-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S1jUsE5QNL+VaEcqrSRLafs3W/NNWszGXT6ZuNfOfW2DplWHt3NHeZp/g0UuGWHH /aqgxW6yBBOg8MYJftE9mg== 0000893750-00-000236.txt : 20000508 0000893750-00-000236.hdr.sgml : 20000508 ACCESSION NUMBER: 0000893750-00-000236 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20000505 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARCOURT GENERAL INC CENTRAL INDEX KEY: 0000040493 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DEPARTMENT STORES [5311] IRS NUMBER: 041619609 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-36438 FILM NUMBER: 620987 BUSINESS ADDRESS: STREET 1: 27 BOYLSTON ST BOX 1000 CITY: CHESTNUT HILL STATE: MA ZIP: 02467 BUSINESS PHONE: 6172328200 MAIL ADDRESS: STREET 1: 27 BOYLSTON ST STREET 2: BOX 1000 CITY: CHESTNUT HILL STATE: MA ZIP: 02467 FORMER COMPANY: FORMER CONFORMED NAME: GENERAL CINEMA CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: MID WEST DRIVE IN THEATRES INC DATE OF NAME CHANGE: 19660907 S-3 1 As filed with the Securities and Exchange Commission on May 5, 2000 Registration Statement No. 333- =============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------- HARCOURT GENERAL, INC. (Exact name of Registrant as specified in its charter) -------------- Delaware 04-1619609 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 27 Boylston Street Chestnut Hill, MA 02467 (617) 232-8200 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) -------------- Eric P. Geller, Senior Vice President, General Counsel and Secretary Harcourt General, Inc. 27 Boylston Street Chestnut Hill, MA 02467 (617) 232-8200 (Name, address, including zip code, and telephone number, including area code, of agent for service) -------------- Copy to: Rise B. Norman, Esq. Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017-3954 (212) 455-2000 -------------- Approximate date of commencement of proposed sale to the public: From time to time after the Registration Statement becomes effective as determined by market conditions and other factors. -------------- If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. /X/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / (Continued on following page) =============================================================================== (Continued from previous page) CALCULATION OF REGISTRATION FEE Proposed Proposed Title of Maximum Maximum Securities Amount Offering Aggregate Amount of to be to be Price Offering Registration Registered Registered per Share Price(1) Fee - ---------- ---------- --------- --------- ------------- Common Stock, 2,000,000 $36.5625 $73,125,000 $20,328.75(1) $1.00 par value per share (1) The registration fee has been calculated in accordance with Rule 457(c) under the Securities Act of 1933, as amended (the "Securities Act"), and is calculated on the basis of the high and low sale prices for the Common Stock on the New York Stock Exchange on May 3, 2000. --------------- The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. --------------- Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. SUBJECT TO COMPLETION, DATED MAY 5, 2000 PROSPECTUS [LOGO] 2,000,000 Shares Harcourt General, Inc. Common Stock --------------- This prospectus relates to 2,000,000 shares of common stock, which may be sold from time to time by the selling stockholder named in this prospectus acting as principal for its own account. We will not receive any of the proceeds from the sale of the common stock. Our common stock is listed on the New York Stock Exchange under the symbol H. On May 4, 2000, the closing price of our common stock was $36.38 per share. Salomon Smith Barney Inc., the selling stockholder and a broker-dealer, may offer and sell the common stock from time to time directly or through underwriters, dealers or agents, to one or more purchasers in fixed price offerings, in negotiated transactions, at market prices prevailing at the time of sale or at prices related to market prices. The selling stockholder may be deemed to have received certain compensation in connection with the sale of our common stock, see "Selling Stockholder" and "Plan of Distribution." The terms of the offering and sale of the common stock, including any public offering price, any discounts, commissions or concessions allowed, reallowed or paid to underwriters, dealers or agents, the purchase price of the common stock and the proceeds to the selling stockholder, and any other material terms will be set forth in the applicable prospectus supplement. --------------- These securities have not been approved by the Securities and Exchange Commission or by any state securities commission, nor have those organizations determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. , 2000 TABLE OF CONTENTS Page WHERE YOU CAN FIND INFORMATION . . . . . . . . . . . . . . . . . . . . 3 INCORPORATION BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . 3 THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 SELLING STOCKHOLDER . . . . . . . . . . . . . . . . . . . . . . . . . . 5 DESCRIPTION OF CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . 6 PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . 16 LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 2 WHERE YOU CAN FIND INFORMATION We have filed with the SEC a registration statement on Form S-3 to register the common stock offered by this prospectus. However, this prospectus does not contain all of the information contained in the registration statement and the exhibits and schedules to the registration statement. We strongly encourage you to carefully read the registration statement and the exhibits and schedules to the registration statement. We file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any materials on file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, as well as at the SEC's regional offices at 500 West Madison Street, Suite 1400, Chicago, Il 60661 and 7 World Trade Center, Suite 1300, New York, NY 10048. Our filings are available to the public over the Internet at the SEC's website at http://www.sec.gov. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. INCORPORATION BY REFERENCE The SEC allows us to "incorporate by reference" the information we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this prospectus, and information that we file later with the SEC will automatically update and supersede this information. We incorporate by reference the documents listed below and any future filings made with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until the selling stockholder sells all of the securities: - Our Annual Report on Form 10-K for the fiscal year ended October 31, 1999; and - Our Quarterly Report on Form 10-Q for the quarter ended January 31, 2000. You can get a free copy of any of the documents incorporated by reference by making an oral or written request directed to: Corporate Relations Department Harcourt General, Inc. 27 Boylston Street Chestnut Hill, MA 02467 Telephone (617) 232-8200 You should rely only on the information contained or incorporated in this prospectus or any supplement. We have not authorized anyone else to provide you with different information. You should not rely on any other representations. Our affairs may change after this prospectus or any supplement is distributed. You should not assume that the information in this prospectus or any supplement is accurate as of any date other 3 than the date on the front of those documents. You should read all information supplementing this prospectus. THE COMPANY Harcourt General, Inc., is a leading global multiple-media publisher providing educational, training and assessment products and services to classroom, corporate, professional and consumer markets. Prior to October 22, 1999, we owned a controlling interest in The Neiman Marcus Group, Inc., a high-end specialty retailer. On October 22, 1999, we distributed to our stockholders approximately 21.4 million of the 26.4 million shares of Neiman Marcus common stock held by us. For more information about this distribution and the relationship between us and Neiman Marcus, see Note 2 to the Consolidated Financial Statements for the fiscal year ended October 31, 1999 incorporated by reference in this prospectus. We operate our business through four principal segments, described below and in Note 3 to the Consolidated Financial Statements incorporated by reference in this prospectus. Education Group. The education group is a leading content provider to classroom and at-home K-12 and supplemental learners offering a complementary array of value-added products and services through school, library and direct-to-consumer channels. The education group includes the operations of Harcourt School Publishers; Holt, Rinehart and Winston; Steck-Vaughn; and Harcourt Trade Publishers. The education group publishes textbooks and related instructional materials for kindergarten to grade eight through Harcourt School and for the middle and secondary education markets through Holt Rinehart and Winston. Steck-Vaughn publishes supplemental educational materials used in elementary, secondary and adult education, test preparation materials, and offers English language literacy programs for training workers for whom English is a second language. Harcourt Trade publishes children's books, general adult fiction and nonfiction hardcover books, and trade paperbacks under the Harvest imprint. Higher Education Group. The higher education group brings traditional and technology-enabled content to adults seeking higher education in traditional and non-traditional settings, offering a broad array of products and services to the campus-based, direct-to-consumer and corporate markets. The higher education group includes Harcourt College Publishers, Harcourt Learning Direct, Archipelago Productions and Harcourt Professional Education. Harcourt College publishes textbooks and other materials for the college and university market under the Harcourt, Saunders, Dryden and Holt Rinehart imprints. Harcourt Learning Direct provides traditional and technology-based distance learning opportunities in vocational, degree and professional self-study programs. Harcourt Professional Education conducts review courses under the BAR/BRI name for individuals preparing for bar examinations, as well as live-lecture and computer-based review courses for law and accounting examinations, and publishes print and electronic information resources, including reference 4 guides and newsletters for financial, legal and human resources professionals. Corporate and Professional Services Group. The corporate and professional services group produces technology-based training, assessment and educational products and services for the corporate learner market and individual professionals. The corporate and professional services group includes the operations of NETg; The Psychological Corporation; Harcourt Assessment Systems, Inc.; Drake Beam Morin; and Knowledge Communication, Inc. NETg develops and sells self-study information technology and related professional training products and services which are delivered by CD-ROM, the Internet and corporate intranets to information technology professionals. The Psychological Corporation provides tests and related products and services for educational and psychological assessment. Harcourt Assessment Systems develops and administers computer-based tests and related services for professional and regulatory licensing and credentialing and corporate pre-employment testing. Drake Beam Morin is one of the world's leading organizational and individual transition consulting firms, assisting organizations and individuals worldwide in outplacement, career and transition management and employee selection. Knowledge Communication provides technology-based professional development and business skills training. Worldwide Scientific, Technical and Medical Group. The worldwide scientific, technical and medical group is a leading provider of information products through both traditional and new technology-enabled channels to health, scientific and technical professionals worldwide. The scientific, technical and medical group includes Harcourt Health Sciences, comprised of the global medical publishing operations of W.B. Saunders, Mosby and Churchill Livingstone; Academic Press; and Harcourt Publishers International. Harcourt Health Sciences publishes books, periodicals and electronic products in the health sciences, and advertising-based newsletters for health professionals. Academic Press publishes scholarly books, journals, data bases and products and value-added services in print and electronic media, in the life, physical, social and computer sciences. Harcourt Publishers International is responsible for international distribution of Harcourt English language products and the publication of adaptations, translations and indigenous materials worldwide. USE OF PROCEEDS We will not receive any of the proceeds from the sale of the common stock offered by the selling stockholder. SELLING STOCKHOLDER Citibank N.A., an affiliate of the selling stockholder listed below, purchased shares of common stock in a transaction exempt from the registration requirements of the Securities Act at the then market price on April 20, 2000. The shares of common stock were subsequently transferred to Salomon Smith Barney Inc., the selling stockholder. Concurrent with the purchase of the stock, Citibank N.A. entered into an equity swap agreement under which Citibank N.A. or an affiliate thereof receives consideration 5 and may receive additional shares of common stock from us if the market price of our common stock declines. The following table states the number of shares of our outstanding common stock that the selling stockholder owns and the number of shares of common stock that may be sold for the account of the selling stockholder. Number of shares