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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: April 30, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the transition period from to
Commission file number 1-11507
JOHN WILEY & SONS, INC.
(Exact name of Registrant as specified in its charter)
NEW YORK 13-5593032
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State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification No.
111 River Street, Hoboken, NJ 07030
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Address of principal executive offices Zip Code
Registrant's telephone number including area code (201) 748-6000
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class of each exchange on which registered
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Class A Common Stock, par value $1.00 per share New York Stock Exchange
Class B Common Stock, par value $1.00 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K _____
The number of shares outstanding of the Registrant's Class A and Class B Common
Stock, par value $1.00 per share as of May 31, 2003, was 50,100,143, and
11,551,864 respectively, and the aggregate market value of such shares of Common
Stock held by non-affiliates of the Registrant as of such date was $963,798,867
based upon the closing market price of the Class A and Class B Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's definitive proxy Statement to be filed with the Commission on
or about August 6, 2003, for the Annual Meeting of Shareholders to be held on
September 18, 2003 (the "2003 Proxy Statement"), is, to the extent noted below,
incorporated by reference in Part III.
PART I
Item 1. Business
--------
The Company, founded in 1807, was incorporated in the state of New
York on January 15, 1904. (As used herein the term "Company" means
John Wiley & Sons, Inc., and its subsidiaries and affiliated
companies, unless the context indicates otherwise.)
The Company is a global publisher of print and electronic products,
providing must-have content and services to customers worldwide. Core
businesses include professional and consumer books and subscription
services; scientific, technical, and medical journals, encyclopedias,
books, and online products and services; and educational materials,
including course management and study guides for undergraduate and
graduate students, teachers and lifelong learners. The Company takes
full advantage of the product content of its various core businesses
to develop material and cross-market products to its diverse customer
base of academics, professionals, researchers and consumers.
Technology is enabling the Company to make its content more accessible
to its global communities of interest. The Company has publishing,
marketing, and distribution centers in the United States, Canada,
Europe, Asia, and Australia.
In recent years, the Company has focused its efforts on delivering a
deep reservoir of 'must-have' content to global communities of
interest. The Company promotes long-term collaborative relationships
with customers, authors, professional societies, suppliers, and
employees to further this objective.
Professional/Trade Publishing
-----------------------------
The Company's Professional/Trade business acquires, develops and
publishes books and subscription products, both print and electronic,
for professionals and consumers worldwide. Subject areas include
business, technology, architecture, culinary, psychology, education,
and consumer categories including cooking, travel, and reference.
Products are developed for worldwide distribution through multiple
channels, including bookstores, the Internet, and direct marketing.
Global Professional/Trade publishing accounted for approximately 43%
of total Company revenues in fiscal 2003.
A key strategy of the Professional/Trade publishing program is to
increase revenue by adding value to its must-have content. Through
organic growth, the development of leading brands, electronic
distribution, strategic acquisitions and the development of franchise
relationships the Company's worldwide Professional/Trade publishing
business grew at a compound annual revenue growth rate of
approximately 21% over the past five years. Key strategic acquisitions
during this period were Hungry Minds, acquired in September 2001, a
leading publisher with an outstanding collection of respected brands
including the For Dummies and Unofficial Guide series, the
technological Bible and Visual series, Frommer's travel guides,
CliffsNotes, Webster's New World Dictionary, Betty Crocker and Weight
Watchers; Frank J. Fabozzi Publishing and Australian publisher,
Wrightbooks Pty Ltd., acquired in 2001, both publishers of
high-quality finance books for the professional market; J.K. Lasser
Tax, acquired in 1999, a publisher of tax and other financial help
guides and Jossey-Bass, also acquired in 1999, a publisher of
business, psychology and education/health management.
During fiscal year 2003, the Company acquired a list of approximately
250 titles from Prentice Hall Direct, a unit of Pearson Education, for
approximately $6.5 million. This acquisition brings a collection of
practical, "hands-on" teaching resources, which complement the
Company's renowned Jossey-Bass Education series and its market-leading
Janice Van Cleave series.
Publishing alliances and franchise products are central to the
Company's strategy. The Company's alliance program brings together
Wiley's product development, sales, marketing, and distribution
capabilities with a partner's content, brand name recognition, and/or
technology. Alliance partners include the Culinary Institute of
America, the American Institute of Architects, Ernst & Young, the
National Restaurant Association Educational Foundation, and the Leader
to Leader Institute (formerly The Peter F. Drucker Foundation), among
many others.
The Internet continues to play a growing role in the Company's
business. The Company's highly respected brands and extensive backlist
are especially well suited for online bookstores. With their unlimited
"virtual" shelf space, online retailers merchandise the Company's
products for longer periods of time than brick-and-mortar bookstores.
Demand for Web-based electronic products has emerged in professional
markets with the advent of broadband Internet access. In fiscal year
2003, the company introduced LPIonline.com, an interactive tool for
administering the Leadership Practice Inventory, a premier 360-degree
leadership assessment instrument created by James M. Kouzes and Barry
Z. Posner. The Company also created GraphicStandards.com, a website
that provides online access to the entire content of Architectural
Graphic Standards, the definitive building design and construction
information resource for architects
Scientific, Technical, and Medical (STM) Publishing
---------------------------------------------------
The Company is a leading international publisher for the scientific,
technical, and medical communities worldwide. Its STM programs
encompass journals, encyclopedias, books, and online products and
services in subjects such as the life and medical sciences, chemistry,
statistics and mathematics, electrical and electronics engineering,
and select medical areas with particular emphasis on cancer medicine.
The Company develops products for global distribution. Global STM
publishing represented 36% of total Company revenues in fiscal 2003.
STM publishing grew at a compound annual revenue growth rate of 7%
over the past five years.
The Company's Web-based service, Wiley InterScience, established
commercially in 1999, offers fully searchable online access to the
Company's products. With more than twelve million authorized users
around the globe, Wiley InterScience
(http://www.interscience.wiley.com) is one of the world's leading
providers of online scientific, technical, medical, and professional
content. The Company continues to add features and content to Wiley
InterScience adding value for customers, while building its revenue
base. Wiley InterScience is based on a successful business model that
features Enhanced Access Licenses. One to three years in duration,
these licenses provide academic and corporate customers with
multi-site online access to more than 400 journals, major reference
works, online books, laboratory manuals, databases, and professional
and management resources--linked to each other and to other online
resources to open new pathways for researchers and practitioners to
explore. Created to respond to the evolving needs of today's
researchers and professionals, Wiley InterScience offers flexible
access and service plans and personalization features to meet customer
needs. Wiley InterScience includes full-text HTML versions of journal
content, allowing more advanced search and navigation options, and
providing customers with greater choice and control over the
information they retrieve.
Wiley InterScience has developed a mobile Internet service for certain
of its journals called MobileEditions to provide tables of contents
and abstracts from Wiley InterScience directly to personal and
wireless handheld devices and Web-enabled phones. Other features of
Wiley InterScience include EarlyView, which provides customers with
online access to individual articles well in advance of the print
issue, and ContentAlerts and RoamingAccess, which enables researchers
to access the scientific literature they need, as soon as it is
available, wherever and whenever they want. Called Article Select,
this service was extended to individuals as well. ArticleSelect allows
subscribers with Enhanced Access Licenses to gain access to individual
journal articles. Recently, the Company introduced a Pay-Per-View
service that we expect will generate additional revenue from customers
who want the opportunity to purchase individual articles by credit
card. The online service continued to register significant growth in
fiscal year 2003, with the number of journal articles viewed
increasing by more than 70% over the prior year. More than 60% of the
Company's global journal subscription revenues are now generated by
Wiley InterScience licenses.
Customer use is being fueled by linking arrangements with alliances
and third-party providers such as EBSCO Online, PubMed, Celera
Genomics, ISI's Web of Science, and Chemical Abstracts Services. An
agreement also exists with Maruzen KnowledgeWorker to provide a
Japanese interface to enable searching and browsing Wiley InterScience
in that language. STM also has communities-of-interest Web sites in
spectroscopy, diabetes, the pharmaceutical industry, and polymer
sciences.
During 2003 the Company signed an agreement with The Cochrane
Collaboration for the publication of the Cochrane Systematic Reviews
in evidence-based medicine. These online databases are widely regarded
as the world's most authoritative source of information on the
effectiveness of health care interventions In addition to enhancing
Wiley's medical publishing program with the prestigious content, the
partnership establishes a major presence for the Company in the
rapidly emerging area of medical informatics.
In April 2002, the Company acquired A&M Publishing Ltd., a U.K.-based
publisher for the pharmaceutical and health-care sectors, and GIT
Verlag GmbH, a German publisher for the chemical, pharmaceutical,
biotechnology, security, and engineering industries.
Higher Education
----------------
The Company publishes educational materials including course
management and study guides, in print and electronic formats, for
advanced placement, undergraduate, and graduate students, teachers and
lifelong learners. Higher Education is a leader in "hard-side courses"
focusing on the sciences, mathematics, engineering, and accounting,
with growing positions in business, economics, computer science,
psychology, education, and modern languages. In Australia, the Company
is also a leading publisher for the secondary school market. Globally,
Higher Educational publishing generated 21% of total Company revenues
in fiscal 2003.
Through organic growth and the development of new and acquired
products, both print and electronic, the Company's worldwide Higher
Education publishing business grew at a compound annual revenue growth
rate of 9% over the past five years.
Technology continues to create opportunities for the Company and its
customers, with increasing demand for Web-based products and course
management tools. The Higher Education segment is capitalizing on
these opportunities and continues to invest in technology to help
teachers teach and students learn. The Higher Education Web site
offers online learning materials on more than 2,300 sub-sites.
In addition to many Web-based free and for-sale supplements, Higher
Education has launched a number of products that integrate technology
and print to provide students and instructors with tools to improve
outcomes or meet specific objectives such as eGrade and Interactive
Homework Edition initiatives. Virtual peer training through Wiley's
Faculty Resource Network increased dramatically in fiscal year 2003,
with hundreds of professors participating in virtual seminars and
one-on-one collaborations. This unique, reliable, and accessible
service gives the Company a competitive advantage.
To mitigate the effect of used textbook sales, which is a continuing
industrywide problem, Higher Education has introduced the Web Access
Licensing program, which is a fee-based service that provides access
to online supplements for students who purchase new books.
The Company continues to develop new formats to create more value for
teachers and students such as Active Learning Editions which includes
brief texts and integrated study tools as a lower-priced alternative
to traditional textbooks. One of the trends in higher education is
toward distance learning - students taking online courses either on or
off campus. Higher Education is developing Wiley eLearning to provide
distant learning courses and online teaching cases.
Higher Education is leveraging the Web in its sales and marketing
efforts to reach students and faculty at universities worldwide
through the use of interactive electronic brochures and e-mail
campaigns.
Publishing Operations
---------------------
Journal Products
----------------
The Company publishes over 400 journals and other subscription-based
STM and Professional/Trade products, which accounted for approximately
31% of the Company's fiscal 2003 revenues. Most journals are owned by
the Company, in which case they may or may not be sponsored by a
professional society. Some are owned by societies and published by the
Company under collaborative agreements. Societies that sponsor or own
such journals generally receive a royalty and/or other consideration.
The Company usually enters into agreements with outside independent
editors of journals that state the duties of the editors, and the fees
and expenses for their services. Contributors of journal articles
transfer publication rights to the Company or professional society, as
applicable.
Journal subscriptions result primarily from licenses for the Web-based
Wiley InterScience service negotiated directly with customers by the
Company's sales representatives, direct mail and other advertising and
promotional campaigns, renewals which are solicited annually either
directly or by independent companies commonly referred to as
subscription agents, and memberships in professional societies for
those journals that are sponsored by such societies.
Printed journals are generally mailed to subscribers directly from
independent printers. Journal content for virtually all journals is
also made available online through licenses, which generally range
from one to three years.
Book Products
-------------
Materials for book publications are obtained from authors throughout
most of the world through the efforts of an editorial staff, outside
editorial advisors, and advisory boards. Most materials originate with
their authors, but many are prepared as a result of suggestion or
solicitations by editors or advisors. The Company enters into
agreements with authors that state the terms and conditions under
which the materials will be published, the name in which the copyright
will be registered, the basis for any royalties, and other matters.
Most of the authors are compensated by royalties, which vary with the
nature of the product and its anticipated sales potential. In general,
royalties for textbooks and consumer books are higher than royalties
for research and reference works. The Company makes advances against
future royalties to authors of certain publications.
The Company continues to add new titles, revise existing titles, and
discontinue the sale of others in the normal course of its business,
also creating adaptations of original content for specific market
demographics fulfilling customer demand. The Company's general
practice is to revise its textbooks every three to five years, if
warranted, and to revise other titles as appropriate.
Subscription-based products are updated more frequently on a regular
schedule. Approximately 35% of the Company's fiscal 2003 U.S.
book-publishing revenues were from titles published or revised in the
current fiscal year.
Professional and consumer books are sold to bookstores and online
booksellers serving the general public; wholesalers who supply such
bookstores; warehouse clubs; college bookstores for their non-textbook
requirements; individual professional practitioners; and research
institutions, jobbers, libraries (including public, professional,
academic, and other special libraries), industrial organizations, and
governmental agencies. The Company employs sales representatives who
call upon independent bookstores, national and regional chain
bookstores, wholesalers, and jobbers. Trade sales to bookstores,
wholesalers, and jobbers are generally made on a returnable basis with
certain restrictions. Sales of professional and consumer books also
result from direct mail campaigns, telemarketing, online access, and
advertising and reviews in periodicals.
Adopted textbooks (i.e., textbooks prescribed for course use) are sold
primarily to bookstores, including online bookstores, serving
educational institutions. The Company employs sales representatives
who call on faculty responsible for selecting books to be used in
courses, and on the bookstores, that serve such institutions and their
students. Textbook sales are generally made on a fully returnable
basis. The textbook business is seasonal, with the majority of
textbook sales occurring during the June through August and November
through January periods. There is an active used textbook market,
which negatively affects the sales of new textbooks.
Like most other publishers, the Company generally contracts with
independent printers and binderies for their services. The Company
purchases its paper from independent suppliers and printers. Paper
prices on average decreased slightly during fiscal 2003. Management
believes that adequate printing and binding facilities, and sources of
paper and other required materials, are available to it, and that it
is not dependent upon any single supplier. Printed book products are
distributed from both Company-operated warehouses and independent
distributors.
The Company performs marketing and distribution services for other
publishers under agency arrangements. It also engages in copublishing
of titles with international publishers and in publication of
adaptations of works from other publishers for particular markets. The
Company also receives licensing revenues from photocopies,
reproductions, and electronic uses of its content.
The Company is increasingly developing content in digital format that
can be used for both online and print products, which results in
productivity and efficiency savings, as well as enabling the Company
to offer customized publishing and print-on-demand products. Book
content is increasingly being made available online through Wiley
InterScience and other platforms, and in eBook format through licenses
with alliance partners. The Company is also developing online
communities of interest, both on its own and in partnership with
others, to expand the market for its products. The Company believes
that the demand for new electronic technology products will increase.
Accordingly, to properly service its customers and to remain
competitive, the Company anticipates it will be necessary to increase
its expenditures related to such new technologies over the next
several years.
The Internet not only enables the Company to deliver content online,
but also helps to sell more books. The growth of online booksellers
benefits the Company because they provide unlimited virtual "shelf
space" for the Company's entire backlist.
International Operations
------------------------
The Company's publications are sold throughout most of the world
through divisions located in Europe, Canada, Australia, Asia, and the
United States. All International divisions market their indigenous
publications, as well as publications produced by other Company
divisions. The Company also markets publications through agents as
well as international sales representatives in countries not served by
the Company's divisions. John Wiley & Sons International Rights, Inc.,
sells foreign reprint and translations rights. The Company publishes
or licenses others to publish its products, which are distributed
throughout the world in foreign languages. Approximately 39% of the
Company's fiscal 2003 revenues were derived from non-U.S. markets.
Copyrights, Patents, Trademarks, and Environment
------------------------------------------------
Substantially all of the Company's publications are protected by
copyright, either in its own name, in the name of the author of the
work, or in the name of the sponsoring professional society. Such
copyrights protect the Company's exclusive right to publish the work
in the United States and in many countries abroad for specified
periods: in most cases the author's life plus 70 years, but in any
event a minimum of 28 years for works published prior to 1978 and 35
years for works published thereafter.
The Company does not own any other material patents, franchises, or
concessions, but does have registered trademarks and service marks in
connection with its publishing businesses. The Company's operations
are generally not affected by environmental legislation.
Concentration of Credit Risk
----------------------------
The Company's business is not dependent upon a single customer.
However, the journal subscription business is primarily sourced
through independent subscription agents who facilitate the journal
ordering process by consolidating the subscription orders/billings of
each subscriber with various publishers. Monies are generally
collected in advance from subscribers by the subscription agents and
are remitted to the journal publishers, including the Company,
generally prior to the commencement of the subscriptions. Although at
fiscal year-end the Company`s credit risk exposure to these agents was
not material, future calendar year subscription receipts from these
agents are highly dependent on their financial condition and
liquidity. Subscription agents account for approximately 16% of total
consolidated revenues, and no one agent accounts for more than 6% of
total consolidated revenues. The book publishing business has
witnessed a significant concentration in national, regional, and
online bookstore chains in recent years. Although no one book customer
accounts for more than 6% of total consolidated revenues, the top 10
book customers account for approximately 26% of total consolidated
revenues and approximately 45% of total gross trade accounts
receivable at April 30, 2003. A journal subscription agent, Rowecom
Inc., filed for bankruptcy in January 2003. The bankruptcy will affect
STM journal sales in calendar year 2004 and is expected to be
immaterial to the Company's consolidated financial statements.
Competition Within the Publishing Industry
------------------------------------------
The sectors of the publishing industry in which the Company is engaged
are highly competitive. The principal competitive criteria for the
publishing industry are believed to be product quality, customer
service, suitability of format and subject matter, author reputation,
price, timely availability of both new titles and revisions of
existing books, online availability of published information, and for
textbooks and certain trade books, timely delivery of products to
retail outlets and consumers. Recent years have seen a consolidation
trend within the publishing industry, including the acquisition of
several publishing companies by larger publishers and other companies.
The Company is in the top rank of publishers of scientific and
technical journals worldwide, as well as a leading commercial
chemistry publisher at the research level; one of the leading
publishers of university and college textbooks for the "hardside"
disciplines i.e., sciences, engineering, and mathematics; and a
leading publisher in its targeted professional markets. The Company
knows of no reliable industry statistics that would enable it to
determine its share of the various international markets in which it
operates. The Company believes that the percentage of its sales in
markets outside the United States is higher than that of most of the
United States-based publishers.
Employees
---------
As of April 30, 2003, the Company employed approximately 3,350 persons
on a full-time basis worldwide.
Financial Information About Industry Segments
---------------------------------------------
The note entitled "Segment Information" of the Notes to Consolidated
Financial Statements listed in the attached index is incorporated
herein by reference.
Financial Information About Foreign and
---------------------------------------
Domestic Operations and Export Sales
------------------------------------
The note entitled "Segment Information" of the Notes to Consolidated
Financial Statements listed in the attached index is incorporated
herein by reference.
Item 2. Properties
The Company occupies office, warehouse, and distribution facilities in
various parts of the world, as listed below (excluding those locations
with less than 10,000 square feet of floor area, none of which is
considered material property).
Lease Expiration
-----------------
Location Purpose Approx. Sq. Ft. Date
-------- ------- --------------- ----
U.S.-Leased
-----------
New Jersey Corporate Headquarters 383,000 2017
Offices
New York Editorial and Administrative 59,000 2010
Offices
New Jersey Distribution Center 188,000 2007
and Office
New Jersey Warehouses 303,000 2006
Indiana Editorial and Administrative 124,000 2009
Offices
California Office 38,000 2012
International-Owned
-------------------
Germany Office 81,000
England Office 50,000
International-Leased
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Australia Office 34,000 2006
Warehouse 105,000 2009
Canada Office 20,000 2004
Warehouse 64,000 2004
England Office 23,000 2012
Warehouse 125,000 2012
Singapore Office and Warehouse 64,000 2004
During the fiscal year 2003, the Company relocated three of its
operations to new offices. Its global headquarters was moved across
the Hudson River to a waterfront site in Hoboken, New Jersey, while
its European operations were relocated to new space in Chichester in
the U.K. and Weinheim, Germany. All of the new facilities were
designed to promote collaboration and productivity and provide room
for growth and expansion in support of business growth.
All of the buildings and the equipment owned or leased are believed to
be in good condition and are generally fully utilized.
Item 3. Legal Proceedings
-----------------
The Company is involved in routine litigation in the ordinary course
of its business. In the opinion of management, the ultimate resolution
of all pending litigation will not have a material effect upon the
financial condition or results of operations of the Company.
Item 4. Submission of Matters to a
--------------------------
Vote of Security Holders
------------------------
No matters were submitted to the Company's security holders during the
last quarter of the fiscal year ended April 30, 2003.
PART II
Item 5. Market for the Company's Common
-------------------------------
Equity and Related Stockholder Matters'
---------------------------------------
The Quarterly Share Prices, Dividends, and Related Stockholder Matters
listed in the attached index are incorporated herein by reference.
Item 6. Selected Financial Data
-----------------------
The Selected Financial Data listed in the attached index is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
Management's Discussion and Analysis of Financial Condition and
Results of Operations listed in the attached index is incorporated
herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
The information appearing under the caption "Market Risk" in
Management's Discussion and Analysis of Financial Condition and
Results of Operations listed in the attached index is incorporated
herein by reference.
JOHN WILEY & SONS, INC., AND SUBSIDIARIES
-----------------------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
---------------------------------------------------------
The following financial statements and information appearing on the pages
indicated are filed as part of this Report:
Page(s)
Management's Discussion and Analysis of Financial Condition
And Results of Operations..................................................... 12 - 24
Results by Quarter (Unaudited).............................................................. 25
Quarterly Share Prices, Dividends, and Related Stockholder Matters...........................25
Selected Financial Data..................................................................... 26
Reports of Independent Public Accountants and
Consent of Independent Public Accountants......................................27 - 28
Consolidated Statements of Financial Position
as of April 30, 2003, and 2002,.................................................... 29
Consolidated Statements of Income
for the years ended April 30, 2003, 2002, and 2001,................................ 30
Consolidated Statements of Cash Flows
for the years ended April 30, 2003, 2002, and 2001,................................ 31
Consolidated Statements of Shareholders' Equity and Comprehensive Income for the
years ended April 30, 2003, 2002, and 2001,........................................ 32
Notes to Consolidated Financial Statements............................................. 33 - 49
Schedule II-- Valuation and Qualifying Accounts
for the years ended April 30, 2003, 2002, and 2001,.................................50
Other schedules are omitted because of absence of conditions under which they
apply or because the information required is included in the Notes to
Consolidated Financial Statements.
Management's Discussion and Analysis of
Financial Condition and Results of
Operations
Results of Operations
Fiscal Year 2003 Compared to Fiscal Year 2002
The Company achieved record revenues, operating income, and net income in fiscal
year 2003. Revenues in fiscal year 2003 increased 16% over the prior year to
$854 million, including foreign currency translation effects, or 14% excluding
those effects. Excluding Hungry Minds acquired in September 2001 - Wiley's
largest acquisition - revenues increased 8%. In addition to Hungry Minds,
year-on-year growth was driven primarily by organic growth in the U.S and the
April 2002 acquisition of GIT Verlag in Germany and A&M Publishing in the UK.
Operating income advanced 37.0% to $120.3 million in fiscal year 2003. Operating
margin, excluding unusual items as explained below, was 14.4% compared with
13.6% in fiscal year 2002, reflecting improvement due to acquisitions, a $5
million write-off of two investments in fiscal year 2002 and the effect of lower
amortization ($9.6 million) due to the adoption of SFAS No. 142 in 2003.
Operating margin as reported for fiscal year 2003 and 2002 was 14.1% and 12.0%,
respectively.
Management believes the non-GAAP financial measures (unusual items) reported,
including a one- time tax credit and relocation charge provide a more meaningful
comparison of the Company's year over year results. The tax credit resulted from
a corporate reorganization and the relocation charge is associated with a move
of the Company's entire corporate headquarters, both unusual to the Company and
unlikely to reoccur in the foreseeable future. Both events were completed in
fiscal year 2003.
During fiscal year 2003, the Company centralized several Web development
activities, which were previously in the publishing operations. This
organizational change will enable the Company to leverage these capabilities
more efficiently across all of its global businesses. The expenses for these
activities are now included in shared services and administrative costs, whereas
previously they were included in business segment results. Accordingly, these
expenses have been reclassified for the prior year periods in the segment
financial statements to provide a more meaningful comparison.
Earnings per diluted share and net income for the fiscal year ended April 30,
2003, advanced 18% to $1.22 and $76.7 million, respectively, excluding a
one-time tax benefit in fiscal year 2003 and an unusual charge in both fiscal
year 2003 and 2002, related to the Company's relocation to Hoboken, New Jersey.
Including the tax benefit and unusual charge, earnings per diluted share and net
income for fiscal year 2003 were $1.38 and $87.3 million, compared to $0.91 and
$57.3 million in fiscal year 2002.
In the fourth quarter of fiscal year 2002, Wiley finalized its commitment to
relocate the Company's headquarters to Hoboken, N.J. The relocation was
completed in the first quarter of fiscal year 2003. The new facilities will meet
the Company's growth expectations and provides for a more collaborative and
efficient work environment. The relocation was accomplished on attractive
financial terms. Fiscal years 2003 and 2002 include an unusual charge for costs
associated with the relocation of approximately $2.5 million, or $1.5 million
after tax and $12.3 million, or $7.7 million after tax for the respective
periods.
In fiscal year 2003, the Company merged several of its European subsidiaries
into a new entity, which enabled the Company to increase the tax-deductible
asset basis of the merged subsidiaries to the fair value of the business at the
date of merger. Under U.S. accounting principles, the tax benefit attributable
to the increase in tax basis is immediately included in income. Consequently,
the Company had a one-time tax benefit of $12.0 million, or $0.19 per diluted
share, in fiscal year 2003. The cash benefit of this change will be recognized
pro-rata over a 15-year period. The Company's effective tax rate, excluding this
tax benefit, was 33.1% for the year.
Effective May 1, 2002, the Company adopted SFAS No. 142, which eliminates the
amortization of goodwill and indefinite lived intangible assets. In fiscal year
2003, the estimated after-tax impact of the non-amortization of goodwill and
intangible assets was $1.9 million, or $0.03 per share, for the fourth quarter
and $7.8 million, or $0.12 per share, for the year.
Pro forma operating income and net income excluding the relocation charge,
one-time tax benefit and the elimination of amortization of goodwill and
indefinite life intangible were as follows:
Reconciliation of non-GAAP financial disclosure
- -----------------------------------------------
(In millions, except per share amounts) 2003 2002
- ------------------------------------------ ---------- ----------
Operating Income as Reported $120.3 $87.8
Relocation Charge 2.5 12.3
SFAS No. 142 - 9.6
---------- ----------
Pro Forma Operating Income $122.8 $109.7
========== ==========
Net Income as Reported $87.3 $57.3
Relocation Charge, Net of Taxes 1.4 7.7
SFAS No. 142, Net of Tax - 7.8
One-Time Tax Benefit (12.0) -
---------- ----------
Pro Forma Net Income $76.7 $72.8
========== ==========
Cost of sales as a percentage of revenues was 33.8% in fiscal year 2003 and
33.1% in fiscal year 2002. The increase was principally due to product mix and a
full year impact from the addition of consumer titles from the Hungry Minds
acquisition, which was acquired in September 2001. While Hungry Minds has
attractive financial characteristics, its gross margin as a percent of revenue
is lower than Wiley's consolidated gross margin.
Operating and administrative expenses as a percentage of revenues declined to
50.7% in fiscal year 2003, compared with 50.9% in fiscal year 2002. Synergistic
benefits realized through the Hungry Minds acquisition and a $5 million
write-off of two investments in fiscal year 2002 were partially offset by
depreciation and other costs on new facilities.
During the year, the Company relocated three of its operations to new offices.
Its global headquarters was moved to a waterfront site in Hoboken, New Jersey,
while its European operations were relocated to new offices in Chichester in the
U.K. and Weinheim, Germany. All of the new facilities were designed to promote
collaboration and productivity and provide room for growth and expansion in
support of business growth.
Interest expense net of interest income was $7.7 million in fiscal year 2003, up
from $6.6 million in fiscal year 2002, reflecting the impact of acquisition
financing.
The Company's effective tax rate was 22.5% in fiscal year 2003. Excluding the
tax benefit mentioned above, the effective tax rate increased to 33.1% as
compared to 29.3% in fiscal year 2002 reflecting higher foreign taxes in fiscal
year 2003 and a favorable settlement of tax issues reported in fiscal year 2002.
During fiscal year 2003, the Company repurchased 535,600 Class A Common shares
at an average price of $21.77 per share for a total cost of $11.7 million.
Through April 30, 2003, the Company repurchased 3.3 million Class A Common
shares at an average price of $17.61 per share for a total cost of $57.9 million
under the Company's existing stock repurchase program. In December 2002, as the
existing program neared its limit of 4 million shares, the Board of Directors
approved an expanded program, increasing the number of shares that may be
acquired by an additional 4 million shares of Class A Common Stock.
Fiscal Year 2003 Segment Results
- --------------------------------
Professional/Trade (P/T): Revenues of Wiley's U.S. Professional/Trade business
advanced 27% over fiscal year 2002, reflecting the combined full-year effects of
the Hungry Minds acquisition and organic growth. While growth in the first half
of the year was very strong, second half performance was adversely impacted by a
sluggish retail environment and reduced customer traffic at brick and mortar
bookstores as a result of the war in Iraq. Despite these unfavorable external
factors, P/T revenues for the fourth quarter advanced 5% over the prior year.
Wiley gained market share in all of its P/T publishing categories throughout the
year. The direct contribution margin was 27.1% of revenues in fiscal year 2003
compared with 25.0% of revenues in the prior year, The margin improvement was
principally due to the full integration of Hungry Minds and the elimination of
goodwill and indefinite life intangible amortization.
Wiley's business program continues to exhibit strength despite soft market
conditions. Eight Wiley business titles appeared on major bestseller lists,
including Conquer the Crash: You Can Survive and Prosper in a Deflationary
Depression; Five Dysfunctions of a Team: A Leadership Fable; The Morningstar
Guide to Mutual Funds: 5-Star Strategies for Success; Home Buying For Dummies;
Starting an eBay Business For Dummies; Straight Talk on Investing: What You Need
to Know; The Ernst & Young Tax Guide 2003; and JK Lasser's Your Income Tax 2003.
A survey of readers by Training Magazine cited Wiley-Jossey Bass as the best
training supplier (based on four criteria: Value, Ease of Use, Met/Exceed
Buyer's Expectations, and Exceptional Customer Service) in four categories --
Business; Management and Leadership Skills Training; Safety/Compliance Training;
and Customer Service. During the quarter, the Company signed an agreement for a
publishing partnership with the Institute of Internal Auditors, a leading global
association of professionals with approximately 85,000 members in over 120
countries.
The Company's consumer publishing programs had a strong year, particularly
cooking, reference, and travel. Cookbooks that sold well during the year were
Betty Crocker's Cooking With Diabetes, Betty Crocker's Cookbook 9e, and Weight
Watchers New Complete Cookbook. Two Wiley consumer titles appeared on major
bestseller lists during the year: Bush's Brain and Religion For Dummies. Wiley
titles recently won awards from the International Association of Cooking
Professionals and the James Beard Institute. The Company also signed a
publishing agreement with The Learning Annex for a series of consumer books on a
variety of subjects, including Feng Shui and wine.
Although the overall market for computer books continues to be weak, Wiley's
technology publishing program continues to outperform the market and gain
significant market share. Performing particularly well are consumer titles in
areas such as digital photography, digital imaging software, general PC
technology, Windows XP, home networking, eBay, Apple's Mac OS X and Red Hat
Linux, and CD/DVD recording. In April 2003, Wiley acquired 34 best-selling
computer titles from Wrox Press. During the quarter, the Company signed an
agreement to become the exclusive publisher for a series of PC Magazine-branded
books.
The Company's professional and academic programs in architecture,
culinary/hospitality, psychology, and teacher education had a solid year. Wiley
launched Graphicstandards.com, a major step in the evolution of the
Architectural Graphic Standards franchise. Earlier in the year, Wiley acquired
approximately 250 teacher education titles, representing an important step
toward becoming the leading publisher of high-quality resources and ready-to-use
tools for school leaders and classroom instructors.
Scientific, Technical, and Medical (STM): Wiley's U.S. STM revenues were 2%
higher than prior year in fiscal year 2003. The continued success of the Wiley
InterScience online service mitigated the adverse impact of the Divine/Rowecom
bankruptcy and softness in the STM book market. Global STM revenues for the
fiscal year 2003 increased 12% as compared to the previous year, bolstered by
the acquisitions of GIT Verlag and A&M Publishing, as well as journal growth.
The direct contribution margin in fiscal 2003 was 46.3% compared with 43.1% in
fiscal 2002. Fiscal year 2002 included a $5 million write-off of two STM
investments.
Wiley's STM journal and book business is continuing its transformation to
digital access through the growth of Wiley InterScience. The online service
experienced a significant increase in the number of journal articles viewed.
More than 60% of global journal subscription revenues are now generated by Wiley
InterScience licenses. Several licenses were signed during the year, including
the Japanese Medical and Pharmaceutical Library Associations Consortium in Asia;
the University of New South Wales in Australia; the Austrian, Bavarian,
Norwegian and Greek consortia in Europe; and Howard University, the Pennsylvania
Academic Library Consortium, the Statewide California Electronic Library
Consortia, and the Quebec Academic Consortium in North America.
The Company continues to add content and functionality to Wiley InterScience,
increasing revenues by meeting customer needs. The Polymer Backfile Collection
launched on Wiley InterScience with great success in March. The largest
collection of high-quality polymer science backfile articles available online
from a single publisher, the Collection includes more than 600,000 pages of
articles from seminal journals, such as the Journal of Polymer Science and
Macromolecular Chemistry and Physics.
In April, Wiley InterScience launched a new Pay-Per-View service that we expect
will generate incremental revenue from customers who want to purchase individual
articles by credit card. More than half a dozen major reference works were added
to Wiley InterScience during fiscal year 2003, including the sixth edition of
the 40-volume Ullman's Encyclopedia of Industrial Chemistry.
Although some key front list books, such as Considine: Van Nostrand Scientific
Encyclopedia 9e, Burger's Medicinal Chemistry and Drug Discovery 6e, and
Horvath/Encyclopedia of Catalysis, exceeded expectations, overall STM book sales
were sluggish due to tight library budgets.
Wiley had an excellent year in the continued development of its society journal
program, signing agreements to publish several important journals in print and
online, such as the British Journal of Surgery, Hepatology, Liver
Transplantation, and Ultrasound in Obstetrics and Gynecology. In addition, the
Company successfully renewed its publishing contract for Cancer, a publication
of the American Cancer Society, and extended its publishing contracts for Annals
of Neurology, Journal of Magnetic Resonance Imaging, and Magnetic Resonance in
Medicine.
Higher Education: Full-year revenues for the U.S. Higher Education business were
up over the comparable prior year period by 5%. Revenue growth was principally
due to a strong front list in the life sciences, as well as solid performances
of the physical sciences and social sciences programs. Results continued to be
affected by sluggish industry-wide conditions in engineering, although there was
some improvement in the fourth quarter. Global revenues for fiscal year 2003
increased 6% over the prior year. The contribution margin for fiscal year 2003
was 26.9% as compared with 31.3% in fiscal year 2002. The change was principally
due to product mix.
During the fourth quarter, Higher Education launched its biggest front list
ever. Key new products include Hughes-Hallett/Applied Calculus 2e; Tortora and
Grabowski/Principles of Anatomy and Physiology 10e; Cutnell/College Physics;
Huffman/Psychology 7e; McDaniel/Marketing Research Essentials 4e;
Voet/Biochemistry 3e; Weygandt/Managerial Accounting 2e; and
Strahler/Introducing Physical Geography 3e.
Technology is creating new opportunities, as reflected in increased demand for
Web-based products and course management tools. Wiley is capitalizing on these
opportunities and meeting the evolving needs of students and teachers. An
example is Wiley Business Extra Select, which was announced in the third quarter
and will enable professors to create customized business courses with material
from Wiley textbooks and other sources.
The Higher Education Web site offers online learning materials on more than
2,300 subsites to support teaching and learning. Virtual peer training through
Wiley's Faculty Resource Network increased dramatically during the fourth
quarter, with hundreds of professors participating in virtual seminars and
one-on-one collaborations. This unique, reliable, and accessible service is a
source of competitive advantage. During the year, the Company began to generate
revenue from its eGrade and Interactive Homework Edition initiatives. Our
Virtual Bookfairs were expanded to cover most disciplines.
Europe: Revenues in fiscal year 2003, excluding foreign translation exchange
gains from Wiley's European operations were up 21% over prior year, reflecting
the GIT Verlag and A&M Publishing acquisitions and organic growth. Primary
contributors to the organic growth were the journals program, as well as
indigenous P/T titles, such as the global bestseller, Prechter/Conquer the
Crash. Results in Germany were negatively affected by a weak advertising market
and sluggish book sales. The direct contribution margin for Europe was 32.9% of
revenues in fiscal 2003 and 34.5% of revenues in fiscal 2002. The decrease in
contribution margin was principally due to product mix.
In March, Wiley Europe signed an agreement with The Cochrane Collaboration for
the publication of the Cochrane Systematic Reviews in evidence-based medicine.
These online databases are widely regarded as the world's most authoritative
source of information on the effectiveness of health care interventions. In
addition to enhancing Wiley's medical publishing program with the addition of
prestigious content, the partnership establishes a major presence for the
Company in the rapidly emerging area of medical informatics. Wiley Europe was
named "Distributor of the Year" for the fifth time in six years by the Academic,
Professional, and Specialist Booksellers Group.
Asia, Australia & Canada: Wiley's Asian, Australian, and Canadian operations
recorded strong results for the year. Revenues in fiscal year 2003, excluding
foreign exchange translation gains, increased over the prior year by 24%.
Including the effects of foreign exchange translation gains, revenues increased
over prior year by 28%. These results were driven by the addition of Hungry
Minds, as well as the performance of the P/T and Higher Education programs in
Canada, and strong overall growth throughout Asia. Rapid growth of the Company's
subscription and translation rights businesses continued in Asia, notably in
China and India. The fourth quarter was adversely affected somewhat by the war
in Iraq and the SARS outbreak.
Indigenous P/T publishing programs grew in Wiley's Asian, Australian, and
Canadian businesses. Two titles, Privatising China by Carl Walter, the COO of JP
Morgan, and Capitalist China by Jonathan Wotzel, a senior partner at McKinsey
Consulting, reflect the importance of the growing market in China, and also
Wiley's success in partnering with prestigious companies. Two Wiley Australia
titles, Westfield/HIH, The Inside Story of Australia's Biggest Corporate
Collapse and King/Gallipoli, published during the quarter to great acclaim.
Wiley Canada had its best year ever, in part on the strength of the For Dummies
brand.
Results of Operations
Fiscal 2002 Compared to Fiscal 2001
The Company continued to achieve strong growth in revenues and operating income
during fiscal 2002, although income was adversely affected by an unusual charge
related to the calendar year 2002 relocation of the Company's headquarters to
Hoboken, New Jersey as more fully described below.
During fiscal 2002, the Company acquired several publishing properties for
purchase prices aggregating $232.4 million net of cash acquired, including the
acquisition of Hungry Minds, Inc. (Hungry Minds) on September 21, 2001, for
approximately $184.1 million, the largest acquisition in the Company's history.
Hungry Minds is a leading publisher with an outstanding collection of respected
brands. The Company also acquired 47 higher education titles from Thomson
Learning; A&M Publishing Ltd. a U.K.-based publisher for the pharmaceutical and
healthcare sectors; GIT Verlag GmbH, a German publisher for the chemical,
pharmaceutical, biotechnology, security and engineering industries; and Frank J.
Fabozzi Publishing and an Australian publisher, Wrightbooks Pty Ltd., both
publishing high-quality finance books for the professional market. Hungry Minds
contributed $91 million to revenues in fiscal 2002 and was accretive to
earnings.
Pro forma results of operations for fiscal 2002 excluding the unusual charge
were as follows:
Reconciliation of non-GAAP financial disclosure
- -----------------------------------------------
(In millions, except per share amounts) 2002 2001
- -------------------------------------------- -------- --------
Operating Income as Reported $ 87.8 $ 95.4
Unusual Relocation Charge 12.3 -
--------- ---------
Operating Income Before Unusual Charge $100.1 $95.4
========= =========
Net Income as Reported $57.3 $58.9
Unusual Relocation Charge, Net of Taxes 7.7 -
--------- ---------
Net Income Before Unusual Charge $65.0 $58.9
========= =========
Income Per Diluted Share as Reported $ .91 $ .93
Unusual Relocation Charge, Net of Taxes .12 -
--------- ---------
Income Per Diluted Share Before Unusual $1.03 $.93
Charge ========= =========
Revenues increased 20% to $734.4 million from $613.8 million in fiscal 2001.
Excluding Hungry Minds' contribution, revenues increased 5% despite the market
disruption following the tragic events of September 11th. All of the Company's
U.S.-based businesses contributed to the revenue growth. European segment
revenues increased, driven primarily by STM journals and higher education
programs. Wiley Canada and Australia enjoyed gains, while the Company's business
in Asia was adversely affected by the weak economy.
The unusual charge related to the relocation of the Company's headquarters
amounted to approximately $12.3 million, or $7.7 million after taxes, equal to
$0.12 per diluted share. This charge consisted of lease payments of
approximately $10.2 million representing amounts due from the move date through
April 2003, the lease termination date, on the Company's vacated offices in New
York and the accelerated depreciation of leasehold improvements and certain
furniture and fixtures and equipment of approximately $2.1 million based on
revised estimates of useful lives.
Before the unusual charge, fiscal 2002 operating income advanced 5% to $100.1
million. Operating margin before the unusual charge declined to 13.6% in fiscal
2002 from 15.5% in fiscal 2001, reflecting the combined effect of the $5 million
write-off of two small investments or $2.9 million after taxes, equal to $0.05
per diluted share; the Hungry Minds acquisition; and the addition of several
society journals, which typically have lower margins than other journals.
Excluding the investment write-offs and the unusual charge, the operating margin
was 14.3% and the operating margin before amortization of intangibles (EBITA)
was 16.7% in fiscal 2002. Operating margin as reported was 12.0% in fiscal year
2002 and 15.5% in fiscal year 2001.
Excluding the unusual charge, fiscal 2002 net income of $65.0 million and income
per diluted share of $1.03 advanced 10% and 11%, respectively, over fiscal 2001.
Including the unusual charge, fiscal 2002 net income was $57.3 million, or $0.91
per diluted share.
