telescopic hoists for sale in China and for export to other Asia-Pacific markets and Europe. Production at this facility is expected to commence in the second half of fiscal 2009.1 We believe this effort will begin to contribute significantly to our revenues and profitability in fiscal 2010 and beyond.1"

Air Distribution Products Group ("ADP") sales for the quarter declined by 30.1% as a result of the continued severe downturn in the new residential construction market. ADP reported a loss for the quarter due to lower sales volume and significantly higher metal costs.

"In an increasingly challenging environment, we remain focused on implementing cost reductions and gaining market share," said Fix. "During the quarter we implemented a second round of price increases consistent with the market. Since the beginning of the calendar year we have achieved approximately 32% in price increases, which is consistent with the market increase in the price of steel during that timeframe. In addition, after the start of the fiscal year, we closed our Bartonville, Illinois facility to reduce the cost structure of the ADP manufacturing base and improve factory utilization. We completed the transfer of the sales and production activities of this facility to ADP locations in Minnesota and Georgia and there were no disruptions to customers. We expect to realize annual cost savings of about $2.2 million from this action.1"

Standex anticipates recording a $4.3 million pre-tax expense related to the closure of the facility, which will be primarily incurred in the first quarter of fiscal 2009.1 This expense includes employee severance and other employee benefit termination costs, expenses associated with the relocation of the plant's production capacity to other Company facilities, and the anticipated loss on the sale of the Bartonville real estate.

Business Outlook

"As we head into fiscal 2009 in an uncertain economy, we are taking every opportunity to gain share in each of our operating segments," said Fix. "At the same time, we will focus on improving margins by reducing costs through lean manufacturing, low-cost sourcing and manufacturing, plant consolidations and investments in automation."

"We are encouraged by our many opportunities to leverage sales synergies and broaden our strong base of blue chip customers across our Food Service businesses and look forward to another year of solid performance from the Food Service Equipment Group,1" added Fix. "While the global automotive sector remains volatile, we expect our global presence, technological leadership position and industry-leading responsiveness will continue to differentiate the Engraving Group as we diversify the business and leverage growth opportunities in emerging markets.1 Our robust sales pipeline across the aviation, aerospace and energy end markets also gives us reason for optimism for our Spincraft business. Our Electronics business completed major transfers of production to low-cost manufacturing facilities in Mexico and China late in fiscal 2008 and is implementing material cost reductions. Both of these initiatives should result in operating margin improvements.1 Although we believe that we have hit the bottom of the market for our Hydraulics business, the timing of a rebound is still uncertain.1 At ADP, we do not expect to see an improvement in housing starts this year, although we are making every effort to achieve profitability in this difficult market.1"

Conference Call Details

Standex will host a conference call for investors today, Wednesday, August 27, at 10:00 a.m. ET. On the call, Roger Fix, president and CEO, and Thomas DeByle, CFO, will review the company's financial results, and business and operating highlights. Investors interested in listening to the webcast should log on to the "Investor Relations" section of Standex's website, located at www.standex.com. The Company's slide show accompanying the web cast audio also can be accessed via its website. To listen to the playback, please dial (888) 286-8010 in the U.S. or (617) 801-6888 internationally; the passcode is 86325325. The replay also can be accessed in the "Investor Relations" section of the company's website, located at www.standex.com.

Use of Non-GAAP Financial Measures

This press release includes a reference to EBITDA (earnings before interest, income taxes plus depreciation and amortization) and free cash flow (EBITDA plus or minus change in working capital less capital expenditures), which are not measures of financial performance under generally accepted accounting principles (GAAP). The company considers free cash flow to be an important indicator of its ability to generate cash for acquisitions and other strategic investments. Standex has included a reference to EBITDA because it can be used to analyze profitability between companies and industries by eliminating the effects of financing (i.e., interest) and capital investments (i.e., depreciation and amortization). Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported operating results or cash flow from operations or any other measure of performance as determined in accordance with GAAP.

A reconciliation of GAAP net income to non-GAAP EBITDA and Free Cash Flow for the three months and year ended June 30, 2008 is provided in the financial tables that accompany this release.

About Standex

Standex International Corporation is a multi-industry manufacturer in five broad business segments: Food Service Equipment Group, Air Distribution Products Group, Engineered Products Group, Engraving Group and Hydraulics Products Group with operations in the United States, Europe, Canada, Australia, Singapore, Mexico, Brazil and China. For additional information, visit the company's website at www.standex.com.

1 Safe Harbor Language

Statements in this news release include, or may be based upon, management's current expectations, estimates and/or projections about Standex's markets and industries. These statements are forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Actual results may materially differ from those indicated by such forward-looking statements as a result of certain risks, uncertainties and assumptions that are difficult to predict. Among the factors that could cause actual results to differ are uncertainty in conditions in the general domestic and international economy including more specifically increases in raw material costs, the ability to substitute less expensive alternative raw materials, the heavy construction vehicle market, the new residential construction market, reduced capital spending by customers, the impact of diversification efforts in our Engraving Group, successful expansion of manufacturing capabilities and diversification efforts in emerging markets, effective completion of plant consolidations and the other factors discussed in the Annual Report of Standex on Form 10-K for the fiscal year ending June 30, 2007, which is on file with the Securities and Exchange Commission, and any subsequent periodic reports filed by the company with the Securities and Exchange Commission. In addition, any forward-looking statements represent management's estimates only as of the day made and should not be relied upon as representing management's estimates as of any subsequent date. While the company may elect to update forward-looking statements at some point in the future, the company and management specifically disclaim any obligation to do so, even if management's estimates change.

STANDEX INTERNATIONAL CORPORATION
Reconciliation of GAAP Net Income to Non-GAAP EBITDA and Free Cash
Flow
                                            Three Months Ended                      Year Ended
(in thousands)                              June 30                                 June 30
                                            2008                2007                2008                       2007
Net Income                                  $     5,431         $     3,021         $     18,510               $     21,242
Discontinued Operations                           386                 290                 774                        (5,317   )
Taxes                                             3,385               1,613               10,459                     6,611
Interest Expense                                  1,839               2,866               9,510                      9,025
Depreciation & Amortization                       4,589               4,003               17,113                     15,198
EBITDA                                            15,630              11,793              56,366                     46,759
Change in WC                                                                              6,940                      (3,153   )
CAPEX                                                                                     (10,975  )                 (10,341  )
Free Cash Flow                                                                            52,331                     33,265
Operating Income                                                                          38,929                     30,097
Other Income/(Expense)-Non Operating                                                      324                        1,464
EBIT                                                                                      39,313                     31,561
Operating Income to FCF                                                                   133.1    %                 105.4    %

STANDEX INTERNATIONAL CORPORATION
Segment Reporting Data
                                 Three Months
Net Revenues:                    Ended June 30,                                Year Ended June 30,
(in thousands)                   Net Sales                                     Net Sales
                                 2008                    2007                  2008                    2007
Food Service Equipment           $    98,771             $    91,379           $    381,254            $    299,009
Air Distribution Products             18,352                  26,256                88,334                  110,081
Engraving Group                       23,855                  20,207                92,167                  84,223
Engineered Products                   30,856                  24,533                100,732                 90,728
Hydraulics Products                   8,940                   9,415                 35,054                  37,170
Corporate and Other                   --                      --                    --                      --
Total                            $    180,774            $    171,790          $    697,541            $    621,211
                                 Three Months
                                 Ended June 30,                                Year Ended June 30,
Income from Operations:          Income From Operations                        Income From Operations
(in thousands)                   2008                    2007                  2008                    2007
Food Service Equipment           $    7,463              $    6,428            $    31,460             $    18,242
Air Distribution Products             (257     )              (929     )            (340     )              2,610
Engraving Group                       3,000                   950                   9,611                   7,595
Engineered Products                   4,302                   3,336                 13,164                  10,776
Hydraulics Products                   1,363                   1,346                 4,712                   5,206
Subtotal                              15,871                  11,131                58,607                  44,429
Restructuring charge                  (376     )              49                    (590     )              (286     )
Other expenses, net                   --                      (40      )            --                      1,023
Corporate                             (5,464   )              (3,942   )            (19,088  )              (15,069  )
Total Income from Operations     $    10,031             $    7,198            $    38,929             $    30,097