of Number of shares of Common Stock to be Selling Stockholder Common Stock Owned Sold - ------------------- ------------------ ------------------ Salomon Smith Barney Inc. 1,372,213* 1,372,213* 390 Greenwich Street New York, NY 10013 * Plus any additional shares, not anticipated to exceed 627,787 shares, that the selling stockholder may receive from us under the equity swap agreement. DESCRIPTION OF CAPITAL STOCK As of the date of this prospectus, we are authorized to issue up to 370,000,000 shares of capital stock: - 150,000,000 shares of Common Stock with a par value of $1.00 per share; - 80,000,000 shares of Class B Stock with a par value of $1.00 per share; - 100,000,000 shares of Class C Stock with a par value of $1.00 per share; and - 40,000,000 shares of Preferred Stock with a par value of $1.00 per share, of which 10,000,000 have been designated Series A Cumulative Convertible Stock. As of April 25, 2000, we had 53,125,371 shares of common stock issued and outstanding, 19,985,762 shares of Class B Stock issued and outstanding, no shares of Class C Stock issued and outstanding and 806,921 shares of Series A Cumulative Preferred Stock issued and outstanding. Description of Common Stock The following summary is not complete. You should refer to the applicable provisions of the Restated Certificate of Incorporation and the Delaware General Corporation Law for a complete statement of the terms and rights of the common stock, Class B Stock and Class C Stock. 6 Dividends. Holders of our common stock are entitled to receive dividends when, as and if declared by our board, out of funds legally available for their payment (subject to the rights of holders of the preferred stock, if any). If a cash dividend is paid to holders of our common stock, a cash dividend equal to 90% of the amount paid to holders of the common stock must be paid to holders of the Class B Stock. Cash dividends paid to holders of Class C Stock, if issued, would be equal to that paid to holders of our common stock. Stock dividends are paid to holders of our common stock, Class B Stock and Class C Stock only in the form of stock corresponding to that class held by the holder. Holders of our common stock are paid stock dividends in common stock, holders of our Class B Stock are paid stock dividends in Class B Stock and holders of our Class C Stock, if issued, would be paid stock dividends in Class C Stock. With respect to property dividends, shares of common stock and Class C Stock are entitled to receive the same per share property dividends, when, as and if declared, and are entitled to receive any rights to purchase shares of their respective class on the same per share basis. Voting Rights. Each share of common stock entitles the holder to one vote on all matters submitted to the stockholders, and each share of Class B Stock entitles the holder to one vote on all these matters, except that each share of Class B Stock entitles the holder to ten votes on the election of directors at any stockholders' meeting if more than 20% of the shares of common stock outstanding on the record date for the meeting is beneficially owned by, or if more than 20% of the total voting power attributable to the shares of the common stock outstanding on the record date for the meeting is voted either directly or by proxy for a person or persons other than those nominated by our board by, a person or group of persons acting in concert (unless a person or group is also the beneficial owner of a majority of the shares of Class B Stock on the record date). If Class C Stock were issued, Holders of Class C Stock would be entitled to one-tenth (1/10th) of one vote on all matters submitted to the stockholders. Except as otherwise required by law or the Restated Certificate of Incorporation, holders of our common stock, Class B Stock and Class C Stock vote together as a single class. However, the holders of common stock and the holders of Class B Stock are each entitled to vote separately as a class on a number of significant matters. For example, the holders of common stock and Class B Stock would each vote separately as a class on any: - merger or consolidation of Harcourt General with or into any other corporation, any sale, lease, exchange or other disposition of all or substantially all of our assets to or with any other person, or any dissolution of Harcourt General, - additional issuances of Class B Stock other than in connection with stock splits and stock dividends, and 7 - amendments to our Restated Certificate of Incorporation. Transferability. Our shares of common stock are freely transferable and publicly traded. The Class B Stock is not publicly traded and is not transferable by a stockholder except to a "Permitted Transferee," as defined in the Restated Certificate of Incorporation, which includes a holder's spouse, certain of a holder's relatives, certain trusts established for their benefit, corporations and partnerships principally owned by holders, their relatives and the trusts, charitable organizations and a holder's estate. Convertibility. The Class B Stock is convertible at all times, at the option of the holder and without cost to the holder into common stock on a share-for-share basis. The Smith- Lurie / Marks Stockholders' Agreement restricts the convertibility of substantially all of the shares of Class B Stock outstanding. The common stock is not convertible into any other class of stock of Harcourt General. If issued, the Class C Stock would not be convertible at the option of the holder. However, it would be automatically converted into common stock upon any dissolution, liquidation or winding up of our affairs, whether voluntary or involuntary. Rights Upon Liquidation. In the event of our voluntary or involuntary liquidation, dissolution or winding up, the holders of our common stock (including holders of Class B Stock and Class C Stock who become holders of common stock through conversion) will be entitled to share equally in any of our assets available for distribution after the payment in full of all debts and distributions and after the holders of all series of outstanding preferred stock, if any, have received their liquidation preferences in full. Miscellaneous. The issued and outstanding shares of common stock and Class B Stock are fully paid and nonassessable. Holders of shares of our common stock are not entitled to preemptive rights. Shares of Class B Stock are subject to certain transfer restrictions as described in the Restated Certificate of Incorporation. The Smith Family Group's Ownership of Harcourt General Stock The Smith Family Group includes Richard A. Smith, Chairman of Harcourt General; Nancy L. Marks, Mr. Smith's sister; Robert A. Smith and Brian J. Knez, Presidents and Co-Chief Executive Officers and directors of Harcourt General, who are, respectively, the son and son-in-law of Mr. Smith; Jeffrey R. Lurie, a director of Harcourt General and the son of Nancy