Cost of sales as a percentage of revenues increased to 33.1% in fiscal 2002 from
32.5% in fiscal 2001 due primarily to the inclusion of Hungry Minds, which has
lower gross margins than the Company's other businesses due to lower price
points.
Operating and administrative expenses as a percentage of revenues were 50.9% in
fiscal 2002, compared with 49.1% in fiscal 2001. The increase was primarily due
to the write-off of the investments mentioned above, as well as increased
spending on new business initiatives. Operating expenses increased 24% over
fiscal 2001, primarily due to the inclusion of Hungry Minds and the
aforementioned investment write-offs. Excluding Hungry Minds and the investment
write-offs, operating expenses increased approximately 9%.
Interest expense net of interest income was $6.6 million in fiscal 2002 versus
$5.2 million in fiscal 2001, reflecting the impact of higher average debt levels
due to the acquisitions, partially offset by lower average rates during the
year.
The Company's effective tax rate was 29.3% in fiscal 2002, compared with 34.7%
in the prior year. The decrease was primarily due to lower foreign taxes
including the settlement of open tax issues.
During fiscal 2002, the Company repurchased 96,500 Class A Common shares at an
average price of $19.49 per share for a total cost of $1.9 million.
Fiscal 2002 Segment Results
Professional/Trade: U.S. Professional/Trade reported a 56% increase in revenues
in fiscal 2002 to $253.1 million. Excluding Hungry Minds, revenues advanced 3%.
Direct contribution to profit improved 74% to $63.2 million in fiscal 2002
versus $36.3 million in fiscal 2001, primarily due to the acquisition of Hungry
Minds. The direct contribution margin was 25.0% of revenues compared with 22.4%
of revenues in fiscal 2001. The margin improvement was attributable to the
synergies realized through the integration of Hungry Minds.
During the year, the Professional/Trade segment experienced the negative effects
of the slowdown in retail and corporate sales following the September 11th
terrorist attacks and general economic conditions. Business and travel books
were most affected. The culinary, architecture, psychology, and general interest
areas continued to perform well. The pace of sales improved significantly in the
last four months of the fiscal year, powered by two bestsellers - Christopher
Byron's Martha, Inc., and Martin Weiss's Ultimate Safe Money Guide. Other
revenue drivers were a strong tax publication season, and the launch of several
titles from the Company's publishing alliances and franchises.
The acquisition of Hungry Minds nearly doubled the annualized revenues of the
U.S. Professional/Trade segment through the addition of new products and
capabilities. The acquisition included 2,500 active titles, which are available
in 39 languages. Well-known brands include the For Dummies and Unofficial Guide
series, the technological Bible and Visual series, Frommer's travel guides,
CliffsNotes, Webster's New World Dictionary, Betty Crocker, and Weight Watchers.
Other acquisitions included Frank. J. Fabozzi Publishing, a publisher of
high-quality finance books for the professional market. The Internet is playing
a growing role in the Company's business. With their unlimited "virtual" shelf
space, online retailers merchandise the Company's products for longer periods of
time than brick-and-mortar bookstores. Demand for Web-based electronic products
has emerged in professional markets with the advent of broadband Internet
access. In fiscal 2002, the Company launched online products such as TheraForms
downloadable forms from Wiley's practice management books.
STM: U.S. STM revenues increased 6% in fiscal 2002 to $164.9 million, reflecting
strong journal subscription renewal rates, the growth of Wiley InterScience
online services, the addition of three society journals, and new products.
Direct contribution to profit declined 4% to $71.1 million, attributable to the
previously mentioned write-off of two small investments. Excluding the
write-off, the direct contribution increased 2% and the direct contribution
margin was 46.1% of revenues compared with 47.6% of revenues in fiscal 2001,
reflecting the continued investment in sales, marketing, and service
enhancements for Wiley InterScience, as well as the addition of new society
journals, which typically have lower margins than other journals.
The value of Wiley InterScience Enhanced Access Licenses signed by academic
institutions, companies, and consortia approximately doubled in fiscal 2002. The
Company continued to add a rich content offering and greater functionality to
Wiley InterScience to meet customer needs and increase the revenue base. As of
fiscal year-end, the service provided online access to virtually all of the
Company's over 350 journals and to more than 30 reference works, as well as to
approximately 250 STM books through OnlineBooks, a new feature. In fiscal 2002,
Wiley expanded its MobileEdition service to 20 journals, including the launch of
TNM MobileEdition, the first portable electronic version of the TNM
classification system, which Wiley publishes in print. MobileEditions are
designed for use on personal digital assistants and other wireless devices. Also
new were ContentAlerts and RoamingAccess, which enable researchers to access the
scientific literature they need, as soon as it is available, wherever and
whenever they want.
Higher Education: U.S. Higher Education revenues increased 6% to $141.3 million
in fiscal 2002, partly attributable to the acquisition of higher education
titles during the year. Direct contribution to profit increased 6% to $44.3
million, and the direct contribution margin of 31.3% of revenues was essentially
the same as the prior year. Although college enrollments in engineering, a key
Wiley area, were flat, the Company's business, psychology, and geography
programs performed well.
The Company rolled out a strong Higher Education frontlist in fiscal 2002,
publishing 134 packages. In November 2001, the Company acquired 47 titles from
Thomson Learning in business, earth and biological sciences, foreign languages,
mathematics, nutrition, and psychology.
Higher education demographics remain favorable overall, with more students
attending college and enrolling in lifelong learning courses than ever before.
In addition, the soft economy has resulted in increased student applications to
graduate programs. The Company has introduced new, value-added materials and
services to combat used book sales, which is a continuing industry-wide problem.
The Company continues to develop new formats to create more value for teachers
and students. Active Learning Editions with brief texts and integrated study
tools were introduced in fiscal 2002 as a lower-priced alternative to
traditional textbooks.
With approximately 1,700 Web sites that support its texts, in addition to many
Web-based free and for-sale supplements, Higher Education has launched a number
of products that integrate technology and print to provide students and
instructors with tools to improve outcomes or meet specific objectives. An
example is eGrade, a Web-based software product that allows students to do
independent, self-paced practice homework with immediate scoring and
individualized feedback. The Company also introduced Calculus Machina, a
step-by-step, Web-based calculus tutorial that will be customized to additional
subjects.
Europe: European fiscal 2002 revenues of $164.1 million advanced 6% over fiscal
2001. Direct contribution to profit was $56.7 million, up 9%. The direct
contribution margin was 34.5% of revenues in fiscal 2002 and 33.3% of revenues
in fiscal 2001. The STM journals business was strong in fiscal 2002, with
improved subscription renewals and growing electronic access. Higher education
programs also were a key revenue driver.
Acquisitions at the end of fiscal 2002 included A&M Publishing Ltd., a
U.K.-based publisher for the pharmaceutical and health care sectors, and GIT
Verlag GmbH, a German publisher for the chemical, pharmaceutical, biotechnology,
security, and engineering industries.
Wiley-VCH in Germany introduced nearly a dozen new journals, including Advanced
Synthesis & Catalysis, Macromolecular Bioscience, and PROTEOMICS.
Wiley U.K. launched ExpressExec, encompassing approximately 100 management books
available in electronic and print formats. Wiley-VCH launched pro-physics.de, a
community-of-interest Web site. As part of its alliance strategy, the Company
concluded an agreement with Symbian Ltd., a joint venture between Nokia,
Ericsson, Motorola, and NTT, to publish a range of titles about applications and
programming for the Symbian operating system.
Asia, Australia and Canada: Revenues advanced 6% in fiscal 2002 to $68.3
million, reflecting a solid performance in Canada and Australia, including
Hungry Minds' international sales, offset to a large degree by weak economic
conditions in Asia. Direct contribution to profit was $15.2 million, up 3%. The
direct contribution margin was 22.2% of revenues in fiscal 2002 and 22.9% of
revenues in fiscal 2001.
Wiley Australia achieved solid growth in its higher education business and won
the bookseller's Tertiary Publisher of the Year award for outstanding service to
the higher education market for the fourth consecutive year. Professional/trade
publishing was expanded with the acquisition of Wrightbooks Pty Ltd., a
publisher of high-quality finance books for the professional market, which
exceeded expectations.
Wiley Canada solidified its leadership in accounting through a targeted effort
to increase sales of higher education titles such as Kimmel, Weygandt, Kieso,
and Trenholm: Financial Accounting: Tools for Business Decision-Making, Canadian
edition. Its trade program was bolstered by Hungry Minds, which has a strong
market presence with titles such as Taxes For Canadians For Dummies and
Frommer's with Kids travel guides to major Canadian cities. In Asia, a weak
economy adversely affected results. However, strong growth continued in China,
as the Company's foreign rights and copublishing business benefited from the
opening of China's educational market.
Liquidity and Capital Resources
The Company's cash and cash equivalents balance was $33.2 million at the end of
fiscal year 2003, compared with $39.7 million a year earlier. Cash provided by
operating activities of $169.1 million improved by $28.8 million over the prior
year. The improvement was mainly due to higher net income and non cash charges.
Non-cash items in Other principally include non-cash charges for pensions and
royalties. These items were partially offset by increased investment in working
capital related to new business and rent payments previously accrued for vacated
facilities related to the move of the Company's corporate headquarters. Pension
contributions in fiscal year 2003 were $5.3 million. Estimated fiscal year 2004
contributions are anticipated to be $8.2 million.
Cash used for investing activities of $125.6 million declined from $314.1
million in the prior year, which included the Hungry Minds acquisition. Current
year investing activity includes $33.0 million for a purchase of a building in
the United Kingdom, additions to a building in Germany and leasehold
improvements at the Company's new Hoboken, NJ headquarters. Cash used for
financing activities was $52.5 million in 2003, as compared to $159.9 million
provided from financing activities in 2002.
Current year financing activity includes a $30.0 million payment of long term
debt and $11.7 million of shares repurchased under the Company's stock
repurchase program. In fiscal year 2002 the Company took on new debt to finance
Hungry Minds and other acquisitions.
The Company's operating cash flow is affected by the seasonality of its U.S.
higher education business and receipts from its journal subscriptions. Receipts
from journal subscriptions occur primarily during November and December from
companies commonly referred to as independent subscription agents. Reference is
made to the Credit Risk section, which follows for a description of the impact
on the Company as it relates to journal agents' financial position and
liquidity. Sales in the U.S. higher education market tend to be concentrated in
June through August, and again in November through January.
The Company normally requires increased funds for working capital from May
through September. Subject to variations that may be caused by fluctuations in
inventory levels or in patterns of customer payments, the Company's normal
operating cash flow is not expected to vary materially in the near term.
Although the statement of financial condition indicates a negative working
capital of $39.4 million at April 30, 2003, current liabilities include $131.4
million of deferred subscription revenues related to journals for which the cash
has been received and will be recognized into income as the journals are shipped
or made available online to the customer, or over the term of the subscription
as services are rendered. Excluding this deferred income item, working capital
at April 30, 2003, was a positive $92.0 million.
The Company has adequate cash and cash equivalents available, as well as
international short-term lines of credit to finance its short-term seasonal
working capital requirements. The Company does not have any off-balance-sheet
debt.
Projected product development, and property and equipment spending for fiscal
year 2004 are approximately $60 million and $35 million, respectively, a more
normalized level as compared to fiscal year 2003, which included spending on new
facilities. These investments will be funded primarily from internal cash
generation, the liquidation of cash equivalents, and the use of short-term lines
of credit.
A summary of contractual obligations and commercial commitments is as follows:
Dollars in millions Payments due by period
- -----------------------------------------------------------------
Contractual Less After
Than 1 1-3 4-5 5
Obligation Total Year Years Years Years
- --------------------- ---------- -------- -------- -------- -------
Total Debt $235.0 35.0 - 200.0 -
Operating Lease
Obligations 241.4 24.2 46.5 43.0 127.7
---------- -------- -------- -------- -------
Total Contractual
Cash Obligations $476.4 59.2 46.5 243.0 127.7
---------- -------- -------- -------- -------
Market Risk
The Company is exposed to market risk primarily related to interest rates,
foreign exchange, and credit risk. It is the Company's policy to monitor these
exposures and to use derivative financial investments and/or insurance contracts
from time to time to reduce fluctuations in earnings and cash flows when it is
deemed appropriate to do so. The Company does not use derivative financial
instruments for trading or speculative purposes.
Interest Rates
The Company had $235.0 million of variable rate loans outstanding at April 30,
2003, which approximated fair value. The Company did not use any derivative
financial investments to manage this exposure. A hypothetical 1% change in
interest rates for this variable rate debt would affect net income and cash flow
by approximately $1.5 million.
Foreign Exchange Rates
The Company is exposed to foreign exchange movements primarily in sterling,
euros, and Asian, Canadian, and Australian currencies. Consequently, the
Company, from time to time, enters into foreign exchange forward contracts as a
hedge against foreign currency asset, liability, commitment, and anticipated
transaction exposures, including inter-company purchases. At April 30, 2003, the
Company had no open foreign exchange forward contracts.
Credit Risk
The Company's business is not dependent upon a single customer; however, the
industry has experienced a significant concentration in national, regional, and
online bookstore chains in recent years. Although no one book customer accounts
for more than 6% of total consolidated revenues, the top 10 book customers
account for approximately 26% of total consolidated revenues and approximately
45% of total gross trade accounts receivable at April 30, 2003. To mitigate its
credit risk exposure, the Company obtains credit insurance where available and
economically justifiable.
In the journal publishing business, subscriptions are primarily sourced through
independent subscription agents who, acting as agents for library customers,
facilitate ordering by consolidating the subscription orders/billings of each
subscriber with various publishers. Monies are generally collected in advance
from subscribers by the subscription agents and are remitted to the journal
publisher, including the Company, generally prior to the commencement of the
subscriptions. Although at fiscal year-end the Company had minimal credit risk
exposure to these agents, future calendar-year subscription receipts from these
agents are highly dependent on their financial condition and liquidity.
Subscription agents account for approximately 16% of total consolidated revenues
and no one agent accounts for more than 6% of total consolidated revenues.
Insurance for these accounts is not commercially feasible and/or available. A
journal subscription agent, Rowecom Inc., filed for bankruptcy in January 2003.
The bankruptcy will effect STM journal sales in calendar year 2004, which is
expected to be immaterial to the Company.
Effects of Inflation and Cost Increases
The Company, from time to time, experiences cost increases reflecting, in part,
general inflationary factors. To mitigate the effect of cost increases, the
Company has implemented a number of initiatives, including various steps to
reduce production and manufacturing costs. In addition, selling prices have been
selectively increased as competitive conditions have permitted. The Company
anticipates that it will be able to continue this approach in the future.
Critical Accounting Policies
The preparation of the Company's financial statements in conformity with
accounting principles generally accepted in the U.S. requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and reported amounts of revenues and expenses during
the reporting period. Management continually evaluates the basis for its
estimates; however, actual results could differ from those estimates, which
could affect the reported results from operations. Set forth below is a
discussion of the Company's critical accounting policies and the basis for
estimates used.
Revenue Recognition
Revenue is recognized when products have been shipped or when services have been
rendered and when the following additional criteria have been met: persuasive
evidence that an arrangement or contract exists; delivery has occurred or
services have been rendered, the price to the customer is fixed or determinable;
and collectibility is reasonably assured. Collectibility is evaluated based on
the amount involved, the credit history of the customer, and the current status
of the customer's account with the Company.
Allowance for Doubtful Accounts
The estimated allowance for doubtful accounts is based on a review of the aging
of the accounts receivable balances, the historical write-off experience, the
credit standing of the customer and the amount of credit insurance coverage. A
change in the credit standing of customers and/or the amount of credit insurance
available could affect the estimated allowance.
Allowance for Sales Returns
The estimated allowance for sales returns is based on a review of the historical
return patterns associated with the various sales outlets, as well as current
market trends in the businesses in which we operate. A change in the pattern or
trends in returns could affect the estimated allowance.
Reserve for Inventory Obsolescence
Inventories are carried at cost or market, whichever is lower. A reserve for
inventory obsolescence is estimated based on a review of damaged, obsolete, or
otherwise unsaleable inventory. The review encompasses historical unit sales
trends by title, current market conditions, including estimates of customer
demand, and publication revision cycles. A change in sales trends could affect
the estimated reserve.
Allocation of Acquisition Purchase Price to Assets Acquired and Liabilities
Assumed
In connection with acquisitions, the Company allocates the cost of the
acquisition to the assets acquired and the liabilities assumed based on
estimates of the fair value of such items including goodwill, other intangible
assets with indefinite lives, and other intangible assets and the related useful
lives. Such estimates include expected cash flows to be generated by those
assets and the expected useful lives based on historical experience, current
market trends as well as synergies to be achieved from the acquisition and
expected tax basis of assets acquired. For major acquisitions, the Company uses
independent appraisers to confirm the reasonableness of such estimates. A change
in the useful lives of intangible assets other than goodwill could affect the
Company's amortization expense for the year.
Impairment of Intangible and Other Long-Lived Assets
Management periodically evaluates the recoverability of intangibles, including
goodwill, and other long-lived assets in connection with its annual financial
process review, or whenever facts and circumstances indicate the carrying value
of those assets may not be recoverable. Evaluations include estimates of future
cash flows generated by the underlying assets, current trends, and other
determinants of fair value. If the carrying value of the asset exceeds the
estimated fair value, an impairment loss is recognized for the difference. It is
possible that the estimates of the fair value may not be realized due to future
changes in market conditions and other factors, in which case a further
impairment loss would have to be recognized.
Recent Accounting Standards
At the beginning of its fiscal year May 1, 2002, the Company adopted SFAS
No.142, "Goodwill and Other Intangible Assets," which eliminates the
amortization of goodwill and indefinite lived intangible assets. In fiscal year
2002, the after-tax impact of the non-amortization of goodwill and intangible
assets on net income was $7.8 million, or $0.12 per share. In June 2001, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards (SFAS) No. 141, "Business Combinations," which requires all business
combinations initiated after June 30, 2001, to be accounted for by a single
method - the purchase method. In addition, the statement requires the purchase
price to be allocated to identifiable intangible assets in addition to goodwill
if certain criteria are met. The statement also requires additional disclosures
related to the reasons for the business combination, the allocation of the
purchase price, and if significant by reportable segment, to the assets acquired
and liabilities assumed.
In July 2001, the Financial Accounting Standards Board issued SFAS No. 143,
"Accounting for Asset Retirement Obligations." This standard addresses the
financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. The standard is effective for fiscal year 2004. The adoption of SFAS No.
143 is not expected to have a material impact on the Company's financial
results.
In August 2001, the Financial Accounting Standards Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets." This standard
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets. The standard is effective for fiscal year 2004. The adoption
of SFAS No. 144 is not expected to have a material impact on the Company's
financial results.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". SFAS 146, which is effective prospectively
for exit or disposal activities initiated after December 31, 2002, applies to
costs associated with an exit activity, including restructurings, or with a
disposal of long-lived assets. SFAS 146 requires that exit or disposal costs are
recorded as an operating expense when the liability is incurred and can be
measured at fair value. The adoption of SFAS No. 146 did not have a material
effect on the Company's financial position or results of operations.
In November 2002, FASB issued Interpretation No. 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("FIN45"). FIN 45 elaborates on the disclosures to be
made by a guarantor in its interim and annual financial statements about its
obligations under certain guarantees it has issued. It also clarifies that a
guarantor is required to recognize, at the inception of a guarantee, a liability
for the fair value of the obligation undertaken in issuing the guarantee. The
interpretation was effective on a prospective basis for guarantees issued as
modified after December 31, 2002 and had no impact on the Company's consolidated
financial statements.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Compensation -
Transition and Disclosure." SFAS No. 148 amends SFAS No. 123, "Accounting for
Stock-Based Compensation," to provide alternative methods of transition for a
voluntary change to the fair value method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure provision of SFAS
No. 123 to require prominent disclosures in both annual and interim financial
statements about the method of accounting and the effect of the method used on
reported results. This standard is effective for fiscal year end 2003.
Currently, the Company uses the intrinsic method of accounting for stock-based
compensation. Therefore, the adoption of SFAS No. 148 will have no effect on the
Company's financial position or results of operations.
In April 2003, the FASB issued SFAS 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities". SFAS 149 amends and clarifies
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities under SFAS 133. The
amendments set forth in SFAS 149 require that contracts with comparable
characteristics be accounted for similarly. SFAS 149 is generally effective for
contracts entered into or modified after June 30, 2003 and for hedging
relationships designated after June 30, 2003. The guidance is to be applied
prospectively. SFAS 149 is not expected to have a material impact on the
Company's financial position or results of operations.
In May 2003, the FASB issued Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity". The
statement requires that certain financial instruments be classified as
liabilities, instead of equity, in statements of financial position. SFAS 150 is
not expected to have a material impact on the Company's financial position or
results of operations.
"Safe Harbor" Statement Under the
Private Securities Litigation Reform Act of 1995
This report contains certain forward-looking statements concerning the Company's
operations, performance, and financial condition. Reliance should not be placed
on forward-looking statements, as actual results may differ materially from
those in any forward-looking statements. Any such forward-looking statements are
based upon a number of assumptions and estimates that are inherently subject to
uncertainties and contingencies, many of which are beyond the control of the
Company, and are subject to change based on many important factors. Such factors
include, but are not limited to (i) the level of investment in new technologies
and products; (ii) subscriber renewal rates for the Company's journals; (iii)
the financial stability and liquidity of journal subscription agents; (iv) the
consolidation of book wholesalers and retail accounts; (v) the market position
and financial stability of key online retailers; (vi) the seasonal nature of the
Company's educational business and the impact of the used book market; (vii)
worldwide economic and political conditions; and (viii) other factors detailed
from time to time in the Company's filings with the Securities and Exchange
Commission. The Company undertakes no obligation to update or revise any such
forward-looking statements to reflect subsequent events or circumstances.
Results by Quarter (Unaudited)
Dollars in millions except per share data
2003 2002
- -----------------------------------------------------------------------
Revenues
First quarter $ 206.4 $ 161.0
Second quarter 223.0 176.2
Third quarter 221.2 208.0
Fourth quarter 203.4 189.2
- ----------------------- --------------------- -----------------------
Fiscal year $ 854.0 $ 734.4
- ----------------------- --------------------- -----------------------
Operating Income (a)
First quarter (b) $ 30.7 $ 30.5
Second quarter 35.9 28.9
Third quarter 36.9 34.7
Fourth quarter (b) 16.8 (6.3)
- ----------------------- --------------------- -----------------------
Fiscal year (b) $ 120.3 $ 87.8
- ----------------------- --------------------- -----------------------
Net Income (a)
First quarter (b) $ 20.0 $ 19.5
Second quarter (c) 34.7 17.9
Third quarter 24.2 21.4
Fourth quarter 8.4 (1.4)
- ----------------------- --------------------- -----------------------
Fiscal year (b) (c) $ 87.3 $ 57.4
- ----------------------- --------------------- -----------------------
Income Per Share Diluted Basic Diluted (a) Basic (a)
---------------------------------------------------
First quarter (b) $.32 $.32 $.31 $.32
Second quarter (c) .55 .57 .28 .29
Third quarter .39 .39 .34 .35
Fourth quarter .13 .13 (.02) (.02)
Fiscal year (b)(c) 1.38 1.42 .91 .94
- -------------------------------------------------------------------------
(a) At the beginning of fiscal year 2003, the Company adopted Statement of
Financial Accounting Standard No. 142: Goodwill and Other Intangible
Assets. In accordance with FAS No. 142, amortization of goodwill and
indefinite life intangibles is discontinued. Fiscal year 2002 includes
amortization which is no longer recorded of approximately $2.4 million
($2.0 million after-tax) per quarter or $9.6 million ($7.8 million
after-tax) for the year.
(b) In the fourth quarter of fiscal year 2002 the Company finalized its
commitment to relocate the Company's headquarters to Hoboken, N.J. The
relocation was completed in the first quarter of fiscal year 2003.
Fiscal years 2003 and 2002 include an unusual charge for costs
associated with the relocation of approximately $2.5 million ($1.5
million after tax) and $12.3 million ($7.7 million after tax), for the
respective periods.
(c) Fiscal year 2003 includes a one-time tax benefit of $12.0 million
equal to $0.19 per diluted share, relating to an increase of the
tax-deductible net asset basis of a European subsidiary's assets.
Quarterly Share Prices, Dividends, and Related Stockholder Matters
The Company's Class A and Class B shares are listed on the New York Stock
Exchange under the symbols JWa and JWb, respectively. Dividends per share and
the market price range by fiscal quarter for the past two fiscal years were as
follows:
Class A Common Stock Class B Common Stock
---------------------- ----------------------
Market Price Market Price
Divi- --------------- Divi- --------------
dends High Low dends High Low
---------------- ------ ------- ------- ------- ------ -------
2003
First quarter $.050 $27.30 $19.61 $.050 $27.31 $19.56
Second quarter .050 23.30 20.13 .050 23.20 20.20
Third quarter .050 24.20 21.27 .050 24.16 21.35
Fourth quarter .050 24.51 21.51 .050 24.60 21.64
---------------- ------ ------- ------- ------- ------ -------
2002
First quarter $.045 $23.68 $18.95 $.045 $23.65 $19.00
Second quarter .045 22.59 19.54 .045 22.60 19.45
Third quarter .045 24.10 20.00 .045 23.90 19.95
Fourth quarter .045 27.46 22.26 .045 27.45 22.40
As of April 30, 2003, the approximate number of holders of the Company's Class A
and Class B Common Stock were 1,184 and 146, respectively, based on the holders
of record and other information available to the Company.
The Company's credit agreement contains certain restrictive covenants related to
the payment of dividends and share repurchases. Under the most restrictive
covenant, approximately $178 million was available for such restricted payments.
Subject to the foregoing, the Board of Directors considers quarterly the payment
of cash dividends based upon its review of earnings, the financial position of
the Company, and other relevant factors.
Selected Financial Data
For the years ended April 30
----------------------------------------------------------------------------------
Dollars in thousands except per share data 2003 2002 2001 2000 1999
- ----------------------------------------------------------- ------------------- ----------------- ---------------- ------------
Revenues $853,971 $734,396 $613,790 $606,024 $519,164
Operating Income 120,261(a) 87,763(a)(b) 95,424 89,004 63,654
Net Income 87,275(a)(c) 57,316(a)(b) 58,918 52,388 39,709
Working Capital (39,421)(d) (45,134)(d) (57,226)(d) (76,939)(d) 60,870
Total Assets 955,972 896,145 588,002 569,337 528,552
Long-Term Debt 200,000 235,000 65,000 95,000 125,000
Shareholders' Equity 344,004 276,650 220,023 172,738 162,212
- ----------------------------------------------------------- ------------------- ----------------- ---------------- ------------
Per Share Data
Income Per Share
Diluted 1.38 (a)(c) .91 (a)(c) .93 .81 .60
Basic 1.42 (a)(c) .94 (a)(c) .97 .85 .63
Cash Dividends
Class A Common .20 .18 .16 .14 .13
Class B Common .20 .18 .16 .13 .11
(a) In the fourth quarter of fiscal year 2002 the Company finalized its
commitment to relocate the Company's headquarters to Hoboken, N.J. The
relocation was completed in the first quarter of fiscal year 2003.
Fiscal year 2003 and 2002 include an unusual charge for costs
associated with the relocation of approximately $2,465, or $1,479
after tax and $12,312 or $7,683 after tax for the respective periods.
(b) At the beginning of fiscal year 2003, the Company adopted Statement of
Financial Accounting Standard No. 142: Goodwill and Other Intangible
Assets. In accordance with FAS No. 142, amortization of goodwill and
indefinite life intangibles is discontinued. Fiscal year 2002 includes
amortization which is no longer recorded of $9,553 ($7,844 after-tax).
(c) Fiscal year 2003 includes a one-time tax benefit of $12,025 equal to
$0.19 per diluted share, relating to an increase in the tax deductible
net asset basis of a European subsidiary's assets.
(d) Working capital is negative as a result of including in current
liabilities the deferred subscription revenues related to journal
subscriptions for which the cash has been received and that will be
recognized into income as the journals are shipped or made available
online to the customer, or over the term of the subscription as
services are rendered.
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and the Shareholders
of John Wiley & Sons, Inc.:
We have audited the accompanying consolidated statements of financial position
of John Wiley & Sons, Inc. (the "Company") and subsidiaries as of April 30, 2003
and 2002, and the related consolidated statements of income, shareholder's
equity and comprehensive income, and cash flows for the years then ended. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule (as listed in the accompanying
index). These consolidated financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audits. The consolidated financial statements
and financial statement schedule for the year ended April 30, 2001 were audited
by other auditors who have ceased operations. Those auditors expressed an
unqualified opinion on the consolidated financial statements and financial
statement schedule, before the revision described in the "Goodwill and Other
Intangible Assets" Note to the consolidated financial statements, in their
report dated June 5, 2001.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of John Wiley & Sons,
Inc. and subsidiaries as of April 30, 2003 and 2002 and the results of their
operations and their cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America. Also,
in our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
As discussed above, the 2001 financial statements of the Company as listed in
the accompanying index were audited by other auditors who have ceased
operations. As described in the "Goodwill and Other Intangible Assets" Note to
the consolidated financial statements, these financial statements have been
revised to include the transitional disclosures required by the Statement of
Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible
Assets," which was adopted by the Company as of May 1, 2002. In our opinion, the
disclosures for 2001 in the "Goodwill and Other Intangible Assets" Note are
appropriate. However, we were not engaged to audit, review, or apply any
procedures to the 2001 financial statements of the Company other than with
respect to such disclosures, and, accordingly, we do not express an opinion or
any other form of assurance on the 2001 financial statements taken as a whole.
/S/ KPMG LLP
New York, New York
June 17, 2003
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and the Shareholders
of John Wiley & Sons, Inc.:
We consent to the incorporation by reference in the Registration Statement Nos.
333-93691, 33-60268, 2-65296, 2-95104, 33-29372 and 33-62605 of John Wiley &
Sons, Inc. (the "Company") of our report dated June 17, 2003, with respect to
the consolidated statements of financial position of John Wiley & Sons, Inc. as
of April 30, 2003 and 2002, and the related consolidated statements of income,
shareholders' equity and comprehensive income, and cash flows for the years then
ended and the related financial statement schedule, which report appears in the
April 30, 2003 annual report on Form 10-K of John Wiley & Sons, Inc.
Our report refers to our audit of the Statement of Financial Accounting
Standards (SFAS) No. 142 transitional disclosures added to revise the 2001
consolidated financial statements, as more fully described in the "Goodwill and
Other Intangible Assets" Note to the consolidated financial statements. However,
we were not engaged to audit, review, or apply any procedures to the 2001
consolidated financial statements other than with respect to such disclosures.
/S/ KPMG LLP
New York, New York
June 25, 2003
The following report of Arthur Andersen LLP ("Andersen") is a copy of the
original report dated June 5, 2001, rendered on the fiscal year 2001 financial
statements. The SEC provided regulatory relief designed to allow public
companies to dispense with the requirement that they file a consent of Andersen
in certain circumstances. After reasonable efforts, we have not been able to
obtain a re-issued report or consent from Andersen, and, accordingly, should you
wish to pursue claims against Andersen in connection with those financial
statements, your ability to seek remedies and obtain relief against Andersen may
be impaired.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and the Shareholders
of John Wiley & Sons, Inc.:
We have audited the accompanying consolidated statement of financial position of
John Wiley & Sons, Inc. (a New York corporation), and subsidiaries as of April
30, 2001, and 2000, and the related consolidated statements of income and
retained earnings, comprehensive income, and cash flows for each of the three
years in the period ended April 30, 2001. These financial statements and the
schedule referred to below are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
the schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of John Wiley & Sons, Inc., and
subsidiaries as of April 30, 2001 and 2000, and the results of their operations
and their cash flows for each of the three years in the period ended April 30,
2001, in conformity with accounting principles generally accepted in the United
States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the Index to
Consolidated Financial Statements and Schedules for the years ended April 30,
2001 and 2000, is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not a required part of the basic financial
statements. This schedule for the years ended April 30, 2001 and 2000, has been
subjected to the auditing procedures applied in our audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
New York, New York
June 5, 2001
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
John Wiley & Sons, Inc., and Subsidiaries April 30
-----------------------
Dollars in thousands 2003 2002
======================================================================================================
Assets
Current Assets
Cash and cash equivalents.......................... $ 33,241 $ 39,705
Accounts receivable................................ 120,057 101,084
Taxes receivable................................... 9,657 18,664
Inventories........................................ 83,337 69,799
Deferred income tax benefits....................... 26,028 34,394
Prepaid expenses................................... 11,524 11,613
-------- -------
Total Current Assets............................... 283,844 275,259
-------- -------
Product Development Asset..s.................................... 60,842 63,055
Property and Equipment.......................................... 114,870 72,127
Intangible Assets............................................... 280,872 275,295
Goodwill........................................................ 192,186 189,099
Deferred Income Tax Benefits.................................... 2,800 1,351
Other Assets.................................................... 20,558 19,959
-------- -------
Total Assets.................................................... $ 955,972 $ 896,145
======== =======
Liabilities and Shareholders' Equity
Current Liabilities
Current portion of long-term debt.................. $ 35,000 $ 30,000
Accounts and royalties payable..................... 71,296 67,516
Deferred subscription revenues..................... 131,392 125,793
Accrued income taxes............................... 7,953 9,769
Other accrued liabilities.......................... 77,624 87,315
-------- -------
Total Current Liabilities.......................... 323,265 320,393
-------- -------
Long-Term Debt.................................................. 200,000 235,000
Accrued Pension Liability....................................... 54,909 27,184
Other Long-Term Liabilities..................................... 28,190 22,643
Deferred Income Taxes........................................... 5,604 14,275
Shareholders' Equity
Preferred Stock, $1 par value: Authorized - 2 million, I - -
Class A Common Stock, $1 par value: Authorized - 180 mil
Issued - 68,149,702 and 68,066,602............ 68,150 68,067
Class B Common Stock, $1 par value: Authorized - 72 mil
Issued - 15,040,560 and 15,123,660............ 15,041 15,124
Additional paid-in capital......................... 34,103 26,838
Retained earnings.................................. 368,963 294,032
Accumulated other comprehensive gain (loss)........ (7,171) (2,702)
Unearned deferred compensation..................... (1,283) (1,375)
------- -------
477,803 399,984
Less Treasury Shares At Cost (Class A - 18,076,002 and 18,004,770;
Class B - 3,484,096 and 3,484,096)................. (133,799) (123,334)
-------- --------
Total Shareholders' Equity...................................... 344,004 276,650
-------- --------
Total Liabilities and Shareholders' Equity...................... $ 955,972 $ 896,145
======= ========
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF INCOME
John Wiley & Sons, Inc. and Subsidiaries For the years ended April 30
---------------------------------------------------
Dollars in thousands except per share data 2003 2002 2001
===================================================================================================================
Revenues........................................................ $ 853,971 $ 734,396 $ 613,790
Costs and Expenses
Cost of sales.......................................... 288,925 243,196 199,400
Operating and administrative expenses.................. 432,700 373,463 301,470
Amortization of intangibles............................ 9,620 17,662 17,496
Unusual item - relocation related expenses............. 2,465 12,312 -
-------------------------------------------------
Total Costs and Expenses............................... 733,710 646,633 518,366
-------------------------------------------------
Operating Income................................................ 120,261 87,763 95,424
Interest Income and Other....................................... 262 835 2,828
Interest Expense................................................ (7,964) (7,480) (8,025)
-------------------------------------------------
Interest Income (Expense) - Net................................. (7,702) (6,645) (5,197)
-------------------------------------------------
Income Before Taxes............................................. 112,559 81,118 90,227
Provision for Income Taxes...................................... 25,284 23,802 31,309
Net Income...................................................... $ 87,275 $ 57,316 $ 58,918
-------------------------------------------------
Income Per Share
Diluted................................................ $ 1.38 $ 0.91 $ 0.93
Basic.................................................. $ 1.42 $ 0.94 $ 0.97
Cash Dividends Per Share
Class A Common......................................... $ 0.20 $ 0.18 $ 0.16
Class B Common......................................... $ 0.20 $ 0.18 $ 0.16
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
John Wiley & Sons, Inc., and Subsidiaries For the years ended April 30
-------------------------------------------
Dollars in thousands 2003 2002 2001
=======================================================================================================================
Operating Activities
Net Income............................................................. $ 87,275 $ 57,316 $ 58,918
Noncash Items
Amortization of intangibles................................... 9,620 17,662 17,496
Amortization of composition costs............................. 29,923 25,653 22,583
Depreciation of property and equipment........................ 23,420 16,007 13,802
Reserves for returns, doubtful accounts, and obsolescence..... 11,219 6,675 7,527
Deferred income taxes......................................... 11,224 451 3,560
Write-off of investments...................................... - 4,989 -
Unusual item - accrued relocation related expenses............ - 12,312 -
Other 29,730 16,523 10,185
Changes in Operating Assets and Liabilities
Decrease (increase) in accounts receivable.................... (17,862) (3,998) 5,063
Decrease (increase) in taxes receivable....................... 15,841 (9,022) -
Increase in inventories....................................... (14,594) (4,657) (9,789)
Increase in deferred subscription revenues.................... 3,810 7,057 5,009
Decrease in other accrued liabilities......................... (19,451) (169) (9,242)
Net change in other operating assets and liabilities.......... (1,027) 5,934 5,902
Payment of acquisition related liabilities.................... - (12,367) -
--------------------------------------------
Cash Provided by Operating Activities......................... 169,128 140,366 131,014
--------------------------------------------
Investing Activities
Additions to product development assets....................... (51,835) (48,039) (36,163)
Additions to property and equipment........................... (63,221) (33,643) (28,656)
Proceeds from sale of publishing assets....................... - - 2,950
Acquisitions, net of cash acquired............................ (10,500) (232,393) (10,052)
--------------------------------------------
Cash Used for Investing Activities............................ (125,556) (314,075) (71,921)
--------------------------------------------
Financing Activities
Borrowings of long-term debt.................................. - 200,000 -
Repayment of long-term debt................................... (30,000) (30,000) (30,000)
Cash dividends................................................ (12,344) (11,015) (9,726)
Purchase of treasury shares................................... (11,661) (1,880) (6,890)
Proceeds from issuance of stock on option exercises and other. 1,500 2,813 (655)
---------------------------------------------
Cash Provided by (Used for) Financing Activities.............. (52,505) 159,918 (47,271)
---------------------------------------------
Effects of exchange rate changes on cash...................... 2,469 549 (1,174)
---------------------------------------------
Cash and Cash Equivalents
Increase (decrease) for year.................................. (6,464) (13,242) 10,648
Balance at beginning of year.................................. 39,705 52,947 42,299
--------------------------------------------
Balance at end of year........................................ $ 33,241 $ 39,705 $ 52,947
============================================
Supplemental Information
Acquisitions
Fair value of assets acquired................................. $ 10,530 $ 307,915 $ 10,188
Liabilities assumed........................................... (30) (75,522) (136)
---------------------------------------------
Cash paid for businesses acquired............................. $ 10,500 $ 232,393 $ 10,052
---------------------------------------------
Cash Paid During the Year for
Interest...................................................... $ 7,496 $ 6,879 $ 9,033
Income taxes.................................................. $ 3,859 $ 17,080 $ 19,074
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
Accumulated
Unearned Other Comp- Total
Common Common Additional Deferred rehensive Share-
John Wiley & Sons, Inc., and Subsidiaries Stocks Stock Paid-In Retained Treasury Comp- Income holder's
Dollars in thousands except per share data Class A Class B Capital Earnings Stock ensation (Loss) Equity
====================================================================================================================================
Balance at May 1, 2000 $ 67,892 $ 15,299 $ 14,178 $198,539 $(117,825) $(1,703) $ (3,642) $172,738
Director Stock Plan issuance 79 26 105
Shares Issued Under Employee Benefit Plans 1,889 115 2,004
Purchase of Treasury Shares (6,890) (6,890)
Exercise of Stock Options 2,754 (352) 2,402
Class A Common Stock Dividends Declared (7,859) (7,859)
Class B Common Stock Dividends Declared (1,867) (1,867)
Other 145 (146) (52) (53)
Comprehensive Income, Net of Tax:
Net Income 58,918 58,918
Foreign currency translation adjustments 525 525
--------
Total Comprehensive Income 59,443
---------------------------------------------------------------------------------
Balance at May 1, 2001 $ 68,037 $ 15,153 $ 18,900 $247,731 $(124,926) $(1,755) $ (3,117) $220,023
Director Stock Plan Issuance 29 10 39
Shares Issued Under Employee Benefit Plans 1,121 336 1,457
Purchase of Treasury Shares (1,880) (1,880)
Exercise of Stock Pptions 6,788 3,126 9,914
Class A Common Stock Dividends Declared (8,918) (8,918)
Class B Common Stock Dividends Declared (2,097) (2,097)
Other 30 (29) 380 381
Comprehensive Income, Net of Tax:
Net Income 57,316 57,316
Foreign Currency Translation Adjustments 583 583
Transition Hedges Adjustment (272) (272)
Derivative Cash Flow Hedges 104 104
--------
Total Comprehensive Income 57,731
----------------------------------------------------------------------------------
Balance at May 1, 2002 $ 68,067 $ 15,124 $ 26,838 $294,032 $(123,334) $(1,375) $ (2,702) $276,650
Shares Issued Under Employee Benefit Plans 4,990 656 5,646
Purchase of Treasury Shares (11,661) (11,661)
Exercise of Stock Options 2,275 540 2,815
Class A Common Stock Dividends Declared (10,024) (10,024)
Class B Common Stock Dividends Declared (2,320) (2,320)
Other 83 (83) 92 92
Comprehensive Income, Net of Tax:
Net Income 87,275 87,275
Foreign Currency Translation Adjustments 12,668 12,668
Derivative Cash Flow Hedges 168 168
Minimum Liability Pension Adjustment, (17,305) (17,305)
Net of $9,299 of Tax
Total Comprehensive Income 82,806
----------------------------------------------------------------------------------
Balance at April 30, 2003 $ 68,150 $ 15,041 $ 34,103 $368,963 $(133,799) $(1,283) $ (7,171) $344,004
==================================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
Notes to Consolidated Financial Statements
The Company, founded in 1807, was incorporated in the state of New York on
January 15, 1904. (As used herein the term "Company" means John Wiley & Sons,
Inc., and its subsidiaries and affiliated companies, unless the context
indicates otherwise).
The Company is a global publisher of print and electronic products, providing
must-have content and services to customers worldwide. Core businesses include
professional and consumer books and subscription services; scientific, technical
and medical journals, encyclopedias, books, and online products and services;
and educational materials for undergraduate and graduate students and lifelong
learners. The Company has publishing, marketing and distribution centers in the
United States, Canada, Europe, Asia, and Australia.