STANDEX INTERNATIONAL CORPORATION
Consolidated Condensed Statement of
Income
June 30, 2008
                                                              Three Months Ended                        Year Ended
                                                              June 30                                   June 30
(In thousands, except per share data)                         2008                 2007                 2008                 2007
Net Sales                                                     $   180,774          $   171,790          $   697,541          $   621,211
Cost of Sales                                                     127,589              123,952              495,694              448,407
Gross Profit                                                      53,185               47,838               201,847              172,804
Operating Expenses:
Selling, general and administrative expenses                      42,777               40,690               162,328              142,421
Restructuring Charges                                             376                  (49      )           590                  286
Income from operations                                            10,032               7,197                38,929               30,097
Interest Expense                                                  1,839                2,866                9,510                9,025
Other non-operating expense/(income)                              (1,009   )           (593     )           (324     )           (1,464   )
                                                                  9,202                4,924                29,743               22,536
Provision for Taxes                                               3,385                1,613                10,459               6,611
Net Income from Continuing Operations                             5,817                3,311                19,284               15,925
Income/(Loss) from discontinued operations, net of taxes          (386     )           (290     )           (774     )           5,317
Net Income                                                    $   5,431            $   3,021            $   18,510           $   21,242
Basic earnings per share
Continuing Operations                                         $   0.47             $   0.27             $   1.57             $   1.30
Discontinued Operations                                           (0.03    )           (0.02    )           (0.06    )           0.44
Total                                                         $   0.44             $   0.25             $   1.51             $   1.74
Diluted earnings per share:
Continuing Operations                                         $   0.47             $   0.26             $   1.55             $   1.28
Discontinued Operations                                           (0.03    )           (0.02    )           (0.06    )           0.43
Total                                                         $   0.44             $   0.24             $   1.49             $   1.71
Average Shares Outstanding
Weighted average shares, basic                                    12,319               12,249               12,291               12,232
Weighted average shares, diluted                                  12,413               12,423               12,395               12,404

Summary Cash Flow Data
                                               Year Ended
                                               June 30             June 30
                                               2008                2007
Cash flows provided by operating activities    $   44,706          $   25,495
Cash flows provided by investing activities        2,386               (73,992  )
Cash flows used in financing activities            (44,149  )          39,066
Effects of exchange rate changes on cash           1,657               898
Net change in cash and cash equivalents            4,600               (8,533   )
Beginning cash and cash equivalents                24,057              32,590
Ending cash and cash equivalents               $   28,657          $   24,057
Supplementary Financial Data
                                               Year Ended
                                               June 30             June 30
                                               2008                2007
Net working capital                            $   124,500         $   131,440
Working capital turns                              5.8                 5.2
Inventory Turns                                    5.5                 5.4
A/R days sales outstanding                         52                  54
A/P days payable outstanding                       40                  39
Capital Expenditures                           $   10,975          $   10,341
Depreciation                                       13,168              11,766
Amortization of intangibles                        3,945               3,432
Net debt                                           106,008             144,263

STANDEX INTERNATIONAL
Consolidated Condensed Balance Sheet
                                                         June 30,                    June 30,
                                                         2008                        2007
ASSETS
Current assets:
Cash and cash equivalents                                $     28,657                $     24,057
Accounts receivable, net                                       103,055                     106,116
Inventories                                                    87,619                      91,301
Income Tax Receivable                                          983                         --
Prepaid expenses and other current assets                      3,337                       3,762
Deferred tax asset                                             13,032                      11,093
Total current assets                                           236,683                     236,329
Property, plant, equipment                                     116,565                     122,315
Intangible assets                                              27,473                      31,228
Goodwill                                                       120,650                     118,911
Prepaid pension cost                                           1,972                       8,256
Other non-current assets                                       19,691                      22,861
Non-current assets -- discontinued                             --                          --
operations
Total non-current assets                                       286,351                     303,571
Total assets                                             $     523,034               $     539,900
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt                        $     28,579                $     4,162
Accounts payable                                               66,174                      65,977
Accrued payroll and employee benefits                          25,073                      21,750
Accrued workers' compensation                                  7,213                       7,430
Income taxes payable                                           --                          454
Other                                                          18,000                      19,736
Current liabilities -- discontinued                            2,701                       821
operations
Total current liabilities                                      147,740                     120,330
Long-term debt - less current portion                          106,086                     164,158
Accrued pension and other non-current liabilities              46,050                      50,981
Total non-current liabilities                                  152,136                     215,139
Commitments and Contingencies
Stockholders' equity:
Common stock                                                   41,976                      41,976
Additional paid-in capital                                     27,158                      25,268
Retained earnings                                              433,435                     426,171
Accumulated other comprehensive income                         (17,531   )                 (26,533   )
Treasury shares                                                (261,880  )                 (262,451  )
Total stockholders' equity                                     223,158                     204,431
Total liabilities and stockholders' equity               $     523,034               $     539,900

SOURCE: Standex International Corporation

Standex International Corporation 
Thomas DeByle, 603-893-9701 
CFO 
InvestorRelations@Standex.com

Public comment is invited within 60 days of the date of this notice. Such comments, and responses thereto, will be published in the Federal Register and filed with the Court. Comments should be directed to James J. Tierney, Chief, Networks & Technology Enforcement Section, Antitrust Division, Department of Justice, 600 E Street, NW., Suite 9500, Washington, DC 20530 (telephone: 202- 307-6200).

Patricia A. Brink,

Deputy Director of Operations, Antitrust Division.

The United States District Court for the District of Columbia

United States of America, United States Department of Justice, Antitrust Division, 600 E Street, NW., Suite 9500, Washington, DC 20530, Plaintiff, v. Cengage Learning Holdings I, L.P., Cengage Learning Holdings II L.P., Cengage Learning, Inc., Apax/Tl Holdings, LLC, Education Media and Publishing Group Limiited, and Houghton Mifflin Harcourt Publishing Company, Defendants

Case No.:

Judge:

Case: 1:08-cv-00899, Assigned To: Bates, John D., Assign. Date: 5/28/2008, Description: Antitrust.

Complaint

The United States of America, acting under the direction of the Attorney General of the United States, brings this civil antitrust action to enjoin the proposed acquisition by Cengage Learning, Inc. and related entities (collectively "Cengage"), of the assets of the Houghton Mifflin College Division ("HM College") from Houghton Mifflin Harcourt Publishing Company and a related entity (collectively "Houghton Mifflin"), and to obtain equitable and other relief. The United States complains and alleges as follows:

I. Nature of the Action

1. On or about November 30, 2007, Cengage and Houghton Mifflin entered into an agreement for Cengage to acquire the assets of HM College for approximately $750 million.

2. Cengage and HM College publish textbooks and other educational materials and are direct competitors in the development, publication, and sale of textbooks and ancillary print and electronic (including Internet-based) educational materials (collectively "textbooks and ancillary materials") used in numerous courses taught at higher education institutions throughout the United States.

For the courses listed in Appendix A of this Complaint (hereinafter "the Overlap Courses"), Cengage and HM College publish textbooks and ancillary materials that compete head-to-head with each other and are close substitutes.

3. The markets for textbooks and ancillary materials used in the Overlap Courses are highly concentrated and have high barriers to entry. Cengage's proposed acquisition of the assets of HM College would eliminate competition between Cengage and HM College in these markets.

4. The United States brings this action to prevent Cengage's proposed acquisition of the assets of HM College because it is likely to substantially lessen competition in the development, publication, and sale of textbooks and ancillary materials used in the Overlap Courses in violation of Section 7 of the Clayton Act, 15 U.S.C. [Section] 18.

II. Parties to the Proposed Acquisition

5. Cengage Learning, Inc. is a Delaware corporation with its headquarters in Stamford, Connecticut. Cengage Learning Holdings I, L.P., a limited partnership with its headquarters in Stamford, Connecticut, is the ultimate parent entity of Cengage Learning, Inc. Cengage Learning Holdings II L.P., a limited partnership with its headquarters in Stamford Connecticut, is an intermediate entity between Cengage Learning Holdings I, L.P. and Cengage Learning, Inc. Apax/TL Holdings, LLC, a Delaware limited liability company, is the general partner in Cengage Learning Holdings I, L.P. The above entities (collectively "Cengage") develop, publish, and sell textbooks and ancillary materials for use

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in the United States and elsewhere. Cengage is the second largest publisher of textbooks and ancillary materials used in courses taught at higher education institutions in the United States and ranks among the top three sellers of such textbooks and materials for each of the Overlap Courses. Cengage had total revenues of about $1.7 billion in the twelve-month period ending September 30, 2007, including about $1 billion in revenues from the sale of higher education textbooks and ancillary materials.

6. Houghton Mifflin Harcourt Publishing Company (formerly Houghton Mifflin Company) is a Massachusetts corporation with its headquarters in Boston, Massachusetts. Education Media and Publishing Group Limited, a Cayman Islands corporation with its headquarters in Dublin, Ireland, is the ultimate parent entity of Houghton Mifflin Harcourt Publishing Company. The above entities (collectively "Houghton Mifflin") develop, publish, and sell textbooks and ancillary materials for use in the United States and elsewhere. Houghton Mifflin's HM College Division is the fifth largest publisher of textbooks and ancillary materials used in courses taught at higher education institutions in the United States and ranks among the top three sellers of such textbooks and materials for each of the Overlap Courses. Houghton Mifflin has total annual revenues of about $2.5 billion, and estimated 2007 revenues of about $230 million from the sale of textbooks and ancillary materials by HM College.

III. Jurisdiction and Venue

7. The United States brings this action under Section 15 of the Clayton Act, as amended, 15 U.S.C. 25, to prevent and restrain the Defendants from violating section 7 of the Clayton Act, 15 U.S.C. 18.