L. Marks, other members of their families and various family corporations, trusts and charitable foundations. The Smith Family Group is the beneficial owner of 260,511 shares of common stock (which constitutes less than 1% of all common stock issued and outstanding and which includes 62,180 shares subject to options exercisable within 60 days of April 25, 2000) and 19,956,398 shares of Class B Stock (which constitutes 99.9% of all Class B Stock issued and outstanding). These shares collectively represent 27.18% of the common stock, Class B Stock 8 and Series A Stock outstanding as of April 25, 2000, assuming conversion of all Series A Stock into common stock. As to any elections in which the Class B Stock would carry 10 votes per share, the Smith Family Group had, as of April 25, 2000, 79% of the combined voting power of the common stock and Class B Stock. The effect of this significant voting power is to permit the Smith Family Group to exert decisive control over the results of elections for our board in an event of a substantial accumulation of our common stock by any person or group unrelated to the Smith Family Group. The Smith-Lurie/ Marks Stockholders' Agreement provides that the members of the Smith Family Group will not convert any of the 19,956,398 shares of Class B Stock subject to the Agreement into common stock without first offering to sell these shares to the parties to the Smith-Lurie/Marks Stockholders' Agreement. Anti-Takeover Effect of Smith Family Group's Ownership. The Smith Family Group has: - ownership of substantially all of the Class B Stock, which has the right, among other things, to the class vote to approve those issues described above, - a substantial portion of Harcourt General's voting power, and - the right to control the outcome of the election of directors in contested and certain other situations. Because any merger, consolidation or sale of all or substantially all of Harcourt General's assets would have to, in effect, be approved by the Smith Family Group, as the holders of the Class B Stock, as well as by holders of a majority of our common stock, any individual, corporation or group that desires to acquire or take control of Harcourt General, or to obtain approval of Harcourt General's stockholders for any proposed merger, consolidation or sale of assets, would probably not be able to do so without the approval of the Smith Family Group. This could discourage attempts to acquire Harcourt General and could deprive holders of our common stock and Class C Stock (if any were to be issued) of an opportunity to sell their shares in an acquisition at a premium over the then market price. The Smith-Lurie / Marks Stockholders' Agreement restricts the ability of the Smith Family Group to convert their Class B Stock subject to certain limited exceptions. The Class B Stock may have the effect of discouraging unsolicited takeover bids from third parties or efforts to remove incumbent management, or make these actions more difficult to accomplish. Description of Preferred Stock The following summary is not complete. You should refer to the applicable provisions of our Restated Certificate of Incorporation and the Delaware General Corporation Law for a complete statement of the 9 terms and rights of the preferred stock. We are authorized to issue shares of preferred stock in one or more series up to the amount authorized in our Restated Certificate of Incorporation. Our Board is authorized by our Restated Certificate of Incorporation to determine for each series of preferred stock: - the voting powers, if any (which voting powers if granted may be full or limited), - designations, - preferences, - relative, participating, optional or other special rights and the qualifications, limitations or restrictions of each series, - the rate of dividend to which holders of preferred stock of any series may be entitled (which may be cumulative or noncumulative), - the rights of holders of preferred stock of any series in the event of liquidation, dissolution or winding up of the affairs of Harcourt General, and - the rights (if any) of holders of preferred stock of any series to convert or exchange shares of preferred stock of any series for shares of any other class of capital stock (including the determination of the price or prices or the rate or rates applicable to these rights to convert or exchange and the adjustment thereof, the time or times during which the right to convert or exchange will be applicable and the time or times during which a particular price or rate will be applicable). Series A Cumulative Convertible Stock Number of Shares. We are authorized to issue up to 10,000,000 shares of preferred stock designated Series A Cumulative Convertible Stock, of which 806,921 shares were outstanding as of April 25, 2000. Dividends. Holders of the Series A Stock are entitled to receive cumulative dividends, when, as and if declared by our board, out of funds legally available for their payment (subject to the rights of holders of any series of preferred stock ranking senior to them, if any). The quarterly dividend to be paid on each share of Series A Stock will be the sum of (x) $.0075 (adjusted, as further described below)) and (y) the product of (1) the amount of the dividend or dividends (including special dividends, if any) paid or to be paid in cash on each share of common stock during the quarter ending on the date on which the Series A Stock dividend is payable, and (2) the conversion rate (as discussed further below). Liquidation Rights. In the event of our voluntary or involuntary liquidation, dissolution or winding up, holders of the Series A Stock will be entitled to be paid in cash from our net assets available for 10 distribution (after the prior claims of the holders of any preferred stock ranking senior to the Series A Stock, if any, have been paid) the sum of $5.00 per share (adjusted, if necessary, to reflect any stock dividend paid on common stock, as discussed below) plus any accrued dividends, before any amount is paid to holders of our common stock. If our net assets available for distribution are insufficient to allow payment in full to be made to the holders of the Series A Stock, the holders of the Series A Stock will be paid, on a pro rata basis, in proportion to the full distributive amounts to which they are entitled. Conversion Rights -- Conversion Rate and Procedures. Shares of Series A Stock are convertible, at the option of the holders of Series A Stock, into fully paid and nonassessable shares (calculated as to each conversion to the nearest 1/100th of a share) of common stock at the rate of 1.31 shares of common stock for each one share of Series A Stock surrendered for conversion, subject to adjustments as described below. The term "conversion rate" means the number of shares or fraction of shares of common stock into which one full share of Series A Stock is entitled to be converted. Upon conversion, we