Summary of Significant Accounting Policies
Principles of Consolidation: The consolidated financial statements include the
accounts of the Company. Investments in entities in which the Company has at
least a 20% but less than a majority interest are accounted for using the equity
method of accounting. Investments in entities in which the Company has less than
a 20% ownership and in which it does not exercise significant influence are
accounted for using the cost method of accounting. All significant intercompany
accounts and transactions have been eliminated in consolidation. Certain prior
year amounts have been reclassified to conform to the current year's
presentation.
Use of Estimates: The preparation of the Company's financial statements in
conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Revenue Recognition: In accordance with S.E.C. Staff Accounting Bulletin No.
101, "Revenue Recognition in Financial Statements," the Company recognizes
revenue when the following criteria are met: persuasive evidence that an
arrangement exists; delivery has occurred or services have been rendered; the
price to the customer is fixed or determinable; and collectibility is reasonably
assured. If all of the above criteria have been met, revenues are principally
recognized upon shipment of products or when services have been rendered.
Subscription revenues are generally collected in advance, and are deferred and
recognized as earned when the related issue is shipped or made available online,
or over the term of the subscription as services are rendered.
Sales Returns and Doubtful Accounts: The Company provides an estimated allowance
for doubtful accounts and for future returns on sales made during the year based
on historical experience. The allowance for doubtful accounts and returns
(estimated returns net of inventory and royalty costs) is shown as a reduction
of accounts receivable in the accompanying consolidated balance sheets and
amounted to $74.7 and $84.8 million at April 30, 2003 and 2002, respectively.
Inventories: Inventories are stated at cost or market, whichever is lower. U.S.
book inventories aggregating $68.1 and $53.6 million at April 30, 2003 and 2002,
respectively, are valued using the last-in, first-out (LIFO) method. All other
inventories are valued using the first-in, first-out method.
Product Development Assets: Product development assets consist of composition
costs and royalty advances to authors. Costs associated with developing any
publication are expensed until the product is determined to be commercially
viable. Composition costs, primarily representing the costs incurred to bring an
edited commercial manuscript to publication including typesetting, proofreading,
design and illustration, etc., are capitalized and generally amortized on a
double-declining basis over estimated useful lives, ranging from 1 to 3 years.
Royalty advances to authors are capitalized and, upon publication, are recovered
as royalties are earned by the authors based on sales of the published works.
Capitalized Internal-Use Software: Costs related to obtaining or developing
computer software for internal use are accounted for as follows: Costs incurred
during the application development stage, including external costs of materials
and services, and payroll- and payroll related costs for employees who are
directly associated with the internal-use software project, are capitalized and
amortized over the expected useful life of the related software. Costs incurred
during the preliminary project stage, as well as maintenance, training, and
upgrades that do not result in additional functionality, are expensed as
incurred.
Depreciation and Amortization: Buildings, leasehold improvements, and capital
leases are amortized over the lesser of the estimated useful lives of the assets
up to 40 years, or the duration of the various leases, using the straight-line
method. Furniture and fixtures are depreciated principally on the straight-line
method over estimated useful lives ranging from 3 to 10 years. Computer
equipment and capitalized software are amortized on a straight-line basis over
estimated useful lives ranging from 3 to 5 years.
Intangible Assets: Intangible assets principally consist of goodwill, branded
trademarks, acquired publication rights and non-compete agreements. As of the
beginning of the Company's fiscal year May 1, 2002, goodwill and acquired
publication rights with indefinite lives are no longer amortized but rather
tested for impairment annually or more often if warranted. Prior to May 1, 2002
the Company amortized all intangible assets on a straight-line basis over
periods ranging from 5 to 40 years over their estimated useful life. All
Acquired publication rights with definitive lives are amortized on a
straight-line basis over periods ranging from 5 to 30 years. Noncompete
agreements are amortized over the terms of the individual agreement.
If facts and circumstances indicate that long-lived assets and/or intangible
assets may be permanently impaired, it is the Company's policy to assess the
carrying value and recoverability of such assets based on an analysis of
undiscounted future cash flows of the related operations. Any resulting
reduction in carrying value based on the estimated fair value would be charged
to operating results. Estimated fair value is principally determined using the
anticipated cash flows discounted at a rate commensurate with the risk involved.
As a result of such reviews, approximately $5.0 million relating primarily to
small investments, was written off and charged against operating income in
fiscal year 2002.
Derivative Financial Instruments - Foreign Exchange Contracts: The Company, from
time to time, enters into forward exchange contracts as a hedge against foreign
currency asset and liability commitments, and anticipated transaction exposures.
The Company does not use financial instruments for trading or speculative
purposes.
The Company accounts for its derivative instruments in accordance with SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities", as amended
by SFAS No. 137 and No. 138. Accordingly, all derivatives are recognized as
assets or liabilities and measured at fair value. Derivatives that are not
determined to be effective hedges are adjusted to fair value with a
corresponding effect on earnings. Changes in the fair value of derivatives that
are designated and determined to be effective as part of a hedge transaction
have no immediate effect on earnings and, depending on the type of hedge, are
recorded either as part of other comprehensive income and will be included in
earnings in the period in which earnings are affected by the hedged item, or are
included in earnings as an offset to the earnings impact of the hedged item. Any
ineffective portions of hedges are reported in earnings as they occur. The
adoption of these new standards as of May 1, 2002, resulted in a transition
adjustment loss of $.3 million after taxes, which is included as part of other
comprehensive income.
For a derivative to qualify as a hedge at inception and throughout the hedged
period, the Company formally documents the nature and relationships between the
hedging instruments and hedged items, as well as its risk-management objectives,
strategies for undertaking the various hedge transactions, and method of
assessing hedge effectiveness. For hedges of forecasted transactions, the
significant characteristics and expected terms of a forecasted transaction are
specifically identified, and it must be probable that each forecasted
transaction will occur. If it is deemed probable that the forecasted transaction
will not occur, the gain or loss is recognized in earnings currently.
At April 30, 2003, there were no open foreign exchange derivative contracts.
Included in operating and administrative expenses were net foreign exchange
transaction losses of approximately $.7, $.3, and $.3 million in 2003, 2002, and
2001, respectively.
Foreign Currency Translation: The Company translates the results of operations
of its international subsidiaries using average exchange rates during each
period, whereas balance sheet accounts are translated using exchange rates at
the end of each period. Currency translation adjustments are recorded as a
component of accumulated other comprehensive income (loss) in stockholders'
equity.
Stock-Based Compensation: Stock options and restricted stock grants are
accounted for in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and the disclosure-only provisions
of Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," as amended by SFAS No. 148," Accounting for Stock
Based Compensation - Transition and Disclosure." Accordingly, the Company
recognizes no compensation expense for fixed stock option grants since the
exercise price is equal to the fair value of the shares at date of grant. For
restricted stock grants, compensation cost is generally recognized ratably over
the vesting period based on the fair value of shares.
The fair value of the awards was estimated at the date of grant using the Black
Scholes option pricing model.
The per share value of options granted in connection with the Company's stock
option plans has been estimated with the following weighted average assumptions:
2003 2002 2001
---------- --------- ----------
Expected Life of Options (years)
8.0 8.0 8.2
Risk-Free Interest Rate 4.9% 5.2% 6.2%
Volatility 34.3% 33.6% 28.1%
Dividend Yield 0.8% 0.9% 1.0%
Weighted Average Fair Value $11.09 $10.19 $9.76
For purposes of the following pro forma disclosure, the estimated fair value of
the options is amortized to expense over the options' vesting periods. The
Company's pro forma information under SFAS No. 123 and SFAS No. 148 was as
follows:
2003 2002 2001
---------- ---------- ------------
Net Income as Reported $87,275 $57,316 $58,918
Stock-Based Compensation, Net
of Tax, Included in the
Determination of Net Income
as Reported
Restricted Stock Plan 1,436 2,049 1,717
Director Stock Plan 230 207 296
Stock-Based Compensation
Costs, Net of Tax, That Would
Have Been Included in the
Determination of Net Income
Had the Fair Value-Based
Method Been Applied (5,521) (5,182) (4,228)
---------- ---------- ------------
Pro Forma Net Income $83,420 $54,390 $56,703
========== ========== ============
Reported Earnings Per Share
Diluted $1.38 $0.91 $0.93
Basic $1.42 $0.94 $0.97
Pro Forma Earnings Per Share
Diluted $1.32 $0.86 $0.90
Basic $1.36 $0.90 $0.94
Cash Equivalents: Cash equivalents consist primarily of highly liquid
investments with a maturity of three months or less and are stated at cost plus
accrued interest, which approximates market value.
Recent Accounting Standards: In July 2001, the Financial Accounting Standards
Board issued SFAS No. 143, "Accounting for Asset Retirement Obligations". This
standard addresses the financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. The standard is effective for fiscal 2004. The adoption
of SFAS No. 143 is not expected to have a material impact on the Company's
financial results.
In August 2001, the Financial Accounting Standards Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets." This standard
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets. The standard is effective for fiscal 2004. The adoption of
SFAS No. 144 is not expected to have a material impact on the Company's
financial results.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". SFAS 146, which is effective prospectively
for exit or disposal activities initiated after December 31, 2002, applies to
costs associated with an exit activity, including restructurings, or with a
disposal of long-lived assets. SFAS 146 requires that exit or disposal costs are
recorded as an operating expense when the liability is incurred and can be
measured at fair value. The adoption of SFAS No. 146 did not have a material
effect on the Company's financial position or results of operations.
In November 2002, FASB issued Interpretation No. 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("FIN45"). FIN 45 elaborates on the disclosures to be
made by a guarantor in its interim and annual financial statements about its
obligations under certain guarantees it has issued. It also clarifies that a
guarantor is required to recognize, at the inception of a guarantee, a liability
for the fair value of the obligation undertaken in issuing the guarantee. The
interpretation was effective on a prospective basis for guarantees issued or
modified after December 31, 2002 and had no impact on the Company's consolidated
financial statements.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Compensation -
Transition and Disclosure." SFAS No. 148 amends SFAS No. 123, "Accounting for
Stock-Based Compensation," to provide alternative methods of transition for a
voluntary change to the fair value method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure provision of SFAS
No. 123 to require prominent disclosures in both annual and interim financial
statements about the method of accounting and the effect of the method used on
reported results. This standard is effective for fiscal year end 2003.
Currently, the Company uses the intrinsic method of accounting for stock-based
compensation. Therefore, the adoption of SFAS No. 148 will have no effect on the
Company's financial position or results of operations.
In April 2003, the FASB issued SFAS 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS 149 amends and clarifies
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities under SFAS 133. The
amendments set forth in SFAS 149 require that contracts with comparable
characteristics be accounted for similarly. SFAS 149 is generally effective for
contracts entered into or modified after June 30, 2003, and for hedging
relationships designated after June 30, 2003. The guidance is to be applied
prospectively. SFAS 149 is not expected to have a material impact on the
Company's financial position or results of operations.
In May 2003, the FASB issued Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." The
statement requires that certain financial instruments be classified as
liabilities, instead of equity, in statements of financial position. SFAS 150 is
not expected to have a material impact on the Company's financial position or
results of operations.
Income Per Share
A reconciliation of the shares used in the computation of net income per share
for the years ended April 30, follows:
In thousands 2003 2002 2001
- ----------------------------- ----------- ---------- -----------
Weighted Average Shares
Outstanding 61,675 60,937 60,813
Less: Unearned Deferred
Compensation Shares (171) (247) (321)
- ----------------------------- ----------- ---------- -----------
Shares Used for Basic
Income Per Share 61,504 60,690 60,492
Dilutive Effect of Stock
Options and Other Stock Awards 1,582 2,404 2,808
- ----------------------------- ----------- ---------- -----------
Shares Used for Diluted
Income Per Share 63,086 63,094 63,300
- ----------------------------- ----------- ---------- -----------
For the years ended April 30, 2003, 2002, and 2001 options to purchase Class A
common stock of .9 million, zero, and, 1.1 million respectively, have been
excluded from the shares used for diluted income per share as their inclusion
would have been antidilutive.
Acquisitions
During fiscal 2003, the Company acquired publishing assets aggregating $10.5
million, which include teacher education titles from Prentice Hall
Direct/Pearson Education, Turfgrass management and golf course design titles
from Sleeping Bear Press/Ann Arbor Press, technology titles from Peer
Information Ltd. published under the Wrox Press Ltd. and Friends of Ed Ltd.
imprints, life-science textbooks from Fitzgerald Science Press, Inc. and the
Book of Yields from Chef Desk. The cost of these investments were principally
allocated to acquired publishing rights and non-compete agreements that are
being amortized on a straight-line basis over estimated average useful lives
ranging from 5 to 20 years.
In September 2001, the Company acquired 100% of the outstanding shares of Hungry
Minds, Inc. (Hungry Minds) for a total purchase price of approximately $184.1
million, consisting of approximately $90.2 million in cash for the common stock
of Hungry Minds, $91.7 million in cash to enable Hungry Minds to repay its
outstanding debt, and fees and expenses of approximately $2 million. Hungry
Minds is a leading publisher with a collection of respected brands including the
For Dummies and Unofficial Guide series, the technological Bible and Visual
series, Frommer's travel guides, CliffsNotes, Webster's New World Dictionary,
Betty Crocker, Weight Watchers, and other market-leading brands. Through the
Hungry Minds' acquisition, the Company substantially increased its strong
collection of content, thereby enhancing its competitive position in the
professional/trade segment. The Hungry Minds brands are well known in the United
States and abroad.
The results of operations of Hungry Minds have been included in the Company's
consolidated financial statements since the date of acquisition. The cost of the
acquisition was allocated on the estimated fair values of the assets acquired
and the liabilities assumed. During Fiscal Year 2003, the Company finalized the
purchase accounting for the Hungry Mind acquisition resulting in no material
change to the Company's financial position.
The following table summarizes the final allocation for the purchase price for
the Hungry Minds' assets acquired and liabilities assumed at the date of
acquisition.
Dollars in thousands
- --------------------
Current Assets $84,163
Product Development Assets 10,661
Property and Equipment 3,839
Goodwill 90,603
Other Intangible Assets 58,600
Deferred Income Tax Benefit 9,282
------------
Total assets acquired 257,148
------------
Current Liabilities (55,776)
Long-Term Liabilities (17,239)
------------
Total liabilities assumed 73,015
------------
Net assets acquired $184,133
------------
In fiscal 2002, the Company also acquired four other businesses for purchase
prices aggregating $35.1 million. These included A&M Publishing Ltd., a
U.K.-based publisher for the pharmaceutical and health care sectors, GIT Verlag
GmbH, a German publisher for the chemical, pharmaceutical, biotechnology,
security and engineering industries; and Frank J. Fabozzi Publishing and an
Australian publisher, Wrightbooks Pty Ltd., both publishing high-quality finance
books for the professional market.
The final intangible assets recorded for all of the above fiscal year 2002
acquisitions, including Hungry Minds, were as follows:
Tax-
Amount Deductible
Dollars in thousands Recorded Amount
- -------------------------------------- ------------ ------------
Goodwill $104,962 $977
Other Intangible Assets Not
Subject to Amortization
Branded Trademarks $57,900 $48,592
Acquired Publication Rights 11,498 -
------------ ------------
Total $69,398 $48,592
------------ ------------
Other Intangible Assets Subject to
Amortization
Acquired Publication Rights $12,746 $9,482
Noncompete Agreements 150 150
------------ ------------
Total $12,896 $9,632
------------ ------------
The weighted average amortization period for acquired publication rights,
subject to amortization was 27 years and 5 years for non-compete agreements. The
following unaudited pro forma financial information presents the results of
operations of the Company as if the above acquisitions had been consummated as
of May 1, 2000. The unaudited pro forma financial information is not necessarily
indicative of the actual results that would have been achieved had the
acquisition actually been consummated as of May 1, 2000, nor is it necessarily
indicative of the future results of operations.
Dollars in thousands
except per share data 2002 2001
- --------------------------- ----------------- ----------------
Revenues $818,038 $848,285
Net Income $36,593 $56,207
Income Per Diluted Share $0.58 $0.89
- --------------------------- ----------------- ----------------
The pro forma financial information for fiscal year 2001 includes certain
adjustments made by previous management prior to the Company's acquisition of
Hungry Minds. The adjustments include a charge related to Hungry Minds
restructuring and an impairment write down amounting to $3 million after taxes,
or $0.05 per share. Offsetting these charges was a gain related to Hungry Minds
revision of certain assumptions in the calculation of its sales returns reserve,
resulting in an increase in revenues, net income and income per share of
approximately $5 million, $3 million, and $0.05 per share, respectively.
During fiscal 2002, the Company also acquired publishing assets consisting of 47
higher education titles from Thomson Learning for approximately $16.1 million in
cash. The titles are in such publishing areas as business, earth and biological
sciences, foreign languages, mathematics, nutrition, and psychology. The excess
of cost over the fair value of the tangible assets acquired amounted to
approximately $13.5 million, relating to acquired publishing rights that are
being amortized on a straight-line basis over 20 years.
In fiscal year 2001, the Company acquired interests in certain publishing
properties for approximately $10.1 million including: an environmental
remediation portal and database; a majority interest in an Oxford-based
publisher of professional business and management titles; new agreements with
certain prestigious scholarly and professional societies to publish their
journals; and an investment in an informatics Company. The costs of these
investments was allocated primarily to investments, and to goodwill, acquired
publication rights and noncompete agreements that are being amortized on a
straight-line basis over estimated average lives ranging from 5 to 20 years.
All prior fiscal year acquisitions have been accounted for by the purchase
method, and the accompanying financial statements include their results of
operations since their respective dates of acquisition.
Headquarters Relocation
In the fourth quarter of fiscal year 2002, the Company finalized its commitment
to relocate the Company's headquarters to Hoboken, N.J. The relocation was
completed in the first quarter of fiscal year 2003. The new facilities will meet
the Company's growth expectations and provides for a more collaborative and
efficient work environment. The relocation was accomplished at attractive
financial terms. The first quarter of fiscal year 2003 and the fourth quarter of
fiscal year 2002 include an unusual charge for costs associated with the
relocation of approximately $2.5 or $1.5 after tax, $0.02 per diluted share; and
$12.3 or $7.7 after tax, $0.12 per diluted share; for the respective periods.
The costs include moving costs, duplicate rent payments, rent payments on the
vacated facilities and the accelerated depreciation of leasehold improvements
and certain furniture, fixtures and equipment based on revised estimates of
useful lives.
Inventories
Inventories at April 30 were as follows:
Dollars in thousands 2003 2002
- --------------------------- ----------------- ----------------
Finished Goods $76,452 $62,756
Work-in-Process 5,643 6,845
Paper, Cloth, and Other 4,798 3,811
- --------------------------- ----------------- ----------------
86,893 73,412
LIFO Reserve (3,556) (3,613)
- --------------------------- ----------------- ----------------
Total $83,337 $69,799
- --------------------------- ----------------- ----------------
Product Development Assets
Product development assets consisted of the following at April 30:
Dollars in thousands 2003 2002
- ---------------------------------- ------------ -------------
Composition Costs $31,959 $29,505
Royalty Advances 28,883 33,550
- ---------------------------------- ------------ -------------
Total $60,842 $63,055
- ---------------------------------- ------------ -------------
Composition costs are net of accumulated amortization of $67,683 in 2003 and
$55,505 in 2002.
Property and Equipment
Property and equipment consisted of the following at April 30:
Dollars in thousands 2003 2002
- -------------------------------- -------------- ---------------
Land and Land Improvements $ 3,539 $ 3,333
Buildings and Leasehold
Improvements 58,367 39,521
Furniture and Fixtures 44,344 37,355
Computer Equipment and
Capitalized Software 99,011 74,873
- -------------------------------- -------------- ---------------
205,261 155,082
Accumulated Depreciation (90,391) (82,955)
- -------------------------------- -------------- ---------------
Total $114,870 $ 72,127
- -------------------------------- -------------- ---------------
Goodwill and Other Intangible Assets
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 141, " Business Combinations" and No.
142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires all business
combinations initiated after June 30, 2001 to be accounted by the purchase
method of accounting. In addition, the statement requires the purchase price to
be allocated to identifiable intangible assets in addition to goodwill if
certain criteria are met.
On May 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other Intangible
Assets," which eliminates the requirement to amortize goodwill and those
intangible assets that have indefinite useful lives, but requires an annual test
for impairment or more frequently if impairment indicators arise. Intangible
assets that have finite useful lives will continue to be amortized over their
useful lives. The Company completed its initial evaluation and assessment of its
goodwill and other intangible assets in accordance with SFAS No. 142 during the
first quarter of fiscal year 2003. No impairment charge was required. The
Company reclassified certain acquired publication rights to indefinite life
intangibles in connection with the implementation of SFAS No. 142.
In fiscal year 2003, the estimated impact of the non-amortization of goodwill
and intangible assets was approximately $9.6 million ($7.8 million after-tax),
or $0.12 per share.
The following table represents adjusted net income of the Company, giving effect
to SFAS No. 142 as if it were adopted on May 1, 2000 (in thousands):
Year Ended April 30,
2003 2002 2001
---------- ---------- ----------
Net Income, As reported $87,275 $57,316 58,918
Add Back: Amortization Expense, Net of Tax
Indefinite Lived Intangibles - 4,001 4,001
Goodwill - 3,844 3,844
---------- ---------- ----------
Adjusted Net Income $87,275 $65,161 66,763
========== ========== ==========
Income Per Diluted Share:
As reported $1.38 $0.91 $0.93
Adjusted $1.38 $1.03 $1.05
Income Per Basic Share:
As reported $1.42 $0.94 $0.97
Adjusted $1.42 $1.07 $1.10
The following table summarizes the activity in goodwill by segment (in
thousands):
Cumulative
As of Acquisitions Translation As of
April and and Other April
30, 2002 Dispositions Adjustments 30, 2003
---------- - ------------ -------------- ----------
Professional/Trade $146,191 - 1,065 $147,256
Scientific,Technical,
and Medical 23,193 - - 23,193
European 18,010 - 1,820 19,830
Other 1,705 - 202 1,907
---------- ------------- -------------- ----------
Total $189,099 - 3,087 $ 192,186
========== ============= ============== ==========
The following table summarizes intangibles subject to amortization as of April
30 (in thousands):
2003 2002
-------------- --------------
Acquired Publication Rights $150,708 $263,392
Accumulated Amortization (43,918) (57,815)
-------------- --------------
Net Acquired Publication Rights 106,790 205,577
Covenants Not to Compete 900 1,257
Accumulated Amortization (303) (937)
-------------- --------------
Net Covenants to Compete 597 320
-------------- --------------
Total $107,387 $205,897
============== ==============
Based on the current amount of intangible assets subject to amortization, the
estimated amortization expense for each of the succeeding 5 years are as
follows: Fiscal 2004 - $9.1 million; 2005 - $9.0 million; 2006 - $8.8 million;
2007 - $8.7 million and 2008 - $8.6 million. As acquisitions and dispositions
occur in the future and as purchase price allocations are finalized, these
amounts vary.
The following table summarizes other intangibles not subject to amortization as
of April 30 (in thousands):
2003 2002
------------ -------------
Acquired Publication Rights $115,585 $11,498
Branded Trademarks 57,900 57,900
------------ -------------
$173,485 $69,398
============ =============
Other Accrued Liabilities
Other accrued liabilities as of April 30 consisted of the following (in
thousands):
2003 2002
--------------- ----------------
Accrued Compensation $31,201 $32,377
Pension Liability 8,046 985
Rent 2,505 13,656
Employee Benefits 3,171 3,002
Other 32,701 37,295
--------------- ----------------
$77,624 $87,315
Income Taxes
The provision for income taxes at April 30, was as follows:
Dollars in thousands 2003 2002 2001
- ---------------------------- ---------- ----------- ----------
Currently Payable
US-- Federal $4,946 $ 14,984 $ 16,606
International 8,186 7,045 10,789
State and local 928 1,322 354
- ---------------------------- ---------- ----------- ----------
Total Current Provision 14,060 23,351 27,749
- ---------------------------- ---------- ----------- ----------
Deferred Provision (Benefit)
US-- Federal 16,923 (2,436) (467)
International (8,159) 1,983 1,858
State and local 2,460 904 2,169
- ---------------------------- ---------- ----------- ----------
Total Deferred Provision 11,224 451 3,560
- ---------------------------- ---------- ----------- ----------
Total Provision $ 25,284 $ 23,802 $31,309
- ---------------------------- ---------- ----------- ----------
Included in the Company's consolidated statements of cash flows as cash provided
by operating activities under the changes in other assets and liabilities
caption are tax benefits related to the exercise of stock options and restricted
stock held by employees amounting to $3.0, $8.0, and $3.5 million for 2003,
2002, and 2001, respectively, which serve to reduce current income taxes
payable. International and U.S. pretax income was as follows (in thousands):
2003 2002 2001
---------- ------------ ----------
International $37,015 $29,707 $32,207
U.S. 75,544 51,411 58,020
---------- ------------ ----------
$112,559 $81,118 $90,227
---------- ------------ ----------
The Company's effective income tax rate as a percent of pretax income differed
from the U.S. federal statutory rate as shown below:
2003 2002 2001
- ------------------------------------- --------- ------- --------
U.S. Federal Statutory Rate 35.0% 35.0% 35.0%
State and Local Income Taxes
Net of Federal Income Tax Benefit 2.0 1.7 2.0
Tax Benefit Derived from FSC/EIE
Income (2.1) (3.0) (3.5)
Foreign Source Earnings Taxed at
Other Than U.S. Statutory Rate (.8) (4.9) .2
Foreign Reorganization Tax Benefit (10.7) - -
Amortization of Intangibles - 2.0 1.8
Other-- Net (.9) (1.5) (.8)
- ------------------------------------- --------- ------- --------
Effective Income Tax Rate 22.5% 29.3% 34.7%
- ------------------------------------- --------- ------- --------
During the second quarter of 2003 the Company merged several of its European
subsidiaries into a new entity, which enabled the Company to increase the
tax-deductible net asset basis of the merged subsidiaries to fair market value
creating a tax asset greater than the related book value. The $12.0 million
benefit attributable to the increase tax basis reduced the Company's fiscal year
2003 effective tax rate by 10.7%. The $12 million benefit includes the release
of $7.8 million of valuation allowance recorded in prior years.
Deferred taxes result from temporary differences in the recognition of revenue
and expense for tax and financial reporting purposes. The net change in
valuation allowance was a benefit of $9.7 million in 2003, a provision of $3.3
million in 2002 and a benefit of $.3 million in 2001.
The significant components of deferred tax assets and liabilities at April 30
were as follows:
2003 2002
-------------------- ------------------
Dollars in thousands Current Long-Term Long-Term Current
- ------------------------- ---------- -------- --------- --------
Deferred Tax Assets:
Net Operating Loss
Carryforwards $ - $ - $ - $1,875
Reserve for Sales Returns
and Doubtful Accounts 23,969 404 28,324 388
Inventory 1,422 - 848 -
Accrued Expenses 637 - 5,222 -
Costs Capitalized for
Taxes - 5,623 - 5,783
Retirement and Post-
Employment Benefits - 15,627 - 3,890
Amortization of
Intangibles - 8,943 - 7,789
- ------------------------- ---------- -------- --------- ----------
Total Assets 26,028 30,597 34,394 19,725
Less: Valuation Allowance - - - (9,664)
- ------------------------- ---------- -------- --------- ----------
Net Deferred Tax Assets 26,028 30,597 34,394 10,061
- ------------------------- ---------- -------- --------- ----------
Deferred Tax Liabilities:
Depreciation and - (18,978) - (2,292)
Amortization
Accrued Expenses - (8,583) - (9,681)
Long-Term Liabilities - (5,840) - (11,012)
- ------------------------- ---------- -------- --------- ----------
Total Liabilities - (33,401) - (22,985)
- ------------------------- ---------- -------- --------- ----------
Net Deferred Tax Assets
(Liabilities) $26,028 (2,804) $34,394 $(12,924)
- ------------------------- ---------- -------- --------- ----------
In general, the Company plans to continue to invest the undistributed earnings
of its international subsidiaries in those businesses, and therefore no
provision is made for taxes that would be payable if such earnings were
distributed. At April 30, 2003, the undistributed earnings of international
subsidiaries approximated $69.8 million and, if remitted currently, would result
in additional taxes approximating $5.9 million.
Notes Payable and Debt
Long-term debt consisted of the following at April 30:
Dollars in thousands 2003 2002
- ---------------------------------------- ------------ ------------
Term Loan Notes Payable -- Due
September 2006 200,000 $ 200,000
October 2003 35,000 65,000
-------- ----------
35,000 265,000
Less: Current Portion of Long-Term Debt (35,000) (30,000)
---------- ----------
$ 200,000 $ 235,000
---------- ----------
The weighted average interest rates on the term loans during fiscal years 2003
and 2002 were 2.35% and 3.17%, respectively. As of April 30, 2003 and 2002 the
weighted average rates for the term loans were 2.11% and 2.56%, respectively.
To finance the Hungry Minds acquisition, as well as to provide funds for general
working capital and other needs, in fiscal 2002, the Company obtained an
additional $300 million bank credit facility with 13 banks, consisting of a $200
million five-year term loan facility to be repaid in September 2006. The Company
has the option of borrowing at the following floating interest rates: (i) at a
rate based on the London Interbank Offered Rate (LIBOR) plus an applicable
margin ranging from .625% to 1.375% depending on the coverage ratio of debt to
EBITDA; or (ii) at the higher of (a) the Federal Funds Rate plus .5% or (b)
UBS's prime rate, plus an applicable margin ranging from 0% to .375% depending
on the coverage ratio of debt to EBITDA. In addition, the Company pays a
commitment fee ranging from .125% to .225% on the unused portion of the
facility, depending on the coverage ratio of debt to EBITDA.
The Company also has an $85 million credit agreement expiring on October 31,
2003, with eight banks. The credit agreement consists of a term loan of $35
million and a $50 million revolving credit facility. The Company has the option
of borrowing at the following floating interest rates: (i) Eurodollars at a rate
based on the London Interbank Offered Rate (LIBOR) plus an applicable margin
ranging from .15% to .30% depending on certain coverage ratios; or (ii) dollars
at a rate based on the current certificate of deposit rate, plus an applicable
margin ranging from .275% to .425% depending on the coverage ratio of debt to
EBITDA or (iii) dollars at the higher of (a) the Federal Funds Rate plus .5% and
(b) the banks' prime rate. In addition, the Company pays a facility fee ranging
from .10% to .20 % on the total facility depending on the coverage ratio of debt
to EBITDA.
In the event of a change of control, as defined, the banks have the option to
terminate the agreements and require repayment of any amounts outstanding.
The credit agreements contain certain restrictive covenants related to minimum
net worth, funded debt levels, an interest coverage ratio, and restricted
payments, including a cumulative limitation for dividends paid and share
repurchases. Under the most restrictive covenant, approximately $178 million was
available for such restricted payments as of April 30, 2003.
The Company and its subsidiaries have other short-term lines of credit
aggregating $33 million at various interest rates. Information relating to all
short-term lines of credit follows:
Dollars in thousands 2003 2002 2001
- ---------------------------------- ---------- --------- --------
End of Year
Amount outstanding $ - $ - $ -
Weighted average interest - - -
rate
During the Year
Maximum amount $95,000 $70,000 $48,445
outstanding
Average amount outstanding $29,500 $14,137 $ 9,018
Weighted average interest rate 2.1% 2.9% 6.7%
- ---------------------------------- ---------- --------- --------
The Company's total available lines of credit as of April 30, 2003 were $185
million. Based on estimates of interest rates currently available to the Company
for loans with similar terms and maturities, the fair value of notes payable and
long-term debt approximates the carrying value.
Commitments and Contingencies
The following schedule shows the composition of rent expense for operating
leases:
Dollars in thousands 2003 2002 2001
- ------------------------------- ----------- ---------- -----------
Minimum Rental $ 24,819 $ 24,463 $ 17,432
Less: Sublease Rentals (156) (303) -
- ------------------------------- ----------- ---------- -----------
Total $ 24,663 $ 24,160 $ 17,432
- ------------------------------- ----------- ---------- -----------
Future minimum payments under operating leases aggregated $241.4 million at
April 30, 2003. Future annual minimum payments under these leases are $24.2,
$23.6, $22.9, $22.2, and $20.8 million for fiscal years 2004 through 2008,
respectively.
The Company is involved in routine litigation in the ordinary course of its
business. In the opinion of management, the ultimate resolution of all pending
litigation will not have a material effect upon the financial condition or
results of operations of the Company.
Retirement Plans
The Company and its principal subsidiaries have contributory and noncontributory
retirement plans that cover substantially all employees. The plans generally
provide for employee retirement between the ages of 60 and 65, and benefits
based on length of service and final average compensation, as defined.
The Company has agreements with certain officers and senior management personnel
that provide for the payment of supplemental retirement benefits during each of
the 10 years after the termination of employment. Under certain circumstances,
including a change of control as defined, the payment of such amounts could be
accelerated on a present value basis.
The Company provides life insurance and health care benefits, subject to certain
dollar limitations and retiree contributions, for substantially all of its
retired U.S. employees. The cost of such benefits is expensed over the years
that the employees render service and is funded on a pay-as-you-go, cash basis.
The accumulated postretirement benefit obligation amounted to $1.0 million at
April 30, 2003 and 2002, and the amount expensed in 2003 and prior years was not
material.
The Company has a defined contribution 401(k) savings plan. The Company
contribution is based on employee contributions and the level of Company match.
The expense for this plan amounted to approximately $2.5, $1.9, and $1.7 million
in 2003, 2002 and 2001, respectively.
The components of net pension expense for the defined benefit plans were as
follows:
Dollars in thousands 2003 2002 2001
- ---------------------------------- --------- --------- ---------
Service Cost $6,519 $6,174 $5,263
Interest Cost 9,350 8,044 7,426
Expected Return on Plan Assets (6,889) (6,987) (7,351)
Net Amortization of Prior
Service Cost 645 511 473
Net Amortization of Unrecognized
Transition Asset (39) (213) (819)
Recognized Net Actuarial Loss 885 363 47
- ---------------------------------- --------- --------- ---------
Net Pension Expense $10,471 $7,892 $5,039
- ---------------------------------- --------- --------- ---------
In fiscal year 2003, certain international plans were amended to require
participants to make annual contributions to their plan. In fiscal 2002, the
U.S. plan was amended to provide that final average compensation be based on the
highest three consecutive years ended December 31, 1997, or, if employed after
that date, the first three consecutive years after that date. Neither of these
amendments had a material impact on pension expense for both years. The Company
may, but is not required to, update from time to time the ending date for the
three-year period used to determine final average compensation. The net pension
expense included above for the international plans amounted to approximately
$5.4, $3.8, and $2.9 million for 2003, 2002, and 2001, respectively.
The following table sets forth the changes in and the status of the plans'
assets and benefit obligations.
Dollars in thousands 2003 2002
-------------------------------------------------------------- --------------------- ---------------------
PLAN ASSETS
Fair Value, Beginning of Year $ 82,540 $ 86,484
Actual Return on Plan Assets (7,037) (3,323)
Employer Contributions 5,293 3,623
Participants' Contributions 220 -
Benefits Paid (5,568) (4,482)
Foreign Currency Rate Changes 3,160 238
-------------------------------------------------------------- --------------------- ---------------------
Fair Value, End of Year $ 78,608 $ 82,540
-------------------------------------------------------------- --------------------- ---------------------
BENEFIT OBLIGATION
Balance, Beginning of Year $ (123,297) $ (112,967)
Service Cost (6,474) (6,174)
Interest Cost (9,350) (8,044)
Participants' Contributions (220) -
Amendments - (2,399)
Actuarial Gain (Loss) (9,743) 1,838
Benefits Paid 5,568 4,482
Foreign Currency Rate Changes (6,580) (33)
-------------------------------------------------------------- --------------------- ---------------------
Balance, End of Year $ (150,096) $ (123,297)
-------------------------------------------------------------- --------------------- ---------------------
Funded Status-- Deficit (71,488) (40,757)
Unrecognized Net Transition Asset (63) (93)
Unrecognized Net Actuarial Loss 35,148 12,354
Unrecognized Prior Service Cost 5,310 4,987
-------------------------------------------------------------- --------------------- ---------------------
Net Accrued Pension Cost $ (31,093) $ (23,509)
-------------------------------------------------------------- --------------------- ---------------------
Amounts Recognized in the Balance Sheet Consist of:
Deferred Pension Asset $ 686 $ 518
Accrued Pension Liability (62,955) (28,169)
Other Asset 4,572 4,142
Accumulated Other Comprehensive Income 26,604 -
-------------------------------------------------------------- --------------------- ---------------------
Net Amount Recognized $ (31,093) $ (23,509)
-------------------------------------------------------------- --------------------- ---------------------
The Weighted Average Assumptions Used in
Determining These Amounts Were as Follows:
Discount Rate 6.3% 7.1%
Expected Return on Plan Assets 7.9% 7.9%
Rate of Compensation Increase 3.7% 5.8%
-------------------------------------------------------------- --------------------- ---------------------
The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for the retirement plans with accumulated benefit obligations in
excess of plan assets were $145.5, $136.2, and $74.0 million, respectively, as
of April 30, 2003, and $119.3, $106.0, $78.1 million, respectively, as of April
30, 2002. The projected benefit obligation, accumulated benefit obligation, and
fair value of assets for the retirement plans with plan assets in excess of the
accumulated benefit obligation were $4.6, $2.4, and $4.6 million respectively as
of April 30, 2003, and $4.0, $2.1, and $4.5 million respectively, as of April
30, 2002.
Equity Compensation Plans
All equity compensation plans have been approved by security holders. The number
of securities to be issued upon exercise of outstanding options, warrants and
rights as of April 30, 2003, was 5,034,904 at a weighted-average exercise price
of $16.98. The number of securities remaining available for future issuance
under equity compensation plans were 5,507,690 excluding securities reserved for
current outstanding options.
Under the Company's Long Term Incentive Plan, qualified employees are eligible
to receive awards that may include stock options, performance stock awards, and
restricted stock awards subject to an overall maximum of 8,000,000 shares and up
to a maximum per year of 600,000 shares of Class A stock to any one individual.
The exercise price of options granted under the plan may not be less than 100%
of the fair market value of the stock at the date of grant. Options are
exercisable, in part or in full, over a maximum period of 10 years from the date
of grant, and generally vest within five years from the date of the grant. Under
certain circumstances relating to a change of control, as defined, the right to
exercise options outstanding could be accelerated.
A summary of the activity and status of the Company's stock option plans were as
follows:
2003 2002 2001
---------------------------- --------------------------- ---------------------------
Weighted Weighted Weighted
Average Average Average
Options Exercise Price Options Exercise Price Options Exercise Price
---------------------------------- -------------- ------------- ------------- ------------- ------------- -------------
Outstanding at Beginning of Year 4,599,704 $14.44 5,080,703 $11.21 4,837,693 $ 8.88
Granted 900,809 $24.90 656,143 $23.15 663,000 $23.28
Exercised (427,356) $ 5.78 (1,131,142) $ 4.95 (414,790) $ 3.18
Canceled (38,253) $23.17 (6,000) $17.91 (5,200) $22.00
---------------------------------- -------------- ------------- ------------- ------------- ------------- -------------
Outstanding at End of Year 5,034,904 $16.98 4,599,704 $14.44 5,080,703 $ 11.21
---------------------------------- -------------- ------------- ------------- ------------- ------------- -------------
Exercisable at End of Year 2,161,372 $10.08 2,021,876 $ 8.05 2,408,257 $ 5.81
---------------------------------- -------------- ------------- ------------- ------------- ------------- -------------
The following table summarizes information about stock options outstanding and
options exercisable at April 30, 2003:
Options Outstanding Options Exercisable
Weighted Weighted Weighted
Average Average Average
Range of Exercise Number of Remaining Exercise Number of Exercise
Prices Options Term Price Options Price
- --------------------------------------------------------------------------------
$ 2.94 to $ 6.56 396,419 1.0 years $4.89 396,419 $ 4.89
$ 7.06 to $ 8.63 1,033,750 3.5 years $8.08 1,033,750 $ 8.08
$13.75 to $18.30 934,936 5.1 years $13.93 534,636 $ 13.90
$19.27 to $21.44 589,867 6.5 years $20.45 187,567 $ 20.49
$22.00 to $24.95 2,079,932 8.2 years $24.10 9,000 $ 23.49
- --------------------------------------------------------------------------------
Total 5,034,904 5.9 years $16.98 2,161,372 $ 10.08
- --------------------------------------------------------------------------------
Under the terms of the Company's executive long-term incentive plans, upon the
achievement of certain three-year financial performance-based targets, awards
will be payable in restricted shares of the Company's Class A Common stock. The
restricted shares vest equally as to 50% on the first and second anniversary
date after the award is earned. Compensation expense is charged to earnings over
the respective three-year period.
The Company also grants restricted shares of the Company's Class A Common stock
to key executive officers and others in connection with their employment. The
restricted shares generally vest one-third at the end of the third, fourth, and
fifth years following the date of the grant. Under certain circumstances
relating to a change of control or termination, as defined, the restrictions
would lapse and shares would vest earlier. Compensation expense is charged to
earnings ratably over five years, or sooner, if vesting is accelerated, from the
dates of grant. Restricted shares issued in connection with the above plans
amounted to 84,376, 12,000, and 103,762 shares at weighted-average fair values
of $26.08, $23.92, and $19.98 per share in 2003, 2002, and 2001, respectively.
Under the terms of the Company's Director Stock Plan, each member of the Board
of Directors who is not an employee of the Company is awarded either (a) Class A
Common stock equal to 50% of the board member's annual cash compensation, based
on the stock price on the date of grant, or (b) stock options equal to 150% of
the annual cash compensation divided by the stock price on the date of grant.
Directors' stock options are 100% exercisable at date of grant. In fiscal year
2003 13,224 stock options were granted at an exercise price of $21.44. Directors
may also elect to receive all or a portion of their cash compensation in stock.
There were no shares issued under this plan for fiscal year 2003. Shares issues
for years 2002 and 2001 were 1,729 and 7,680 shares, respectively.
Capital Stock and Changes in Capital Accounts
Each share of the Company's Class B Common stock is convertible into one share
of Class A Common stock. The holders of Class A stock are entitled to elect 30%
of the entire Board of Directors and the holders of Class B stock are entitled
to elect the remainder. On all other matters, each share of Class A stock is
entitled to one-tenth of one vote and each share of Class B stock is entitled to
one vote.
Under the Company's current stock repurchase program, up to four million shares
of its Class A common stock may be purchased from time to time in the open
market and through privately negotiated transactions. In December 2002, as the
existing stock repurchase program reached its limit of four million shares, the
Board of Directors approved an expanded program increasing the number of shares
that may be acquired by an additional 4 million shares of Class A Common Stock.
During fiscal year 2003 the Company repurchased 535,600 shares at an average
price of $21.77 per share under the program.