8. Defendants' activities in developing, publishing, and selling textbooks and ancillary materials for use in the Overlap Courses are in the flow of and substantially affect interstate trade and commerce. This Court has subject matter jurisdiction over this action pursuant to section 12 of the Clayton Act, 15 U.S.C. 22, and 28 U.S.C. 1331, 1337(a), and 1345.

9. Defendants sell higher education textbooks and ancillary materials in, and have consented to venue and personal jurisdiction in, this judicial district. Venue is proper under 15 U.S.C. 22 and 28 U.S.C. 1391(d).

IV. Trade and Commerce

A. Relevant Product Markets for Textbooks and Ancillary Materials

10. Publishers market and sell textbooks and ancillary materials for use in courses taught at higher education institutions. In most cases, instructors select the textbooks and ancillary materials that will be used for their courses, and students buy the selected textbooks and ancillary materials.

11. Textbooks are often supplemented with ancillary educational materials, such as teacher's editions, audio-visual teaching tools, Internet content, CD- ROMs, workbooks, and study guides. These materials are often offered by publishers for free or as part of a discounted package to induce instructors to select a particular textbook and to induce students to purchase the publisher's textbooks and ancillary materials.

12. Textbooks and ancillary materials are used as the primary teaching materials in each of the Overlap Courses. Textbooks provide the core written material for the Overlap Courses and serve as the foundation for instructors' overall lesson plans. While instructors could use alternative teaching materials (such as copies of lecture notes and articles), they generally select textbooks to serve as the primary teaching materials for their courses because accessing and creating alternative teaching materials is often a more time-consuming, costly, and inefficient method of delivering high quality content to their students. Instructors using textbooks and ancillary materials would not turn to any alternative teaching materials in sufficient numbers to defeat a small but significant increase in the price of any textbooks and ancillary materials for the Overlap Courses, or a small but significant decrease in the quality of such textbooks and other materials.

13. Students taking the Overlap Courses are unlikely to have any significant alternatives to purchasing new textbooks for these courses. Although used textbooks, if available, can sometimes serve as alternatives for new textbooks, used textbooks are not uniformly available in large numbers. Moreover, instructors often require students to use the newest textbook editions. Publishers generally revise textbooks every three to four years and revised textbooks often differ substantially from their prior edition, limiting the extent to which used textbooks may be substituted for new editions of the same textbooks. Students would not turn to purchasing used textbooks in sufficient numbers to defeat a small but significant increase in the price of a new edition of the textbooks.

14. Each Overlap Course is a separate course focused on a different subject and therefore requires instructors and students in the course to use the textbooks and ancillary materials that have been developed for that course. For each Overlap Course, the textbooks and ancillary materials for that course constitute a separate relevant product market and a line of commerce pursuant to Section 7 of the Clayton Act.

B. The Relevant Geographic Market

15. Defendants market and sell textbooks and ancillary materials for use in courses taught at higher education institutions throughout the United States. Market participants for each relevant product market alleged herein are those publishers from which instructors select textbooks and ancillary materials for use as primary teaching materials in their courses. A hypothetical monopolist of the textbooks and ancillary materials sold for use in any Overlap Course in the United States could profitably lower the rate of quality improvements in and/or increase the price of such textbooks and ancillary materials in the United States. For each relevant product market alleged herein, the United States constitutes a relevant geographic market pursuant to Section 7 of the Clayton Act.

C. Anti Competitive Effects: Loss of Price and Product Quality Competition

16. In each relevant product and geographic market alleged herein, Cengage and HM College offer leading textbooks and ancillary materials that are close substitutes for a significant number of customers in that market. In each such market, Cengage and HM College are among the few firms with a significant presence that compete to provide textbooks and ancillary materials and consistently account for at least 35 percent of all sales. Using a standard concentration measure called the Herfindahl-Hirschman Index (or "HHI," defined and explained in Appendix B), the proposed acquisition would substantially raise market concentration in highly concentrated markets, increasing the HHI by more than 500 and producing a post-merger HHI in excess of 3000 in each relevant market.

17. Cengage and HM College compete head-to-head to be selected by instructors to provide textbooks and ancillary materials for each Overlap Course in the United States. This competition has provided significant

[Page Number 34950]

incentives for each to publish new titles and improve product quality and has disciplined pricing decisions. The proposed acquisition would eliminate this competition in each relevant market, increasing the likelihood that Cengage will unilaterally increase prices or reduce its investment or other efforts to develop new or improved textbooks and ancillary materials.

18. The proposed acquisition is likely to substantially lessen competition in the development, publication, and sale of textbooks and ancillary materials in each of the relevant markets, in violation of Section 7 of the Clayton Act.

D. Entry: New Entrants Will Not Defeat an Exercise of Market Power

19. In each relevant product and geographic market alleged herein, there is unlikely to be timely entry by any firm that would be sufficient to defeat the likely anticompetitive effects of the proposed acquisition. Successful entry into developing, publishing, and selling textbooks and ancillary materials in each of the relevant markets is difficult, time-consuming, and costly.

20. Successful entry generally can be achieved only over many years and after at least one or more textbook revision cycles. Significant investment and effort are required to assemble authors, editorial staff, and reviewing professors, to develop and obtain licenses to copyrighted content and ancillary educational materials, and to train a knowledgeable sales force. The outcome of such effort would be highly uncertain because, among other things, the reputation of a successful incumbent textbook is difficult for a publisher of a new textbook to challenge. The leading textbooks in each relevant market have been published for some time and are well-known to instructors. Most instructors switch textbooks infrequently because they develop course syllabi, lesson plans, homework, tests, and other materials that conform to the textbooks they use, and changing textbooks usually requires modifications to course syllabi and other materials.

V. Violations Alleged

21. The United States incorporates the allegations of paragraphs 1 through 20 above.

22. The proposed acquisition of HM College by Cengage would substantially lessen competition in interstate trade and commerce in violation of section 7 of the Clayton Act, 15 U.S.C. 18.

23. Unless restrained, the acquisition would likely have the following anticompetitive effects, among others:

a. Actual and future competition between Cengage and Houghton Mifflin in the development, publication, and sale of textbooks and ancillary materials in each relevant product and geographic market alleged herein will be eliminated;

b. Competition in the development, publication, and sale of textbooks and ancillary materials in each relevant market will be substantially lessened; and

c. The rate of quality improvements in the textbooks and ancillary materials in each relevant market likely will decline and/or prices for such textbooks and ancillary materials likely will increase.

VI. Request for Relief

24. The United States requests that this Court:

a. Adjudge and decree the proposed acquisition to violate section 7 of the Clayton Act, 15 U.S.C. 18;

b. Enjoin and restrain the Defendants and all persons acting on their behalf from consummating the proposed acquisition or from entering into or carrying out any contract, agreement, plan, or understanding, the effect of which would be to combine HM College with the operations of Cengage;

c. Award the United States its costs for this action; and

d. Grant the United States such other and further relief as the Court deems just and proper.

Respectfully submitted,

For Plaintiff United States of America:

Thomas O. Barnett (D.C. Bar #426840),

Assistant Attorney General.

James J. Tierney (D.C. Bar #434610), Chief, Networks & Technology Enforcement Section.

David L. Meyer (D.C. Bar #414420), Deputy Assistant Attorney General.

Scott A. Scheele (D.C. Bar #429061), Assistant Chief, Networks & Technology Enforcement Section.

Patricia A. Brink, Deputy Director of Operations.

Janet J. Brody.

Justine K. Donahue (D.C. Bar #476255).

Aaron Comenetz (D.C. Bar #479572).

John C. Filippini (D.C. Bar #165159).

Kent Brown.

Aaron Brodsky.

Attorneys, Networks & Technology Enforcement Section.

Antitrust Division, United States Department of Justice, 600 B Street, NW., Suite 9500, Washington, DC 20530, (202) 307-6200, Dated: May 28, 2008.

Appendix A

Overlap Courses

Business: Introductory.

Foreign Languages and Literature: French: Language: Business French.

Foreign Languages and Literature: French: Language: Intermediate.

Foreign Languages and Literature: German: Language: Grammar.

Foreign Languages and Literature: Italian: Language: Elementary.

Foreign Languages and Literature: Italian: Language: Intermediate.

History: Western Civilization Survey: 1500 to Present.

History: Western Civilization Survey: 1750 to Present.

History: Western Civilization Survey: Prehistory to 1715.

History: Western Civilization Survey: Prehistory to Present.

History: World History Survey: 1400 to 1750.

History: World History Survey: 1500 to Present.

History: World History Survey: Prehistory to Present.

Interdisciplinary Studies: Orientation to College.

Appendix B

Herfindahl-Hirschman Index

"HHI" means the Herfindahl-Hirschman Index, a commonly accepted measure of market concentration. It is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. For example, for a market consisting of four firms with shares of 30%, 30%, 20%, and 20%, the HHI is 2600 (302 + 302 +202 + 202 = 2600). The HHI takes into account the relative size distribution of the firms in a market and approaches zero when a market consists of a large number of small firms. The HHI increases both as the number of firms in the market decreases and as the disparity in size between those firms increases.