will not make payment or adjustment on account of dividends accrued or in arrears on Series A Stock surrendered for conversion or on account of any dividends on our common stock issuable on a conversion. Adjustments. In the event that we: - declare a stock dividend on our common stock in shares of capital stock except in any case where a dividend on our Series A Stock has also been declared - subdivide outstanding shares of our common stock, - combine outstanding shares of our common stock into a smaller number of shares, or - issue by reclassification of our shares of common stock (including any reclassification in connection with a consolidation or merger in which Harcourt General is the continuing corporation) any shares of capital stock, then the conversion rate in effect at the time of the record date for the dividend or of the effective date of the subdivision, combination or reclassification will be adjusted so that the holder of any Series A Stock surrendered for conversion after one of these events has occurred will be entitled to receive the number and kind of shares which he or she would have owned or been entitled to receive had his or her Series A Stock been converted immediately prior to the relevant event. Each time any of the events set out above occur, a corresponding adjustment will be made. Other events that trigger adjustments include: - the fixing by us of a record date for the issuance of rights, warrants or options to all holders of our common stock and/or 11 Class B Stock entitling them to subscribe for or purchase shares of our common stock and/or Class B Stock at a price per share less than the current market price per share of common stock on this record date; and - the fixing by us of a record date for the making of a distribution to all holders of our common stock and/or Class B Stock of evidences of our indebtedness or assets, or subscription rights, warrants or options. In case of any reclassification or change of outstanding common stock and/or Class B Stock, or in case of any consolidation or merger of Harcourt General with or into another corporation, or in case of any sale or conveyance to another corporation or entity (other than by mortgage or pledge) of all or substantially all of the properties and assets of Harcourt General, Harcourt General (or its successor in the consolidation or merger, or the purchaser of the properties and assets) will make appropriate provision so that the holder of each share of Series A Stock then outstanding will have the right thereafter to convert his or her share into the kind and amount of shares of stock and other securities and property receivable upon the occurrence of this type of event by a holder of the number of shares of common stock into which the Series A Stock might have been converted immediately prior to this event. No adjustment in the conversion rate is required unless this adjustment (plus any adjustments not previously made by reason of this paragraph) would require an increase or decrease of at least one percent in the rate; however, any adjustments which are not required because they are less than one percent will be carried forward and taken into account in any subsequent adjustment. Except as expressly set out in the Restated Certificate of Incorporation, no adjustment in the conversion rate will be made by reason of the issuance or sale, in exchange for cash, property or services, of shares of common stock and/or Class B Stock, or any securities convertible into or exchangeable for shares of common stock and/or Class B Stock, or securities carrying the right to purchase any of the foregoing. Any determination as to fair market value or as to whether an adjustment in the conversion rate in effect is required, or as to the amount of any adjustment, will be binding on holders of Series A Stock and Harcourt General if made in good faith by our board. Transferability. Our shares of Series A Stock are freely transferable and publicly traded. Advance Notice of Certain Events. If at any time: - we authorize the issuance to all holders of our common stock of rights, warrants or options to subscribe for or purchase shares of our common stock or of any other subscription rights, warrants or options; or 12 - we authorize the distribution to all holders of our common stock of evidences of our indebtedness or assets (other than dividends paid in, or distributions of, cash to the extent permitted by law); or - there is any consolidation or merger to which we are a party and for which approval of any of our stockholders is required, or a conveyance or transfer of all or substantially all of our properties and assets, or a tender offer for at least a majority of our common stock which has been recommended by our board as being in the best interests of the holders of common stock; or - there is a total voluntary or involuntary dissolution, liquidation or winding up of Harcourt General; or - we propose to take any actions which would require an adjustment of the conversion rate; then we will send a notice to the holders of record of the outstanding Series A Stock, at least 20 days (or 10 days in any case specified in the first or second clause above or in the case of a recommended tender offer as specified in the third clause above) prior to the applicable record date (or effective date if there is no record date) hereinafter specified, stating (A) the date as of which the holders of common stock of record to be entitled to receive any rights, warrants, options or distributions are to be determined, or (B) the date on which any consolidation, merger, conveyance, transfer, tender offer, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of common stock of record will be entitled to exchange their shares of common stock for securities or other property, if any, deliverable upon the distribution, right, warrant, option, consolidation, merger, conveyance, transfer, tender offer, dissolution, liquidation or winding up. The failure to give this required notice or the inadequacy in the notice will not affect the legality or validity of any distribution, right, warrant, option, consolidation, merger, conveyance, transfer, tender offer, dissolution, liquidation, or winding up, or the vote upon any of these actions. Fractions Upon Conversion. No fractional shares of common stock will be issued upon conversion, but in lieu of fractional shares we will pay a cash adjustment (computed to the nearest cent) in an amount equal to the fraction of the market price per share of common stock computed by our board. Voting Rights. Except as described in the Restated Certification of Incorporation and as required by applicable law, the holders of Series A Stock are not entitled to vote. Holders of Series A Stock (as well as holders of any other series of preferred stock) will be entitled to vote for a certain number of members of our board (as further described in the Restated Certificate of