Segment Information
The Company is a global publisher of print and electronic products, providing
must-have content and services to customers worldwide. Core businesses include
professional and consumer books and subscription services; scientific, technical
and medical journals, encyclopedias, books, and online products and services;
and educational materials for advanced placement, undergraduate, and graduate
students, teachers and lifelong learners. The Company has publishing, marketing,
and distribution centers in the United States, Canada, Europe, Asia, and
Australia. The Company's reportable segments are based on the management
reporting structure used to evaluate performance. Segment information is as
follows:
Dollars In thousands 2003
- ------------------------- ---------------------------------------------------------------------------------------------------------
Eliminations &
European Other Corporate
U.S.Segments Segment Segments Items Total
------------------------------------------------- --------- --------- ---------- ------------
Scientific,
Professional/ Technical, Higher Total
Trade and Medical Education U.S.
----------- ------------ ---------- -----------
Revenues
External Customers $289,090 $160,017 $124,017 $573,124 $194,326 $86,521 $ - $853,971
Intersegment Sales 32,873 8,191 24,203 65,267 16,156 793 (82,216) -
----------- ------------ ---------- ----------- --------- --------- ---------- -----------
Total Revenues $321,963 $168,208 $148,220 $638,391 $210,482 $87,314 $ (82,216) $853,971
----------- ------------ ---------- ----------- --------- --------- ---------- -----------
Direct Contribution
to Profit $87,354 $77,937 $39,938 $205,229 $69,191 $16,278 - $290,698
----------- ------------ ---------- ----------- --------- --------- ---------- -----------
Shared Services and ($167,972)
Admin. Costs (a)
Unusual Item (b) (2,465)
-----------
Operating Income 120,261
Interest Expense-- Net (7,702)
-----------
Income Before Taxes $112,559
Assets $397,960 $59,995 $125,955 $583,910 $228,013 $36,565 $107,484 $955,972
Expenditures for Other
Long-Lived Assets $35,218 $9,258 $13,812 $58,288 $26,150 $3,602 $37,516 $125,556
Depreciation and
Amortization $16,849 $4,130 $12,650 $33,629 $10,054 $2,403 $16,877 $62,963
- -----------------------------------------------------------------------------------------------------------------------------------
Dollars In thousands 2002
- ------------------------- ---------------------------------------------------------------------------------------------------------
Eliminations &
European Other Corporate
U.S.Segments Segment Segments Items Total
------------------------------------------------- --------- --------- ---------- ------------
Scientific,
Professional/ Technical, Higher Total
Trade and Medical Education U.S.
----------- ------------ ---------- -----------
Revenues
External Customers $238,060 $157,503 $119,833 $515,396 $151,442 $67,558 $ - $734,396
Intersegment Sales 15,012 7,427 21,463 43,902 12,662 760 (57,324) -
----------- ---------- ---------- ---------- ---------- --------- ---------- ------------
Total Revenues $253,072 $164,930 $141,296 $559,298 $164,104 $68,318 $(57,324) $734,396
----------- ---------- ---------- ---------- ---------- --------- ---------- ------------
Direct Contribution
to Profit $63,210 $71,085 $44,272 $178,567 $56,664 $15,199 - $250,430
----------- ---------- ---------- ---------- ----------- --------- ---------
Shared Services and
Admin. Costs (a)
($150,355)
Unusual Item (b) (12,312)
------------
Operating Income 87,763
Interest Expense-- Net (6,645)
------------
Income Before Taxes $81,118
------------
Assets $397,054 $55,787 $103,496 $556,337 $198,432 $30,334 $111,042 $896,145
Goodwill Acquired $90,656 - - $90,656 $11,646 $1,596 - $103,898
Expenditures for
Long-Lived Assets $122,090 $7,581 $25,458 $155,129 $34,196 $3,112 $17,740 $210,177
Depreciation and
Amortization $19,096 $5,955 $11,330 $36,381 $11,922 $2,051 $8,968 $59,322
- ------------------------------------------------------------------------------------------------------------------------------------
2001
Dollars In thousands
- ------------------------- ---------------------------------------------------------------------------------------------------------
Eliminations &
European Other Corporate
U.S.Segments Segment Segments Items Total
------------------------------------------------- --------- --------- ---------- ------------
Scientific,
Professional/ Technical, Higher Total
Trade and Medical Education U.S.
----------- ------------ ---------- -----------
Revenues
External Customers $146,480 $148,452 $112,863 $407,795 $142,798 $63,197 $ - $613,790
Intersegment Sales 15,623 7,667 20,218 43,508 12,488 1,133 (57,129) -
------------ ----------- ---------- --------- ----------- ---------- ---------- -----------
Total Revenues $162,103 $156,119 $133,081 $451,303 $155,286 $64,330 $ (57,129) $613,790
------------ ----------- ---------- --------- ----------- ---------- ----------- ----------
Direct Contribution
to Profit $36,265 $74,380 $41,872 $152,517 $51,785 $14,730 - $219,032
------------ ----------- ---------- --------- ----------- ---------- -----------
Shared Services and
Admin. Costs (a)
($123,608)
Unusual Items -
----------
Operating Income 95,424
Interest Expense-- Net ($5,197)
----------
Income Before Taxes $90,227
----------
Assets $172,364 $56,801 $84,462 $313,627 $157,436 $19,521 $97,418 $588,002
Goodwill Acquired - $2,417 - $2,417 - - - $2,417
Expenditures for Other
Long-Lived Assets $17,841 $11,013 $8,108 $36,962 $13,005 $2,751 $19,736 $72,454
Depreciation and
Amortization $15,256 $7,305 $10,216 $32,777 $11,868 $1,976 $7,260 $53,881
(a) The following chart is a detail of Shared Services and
Administrative Costs:
2003 2002 2001
----------------- ---------------- -------------------
Distribution $45,680 $37,627 $30,048
Information Technology 42,427 39,750 33,087
Finance 27,919 23,691 20,987
Other Administration 51,946 49,287 39,486
----------------- ---------------- -------------------
$167,972 $150,355 $123,608
================= ================ ===================
(b) Relocation related expenses
During fiscal year 2003, the Company centralized several Web development
activities, which were previously in the publishing operations. This
organizational change enables the Company to leverage these capabilities more
efficiently across all of its global businesses. The expenses for these
activities are now included in shared services and administrative costs, whereas
previously they were included in business segment results. Accordingly, these
expenses have been reclassified for the prior year periods in the above
statements to provide a more meaningful comparison.
Fiscal 2002 direct contribution to profit for the U.S., scientific, technical
and medical segment includes a charge to earnings of $5 million representing a
write off of two investments in an environmental remediation portal and database
and an entrepreneurial informatics Company. Intersegment sales are generally
made at a fixed discount from list price. Shared services costs are not
allocated as they support the Company's worldwide operations. Corporate assets
primarily consist of cash and cash equivalents, deferred tax benefits, and
certain property and equipment. Export sales from the United States to
unaffiliated international customers amounted to approximately $75.6, $74.3, and
$66.0 million in 2003, 2002, and 2001, respectively. The pretax income for
consolidated international operations was approximately $37.0, $28.4, and $30.0
million in 2003, 2002, and 2001, respectively.
Worldwide revenues for the Company's core businesses were as follows:
Dollars in thousands Revenues
- --------------------------------------------------- ---------------------------------------------------------------
2003 2002 2001
------------------ ------------------- ------------------
Professional/Trade $369,115 $292,054 $196,787
Scientific, Technical, and Medical 308,554 276,510 259,094
Higher Education 176,302 165,832 157,909
------------------ ------------------- ------------------
Total $853,971 $734,396 $613,790
------------------ ------------------- ------------------
Revenues from external customers based on the location of the customer, and
long-lived assets by geographic area were as follows:
Dollars in thousands Revenues Long-Lived Assets
-------------------- ------------------------------------------- ------------------------------------------
2003 2002 2001 2003 2002 2001
------------- ----------- ----------- ----------- ------------ ------------
U.S. $524,394 $473,145 $364,559 $468,763 $446,103 $260,034
International
United Kingdom 56,285 35,427 33,403 55,941 39,218 19,783
Germany 56,826 34,818 32,411 135,553 126,786 110,751
Canada 33,063 26,798 20,620 1,651 639 432
Australia 27,849 23,182 22,531 5,690 4,262 2,364
Japan 25,339 28,732 27,192 30 44 16
Other Countries 130,215 112,294 113,074 1,700 2,483 1,707
------------- ----------- ----------- ----------- ------------ ------------
Total International 329,577 261,251 249,231 200,565 173,432 135,053
------------- ----------- ----------- ----------- ------------ ------------
Total $853,971 $734,396 $613,790 $669,328 $619,535 $395,087
============= =========== =========== =========== ============ ============
Schedule II
JOHN WILEY & SONS, INC., AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED APRIL 30, 2003, 2002, AND 2001
(Dollars in thousands)
Additions/(Deductions)
------------------------------
Balance at Charged to Deductions Balance at
Description Beginning Cost & From (3) From Reserves End of
of Period Expenses Acquisitions Period
- --------------------------------------------- ------------- -------------- --------------- ---------------- -------------
Year Ended April 30, 2003
Allowance for sales returns(1) $ 67,816 $ 65,130 $ - $ 67,816 $ 65,130
Allowance for doubtful accounts $ 17,008 $ 1,590 $ (7,326) $ 1,726(2) $ 9,546
Year Ended April 30, 2002
Allowance for sales returns(1) $ 43,118 $ 67,816 $ 30,226 $ 73,344 $ 67,816
Allowance for doubtful accounts $ 9,684 $ 2,219 $ 7,026 $ 1,921(2) $ 17,008
Year Ended April 30, 2001
Allowance for sales returns(1) $ 43,960 $ 43,118 $ - $ 43,960 $ 43,118
Allowance for doubtful accounts $ 9,414 $ 2,268 $ - $ 1,998(2) $ 9,684
- ---------------------------------------
(1) Allowance for sales returns represents anticipated returns net of
inventory and royalty costs.
(2) Accounts written off, less recoveries.
(3) Purchase accounting adjustment associated with the acquisition of
Hungry Minds
Item 9. Changes in and Disagreements With
---------------------------------
Accountants on Accounting and Financial Disclosure
--------------------------------------------------
None
PART III
Item 10. Directors and Executive Officers
--------------------------------
The information regarding the Board of Directors on pages 3 to 11 of
the 2003 Proxy Statement is incorporated herein by reference.
Executive Officers
------------------
Set forth below as of April 30, 2003 are the names and ages of all
executive officers of the Company, the period during which they have
been officers, and the offices presently held by each of them.
Name and Age Officer Since Present Office
Peter Booth Wiley 2002 Chairman of the Board since September 2002
60 and a Director
William J. Pesce 1989 President and Chief Executive Officer
52 and a Director since May 1, 1998 (previously
Chief Operating Officer; Executive Vice
President, Educational and International
Group)
Ellis E. Cousens 2001 Executive Vice President and Chief Financial
51 and Operations Officer since March 2001
(previously Senior Vice President, Chief Financial Officer
of Bookspan, a Bertelsmann AG joint venture, from March
2000; Vice President, Finance and Strategic Planning, of
Bertelsmann AG from March 1999; Vice President, Chief
Financial Officer of BOL.com, a subsidiary of Bertelsmann
AG, from August 1998; Vice President, Financial Planning and
Analysis, of Reader's Digest Association, Inc., from May
1997)
Stephen A. Kippur 1986 Executive Vice President; and President,
56 Professional and Trade Publishing, since July
1998 (previously Executive Vice President and Group President,
Professional, Reference and Trade)
William Arlington 1990 Senior Vice President, Human Resources, since
54 une 1996
Timothy B. King 1996 Senior Vice President, Planning and
63 Development, since June 1996
Richard S. Rudick 1978 Senior Vice President, General Counsel, since
63 June 1989
Deborah E. Wiley 1982 Senior Vice President, Corporate
57 Communications, since June 1996
Edward J. Melando 2002 Vice President, Corporate Controller, since April 2002
47 (previously Vice President, Corporate Controller of
Journal Register Company from August 2000; Corporate
Controller of Asarco Incorporated, from April 1999;
Commercial Director of Asarco Incorporated, from June 1997)
The Board of Directors elected Peter Booth Wiley, age 60 and current
Board member, as Chairman of the Board effective September 19, 2002,
succeeding Bradford Wiley II. Each of the other officers listed above
will serve until the next organizational meeting of the Board of
Directors of the Company and until each of the respective successors
is duly elected and qualified. Deborah E. Wiley is the sister of
Bradford Wiley II and Peter Booth Wiley. There is no other family
relationship among any of the aforementioned individuals.
Item 11. Executive Compensation
----------------------
The information on pages 11 to 18 of the 2003 Proxy Statement is
incorporated herein by reference.
Item 12. Security Ownership of Certain
-----------------------------
Beneficial Owners and Management
--------------------------------
The information on pages 2, 3, 10 and11 of the 2003 Proxy Statement is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
-----------------------------------------------
None.
Item 14. Controls and Procedures
-----------------------
As of April 30, 2003, an evaluation was performed under the
supervision and with the participation of the Company's management,
including the CEO and CFO, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures. Based
on that evaluation, the Company's management, including the CEO and
CFO, concluded that the Company's disclosure controls and procedures
were effective as of April 30, 2003. There have been no significant
changes in the Company's internal controls or in other factors that
could significantly affect internal controls subsequent to April 30,
2003.
PART IV
Item 15. Exhibits, Financial Statement
-----------------------------
Schedules and Reports on Form 8-K
---------------------------------
(a) Financial Statements and Schedules
(1) List of Financial Statements filed. The financial statements
listed in the attached index are filed as part of this
Report.
(2) List of Financial Statement Schedules filed. The financial
statement schedules listed in the attached index are filed
as part of this Report.
(b) Reports on Form 8-K
Earnings Release on Fiscal 2003 Results issued on Form 8-K dated
June 17, 2003.
(c) Exhibits
2.1 Agreement and Plan of Merger dated as of August 12, 2001, among
the Company, HMI Acquisition Corp. and Hungry Minds, Inc.
(incorporated by reference to the Company's Report on Form 8-K
dated as of August 12, 2001).
3.1 Restated Certificate of Incorporation (incorporated by reference
to the Company's Report on Form 10-K for the year ended April 30,
1992).
3.2 Certificate of Amendment of the Certificate of Incorporation
dated October 13, 1995 (incorporated by reference to the
Company's Report on Form 10-K for the year ended April 30, 1997).
3.3 Certificate of Amendment of the Certificate of Incorporation
dated as of September 1998 (incorporated by reference to the
Company's Report on Form 10-Q for the quarterly period ended
October 31, 1998).
3.4 Certificate of Amendment of the Certificate of Incorporation
dated as of September 1999 (incorporated by reference to the
Company's Report on Form 10-Q for the quarterly period ended
October 31, 1999).
3.5 By-Laws as Amended and Restated dated as of September 1998
(incorporated by reference to the Company's Report on Form 10-Q
for the quarterly period ended October 31, 1998).
10.1 $300,000,000 Credit Agreement dated as of September 21, 2001,
among the Company and the Lenders From Time to Time Parties
Hereto, UBS AG Stamford Branch, as Administrative Agent and UBS
Warburg LLC, as Arranger (incorporated by reference to the
Company's Report on Schedule TO/A Amendment No. 5 dated September
21, 2001).
10.2 Credit agreement dated as of November 15, 1996 among the Company,
the Banks from time to time parties hereto, and Morgan Guaranty
Trust Company of New York, as Agent (incorporated by reference to
the Company's report on Form 10-Q for the quarterly period ended
October 31, 1996).
10.3 Agreement of Lease dated as of August 4, 2000, between Block A
South Waterfront Development L.L.C., as Landlord, and the
Company, as Tenant (incorporated by reference to the Company's
Report on Form 10-Q for the quarterly period ended July 31,
2000).
10.4 Agreement of Lease dated as of May 16, 1985 between Fisher 40th &
3rd Company and Hawaiian Realty, Inc., Landlord, and the Company,
Tenant (incorporated by reference to the Company's Report on Form
10-K for the year ended April 30, 1985).
10.5 Long Term Incentive Plan (incorporated by reference to the
Company's Definitive Proxy Statement dated August 6, 1999).
10.6 Executive Annual Incentive Plan (incorporated by reference to the
Company's Definitive Proxy Statement dated August 6, 1999).
10.7 1991 Key Employee Stock Plan (incorporated by reference to the
Company's Definitive Proxy Statement dated August 8, 1991).
10.8 Amendment to 1991 Key Employee Stock plan dated as of September
19, 1996, (Incorporated by reference to the Company's Definitive
Proxy Statement dated August 9, 1996).
10.9 Senior executive employment Agreement to Arbitrate dated as of
April 29, 2003.
10.10 Senior executive Non-competition and Non-disclosure Agreement
dated as of April 29, 2003
10.11 1990 Director Stock Plan as Amended and Restated as of June 22,
2001 (incorporated By reference to the Company's Definitive Proxy
Statement dated August 8, 2001)
10.12 1989 Supplemental Executive Retirement Plan (incorporated by
reference to the Company's Report on Form 10-K for the year ended
April 30, 1989).
10.13 Form of the Fiscal Year 2002 Qualified Executive Long Term
Incentive Plan (Incorporated by reference to the Company's Report
on Form 10-K for the year ended April 30, 2002).
10.14 Form of the Fiscal Year 2002 Qualified Executive Annual
Incentive Plan (incorporated by reference to the Company's Report
on Form 10-K for the year ended April 30, 2002).
10.15 Form of the Fiscal Year 2002 Executive Annual Strategic
Milestones Incentive Plan (incorporated by reference to the
Company's Report on Form 10-K for the year ended April 30, 2002).
10.16 Form of the Fiscal Year 2001 Qualified Executive Long Term
Incentive Plan (incorporated by reference to the Company's Report
on Form 10-K for the year ended April 30, 2001).
10.17 Form of the Fiscal Year 2001 Qualified Executive Annual
Incentive Plan (incorporated by reference to the Company's Report
on Form 10-K for the year ended April 30, 2001).
10.18 Form of the Fiscal Year 2001 Executive Annual Strategic
Milestones Incentive Plan (incorporated by reference to the
Company's Report on Form 10-K for the year ended April 30, 2001).
10.19 Form of the Fiscal Year 2003 Qualified Executive Long Term
Incentive Plan. (filed as a exhibit to the 10K report)
10.20 Form of the Fiscal Year 2003 Qualified Executive Annual
Incentive Plan. (filed as a exhibit to the 10K report)
10.21 Form of the fiscal year 2003 Executive Annual Strategic
Milestones Incentive Plan. (filed as a exhibit to the 10K report)
10.22 Senior executive Employment Agreement dated as of March 1, 2003,
between William J. Pesce and the Company (filed as an exhibit to
this form 10K report)
10.23 Senior executive Employment Agreement dated as of March 1, 2003,
between Stephen A. Kippur and the Company (filed as an exhibit to
this form 10K report)
10.24 Senior executive Employment Agreement dated as of March 1, 2003,
between Ellis E. Cousens and the Company (filed as an exhibit to
this form 10K report)
10.25 Senior executive Employment Agreement letter dated as of March
1, 2003, between Richard S. Rudick and the Company (filed as an
exhibit to this form 10K report)
10.26 Senior executive Employment Agreement letter dated as of March
1, 2003, between Timothy B. King and the Company (filed as an
exhibit to this form 10K report)
22 List of Subsidiaries of the Company.
23 Consent of Independent Public Accountants (included in this
report as listed in the attached index).
99 Certificates Pursuant to 18 S.C. Section 1350, as adopted
pursuant to Sarbanes-Oxley Act of 2002.
Item 16. Principal Accountant Fees and Services
--------------------------------------
The information regarding principal accountant fees and services on
pages 18 and 19 of the 2003 Proxy Statement is incorporated herein by
reference.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
JOHN WILEY & SONS, INC.
---------------------------------------------------------------------
(Company)
By: /s/ William J. Pesce
-----------------------------------------------------
William J. Pesce
President and Chief Executive Officer
By: /s/ Ellis E. Cousens
-----------------------------------------------------
Ellis E. Cousens
Executive Vice President and
Chief Financial and Operations Officer
By: /s/ Edward J. Melando
-----------------------------------------------------
Edward J. Melando
Vice President, Controller and
Chief Accounting Officer
Dated: June 17, 2003
CERTIFICATIONS
I, William J. Pesce, certify that:
I have reviewed this annual report on Form 10-K of John Wiley & Sons, Inc.;
- Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report; and
- Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
- The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation
Date"); and
c. presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
- The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which would adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
- The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weakness.
By /s/ William J. Pesce
-------------------------------------
William J. Pesce
President and Chief Executive Officer
Dated: June 17, 2003
CERTIFICATIONS
I, Ellis E. Cousens, certify that:
- Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report; and
- Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
- The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation
Date"); and
c. presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
- The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which would adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
- The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weakness.
By /s/ Ellis E. Cousens
------------------------------------
Ellis E. Cousens
Executive Vice President and
Chief Financial & Operations Officer
Dated: June 17, 2003
Exhibit 22
SUBSIDIARIES OF JOHN WILEY & SONS, INC.(1)
------------------------------------------
Jurisdiction
in Which
Incorporated
------------
John Wiley & Sons International Rights, Inc. Delaware
JWS HQ, LLC New Jersey
JWS DCM, LLC New Jersey
Wiley-Liss, Inc. Delaware
Wiley Publishing Services, Inc. Delaware
Wiley Periodicals, Inc. Delaware
Wiley Subscription Services, Inc. Delaware
John Wiley & Sons (Asia) Pte Ltd. Singapore
John Wiley & Sons Australia, Ltd Australia
John Wiley & Sons Canada Limited Canada
John Wiley & Sons (HK) Limited Hong Kong
Wiley Europe Limited England
Wiley Heyden Ltd England
Wiley Europe (S.A.R.L.) France
Wiley Distribution Services Limited England
John Wiley & Sons Ltd. England
InPharm-Internet Services Limited England
Wiley HMI Holdings, Inc. Delaware
Wiley Europe Investment Holdings Ltd England
A&M Publishing Ltd England
HMI Investment, Inc. Delaware
Wiley Publishing, Inc. Delaware
Wiley Dreamtech India Private Limited (65%) India
John Wiley & Sons GmbH Germany
Wiley InterScience GmbH Germany
Verlag Chemie GmbH Germany
Wiley-VCH Verlag GmbH & Co. KGaA Germany
Wiley-GIT Publishers GmbH Germany
GIT Verlag GmbH & Co. KG Germany
Wiley Fachverlag GmbH Germany
Wilhelm Ernst & Sohn Verlag fuer Architectur
und technische Wissenschaften GmbH & Co. KG Germany
Verlag Helvetica Chimica Acta AG Switzerland
Wiley-VCH Verlag Schweiz AG Switzerland
Physik Verlag GmbH (52%) Germany
WWL, Inc. Delaware
Wiley-Japan Y.K. Japan
- --------------------------------------------------------
(1) The names of other subsidiaries that would not constitute a significant
subsidiary in the aggregate have been omitted. All subsidiaries are wholly
owned unless indicated parenthetically.
Exhibit 99.1
CERTIFICATION PURSUANT TO
U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of John Wiley & Sons, Inc. (the "Company"),
on Form 10-K for the period ending April 30, 2003, as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, William J. Pesce,
President and Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that based on my knowledge:
The Report fully complies with the requirements of section 13(a) or 15 (d) of
the Securities Exchange Act of 1934 (as amended), as applicable; and
The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ William J. Pesce
- -----------------------
William J. Pesce
President and
Chief Executive Officer
Dated: June 17, 2003
Exhibit 99.2
CERTIFICATION PURSUANT TO
18 .S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of John Wiley & Sons, Inc. (the "Company"),
on Form 10-K for the period ending April 30, 2003, as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Ellis E. Cousens,
Executive Vice President and Chief Financial & Operations Officer of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:
The Report fully complies with the requirements of section 13(a) or 15 (d) of
the Securities Exchange Act of 1934 (as amended), as applicable; and
The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ Ellis E. Cousens
- ----------------------------
Ellis E. Cousens
Executive Vice President and
Chief Financial & Operations Officer
Dated: June 17, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons constituting directors of the
Company on June 21, 2003.
/s/ Warren J. Baker /s/ William J. Pesce
------------------------------------- ------------------------------------
Warren J. Baker William J. Pesce
/s/ H. Allen Fernald /s/ William R. Sutherland
------------------------------------- ------------------------------------
H. Allen Fernald William R. Sutherland
/s/ Larry Franklin /s/ Bradford Wiley II
------------------------------------- ------------------------------------
Larry Franklin Bradford Wiley II
/s/ Henry A. McKinnell /s/ Peter Booth Wiley
------------------------------------- ------------------------------------
Henry A. McKinnell Peter Booth Wiley
/s/ John L. Marion, Jr.
-------------------------------------
John L. Marion, Jr.
Exhibit 10.9
PARTIES TO THE AGREEMENT TO ARBITRATE
Each of the following persons are parties to their own separate agreement with
John Wiley & Sons, Inc. in the form attached:
E. Cousens
T. King
S. Kippur
W. Pesce
R. Rudick
AGREEMENT TO ARBITRATE
AGREEMENT TO ARBITRATE (this "Agreement") made as of the 29th day of April,
2003, by and between John Wiley & Sons, Inc., a New York corporation, with
offices at 111 River Street, Hoboken, New Jersey 07030 (hereinafter referred to
as the "Company"), and (see above list) (hereinafter referred to as
"Executive").
The Company and the undersigned agree as follows:
1. Binding Arbitration
a. Executive and the Company hereby agree that any controversy or
claim arising out of or relating to the Employment Agreement
between Executive and the Company executed on the same date as
this Agreement, as it may be amended or extended from time to
time by the parties (the "Employment Agreement"), the employment
relationship between Executive and the Company, or the
termination thereof, including the arbitrability of any
controversy or claim, which cannot be settled by mutual agreement
will be finally settled by binding arbitration in accordance with
the Federal Arbitration Act (or if not applicable, the applicable
state arbitration law) as follows: Any party who is aggrieved
will deliver a notice to the other party setting forth the
specific points in dispute. Any points remaining in dispute
twenty (20) days after the giving of such notice may, upon ten
(10) days' notice to the other party, be submitted to arbitration
in New York, New York, to the American Arbitration Association,
before a single arbitrator appointed in accordance with the
Commercial Dispute Resolution Procedures and Rules of the
American Arbitration Association, as such procedures and rules
may be amended from time to time and modified only as herein
expressly provided. The arbitrator may enter a default decision
against any party who fails to participate in the arbitration
proceedings. Notwithstanding the foregoing, any controversy or
claim arising out of or relating to the Non-Competition and
Non-Disclosure Agreement between Executive and the Company,
executed on the same date as this Agreement, as it may be amended
from time to time (the "Non-Competition Agreement") shall not be
subject to this Agreement and shall be resolved only in
accordance with provisions of the Non-Competition Agreement.
b. The decision of the arbitrator on the points in dispute will be
final, unappealable and binding, and judgment on the award may be
entered in any court having jurisdiction thereof. The parties
agree that this Agreement has been entered by the parties to
rapidly and inexpensively resolve any disputes between them and
that this Agreement will be grounds for dismissal of any court
action commenced by either party with respect to this Agreement,
other than post-arbitration actions seeking to enforce an
arbitration award. In the event that any court determines that
this arbitration procedure is not binding, or otherwise allows
any litigation regarding a dispute, claim, or controversy covered
by this Agreement to proceed, the parties hereto hereby waive any
and all right to a trial by jury in or with respect to such
litigation.
c. Except as otherwise provided in this Agreement or by law, the
arbitrator will be authorized to apportion its fees and expenses
and the reasonable attorneys' fees and expenses of any such party
as the arbitrator deems appropriate. In the absence of any such
apportionment, the fees and expenses of the arbitrator will be
borne equally by each party, and each party will bear the fees
and expenses of its own attorney.
d. The parties will keep confidential, and will not disclose to any
person, except as may be required by law, the existence of any
controversy hereunder, the referral of any such controversy to
arbitration or the status or resolution thereof. In addition, the
confidentiality restrictions set forth in paragraph A(4) of the
Non-Competition Agreement shall continue in full force and
effect.
e. Executive acknowledges that prior to the signing of this
agreement Executive has had a sufficient opportunity to read and
has read the Commercial Dispute Resolution Procedures and Rules
of the American Arbitration Association, which are available on
the web site of the American Arbitration Association at
http://www.adr.org.
2. Waiver
Executive acknowledges that this agreement to submit to arbitration
includes all controversies or claims of any kind (e.g., whether in contract
or in tort, statutory or common law, legal or equitable) now existing or
hereafter arising under any federal, state, local or foreign law (except
for any claims or controversy arising out of the Non-Competition
Agreement), including, but not limited to, the Age Discrimination in
Employment Act, Title VII of the Civil Rights Act of 1964, the Civil Rights
Act of 1866, the Employee Retirement Income Security Act, the Family and
Medical Leave Act, the Americans With Disabilities Act, the New York State
Human Rights Law, the New York City Human Rights Law, and all similar
federal, state and local laws, and Executive hereby waives all rights
thereunder to have a judicial tribunal and/or a jury determine such claims.
3. Acknowledgement
Executive acknowledges that before entering into this Arbitration
Agreement, Executive has had the opportunity to consult with any attorney
or other advisor of Executive's choice, and that this Agreement constitutes
advice from the Company to do so if Executive chooses. Executive further
acknowledges that Executive has entered into this Agreement of Executive's
own free will, and that no promises or representations have been made to
Executive by any person to induce Executive to enter into this Arbitration
Agreement other than the express terms set forth herein. Executive further
acknowledges that Executive has read this Agreement and understands all of
its terms, including the waiver of rights set forth in paragraph 2 of this
Agreement immediately above. Executive may take up to twenty-one (21) days
from today to consider, sign and return this Agreement. In addition,
Executive may revoke this Arbitration Agreement after signing it, but only
by delivering a
signed revocation notice to the Employer within seven (7) days of signing
this Agreement. Such a revocation shall constitute a resignation from
Executive's employment, and shall void the Employment Agreement and the
Non-Competition Agreement, except for paragraph A(4) of the Non-Competition
Agreement regarding Executive's duty not to use or disclose confidential
information, which shall remain in full force and effect.
4. Miscellaneous
a. This Agreement together with the Employment Agreement and the
Non-Competition Agreement constitute the sole and entire
agreements and understandings between Executive and the Company
with respect to the matters covered thereby, and there are no
other promises, agreements, representations, warranties or other
statements between Executive and the Company in respect to such
matters not expressly set forth in these Agreements. These
Agreements supersede all prior and contemporaneous agreements,
understandings or other arrangements concerning the subject
matter thereof. These Agreements may not be changed or terminated
orally but only by an agreement in writing signed by the parties
hereto.
b. No course of dealing or any delay on the part of the Corporation
or Employee in exercising any rights hereunder shall operate as a
waiver of any such rights. No waiver of any default or breach of
this Agreement shall be deemed a continuing waiver of any other
breach or default.
c. This Agreement shall be governed by, and construed in accordance
with federal law including the Federal Arbitration Act, and to
the extent that federal law is not applicable the laws of the
State of New York without regard to the choice of law rules of
any state or where Executive is in fact required to work.
d. If any provision or clause of this Agreement, or portion thereof,
shall be held by any court of competent jurisdiction or any
arbitrator to be illegal, void or unenforceable, the remainder of
such provisions shall not thereby be affected and shall be given
full effect, without regard to the invalid portion.
e. The obligations of Executive may not be delegated and, Executive
may not assign or otherwise transfer this Agreement or any
obligations hereunder. This Agreement and all of the Company's
rights and obligations under this Agreement may be assigned or
transferred by the Company to and may be assumed by and inure to
the benefit of any successor or other transferee of all or a
substantial part of the assets of the Company's business in which
Executive works.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered, effective as of the date first indicated above by a
duly authorized officer of the Company.
JOHN WILEY & SONS, INC.
Signed by all parties of agreement.
Exhibit 10.10
PARTIES TO THE AGREEMENT TO NON-COMPETITION AND NON-DISCLOSURE AGREEMENT
Each of the following persons are parties to their own separate agreement with
John Wiley & Sons, Inc. in the form attached:
E. Cousens
T. King
S. Kippur
W. Pesce
R.Rudick
NON-COMPETITION AND NON-DISCLOSURE AGREEMENT
NON-COMPETITION AND NON-DISCLOSURE AGREEMENT (this "Agreement") made
as of the 29th day of April, 2003, by and between John Wiley & Sons, Inc.,
a New York corporation, with offices at 111 River Street, Hoboken, New
Jersey 07030 (hereinafter referred to as the "Company"), and (see above
list) (hereinafter referred to as "Executive").
In consideration of the Company's employment or continued employment
of Executive, certain severance pay benefits provided to Executive as set
forth in the Employment Agreement between Executive and the Company
executed on the same date as this Agreement as it may be amended or
extended from time to time by the parties (the "Employment Agreement"), the
Company's providing Executive with access to its property, equipment and
valuable Confidential Information (as defined below), and other good and
valuable consideration, the parties hereby agree as follows:
A. Executive's Covenants
1. Non-Competition: During the period of Executive's employment at
the Company and for twelve (12) months following Executive's
resignation, for any reason (other than for a resignation for
"Good Reason" following a "Change of Control" as those terms are
defined in the Company's 1989 Supplemental Executive Retirement
Plan, as amended or restated from time to time (the "SERP")),
from employment by the Company, Executive agrees not to compete
in any manner, either directly or indirectly, whether for
compensation or otherwise, with the Company, its parents,
subsidiaries or affiliates, and their respective predecessors and
successors (collectively, the "Wiley Companies"), or to assist
any other person or entity to compete with the Company either:
(a) by producing, developing or marketing, or
assisting others to produce, develop or
market, or
(b) by accepting employment from or having any
other relationship (including, without
limitation, through owning, managing,
operating, controlling or consulting) with
any entity which produces, develops or
markets,
a product, process, or service which is competitive with those
products, processes, or services of the Wiley Companies, whether
existing or planned for the future, on which Executive has
worked, or concerning which Executive has in any manner acquired
knowledge of or had access to Confidential Information (as
defined below), during the five (5) years preceding termination
of Executive's employment, provided, however, that it shall not
be a violation of this Agreement for Executive to have beneficial
ownership of less than 1% of the outstanding amount of any class
of securities listed on a national securities exchange or quoted
on an inter-dealer quotation system.
2. Non-Solicitation: During the period of Executive's employment at
the Company and for twelve (12) months following the termination,
for any reason, of Executive's employment, Executive agrees that
Executive will not, either on Executive's own behalf or on behalf
of any other person or entity, directly or indirectly, (a)
solicit any person or entity that is a customer of the Wiley
Companies, or has been a customer of the Wiley Companies during
the prior twelve (12) months, to purchase any products or
services the Wiley Companies provides to the customer, or (b)
interfere with any of the Wiley Companies' business
relationships.
3. No-Hire: During the period of Executive's employment at the
Company and for twelve (12) months following the termination, for
any reason, of Executive's employment, Executive agrees that
Executive will not, either on Executive's own behalf or on behalf
of any other person or entity, directly or indirectly, hire,
solicit or encourage to leave the employ of the Wiley Companies
any person who is then an employee of any of the Wiley Companies
or who was an employee of the Wiley Companies within six (6)
months of the date of such hiring, soliciting, or encouragement
to leave the Wiley Companies.
4. Non-Disclosure: During the period of Executive's employment at
the Company and for all time following the termination, for any
reason, of Executive's employment, Executive shall hold all
Confidential Information (as hereinafter defined) of the Wiley
Companies in a fiduciary capacity and agrees not to take any
action which would constitute or facilitate the Unauthorized (as
hereinafter defined) use or disclosure of Confidential
Information. Executive further agrees to take all reasonable
measures to prevent the Unauthorized use and disclosure of
Confidential Information and to prevent Unauthorized persons or
entities from obtaining or using Confidential Information.
Promptly upon termination, for any reason, of Executive's
employment with the Company, Executive agrees to deliver to the
Company all property and materials within Executive's possession
or control which belong to any of the Wiley Companies or which
contain Confidential Information.
5. Geographic Scope: The non-competition covenants contained in
paragraph A(1) hereof shall apply in the "Restricted Area" which
means (a) the geographic region(s) over which Executive had
responsibility in the performance of Executive's responsibilities
to each of the Wiley Companies during the twelve (12) month
period prior to termination of Executive's employment and the
fifty (50) mile radius around any office of the Company out of
which Executive worked, provided services to or provided
supervision over, and (b) any location, storefront, address or
place of business where a Covered Customer (as defined below) is
present and available for solicitation. Executive will not
circumvent the purpose of any restriction by engaging in business
outside the geographic region covered by the above definition
through remote means like telephone, correspondence or
computerized communication. "Covered Customer" means those
customers, entities and/or persons who did business with the
Company and that Executive either (x) received Confidential
Information about in the course of Executive's duties, (y) had
contact with within the last twenty-four (24) month period of
employment by the Company, or (z) supervised contact with within
the last twenty-four (24) month period of employment with the
Company.
B. Definitions
1. As used in this Agreement, the term "Confidential Information"
shall mean trade secrets, confidential or proprietary
information, and all other information, documents or materials,
owned, developed or possessed by any of the Wiley Companies,
whether in tangible or intangible form. Confidential Information
includes, but is not limited to, (a) financial information, (b)
products, (c) product and service costs, prices, profits and
sales, (d) new business ideas, (e) business strategies, (f)
product and service plans, (g) marketing plans and studies, (h)
forecasts, (i) budgets, (j) projections, (k) computer programs,
(l) data bases and the documentation (and information contained
therein), (m) computer access codes and similar information, (n)
software ideas, (o) know-how, technologies, concepts and designs,
(p) research projects and all information connected with research
and development efforts, (q) records, (r) business relationships,
methods and recommendations, (s) existing or prospective client,
customer, vendor and supplier information (including, but not
limited to, identities, needs, transaction histories, volumes,
characteristics, agreements, prices, identities of individual
contacts, and spending, preferences or habits), (t) training
manuals and similar materials used by the Company in conducting
its business operations, (u) skills, responsibilities,
compensation and personnel files of Company employees, directors
and independent contractors, (v) competitive analyses, (w)
contracts with other parties, and (x) other confidential or
proprietary information that has not been made available to the
general public by the senior management of each of the Wiley
Companies. Confidential Information as defined in this Agreement
shall not include information that (i) is or becomes generally
available to the public through no act or omission on the part of
Executive, (ii) is hereafter received on a non-confidential basis
by Executive from a third party who has the lawful right to
disclose such information, or (iii) Executive is required to
disclose pursuant to court order or law.
2. As used in this Agreement, the term "Unauthorized" shall mean:
(a) in contravention of the policies or procedures of any of the
Wiley Companies; (b) otherwise inconsistent with any measures
taken by any of the Wiley Companies to protect their interests in
the Confidential Information; (c) in contravention of any lawful
instruction or directive, either written or oral, of a director,
officer or employee of any of the Wiley Companies empowered to
issue such instruction or directive; (d) in contravention of any
duty existing under law or contract; or (e) to the detriment of
any of the Wiley Companies.
C. Representations, Warranties and Acknowledgements
1. Executive acknowledges that (a) the Wiley Companies consider
Confidential Information to be commercially and competitively
valuable to the Wiley Companies and critical to their success;
(b) Unauthorized use or disclosure of Confidential Information
would cause irreparable harm to one or more of the Wiley
Companies; and (c) by this Agreement, the Company is taking
reasonable steps to protect its legitimate interests in the Wiley
Companies' Confidential Information.
2. Executive acknowledges that Executive's services are of a
special, unique and extraordinary character and, Executive's
position with the Company places Executive in a position of
confidence and trust with the customers, suppliers, vendors,
employees and agents of the Wiley Companies.
3. Executive also acknowledges that businesses that are competitive
with the Wiley Companies include, but are not limited to, any
business which are publishers of print and electronic products,
including those specializing in: scientific, technical and
medical journals and books; professional and consumer books and
subscription services; and textbooks and other educational
materials for undergraduate and graduate students as well as
lifelong learners. Executive further acknowledges that given the
nature of the business of the Wiley Companies, certain accounts
of the Wiley Companies are national and international in scope
and are not dependent on the geographic location of Executive or
the Wiley Companies.
4. Executive represents and warrants to the Company that Executive
is not a party to any agreement, or non-competition or other
covenant or restriction contained in any agreement, commitment,
arrangement or understanding (whether oral or written), that in
any way conflicts with or limits Executive's ability to commence
or continue to render services to any of the Wiley Companies or
that would otherwise limit Executive's ability to perform all
responsibilities in accordance with the terms and subject to the
conditions of Executive's employment.
D. Remedies
1. In the event of breach or threatened breach by Executive of any
provision of paragraph A hereof, the Company shall be entitled to
(a) temporary and preliminary and permanent injunctive relief and
without the posting any bond or other security, (b) damages and
an equitable accounting of all earnings, profits and other
benefits arising from such violation, (c) recovery of all
attorney's fees and costs incurred by the Company in obtaining
such relief, (d) cessation and repayment of any severance
benefits paid to Executive pursuant to any agreement with the
Company, including any employment agreement, severance benefit
agreement, plan or program of the Company, and (e) any other
legal and equitable relief to which it may be entitled, including
any and all monetary damages which company may incur as a result
of said breach or threatened breach. The Company may pursue any
remedy available, including declaratory relief, concurrently or
consecutively in any order, and the pursuit of one such remedy at
any time will not be deemed an election of remedies or waiver of
the right to pursue any other remedy.
2. The period of time during which the restrictions set forth in
paragraphs A(1), A(2) and A(3) hereof will be in effect will be
extended by the length of time during which Executive is in
breach of the terms of those provisions as determined by any
court of competent jurisdiction on the Company's application for
injunctive relief.
E. Early Resolution Conference
This Agreement is understood to be clear and enforceable as written
and is executed by both parties on that basis. However, should Executive
later challenge any provision as unclear, unenforceable, or inapplicable to
activity that Executive intends to engage in, Executive will first notify
Company in writing and meet with a Company representative and a neutral
mediator (if the Company elects to retain one at its expense) to discuss
resolution of any disputes between the parties. Executive will provide this
notification at least fourteen (14) days before Executive engages in any
activity on behalf of a competing business or engages in other activity
that could foreseeably fall within a questioned restriction. The failure to
comply with this requirement shall waive Executive's right to challenge the
reasonable scope, clarity, applicability, or enforceability of the
Agreement and its restrictions at a later time. All rights of both parties
will be preserved if the Early Resolution Conference requirement is
complied with even if no agreement is reached in the conference.
F. Miscellaneous
1. This Agreement together with the Employment Agreement and the
Agreement to Arbitrate executed simultaneously with this
Agreement constitute the sole and entire agreements and
understandings between Executive and the Company with respect to
the matters covered thereby, and there are no other promises,
agreements, representations, warranties or other statements
between Executive and the Company in respect to such matters not
expressly set forth in these agreements. These Agreements
supersede all prior and contemporaneous agreements,
understandings or other arrangements concerning the subject
matter thereof. These Agreements may not be changed or terminated
orally but only by an agreement in writing signed by the parties
hereto.