Markets in which the HHI is between 1000 and 1800 points are considered to be moderately concentrated, and those in which the HHI is in excess of 1800 points are considered to be highly concentrated. See Horizontal Merger Guidelines [Section] 1.51 (revised Apr. 8, 1997). Transactions that increase the HHI by more than 100 points in concentrated markets presumptively raise antitrust concerns under the guidelines issued by the U.S. Department of Justice and Federal Trade Commission. See id.

The United States District Court for the District of Columbia

United States of America, Plaintiff, v. Cengage Learning Holdings I, L.P., Cengage Learning Holdings II L.P., Cengage Learning, Inc., Apax/Tl Holdings, LLC, Education Media and Publishing Group Limited, and Houghton Mifflin Harcourt Publishing Company, Defendants

Case No.: Judge: Case: 1:08-Cv-00899, Assigned To: Bates, John D., Assign. Date: 5/28/2008, Description: Antitrust.

Final Judgment

Whereas, plaintiff, United States of Amer ica, filed its Complaint on May 28, 2008, and the United States and Defendants, Cengage and Houghton

[Page Number 34951]

Mifflin, as defined below, by their respective attorneys, have consented to the entry of this Final Judgment without trial or adjudication of any issue of fact or law, and without this Final Judgment constituting any evidence against or admission by any party regarding any issue of fact or law;

And whereas, Defendants agree to be bound by the provisions of this Final Judgment pending its approval by the Court;

And whereas, the essence of this Final Judgment is the prompt and certain divestiture of certain rights or assets by the Defendants to assure that competition is not substantially lessened;

And whereas, the United States requires Defendants to make certain divestitures for the purpose of remedying the loss of competition alleged in the Complaint;

And whereas, Defendants have represented to the United States that the divestitures required below can and will be made and that Defendants will later raise no claim of hardship or difficulty as grounds for asking the Court to modify any of the divestiture provisions contained below;

Now Therefore, before any testimony is taken, without trial or adjudication of any issue of fact or law, and upon consent of the parties, it is ordered, Adjudged and decreed:

I. Jurisdiction

This Court has jurisdiction over the subject matter and each of the parties to this action. The Complaint states a claim upon which relief may be granted against Defendants under Section 7 of the Clayton Act, as amended (15 U.S.C. 18).

II. Definitions

As used in this Final Judgment:

A. "Cengage" means Defendants Cengage Learning Holdings I, L.P, a limited partnership with its headquarters in Stamford, Connecticut; Cengage Learning Holdings II L.P., a limited partnership with its headquarters in Stamford, Connecticut, which is controlled by Cengage Learning Holdings I, L.P.; Cengage Learning, Inc., a Delaware corporation with its headquarters in Stamford, Connecticut, which is controlled by Cengage Learning Holdings II L.P.; and Apax/TL Holdings, LLC, a Delaware limited liability company that is the general partner in Cengage Learning Holdings I, L.P.; their successors, assigns, subsidiaries, divisions, groups, affiliates, partnerships, joint ventures; and their directors, officers, managers, agents, and employees.

B. "Houghton Mifflin" means Defendants Education Media and Publishing Group Limited, a Cayman Islands corporation with it headquarters in Dublin, Ireland, and Houghton Mifflin Harcourt Publishing Company, a Massachusetts corporation with its headquarters in Boston, Massachusetts, which is an indirect wholly- owned subsidiary of Education Media and Publishing Group Limited; their successors, assigns, subsidiaries, divisions, groups, affiliates, partnerships, joint ventures; and their directors, officers, managers, agents, and employees.

C. "Divestiture Assets" means all of the textbooks described in Exhibit A attached hereto and associated ancillary educational materials offered or under development by any of the Defendants for use with any such textbook. Each textbook includes all versions that are customizations of, components of supplements to, derivations of, volumes that address specific subjects or periods included in the subject matter of, or brief or "essentials" versions of the textbook, but does not include any customized publication sold prior to the filing of the Complaint in this matter that both (i) is not authored or co-authored by any author listed in Exhibit A, and (ii) contains content from an author identified in, or a textbook described in, Exhibit A that comprises less than twenty-five (25) percent of the publisher-provided content (hereafter "Excluded Customized Publications"). The associated ancillary educational materials include all materials in any form or format offered or under development for use with any textbook, including teacher editions or aids, excerpts, workbooks, outlines, summaries, study guides, notebooks, charts, audio, video, software, CD-ROMs, DVD-ROMs, Internet and broadcast components, all other technology components, teacher support and staff development materials, and any other materials. The associated ancillary educational materials include (i) materials that are or will be offered specifically for use with any textbook listed on Exhibit A; (ii) materials that are or will be offered primarily for use with any such textbook, meaning at least fifty (50) percent of the total units of such materials shipped in the United States during the twelve-month period prior to the filing of the Complaint in this matter were associated with the sale of any such textbook (or for materials still under development, meaning at least fifty (50) percent of the total units of such materials forecast to be shipped in the United States during the twelve-month period following development are forecast to be associated with the sale of any such textbook) (hereafter "Category (ii) Ancillary Materials"); and (iii) a one-year, nonexclusive, royalty-free license to use materials that have been offered during the twelve-month period prior to the filing of the Complaint in this matter for use in association with any of the textbooks described in Exhibit A but are offered primarily for use with other textbooks, meaning at least fifty (50) percent of the units of such materials shipped in the United States during the twelve-month period prior to the filing of the Complaint in this matter were associated with the sale of other textbooks. (The textbooks and associated ancillary educational materials are hereafter collectively referred to as "Divested Textbooks.")

(1) The Divestiture Assets Include:

(a) All tangible assets used in the development, production, servicing, marketing, distribution, and sale of the Divested Textbooks, including, but not limited to, all records relating to historic and current research data and activities and development activities relating to the Divested Textbooks; all original and digital artwork, film plates, and other reproductive materials relating to the Divested Textbooks; all manuscripts, illustrations, any other content, and any revisions or revision plans thereof in print or digital form; all finished inventory; all licenses, permits and authorizations issued by any governmental organization relating to the Divested Textbooks; all contracts, teaming arrangements, agreements, commitments, certifications, and understandings relating to the Divested Textbooks, including, but not limited to, author permissions and agreements, publishing agreements, research agreements, other similar agreements, and supply and distribution agreements; all customer lists, contracts, purchase orders, accounts, and credit records, or similar records of all sales and potential sales of the Divested Textbooks; all sales support and promotional materials, advertising materials, and production, sales and marketing files relating to the Divested Textbooks; at the option of the Acquirer(s), computers and other tangible assets used primarily for the production or distribution of the Divested Textbooks; and all performance and all other records relating to the Divested Textbooks; and

(b) All intangible assets used in the development, production, servicing, marketing, distribution, and sale of the Divested Textbooks, including, but not limited to; all patents, licenses and sublicenses, intellectual property,

[Page Number 34952]

copyrights, contract rights, trademarks (registered and unregistered), trade names, service marks, service names, including all titles of existing products comprising or relating to the Divested Textbooks, but only including nonexclusive licenses to use the corporate trademarks or trade names of Cengage or Houghton Mifflin sufficient to allow any Acquirer to sell finished inventory or other materials that have already been marked with such trademarks or trade names; all technical information, computer software and related documentation, know-how, trade secrets, drawings, blueprints, designs, design protocols, specifications for materials, quality assurance and control procedures, and manuals used for any purpose relating to the Divested Textbooks or that Defendants provide to their own employees, customers, suppliers, agents or licensees for use in relation to the Divested Textbooks; and all other intangible research data concerning historic and current research and development efforts relating to the Divested Textbooks.

(2) The Divestiture Assets Do Not Include:

(a) Except to the extent included in the non-exclusive license of materials described in Section II.C.(1)(b), the company names, company Internet domain names, and company trademarks of Defendants or any of their affiliates, or portions or elements thereof, including, but not limited to, "Cengage", "South-Western", "Wadsworth", "Brooks Cole", "Heinle", "Houghton Mifflin", "HM", and "HMCo";

(b) Defendants' employee records that may not be produced under applicable law; and

(c) Originals of books or records, as well as the information management systems used to create and store such books and records, that Defendants are required by law to retain or that Defendants determine are necessary or advisable to retain, provided that copies of any such books or records, or data sets that can be accessed by information management systems, are provided in a form useable by the Acquirer(s), subject to customary confidentiality assurances, to any Acquirer(s) or potential Acquirer(s).

D. "Acquirer" or "Acquirers" means the entity or entities to whom Defendants divest the Divestiture Assets.

III. Applicability

A. This Final Judgment applies to Cengage and Houghton Mifflin, as defined above, and all other persons in active concert or participation with any of them who receive actual notice of this Final Judgment by personal service or otherwise. Notwithstanding any other provision of this Final Judgment, Houghton Mifflin's obligations under sections IV.A, IV.H, V.A, V.B, V.D, VI.A shall cease upon completion of its sale of the Divestiture Assets to Cengage as part of its sale to Cengage of the assets of the Houghton Mifflin College Division.