Incorporation) if and when accrued dividends on Series A Stock have not been paid or declared and a sum sufficient for the payment of these dividends set aside, in an amount equivalent to six quarterly dividends. These special voting rights of the holders of Series 13 A Stock may be exercised until all dividends in default on the Series A Stock have been paid in full or declared and funds sufficient for payment of these dividends set aside. When these dividends have been paid or provided for, the special voting rights of the holders of Series A Stock (as well as holders of any other series of preferred stock) will cease. As long as any shares of Series A Stock are outstanding, we will not amend the Restated Certificate of Incorporation to increase the authorized number of shares of preferred stock, without the affirmative vote or written consent of the holders of a majority of the number of shares of Series A Stock at the time outstanding. As long as any shares of Series A Stock are outstanding, we will not amend our Restated Certificate of Incorporation to: - change the designations, preferences, limitations or other relevant rights of the Series A Stock; - effect an exchange, reclassification or cancellation of all or part of the Series A Stock; - effect an exchange or create a right of exchange of another class or series into Series A Stock; - change the Series A Stock into the same or a different number of shares of the same or another class or series; or - cancel or otherwise affect dividends on the shares of Series A Stock which have accrued but have not been declared, without the affirmative vote or written consent of the holders of two-thirds of the number of shares of Series A Stock then outstanding. Anti-Takeover Effect of Harcourt General's Restated Certificate of Incorporation and By-Laws and the Terms of Our Common Stock Our Board is divided into three classes, only one of which is scheduled for re-election each year. Consequently, a person considering the acquisition of voting control of Harcourt General would be entitled to replace only one-third of our board at each annual meeting, and thus might be dissuaded from seeking the substantial equity position required for voting control without the ability to install a Board which would be responsive to the person's wishes during the period immediately following the person's acquisition of control. A two-thirds vote of the outstanding stock is required for the approval of any merger or consolidation involving us, or of a sale of all or substantially all of our assets, or of the issuance of any of our voting securities or of any of our subsidiaries (except pursuant to employee stock incentive plans), unless this transaction is approved by a two-thirds vote of our board, in which event only the class voting rights of our common stock and our Class B Stock granted in the Restated Certificate of Incorporation (with respect to mergers, consolidations and 14 asset sales) and the provisions of Delaware law will apply in determining the percentage of stockholder approval, if any, that is required. Holders of our common stock and Class B Stock are each entitled to a separate class vote to approve any merger or consolidation of us, any sale, lease, exchange or other disposition of all or substantially all of our assets or any dissolution of us. Holders of our common stock and Class B Stock are also each entitled to a separate class vote with respect to any amendment to the Restated Certificate of Incorporation and any issuance of any additional shares of Class B Stock (other than in connection with stock splits and stock dividends). Both the Restated Certificate of Incorporation and the by-laws provide that the affirmative vote of the holders of at least 66 2/3% of the outstanding stock entitled to vote generally for the election of directors of Harcourt General, voting together as a single class, is required to modify, revise, alter, amend, repeal or rescind certain provisions of the Restated Certificate of Incorporation or the by-laws or to adopt any inconsistent provision. These provisions in the Restated Certificate of Incorporation are: - paragraph (b) of Article Eighth requiring a two-thirds vote of the outstanding stock for any merger, sale of all or substantially all of Harcourt General's assets or issuance of voting securities (as described above); - paragraph (c) of Article Eighth stating that the election of directors need not be by ballot unless the By-Laws so require and that no director need be a stockholder; - paragraph (d) of Article Eighth concerning any alteration, amendment or repeal of the By-Laws; - Article Ninth concerning stockholders' meetings and the ability of the stockholders to remove any director with or without cause; and - Article Tenth concerning the ability of the stockholders to amend provisions of the Restated Certificate of Incorporation and By-Laws. These provisions in the By-Laws are: - Section 3.1 concerning the number, classification and composition of our board; - Section 3.2 concerning the tenure of directors; - Section 3.3 concerning vacancies in our board; - Section 3.4 concerning the removal of directors; and - Section 13 concerning amendment of the By-Laws. 15 These "supermajority" voting requirements may discourage or deter a person from attempting to obtain control of us by rendering more difficult amendment of our Restated Certificate of Incorporation or by-laws to eliminate provisions that have an anti-takeover effect or that protect the interests of minority stockholders. The Restated Certificate of Incorporation authorizes Harcourt General to issue 40,000,000 shares of preferred stock, and empowers our board to set the voting and other rights of the preferred stockholders. At present, 10,000,000 shares have been designated as the Series A Stock, and the remaining 30,000,000 shares are available for designation. This "blank check" preferred stock will be available for issuance without further action by stockholders, unless action is required by applicable law or the rules of any exchange on which the securities may be listed. This "blank check" preferred stock could discourage a person from acquiring our common stock because of the possibility that our board would issue preferred stock with terms that significantly disadvantage the rights of our common stockholders. There is no provision in the Restated Certificate of Incorporation permitting cumulative voting. PLAN OF DISTRIBUTION We have been advised that the distribution of our common stock may be effected from time to time in one or more transactions by the selling stockholder acting as principal for its own account, which may involve block transactions (1) on the New York Stock Exchange in transactions that may include special offerings and exchange distributions pursuant to and in accordance with the rules of the exchange, (2) in the over-the-counter market or (3) in transactions otherwise than on the