2. No course of dealing or any delay on the part of the Company or
Executive in exercising any rights hereunder shall operate as a
waiver of any such rights. No waiver of any default or breach of
this Agreement shall be deemed a continuing waiver of any other
breach or default.
3. Because the Company is incorporated in the state of New York this
Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York without regard to the choice of
law rules of any state or where Executive is in fact required to
work.
4. If any provision or clause of this Agreement, or portion thereof,
shall be held by any court of competent jurisdiction to be
illegal, void or unenforceable in such jurisdiction, the
remainder of such provisions shall not thereby be affected and
shall be given full effect, without regard to the invalid
portion. It is the intention of the parties that, if any court
construes any provision or clause of this Agreement, or any
portion thereof, to be illegal, void or unenforceable because of
the duration of such provision or the area or matter covered
thereby, such court shall reduce the duration, area, or matter of
such provision and, in its reduced form, such provision shall
then be enforceable and shall be enforced.
5. The obligations of Executive may not be delegated and, Executive
may not assign or otherwise transfer this Agreement or any
obligations hereunder. This Agreement and all of the Company's
rights and obligations under this Agreement may be assigned or
transferred by the Company to and may be assumed by and inure to
the benefit of any successor or other transferee of all or a
substantial part of the assets of the Company's business in which
Executive works.
6. Any legal suit, action or proceeding against any party hereto
arising out of or relating to this Agreement shall be instituted
in a New York federal or state court in the Borough of Manhattan
and each party hereto waives any objection which it may now or
hereafter have to the laying of venue of any such suit, action or
proceeding and each party hereto irrevocably submits to the
jurisdiction of any such court in any suit, action or proceeding.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered, effective as of the date first indicated above by a
duly authorized officer of the Company.
JOHN WILEY & SONS, INC.
Signed by all parties of agreement.
Exhibit 10.19
JOHN WILEY & SONS, INC.
FY 2003 QUALIFIED EXECUTIVE LONG TERM INCENTIVE PLAN
PLAN DOCUMENT
CONFIDENTIAL
MAY 1, 2002
CONTENTS
Section Subject Page
I. Definitions 2
II. Plan Objectives 3
III. Eligibility 4
IV. Performance Measurement and Objectives 4
V. Performance Evaluation 4
VI. Restricted Performance Shares Award Provisions 5
VII. Stock Option 5
VIII. Payouts 5
IX. Administration and Other Matters 6
I. DEFINITIONS
Following are definitions for words and phrases used in this document. Unless
the context clearly indicates otherwise, these words and phrases are considered
to be defined terms and appear in this document in italicized print:
Company John Wiley & Sons, Inc.
business unit The Company, a division or subsidiary of the Company, or a
global unit of the Company.
plan This FY2003 Qualified Executive Long Term Incentive Plan.
shareholder plan The Company's Long Term Incentive Plan
plan period The three year period from May 1, 2002 to April 30, 2005, or a
portion of this period, at the discretion of the GCC.
Governance and Compensation Committee (GCC) The committee of the Company's Board
of Directors responsible for the review and approval of executive compensation.
performance target A participant's objective to achieve specific financial
goals for the plan period, as approved by the GCC. A performance target
comprises all of the financial goals for a business unit.
business criteria An indicator of financial performance, chosen from the
business criteria listed in Section 7(b)(ii)(B) of the shareholder plan. The
following business criteria are used in this plan:
cash flow Net income, excluding unusual items not related to the
period being measured, plus/minus any non-cash items included in net
income and changes in operating assets and liabilities, minus normal
investments in product development assets and property and equipment.
earnings per share Earnings per share, excluding unusual items not
related to the period being measured.
divisional EBITA Operating income before amortization of intangibles.
divisional cash flow divisional operating income, plus/minus any
non-cash items included in divisional operating income (other than
provisions for bad debts), and changes in controllable assets and
liabilities, less normal investments in product development assets and
direct property and equipment additions. Controllable assets and
liabilities are inventory, composition, author advances, other deferred
publication costs, and deferred subscription revenues.
GPC EBITA divisional operating income before amortization of
intangibles as adjusted for profit earned by other divisions on
intercompany transactions.
GPC cash flow divisional cash flow as adjusted for the profit
earned by other divisions on intercompany transactions.
special cash flow Gross collections on accounts receivable less
operating expenses.
financial goal A targeted level of attainment of a given business criteria.
financial results The published, audited financial results of the Company
and the divisional financial results derived therefrom.
participant A person selected to participate in the plan.
performance levels
threshold The minimum acceptable level of achievement of a financial
goal in order to earn a payout, expressed as a percentage of target
( e.g., 95% of target.)
target Achievement of the assigned financial goal-100%.
outstanding Superior achievement of a financial goal, earning the
maximum payout, expressed as a percentage of target (e.g.,
115% of target.)
target incentive An award of restricted performance shares that a participant
is eligible to receive if 100% of his/her applicable award period objectives are
achieved and the participant remains an employee of the Company through April
30, 2007, except as otherwise provided in Section VIII.
stock Class A Common Stock of the Company.
restricted performance share A share of stock issued pursuant to this
plan and the shareholder plan that is subject to forfeiture.
In the shareholder plan, such stock is referred to as "Performance-Based Stock."
restricted period The period during which the restricted performance shares
shall be subject to forfeiture in whole or in part, as defined in the
shareholder plan, in accordance with the terms of the award.
plan end adjusted restricted performance share award. The amount of
restricted performance shares awarded to a participant at the end of the plan
cycle after adjustments, if any, are made, as set forth in Section VIII.
II. PLAN OBJECTIVES
The plan is intended to provide the officers and other key employees of the
Company and of its subsidiaries, affiliates and certain joint venture companies,
upon whose judgement, initiative and efforts the Company depends for its growth
and for the profitable conduct of its business, with additional incentive to
promote the success of the Company.
III. ELIGIBILITY
A participant is selected by the CEO and recommended for participation to the
GCC, which has sole discretion for determining eligibility, from among those
employees in key management positions deemed able to make the most significant
contributions to the growth and profitability of the Company. The President and
CEO of the Company is a participant.
IV. PERFORMANCE TARGETS AND MEASUREMENT
The CEO recommends and the GCC adopts, in its sole discretion, performance
targets and performance levels for each participant, not later than 90 days from
the commencement of the plan period. No performance target or performance level
may be modified after 90 days from the commencement of the plan period.
A. Performance targets, comprising one or more financial goals, for each
business unit are defined for each participant. Each financial goal is
assigned a weight, such that the sum of the weights of all financial goals
for a business unit equals 100%.
B. Each participant is assigned performance targets for one or more business
units , based on the participant's position, responsibilities, and his
ability to affect the results of the assigned business unit. For each
participant, each business unit is assigned a weight, such that the sum of
the weights of all business units for a participant equals 100%.
Collectively, all business unit performance targets together constitute the
participant's plan period objectives.
C. Each financial goal is assigned performance levels (threshold, target and
outstanding).
V. PERFORMANCE EVALUATION
A. Financial Results
1. At the end of the plan period, the financial results for each business
unit are compared with that unit's financial goals to determine the
payout for each participant.
2. Award Determination
a. Achievement of threshold performance of at least one financial
goal of a performance target is necessary for a participant to
receive a payout for that performance target.
b. The unweighted payout factor for each financial goal is
determined as follows:
1. For performance at the below threshold level, the payout
factor is zero.
2. For performance at the threshold level, the payout factor is
25%.
3. For performance between the threshold and target levels, the
payout factor is between 25% and 100%, determined on a
pro-rata basis.
4. For performance at the target level, the payout factor is
100%.
5. For performance between the target and outstanding levels,
the payout factor is between 100% and 200%, determined on a
pro-rata basis.
6. For performance at or above the outstanding level, the
unweighted payout factor is 200%.
c. A participant's plan end adjusted restricted performance shares award
is determined as follows:
1. Each financial goal's unweighted payout factor determined above
times the weighting of that financial goal equals the weighted
payout factor for that financial goal.
2. The sum of the weighted payout factors for a business unit's
performance target equals the payout factor for that performance
target.
3. The participant's target incentive times the performance target
payout factor times the business unit weight equals the
participant's payout for that business unit.
4. The sum of the payouts for all the business units assigned to a
participant equals the participant's total plan end adjusted
restricted performance shares award.
d. The GCC may, in its sole discretion, reduce a participant's payout to
any level it deems appropriate.
3. In determining the attainment of financial goals,
a. the impact of any acquisition or divestiture which closes in the final
year of a plan period and which is valued at greater than $5,000,000
and which is dilutive, will be excluded in determining the financial
results for any affected business unit.
b. the impact of foreign exchange gains or losses will be removed from
divisional EBITA and divisional cash flow criteria.
c. the impact of any of the events (a) through (e) listed in Section
7(b)(ii)(B) of the shareholder plan, if dilutive (causes a reduction
in the financial result), will be excluded from the financial results
for any affected business unit.
VI. RESTRICTED PERFORMANCE SHARES AWARD PROVISIONS
A. Restricted performance shares, equal to a participant's target shares shall
be awarded at the beginning of the plan period. In addition to the terms
and conditions set forth in the shareholder plan, the restricted period for
restricted performance shares awarded shall be as follows: subject to
continued employment except as otherwise set forth in the shareholder plan,
the lapse of restrictions on one-half of the restricted performance shares
awarded will occur on the first anniversary of the plan period end date
(April 30, 2006) at which time the participant will receive a stock
certificate in a number of shares equal to one-half of the restricted
performance shares awarded with the restrictive legend deleted, and the
lapse of restrictions on the remaining half will occur on the second
anniversary of the plan period end date (April 30, 2007) at which time the
participant will receive a new stock certificate in a number of shares
equal to the remaining half with the restrictive legend deleted.
B. The plan end adjusted restricted performances share award will be
determined as follows: The restricted performance shares awarded by the GCC
at the beginning of the plan period multiplied times the payout factor
equals the number of shares for the plan end adjusted restricted
performance shares award. The result of this calculation will be compared
to the restricted performance shares awarded at the beginning of the plan
period, and the appropriate amount of restricted performance shares will be
awarded or forfeited, as required, to bring the restricted performance
shares award to the number of shares designated as the plan end adjusted
restricted performance shares award.
VII STOCK OPTIONS
The participant may be granted a stock option pursuant to the shareholder plan
at the beginning of the plan period, representing another incentive vehicle by
which the participant is able to share in the equity growth of the Company. The
terms and conditions of the award of the stock option are contained in the
shareholder plan and in the stock option award.
VIII PAYOUTS
A. Payouts will be made within 90 days after the end of the plan period.
B. In the event of a participant's death, disability, retirement or leave of
absence prior to payout, the payout, if any, will be determined by the GCC.
C. A participant who resigns, or whose employment is terminated by the
Company, with or without cause, before payout from the plan is distributed,
will not receive a payout. Exception to this provision shall be made with
the approval of the GCC, in its sole discretion.
D. A participant who transfers between business units of the Company will have
his/her payout prorated to the nearest fiscal quarter for the time spent in
each business unit, based on the achievement of performance targets
established for the position in each business unit.
E. A participant who is appointed to a position with a different target
incentive percent will have his/her payout prorated to the nearest fiscal
quarter for the time spent in each position, based on the achievement of
performance target established for each position.
F. A participant who is hired or promoted into an eligible position during the
plan period may receive a prorated payout as determined by the GCC, in its
sole discretion.
IX. ADMINISTRATION AND OTHER MATTERS
A. The plan will be administered by the GCC, which shall have authority in its
sole discretion to interpret and administer this plan, including, without
limitation, all questions regarding eligibility and status of any
participant, and no participant shall have any right to receive a payout or
payment of any kind whatsoever, except as determined by the GCC hereunder.
B. The Company will have no obligation to reserve or otherwise fund in advance
any amount which may become payable under the plan.
C. This plan may not be modified or amended except with the approval of the
GCC.
D. In the event of a conflict between the provisions of this plan and the
provisions of the shareholder plan, the provisions of the shareholder plan
shall apply.
E No awards of any type under this plan shall be considered as compensation
for purposes of defining compensation for retirement, savings or
supplemental executive retirement plans, or any other benefit.
Exhibit 10.20
JOHN WILEY & SONS, INC.
FY 2003 QUALIFED EXECUTIVE ANNUAL INCENTIVE PLAN
PLAN DOCUMENT
CONFIDENTIAL
MAY 1, 2002
CONTENTS
Section Subject Page
- ------- ------- ----
I. Definitions 2
II. Plan Objectives 3
III. Eligibility 3
IV. Performance Targets and Measurements 3
V. Performance Evaluation 4
VI. Payouts 5
VI Administration and Other Matters 5
I. DEFINITIONS
Following are definitions for words and phrases used in this document. Unless
the context clearly indicates otherwise, these words and phrases are considered
to be defined terms and appear in this document in italicized print:
Company John Wiley & Sons, Inc.
business unit The Company, a division or subsidiary of the Company, or a global
unit of the Company.
plan This FY2003 Qualified Executive Annual Incentive Plan.
shareholder plan . The Company's Executive Annual Incentive Plan.
plan period The twelve-month period from May 1, 2002 to April 30, 2003, or a
portion of this period, at the discretion of the GCC.
Governance and Compensation Committee (GCC) The committee of the Company's
Board of Directors responsible for the review and approval of executive
compensation.
performance target A participant's objective to achieve specific financial
goals for the plan period, as approved by the GCC. A performance target
comprises all of the financial goals for a business unit.
business criteria An indicator of financial performance, chosen from the
business criteria listed in Section 4(b)(ii) of the shareholder plan. The
following business criteria are used in this plan:
revenue (corporate) Gross annual revenue, net of provision for returns.
cash flow Net income, excluding unusual items not related to the
period being measured, plus/minus any non-cash items included in net
income and changes in operating assets and liabilities, minus normal
investments in product development assets and property and equipment.
earnings per share Earnings per share, excluding unusual items not
related to the period being measured.
revenue (divisional) Gross annual revenue, net of actual returns.
divisional EBITA Operating income before amortization of intangibles.
divisional cash flow divisional operating income, plus/minus any
non-cash items included in divisional operating income (other than
provisions for bad debts), and changes in controllable assets and
liabilities, less normal investments in product development assets and
direct property and equipment additions. Controllable assets and
liabilities are inventory, composition, author advances, other deferred
publication costs, and deferred subscription revenues.
GPC EBITA divisional operating income before amortization of
intangibles as adjusted for profit earned by other divisions on
intercompany transactions.
GPC cash flow divisional cash flow as adjusted for the profit earned
by other divisions on intercompany transactions.
financial goal A targeted level of attainment of a given business criteria.
financial results The published, audited financial results of the Company and
the divisional financial results derived therefrom.
participant A person selected to participate in the plan.
performance levels
threshold The minimum acceptable level of achievement of a financial
goal in order to earn a payout, expressed as a percentage of target
( e.g., 95% of target.)
target Achievement of the assigned financial goal-100%.
outstanding Superior achievement of a financial goal, earning the
maximum payout, expressed as a percentage of target (e.g., 115% of target.)
base salary A participant's base salary as of July 2, 2002, or the date of
hire, or promotion into the plan, if later, adjusted for any increases or
decreases during FY 2003, on a prorated basis and adjusted for any amount of
time the participant may not be in the plan for reasons of hire, death,
disability, retirement and/or termination.
payout Actual gross dollar amount paid to a participant under the plan,
if any, for achievement of assigned performance targets, as further discussed in
this plan.
total annual incentive opportunity he total amount that a participant is
eligible to receive from all annual incentive plans, including this plan,
expressed as a percent of base salary.
target incentive percent The percent applied to the participant's total annual
incentive opportunity to determine the target incentive amount for this plan.
Generally, for the plan period 2003, the target incentive percent for this plan
is 85%.
target incentive amount The amount that a participant is eligible to receive
if he/she achieves 100% of his/her performance target for a business unit. The
sum of the target incentive amounts for all business units assigned to a
participant is the total target incentive amount.
II. PLAN OBJECTIVES
The plan is intended to provide the officers and other key employees of the
Company and of its subsidiaries, affiliates and certain joint venture
companies, upon whose judgement, initiative and efforts the Company depends
for its growth and for the profitable conduct of its business, with
additional incentive to promote the success of the Company.
III. ELIGIBILITY
A participant is selected by the CEO and recommended for participation to
the GCC, which has sole discretion for determining eligibility, from among
those employees in key management positions deemed able to make the most
significant contributions to the growth and profitability of the Company.
The President and CEO of the Company is a participant.
IV. PERFORMANCE TARGETS AND MEASUREMENT
The CEO recommends and the GCC adopts, in its sole discretion, performance
targets and performance levels for each participant, not later than 90 days
from the commencement of the plan period. No performance target or
performance level may be modified after 90 days from the commencement of
the plan period.
A. Performance targets, comprising one or more financial goals, for each
business unit are defined for each participant. Each financial goal is
assigned a weight, such that the sum of the weights of all financial
goals for a business unit equals 100%.
B. Each participant is assigned performance targets for one or more
business units , based on the participant's position,
responsibilities, and his ability to affect the results of the
assigned business unit. For each participant, each business unit is
assigned a weight, such that the sum of the weights of all business
units for a participant equals 100%. Collectively, all business unit
performance targets together constitute the participant's plan period
objectives.
C. Each financial goal is assigned performance levels (threshold, target
and outstanding).
V. PERFORMANCE EVALUATION
A. Financial Results
1. At the end of the plan period, the financial results for each
business unit are compared with that unit's financial goals to
determine the payout for each participant
2. Award Determination
a. Achievement of threshold performance of at least one
financial goal of a performance target is necessary for a
participant to receive a payout for that performance target.
b. The unweighted payout factor for each financial goal is
determined as follows:
1. For performance at the below threshold level, the
payout factor is zero.
2. For performance at the threshold level, the payout
factor is 25%.
3. For performance between the threshold and target
levels, the payout factor is between 25% and 100%,
determined on a pro-rata basis.
4. For performance at the target level, the payout factor
is 100%.
5. For performance between the target and outstanding
levels, the payout factor is between 100% and 200%,
determined on a pro-rata basis.
6. For performance at or above the outstanding level, the
unweighted payout factor is 200%.
c. A participant's payout is determined as follows:
1. Each financial goal's unweighted payout factor
determined above times the weighting of that financial
goal equals the weighted payout factor for that
financial goal.
2. The sum of the weighted payout factors for a business
unit's performance target equals the payout factor for
that performance target.
3. The participant's base salary
times
the participant's target incentive percent
times
the performance target payout factor
times
the business unit weight
equals
the participant's payout for that business unit
4. The sum of the payouts for all the business units
assigned to a participant equals the participant's
total payout.
d. The GCC may, in its sole discretion, reduce a participant's
payout to any level it deems appropriate.
3. In determining the attainment of financial goals,
a. the impact of foreign exchange gains or losses will be
excluded from revenue and divisional EBITA and divisional
cash flow criteria.
b. the impact of any of the events (1) through (5) listed in
Section 4(b)(ii) of the shareholder plan, if dilutive
(causes a reduction in the financial result), will be
excluded from the financial results of any affected business
unit.
VI PAYOUTS
A. Payouts will be made within 90 days after the end of the plan period.
B. In the event of a participant's death, disability, retirement or leave
of absence prior to payout, the payout, if any, will be determined by
the GCC.
C. A participant who resigns, or whose employment is terminated by the
Company, with or without cause, before payout from the plan is
distributed, will not receive a payout. Exception to this provision
shall be made with the approval of the GCC, in its sole discretion.
D. A participant who transfers between business units of the Company will
have his/her payout prorated to the nearest fiscal quarter for the
time spent in each business unit, based on the achievement of
performance targets established for the position in each business
unit.
E. A participant who is appointed to a position with a different target
incentive percent will have his/her payout prorated to the nearest
fiscal quarter for the time spent in each position, based on the
achievement of performance target established for each position.
F. A participant who is hired or promoted into an eligible position
during the plan period may receive a prorated payout as determined by
the GCC, in its sole discretion.
VII. ADMINISTRATION AND OTHER MATTERS
A. The plan will be administered by the GCC, which shall have authority
in its sole discretion to interpret and administer this plan,
including, without limitation, all questions regarding eligibility and
status of any participant, and no participant shall have any right to
receive a payout or payment of any kind whatsoever, except as
determined by the GCC hereunder.
B. The Company will have no obligation to reserve or otherwise fund in
advance any amount which may become payable under the plan.
C. This plan may not be modified or amended except with the approval of
the GCC.
D. In the event of a conflict between the provisions of this plan and the
provisions of the shareholder plan, the provisions of the shareholder
plan shall apply.
Exhibit 10.21
JOHN WILEY & SONS, INC.
FY 2003 EXECUTIVE ANNUAL STRATEGIC MILESTONES INCENTIVE PLAN
ADMINISTRATIVE DOCUMENT
CONFIDENTIAL
MAY 1, 2002
CONTENTS
Section Subject Page
------- ------- ----
I. Definitions 2
II. Plan Objectives 3
III. Eligibility 3
IV. Performance Objectives and Measurement 3
V. Performance Evaluation 3
VI. Payouts 4
VII. Administration and Other Matters 5
I. DEFINITIONS
Following are definitions for words and phrases used in this document. Unless
the context clearly indicates otherwise, these words and phrases are considered
to be defined terms and appear in this document in italicized print:
company John Wiley & Sons, Inc.
plan The company's Fiscal Year 2003 Executive Annual Strategic Milestones
Incentive Plan described in this document and any written amendments to this
document.
plan year The twelve month period from May 1, 2002 to April 30, 2003.
Governance and Compensation Committee (GCC) The committee of the company's
Board of Directors (Board) responsible for reviewing executive compensation.
strategic milestone A participant's objective to achieve specific results
for FY2003, including interim revised strategic milestones, if any, as approved
and communicated in writing, as described in Sections IV and V below. Strategic
milestones are leading indicators of performance.
participant A person selected to participate in the plan.
base salary The participant's base salary as of July 2, 2003, or the date of
hire, or promotion into the plan, if later, adjusted for any increases or
decreases during FY 2003, on a prorated basis and adjusted for any amount of
time the participant may not be in the plan for reasons of hire, death,
disability, retirement and/or termination.
payout Actual gross dollar amount paid to a participant under the plan,
if any, for achievement of strategic milestones, as further discussed in this
plan.
total annual incentive opportunity The total target amount a participant is
eligible to receive from all annual incentive programs, including this plan.
target incentive percent The percent applied to the participant's total
annual incentive opportunity to determine the target incentive amount for the
plan. Generally, for the plan year 2003, the target incentive percent is 15%.
target incentive amount The amount, if any, that a participant is eligible to
receive if he/she achieves 100% of his/her strategic milestones.
summary evaluation levels
threshold The minimum acceptable level of achievement of strategic
milestones. If threshold performance is achieved against all strategic
milestones, a participant may earn 25% of the target incentive amount for
which he/she is eligible.
target Achievement in aggregate of target strategic milestones. Each
individual strategic milestone is set at a level that is both challenging
and achievable.
outstanding Superior achievement of strategic milestones, both in
quality and scope, with limited time and resources. If outstanding
performance is achieved against strategic milestones, the maximum amount a
participant may earn is 200% of the target incentive amount.
payout factor Percentage of strategic milestones deemed achieved, applied
to the target incenive amount, used to determine the payout for which a
participant is eligible.
II. PLAN OBJECTIVES
The purpose of the FY 2003 Executive Annual Strategic Milestones Incentive Plan
is to enable the company to reinforce and sustain a culture devoted to excellent
performance, reward significant contributions to the success of Wiley, and
attract and retain highly qualified executives.
III. ELIGIBILITY
The participant is selected by the President and CEO of the company, from among
those employees in key management positions deemed able to make the most
significant contributions to the growth and profitability of the company, with
the approval of the GCC. The President and CEO of the company is a participant.
IV. PERFORMANCE OBJECTIVES AND MEASUREMENT
A. Strategic milestones are non-financial individual objectives over which
the participant has a large measure of control, which lead to, or are
expected to lead to improved performance for the company in the future.
Strategic milestones are determined near the beginning of the plan year
by the participant, and approved by CEO or the participant's manager, if
the CEO is not the participant's manager.
B. The strategic milestones for the President and CEO are reviewed and
approved by the GCC.
C. The strategic milestones for the President and CEO should be
appropriately reflected in those of all other employees at all levels.
Each participant collaborates with his/her manager in setting strategic
milestones. The strategic milestones may be revised during the plan year,
as appropriate.
D. The determination of strategic milestones includes defining a target
level of performance and the measure of such, and may include defining
threshold and outstanding levels of performance and the measures of such.
V. PERFORMANCE EVALUATION
A. Achievement of a participant's strategic milestones will be determined at
the end of the plan year by comparing results achieved to previously set
objectives.
B. Each participant's manager will recommend a summary evaluation level and
a payout factor for achievement of all strategic milestones, compared
with the previously set objectives. In determining the payout factor, the
overall performance on all strategic milestones will be considered. The
CEO will recommend to the GCC for approval the payout factors for all
other participants. The GCC will recommend to the Board for approval the
payout factor for the CEO
Summary evaluation levels and related payout factors are as follows:
Summary Evaluation Payout factor range
Less than Threshold 0
Threshold 25% - less than 35%
Great than Threshold greater than or equal to 35% - less then 50%
Less than Target greater than or equal to 50% - less than 90%
Target greater than or equal to 90% - less than or equal to 110%
Greater than Target greater than or equal to 110% - less than 150%
Less than Outstanding greater than or equal to 150% - less than 175%
Outstanding greater than or equal to 175% - 200%
C. Award Determination
STRATEGIC MILESTONES PAYOUT AMOUNT
----------------------------------
total annual incentive opportunity X plan target
incentive percent X payout factor
= Strategic Milestones Payout Eligibility
1. Notwithstanding anything to the contrary, the maximum payout, if any,
a participant may receive is 200% of the target incentive amount.
2. The foregoing Strategic Milestones payout eligibility calculation is
intended to set forth general guidelines on how awards are to be
determined. The purpose of this plan is to motivate the participant to
perform in an outstanding manner. The President and CEO has discretion
under this plan to take into consideration the contribution of the
participant, the participant's management of his/her organizational
unit and other relevant factors, positive or negative, which impact
the company's, the participant's organizational unit(s), and the
participant's performance overall in determining whether to recommend
granting or denying an award, and the amount of the award, if any. If
the participant is the President and CEO, such discretion is exercised
by the GCC and the Board.
VI. PAYOUTS
A. Payouts will be made within 90 days after the end of the plan year.
B. In the event of a participant's death, disability, retirement or leave of
absence prior to payout from the plan, the payout, if any, will be
determined by the President and CEO in his/her sole discretion, subject to
any approval of the GCC, subject to any required Board approvals. If the
participant is the President and CEO, such approval is required by the
Board..
C. A participant who resigns, or whose employment is terminated by the
company, with or without cause, before payout from the plan is distributed,
will not receive a payout. Exception to this provision shall be made only
with the approval of the Committee, subject to any required Board
approvals. If the participant is the President and CEO, such approval is
required by the Board.
D. A participant who transfers between divisions of the company, will have
his/her payout prorated to the nearest fiscal quarter for the time spent in
each division, based on the achievement of strategic milestones established
for the position in each division, and based upon a judgment of the
participant's contribution to the achievement of goals in each position,
including interim revisions, if appropriate.
E. A participant who is appointed to a position with a different target
incentive percent will have his/her payout prorated to the nearest fiscal
quarter for the time spent in each position, based on the achievement of
strategic milestones established for each position.
F. A participant who is hired or promoted into an eligible position during the
plan year may receive a prorated payout as determined by the CEO, in
his/her sole discretion, subject to the approval of the Committee.
VII. ADMINISTRATION AND OTHER MATTERS
A. The plan is effective for the plan year. It will terminate, subject to
payout, if any, in accordance with and subject to the provisions of this
plan.
B. This plan will be administered by the CEO, who will have authority to
interpret and administer this plan, including, without limitation, all
questions regarding eligibility and status of the participant, subject to
the approval of the Committee required under this plan or the by-laws of
the company.
C. This plan may be withdrawn, amended or modified at any time, for any
reason, in writing, by the company.
D. The determination of an award and payout under this plan, if any, is
subject to the approval of the President and CEO, the Committee, and the
Board. This plan does not confer upon any participant the right to
receive any payout, or payment of any kind whatsoever.
E. No participant shall have any vested rights under this plan. This plan
does not constitute a contract.
F. All deductions and other withholdings required by law shall be made to
the participant's payout, if any.
Exhibit 10.22
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") made as of the 1st day
of March, 2003, by and between John Wiley & Sons, Inc., a New York corporation,
with offices at 111 River Street, Hoboken, New Jersey 07030 (hereinafter
referred to as the "Company"), and William J. Pesce (hereinafter referred to as
"Executive").
WHEREAS, the Executive is currently employed as President &
CEO of the Company, and Executive desires to serve the Company in such capacity.
NOW THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Employment. The Company agrees to employ Executive and
Executive agrees to be employed by the Company for the Period of Employment (as
defined below) and upon the terms and conditions provided in this Agreement.
2. Position and Responsibilities.
(a) During the Period of Employment, Executive will
serve as President & CEO of the Company, and subject
to the direction of the Company's Board of Directors will perform such duties
and exercise such supervision with regard to the business of the Company as are
associated with such position, as well as such other duties as may be prescribed
from time to time by the Board of Directors. Executive shall be subject to and
shall observe and carry out such reasonable rules, regulations, policies,
directions and restrictions consistent with the duties to be performed by
Executive hereunder as the Company shall from time to time establish.
(b) Executive will, during the Period of Employment,
devote Executive's full business time and attention
to the faithful and competent performance of services for the Company. Executive
hereby represents and warrants to the Company that Executive has no obligations
under any existing employment or service agreement and that Executive's
performance of the services required of Executive hereunder will not conflict
with any other existing obligations or commitments. Nothing in this Agreement
shall preclude Executive from engaging, consistent with Executive's duties and
responsibilities hereunder, in charitable and community affairs.
(c) Executive shall perform the duties contemplated
hereunder at the principal executive office of the
Company and at such other locations as may be reasonably necessary to the
performance of such duties, and Executive shall do such traveling as may be
reasonably required of Executive in the performance of such duties.
3. Period of Employment. The period of Executive's employment
under this Agreement (the "Period of Employment") will begin on March 1, 2003
(the "Commencement Date"), and end on the third anniversary thereof, subject to
earlier termination and further renewal as provided in this Agreement.
Executive's Period of Employment shall automatically renew for subsequent three
year periods, subject to the terms of this Agreement, unless either party gives
written notice 90 days or more prior to the expiration of the then existing
Period of Employment of Executive's or the Company's decision not to renew. A
decision by the Company not to renew other than as a result of Executive's death
or Disability (as defined below), and other than in circumstances which would
give rise to a Termination for Cause (as defined below) shall be treated as a
Without Cause Termination (as defined below), and so governed by the provisions
of Section 9 hereof.
4. Compensation and Benefits. For all services rendered by
Executive pursuant to this Agreement during the Period of Employment, including
services as an executive, officer, director or committee member of the Company
or any of its subsidiaries or affiliates, Executive will be compensated as
follows:
(a) Base Salary. The Company will pay Executive a
fixed base salary ("Base Salary") of not less than
$750,000 per annum. Executive will be eligible to receive annual increases as
the Company's Board of Directors (the "Board") deems appropriate, in accordance
with the Company's customary procedures regarding the salaries of senior
officers. Base Salary will be payable according to the customary payroll
practices of the Company but in no event less frequently than once each month.
(b) Executive Compensation Plans. Executive shall be
eligible to participate in all of the Company's
executive compensation plans in effect on the date hereof in which any senior
executive of the Company is eligible to participate, including but not limited
to the Company's Executive Annual Incentive Plan, as amended or restated from
time to time (the "EAIP"), the Company's Long Term Incentive Plan, as amended or
restated from time to time (the "LTIP"), or equivalents, for so long as such
plans remain in effect. Nothing in this Agreement shall require the Company or
its affiliates to establish, maintain or continue any executive compensation
plan or restrict the right of the Company or any of its affiliates to amend,
modify or terminate any such plan.
(c) Participation in Benefit Plans. To the extent
that Executive's participation or coverage is not
duplicative of that provided under an executive compensation plan or arrangement
in which Executive is eligible to participate, the Company shall afford
Executive with an opportunity to participate in any health care, dental,
disability insurance, life insurance, retirement, savings and any other employee
benefits plans, policies or arrangements which the Company maintains for its
employees in accordance with the written terms of such plans, policies or
arrangements. Nothing in this Agreement shall require the Company or its
affiliates to establish, maintain or continue any benefit plans, policies or
arrangements or restrict the right of the Company or any of its affiliates to
amend, modify or terminate any such benefit plan, policy or arrangement.
(d) Vacations, Holidays or Temporary Leave. Executive
shall be entitled to take four weeks of vacation per
calendar year, or such greater amount, if any, as provided in the policies of
the Company then applicable to Executive, without loss or diminution of
compensation. Such vacation shall be taken at such time or times consistent with
the needs of the Company's business. Executive shall further be entitled to the
number of paid holidays, and leaves for illness or temporary disability in
accordance with the Company's policies as such policies may be amended from time
to time or terminated in the Company's sole discretion.
5. Other Offices. Executive agrees to serve without additional
compensation, if elected or appointed thereto, as an officer or director of any
of the Company's subsidiaries or affiliates or as any other officer of the
Company.
6. Business Expenses. The Company will reimburse Executive for
all reasonable travel and other expenses incurred by Executive in connection
with the performance of Executive's duties and obligations under this Agreement.
Executive will comply with such limitations and reporting requirements with
respect to expenses as may be established by Company from time to time and will
promptly provide all appropriate and requested documentation in connection with
such expenses.
7. Disability. If Executive becomes Disabled (as defined
below) during the Period of Employment, the Company may, in its discretion, hire
a permanent replacement to fill the position previously held and to perform the
duties previously performed by Executive, provided, however, the Company shall
continue Executive's employment with the Company on an inactive basis to the
extent necessary to continue to maintain Executive's eligibility for benefits
available under the Company's Group Long-Term Disability Insurance Plan or under
any generally similar plan then in effect (the "LTD Plan") and such other
employee benefit plans that are generally available to employees receiving
benefits under the LTD Plan, in accordance with the terms of such plan(s) as
they may be amended from time to time. For purposes of this Agreement,
"Disabled" or "Disability" means Executive's inability, because of mental or
physical illness or incapacity, whether total or partial, to perform one or more
of the primary duties of Executive's employment, with or without reasonable
accommodation, for a length of time that the Company determines is sufficient to
satisfy such obligations as it may have under the Family and Medical Leave Act
("FMLA") and such "reasonable accommodation" obligations it may have under
federal, state or local disability laws. Upon Executive's entitlement to receive
benefits available under the LTD Plan and such other benefits generally
available to employees receiving benefits under the LTD Plan, the Company's
obligation to provide Executive compensation and other benefits pursuant to
Section 4 hereof shall cease. In the event that Executive ceases to be Disabled
and Executive is able to return to work and Executive's former position is not
open, the Company will endeavor to find, and will work interactively with
Executive to find, a position of comparable responsibility, compensation and
benefits and to reinstate Executive to such position, if such a position is
available at the conclusion of Executive's disability leave of absence. Prior to
restoration of Executive to active employment with the Company, Executive shall
cooperate in obtaining all fitness for duty certifications from Executive's
treating physician(s) and such other physicians as the Company may request in
accordance with the FMLA and federal, state and local disability and worker's
compensation laws. Within fifteen (15) days of receipt of all medical
certification(s) requested by the Company, if the Company does not restore
Executive to active employment with the Company, then at that time Executive's
employment with the Company will be deemed to have terminated. Under the policy
currently in effect for employees of the Company, such termination will be
treated as a Without Cause Termination in accordance with Paragraph 9(a) below,
provided the Executive has not then attained the age of 65. Nothing in this
Agreement shall require the Company to continue such policy, and such
termination shall be treated in accordance with the policy applicable at the
time the Executive becomes disabled.
8. Death. In the event of the death of Executive during the
Period of Employment, the Period of Employment will end and the Company's
obligation to make payments under this Agreement will cease as of the date of
death, except that the Company will pay to Executive's beneficiary designated
for purposes of Executive's life insurance provided by the Company, or absent
such designation to Executive's estate, Executive's Base Salary until the end of
the month in which Executive dies, and except for any rights and benefits of
Executive under the benefit plans and programs of the Company including, without
limitation, the SERP (as defined below) in which Executive is a participant, as
determined in accordance with the terms and provisions of such plans and
programs. The payout under the EAIP, or equivalent, for the fiscal year in which
Executive's death occurs, shall be annualized and paid at the normal time to
Executive's estate pro rata to the date of death. The value of the "payout
amount," in cash, for any executive long term incentive plan established by the
Company, the plan cycle of which ends within 12 months after the date of
Executive's death, shall be paid at the normal time to Executive's estate.
9. Effect of Termination of Employment.
(a) Without Cause Termination and Constructive
Discharge Absent a Change of Control or a Special Change of
Control. If Executive's employment terminates during the Period of Employment in
circumstances in which no Change of Control (as defined below) or Special Change
of Control (as defined below) has occurred, due to a Without Cause Termination
or a Constructive Discharge, then the Company will provide Executive (or
Executive's surviving spouse, estate or personal representative, as applicable)
the following payments and/or benefits upon such event: (i) Base Salary earned
but unpaid as of the effective date of such termination of employment; (ii) a
lump sum amount equal to thirty six (36) months of Executive's then current Base
Salary; (iii) the "target incentive amount" under any executive annual incentive
plan established by the Company for a fiscal year ending during the Benefits
Continuation Period, and the same "target incentive amount" for any such
executive annual incentive plan, pro-rated to the end of the Benefits
Continuation Period, for a fiscal year commencing during but ending after the
Benefit Continuation Period, or the equivalent under any bonus or variable
compensation plan which may hereafter be adopted by the Company in lieu of such
executive annual incentive plan; (iv) accelerated vesting of all "target"
restricted performance shares awarded to Executive under any executive long term
incentive plan established by the Company that would be earned in the fiscal
year of termination of employment or subsequent fiscal years, or at the
Company's option, the cash value of the "target" restricted performance shares
forfeited under such awards based on fair market value on the effective date of
termination of employment; (v) coverage during the Benefits Continuation Period
under the following employee benefit plans or provisions for comparable benefits
outside such plans, but only to the extent comparable coverage is not provided
by any new employer, for (x) the Company's Group Health Insurance Program, (y)
the LTD Plan (as provided under such plan, Executive shall be required to pay
the premium), and (z) the Company's Group Life and Accidental Death and
Dismemberment Insurance (at the levels in effect at the date of termination of
employment).
(b) Without Cause Termination and Constructive
Discharge Following a Change of Control or a Special Change
of Control. If Executive's employment terminates during the Period of Employment
due to a Without Cause Termination or a Constructive Discharge within the
twenty-four (24) month period following a Change of Control or a Special Change
of Control, then in addition to the payments and benefits described in 9(a)
hereof, the Company will provide (i) Executive (or Executive's surviving spouse,
estate or personal representative, as applicable) the following payments and/or
benefits upon such event: accelerated vesting of all stock options and
restricted stock granted to Executive under any executive long term incentive
plan established by the Company but not yet vested on the effective date of
termination of employment, or at the Company's option, the cash value of the
stock options and restricted stock forfeited under such grants based on fair
market value on the effective date of termination of employment; (ii) all
payments and benefits to which Executive may be entitled pursuant to the terms
and conditions of the SERP; and (iii) all payments and benefits to which
Executive may be entitled under the Company's Non-Qualified Supplemental Benefit
Plan.
(c) Termination for Cause; Resignation. If
Executive's employment terminates due to a Termination for
Cause (as defined below) or a Resignation (as defined below), Base Salary earned
but unpaid as of the date of such termination will be paid to Executive in a
lump sum and the Company will have no further obligations to Executive
hereunder. In the event any termination of Executive's employment for any
reason, Executive if so requested by the Company agrees to assist in the orderly
transfer of authority and responsibility to Executive's successor.
(d) For purposes of this Agreement, the following
capitalized terms have the following meanings:
(i) "Benefits Continuation Period" means
that number of months which is equal to the number
of months of Base Salary that Executive receives as a lump sum severance payment
in accordance with Section 9(a) hereof.
(ii) "Change of Control" shall have the
meaning set forth in the SERP.
(iii) "Constructive Discharge" means: (A)
any material failure by the Company to fulfill its
obligations under this Agreement (including, without limitation, any reduction
of the Base Salary, as the same may be increased during the Period of
Employment, or other material element of compensation); (B) a material and
adverse change to, or a material reduction of, Executive's duties and
responsibilities to the Company; or (C) the relocation of Executive's primary
office to any location more than fifty (50) miles from the Company's principal
executive offices. Executive will provide the Company a written notice which
describes the circumstances being relied upon for all terminations of employment
by Executive resulting from any circumstances claimed to be a Constructive
Discharge thirty (30) days after the event giving rise to the notice. The
Company will have thirty (30) days after receipt of such notice to remedy the
situation prior to Executive's termination of employment due to a Constructive
Discharge.
(iv) "Resignation" means a termination of
Executive's employment by Executive, other than in
connection with Executive's Disability pursuant to Section 7 hereof, Death
pursuant to Section 8 hereof or Constructive Discharge pursuant to Section9(a)
hereof.
(v) "SERP" means the Company's 1989
Supplemental Executive Retirement Plan, as amended or
restated from time to time.
(vi) A "Special Change of Control" shall be
deemed to have occurred if a Person (as
hereinafter defined) who was the beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended), directly or indirectly,
of 33-1/3% or more of the Voting Power (as hereinafter defined) of the Company
on January 1, 1989, ceases to have the Voting Power to elect a majority of the
board of directors of the Company. For purposes of this subsection, each of the
terms "Person" and "Voting Power" shall have the meaning ascribed to it by
Section 6.3 of the SERP (as if it had been used in clause (b) of Section 6.2 of
the SERP). For avoidance of doubt, it is understood by Executive and the Company
that the only Person who was the beneficial owner, directly or indirectly, of
33-1/3% or more of the Voting Power of the Company on January 1, 1989, was
composed of W. Bradford Wiley, Deborah E. Wiley, Peter Booth Wiley and William
Bradford Wiley II (including trusts for which such any such persons serves as
trustee); and it is further understood that as of the date hereof, such Person
was composed of Deborah E. Wiley, Peter Booth Wiley and William Bradford Wiley
II (including trusts for which any such person serves as trustee).
Notwithstanding the foregoing, a Special Change of Control shall not be deemed
to have occurred as a result of a "person" comprising such Person ceasing to
have Voting Power to elect a majority of the Board of Directors of the Company
so long as the other "person" or "persons" who compose such Person, in the
aggregate, continue to have Voting Power to elect a majority of the board of
directors of the Company.