B. If prior to complying with sections IV and V of this Final Judgment, Defendants sell or otherwise dispose of all or substantially all of their assets or of lesser business units that include the Divestiture Assets, they shall require the purchaser to be bound by the provisions of this Final Judgment. Defendants need not obtain such an agreement from the Acquirer(s) of the Divestiture Assets pursuant to this Final Judgment.

IV. Divestitures

A. Defendants are ordered and directed, within forty-five (45) calendar days after the filing of the Complaint in this matter, or five (5) calendar days after notice of the entry of this Final Judgment by the Court, whichever is later, to divest the Divestiture Assets in a manner consistent with this Final Judgment to one or more Acquirers acceptable to the United States, in its sole discretion. The United States, in its sole discretion, may agree to one or more extensions of this time period not to exceed thirty (30) calendar days in total, and shall notify the Court in such circumstances. Defendants agree to use their best efforts to divest the Divestiture Assets as expeditiously as possible.

B. In accomplishing the divestitures ordered by this Final Judgment, Defendants promptly shall make known, by usual and customary means, the availability of the Divestiture Assets. Defendants shall inform any person making inquiry regarding a possible purchase of the Divestiture Assets that they are being divested pursuant to this Final Judgment and provide that person with a copy of this Final Judgment. Defendants shall offer to furnish to all prospective Acquirers, subject to customary confidentiality assurances, all information and documents relating to the Divestiture Assets customarily provided in a due diligence process except such information or documents subject to the attorney-client privilege or work-product doctrine. Defendants shall make available such information to the United States at the same time that such information is made available to any other person.

C. Defendants shall provide the Acquirer(s) and the United States the identity of any personnel responsible for any editorial content of any Divestiture Asset, and any personnel involved in the management, sale, marketing, development, design, layout, production, research, operation, delivery, distribution, acquisition or maintenance of licenses or other rights to copyrights or other intellectual property, or provision or development of seminars or training activities relating to any of the Divestiture Assets, to enable the Acquirer(s) to make offers of employment. Defendants will not interfere with any negotiations or attempts by the Acquirer(s) to employ or contract with any of Defendants' officers, directors, employees, or any other persons responsible for any such activity related to any Divestiture Asset and, if requested, will release any such person from any non-compete agreement with any of the Defendants.

D. Defendants shall permit prospective Acquirers of the Divestiture Assets to have reasonable access to personnel responsible for the Divestiture Assets (as described in section IV.C of this Final Judgment); and to have access to any and all financial, operational, or other documents and information customarily provided as part of a due diligence process.

E. Defendants shall warrant to all Acquirers of the Divestiture Assets that each asset is complete, intact, fully functional and operational on the date of sale, provided that, for any asset that is in development at the time of sale, Defendants shall describe the extent to which the asset is complete, intact, functional and operational and project the amount of time, money and effort required to complete the development. Defendants shall warrant to all Acquirers of the Divestiture Assets that each asset has been preserved, maintained, developed, sold, and operated as required by the Asset Preservation Stipulation and Order filed simultaneously with the Court.

F. Defendants shall not take any action that will impede in any way the permitting, publication, marketing, sale, development, administration, acquisition or maintenance of related licenses or other rights to copyrights or other intellectual property, function, operation or divestiture of the Divestiture Assets. Defendants shall use their best efforts to facilitate the assignment to the Acquirer(s) of all of the tangible and intangible assets included in the Divestiture Assets that Defendants presently hold or use pursuant to a license or any other agreement.

[Page Number 34953]

G. Defendant Cengage shall have the right to obtain from the Acquirer(s) of the Divestiture Assets:

(1) With respect to each Excluded Customized Publication, a one-year, non- exclusive, royalty-free license to continue to include in that publication Divestiture Asset-related content;

(2) With respect to Category (ii) Ancillary Materials, a one-year, non- exclusive, royalty-free license to continue to sell such materials in association with textbooks that are not described on Exhibit A where, prior to the filing of the Complaint in this matter, such materials were sold in association with those textbooks; and

(3) With respect to copyrighted art, photographs, illustrations, charts, graphs, or other similar content that, at the time of the filing of the Complaint in this matter, were included within both the Divestiture Assets and other textbooks and products (other than content written, developed produced or copyrighted by, or otherwise attributable to, (i) any author identified in Exhibit A with respect to any course associated with that author in Exhibit A, or (ii) the author's co-authors or successor authors), a non-exclusive, royalty-free license to continue to use such content (i) in the other textbooks and products in which it is now included, (ii) in future textbooks and ancillary educational materials other than textbooks and materials offered for use in any course listed in Exhibit A, and (iii) with the permission of the Acquirer(s) of all of the Divested Assets applicable to any course listed in Exhibit A, in future textbooks and ancillary materials for use in that course.

H. Unless the United States otherwise consents in writing, the divestitures pursuant to section IV, or by trustee appointed pursuant to section V, of this Final Judgment, shall include the entire Divestiture Assets, and shall be accomplished in such a way as to satisfy the United States, in its sole discretion, that the Divestiture Assets can and will be used by the Acquirer(s) as part of a viable, ongoing higher education textbook publishing business. Divestiture of the Divestiture Assets may be made to one or more Acquirers, provided that in each instance it is demonstrated to the sole satisfaction of the United States that the Divestiture Assets will remain viable and the divestiture of such assets will remedy the competitive harm alleged in the Complaint. The divestitures, whether pursuant to section IV or section V of this Final Judgment:

(1) Shall be made to an Acquirer(s) that, in the United States's sole judgment, has the intent and capability (including the necessary managerial, operational, technical and financial capability) of competing effectively in the higher education textbook publishing business; and

(2) Shall be accomplished so as to satisfy the United States, in its sole discretion, that none of the terms of any agreement between an Acquirer(s) and Defendants give Defendants the ability unreasonably to raise the Acquirer's costs, to lower the Acquirer's efficiency, or otherwise to interfere in the ability of the Acquirer to compete effectively.

V. Appointment of Trustee

A. If Defendants have not divested the Divestiture Assets within the time period specified in section IV.A of this Final Judgment, Defendants shall notify the United States of that fact in writing. Upon application of the United States, the Court shall appoint a trustee selected by the United States and approved by the Court to effect the divestiture of the Divestiture Assets.

B. After the appointment of a trustee becomes effective, only the trustee shall have the right to sell the Divestiture Assets. The trustee shall have the power and authority to accomplish the divestiture to an Acquirer(s) acceptable to the United States at such price and on such terms as are then obtainable upon reasonable effort by the trustee, subject to the provisions of sections IV, V, and VI of this Final Judgment, and shall have such other powers as this Court deems appropriate. Subject to section V.D of this Final Judgment, the trustee may hire at the cost and expense of Defendants any investment bankers, attorneys, or other agents, who shall be solely accountable to the trustee, reasonably necessary in the trustee's judgment to assist in the divestitures.

C. Defendants shall not object to a sale by the trustee on any ground other than the trustee's malfeasance. Any such objections by Defendants must be conveyed in writing to the United States and the trustee within ten (10) calendar days after the trustee has provided the notice required under section VI of this Final Judgment.

D. The trustee shall serve at the cost and expense of Defendants, on such terms and conditions as the United States approves, and shall account for all monies derived from the sale of the assets sold by the trustee and all costs and expenses so incurred. After approval by the Court of the trustee's accounting, including fees for its services and those of any professionals and agents retained by the trustee, all remaining money shall be paid to Defendants and the trust shall then be terminated. The compensation of the trustee and any professionals and agents retained by the trustee shall be reasonable in light of the value of the Divestiture Assets and based on a fee arrangement providing the trustee with an incentive based on the price and terms of the divestiture and the speed with which it is accomplished, but timeliness is paramount.

E. Defendants shall use their best efforts to assist the trustee in accomplishing the required divestitures. The trustee and any consultants, accountants, attorneys, and other persons retained by the trustee shall have full and complete access to the personnel, books, records, and facilities of the businesses to be divested, and Defendants shall develop financial and other information relevant to such businesses as the trustee may reasonably request, subject to reasonable protection for trade secrets or other confidential research, development, or commercial information. Defendants shall take no action to interfere with or to impede the trustee's accomplishment of the divestitures.

F. After its appointment, the trustee shall file monthly reports with the United States and the Court setting forth the trustee's efforts to accomplish the divestitures ordered under this Final Judgment. To the extent such reports contain information that the trustee deems confidential, such reports shall not be filed in the public docket of the Court. Such reports shall include the name, address, and telephone number of each person who, during the preceding month, made an offer to acquire, expressed an interest in acquiring, entered into negotiations to acquire, or was contacted or made an inquiry about acquiring, any interest in the Divestiture Assets, and shall describe in detail each contact with any such person. The trustee shall maintain full records of all efforts made to divest the Divestiture Assets.

G. If the trustee has not accomplished the divestitures ordered under this Final Judgment within six (6) months after its appointment, the trustee shall promptly file with the Court a report setting forth: (1) The trustee's efforts to accomplish the required divestitures, (2) the reasons, in the trustee's judgment, why the required divestitures have not been accomplished, and (3) the trustee's recommendations. To the extent such reports contain information that the trustee deems confidential, such reports shall not be filed in the public docket of the Court. The trustee shall at the same time furnish such report to the United States, which shall have the right to make additional

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recommendations consistent with the purpose of the trust. The Court thereafter shall enter such orders as it shall deem appropriate to carry out the purpose of the Final Judgment, which may, if necessary, include extending the trust and the term of the trustee's appointment by a period requested by the United States.