exchange or in the over-the-counter market, or in a combination of any of these transactions. The transactions may be effected by the selling stockholder in negotiated transactions, at market prices prevailing at the time of sale or at prices related to market prices. Salomon Smith Barney Inc., the selling stockholder and a broker-dealer may effect transactions by selling our common stock directly or through underwriters, dealers or agents, who may receive compensation in the form of discounts, concessions or commissions from the selling stockholder and may receive commissions from the purchasers of the common stock for whom they may act as agent (which discounts or commissions from the selling stockholder or purchasers will not exceed those customary in the type of transactions involved). The selling stockholder and any dealers, agents or underwriters that participate with the selling stockholder in the distribution of our common stock may be deemed to be "underwriters" within the meaning of the Securities Act, and any commissions or discounts received by them and any profit on the resale of the common stock by them might be deemed to be underwriting discounts and commissions under the Act. Upon being notified by the selling stockholder that any material arrangement has been entered into with a broker or dealer for the sale of 16 our common stock through a secondary distribution, or a purchase by a broker or dealer, a supplemented prospectus will be filed, if required, pursuant to Rule 424(b) under the Securities Act, disclosing: - The names of the brokers or dealers; - The number of shares involved; - The price at which the shares are being sold; - The commission paid or the discounts or concessions allowed to the broker or dealer; and - Other facts material to the transaction. LEGAL MATTERS Certain legal matters relating to the validity of the common stock are being passed upon by Eric P. Geller, Senior Vice President, General Counsel and Secretary. EXPERTS The financial statements and schedule incorporated by reference in this prospectus and elsewhere in the registration statement have been audited by Deloitte & Touche LLP, independent auditors, as stated in their reports which have been incorporated by reference and are included herein in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. 17 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses Of Issuance And Distribution The following is an itemization of all fees and expenses incurred or expected to be incurred by the Registrant in connection with the issuance and distribution of the securities being registered hereby, other than underwriting discounts and commissions. All but the Securities and Exchange Commission registration fee are estimates and remain subject to future contingencies. Securities and Exchange Commission registration fee . . . . . . . . . $20,328.75 Legal fees and expenses . . . . . . * Accounting fees and expenses . . . . * New York Stock Exchange filing fee . * Printing and engraving fees . . . . * Blue Sky fees and expenses . . . . . * Miscellaneous expenses . . . . . . . 5,000.00 ---------- Total . . . . . . . . . . . . . . . $ ========== * To be supplied by amendment. Item 15. Indemnification Of Directors And Officers Section 145 of the General Corporation Law of Delaware provides that a corporation has the power to indemnify a director, officer, employee or agent of the corporation and certain other persons serving at the request of the corporation in related capacities against amounts paid and expenses incurred in connection with an action or proceeding to which he is or is threatened to be made a party by reason of such position, if such person shall have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal proceeding, if such person had no reasonable cause to believe his conduct was unlawful; provided that, in the case of actions brought by or in the right of the corporation, no indemnification shall be made with respect to any matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the adjudicating court determines that such indemnification is proper under the circumstances. The By-laws of the Registrant contain provisions to the effect that each director or officer of the Registrant and persons serving at the request of the Registrant as a director, officer, employee or agent of another organization shall be indemnified by the Registrant against liabilities and expenses in connection with any legal proceedings to which he may be made a party or with which he may become involved or threatened by reason of his position with the Registrant or such other organization. The provisions include indemnification with respect to matters covered by a settlement. Any such indemnification shall be made only if our board determines by a majority vote of a quorum consisting of directors who were not parties to such action (or, if such quorum is not obtainable, or if our board directs, by independent legal counsel) or by II-1 the stockholders, that indemnification is proper in the circumstances because the person seeking indemnification has met applicable standards of conduct. It must be determined that the director, officer or other person acting at the request of the Registrant acted in good faith with the reasonable belief that his action was in or not opposed to the best interests of the Registrant, and with respect to any criminal action or proceeding, he had no reasonable cause to believe his conduct was unlawful. The Registrant has a directors and officers liability insurance policy covering certain liabilities that may be incurred by its directors and officers. Any agreement with underwriters or agents may contain provisions providing for the indemnification of the Registrant and certain of its directors and officers in certain circumstances. Item 16. Exhibits The following exhibits are filed as part of this registration statement: Exhibit No. Description - ----------- ----------- 1.1 Equity Swap Agreement, dated April 20, 2000. 1.2 Purchase Agreement, dated April 20, 2000. 4.2 Form of Common Stock Certificate. 5* Opinion of Eric P. Geller, Esq. as to the legality of the Common Stock. 23.1 Consent of Deloitte & Touche LLP. 23.2* Consent of Eric P. Geller, Esq., included in Exhibit 5. 