(vii) "Termination for Cause" means: (A)
Executive's refusal or willful and continued failure
to substantially perform Executive's material duties to the best of Executive's
ability under this Agreement (for reasons other than death or disability), in
any such case after written notice thereof; (B) Executive's gross negligence in
the performance of Executive's material duties under this Agreement; (C) any act
of fraud, misappropriation, material dishonesty, embezzlement, willful
misconduct or similar conduct; (D) Executive's conviction of or plea of guilty
or nolo contendere to a felony or any crime involving moral turpitude; or (E)
Executive's material and willful violation of any of the Company's reasonable
rules, regulations, policies, directions and restrictions.
(viii) "Without Cause Termination" or
"Terminated Without Cause" means termination of
Executive's employment by the Company other than in connection with Executive's
Disability pursuant to Section 7 hereof, death pursuant to Section 8 hereof or
Constructive Discharge pursuant to Sections 9(a) hereof, or the Company's
Termination for Cause of Executive.
(e) Conditions to Payment. All payments and benefits
due to Executive under this Section 9 shall be
contingent upon the execution by Executive (or Executive's beneficiary or
estate) of a general release of all claims to the maximum extent permitted by
law against the Company, its affiliates, and their current and former officers,
directors, employees and agents in such form as determined by the Company in its
sole discretion.
(f) No Other Payments. Except as provided in this
Section 9, Executive shall not be entitled to receive
any other payments or benefits from the Company due to the termination of
Executive's employment, including but not limited to, any employee benefits
under any of the Company's employee benefits plans or arrangements (other than
at Executive's expense under the Consolidated Omnibus Budget Reconciliation Act
of 1985 or pursuant to the written terms of any pension benefit plan in which
Executive is a participant in which the Company may have in effect from time to
time) or any right to severance benefits. Notwithstanding the foregoing
sentence, in the event of a termination of employment by Executive under the
circumstances described in Section 9(b) hereof following a Change of Control,
nothing in this Agreement shall reduce Executive's entitlement, if any, to any
payment or benefit pursuant to the LTIP resulting from Executive's termination
of employment following a Change of Control.
(g) Conditional Payments and Limitations.
(i) In the event that (A) any payment or
benefit received or to be received by Executive
pursuant to the terms of this Agreement or of any other plan, arrangement or
agreement of the Company (or any affiliate) (together, the "Payments") would, in
the opinion of independent tax counsel selected by the Company and reasonably
acceptable to Executive ("Tax Counsel"), be subject to the excise tax (the
"Excise Tax") imposed by section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code") (in whole or in part), determined as provided below, and
(B) the present value of the Payments is less than 115% of the present value of
an amount calculated such that no portion of the Payments would be subject to
the Excise Tax, then the Payments shall be reduced (but not below zero) until no
portion of the payments would be subject to the Excise Tax. In the event that
(C) the Payments would, in the opinion of Tax Counsel, be subject to the Excise
Tax (in whole or in part), determined as provided below, and (D) the present
value of the Payments is equal to or greater than 115% of the present value of
an amount calculated such that no portion of the Payments would be subject to
the Excise Tax, then the Company shall pay to Executive, at the time specified
in Section 9(g)(vi) below, an additional amount (the "Gross-Up Payment") such
that the net amount retained by Executive, after deduction of the Excise Tax on
the Covered Payments (as that term is defined below) and any federal, state and
local income tax and Excise Tax upon the payment provided for by this Section
9(g), and any interest, penalties or additions to tax payable by Executive with
respect thereto, shall be equal to the total present value of the Covered
Payments at the time such Covered Payments are to be made.
(ii) For purposes of determining whether any
of the Payments will be subject to the Excise Tax
and the amounts of such Excise Tax: (1) the total amount of the Payments shall
be treated as "parachute payments" within the meaning of section 280G(b)(2) of
the Code, and all "excess parachute payments" within the meaning of section
280G(b)(1) of the Code shall be treated as subject to the Excise Tax, except to
the extent that, in the opinion of Tax Counsel, a Payment (in whole or in part)
does not constitute a "parachute payment" within the meaning of section
280G(b)(2) of the Code, or such "excess parachute payments" (in whole or in
part) are not subject to the Excise Tax; (2) the amount of the Payments that
shall be treated as subject to the Excise Tax shall be equal to the lesser of
(A) the total amount of the Payments or (B) the amount of "excess parachute
payments" within the meaning of section 280G(b)(1) of the Code (after applying
clause (1) hereof); and (3) the value of any noncash benefits or any deferred
payment or benefit shall be determined by Tax Counsel in accordance with the
principles of sections 280G(d)(3) and (4) of the Code.
(iii) In the event that by reason of the
application of this Section 9(g), the Payments to
Executive shall be reduced, then Executive may select from among the Payments
those Payments to be reduced.
(iv) As used in this Section 9(g), the term
"Covered Payments" shall mean the payments and/or
benefits payable to Executive pursuant to the provisions of Sections 9(a)(i),
9(a)(ii), 9(a)(iii), 9(a)(v) and 9(b) of this Agreement (but in the case of
Section 9(b), only with respect to restricted performance shares awarded to
Executive that have been earned prior to a Change of Control), the SERP and the
Company's Nonqualified Supplemental Benefit Plan. Covered Payments shall not
include any payments and/or benefits other than those listed in the preceding
sentence (including, without limitation, any payments and/or benefits under the
EAIP or the LTIP), except as expressly provided above.
(v) For purposes of determining the amount
of the Gross-Up Payment, Executive shall be deemed
to pay federal income taxes at the highest marginal rates of federal income
taxation applicable to the individuals in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rates of taxation applicable to individuals as are in effect in the
state and locality of Executive's residence in the calendar year in which the
Gross-Up Payment is to be made, net of the maximum reduction in federal income
taxes that can be obtained from deduction of such state and local taxes taking
into account any limitations applicable to individuals subject to federal income
tax at the highest marginal rates.
(vi)The Gross-Up Payment provided for in
Section 9(g)(i) hereof shall be made upon the earlier of
(A) the making to Executive of any Payment or (B) the imposition upon Executive
or payment by Executive of any Excise Tax.
(vii) If it is established pursuant to a
final determination of a court or an Internal Revenue
Service proceeding or the opinion of Tax Counsel that the Excise Tax on Covered
Payments is less than the amount taken into account under Section 9(g)(i)
hereof, Executive shall repay to the Company within five days of Executive's
receipt of notice of such final determination or opinion the portion of the
Gross-Up Payment attributable to such reduction (plus the portion of the
Gross-Up Payment attributable to the Excise Tax and federal, state and local
income tax imposed on the Gross-Up Payment being repaid by Executive if such
repayment results in a reduction in Excise Tax or a federal, state and local
income tax deduction) plus any interest received by Executive on the amount of
such repayment. If it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding or the opinion of Tax Counsel
that the Excise Tax on Covered Payments exceeds the amount taken into account
hereunder (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess within five days
of the Company's receipt of notice of such final determination or opinion.
Executive acknowledges that the timing of the Gross-Up Payment made by the
Company to the Executive pursuant to Section 9(g) hereof is for the benefit of
the Executive, and that any repayment of such Gross-Up Payment by Executive to
the Company that may subsequently be required pursuant to this Section 9(g)(vii)
is solely for the purposes of the Company's recoupment of compensation that the
Company overpaid to Executive.
10. Other Duties of Executive During and After the Period of
Employment.
(a) Non-Competition and Non-Disclosure Agreement.
Simultaneously with the execution of this Agreement,
Executive agrees to execute and to comply with the terms of the Non-Competition
and Non-Disclosure Agreement (hereinafter referred to as the "Non-Competition
Agreement") in the form provided to Executive by the Company. The terms and
conditions of the Non-Competition Agreement are incorporated herein by reference
and made a part of this Agreement as if fully set forth herein.
(b) Agreement To Arbitrate. Simultaneous with the
execution of this Agreement, Executive agrees to
execute and to comply with the terms of the Agreement to Arbitrate (hereinafter
referred to as the "Agreement to Arbitrate") in the form provided to Executive
by the Company. The terms and conditions of the Agreement to Arbitrate are
incorporated herein by reference and made a part of this Agreement as if fully
set forth herein.
11. Indemnification. The Company will indemnify Executive to
the fullest extent permitted by the laws of the state of the Company's
incorporation in effect at that time, or the certificate of incorporation and
by-laws of Company, whichever affords the greater protection to Executive.
12. Mitigation. Executive will not be required to mitigate the
amount of any payment provided for hereunder by seeking other employment or
otherwise, nor will the amount of any such payment be reduced by any
compensation earned by Executive as the result of employment by another employer
after the date Executive's employment hereunder terminates.
13. Withholding Taxes. Executive acknowledges and agrees that
the Company may directly or indirectly withhold from any payments under this
Agreement all federal, state, city or other taxes that will be required pursuant
to any law or governmental regulation.
14. Effect of Prior Agreements. This Agreement, together with
the Non-Competition Agreement and the Agreement to Arbitrate, constitute the
sole and entire agreements and understandings between Executive and the Company
with respect to the matters covered thereby, and there are no other promises,
agreements, representations, warranties or other statements between Executive
and the Company in respect to such matters not expressly set forth in these
agreements. These agreements supersede all prior and contemporaneous agreements,
understandings or other arrangements, whether written or oral, concerning the
subject matter thereof. Upon execution of this Agreement, Executive's existing
employment agreement with the Company shall be superceded by this Agreement in
its entirety and shall be of no further force and effect.
15. Notices. Any notice required, permitted, or desired to be
given pursuant to any of the provisions of this Agreement shall be deemed to
have been sufficiently given or served for all purposes if delivered in person
or sent by registered or certified mail, return receipt requested, postage and
fees prepaid, as follows:
If to the Company, at:
John Wiley & Sons, Inc.
111 River Street
Hoboken, New Jersey 07030
Attention: SVP, Human Resources
with a copy to:
John Wiley & Sons, Inc.
111 River Street
Hoboken, New Jersey 07030
Attention: General Counsel
If to Executive, at:
2 Heath Drive
Basking Ridge, New Jersey 07030
Either of the parties hereto may at any time and from time to time change the
address to which notices shall be sent hereunder by notice to the other party.
16. Assignability. The obligations of Executive may not be
delegated and, except as expressly provided in Section 8 hereof relating to the
designation of a beneficiary in the event of death, Executive may not, without
the Company's written consent thereto, assign, transfer, convey, pledge,
encumber, hypothecate or otherwise dispose of this Agreement or any interest
therein. Any such attempted delegation or disposition shall be null and void and
without effect. The Company and Executive agree that this Agreement and all of
the Company's rights and obligations hereunder may be assigned or transferred by
the Company to and may be assumed by and become binding upon and may inure to
the benefit of any affiliate of or successor to the Company. The term
"successor" shall mean (with respect to the Company or any of its subsidiaries)
any other corporation or other business entity which, by merger, consolidation,
purchase of the assets, or otherwise, acquires all or a material part of the
assets of the Company. Any assignment by the Company of its rights or
obligations hereunder to any affiliate of or successor to the Company shall not
be a termination of employment for purposes of this Agreement.
17. Modification. This Agreement may not be modified or
amended except in writing signed by the parties. No term or condition of this
Agreement will be deemed to have been waived except in writing by the party
charged with waiver. A waiver will operate only as to the specific term or
condition waived and will not constitute a waiver for the future or act on
anything other than that which is specifically waived.
18. Governing Law. This Agreement has been executed and
delivered in the State of New York and its validity, interpretation, performance
and enforcement will be governed by the internal laws of that state without
regard to the choice of law rules.
19. Separability. All provisions of this Agreement are
intended to be severable. In the event any provision or restriction contained
herein is held to be invalid or unenforceable in any respect, in whole or in
part, such finding will in no way affect the validity or enforceability of any
other provision of this Agreement. The parties hereto further agree that any
such invalid or unenforceable provision will be deemed modified so that it will
be enforced to the greatest extent permissible under law, and to the extent that
any court of competent jurisdiction determines any restriction herein to be
unreasonable in any respect, such court may limit this Agreement to render it
reasonable in the light of the circumstances in which it was entered into and
specifically enforce this Agreement as limited.
20. No Waiver: No course of dealing or any delay on the part
of the Company or Executive in exercising any rights hereunder shall operate as
a waiver of any such rights. No waiver of any default or breach of this
Agreement shall be deemed a continuing waiver of any other breach or default.
21. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered, effective as of the date first indicated above by a
duly authorized officer of the Company.
EXECUTIVE: JOHN WILEY & SONS, INC.
/S/ William J. Pesce /S/ Peter B. Wiley
- ------------------------------------ ---------------------------------
William J. Pesce Peter B. Wiley
President and Chief Executive Officer Chairman
Signed April 29, 2003
Exhibit 10.23
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") made as of the 1st day
of March, 2003, by and between John Wiley & Sons, Inc., a New York corporation,
with offices at 111 River Street, Hoboken, New Jersey 07030 (hereinafter
referred to as the "Company"), and Stephen A. Kippur (hereinafter referred to as
"Executive").
WHEREAS, the executive is currently employed as Executive Vice
President and Group President, Professional/Trade of the Company, and Executive
desires to serve the Company in such capacity.
NOW THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Employment. The Company agrees to employ Executive and
Executive agrees to be employed by the Company for the Period of Employment (as
defined below) and upon the terms and conditions provided in this Agreement.
2. Position and Responsibilities.
(a) During the Period of Employment, Executive will
serve as Executive Vice President and Group President,
Professional/Trade of the Company, and subject to the direction of the Company's
Chief Executive Officer ("CEO") will perform such duties and exercise such
supervision with regard to the business of the Company as are associated with
such position, as well as such other duties as may be prescribed from time to
time by the CEO. Executive shall be subject to and shall observe and carry out
such reasonable rules, regulations, policies, directions and restrictions
consistent with the duties to be performed by Executive hereunder as the Company
shall from time to time establish.
(b) Executive will, during the Period of Employment,
devote Executive's full business time and attention
to the faithful and competent performance of services for the Company. Executive
hereby represents and warrants to the Company that Executive has no obligations
under any existing employment or service agreement and that Executive's
performance of the services required of Executive hereunder will not conflict
with any other existing obligations or commitments. Nothing in this Agreement
shall preclude Executive from engaging, consistent with Executive's duties and
responsibilities hereunder, in charitable and community affairs.
(c) Executive shall perform the duties contemplated
hereunder at the principal executive office of the
Company and at such other locations as may be reasonably necessary to the
performance of such duties, and Executive shall do such traveling as may be
reasonably required of Executive in the performance of such duties.
3. Period of Employment. The period of Executive's employment
under this Agreement (the "Period of Employment") will begin on March 1, 2003
(the "Commencement Date"), and end on the second anniversary thereof, subject to
earlier termination and further renewal as provided in this Agreement.
Executive's Period of Employment shall automatically renew for subsequent two
year periods, subject to the terms of this Agreement, unless either party gives
written notice 90 days or more prior to the expiration of the then existing
Period of Employment of Executive's or the Company's decision not to renew. A
decision by the Company not to renew other than as a result of Executive's death
or Disability (as defined below), and other than in circumstances which would
give rise to a Termination for Cause (as defined below) shall be treated as a
Without Cause Termination (as defined below), and so governed by the provisions
of Section 9 hereof.
4. Compensation and Benefits. For all services rendered by
Executive pursuant to this Agreement during the Period of Employment, including
services as an executive, officer, director or committee member of the Company
or any of its subsidiaries or affiliates, Executive will be compensated as
follows:
(a) Base Salary. The Company will pay Executive a
fixed base salary ("Base Salary") of not less than
$400,000 per annum. Executive will be eligible to receive annual increases as
the Company's Board of Directors (the "Board") deems appropriate, in accordance
with the Company's customary procedures regarding the salaries of senior
officers. Base Salary will be payable according to the customary payroll
practices of the Company but in no event less frequently than once each month.
(b) Executive Compensation Plans. Executive shall be
eligible to participate in all of the Company's
executive compensation plans in effect on the date hereof in which any senior
executive of the Company is eligible to participate, including but not limited
to the Company's Executive Annual Incentive Plan, as amended or restated from
time to time (the "EAIP"), the Company's Long Term Incentive Plan, as amended or
restated from time to time (the "LTIP"), or equivalents, for so long as such
plans remain in effect. Nothing in this Agreement shall require the Company or
its affiliates to establish, maintain or continue any executive compensation
plan or restrict the right of the Company or any of its affiliates to amend,
modify or terminate any such plan.
(c) Participation in Benefit Plans. To the extent
that Executive's participation or coverage is not
duplicative of that provided under an executive compensation plan or arrangement
in which Executive is eligible to participate, the Company shall afford
Executive with an opportunity to participate in any health care, dental,
disability insurance, life insurance, retirement, savings and any other employee
benefits plans, policies or arrangements which the Company maintains for its
employees in accordance with the written terms of such plans, policies or
arrangements. Nothing in this Agreement shall require the Company or its
affiliates to establish, maintain or continue any benefit plans, policies or
arrangements or restrict the right of the Company or any of its affiliates to
amend, modify or terminate any such benefit plan, policy or arrangement.
(d) Vacations, Holidays or Temporary Leave. Executive
shall be entitled to take four weeks of vacation per
calendar year, or such greater amount, if any, as provided in the policies of
the Company then applicable to Executive, without loss or diminution of
compensation. Such vacation shall be taken at such time or times consistent with
the needs of the Company's business. Executive shall further be entitled to the
number of paid holidays, and leaves for illness or temporary disability in
accordance with the Company's policies as such policies may be amended from time
to time or terminated in the Company's sole discretion.
5. Other Offices. Executive agrees to serve without additional
compensation, if elected or appointed thereto, as an officer or director of any
of the Company's subsidiaries or affiliates or as any other officer of the
Company.
6. Business Expenses. The Company will reimburse Executive for
all reasonable travel and other expenses incurred by Executive in connection
with the performance of Executive's duties and obligations under this Agreement.
Executive will comply with such limitations and reporting requirements with
respect to expenses as may be established by Company from time to time and will
promptly provide all appropriate and requested documentation in connection with
such expenses.
7. Disability. If Executive becomes Disabled (as defined
below) during the Period of Employment, the Company may, in its discretion, hire
a permanent replacement to fill the position previously held and to perform the
duties previously performed by Executive, provided, however, the Company shall
continue Executive's employment with the Company on an inactive basis to the
extent necessary to continue to maintain Executive's eligibility for benefits
available under the Company's Group Long-Term Disability Insurance Plan or under
any generally similar plan then in effect (the "LTD Plan")
and such other employee benefit plans that are generally available to employees
receiving benefits under the LTD Plan, in accordance with the terms of such
plan(s) as they may be amended from time to time. For purposes of this
Agreement, "Disabled" or "Disability" means Executive's inability, because of
mental or physical illness or incapacity, whether total or partial, to perform
one or more of the primary duties of Executive's employment, with or without
reasonable accommodation, for a length of time that the Company determines is
sufficient to satisfy such obligations as it may have under the Family and
Medical Leave Act ("FMLA") and such "reasonable accommodation" obligations it
may have under federal, state or local disability laws. Upon Executive's
entitlement to receive benefits available under the LTD Plan and such other
benefits generally available to employees receiving benefits under the LTD Plan,
the Company's obligation to provide Executive compensation and other benefits
pursuant to Section 4 hereof shall cease. In the event that Executive ceases to
be Disabled and Executive is able to return to work and Executive's former
position is not open, the Company will endeavor to find, and will work
interactively with Executive to find, a position of comparable responsibility,
compensation and benefits and to reinstate Executive to such position, if such a
position is available at the conclusion of Executive's disability leave of
absence. Prior to restoration of Executive to active employment with the
Company, Executive shall cooperate in obtaining all fitness for duty
certifications from Executive's treating physician(s) and such other physicians
as the Company may request in accordance with the FMLA and federal, state and
local disability and worker's compensation laws. Within fifteen (15) days of
receipt of all medical certification(s) requested by the Company, if the Company
does not restore Executive to active employment with the Company, then at that
time Executive's employment with the Company will be deemed to have terminated.
Under the policy currently in effect for employees of the Company, such
termination will be treated as a Without Cause Termination in accordance with
Paragraph 9(a) below, provided the Executive has not then attained the age of
65. Nothing in this Agreement shall require the Company to continue such policy,
and such termination shall be treated in accordance with the policy applicable
at the time the Executive becomes disabled.
8. Death. In the event of the death of Executive during the
Period of Employment, the Period of Employment will end and the Company's
obligation to make payments under this Agreement will cease as of the date of
death, except that the Company will pay Executive's beneficiary designated for
purposes of Executive's life insurance provided by the Company or absent such
designation to Executive's estate Executive's Base Salary until the end of the
month in which Executive dies, and except for any rights and benefits of
Executive under the benefit plans and programs of the Company including, without
limitation, the SERP (as defined below) in which Executive is a participant, as
determined in accordance with the terms and provisions of such plans and
programs. The payout under the EAIP, or equivalent, for the fiscal year in which
Executive's death occurs, shall be annualized and paid at the normal time to
Executive's estate pro rata to the date of death. The value of the "payout
amount," in cash, for any executive long term incentive plan established by the
Company, the plan cycle of which ends within 12 months after the date of
Executive's death, shall be paid at the normal time to Executive's estate.
9. Effect of Termination of Employment.
(a) Without Cause Termination and Constructive
Discharge Absent a Change of Control or a Special Change of
Control. If Executive's employment terminates during the Period of Employment in
circumstances in which no Change of Control (as defined below) or Special Change
of Control (as defined below) has occurred, due to a Without Cause Termination
(as defined below) or a Constructive Discharge (as defined below), subject to
Executive executing a general release of claims as more fully described in
Section 9(e) hereof, the Company will pay or provide, as the case may be,
Executive (or Executive's surviving spouse, estate or personal representative,
as applicable) upon such event: (i) Base Salary earned but unpaid as of the
effective date of such termination of employment; (ii) a lump sum payment equal
to the Severance Pay Amount (as defined below); (iii) the "target incentive
amount" under any executive annual incentive plan established by the Company for
a fiscal year ending during the Benefits Continuation Period, and the same
"target incentive amount" for any such executive annual incentive plan,
pro-rated to the end of the Benefits Continuation Period, for a fiscal year
commencing during but ending after the Benefit Continuation Period, or the
equivalent under any bonus or variable compensation plan which may hereafter be
adopted by the Company in lieu of such executive annual incentive plan; (iv) the
value of the "payout amount," in cash, for any executive long term incentive
plan established by the Corporation, the plan cycle of which ends within 12
months after the effective date
of termination, pro-rated to the date of termination; and (v) coverage during
the Benefits Continuation Period (as defined below) under the following employee
benefit plans or provisions for comparable benefits outside such plans, but only
to the extent comparable coverage is not provided by any new employer, (x) the
Company's Group Health Insurance Program, (y) the LTD Plan (as provided under
such plan, Executive shall be required to pay the premium), and (z) the
Company's Group Life and Accidental Death and Dismemberment Insurance (at the
levels in effect at the date of termination of employment). As used in this
Agreement, the term "Severance Pay Amount" shall equal the amount of Executive's
then current Base Salary payable to Executive during one month multiplied by (x)
twelve (12) if Executive has been employed by the Company for less than ten (10)
continuous unbroken years of service, or (y) eighteen (18) if Executive has been
employed by the Company for between ten (10) and twenty (20) continuous unbroken
years of service, or (z) twenty-four (24) if Executive has been employed by the
Company for more than twenty (20) continuous unbroken years of service.
(b) Without Cause Termination and Constructive
Discharge Following a Change of Control or a Special Change
of Control. If Executive's employment terminates during the Period of Employment
due to a Without Cause Termination or a Constructive Discharge within the
twenty-four (24) month period following a Change of Control or a Special Change
of Control, then the Company will provide Executive (or Executive's surviving
spouse, estate or personal representative, as applicable) the following payments
and/or benefits upon such event: (i) Base Salary earned but unpaid as of the
effective date of such termination of employment; (ii) a lump sum amount equal
to twenty-four (24) months of Executive's then current Base Salary; (iii) the
"target incentive amount" under any executive annual incentive plan established
by the Company for a fiscal year ending during the Benefits Continuation Period,
and the same "target incentive amount" for any such executive annual incentive
plan, pro-rated to the end of the Benefits Continuation Period, for a fiscal
year commencing during but ending after the Benefit Continuation Period, or the
equivalent under any bonus or variable compensation plan which may hereafter be
adopted by the Company in lieu of such executive annual incentive plan; (iv)
accelerated vesting of all stock options and restricted stock granted to
Executive under any executive long term incentive plan established by the
Company but not yet vested on the effective date of termination of employment,
or at the Company's option, the cash value of the stock options and restricted
stock forfeited under such grants based on fair market value on the effective
date of termination of employment; (v) accelerated vesting of all "target"
restricted performance shares awarded to Executive under any executive long term
incentive plan established by the Company that would be earned in the fiscal
year of termination of employment or subsequent fiscal years, or at the
Company's option, the cash value of the "target" restricted performance shares
forfeited under such awards based on fair market value on the effective date of
termination of employment; (vi) coverage during the Benefits Continuation Period
under the following employee benefit plans or provisions for comparable benefits
outside such plans, but only to the extent comparable coverage is not provided
by any new employer, for (x) the Company's Group Health Insurance Program, (y)
the LTD Plan (as provided under such plan, Executive shall be required to pay
the premium), and (z) the Company's Group Life and Accidental Death and
Dismemberment Insurance (at the levels in effect at the date of termination of
employment); (vii) all payments and benefits to which Executive may be entitled
pursuant to the terms and conditions of the SERP; and (viii) all payments and
benefits to which Executive may be entitled under the Company's Non-Qualified
Supplemental Benefit Plan.
(c) Termination for Cause; Resignation. If
Executive's employment terminates due to a Termination for
Cause (as defined below) or a Resignation (as defined below), Base Salary earned
but unpaid as of the date of such termination will be paid to Executive in a
lump sum and the Company will have no further obligations to Executive
hereunder. In the event any termination of Executive's employment for any
reason, Executive if so requested by the Company agrees to assist in the orderly
transfer of authority and responsibility to Executive's successor.
(d) For purposes of this Agreement, the following
capitalized terms have the following meanings:
(i) "Benefits Continuation Period" means
that number of months which is equal to the number
of months of Base Salary that Executive receives as a lump sum severance payment
in accordance with Sections 9(a) or 9(b) hereof.
(ii) "Change of Control" shall have the
meaning set forth in the SERP.
(iii) "Constructive Discharge" means: (A)
any material failure by the Company to fulfill its
obligations under this Agreement (including, without limitation, any reduction
of the Base Salary, as the same may be increased during the Period of
Employment, or other material element of compensation); (B) a material and
adverse change to, or a material reduction of, Executive's duties and
responsibilities to the Company; or (C) the relocation of Executive's primary
office to any location more than fifty (50) miles from the Company's principal
executive offices. Executive will provide the Company a written notice which
describes the circumstances being relied upon for all terminations of employment
by Executive resulting from any circumstances claimed to be a Constructive
Discharge thirty (30) days after the event giving rise to the notice. The
Company will have thirty (30) days after receipt of such notice to remedy the
situation prior to Executive's termination of employment due to a Constructive
Discharge.
(iv) "Resignation" means a termination of
Executive's employment by Executive, other than in
connection with Executive's Disability pursuant to Section 7 hereof, Death
pursuant to Section 8 hereof or Constructive Discharge pursuant to Sections 9(a)
or 9(b) hereof.
(v) "SERP" means the Company's 1989
Supplemental Executive Retirement Plan, as amended or
restated from time to time.
(vi) A "Special Change of Control" shall be
deemed to have occurred if a Person (as
hereinafter defined) who was the beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended), directly or indirectly,
of 33-1/3% or more of the Voting Power (as hereinafter defined) of the Company
on January 1, 1989, ceases to have the Voting Power to elect a majority of the
board of directors of the Company. For purposes of this subsection, each of the
terms "Person" and "Voting Power" shall have the meaning ascribed to it by
Section 6.3 of the SERP (as if it had been used in clause (b) of Section 6.2 of
the SERP). For avoidance of doubt, it is understood by Executive and the Company
that the only Person who was the beneficial owner, directly or indirectly, of
33-1/3% or more of the Voting Power of the Company on January 1, 1989, was
composed of W. Bradford Wiley, Deborah E. Wiley, Peter Booth Wiley and William
Bradford Wiley II (including trusts for which such any such persons serves as
trustee); and it is further understood that as of the date hereof, such Person
was composed of Deborah E. Wiley, Peter Booth Wiley and William Bradford Wiley
II (including trusts for which any such person serves as trustee).
Notwithstanding the foregoing, a Special Change of Control shall not be deemed
to have occurred as a result of a "person" comprising such Person ceasing to
have Voting Power to elect a majority of the Board of Directors of the Company
so long as the other "person" or "persons" who compose such Person, in the
aggregate, continue to have Voting Power to elect a majority of the board of
directors of the Company.
(vii) "Termination for Cause" means: (A)
Executive's refusal or willful and continued failure
to substantially perform Executive's material duties to the best of Executive's
ability under this Agreement (for reasons other than death or disability), in
any such case after written notice thereof; (B) Executive's gross negligence in
the performance of Executive's material duties under this Agreement; (C) any act
of fraud, misappropriation, material dishonesty, embezzlement, willful
misconduct or similar conduct; (D) Executive's conviction of or plea of guilty
or nolo contendere to a felony or any crime involving moral turpitude; or (E)
Executive's material and willful violation of any of the Company's reasonable
rules, regulations, policies, directions and restrictions.
(viii) "Without Cause Termination" or
"Terminated Without Cause" means termination of
Executive's employment by the Company other than in connection with Executive's
Disability pursuant to Section 7 hereof, death pursuant to Section 8 hereof or
Constructive Discharge pursuant to Sections 9(a) or 9(b) hereof, or the
Company's Termination for Cause of Executive.
(e) Conditions to Payment. All payments and benefits
due to Executive under this Section 9 shall be
contingent upon the execution by Executive (or Executive's beneficiary or
estate) of a general release of all claims to the maximum extent permitted by
law against the Company, its affiliates, and their current and former officers,
directors, employees and agents in such form as determined by the Company in its
sole discretion.
(f) No Other Payments. Except as provided in this
Section 9, Executive shall not be entitled to receive
any other payments or benefits from the Company due to the termination of
Executive's employment, including but not limited to, any employee benefits
under any of the Company's employee benefits plans or arrangements (other than
at Executive's expense under the Consolidated Omnibus Budget Reconciliation Act
of 1985 or pursuant to the written terms of any pension benefit plan in which
Executive is a participant in which the Company may have in effect from time to
time) or any right to severance benefits. Notwithstanding the foregoing
sentence, in the event of a termination of employment by Executive under the
circumstances described in Section 9(b) hereof following a Change of Control,
nothing in this Agreement shall reduce Executive's entitlement, if any, to any
payment or benefit pursuant to the LTIP resulting from Executive's termination
of employment following a Change of Control.
(g) Conditional Payments and Limitations.
(i) In the event that (A) any payment or
benefit received or to be received by Executive
pursuant to the terms of this Agreement or of any other plan, arrangement or
agreement of the Company (or any affiliate) (together, the "Payments") would, in
the opinion of independent tax counsel selected by the Company and reasonably
acceptable to Executive ("Tax Counsel"), be subject to the excise tax (the
"Excise Tax") imposed by section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code") (in whole or in part), determined as provided below, and
(B) the present value of the Payments is less than 115% of the present value of
an amount calculated such that no portion of the Payments would be subject to
the Excise Tax, then the Payments shall be reduced (but not below zero) until no
portion of the payments would be subject to the Excise Tax. In the event that
(C) the Payments would, in the opinion of Tax Counsel, be subject to the Excise
Tax (in whole or in part), determined as provided below, and (D) the present
value of the Payments is equal to or greater than 115% of the present value of
an amount calculated such that no portion of the Payments would be subject to
the Excise Tax, then the Company shall pay to Executive, at the time specified
in Section 9(g)(vi) below, an additional amount (the "Gross-Up Payment") such
that the net amount retained by Executive, after deduction of the Excise Tax on
the Covered Payments (as that term is defined below) and any federal, state and
local income tax and Excise Tax upon the payment provided for by this Section
9(g), and any interest, penalties or additions to tax payable by Executive with
respect thereto, shall be equal to the total present value of the Covered
Payments at the time such Covered Payments are to be made.
(ii) For purposes of determining whether any
of the Payments will be subject to the Excise Tax
and the amounts of such Excise Tax: (1) the total amount of the Payments shall
be treated as "parachute payments" within the meaning of section 280G(b)(2) of
the Code, and all "excess parachute payments" within the meaning of section
280G(b)(1) of the Code shall be treated as subject to the Excise Tax, except to
the extent that, in the opinion of Tax Counsel, a Payment (in whole or in part)
does not constitute a "parachute payment" within the meaning of section
280G(b)(2) of the Code, or such "excess parachute payments" (in whole or in
part) are not subject to the Excise Tax; (2) the amount of the Payments that
shall be treated as subject to the Excise Tax shall be equal to the lesser of
(A) the total amount of the Payments or (B) the amount of "excess parachute
payments" within the meaning of section 280G(b)(1) of the Code (after applying
clause (1) hereof); and (3) the value of any noncash benefits or any deferred
payment or benefit shall be determined by Tax Counsel in accordance with the
principles of sections 280G(d)(3) and (4) of the Code.
(iii) In the event that by reason of the
application of this Section 9(g), the Payments to
Executive shall be reduced, then Executive may select from among the Payments
those Payments to be reduced.
(iv) As used in this Section 9(g), the term
"Covered Payments" shall mean the payments and/or
benefits payable to Executive pursuant to the provisions of Sections 9(b)(i),
9(b)(ii), 9(b)(iii), 9(b)(iv) and 9(b)(vi) of this Agreement (but in the case of
Section 9(b)(iv), only with respect to restricted performance shares awarded to
Executive that have been earned prior to a Change of Control), the SERP and the
Company's Nonqualified Supplemental Benefit Plan. Covered Payments shall not
include any payments and/or benefits other than those listed in the preceding
sentence (including, without limitation, any payments and/or benefits under the
EAIP or the LTIP), except as expressly provided above.
(v) For purposes of determining the amount
of the Gross-Up Payment, Executive shall be deemed
to pay federal income taxes at the highest marginal rates of federal income
taxation applicable to the individuals in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rates of taxation applicable to individuals as are in effect in the
state and locality of Executive's residence in the calendar year in which the
Gross-Up Payment is to be made, net of the maximum reduction in federal income
taxes that can be obtained from deduction of such state and local taxes taking
into account any limitations applicable to individuals subject to federal income
tax at the highest marginal rates.
(vi)The Gross-Up Payment provided for in
Section 9(g)(i) hereof shall be made upon the earlier of
(A) the making to Executive of any Payment or (B) the imposition upon Executive
or payment by Executive of any Excise Tax.
(vii) If it is established pursuant to a
final determination of a court or an Internal Revenue
Service proceeding or the opinion of Tax Counsel that the Excise Tax on Covered
Payments is less than the amount taken into account under Section 9(g)(i)
hereof, Executive shall repay to the Company within five days of Executive's
receipt of notice of such final determination or opinion the portion of the
Gross-Up Payment attributable to such reduction (plus the portion of the
Gross-Up Payment attributable to the Excise Tax and federal, state and local
income tax imposed on the Gross-Up Payment being repaid by Executive if such
repayment results in a reduction in Excise Tax or a federal, state and local
income tax deduction) plus any interest received by Executive on the amount of
such repayment. If it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding or the opinion of Tax Counsel
that the Excise Tax on Covered Payments exceeds the amount taken into account
hereunder (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess within five days
of the Company's receipt of notice of such final determination or opinion.
Executive acknowledges that the timing of the Gross-Up Payment made by the
Company to the Executive pursuant to Section 9(g) hereof is for the benefit of
the Executive, and that any repayment of such Gross-Up Payment by Executive to
the Company that may subsequently be required pursuant to this Section 9(g)(vii)
is solely for the purposes of the Company's recoupment of compensation that the
Company overpaid to Executive.
10. Other Duties of Executive During and After the Period of
Employment.
(a) Non-Competition and Non-Disclosure Agreement.
Simultaneously with the execution of this Agreement,
Executive agrees to execute and to comply with the terms of the Non-Competition
and Non-Disclosure Agreement (hereinafter referred to as the "Non-Competition
Agreement") in the form provided to Executive by the Company. The terms and
conditions of the Non-Competition Agreement are incorporated herein by reference
and made a part of this Agreement as if fully set forth herein.
(b) Agreement To Arbitrate. Simultaneous with the
execution of this Agreement, Executive agrees to
execute and to comply with the terms of the Agreement to Arbitrate (hereinafter
referred to as the "Agreement to Arbitrate") in the form provided to Executive
by the Company. The terms and conditions of the Agreement to Arbitrate are
incorporated herein by reference and made a part of this Agreement as if fully
set forth herein.
11. Indemnification. The Company will indemnify Executive to
the fullest extent permitted by the laws of the state of the Company's
incorporation in effect at that time, or the certificate of incorporation and
by-laws of Company, whichever affords the greater protection to Executive.
12. Mitigation. Executive will not be required to mitigate the
amount of any payment provided for hereunder by seeking other employment or
otherwise, nor will the amount of any such payment be reduced by any
compensation earned by Executive as the result of employment by another employer
after the date Executive's employment hereunder terminates.
13. Withholding Taxes. Executive acknowledges and agrees that
the Company may directly or indirectly withhold from any payments under this
Agreement all federal, state, city or other taxes that will be required pursuant
to any law or governmental regulation.
14. Effect of Prior Agreements. This Agreement, together with
the Non-Competition Agreement and the Agreement to Arbitrate, constitute the
sole and entire agreements and understandings between Executive and the Company
with respect to the matters covered thereby, and there are no other promises,
agreements, representations, warranties or other statements between Executive
and the Company in respect to such matters not expressly set forth in these
agreements. These agreements supersede all prior and contemporaneous agreements,
understandings or other arrangements, whether written or oral, concerning the
subject matter thereof. Upon execution of this Agreement, Executive's existing
employment agreement with the Company shall be superceded by this Agreement in
its entirety and shall be of no further force and effect.
15. Notices. Any notice required, permitted, or desired to be
given pursuant to any of the provisions of this Agreement shall be deemed to
have been sufficiently given or served for all purposes if delivered in person
or sent by registered or certified mail, return receipt requested, postage and
fees prepaid, as follows:
If to the Company, at:
John Wiley & Sons, Inc.
111 River Street
Hoboken, New Jersey 07030
Attention: Chief Executive Officer
with a copy to:
John Wiley & Sons, Inc.
111 River Street
Hoboken, New Jersey 07030
Attention: General Counsel
If to Executive, at:
37 Riverside Drive, Apartment 4A
New York, New York 10023
Either of the parties hereto may at any time and from time to time change the
address to which notices shall be sent hereunder by notice to the other party.
16. Assignability. The obligations of Executive may not be
delegated and, except as expressly provided in Section 8 hereof relating to the
designation of a beneficiary in the event of death, Executive may not, without
the Company's written consent thereto, assign, transfer, convey, pledge,
encumber, hypothecate or otherwise dispose of this Agreement or any interest
therein. Any such attempted delegation or disposition shall be null and void and
without effect. The Company and Executive agree that this Agreement and all of
the Company's rights and obligations hereunder may be assigned or transferred by
the Company to and may be assumed by and become binding upon and may inure to
the benefit of any affiliate of or successor to the Company. The term
"successor" shall mean (with respect to the Company or any of its subsidiaries)
any other corporation or other business entity which, by merger, consolidation,
purchase of the assets, or otherwise, acquires all or a material part of the
assets of the Company. Any assignment by the Company of its rights or
obligations hereunder to any affiliate of or successor to the Company shall not
be a termination of employment for purposes of this Agreement.
17. Modification. This Agreement may not be modified or
amended except in writing signed by the parties. No term or condition of this
Agreement will be deemed to have been waived except in writing by the party
charged with waiver. A waiver will operate only as to the specific term or
condition waived and will not constitute a waiver for the future or act on
anything other than that which is specifically waived.
18. Governing Law. This Agreement will be construed and
interpreted pursuant to the laws of the State of New York, without regard to
such State's conflict of law rules.
19. Separability. All provisions of this Agreement are
intended to be severable. In the event any provision or restriction contained
herein is held to be invalid or unenforceable in any respect, in whole or in
part, such finding will in no way affect the validity or enforceability of any
other provision of this Agreement. The parties hereto further agree that any
such invalid or unenforceable provision will be deemed modified so that it will
be enforced to the greatest extent permissible under law, and to the extent that
any court of competent jurisdiction determines any restriction herein to be
unreasonable in any respect, such court may limit this Agreement to render it
reasonable in the light of the circumstances in which it was entered into and
specifically enforce this Agreement as limited.
20. No Waiver: No course of dealing or any delay on the part
of the Company or Executive in exercising any rights hereunder shall operate as
a waiver of any such rights. No waiver of any default or breach of this
Agreement shall be deemed a continuing waiver of any other breach or default.
21. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered, effective as of the date first indicated above by a
duly authorized officer of the Company.
EXECUTIVE: JOHN WILEY & SONS, INC.
/S/ Stephen A. Kippur /S/ William J. Pesce
- --------------------------------- -----------------------------------------
Stephen A. Kippur William J. Pesce
President and Chief Executive Officer
Signed April 29, 2003
Exhibit 10.24
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") made as of the 29th
day of April, 2003, by and between John Wiley & Sons, Inc., a New York
corporation, with offices at 111 River Street, Hoboken, New Jersey 07030
(hereinafter referred to as the "Company"), and Ellis E. Cousens (hereinafter
referred to as "Executive").
WHEREAS, the executive is currently employed as Executive Vice
President and Chief Financial and Support Operations Officer of the Company, and
Executive desires to serve the Company in such capacity.
NOW THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Employment. The Company agrees to employ Executive and
Executive agrees to be employed by the Company for the Period of Employment (as
defined below) and upon the terms and conditions provided in this Agreement.
2. Position and Responsibilities.
(a) During the Period of Employment, Executive will
serve as Executive Vice
President and Chief Financial and Support Operations Officer of the Company, and
subject to the direction of the Company's Chief Executive Officer ("CEO") will
perform such duties and exercise such supervision with regard to the business of
the Company as are associated with such position, as well as such other duties
as may be prescribed from time to time by the CEO. Executive shall be subject to
and shall observe and carry out such reasonable rules, regulations, policies,
directions and restrictions consistent with the duties to be performed by
Executive hereunder as the Company shall from time to time establish.
(b) Executive will, during the Period of Employment,
devote Executive's full
business time and attention to the faithful and competent performance of
services for the Company. Executive hereby represents and warrants to the
Company that Executive has no obligations under any existing employment or
service agreement and that Executive's performance of the services required of
Executive hereunder will not conflict with any other existing obligations or
commitments. Nothing in this Agreement shall preclude Executive from engaging,
consistent with Executive's duties and responsibilities hereunder, in charitable
and community affairs.