VI. Notice of Proposed Divestitures

A. Within two (2) business days following execution of a definitive divestiture agreement, Defendants or the trustee, whichever is then responsible for effecting the divestitures required herein, shall notify the United States of any proposed divestiture(s) required by section IV or V of this Final Judgment. If the trustee is responsible, it shall similarly notify Defendants. The notice shall set forth the details of the proposed divestiture(s) and list the name, address, and telephone number of each person not previously identified who offered or expressed an interest in or desire to acquire any ownership interest in the Divestiture Assets, together with full details of the same.

B. Within fifteen (15) calendar days of receipt by the United States of such notice, the United States may request from Defendants, the proposed Acquirer(s), any other third party, or the trustee, if applicable, additional information concerning the proposed divestiture(s), the proposed Acquirer(s), and any other potential Acquirer. Defendants and the trustee shall furnish any additional information requested within fifteen (15) calendar days of the receipt of the request, unless the parties shall otherwise agree.

C. Within thirty (30) calendar days after receipt of the notice or within twenty (20) calendar days after the United States has been provided the additional information requested from Defendants, the proposed Acquirer(s), any third party, and the trustee, whichever is later, the United States shall provide written notice to Defendants and the trustee, if there is one, stating whether or not it objects to the proposed divestiture(s). If the United States provides written notice that it does not object, the divestiture(s) may be consummated, subject only to Defendants' limited right to object to the sale under section V.C of this Final Judgment. Absent written notice that the United States does not object to the proposed Acquirer or upon objection by the United States, a divestiture proposed under section IV or section V of this Final Judgment shall not be consummated. Upon objection by Defendants under section V.C, a divestiture proposed under section V shall not be consummated unless approved by the Court.

VII. Financing

Defendants shall not finance all or any part of any purchase made pursuant to section IV or section V of this Final Judgment.

VIII. Preservation of Assets

Until the divestitures required by this Final Judgment have been accomplished, Defendants shall take all steps necessary to comply with the Asset Preservation Stipulation and Order entered by this Court. Defendants shall take no action that would jeopardize the divestitures ordered by this Court.

IX. Affidavits

A. Within twenty (20) calendar days of the filing of the Complaint in this matter, and every thirty (30) calendar days thereafter until the divestitures have been completed under section IV or section V of this Final Judgment, Defendants shall deliver to the United States an affidavit as to the fact and manner of its compliance with section IV or section V. Each such affidavit shall include the name, address, and telephone number of each person who, during the preceding thirty (30) calendar days, made an offer to acquire, expressed an interest in acquiring, entered into negotiations to acquire, or was contacted or made an inquiry about acquiring, any interest in the Divestiture Assets, and shall describe in detail each contact with any such person during that period. Each such affidavit shall also include a description of the efforts Defendants have taken to solicit buyers for the Divestiture Assets, and to provide required information to prospective Acquirers, including the limitations, if any, on such information. Assuming the information set forth in the affidavit is true and complete, any objection by the United States to information provided by Defendants, including limitations on information, shall be made within fourteen (14) calendar days of receipt of such affidavit.

B. Within twenty (20) calendar days of the filing of the Complaint in this matter, Defendants shall deliver to the United States an affidavit that describes in reasonable detail all actions Defendants have taken and all steps Defendants have implemented on an ongoing basis to comply with section VIII of this Final Judgment. Defendants shall deliver to the United States an affidavit describing any changes to the efforts and actions outlined in Defendants' earlier affidavits filed pursuant to this section within fifteen (15) calendar days after the change is implemented.

C. Defendants shall keep all records of all efforts made to preserve and divest the Divestiture Assets until one year after such divestitures have been completed.

X. Compliance Inspection

A. For the purposes of determining or securing compliance with this Final Judgment, or of determining whether the Final Judgment should be modified or vacated, and subject to any legally recognized privilege, from time to time authorized representatives of the United States Department of Justice, including consultants and other persons retained by the United States, shall, upon written request of an authorized representative of the Assistant Attorney General in charge of the Antitrust Division, and on reasonable notice to Defendants, be permitted:

(1) Access during Defendants' regular office hours to inspect and copy, or at the option of the United States, to require Defendants to provide electronic or hard copies of, all books, ledgers, accounts, records, data, and documents in the possession, custody, or control of Defendants, relating to any matters contained in this Final Judgment; and

(2) To interview, either informally or on the record, Defendants' officers, employees, or agents, who may have their individual counsel present, regarding such matters. The interviews shall be subject to the reasonable convenience of the interviewee and without restraint or interference by Defendants.

B. Upon the written request of an authorized representative of the Assistant Attorney General in charge of the Antitrust Division, Defendants shall submit written reports or responses to written interrogatories, under oath if requested, relating to any of the matters contained in this Final Judgment as may be requested.

C. No information or documents obtained by the means provided in this section shall be divulged by the United States to any person other than an authorized representative of the executive branch of the United States, except in the course of legal proceedings to which the United States is a party (including grand jury proceedings), or for the purpose of securing compliance with this Final Judgment, or as otherwise required by law.

D. If at the time information or documents are furnished by Defendants to the United States, Defendants represent and identify in writing the material in any such information or

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documents to which a claim of protection may be asserted under Rule 26(c)(7) of the Federal Rules of Civil Procedure, and Defendants mark each pertinent page of such material, "Subject to claim of protection under Rule 26(c)(7) of the Federal Rules of Civil Procedure," then the United States shall give Defendants ten (10) calendar days notice prior to divulging such material in any legal proceeding (other than a grand jury proceeding).

XI. No Reacquisition

Defendant Cengage may not reacquire any part of the Divestiture Assets during the term of this Final Judgment.

XII. Retention of Jurisdiction

This Court retains jurisdiction to enable any party to this Final Judgment to apply to this Court at any time for further orders and directions as may be necessary or appropriate to carry out or construe this Final Judgment, to modify any of its provisions, to enforce compliance, and to punish violations of its provisions.

XIII. Expiration of Final Judgment

Unless this Court grants an extension, this Final Judgment shall expire ten (10) years from the date of its entry.

XIV. Public Interest Determination

Entry of this Final Judgment is in the public interest. The parties have complied with the requirements of the Antitrust Procedures and Penalties Act, 15 U.S.C. 16, including making copies available to the public of this Final Judgment, the Competitive Impact Statement, and any comments thereon and the United States's responses to comments. Based upon the record before the Court, which includes the Competitive Impact Statement and any comments and response to comments filed with the Court, entry of this Final Judgment is in the public interest.

Date:

Court approval subject to procedures of Antitrust Procedures and Penalties Act, 15 U.S.C. 16.

United States District Judge.

Exhibit A

[TB]

Course Textbooks

Business: Introductory All textbooks that relate to the study

of introduction to business with which

LouisBoone has been or will be

associated, and all textbooks that

relate to the study of introduction to

business with which David Kurtz has

been or will be associated.

Foreign Languages and Literature: All textbooks with which Jean-Luc

French: Language: Business French Penfornis has been or will be

associated.

Foreign Languages and Literature: All textbooks that relate to the study

French: Language: Intermediate of French language or literature at

the intermediate level with which

Michael Oates has been or will be

associated, all textbooks with which

JacquesDubois has been or will be

associated, all textbooks with which

Simone Renaud has been or will be

associated, all textbooks with which

Dominique Van Hooff has been or will

be associated, all textbooks that

relate to the study of French language

or literature at the intermediate

level with which Jean-Paul Valette has

been or will be associated, and all

textbooks that relate to the study of

French language, or literature at the

intermediate level with which

RebeccaValette has been or will be

associated.

Foreign Languages and Literature: All textbooks with which Kimberly

German: Language: Grammar Sparks has been or will be associated,

and all textbooks with which Van Horn

Vail has been or will be associated.

Foreign Languages and Literature: All textbooks with which Marcel Danesi

Italian: Language: Elementary has been or will be associated, and

all textbooks with which Suzanne

Branciforte has been or will be

associated.

Foreign Languages and Literature: All textbooks with which Marcel Danesi

Italian: Language: Intermediate has been or will be associated, and

all textbooks with which Francesca

Italiano has been or will be

associated.

History: Western Civilization Survey: All textbooks with which John McKay

1500 to Present has beenor will be associated.

History: Western Civilization Survey: All textbooks with which John McKay

1750 to Present has beenor will be associated.

History: Western Civilization Survey: All textbooks with which John McKay

Prehistory to 1715 has beenor will be associated.

History: Western Civilization Survey: All textbooks with which John McKay

Prehistory to Present has been or will be associated.

History: World History Survey: 1400 to All textbooks with which John McKay

1750 has been or will be associated.

History: World History Survey: 1500 to All textbooks with which John McKay

Present has been or will be associated.

History: World History Survey: All textbooks with which John McKay

Prehistory to Present has been or will be associated.

Interdisciplinary Studies: Orientation All textbooks with which John Gardner

to College has been or will be associated.

[Page Number 34956]
The United States District Court for the District of Columbia
United States of America, Plaintiff, v. Cengage Learning Holdings I, L.P., Cengage Learning Holdings II L.P., Cengage Learning, Inc., Apax/Tl Holdings, LLC, Education Media and Publishing Group Limited, and Houghton Mifflin Harcourt Publishing Company, Defendants
Case No.: Judge: Case: 1:08Cv-00899, Assigned To: Bates, John D., Assign. Date: 5/28/2008, Description: Antitrust.
Competitive Impact Statement
   Plaintiff United States of America ("United States"), pursuant to section 2(b) of the Antitrust Procedures and Penalties Act ("APPA" or "Tunney Act"), 15 U.S.C. 16(b)-(h), files this Competitive Impact Statement relating to the proposed Final Judgment submitted for entry in this civil antitrust proceeding.
I. Nature and Purpose of the Proceeding
   The United States filed a civil antitrust Complaint on May 28, 2008, seeking to enjoin the proposed acquisition by Cengage Learning, Inc., and related entities (collectively "Cengage"), of the assets of the Houghton Mifflin College Division ("HM College") from Houghton Mifflin Harcourt Publishing Company, and a related entity (collectively "Houghton Mifflin"). The Complaint alleges that the likely effects of this acquisition would be to substantially lessen competition in the development, publication, and sale of textbooks and ancillary educational materials (collectively "textbooks and ancillary materials") used in fourteen higher education courses listed in Appendix A (hereinafter "the Overlap Courses"), in violation of section 7 of the Clayton Act, 15 U.S.C. 18. The loss of competition caused by the acquisition would likely result in a reduced rate of quality improvements in, and/or increased prices for, the textbooks and ancillary materials used in each of the fourteen courses in the United States.
   At the same time the Complaint was filed, the United States also filed an Asset Preservation Stipulation and Order ("APSO") and a proposed Final Judgment, which are designed to eliminate the anticompetitive effects of the acquisition. Under the proposed Final Judgment, which is explained more fully below, the Defendants are required to divest all tangible and intangible assets used in the development, production, servicing, marketing, distribution and sale of certain textbooks in the Overlap Courses and all associated ancillary educational materials (collectively "Divestiture Assets"). Until the divestitures required by the Final Judgment have been accomplished, the APSO requires the Defendants to preserve and maintain the value of and goodwill in the Divestiture Assets, and continue to operate the Divestiture Assets as economically viable, competitive, and ongoing business properties.
   The United States and Defendants have stipulated that the proposed Final Judgment may be entered after compliance with the APPA. Entry of the proposed Final Judgment would terminate this action, except that the Court would retain jurisdiction to construe, modify, or enforce the provisions of the proposed Final Judgment and to punish violations thereof.
II. Description of the Events Giving Rise to the Alleged Violations
A. The Defendants and the Proposed Transaction
   Cengage Learning, Inc. is a Delaware corporation with its headquarters in Stamford, Connecticut. Cengage Learning Holdings I, L.P., a limited partnership with its headquarters in Stamford, Connecticut, is the ultimate parent entity of Cengage Learning, Inc. Cengage Learning Holdings II L.P., a limited partnership with its headquarters in Stamford Connecticut, is an intermediate entity between Cengage Learning Holdings I, L.P. and Cengage Learning, Inc. Apax/TL Holdings, LLC, a Delaware limited liability company, is the general partner in Cengage Learning Holdings I, L.P. The above entities (collectively "Cengage") develop, publish and sell textbooks and ancillary materials for use in the United States and elsewhere. Cengage is the second largest publisher of textbooks and ancillary materials used in courses taught at higher education institutions in the United States and ranks among the top three sellers of such textbooks and materials for each of the Overlap Courses. Cengage had total revenues of about $1.7 billion in the twelve-month period ending September 30, 2007, including about $1 billion in revenues from the sale of higher education textbooks and ancillary materials.
   Houghton Mifflin Harcourt Publishing Company (formerly Houghton Mifflin Company) is a Massachusetts corporation with its headquarters in Boston, Massachusetts. Education Media and Publishing Group Limited, a Cayman Islands corporation with its headquarters in Dublin, Ireland, is the ultimate parent entity of Houghton Mifflin Harcourt Publishing Company. The above entities (collectively "Houghton Mifflin"), develop, publish and sell textbooks and ancillary materials for use in the United States and elsewhere. Houghton Mifflin's HM College Division is the fifth largest publisher of textbooks and ancillary materials used in courses taught at higher education institutions in the United States and ranks among the top three sellers of such textbooks and materials for each of the Overlap Courses. Houghton Mifflin has total annual revenues of about $2.5 billion, and estimated 2007 revenues of about $230 million from the sale of textbooks and ancillary materials by HM College.
   On or about November 30, 2007, Cengage and Houghton Mifflin entered into an agreement for Cengage to acquire the assets of HM College for approximately $750 million.
B. The Competitive Effects of the Transaction
1. Textbooks and Ancillary Materials
   Publishers market and sell textbooks and ancillary materials for use in courses taught at higher education institutions. In most cases, instructors select the textbooks and ancillary materials that will be used for their courses, and students buy the selected textbooks and ancillary materials.
   Textbooks are often supplemented with ancillary educational materials, such as teacher's editions, audio-visual teaching tools, Internet content, CD-ROMs, workbooks, and study guides. These ancillary materials are often offered by publishers for free or as part of a discounted package to induce instructors to select a particular textbook and to induce students to purchase the publisher's textbooks and ancillary materials. Textbooks and ancillary materials are used as the primary teaching materials in each of the Overlap Courses.
2. Relevant Product Markets
   The Complaint alleges that for each Overlap Course, the textbooks and ancillary materials for that course constitute a separate relevant product market and a line of commerce pursuant to section 7 of the Clayton Act.
   Textbooks and ancillary materials are used as the primary teaching materials in each of the Overlap courses. Textbooks provide the core written material for the Overlap Courses and serve as the foundation for instructors' overall lesson plans. While instructors could use alternative teaching materials (such as copies of lecture notes and
[Page Number 34957]
articles), they generally select textbooks to serve as the primary teaching materials for their courses because accessing and creating alternative teaching materials is often a more time-consuming, costly, and inefficient method of delivering high quality content to their students. Instructors using textbooks and ancillary materials would not turn to any alternative teaching materials in sufficient numbers to defeat a small but significant increase in the price of any textbooks and ancillary materials for the Overlap Courses, or a small but significant decrease in the quality of such textbooks and other materials.
   Students taking the Overlap Courses are unlikely to have any significant alternatives to purchasing new textbooks for their Overlap Courses. Although used textbooks, if available, can sometimes serve as alternatives for new textbooks, used textbooks are not uniformly available in large numbers. Moreover, instructors often require students to use the newest textbook editions. Publishers generally revise textbooks every three to four years, and revised textbooks often differ substantially from their prior edition, limiting the extent to which used textbooks may be substituted for new editions of the same textbooks. Students would not turn to purchasing used textbooks in sufficient numbers to defeat a small but significant increase in the price of a new edition of the textbooks.
3. Relevant Geographic Market
   The Complaint alleges that Defendants market and sell textbooks and ancillary materials for use in courses taught at higher education institutions throughout the United States. Market participants for each relevant product market alleged in the Complaint are those publishers from which instructors select textbooks and ancillary materials for use as primary teaching materials in their courses. A hypothetical monopolist of the textbooks and ancillary materials sold for use in any Overlap Course in the United States could profitably lower the rate of quality improvements in, or increase the price of, such textbooks and ancillary materials in the United States. Therefore, for each relevant product market alleged in the Complaint, the United States constitutes a relevant geographic market pursuant to section 7 of the Clayton Act.
4. Anticompetitive Effects of the Acquisition
   In each relevant product and geographic market alleged in the Complaint, Cengage and HM College offer leading textbooks and ancillary materials that are close substitutes for a significant number of customers in that market. In each such market, Cengage and HM College are among the few firms with a significant presence that compete to provide textbooks and ancillary materials, and together they account for at least 35 percent of all sales. Using a standard concentration measure called the Herfindahl-Hirschman Index ("HHI"), the proposed acquisition would substantially raise market concentration in highly concentrated markets, increasing the HHI by more than 500 and producing a post-merger HHI in excess of 3000 in each relevant market.
   Cengage and HM College compete head-to-head to have their textbooks and ancillary materials selected by instructors for each Overlap Course in the United States. This competition has provided significant incentives for each to publish new titles and improve product quality, and it has also disciplined pricing decisions. Although textbooks are purchased by students who do not select the books, the Department's investigation revealed that when institutions and instructors request price concessions at the time they are selecting textbooks, publishers such as Cengage and HM College have competed to provide them. The proposed acquisition would eliminate the competition between Cengage and HM College in each relevant market, increasing the likelihood that Cengage will unilaterally increase prices or reduce its investment or other efforts to develop new or improved textbooks and ancillary materials.
   The proposed acquisition therefore is likely to substantially lessen competition in the development, publication, and sale of textbooks and ancillary materials in each of the relevant markets alleged in the Complaint, in violation of section 7 of the Clayton Act.
5. Entry Would Not Likely Constrain the Acquisition's Adverse Effects