(c) Executive shall perform the duties contemplated
hereunder at the principal
executive office of the Company and at such other locations as may be reasonably
necessary to the performance of such duties, and Executive shall do such
traveling as may be reasonably required of Executive in the performance of such
duties.
3. Period of Employment. The period of Executive's employment
under this Agreement (the "Period of Employment") will begin on March 1, 2003
(the "Commencement Date"), and end on the second anniversary thereof, subject to
earlier termination and further renewal as provided in this Agreement.
Executive's Period of Employment shall automatically renew for subsequent two
year periods, subject to the terms of this Agreement, unless either party gives
written notice 90 days or more prior to the expiration of the then existing
Period of Employment of Executive's or the Company's decision not to renew. A
decision by the Company not to renew other than as a result of Executive's death
or Disability (as defined below), and other than in circumstances which would
give rise to a Termination for Cause (as defined below) shall be treated as a
Without Cause Termination (as defined below), and so governed by the provisions
of Section 9 hereof.
4. Compensation and Benefits. For all services rendered by
Executive pursuant to this Agreement during the Period of Employment, including
services as an executive, officer, director or committee member of the Company
or any of its subsidiaries or affiliates, Executive will be compensated as
follows:
(a) Base Salary. The Company will pay Executive a
fixed base salary ("Base Salary")
of not less than $400,000 per annum. Executive will be eligible to receive
annual increases as the Company's Board of Directors (the "Board") deems
appropriate, in accordance with the Company's customary procedures regarding the
salaries of senior officers. Base Salary will be payable according to the
customary payroll practices of the Company but in no event less frequently than
once each month.
(b) Executive Compensation Plans. Executive shall be
eligible to participate in all
of the Company's executive compensation plans in effect on the date hereof in
which any senior executive of the Company is eligible to participate, including
but not limited to the Company's Executive Annual Incentive Plan, as amended or
restated from time to time (the "EAIP"), the Company's Long Term Incentive Plan,
as amended or restated from time to time (the "LTIP"), or equivalents, for so
long as such plans remain in effect. Nothing in this Agreement shall require the
Company or its affiliates to establish, maintain or continue any executive
compensation plan or restrict the right of the Company or any of its affiliates
to amend, modify or terminate any such plan.
(c) Participation in Benefit Plans. To the extent
that Executive's participation or
coverage is not duplicative of that provided under an executive compensation
plan or arrangement in which Executive is eligible to participate, the Company
shall afford Executive with an opportunity to participate in any health care,
dental, disability insurance, life insurance, retirement, savings and any other
employee benefits plans, policies or arrangements which the Company maintains
for its employees in accordance with the written terms of such plans, policies
or arrangements. Nothing in this Agreement shall require the Company or its
affiliates to establish, maintain or continue any benefit plans, policies or
arrangements or restrict the right of the Company or any of its affiliates to
amend, modify or terminate any such benefit plan, policy or arrangement.
(d) Vacations, Holidays or Temporary Leave. Executive
shall be entitled to take four
weeks of vacation per calendar year, or such greater amount, if any, as provided
in the policies of the Company then applicable to Executive, without loss or
diminution of compensation. Such vacation shall be taken at such time or times
consistent with the needs of the Company's business. Executive shall further be
entitled to the number of paid holidays, and leaves for illness or temporary
disability in accordance with the Company's policies as such policies may be
amended from time to time or terminated in the Company's sole discretion.
(e) Relocation Expenses. After the Company moves its
principal executive office to
Hoboken, New Jersey, the Company shall reimburse normal and customary expenses
reasonably incurred by Executive in relocating, within 18 months of such move to
within a reasonable commuting distance of such new principal executive office as
determined by the Company in its sole discretion (the "Commute Zone"), such
relocation expenses to include (x) reasonable expenses incurred in connection
with packing, loading, transporting and unloading all of Executive's household
belongings and (y) reasonable expenses incidental to the sale of Executive's
current residence in Yonkers, New York, and Executive's purchase of a new
residence within the Commute Zone, including without limitation, brokers' fees
and other closing costs. The Company will "gross-up" such relocation expense
reimbursement payments in an amount equal to the tax liability of Executive
resulting from such relocation expense reimbursement. Executive agrees to
provide the Company promptly with all appropriate and requested documentation
for all reimbursable relocation expenses. In the event Executive's employment is
terminated due to a voluntary Resignation (as defined in Section 9 hereof)
within three (3) years of the date Executive's relocation is completed, then
Executive shall reimburse the Company on such termination date for all
relocation expenses (but not the "gross-up" payment) paid by the Company to
Executive under this Section 4(e).
5. Other Offices. Executive agrees to serve without additional
compensation, if elected or appointed thereto, as an officer or director of any
of the Company's subsidiaries or affiliates or as any other officer of the
Company.
6. Business Expenses. The Company will reimburse Executive for
all reasonable travel and other expenses incurred by Executive in connection
with the performance of Executive's duties and obligations under this Agreement.
Executive will comply with such limitations and reporting requirements with
respect to expenses as may be established by Company from time to time and will
promptly provide all appropriate and requested documentation in connection with
such expenses.
7. Disability. If Executive becomes Disabled (as defined
below) during the Period of Employment, the Company may, in its discretion, hire
a permanent replacement to fill the position previously held and to perform the
duties previously performed by Executive, provided, however, the Company shall
continue Executive's employment with the Company on an inactive basis to the
extent necessary to continue to maintain Executive's eligibility for benefits
available under the Company's Group Long-Term Disability Insurance Plan or under
any generally similar plan then in effect (the "LTD Plan") and such other
employee benefit plans that are generally available to employees receiving
benefits under the LTD Plan, in accordance with the terms of such plan(s) as
they may be amended from time to time. For purposes of this Agreement,
"Disabled" or "Disability" means Executive's inability, because of mental or
physical illness or incapacity, whether total or partial, to perform one or more
of the primary duties of Executive's employment, with or without reasonable
accommodation, for a length of time that the Company determines is sufficient to
satisfy such obligations as it may have under the Family and Medical Leave Act
("FMLA") and such "reasonable accommodation" obligations it may have under
federal, state or local disability laws. Upon Executive's entitlement to receive
benefits available under the LTD Plan and such other benefits generally
available to employees receiving benefits under the LTD Plan, the Company's
obligation to provide Executive compensation and other benefits pursuant to
Section 4 hereof shall cease. In the event that Executive ceases to be Disabled
and Executive is able to return to work and Executive's former position is not
open, the Company will endeavor to find, and will work interactively with
Executive to find, a position of comparable responsibility, compensation and
benefits and to reinstate Executive to such position, if such a position is
available at the conclusion of Executive's disability leave of absence. Prior to
restoration of Executive to active employment with the Company, Executive shall
cooperate in obtaining all fitness for duty certifications from Executive's
treating physician(s) and such other physicians as the Company may request in
accordance with the FMLA and federal, state and local disability and worker's
compensation laws. Within fifteen (15) days of receipt of all medical
certification(s) requested by the Company, if the Company does not restore
Executive to active employment with the Company, then at that time Executive's
employment with the Company will be deemed to have terminated. Such termination
of employment shall be treated as a Without Cause Termination in accordance with
9(a) hereof.
8. Death. In the event of the death of Executive during the
Period of Employment, the Period of Employment will end and the Company's
obligation to make payments under this Agreement will cease as of the date of
death, except that the Company will pay Executive's beneficiary designated for
purposes of Executive's life insurance provided by the Company or absent such
designation to Executive's estate Executive's Base Salary until the end of the
month in which Executive dies, and except for any rights and benefits of
Executive under the benefit plans and programs of the Company including, without
limitation, the SERP (as defined below) in which Executive is a participant, as
determined in accordance with the terms and provisions of such plans and
programs. The payout under the EAIP, or equivalent, for the fiscal year in which
Executive's death occurs, shall be annualized and paid at the normal time to
Executive's estate pro rata to the date of death. The value of the "payout
amount," in cash, for any executive long term incentive plan established by the
Company, the plan cycle of which ends within 12 months after the date of
Executive's death, shall be paid at the normal time to Executive's estate.
9. Effect of Termination of Employment.
(a) Without Cause Termination and Constructive
Discharge Absent a Change of Control
or a Special Change of Control. If Executive's employment terminates during the
Period of Employment in circumstances in which no Change of Control (as defined
below) or Special Change of Control (as defined below) has occurred, due to a
Without Cause Termination (as defined below) or a Constructive Discharge (as
defined below), subject to Executive executing a general release of claims as
more fully described in Section 9(e) hereof, the Company will pay or provide, as
the case may be, Executive (or Executive's surviving spouse, estate or personal
representative, as applicable) upon such event: (i) Base Salary earned but
unpaid as of the effective date of such termination of employment; (ii) a lump
sum payment equal to the Severance Pay Amount (as defined below); and (iii)
coverage during the Benefits Continuation Period (as defined below) under the
following employee benefit plans or provisions for comparable benefits outside
such plans, but only to the extent comparable coverage is not provided by any
new employer, (x) the Company's Group Health Insurance Program, (y) the LTD Plan
(as provided under such plan, Executive shall be required to pay the premium),
and (z) the Company's Group Life and Accidental Death and Dismemberment
Insurance (at the levels in effect at the date of termination of employment). As
used in this Agreement, the term "Severance Pay Amount" shall equal the amount
of Executive's then current Base Salary payable to Executive during one month
multiplied by eighteen (18).
(b) Without Cause Termination and Constructive
Discharge Following a Change of
Control or a Special Change of Control. If Executive's employment terminates
during the Period of Employment due to a Without Cause Termination or a
Constructive Discharge within the twenty-four (24) month period following a
Change of Control or a Special Change of Control, then the Company will provide
Executive (or Executive's surviving spouse, estate or personal representative,
as applicable) the following payments and/or benefits upon such event: (i) Base
Salary earned but unpaid as of the effective date of such termination of
employment; (ii) a lump sum amount equal to twenty-four (24) months of
Executive's then current Base Salary; (iii) the "target incentive amount" under
any executive annual incentive plan established by the Company for a fiscal year
ending during the Benefits Continuation Period, and the same "target incentive
amount" for any such executive annual incentive plan, pro-rated to the end of
the Benefits Continuation Period, for a fiscal year commencing during but ending
after the Benefit Continuation Period, or the equivalent under any bonus or
variable compensation plan which may hereafter be adopted by the Company in lieu
of such executive annual incentive plan; (iv) accelerated vesting of all stock
options and restricted stock granted to Executive under any executive long term
incentive plan established by the Company but not yet vested on the effective
date of termination of employment, or at the Company's option, the cash value of
the stock options and restricted stock forfeited under such grants based on fair
market value on the effective date of termination of employment; (v) accelerated
vesting of all "target" restricted performance shares awarded to Executive under
any executive long term incentive plan established by the Company that would be
earned in the fiscal year of termination of employment or subsequent fiscal
years, or at the Company's option, the cash value of the "target" restricted
performance shares forfeited under such awards based on fair market value on the
effective date of termination of employment; (vi) coverage during the Benefits
Continuation Period under the following employee benefit plans or provisions for
comparable benefits outside such plans, but only to the extent comparable
coverage is not provided by any new employer, for (x) the Company's Group Health
Insurance Program, (y) the LTD Plan (as provided under such plan, Executive
shall be required to pay the premium), and (z) the Company's Group Life and
Accidental Death and Dismemberment Insurance (at the levels in effect at the
date of termination of employment); (vii) all payments and benefits to which
Executive may be entitled pursuant to the terms and conditions of the SERP; and
(viii) all payments and benefits to which Executive may be entitled under the
Company's Non-Qualified Supplemental Benefit Plan.
(c)Without Cause Termination Following Change of CEO.
Notwithstanding the
foregoing, in the event that during the Period of Employment the Company shall
hire a new CEO and the new CEO terminates Executive's employment in
circumstances constituting a Without Cause Termination (as defined below) during
the new CEO's first twelve (12) months of employment, and in circumstances in
which no Change of Control (as defined below) has occurred, then under those
circumstances the Company will provide Executive the following payments and/or
benefits upon such event: (i) Base Salary earned but unpaid as of the effective
date of such termination of employment; (ii) a lump sum amount equal to
twenty-four (24) months of Executive's then current Base Salary; (iii) the
"target incentive amount" under any executive annual incentive plan established
by the Company for a fiscal year ending during the Benefits Continuation Period,
and the same "target incentive amount" for any such executive annual incentive
plan, pro-rated to the end of the Benefits Continuation Period, for a fiscal
year commencing during but ending after the Benefit Continuation Period, or the
equivalent under any bonus or variable compensation plan which may hereafter be
adopted by the Company in lieu of such executive annual incentive plan; (iv)
accelerated vesting of all stock options and restricted stock granted to
Executive under any executive long term incentive plan established by the
Company but not yet vested on the effective date of termination of employment,
or at the Company's option, the cash value of the stock options and restricted
stock forfeited under such grants based on fair market value on the effective
date of termination of employment; (v) accelerated vesting of all "target"
restricted performance shares awarded to Executive under any executive long term
incentive plan established by the Company that would be earned in the fiscal
year of termination of employment, or at the Company's option, the cash value of
the "target" restricted performance shares forfeited under such awards based on
fair market value on the effective date of termination of employment; and (vi)
coverage during the Benefits Continuation Period under the following employee
benefit plans or provisions for comparable benefits outside such plans, but only
to the extent comparable coverage is not provided by any new employer, for (x)
Group Health Insurance Program, (y) Long-Term Disability Plan (as provided under
such plan, Executive shall be required to pay the premium), and (z) Group Life
and Accidental Death and Dismemberment Insurance (at the levels in effect at the
date of termination of employment).
(d) Termination for Cause; Resignation. If
Executive's employment terminates due to
a Termination for Cause (as defined below) or a Resignation (as defined below),
Base Salary earned but unpaid as of the date of such termination will be paid to
Executive in a lump sum and the Company will have no further obligations to
Executive hereunder. In the event any termination of Executive's employment for
any reason, Executive if so requested by the Company agrees to assist in the
orderly transfer of authority and responsibility to Executive's successor.
(e) For purposes of this Agreement, the following
capitalized terms have the
following meanings:
(i) "Benefits Continuation Period" means
that number of months which is
equal to the number of months of Base Salary that Executive receives as a lump
sum severance payment in accordance with Sections 9(a) or 9(b) hereof.
(ii) "Change of Control" shall have the
meaning set forth in the SERP.
(iii) "Constructive Discharge" means: (A)
any material failure by the
Company to fulfill its obligations under this Agreement (including, without
limitation, any reduction of the Base Salary, as the same may be increased
during the Period of Employment, or other material element of compensation); (B)
a material and adverse change to, or a material reduction of, Executive's duties
and responsibilities to the Company; or (C) the relocation of Executive's
primary office to any location more than fifty (50) miles from the Company's
principal executive offices. Executive will provide the Company a written notice
which describes the circumstances being relied upon for all terminations of
employment by Executive resulting from any circumstances claimed to be a
Constructive Discharge thirty (30) days after the event giving rise to the
notice. The Company will have thirty (30) days after receipt of such notice to
remedy the situation prior to Executive's termination of employment due to a
Constructive Discharge.
(iv) "Resignation" means a termination of
Executive's employment by
Executive, other than in connection with Executive's Disability pursuant to
Section 7 hereof, Death pursuant to Section 8 hereof or Constructive Discharge
pursuant to Sections 9(a) or 9(b) hereof.
(v) "SERP" means the Company's 1989
Supplemental Executive Retirement
Plan, as amended or restated from time to time.
(vi) A "Special Change of Control" shall be
deemed to have occurred if a
Person (as hereinafter defined) who was the beneficial owner (as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended), directly or
indirectly, of 33-1/3% or more of the Voting Power (as hereinafter defined) of
the Company on January 1, 1989, ceases to have the Voting Power to elect a
majority of the board of directors of the Company. For purposes of this
subsection, each of the terms "Person" and "Voting Power" shall have the meaning
ascribed to it by Section 6.3 of the SERP (as if it had been used in clause (b)
of Section 6.2 of the SERP). For avoidance of doubt, it is understood by
Executive and the Company that the only Person who was the beneficial owner,
directly or indirectly, of 33-1/3% or more of the Voting Power of the Company on
January 1, 1989, was composed of W. Bradford Wiley, Deborah E. Wiley, Peter
Booth Wiley and William Bradford Wiley II (including trusts for which such any
such persons serves as trustee); and it is further understood that as of the
date hereof, such Person was composed of Deborah E. Wiley, Peter Booth Wiley and
William Bradford Wiley II (including trusts for which any such person serves as
trustee). Notwithstanding the foregoing, a Special Change of Control shall not
be deemed to have occurred as a result of a "person" comprising such Person
ceasing to have Voting Power to elect a majority of the Board of Directors of
the Company so long as the other "person" or "persons" who compose such Person,
in the aggregate, continue to have Voting Power to elect a majority of the board
of directors of the Company.
(vii) "Termination for Cause" means: (A)
Executive's refusal or willful
and continued failure to substantially perform Executive's material duties to
the best of Executive's ability under this Agreement (for reasons other than
death or disability), in any such case after written notice thereof; (B)
Executive's gross negligence in the performance of Executive's material duties
under this Agreement; (C) any act of fraud, misappropriation, material
dishonesty, embezzlement, willful misconduct or similar conduct; (D) Executive's
conviction of or plea of guilty or nolo contendere to a felony or any crime
involving moral turpitude; or (E) Executive's material and willful violation of
any of the Company's reasonable rules, regulations, policies, directions and
restrictions.
(viii) "Without Cause Termination" or
"Terminated Without Cause" means
termination of Executive's employment by the Company other than in connection
with Executive's Disability pursuant to Section 7 hereof, death pursuant to
Section 8 hereof or Constructive Discharge pursuant to Sections 9(a) or 9(b)
hereof, or the Company's Termination for Cause of Executive.
(f) Conditions to Payment. All payments and benefits
due to Executive under this
Section 9 shall be contingent upon the execution by Executive (or Executive's
beneficiary or estate) of a general release of all claims to the maximum extent
permitted by law against the Company, its affiliates, and their current and
former officers, directors, employees and agents in such form as determined by
the Company in its sole discretion.
(g) No Other Payments. Except as provided in this
Section 9, Executive shall not be
entitled to receive any other payments or benefits from the Company due to the
termination of Executive's employment, including but not limited to, any
employee benefits under any of the Company's employee benefits plans or
arrangements (other than at Executive's expense under the Consolidated Omnibus
Budget Reconciliation Act of 1985 or pursuant to the written terms of any
pension benefit plan in which Executive is a participant in which the Company
may have in effect from time to time) or any right to severance benefits.
Notwithstanding the foregoing sentence, in the event of a termination of
employment by Executive under the circumstances described in Section 9(b) hereof
following a Change of Control, nothing in this Agreement shall reduce
Executive's entitlement, if any, to any payment or benefit pursuant to the LTIP
resulting from Executive's termination of employment following a Change of
Control.1 Wiley-Benefits/Legal to confirm whether this last sentence is
necessary in light of the inclusion of clauses (iv) and (v) in Section 9(b).
(h) Conditional Payments and Limitations.
(i) In the event that (A) any payment or
benefit received or to be
received by Executive pursuant to the terms of this Agreement or of any other
plan, arrangement or agreement of the Company (or any affiliate) (together, the
"Payments") would, in the opinion of independent tax counsel selected by the
Company and reasonably acceptable to Executive ("Tax Counsel"), be subject to
the excise tax (the "Excise Tax") imposed by section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code") (in whole or in part), determined
as provided below, and (B) the present value of the Payments is less than 115%
of the present value of an amount calculated such that no portion of the
Payments would be subject to the Excise Tax, then the Payments shall be reduced
(but not below zero) until no portion of the payments would be subject to the
Excise Tax. In the event that (C) the Payments would, in the opinion of Tax
Counsel, be subject to the Excise Tax (in whole or in part), determined as
provided below, and (D) the present value of the Payments is equal to or greater
than 115% of the present value of an amount calculated such that no portion of
the Payments would be subject to the Excise Tax, then the Company shall pay to
Executive, at the time specified in Section 9(h)(vi) below, an additional amount
(the "Gross-Up Payment") such that the net amount retained by Executive, after
deduction of the Excise Tax on the Covered Payments (as that term is defined
below) and any federal, state and local income tax and Excise Tax upon the
payment provided for by this Section 9(h), and any interest, penalties or
additions to tax payable by Executive with respect thereto, shall be equal to
the total present value of the Covered Payments at the time such Covered
Payments are to be made.
(ii) For purposes of determining whether any
of the Payments will be
subject to the Excise Tax and the amounts of such Excise Tax: (1) the total
amount of the Payments shall be treated as "parachute payments" within the
meaning of section 280G(b)(2) of the Code, and all "excess parachute payments"
within the meaning of section 280G(b)(1) of the Code shall be treated as subject
to the Excise Tax, except to the extent that, in the opinion of Tax Counsel, a
Payment (in whole or in part) does not constitute a "parachute payment" within
the meaning of section 280G(b)(2) of the Code, or such "excess parachute
payments" (in whole or in part) are not subject to the Excise Tax; (2) the
amount of the Payments that shall be treated as subject to the Excise Tax shall
be equal to the lesser of (A) the total amount of the Payments or (B) the amount
of "excess parachute payments" within the meaning of section 280G(b)(1) of the
Code (after applying clause (1) hereof); and (3) the value of any noncash
benefits or any deferred payment or benefit shall be determined by Tax Counsel
in accordance with the principles of sections 280G(d)(3) and (4) of the Code.
(iii) In the event that by reason of the
application of this Section
9(h), the Payments to Executive shall be reduced, then Executive may select from
among the Payments those Payments to be reduced.
(iv) As used in this Section 9(h), the term
"Covered Payments" shall
mean the payments and/or benefits payable to Executive pursuant to the
provisions of Sections 9(b)(i), 9(b)(ii), 9(b)(iii), 9(b)(iv) and 9(b)(vi) of
this Agreement (but in the case of Section 9(b)(iv), only with respect to
restricted performance shares awarded to Executive that have been earned prior
to a Change of Control), the SERP and the Company's Nonqualified Supplemental
Benefit Plan. Covered Payments shall not include any payments and/or benefits
other than those listed in the preceding sentence (including, without
limitation, any payments and/or benefits under the EAIP or the LTIP), except as
expressly provided above.
(v) For purposes of determining the amount
of the Gross-Up Payment,
Executive shall be deemed to pay federal income taxes at the highest marginal
rates of federal income taxation applicable to the individuals in the calendar
year in which the Gross-Up Payment is to be made and state and local income
taxes at the highest marginal rates of taxation applicable to individuals as are
in effect in the state and locality of Executive's residence in the calendar
year in which the Gross-Up Payment is to be made, net of the maximum reduction
in federal income taxes that can be obtained from deduction of such state and
local taxes taking into account any limitations applicable to individuals
subject to federal income tax at the highest marginal rates.
(vi)The Gross-Up Payment provided for in
Section 9(h)(i) hereof shall be
made upon the earlier of (A) the making to Executive of any Payment or (B) the
imposition upon Executive or payment by Executive of any Excise Tax.
(vii) If it is established pursuant to a
final determination of a court
or an Internal Revenue Service proceeding or the opinion of Tax Counsel that the
Excise Tax on Covered Payments is less than the amount taken into account under
Section 9(h)(i) hereof, Executive shall repay to the Company within five days of
Executive's receipt of notice of such final determination or opinion the portion
of the Gross-Up Payment attributable to such reduction (plus the portion of the
Gross-Up Payment attributable to the Excise Tax and federal, state and local
income tax imposed on the Gross-Up Payment being repaid by Executive if such
repayment results in a reduction in Excise Tax or a federal, state and local
income tax deduction) plus any interest received by Executive on the amount of
such repayment. If it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding or the opinion of Tax Counsel
that the Excise Tax on Covered Payments exceeds the amount taken into account
hereunder (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess within five days
of the Company's receipt of notice of such final determination or opinion.
Executive acknowledges that the timing of the Gross-Up Payment made by the
Company to the Executive pursuant to Section 9(h) hereof is for the benefit of
the Executive, and that any repayment of such Gross-Up Payment by Executive to
the Company that may subsequently be required pursuant to this Section 9(h)(vii)
is solely for the purposes of the Company's recoupment of compensation that the
Company overpaid to Executive.
10. Other Duties of Executive During and After the Period of
Employment.
(a) Non-Competition and Non-Disclosure Agreement.
Simultaneously with the execution
of this Agreement, Executive agrees to execute and to comply with the terms of
the Non-Competition and Non-Disclosure Agreement (hereinafter referred to as the
"Non-Competition Agreement") in the form provided to Executive by the Company.
The terms and conditions of the Non-Competition Agreement are incorporated
herein by reference and made a part of this Agreement as if fully set forth
herein.
(b) Agreement To Arbitrate. Simultaneous with the
execution of this Agreement,
Executive agrees to execute and to comply with the terms of the Agreement to
Arbitrate (hereinafter referred to as the "Agreement to Arbitrate") in the form
provided to Executive by the Company. The terms and conditions of the Agreement
to Arbitrate are incorporated herein by reference and made a part of this
Agreement as if fully set forth herein.
11. Indemnification. The Company will indemnify Executive to
the fullest extent permitted by the laws of the state of the Company's
incorporation in effect at that time, or the certificate of incorporation and
by-laws of Company, whichever affords the greater protection to Executive.
12. Mitigation. Executive will not be required to mitigate the
amount of any payment provided for hereunder by seeking other employment or
otherwise, nor will the amount of any such payment be reduced by any
compensation earned by Executive as the result of employment by another employer
after the date Executive's employment hereunder terminates.
13. Withholding Taxes. Executive acknowledges and agrees that
the Company may directly or indirectly withhold from any payments under this
Agreement all federal, state, city or other taxes that will be required pursuant
to any law or governmental regulation.
14. Effect of Prior Agreements. This Agreement, together with
the Non-Competition Agreement and the Agreement to Arbitrate, constitute the
sole and entire agreements and understandings between Executive and the Company
with respect to the matters covered thereby, and there are no other promises,
agreements, representations, warranties or other statements between Executive
and the Company in respect to such matters not expressly set forth in these
agreements. These agreements supersede all prior and contemporaneous agreements,
understandings or other arrangements, whether written or oral, concerning the
subject matter thereof. Upon execution of this Agreement, Executive's existing
employment agreement with the Company shall be superceded by this Agreement in
its entirety and shall be of no further force and effect.
15. Notices. Any notice required, permitted, or desired to be
given pursuant to any of the provisions of this Agreement shall be deemed to
have been sufficiently given or served for all purposes if delivered in person
or sent by registered or certified mail, return receipt requested, postage and
fees prepaid, as follows:
If to the Company, at:
John Wiley & Sons, Inc.
111 River Street
Hoboken, New Jersey 07030
Attention: Chief Executive Officer
with a copy to:
John Wiley & Sons, Inc.
111 River Street
Hoboken, New Jersey 07030
Attention: General Counsel
If to Executive, at:
174 Trenor Drive
New Rochelle, New York 10804
Either of the parties hereto may at any time and from time to time change the
address to which notices shall be sent hereunder by notice to the other party.
16. Assignability. The obligations of Executive may not be
delegated and, except as expressly provided in Section 8 hereof relating to the
designation of a beneficiary in the event of death, Executive may not, without
the Company's written consent thereto, assign, transfer, convey, pledge,
encumber, hypothecate or otherwise dispose of this Agreement or any interest
therein. Any such attempted delegation or disposition shall be null and void and
without effect. The Company and Executive agree that this Agreement and all of
the Company's rights and obligations hereunder may be assigned or transferred by
the Company to and may be assumed by and become binding upon and may inure to
the benefit of any affiliate of or successor to the Company. The term
"successor" shall mean (with respect to the Company or any of its subsidiaries)
any other corporation or other business entity which, by merger, consolidation,
purchase of the assets, or otherwise, acquires all or a material part of the
assets of the Company. Any assignment by the Company of its rights or
obligations hereunder to any affiliate of or successor to the Company shall not
be a termination of employment for purposes of this Agreement.
17. Modification. This Agreement may not be modified or
amended except in writing signed by the parties. No term or condition of this
Agreement will be deemed to have been waived except in writing by the party
charged with waiver. A waiver will operate only as to the specific term or
condition waived and will not constitute a waiver for the future or act on
anything other than that which is specifically waived.
18. Governing Law. This Agreement has been executed and
delivered in the State of New York and its validity, interpretation, performance
and enforcement will be governed by the internal laws of that state without
regard to the choice of law rules.
19. Separability. All provisions of this Agreement are
intended to be severable. In the event any provision or restriction contained
herein is held to be invalid or unenforceable in any respect, in whole or in
part, such finding will in no way affect the validity or enforceability of any
other provision of this Agreement. The parties hereto further agree that any
such invalid or unenforceable provision will be deemed modified so that it will
be enforced to the greatest extent permissible under law, and to the extent that
any court of competent jurisdiction determines any restriction herein to be
unreasonable in any respect, such court may limit this Agreement to render it
reasonable in the light of the circumstances in which it was entered into and
specifically enforce this Agreement as limited.
20. No Waiver: No course of dealing or any delay on the part
of the Company or Executive in exercising any rights hereunder shall operate as
a waiver of any such rights. No waiver of any default or breach of this
Agreement shall be deemed a continuing waiver of any other breach or default.
21. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered, effective as of the date first indicated above by a
duly authorized officer of the Company.
EXECUTIVE: JOHN WILEY & SONS, INC.
/S/ Ellis E. Cousens /S/ William J. Pesce
- ------------------------------- ------------------------------------------
Ellis E. Cousens William J. Pesce
President and Chief Executive Officer
Signed April 29, 2003
Exhibit 10.25
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") made as of the 10th
day of March, 2003, by and between John Wiley & Sons, Inc., a New York
corporation, with offices at 111 River Street, Hoboken, New Jersey 07030
(hereinafter referred to as the "Company"), Richard S. Rudick (hereinafter
referred to as "Executive").
WHEREAS, the executive is currently employed with the Company,
and Executive desires to serve the Company in such capacity.
NOW THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Employment. The Company agrees to employ Executive and
Executive agrees to be employed by the Company for the Period of Employment (as
defined below) and upon the terms and conditions provided in this Agreement.
2. Position and Responsibilities.
(a) During the Period of Employment, Executive will
serve as Senior Vice President and General Counsel of the
Company, and subject to the direction of the Company's Chief Executive Officer
("CEO") will perform such duties and exercise such supervision with regard to
the business of the Company as are associated with such position, as well as
such other duties as may be prescribed from time to time by the CEO. Executive
shall be subject to and shall observe and carry out such reasonable rules,
regulations, policies, directions and restrictions consistent with the duties to
be performed by Executive hereunder as the Company shall from time to time
establish.
(b) Executive will, during the Period of Employment,
devote Executive's full
business time and attention to the faithful and competent performance of
services for the Company. Executive hereby represents and warrants to the
Company that Executive has no obligations under any existing employment or
service agreement and that Executive's performance of the services required of
Executive hereunder will not conflict with any other existing obligations or
commitments. Nothing in this Agreement shall preclude Executive from engaging,
consistent with Executive's duties and responsibilities hereunder, in charitable
and community affairs.
(c) Executive shall perform the duties contemplated
hereunder at the principal
executive office of the Company and at such other locations as may be reasonably
necessary to the performance of such duties, and Executive shall do such
traveling as may be reasonably required of Executive in the performance of such
duties.
3. Period of Employment. The period of Executive's employment
under this Agreement (the "Period of Employment") will begin on March 1, 2003
(the "Commencement Date"), and end on the second anniversary thereof, subject to
earlier termination and further renewal as provided in this Agreement.
Executive's Period of Employment shall automatically renew for subsequent two
year periods, subject to the terms of this Agreement, unless either party gives
written notice 90 days or more prior to the expiration of the then existing
Period of Employment of Executive's or the Company's decision not to renew. A
decision by the Company not to renew other than as a result of Executive's death
or Disability (as defined below), and other than in circumstances which would
give rise to a Termination for Cause (as defined below) shall be treated as a
Without Cause Termination (as defined below), and so governed by the provisions
of Section 9 hereof.
4. Compensation and Benefits. For all services rendered by
Executive pursuant to this Agreement during the Period of Employment, including
services as an executive, officer, director or committee member of the Company
or any of its subsidiaries or affiliates, Executive will be compensated as
follows:
(a) Base Salary. The Company will pay Executive a
fixed base salary ("Base Salary")
of not less than Executive's base salary as of the effective date of this
agreement. Executive will be eligible to receive annual increases as the
Company's Board of Directors (the "Board") deems appropriate, in accordance with
the Company's customary procedures regarding the salaries of senior officers.
Base Salary will be payable according to the customary payroll practices of the
Company but in no event less frequently than once each month.
(b) Executive Compensation Plans. Executive shall be
eligible to participate in all
of the Company's executive compensation plans in effect on the date hereof in
which any senior executive of the Company is eligible to participate, including
but not limited to the Company's Executive Annual Incentive Plan, as amended or
restated from time to time (the "EAIP"), the Company's Long Term Incentive Plan,
as amended or restated from time to time (the "LTIP"), or equivalents, for so
long as such plans remain in effect. Nothing in this Agreement shall require the
Company or its affiliates to establish, maintain or continue any executive
compensation plan or restrict the right of the Company or any of its affiliates
to amend, modify or terminate any such plan.
(c) Participation in Benefit Plans. To the extent
that Executive's participation or
coverage is not duplicative of that provided under an executive compensation
plan or arrangement in which Executive is eligible to participate, the Company
shall afford Executive with an opportunity to participate in any health care,
dental, disability insurance, life insurance, retirement, savings and any other
employee benefits plans, policies or arrangements which the Company maintains
for its employees in accordance with the written terms of such plans, policies
or arrangements. Nothing in this Agreement shall require the Company or its
affiliates to establish, maintain or continue any benefit plans, policies or
arrangements or restrict the right of the Company or any of its affiliates to
amend, modify or terminate any such benefit plan, policy or arrangement.
(d) Vacations, Holidays or Temporary Leave. Executive
shall be entitled to take four
weeks of vacation per calendar year, or such greater amount, if any, as provided
in the policies of the Company then applicable to Executive, without loss or
diminution of compensation. Such vacation shall be taken at such time or times
consistent with the needs of the Company's business. Executive shall further be
entitled to the number of paid holidays, and leaves for illness or temporary
disability in accordance with the Company's policies as such policies may be
amended from time to time or terminated in the Company's sole discretion.
5. Other Offices. Executive agrees to serve without additional
compensation, if elected or appointed thereto, as an officer or director of any
of the Company's subsidiaries or affiliates or as any other officer of the
Company.
6. Business Expenses. The Company will reimburse Executive for
all reasonable travel and other expenses incurred by Executive in connection
with the performance of Executive's duties and obligations under this Agreement.
Executive will comply with such limitations and reporting requirements with
respect to expenses as may be established by Company from time to time and will
promptly provide all appropriate and requested documentation in connection with
such expenses.
7. Disability. If Executive becomes Disabled (as defined
below) during the Period of Employment, the Company may, in its discretion, hire
a permanent replacement to fill the position previously held and to perform the
duties previously performed by Executive, provided, however, the Company shall
continue Executive's employment with the Company on an inactive basis to the
extent necessary to continue to maintain Executive's eligibility for benefits
available under the Company's Group Long-Term Disability Insurance Plan or under
any generally similar plan then in effect (the "LTD Plan")
and such other employee benefit plans that are generally available to employees
receiving benefits under the LTD Plan, in accordance with the terms of such
plan(s) as they may be amended from time to time. For purposes of this
Agreement, "Disabled" or "Disability" means Executive's inability, because of
mental or physical illness or incapacity, whether total or partial, to perform
one or more of the primary duties of Executive's employment, with or without
reasonable accommodation, for a length of time that the Company determines is
sufficient to satisfy such obligations as it may have under the Family and
Medical Leave Act ("FMLA") and such "reasonable accommodation" obligations it
may have under federal, state or local disability laws. Upon Executive's
entitlement to receive benefits available under the LTD Plan and such other
benefits generally available to employees receiving benefits under the LTD Plan,
the Company's obligation to provide Executive compensation and other benefits
pursuant to Section 4 hereof shall cease. In the event that Executive ceases to
be Disabled and Executive is able to return to work and Executive's former
position is not open, the Company will endeavor to find, and will work
interactively with Executive to find, a position of comparable responsibility,
compensation and benefits and to reinstate Executive to such position, if such a
position is available at the conclusion of Executive's disability leave of
absence. Prior to restoration of Executive to active employment with the
Company, Executive shall cooperate in obtaining all fitness for duty
certifications from Executive's treating physician(s) and such other physicians
as the Company may request in accordance with the FMLA and federal, state and
local disability and worker's compensation laws. Within fifteen (15) days of
receipt of all medical certification(s) requested by the Company, if the Company
does not restore Executive to active employment with the Company, then at that
time Executive's employment with the Company will be deemed to have terminated.
Under the policy currently in effect for employees of the Company, such
termination will be treated as a Without Cause Termination in accordance with
Paragraph 9(a) below, provided the Executive has not then attained the age of
65. Nothing in this Agreement shall require the Company to continue such policy,
and such termination shall be treated in accordance with the policy applicable
at the time the Executive becomes disabled.
8. Death. In the event of the death of Executive during the
Period of Employment, the Period of Employment will end and the Company's
obligation to make payments under this Agreement will cease as of the date of
death, except that the Company will pay Executive's beneficiary designated for
purposes of Executive's life insurance provided by the Company or absent such
designation to Executive's estate Executive's Base Salary until the end of the
month in which Executive dies, and except for any rights and benefits of
Executive under the benefit plans and programs of the Company including, without
limitation, the SERP (as defined below) in which Executive is a participant, as
determined in accordance with the terms and provisions of such plans and
programs. The payout under the EAIP, or equivalent, for the fiscal year in which
Executive's death occurs, shall be annualized and paid at the normal time to
Executive's estate pro rata to the date of death. The value of the "payout
amount," in cash, for any executive long term incentive plan established by the
Company, the plan cycle of which ends within 12 months after the date of
Executive's death, shall be paid at the normal time to Executive's estate.
9. Effect of Termination of Employment.
(a) Without Cause Termination and Constructive
Discharge Absent a Change of Control
or a Special Change of Control. If Executive's employment terminates during the
Period of Employment in circumstances in which no Change of Control (as defined
below) or Special Change of Control (as defined below) has occurred, due to a
Without Cause Termination (as defined below) or a Constructive Discharge (as
defined below), subject to Executive executing a general release of claims as
more fully described in Section 9(e) hereof, the Company will pay or provide, as
the case may be, Executive (or Executive's surviving spouse, estate or personal
representative, as applicable) upon such event: (i) Base Salary earned but
unpaid as of the effective date of such termination of employment; (ii) a lump
sum payment equal to the Severance Pay Amount (as defined below); and (iii)
coverage during the Benefits Continuation Period (as defined below) under the
following employee benefit plans or provisions for comparable benefits outside
such plans, but only to the extent comparable coverage is not provided by any
new employer, (x) the Company's Group Health Insurance Program, (y) the LTD Plan
(as provided under such plan, Executive shall be required to pay the premium),
and (z) the Company's Group Life and Accidental Death and Dismemberment
Insurance (at the levels in effect at the date of termination of employment). As
used in this Agreement, the term "Severance Pay Amount" shall equal the amount
of Executive's then current Base Salary payable to Executive during one month
multiplied by (x) twelve (12)
if Executive has been employed by the Company for less than ten (10) continuous
unbroken years of service, or (y) eighteen (18) if Executive has been employed
by the Company for between ten (10) and twenty (20) continuous unbroken years of
service, or (z) twenty-four (24) if Executive has been employed by the Company
for more than twenty (20) continuous unbroken years of service.
(b) Without Cause Termination and Constructive
Discharge Following a Change of
Control or a Special Change of Control. If Executive's employment terminates
during the Period of Employment due to a Without Cause Termination or a
Constructive Discharge within the twenty-four (24) month period following a
Change of Control or a Special Change of Control, then the Company will provide
Executive (or Executive's surviving spouse, estate or personal representative,
as applicable) the following payments and/or benefits upon such event: (i) Base
Salary earned but unpaid as of the effective date of such termination of
employment; (ii) a lump sum amount equal to twenty-four (24) months of
Executive's then current Base Salary; (iii) the "target incentive amount" under
any executive annual incentive plan established by the Company for a fiscal year
ending during the Benefits Continuation Period, and the same "target incentive
amount" for any such executive annual incentive plan, pro-rated to the end of
the Benefits Continuation Period, for a fiscal year commencing during but ending
after the Benefit Continuation Period, or the equivalent under any bonus or
variable compensation plan which may hereafter be adopted by the Company in lieu
of such executive annual incentive plan; (iv) accelerated vesting of all stock
options and restricted stock granted to Executive under any executive long term
incentive plan established by the Company but not yet vested on the effective
date of termination of employment, or at the Company's option, the cash value of
the stock options and restricted stock forfeited under such grants based on fair
market value on the effective date of termination of employment; (v) accelerated
vesting of all "target" restricted performance shares awarded to Executive under
any executive long term incentive plan established by the Company that would be
earned in the fiscal year of termination of employment or subsequent fiscal
years, or at the Company's option, the cash value of the "target" restricted
performance shares forfeited under such awards based on fair market value on the
effective date of termination of employment; (vi) coverage during the Benefits
Continuation Period under the following employee benefit plans or provisions for
comparable benefits outside such plans, but only to the extent comparable
coverage is not provided by any new employer, for (x) the Company's Group Health
Insurance Program, (y) the LTD Plan (as provided under such plan, Executive
shall be required to pay the premium), and (z) the Company's Group Life and
Accidental Death and Dismemberment Insurance (at the levels in effect at the
date of termination of employment); (vii) all payments and benefits to which
Executive may be entitled pursuant to the terms and conditions of the SERP; and
(viii) all payments and benefits to which Executive may be entitled under the
Company's Non-Qualified Supplemental Benefit Plan.
(c) Termination for Cause; Resignation. If
Executive's employment terminates due to
a Termination for Cause (as defined below) or a Resignation (as defined below),
Base Salary earned but unpaid as of the date of such termination will be paid to
Executive in a lump sum and the Company will have no further obligations to
Executive hereunder. In the event any termination of Executive's employment for
any reason, Executive if so requested by the Company agrees to assist in the
orderly transfer of authority and responsibility to Executive's successor.
(d) For purposes of this Agreement, the following
capitalized terms have the
following meanings:
(i) "Benefits Continuation Period" means
that number of months which is
equal to the number of months of Base Salary that Executive receives as a lump
sum severance payment in accordance with Sections 9(a) or 9(b) hereof.
(ii) "Change of Control" shall have the
meaning set forth in the SERP.