   The Complaint alleges that, in each of the relevant product and geographic markets, there is unlikely to be timely entry by any firm that would be sufficient to defeat the likely anticompetitive effects of the proposed acquisition. Successful entry into developing, publishing, and selling textbooks and ancillary materials in each of the relevant markets is difficult, time-consuming, and costly.
   Successful entry generally can be achieved only over many years and after at least one or more textbook revision cycles. Significant investment and effort are required to assemble authors, editorial staff and reviewing professors, to develop and obtain licenses to copyrighted content and ancillary educational materials, and to train a knowledgeable sales force. The outcome of any such effort would be highly uncertain, because, among other things, the reputation of a successful incumbent textbook is difficult for a publisher of a new textbook to challenge. The leading textbooks in each relevant market have been published for some time and are well-known to instructors. Most instructors switch textbooks infrequently because they develop course syllabi, lesson plans, homework, tests, and other materials that conform to the textbooks they use, and changing textbooks often requires modifications to course syllabi and other materials.
III. Explanation of the Proposed Final Judgment
A. The Required Divestitures
   Section IV.A of the proposed Final Judgment requires that the Defendants divest the existing or future textbooks described in Appendix A, which are used in the Overlap Courses, and associated ancillary educational materials used with those textbooks. The Divestiture Assets may be sold to more than one acquirer with approval of the United States. Section II.C specifies that the divested textbooks include all supplements to, derivations of, and customized versions of the textbooks, except the Defendants are not required to divest existing publications that were customized for specific institutions that contain only a small amount of content (less than 25%) written by an author listed on Appendix A. The description of Divestiture Assets in Section II.C will ensure that the acquirer or acquirers shall have access to all ancillary educational materials offered with a divested textbook. The Defendants are required to divest all associated ancillary materials offered specifically or primarily for use with the textbooks. With respect to other ancillary educational materials that are offered primarily for use with Defendants' other textbooks, but are also offered with divested textbooks, the Defendants are required to grant the acquirer(s) a one-year license to use any such materials. To the extent an acquirer desires to continue to provide these other ancillary materials to instructors and students who use a divested textbook, the one-year license is intended to provide the acquirer a sufficient period of time to continue selling the
[Page Number 34958]
Defendants' materials while it develops substitute materials.
   The Divestiture Assets also include all tangible and intangible assets related to the divested textbooks and any ancillary educational materials associated with those textbooks. For example, section II.C(1)(a) provides that the Divestiture Assets include, among other things, all original artwork, illustrations and other content, and all contracts, author permissioning agreements and other agreements related to the divested textbooks and ancillary materials. In addition, section II.C(1)(b) provides that the Divestiture Assets include, among other things, licenses and sublicenses to intellectual property of any kind that is used in the development, production, servicing, marketing, distribution, and sale of any of the divested textbooks or ancillary materials.
   The Divestiture Assets do not include Defendants' company names or trademarks, except that the Divestiture Assets include nonexclusive licenses to use the corporate trademarks or trade names of Cengage or Houghton Mifflin sufficient to allow the acquirer(s) to sell finished inventory or other materials that have already been marked with such trademarks or trade names. This provision will ensure that the acquirer(s) will not infringe the Defendants' intellectual property rights in the course of distributing the finished inventory.
   Sale of the Divestiture Assets according to the terms of the proposed Final Judgment will preserve competition between the textbooks and ancillary materials to be divested and the textbooks and ancillary materials that Cengage will retain and will thus eliminate the anticompetitive effects of the proposed acquisition in each relevant market alleged in the Complaint. In each of the Overlap Courses, the textbooks to be divested, alone or in combination with each other, are among the leading textbooks sold by Defendants. For several of the Overlap Courses, the Final Judgment requires the divestiture of all of the significant textbooks Cengage or HM College offers for sale. For others, the textbooks to be divested are the publications by one Defendant that are close substitutes with textbooks offered by the other Defendant, and thus as to which there is meaningful competition between Cengage and HM College that would have been eliminated by the proposed acquisition.
B. Selected Provisions of the Proposed Final Judgment
   In antitrust cases involving acquisitions in which the United States seeks a divestiture remedy, the United States seeks to require completion of the divestiture(s) within the shortest period of time reasonable under the circumstances. A quick divestiture has the benefits of restoring competition lost in the acquisition and reducing the possibility that the value of the assets will be diminished. Section IV.A of the proposed Final Judgment requires the Defendants to divest the Divestiture Assets within forty-five (45) calendar days after the filing of the Complaint in this matter, or five (5) calendar days after notice of the entry of this Final Judgment by the Court, whichever is later. n*1 Section IV.H requires that the Divestiture Assets be divested in such a way as to satisfy the United States in its sole discretion that the Divestiture Assets will remain viable and can and will be operated by the acquirer(s) as part of a viable, competitively-effective, ongoing higher education textbook publishing business and that the divestiture of such assets will remedy the competitive harm alleged in the Complaint.
   n*1 The proposed Final Judgment also provides that this time period may be extended by the United States in its sole discretion for a period not to exceed thirty (30) calendar days, and that the Court will receive notice of any such extension.
   Sections IV.B, IV.C, IV.D, and IV.E include specific obligations and prohibitions that require the Defendants to cooperate with prospective acquirer(s) and facilitate the divestitures. Similarly, section IV.F requires the Defendants to use their best efforts to facilitate the assignment to the acquirer(s) of all assets included in the Divestiture Assets that Defendants hold or use pursuant to a license or any other agreement.
   Section V.G creates a limited exception to the Defendants' obligation to divest the Divestiture Assets in their entirety by allowing Cengage to retain a nonexclusive license to certain intellectual property that is used jointly in divested textbooks and textbooks that are not being divested. Cengage has the right to obtain a one-year license to continue to include content written by an author on Appendix A in certain customized publications that are not required to be divested and to continue to sell for use with textbooks that will not be divested ancillary educational materials that are primarily, but not exclusively, used with the divested textbooks. This license is intended to allow Cengage a sufficient period of time to continue its limited use of the divested content while it develops substitute content. Cengage also has the right to a license to continue using any copyrighted art, charts or similar content that has been included in both divested textbooks and textbooks that will not be divested, other than content attributable to the authors of the divested textbooks. Cengage may continue to use this content in all existing and future textbooks and ancillary materials, except that Cengage must obtain the consent of the acquirer(s) to use the content in future textbooks or ancillary materials that will compete with the divested textbooks and ancillary materials.
   Section V.A of the proposed Final Judgment provides that in the event the Defendants do not accomplish the divestitures within the periods prescribed in section IV.A of the proposed Final Judgment, the Court will appoint a trustee selected by the United States to effect the divestitures. Section IV.H requires that any sale of the Divestiture Assets by a trustee be acceptable to the United States, in its sole discretion, and specifies that any divestiture by a trustee must satisfy the same criteria that a divestiture by Defendants must satisfy. Section V.B provides that, after a trustee is appointed, only the trustee will have the right to sell the Divestiture Assets, and section V.C precludes Defendants from objecting to a sale by the trustee on any ground other than the trustee's malfeasance. Section V.E requires Defendants to use their best efforts to assist the trustee in accomplishing the divestitures.
   If a trustee is appointed, section V.D provides that Defendants will pay all costs and expenses of the trustee. The trustee's commission will be structured so as to provide an incentive for the trustee based on the price obtained and the speed with which the divestitures are accomplished. After his or her appointment, section V.F requires the trustee to file monthly reports with the Court and the United States setting forth his or her efforts to accomplish the required divestitures. Section V.G requires that, if the required divestitures have not been accomplished within six (6) months after a trustee's appointment, the trustee and the United States will both make recommendations to the Court, which shall enter such orders as appropriate to carry out the purpose of the Final Judgment, which may include extending the trust or the term of the trustee's appointment.
C. The Asset Preservation Stipulation and Order
   To ensure that the Divestiture Assets will be preserved, maintained, marketed, and further developed, and continue to be operated as economically viable and ongoing business properties,
[Page Number 34959]
until the divestitures required by the proposed Final Judgement have been accomplished, the United States and Defendants have agreed that the Court may enter the APSO that was filed simultaneously with the proposed Final Judgment.
   Sections V.A and V.B of the APSO provide that Defendants are required to preserve and maintain the value and goodwill of the Divestiture Assets. Prior to the completion of the divestitures, Defendants must maintain and increase the sales and revenues of the Divestiture Asset-related products and services, and maintain all operational, promotional, developmental, advertising, sales, technical, customer-service and marketing funding and other support for the Divestiture Assets. Defendants must also ensure that the Divestiture Assets arc fully maintained in operable and saleable condition and continue to be developed and updated, and maintain and adhere to normal sales, development, updating, and support schedules for the Divestiture Assets. Section V.C requires the Defendants to prov