(iii) "Constructive Discharge" means: (A)
any material failure by the
Company to fulfill its obligations under this Agreement (including, without
limitation, any reduction of the Base Salary, as the same may be increased
during the Period of Employment, or other material element of compensation); (B)
a material and adverse change to, or a material reduction of, Executive's duties
and responsibilities to the Company; or (C) the relocation of Executive's
primary office to any location more than fifty (50) miles from the Company's
principal executive offices. Executive will provide the Company a written notice
which describes the circumstances being relied upon for all terminations of
employment by Executive resulting from any circumstances claimed to be a
Constructive Discharge thirty (30) days after the event giving rise to the
notice. The Company will have thirty (30) days after receipt of such notice to
remedy the situation prior to Executive's termination of employment due to a
Constructive Discharge.
(iv) "Resignation" means a termination of
Executive's employment by
Executive, other than in connection with Executive's Disability pursuant to
Section 7 hereof, Death pursuant to Section 8 hereof or Constructive Discharge
pursuant to Sections 9(a) or 9(b) hereof.
(v) "SERP" means the Company's 1989
Supplemental Executive Retirement
Plan, as amended or restated from time to time.
(vi) A "Special Change of Control" shall be
deemed to have occurred if a
Person (as hereinafter defined) who was the beneficial owner (as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended), directly or
indirectly, of 33-1/3% or more of the Voting Power (as hereinafter defined) of
the Company on January 1, 1989, ceases to have the Voting Power to elect a
majority of the board of directors of the Company. For purposes of this
subsection, each of the terms "Person" and "Voting Power" shall have the meaning
ascribed to it by Section 6.3 of the SERP (as if it had been used in clause (b)
of Section 6.2 of the SERP). For avoidance of doubt, it is understood by
Executive and the Company that the only Person who was the beneficial owner,
directly or indirectly, of 33-1/3% or more of the Voting Power of the Company on
January 1, 1989, was composed of W. Bradford Wiley, Deborah E. Wiley, Peter
Booth Wiley and William Bradford Wiley II (including trusts for which such any
such persons serves as trustee); and it is further understood that as of the
date hereof, such Person was composed of Deborah E. Wiley, Peter Booth Wiley and
William Bradford Wiley II (including trusts for which any such person serves as
trustee). Notwithstanding the foregoing, a Special Change of Control shall not
be deemed to have occurred as a result of a "person" comprising such Person
ceasing to have Voting Power to elect a majority of the Board of Directors of
the Company so long as the other "person" or "persons" who compose such Person,
in the aggregate, continue to have Voting Power to elect a majority of the board
of directors of the Company.
(vii) "Termination for Cause" means: (A)
Executive's refusal or willful
and continued failure to substantially perform Executive's material duties to
the best of Executive's ability under this Agreement (for reasons other than
death or disability), in any such case after written notice thereof; (B)
Executive's gross negligence in the performance of Executive's material duties
under this Agreement; (C) any act of fraud, misappropriation, material
dishonesty, embezzlement, willful misconduct or similar conduct; (D) Executive's
conviction of or plea of guilty or nolo contendere to a felony or any crime
involving moral turpitude; or (E) Executive's material and willful violation of
any of the Company's reasonable rules, regulations, policies, directions and
restrictions.
(viii) "Without Cause Termination" or
"Terminated Without Cause" means
termination of Executive's employment by the Company other than in connection
with Executive's Disability pursuant to Section 7 hereof, death pursuant to
Section 8 hereof or Constructive Discharge pursuant to Sections 9(a) or 9(b)
hereof, or the Company's Termination for Cause of Executive.
(e) Conditions to Payment. All payments and benefits
due to Executive under this
Section 9 shall be contingent upon the execution by Executive (or Executive's
beneficiary or estate) of a general release of all claims to the maximum extent
permitted by law against the Company, its affiliates, and their current and
former officers, directors, employees and agents in such form as determined by
the Company in its sole discretion.
(f) No Other Payments. Except as provided in this
Section 9, Executive shall not be
entitled to receive any other payments or benefits from the Company due to the
termination of Executive's employment, including but not limited to, any
employee benefits under any of the Company's employee benefits plans or
arrangements (other than at Executive's expense under the Consolidated Omnibus
Budget Reconciliation Act of 1985 or pursuant to the written terms of any
pension benefit plan in which Executive is a participant in which the Company
may have in effect from time to time) or any right to severance benefits.
Notwithstanding the foregoing sentence, in the event of a termination of
employment by Executive under the circumstances described in Section 9(b) hereof
following a Change of Control, nothing in this Agreement shall reduce
Executive's entitlement, if any, to any payment or benefit pursuant to the LTIP
resulting from Executive's termination of employment following a Change of
Control.
(g) Conditional Payments and Limitations.
(i) In the event that (A) any payment or
benefit received or to be
received by Executive pursuant to the terms of this Agreement or of any other
plan, arrangement or agreement of the Company (or any affiliate) (together, the
"Payments") would, in the opinion of independent tax counsel selected by the
Company and reasonably acceptable to Executive ("Tax Counsel"), be subject to
the excise tax (the "Excise Tax") imposed by section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code") (in whole or in part), determined
as provided below, and (B) the present value of the Payments is less than 115%
of the present value of an amount calculated such that no portion of the
Payments would be subject to the Excise Tax, then the Payments shall be reduced
(but not below zero) until no portion of the payments would be subject to the
Excise Tax. In the event that (C) the Payments would, in the opinion of Tax
Counsel, be subject to the Excise Tax (in whole or in part), determined as
provided below, and (D) the present value of the Payments is equal to or greater
than 115% of the present value of an amount calculated such that no portion of
the Payments would be subject to the Excise Tax, then the Company shall pay to
Executive, at the time specified in Section 9(g)(vi) below, an additional amount
(the "Gross-Up Payment") such that the net amount retained by Executive, after
deduction of the Excise Tax on the Covered Payments (as that term is defined
below) and any federal, state and local income tax and Excise Tax upon the
payment provided for by this Section 9(g), and any interest, penalties or
additions to tax payable by Executive with respect thereto, shall be equal to
the total present value of the Covered Payments at the time such Covered
Payments are to be made.
(ii) For purposes of determining whether any
of the Payments will be
subject to the Excise Tax and the amounts of such Excise Tax: (1) the total
amount of the Payments shall be treated as "parachute payments" within the
meaning of section 280G(b)(2) of the Code, and all "excess parachute payments"
within the meaning of section 280G(b)(1) of the Code shall be treated as subject
to the Excise Tax, except to the extent that, in the opinion of Tax Counsel, a
Payment (in whole or in part) does not constitute a "parachute payment" within
the meaning of section 280G(b)(2) of the Code, or such "excess parachute
payments" (in whole or in part) are not subject to the Excise Tax; (2) the
amount of the Payments that shall be treated as subject to the Excise Tax shall
be equal to the lesser of (A) the total amount of the Payments or (B) the amount
of "excess parachute payments" within the meaning of section 280G(b)(1) of the
Code (after applying clause (1) hereof); and (3) the value of any noncash
benefits or any deferred payment or benefit shall be determined by Tax Counsel
in accordance with the principles of sections 280G(d)(3) and (4) of the Code.
(iii) In the event that by reason of the
application of this Section
9(g), the Payments to Executive shall be reduced, then Executive may select from
among the Payments those Payments to be reduced.
(iv) As used in this Section 9(g), the term
"Covered Payments" shall
mean the payments and/or benefits payable to Executive pursuant to the
provisions of Sections 9(b)(i), 9(b)(ii), 9(b)(iii), 9(b)(iv) and 9(b)(vi) of
this Agreement (but in the case of Section 9(b)(iv), only with respect to
restricted performance shares awarded to Executive that have been earned prior
to a Change of Control), the SERP and the Company's Nonqualified Supplemental
Benefit Plan. Covered Payments shall not include any payments and/or benefits
other than those listed in the preceding sentence (including, without
limitation, any payments and/or benefits under the EAIP or the LTIP), except as
expressly provided above.
(v) For purposes of determining the amount
of the Gross-Up Payment,
Executive shall be deemed to pay federal income taxes at the highest marginal
rates of federal income taxation applicable to the individuals in the calendar
year in which the Gross-Up Payment is to be made and state and local income
taxes at the highest marginal rates of taxation applicable to individuals as are
in effect in the state and locality of Executive's residence in the calendar
year in which the Gross-Up Payment is to be made, net of the maximum reduction
in federal income taxes that can be obtained from deduction of such state and
local taxes taking into account any limitations applicable to individuals
subject to federal income tax at the highest marginal rates.
(vi)The Gross-Up Payment provided for in
Section 9(g)(i) hereof shall be
made upon the earlier of (A) the making to Executive of any Payment or (B) the
imposition upon Executive or payment by Executive of any Excise Tax.
(vii) If it is established pursuant to a
final determination of a court
or an Internal Revenue Service proceeding or the opinion of Tax Counsel that the
Excise Tax on Covered Payments is less than the amount taken into account under
Section 9(g)(i) hereof, Executive shall repay to the Company within five days of
Executive's receipt of notice of such final determination or opinion the portion
of the Gross-Up Payment attributable to such reduction (plus the portion of the
Gross-Up Payment attributable to the Excise Tax and federal, state and local
income tax imposed on the Gross-Up Payment being repaid by Executive if such
repayment results in a reduction in Excise Tax or a federal, state and local
income tax deduction) plus any interest received by Executive on the amount of
such repayment. If it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding or the opinion of Tax Counsel
that the Excise Tax on Covered Payments exceeds the amount taken into account
hereunder (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess within five days
of the Company's receipt of notice of such final determination or opinion.
Executive acknowledges that the timing of the Gross-Up Payment made by the
Company to the Executive pursuant to Section 9(g) hereof is for the benefit of
the Executive, and that any repayment of such Gross-Up Payment by Executive to
the Company that may subsequently be required pursuant to this Section 9(g)(vii)
is solely for the purposes of the Company's recoupment of compensation that the
Company overpaid to Executive.
10. Other Duties of Executive During and After the Period of
Employment.
(a) Non-Competition and Non-Disclosure Agreement.
Simultaneously with the execution
of this Agreement, Executive agrees to execute and to comply with the terms of
the Non-Competition and Non-Disclosure Agreement (hereinafter referred to as the
"Non-Competition Agreement") in the form provided to Executive by the Company.
The terms and conditions of the Non-Competition Agreement are incorporated
herein by reference and made a part of this Agreement as if fully set forth
herein.
(b) Agreement To Arbitrate. Simultaneous with the
execution of this Agreement,
Executive agrees to execute and to comply with the terms of the Agreement to
Arbitrate (hereinafter referred to as the "Agreement to Arbitrate") in the form
provided to Executive by the Company. The terms and conditions of the Agreement
to Arbitrate are incorporated herein by reference and made a part of this
Agreement as if fully set forth herein.
11. Indemnification. The Company will indemnify Executive to
the fullest extent permitted by the laws of the state of the Company's
incorporation in effect at that time, or the certificate of incorporation and
by-laws of Company, whichever affords the greater protection to Executive.
12. Mitigation. Executive will not be required to mitigate the
amount of any payment provided for hereunder by seeking other employment or
otherwise, nor will the amount of any such payment be reduced by any
compensation earned by Executive as the result of employment by another employer
after the date Executive's employment hereunder terminates.
13. Withholding Taxes. Executive acknowledges and agrees that
the Company may directly or indirectly withhold from any payments under this
Agreement all federal, state, city or other taxes that will be required pursuant
to any law or governmental regulation.
14. Effect of Prior Agreements. This Agreement, together with
the Non-Competition Agreement and the Agreement to Arbitrate, constitute the
sole and entire agreements and understandings between Executive and the Company
with respect to the matters covered thereby, and there are no other promises,
agreements, representations, warranties or other statements between Executive
and the Company in respect to such matters not expressly set forth in these
agreements. These agreements supersede all prior and contemporaneous agreements,
understandings or other arrangements, whether written or oral, concerning the
subject matter thereof. Upon execution of this Agreement, Executive's existing
employment agreement with the Company shall be superceded by this Agreement in
its entirety and shall be of no further force and effect.
15. Notices. Any notice required, permitted, or desired to be
given pursuant to any of the provisions of this Agreement shall be deemed to
have been sufficiently given or served for all purposes if delivered in person
or sent by registered or certified mail, return receipt requested, postage and
fees prepaid, as follows:
If to the Company, at:
John Wiley & Sons, Inc.
111 River Street
Hoboken, New Jersey 07030
Attention: Chief Executive Officer
with a copy to:
John Wiley & Sons, Inc.
111 River Street
Hoboken, New Jersey 07030
Attention: General Counsel
Either of the parties hereto may at any time and from time to time change the
address to which notices shall be sent hereunder by notice to the other party.
16. Assignability. The obligations of Executive may not be
delegated and, except as expressly provided in Section 8 hereof relating to the
designation of a beneficiary in the event of death, Executive may not, without
the Company's written consent thereto, assign, transfer, convey, pledge,
encumber, hypothecate or otherwise dispose of this Agreement or any interest
therein. Any such attempted delegation or disposition shall be null and void and
without effect. The Company and Executive agree that this Agreement and all of
the Company's rights and obligations hereunder may be assigned or transferred by
the Company to and may be assumed by and become binding upon and may inure to
the benefit of any affiliate of or successor to the Company. The term
"successor" shall mean (with respect to the Company or any of its subsidiaries)
any other corporation or other business entity which, by merger, consolidation,
purchase of the assets, or otherwise, acquires all or a material part of the
assets of the Company. Any assignment by the Company of its rights or
obligations hereunder to any affiliate of or successor to the Company shall not
be a termination of employment for purposes of this Agreement.
17. Modification. This Agreement may not be modified or
amended except in writing signed by the parties. No term or condition of this
Agreement will be deemed to have been waived except in writing by the party
charged with waiver. A waiver will operate only as to the specific term or
condition waived and will not constitute a waiver for the future or act on
anything other than that which is specifically waived.
18. Governing Law. This Agreement will be construed and
interpreted pursuant to the laws of the State of New York, without regard to
such State's conflict of law rules.
19. Separability. All provisions of this Agreement are
intended to be severable. In the event any provision or restriction contained
herein is held to be invalid or unenforceable in any respect, in whole or in
part, such finding will in no way affect the validity or enforceability of any
other provision of this Agreement. The parties hereto further agree that any
such invalid or unenforceable provision will be deemed modified so that it will
be enforced to the greatest extent permissible under law, and to the extent that
any court of competent jurisdiction determines any restriction herein to be
unreasonable in any respect, such court may limit this Agreement to render it
reasonable in the light of the circumstances in which it was entered into and
specifically enforce this Agreement as limited.
20. No Waiver: No course of dealing or any delay on the part
of the Company or Executive in exercising any rights hereunder shall operate as
a waiver of any such rights. No waiver of any default or breach of this
Agreement shall be deemed a continuing waiver of any other breach or default.
21. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered, effective as of the date first indicated above by a
duly authorized officer of the Company.
EXECUTIVE: JOHN WILEY & SONS, INC.
/S/ Richard S. Rudick /S/ William J. Pesce
- -------------------------------- ------------------------------------------
Richard S. Rudick William J. Pesce
President and Chief Executive Officer
Signed April 29, 2003
Exhibit 10.26
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") made as of the 10th
day of March, 2003, by and between John Wiley & Sons, Inc., a New York
corporation, with offices at 111 River Street, Hoboken, New Jersey 07030
(hereinafter referred to as the "Company"), Timothy King (hereinafter referred
to as "Executive").
WHEREAS, the executive is currently employed with the Company,
and Executive desires to serve the Company in such capacity.
NOW THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Employment. The Company agrees to employ Executive and
Executive agrees to be employed by the Company for the Period of Employment (as
defined below) and upon the terms and conditions provided in this Agreement.
2. Position and Responsibilities.
(a) During the Period of Employment, Executive will
serve as Senior Vice President Planning and Development of the
Company, and subject to the direction of the Company's Chief Executive Officer
("CEO") will perform such duties and exercise such supervision with regard to
the business of the Company as are associated with such position, as well as
such other duties as may be prescribed from time to time by the CEO. Executive
shall be subject to and shall observe and carry out such reasonable rules,
regulations, policies, directions and restrictions consistent with the duties to
be performed by Executive hereunder as the Company shall from time to time
establish.
(b) Executive will, during the Period of Employment,
devote Executive's full
business time and attention to the faithful and competent performance of
services for the Company. Executive hereby represents and warrants to the
Company that Executive has no obligations under any existing employment or
service agreement and that Executive's performance of the services required of
Executive hereunder will not conflict with any other existing obligations or
commitments. Nothing in this Agreement shall preclude Executive from engaging,
consistent with Executive's duties and responsibilities hereunder, in charitable
and community affairs.
(c) Executive shall perform the duties contemplated
hereunder at the principal
executive office of the Company and at such other locations as may be reasonably
necessary to the performance of such duties, and Executive shall do such
traveling as may be reasonably required of Executive in the performance of such
duties.
3. Period of Employment. The period of Executive's employment
under this Agreement (the "Period of Employment") will begin on March 1, 2003
(the "Commencement Date"), and end on the second anniversary thereof, subject to
earlier termination and further renewal as provided in this Agreement.
Executive's Period of Employment shall automatically renew for subsequent two
year periods, subject to the terms of this Agreement, unless either party gives
written notice 90 days or more prior to the expiration of the then existing
Period of Employment of Executive's or the Company's decision not to renew. A
decision by the Company not to renew other than as a result of Executive's death
or Disability (as defined below), and other than in circumstances which would
give rise to a Termination for Cause (as defined below) shall be treated as a
Without Cause Termination (as defined below), and so governed by the provisions
of Section 9 hereof.
4. Compensation and Benefits. For all services rendered by
Executive pursuant to this Agreement during the Period of Employment, including
services as an executive, officer, director or committee member of the Company
or any of its subsidiaries or affiliates, Executive will be compensated as
follows:
(a) Base Salary. The Company will pay Executive a
fixed base salary ("Base Salary")
of not less than Executive's base salary as of the effective date of this
agreement. Executive will be eligible to receive annual increases as the
Company's Board of Directors (the "Board") deems appropriate, in accordance with
the Company's customary procedures regarding the salaries of senior officers.
Base Salary will be payable according to the customary payroll practices of the
Company but in no event less frequently than once each month.
(b) Executive Compensation Plans. Executive shall be
eligible to participate in all
of the Company's executive compensation plans in effect on the date hereof in
which any senior executive of the Company is eligible to participate, including
but not limited to the Company's Executive Annual Incentive Plan, as amended or
restated from time to time (the "EAIP"), the Company's Long Term Incentive Plan,
as amended or restated from time to time (the "LTIP"), or equivalents, for so
long as such plans remain in effect. Nothing in this Agreement shall require the
Company or its affiliates to establish, maintain or continue any executive
compensation plan or restrict the right of the Company or any of its affiliates
to amend, modify or terminate any such plan.
(c) Participation in Benefit Plans. To the extent
that Executive's participation or
coverage is not duplicative of that provided under an executive compensation
plan or arrangement in which Executive is eligible to participate, the Company
shall afford Executive with an opportunity to participate in any health care,
dental, disability insurance, life insurance, retirement, savings and any other
employee benefits plans, policies or arrangements which the Company maintains
for its employees in accordance with the written terms of such plans, policies
or arrangements. Nothing in this Agreement shall require the Company or its
affiliates to establish, maintain or continue any benefit plans, policies or
arrangements or restrict the right of the Company or any of its affiliates to
amend, modify or terminate any such benefit plan, policy or arrangement.
(d) Vacations, Holidays or Temporary Leave. Executive
shall be entitled to take four
weeks of vacation per calendar year, or such greater amount, if any, as provided
in the policies of the Company then applicable to Executive, without loss or
diminution of compensation. Such vacation shall be taken at such time or times
consistent with the needs of the Company's business. Executive shall further be
entitled to the number of paid holidays, and leaves for illness or temporary
disability in accordance with the Company's policies as such policies may be
amended from time to time or terminated in the Company's sole discretion.
5. Other Offices. Executive agrees to serve without additional
compensation, if elected or appointed thereto, as an officer or director of any
of the Company's subsidiaries or affiliates or as any other officer of the
Company.
6. Business Expenses. The Company will reimburse Executive for
all reasonable travel and other expenses incurred by Executive in connection
with the performance of Executive's duties and obligations under this Agreement.
Executive will comply with such limitations and reporting requirements with
respect to expenses as may be established by Company from time to time and will
promptly provide all appropriate and requested documentation in connection with
such expenses.
7. Disability. If Executive becomes Disabled (as defined
below) during the Period of Employment, the Company may, in its discretion, hire
a permanent replacement to fill the position previously held and to perform the
duties previously performed by Executive, provided, however, the Company shall
continue Executive's employment with the Company on an inactive basis to the
extent necessary to continue to maintain Executive's eligibility for benefits
available under the Company's Group Long-Term Disability Insurance Plan or under
any generally similar plan then in effect (the "LTD Plan")
and such other employee benefit plans that are generally available to employees
receiving benefits under the LTD Plan, in accordance with the terms of such
plan(s) as they may be amended from time to time. For purposes of this
Agreement, "Disabled" or "Disability" means Executive's inability, because of
mental or physical illness or incapacity, whether total or partial, to perform
one or more of the primary duties of Executive's employment, with or without
reasonable accommodation, for a length of time that the Company determines is
sufficient to satisfy such obligations as it may have under the Family and
Medical Leave Act ("FMLA") and such "reasonable accommodation" obligations it
may have under federal, state or local disability laws. Upon Executive's
entitlement to receive benefits available under the LTD Plan and such other
benefits generally available to employees receiving benefits under the LTD Plan,
the Company's obligation to provide Executive compensation and other benefits
pursuant to Section 4 hereof shall cease. In the event that Executive ceases to
be Disabled and Executive is able to return to work and Executive's former
position is not open, the Company will endeavor to find, and will work
interactively with Executive to find, a position of comparable responsibility,
compensation and benefits and to reinstate Executive to such position, if such a
position is available at the conclusion of Executive's disability leave of
absence. Prior to restoration of Executive to active employment with the
Company, Executive shall cooperate in obtaining all fitness for duty
certifications from Executive's treating physician(s) and such other physicians
as the Company may request in accordance with the FMLA and federal, state and
local disability and worker's compensation laws. Within fifteen (15) days of
receipt of all medical certification(s) requested by the Company, if the Company
does not restore Executive to active employment with the Company, then at that
time Executive's employment with the Company will be deemed to have terminated.
Under the policy currently in effect for employees of the Company, such
termination will be treated as a Without Cause Termination in accordance with
Paragraph 9(a) below, provided the Executive has not then attained the age of
65. Nothing in this Agreement shall require the Company to continue such policy,
and such termination shall be treated in accordance with the policy applicable
at the time the Executive becomes disabled.
8. Death. In the event of the death of Executive during the
Period of Employment, the Period of Employment will end and the Company's
obligation to make payments under this Agreement will cease as of the date of
death, except that the Company will pay Executive's beneficiary designated for
purposes of Executive's life insurance provided by the Company or absent such
designation to Executive's estate Executive's Base Salary until the end of the
month in which Executive dies, and except for any rights and benefits of
Executive under the benefit plans and programs of the Company including, without
limitation, the SERP (as defined below) in which Executive is a participant, as
determined in accordance with the terms and provisions of such plans and
programs. The payout under the EAIP, or equivalent, for the fiscal year in which
Executive's death occurs, shall be annualized and paid at the normal time to
Executive's estate pro rata to the date of death. The value of the "payout
amount," in cash, for any executive long term incentive plan established by the
Company, the plan cycle of which ends within 12 months after the date of
Executive's death, shall be paid at the normal time to Executive's estate.
9. Effect of Termination of Employment.
(a) Without Cause Termination and Constructive
Discharge Absent a Change of Control
or a Special Change of Control. If Executive's employment terminates during the
Period of Employment in circumstances in which no Change of Control (as defined
below) or Special Change of Control (as defined below) has occurred, due to a
Without Cause Termination (as defined below) or a Constructive Discharge (as
defined below), subject to Executive executing a general release of claims as
more fully described in Section 9(e) hereof, the Company will pay or provide, as
the case may be, Executive (or Executive's surviving spouse, estate or personal
representative, as applicable) upon such event: (i) Base Salary earned but
unpaid as of the effective date of such termination of employment; (ii) a lump
sum payment equal to the Severance Pay Amount (as defined below); and (iii)
coverage during the Benefits Continuation Period (as defined below) under the
following employee benefit plans or provisions for comparable benefits outside
such plans, but only to the extent comparable coverage is not provided by any
new employer, (x) the Company's Group Health Insurance Program, (y) the LTD Plan
(as provided under such plan, Executive shall be required to pay the premium),
and (z) the Company's Group Life and Accidental Death and Dismemberment
Insurance (at the levels in effect at the date of termination of employment). As
used in this Agreement, the term "Severance Pay Amount" shall equal the amount
of Executive's then current Base Salary payable to Executive during one month
multiplied by (x) twelve (12)
if Executive has been employed by the Company for less than ten (10) continuous
unbroken years of service, or (y) eighteen (18) if Executive has been employed
by the Company for between ten (10) and twenty (20) continuous unbroken years of
service, or (z) twenty-four (24) if Executive has been employed by the Company
for more than twenty (20) continuous unbroken years of service.
(b) Without Cause Termination and Constructive
Discharge Following a Change of
Control or a Special Change of Control. If Executive's employment terminates
during the Period of Employment due to a Without Cause Termination or a
Constructive Discharge within the twenty-four (24) month period following a
Change of Control or a Special Change of Control, then the Company will provide
Executive (or Executive's surviving spouse, estate or personal representative,
as applicable) the following payments and/or benefits upon such event: (i) Base
Salary earned but unpaid as of the effective date of such termination of
employment; (ii) a lump sum amount equal to twenty-four (24) months of
Executive's then current Base Salary; (iii) the "target incentive amount" under
any executive annual incentive plan established by the Company for a fiscal year
ending during the Benefits Continuation Period, and the same "target incentive
amount" for any such executive annual incentive plan, pro-rated to the end of
the Benefits Continuation Period, for a fiscal year commencing during but ending
after the Benefit Continuation Period, or the equivalent under any bonus or
variable compensation plan which may hereafter be adopted by the Company in lieu
of such executive annual incentive plan; (iv) accelerated vesting of all stock
options and restricted stock granted to Executive under any executive long term
incentive plan established by the Company but not yet vested on the effective
date of termination of employment, or at the Company's option, the cash value of
the stock options and restricted stock forfeited under such grants based on fair
market value on the effective date of termination of employment; (v) accelerated
vesting of all "target" restricted performance shares awarded to Executive under
any executive long term incentive plan established by the Company that would be
earned in the fiscal year of termination of employment or subsequent fiscal
years, or at the Company's option, the cash value of the "target" restricted
performance shares forfeited under such awards based on fair market value on the
effective date of termination of employment; (vi) coverage during the Benefits
Continuation Period under the following employee benefit plans or provisions for
comparable benefits outside such plans, but only to the extent comparable
coverage is not provided by any new employer, for (x) the Company's Group Health
Insurance Program, (y) the LTD Plan (as provided under such plan, Executive
shall be required to pay the premium), and (z) the Company's Group Life and
Accidental Death and Dismemberment Insurance (at the levels in effect at the
date of termination of employment); (vii) all payments and benefits to which
Executive may be entitled pursuant to the terms and conditions of the SERP; and
(viii) all payments and benefits to which Executive may be entitled under the
Company's Non-Qualified Supplemental Benefit Plan.
(c) Termination for Cause; Resignation. If
Executive's employment terminates due to
a Termination for Cause (as defined below) or a Resignation (as defined below),
Base Salary earned but unpaid as of the date of such termination will be paid to
Executive in a lump sum and the Company will have no further obligations to
Executive hereunder. In the event any termination of Executive's employment for
any reason, Executive if so requested by the Company agrees to assist in the
orderly transfer of authority and responsibility to Executive's successor.
(d) For purposes of this Agreement, the following
capitalized terms have the
following meanings:
(i) "Benefits Continuation Period" means
that number of months which is
equal to the number of months of Base Salary that Executive receives as a lump
sum severance payment in accordance with Sections 9(a) or 9(b) hereof.
(ii) "Change of Control" shall have the
meaning set forth in the SERP.
(iii) "Constructive Discharge" means: (A)
any material failure by the
Company to fulfill its obligations under this Agreement (including, without
limitation, any reduction of the Base Salary, as the same may be increased
during the Period of Employment, or other material element of compensation); (B)
a material and adverse change to, or a material reduction of, Executive's duties
and responsibilities to the Company; or (C) the relocation of Executive's
primary office to any location more than fifty (50) miles from the Company's
principal executive offices. Executive will provide the Company a written notice
which describes the circumstances being relied upon for all terminations of
employment by Executive resulting from any circumstances claimed to be a
Constructive Discharge thirty (30) days after the event giving rise to the
notice. The Company will have thirty (30) days after receipt of such notice to
remedy the situation prior to Executive's termination of employment due to a
Constructive Discharge.
(iv) "Resignation" means a termination of
Executive's employment by
Executive, other than in connection with Executive's Disability pursuant to
Section 7 hereof, Death pursuant to Section 8 hereof or Constructive Discharge
pursuant to Sections 9(a) or 9(b) hereof.
(v) "SERP" means the Company's 1989
Supplemental Executive Retirement
Plan, as amended or restated from time to time.
(vi) A "Special Change of Control" shall be
deemed to have occurred if a
Person (as hereinafter defined) who was the beneficial owner (as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended), directly or
indirectly, of 33-1/3% or more of the Voting Power (as hereinafter defined) of
the Company on January 1, 1989, ceases to have the Voting Power to elect a
majority of the board of directors of the Company. For purposes of this
subsection, each of the terms "Person" and "Voting Power" shall have the meaning
ascribed to it by Section 6.3 of the SERP (as if it had been used in clause (b)
of Section 6.2 of the SERP). For avoidance of doubt, it is understood by
Executive and the Company that the only Person who was the beneficial owner,
directly or indirectly, of 33-1/3% or more of the Voting Power of the Company on
January 1, 1989, was composed of W. Bradford Wiley, Deborah E. Wiley, Peter
Booth Wiley and William Bradford Wiley II (including trusts for which such any
such persons serves as trustee); and it is further understood that as of the
date hereof, such Person was composed of Deborah E. Wiley, Peter Booth Wiley and
William Bradford Wiley II (including trusts for which any such person serves as
trustee). Notwithstanding the foregoing, a Special Change of Control shall not
be deemed to have occurred as a result of a "person" comprising such Person
ceasing to have Voting Power to elect a majority of the Board of Directors of
the Company so long as the other "person" or "persons" who compose such Person,
in the aggregate, continue to have Voting Power to elect a majority of the board
of directors of the Company.
(vii) "Termination for Cause" means: (A)
Executive's refusal or willful
and continued failure to substantially perform Executive's material duties to
the best of Executive's ability under this Agreement (for reasons other than
death or disability), in any such case after written notice thereof; (B)
Executive's gross negligence in the performance of Executive's material duties
under this Agreement; (C) any act of fraud, misappropriation, material
dishonesty, embezzlement, willful misconduct or similar conduct; (D) Executive's
conviction of or plea of guilty or nolo contendere to a felony or any crime
involving moral turpitude; or (E) Executive's material and willful violation of
any of the Company's reasonable rules, regulations, policies, directions and
restrictions.
(viii) "Without Cause Termination" or
"Terminated Without Cause" means
termination of Executive's employment by the Company other than in connection
with Executive's Disability pursuant to Section 7 hereof, death pursuant to
Section 8 hereof or Constructive Discharge pursuant to Sections 9(a) or 9(b)
hereof, or the Company's Termination for Cause of Executive.
(e) Conditions to Payment. All payments and benefits
due to Executive under this
Section 9 shall be contingent upon the execution by Executive (or Executive's
beneficiary or estate) of a general release of all claims to the maximum extent
permitted by law against the Company, its affiliates, and their current and
former officers, directors, employees and agents in such form as determined by
the Company in its sole discretion.
(f) No Other Payments. Except as provided in this
Section 9, Executive shall not be
entitled to receive any other payments or benefits from the Company due to the
termination of Executive's employment, including but not limited to, any
employee benefits under any of the Company's employee benefits plans or
arrangements (other than at Executive's expense under the Consolidated Omnibus
Budget Reconciliation Act of 1985 or pursuant to the written terms of any
pension benefit plan in which Executive is a participant in which the Company
may have in effect from time to time) or any right to severance benefits.
Notwithstanding the foregoing sentence, in the event of a termination of
employment by Executive under the circumstances described in Section 9(b) hereof
following a Change of Control, nothing in this Agreement shall reduce
Executive's entitlement, if any, to any payment or benefit pursuant to the LTIP
resulting from Executive's termination of employment following a Change of
Control.
(g) Conditional Payments and Limitations.
(i) In the event that (A) any payment or
benefit received or to be
received by Executive pursuant to the terms of this Agreement or of any other
plan, arrangement or agreement of the Company (or any affiliate) (together, the
"Payments") would, in the opinion of independent tax counsel selected by the
Company and reasonably acceptable to Executive ("Tax Counsel"), be subject to
the excise tax (the "Excise Tax") imposed by section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code") (in whole or in part), determined
as provided below, and (B) the present value of the Payments is less than 115%
of the present value of an amount calculated such that no portion of the
Payments would be subject to the Excise Tax, then the Payments shall be reduced
(but not below zero) until no portion of the payments would be subject to the
Excise Tax. In the event that (C) the Payments would, in the opinion of Tax
Counsel, be subject to the Excise Tax (in whole or in part), determined as
provided below, and (D) the present value of the Payments is equal to or greater
than 115% of the present value of an amount calculated such that no portion of
the Payments would be subject to the Excise Tax, then the Company shall pay to
Executive, at the time specified in Section 9(g)(vi) below, an additional amount
(the "Gross-Up Payment") such that the net amount retained by Executive, after
deduction of the Excise Tax on the Covered Payments (as that term is defined
below) and any federal, state and local income tax and Excise Tax upon the
payment provided for by this Section 9(g), and any interest, penalties or
additions to tax payable by Executive with respect thereto, shall be equal to
the total present value of the Covered Payments at the time such Covered
Payments are to be made.
(ii) For purposes of determining whether any
of the Payments will be
subject to the Excise Tax and the amounts of such Excise Tax: (1) the total
amount of the Payments shall be treated as "parachute payments" within the
meaning of section 280G(b)(2) of the Code, and all "excess parachute payments"
within the meaning of section 280G(b)(1) of the Code shall be treated as subject
to the Excise Tax, except to the extent that, in the opinion of Tax Counsel, a
Payment (in whole or in part) does not constitute a "parachute payment" within
the meaning of section 280G(b)(2) of the Code, or such "excess parachute
payments" (in whole or in part) are not subject to the Excise Tax; (2) the
amount of the Payments that shall be treated as subject to the Excise Tax shall
be equal to the lesser of (A) the total amount of the Payments or (B) the amount
of "excess parachute payments" within the meaning of section 280G(b)(1) of the
Code (after applying clause (1) hereof); and (3) the value of any noncash
benefits or any deferred payment or benefit shall be determined by Tax Counsel
in accordance with the principles of sections 280G(d)(3) and (4) of the Code.
(iii) In the event that by reason of the
application of this Section
9(g), the Payments to Executive shall be reduced, then Executive may select from
among the Payments those Payments to be reduced.
(iv) As used in this Section 9(g), the term
"Covered Payments" shall
mean the payments and/or benefits payable to Executive pursuant to the
provisions of Sections 9(b)(i), 9(b)(ii), 9(b)(iii), 9(b)(iv) and 9(b)(vi) of
this Agreement (but in the case of Section 9(b)(iv), only with respect to
restricted performance shares awarded to Executive that have been earned prior
to a Change of Control), the SERP and the Company's Nonqualified Supplemental
Benefit Plan. Covered Payments shall not include any payments and/or benefits
other than those listed in the preceding sentence (including, without
limitation, any payments and/or benefits under the EAIP or the LTIP), except as
expressly provided above.
(v) For purposes of determining the amount
of the Gross-Up Payment,
Executive shall be deemed to pay federal income taxes at the highest marginal
rates of federal income taxation applicable to the individuals in the calendar
year in which the Gross-Up Payment is to be made and state and local income
taxes at the highest marginal rates of taxation applicable to individuals as are
in effect in the state and locality of Executive's residence in the calendar
year in which the Gross-Up Payment is to be made, net of the maximum reduction
in federal income taxes that can be obtained from deduction of such state and
local taxes taking into account any limitations applicable to individuals
subject to federal income tax at the highest marginal rates.
(vi)The Gross-Up Payment provided for in
Section 9(g)(i) hereof shall be
made upon the earlier of (A) the making to Executive of any Payment or (B) the
imposition upon Executive or payment by Executive of any Excise Tax.
(vii) If it is established pursuant to a
final determination of a court
or an Internal Revenue Service proceeding or the opinion of Tax Counsel that the
Excise Tax on Covered Payments is less than the amount taken into account under
Section 9(g)(i) hereof, Executive shall repay to the Company within five days of
Executive's receipt of notice of such final determination or opinion the portion
of the Gross-Up Payment attributable to such reduction (plus the portion of the
Gross-Up Payment attributable to the Excise Tax and federal, state and local
income tax imposed on the Gross-Up Payment being repaid by Executive if such
repayment results in a reduction in Excise Tax or a federal, state and local
income tax deduction) plus any interest received by Executive on the amount of
such repayment. If it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding or the opinion of Tax Counsel
that the Excise Tax on Covered Payments exceeds the amount taken into account
hereunder (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess within five days
of the Company's receipt of notice of such final determination or opinion.
Executive acknowledges that the timing of the Gross-Up Payment made by the
Company to the Executive pursuant to Section 9(g) hereof is for the benefit of
the Executive, and that any repayment of such Gross-Up Payment by Executive to
the Company that may subsequently be required pursuant to this Section 9(g)(vii)
is solely for the purposes of the Company's recoupment of compensation that the
Company overpaid to Executive.
10. Other Duties of Executive During and After the Period of
Employment.
(a) Non-Competition and Non-Disclosure Agreement.
Simultaneously with the execution
of this Agreement, Executive agrees to execute and to comply with the terms of
the Non-Competition and Non-Disclosure Agreement (hereinafter referred to as the
"Non-Competition Agreement") in the form provided to Executive by the Company.
The terms and conditions of the Non-Competition Agreement are incorporated
herein by reference and made a part of this Agreement as if fully set forth
herein.
(b) Agreement To Arbitrate. Simultaneous with the
execution of this Agreement,
Executive agrees to execute and to comply with the terms of the Agreement to
Arbitrate (hereinafter referred to as the "Agreement to Arbitrate") in the form
provided to Executive by the Company. The terms and conditions of the Agreement
to Arbitrate are incorporated herein by reference and made a part of this
Agreement as if fully set forth herein.
11. Indemnification. The Company will indemnify Executive to
the fullest extent permitted by the laws of the state of the Company's
incorporation in effect at that time, or the certificate of incorporation and
by-laws of Company, whichever affords the greater protection to Executive.
12. Mitigation. Executive will not be required to mitigate the
amount of any payment provided for hereunder by seeking other employment or
otherwise, nor will the amount of any such payment be reduced by any
compensation earned by Executive as the result of employment by another employer
after the date Executive's employment hereunder terminates.
13. Withholding Taxes. Executive acknowledges and agrees that
the Company may directly or indirectly withhold from any payments under this
Agreement all federal, state, city or other taxes that will be required pursuant
to any law or governmental regulation.
14. Effect of Prior Agreements. This Agreement, together with
the Non-Competition Agreement and the Agreement to Arbitrate, constitute the
sole and entire agreements and understandings between Executive and the Company
with respect to the matters covered thereby, and there are no other promises,
agreements, representations, warranties or other statements between Executive
and the Company in respect to such matters not expressly set forth in these
agreements. These agreements supersede all prior and contemporaneous agreements,
understandings or other arrangements, whether written or oral, concerning the
subject matter thereof. Upon execution of this Agreement, Executive's existing
employment agreement with the Company shall be superceded by this Agreement in
its entirety and shall be of no further force and effect.
15. Notices. Any notice required, permitted, or desired to be
given pursuant to any of the provisions of this Agreement shall be deemed to
have been sufficiently given or served for all purposes if delivered in person
or sent by registered or certified mail, return receipt requested, postage and
fees prepaid, as follows:
If to the Company, at:
John Wiley & Sons, Inc.
111 River Street
Hoboken, New Jersey 07030
Attention: Chief Executive Officer
with a copy to:
John Wiley & Sons, Inc.
111 River Street
Hoboken, New Jersey 07030
Attention: General Counsel
Either of the parties hereto may at any time and from time to time change the
address to which notices shall be sent hereunder by notice to the other party.
16. Assignability. The obligations of Executive may not be
delegated and, except as expressly provided in Section 8 hereof relating to the
designation of a beneficiary in the event of death, Executive may not, without
the Company's written consent thereto, assign, transfer, convey, pledge,
encumber, hypothecate or otherwise dispose of this Agreement or any interest
therein. Any such attempted delegation or disposition shall be null and void and
without effect. The Company and Executive agree that this Agreement and all of
the Company's rights and obligations hereunder may be assigned or transferred by
the Company to and may be assumed by and become binding upon and may inure to
the benefit of any affiliate of or successor to the Company. The term
"successor" shall mean (with respect to the Company or any of its subsidiaries)
any other corporation or other business entity which, by merger, consolidation,
purchase of the assets, or otherwise, acquires all or a material part of the
assets of the Company. Any assignment by the Company of its rights or
obligations hereunder to any affiliate of or successor to the Company shall not
be a termination of employment for purposes of this Agreement.
17. Modification. This Agreement may not be modified or
amended except in writing signed by the parties. No term or condition of this
Agreement will be deemed to have been waived except in writing by the party
charged with waiver. A waiver will operate only as to the specific term or
condition waived and will not constitute a waiver for the future or act on
anything other than that which is specifically waived.
18. Governing Law. This Agreement will be construed and
interpreted pursuant to the laws of the State of New York, without regard to
such State's conflict of law rules.
19. Separability. All provisions of this Agreement are
intended to be severable. In the event any provision or restriction contained
herein is held to be invalid or unenforceable in any respect, in whole or in
part, such finding will in no way affect the validity or enforceability of any
other provision of this Agreement. The parties hereto further agree that any
such invalid or unenforceable provision will be deemed modified so that it will
be enforced to the greatest extent permissible under law, and to the extent that
any court of competent jurisdiction determines any restriction herein to be
unreasonable in any respect, such court may limit this Agreement to render it
reasonable in the light of the circumstances in which it was entered into and
specifically enforce this Agreement as limited.
20. No Waiver: No course of dealing or any delay on the part
of the Company or Executive in exercising any rights hereunder shall operate as
a waiver of any such rights. No waiver of any default or breach of this
Agreement shall be deemed a continuing waiver of any other breach or default.
21. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered, effective as of the date first indicated above by a
duly authorized officer of the Company.
EXECUTIVE: JOHN WILEY & SONS, INC.
/S/ Timothy King /S/ William J. Pesce
- --------------------------- --------------------------------
Timothy King William J. Pesce
President and Chief Executive Officer
Signed April 29, 2003