24 Powers of Attorney, included on pages II-5-6 of this Registration Statement. _______________________ * To be supplied by amendment. Item 17. Undertakings (a) The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the II-2 information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective Registration Statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that paragraphs (a)(1)(i) and (1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act, (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by a registrant of expenses incurred or paid by a director, officer or controlling person of such registrant in the successful defense of any action suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being II-3 registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. [The rest of this page is intentionally left blank.] II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Newton, the Commonwealth of Massachusetts, on May 4, 2000. Harcourt General, Inc. By: /s/ Brian J. Knez ----------------------------------------- Name: Brian J. Knez Title: President and Co-Chief Executive Officer By: /s/ Robert A. Smith ----------------------------------------- Name: Robert A. Smith Title: President and Co-Chief Executive Officer POWERS OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Eric P. Geller and John R. Cook, severally, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, and in any and all capacities, to sign this Registration Statement and any and all amendments to this Registration Statement of the Registrant, together with all schedules and exhibits thereto, and to file the same with all scheduled exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, severally, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as each such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof, all on April 19, 2000. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities indicated and on the dates indicated. II-5 Signature Title Date --------- ----- ----- Principal Executive Officers: President and Co-Chief April 19, 2000 /s/ Brian J. Knez Executive Officer - --------------------------- Brian J. Knez President and Co-Chief April 19, 2000 /s/ Robert A. Smith Executive Officer - --------------------------- Robert A. Smith Principal Financial Officer: Senior Vice President and April 19, 2000 /s/ John R. Cook Chief Financial Officer - --------------------------- John R. Cook Principal Accounting Officer: Vice President and April 19, 2000 /s/ Catherine N. Janowski Controller - --------------------------- Catherine N. Janowski Directors: April 19, 2000 /s/ Richard A. Smith - --------------------------- Richard A. Smith April 19, 2000 /s/ William F. Connell - --------------------------- William F. Connell April 19, 2000 /s/ Gary L. Countryman - --------------------------- Gary L. Countryman II-6 April 19, 2000 /s/ Jack M. Greenberg - --------------------------- Jack M. Greenberg April 19, 2000 /s/ Brian J. Knez - --------------------------- Brian J. Knez April 19, 2000 /s/ Jeffrey R. Lurie - --------------------------- Jeffrey R. Lurie April 19, 2000 /s/ Lynn Morley Martin - --------------------------- Lynn Morley Martin April 19, 2000 /s/ Maurice Segall - --------------------------- Maurice Segall April 19, 2000 /s/ Robert A. Smith - --------------------------- Robert A. Smith April 19, 2000 /s/ Paula Stern - --------------------------- Paula Stern April 19, 2000 /s/ Hugo Uyterhoeven - --------------------------- Hugo Uyterhoeven April 19, 2000 /s/ Clifton R. Wharton, Jr. - --------------------------- Clifton R. Wharton, Jr. II-7 EX-1.1 2 Exhibit 1.1 CONFIRMATION FOR EQUITY SWAP TRANSACTION BETWEEN CITIBANK, N.A. AND HARCOURT GENERAL, INC. The purpose of this confirmation, dated as of April 20, 2000, is to set forth certain terms and conditions for the equity swap transaction that Harcourt General, Inc. ("Counterparty") entered into with Citibank, N.A. ("Citibank") on April 20, 2000 (the "Trade Date") (the "Transaction"). This confirmation constitutes a "Confirmation" as referred to in the Agreement specified below. This Confirmation evidences a complete binding agreement between you and us as to the terms of the Transaction to which this Confirmation relates. In the event you and we execute the ISDA Master Agreement (Multicurrency-Cross Border) (the "ISDA Agreement") in the form published by the International Swaps and Derivatives Association, Inc. ("ISDA") with such modifications as you and we shall in good faith agree (as modified, the "Master Agreement"), this Confirmation will supplement, form a part of, and be subject to the Agreement. Prior to execution of the Agreement, this Confirmation, together with all other documents referring to the ISDA Agreement (each a "Confirmation") confirming transactions (each a "Transaction") entered into between you and us (notwithstanding anything to the contrary in a Confirmation), shall supplement, form a part of, and be subject to an agreement in the form of the ISDA Agreement as if we had executed an agreement in such form (without any Schedule but modified by the provisions in Section 12 herein) on the Trade Date (the "Agreement"). The ISDA Agreement and this Confirmation will be governed by the laws of the State of New York. 1. In the event of any inconsistency between this Confirmation, on the one hand, and the ISDA Agreement, or when executed, the Agreement, on the other hand, this Confirmation will control for the purpose of the Transaction. With respect to the Transaction, capitalized terms used herein that are not otherwise defined herein shall have the meanings assigned to them in the ISDA Agreement or, when executed, the Agreement. 2. Each party will make each payment specified in this Confirmation as being payable by it not later than the due date for value on that date in the place of the account specified below or otherwise specified in writing, in freely transferable funds and in a manner customary for payments in the required currency. This Confirmation and the Agreement shall constitute the written agreement between Counterparty and Citibank with respect to this Transaction. 3. The Transaction to which this Confirmation relates is an equity swap transaction, the terms of which include: 4. General Definitions: Business Day: means a day (other than a Saturday or a Sunday) on which commercial banks generally are open for business in New York City. Carrying Rate: means on any day with respect to the Notional Amount (i) until, but not including the Initial Reset Date, LIBOR as determined as of the first day of the initial period plus the Carrying Spread and (ii) during each period thereafter, LIBOR determined as of the beginning of such period plus the Carrying Spread. Closing Price: means, with respect to a Trading Day (subject to the Market Disruption Event provisions in paragraph 8(a)), the closing price per Common Share on the Principal Market on such day or if the Common Shares cease to be listed on a national securities exchange or included in a quotation system, then the price as determined by Citibank in a commercially reasonable manner. Common Shares: means shares of Harcourt General, Inc.'s common stock. Designated Citibank Affiliate: means Citibank or one or more affiliates of Citibank, wholly-owned, directly or indirectly, by Citigroup (or any successor thereto) as designated by Citibank (or to the extent that Citibank does not designate such an affiliate), the Designated Citibank Affiliate shall mean Salomon Smith Barney, Inc. ("SSB"). LIBOR: means, 6.31813% per annum for the initial Calculation Period, and thereafter, the rate per annum for U.S. dollar LIBOR (determined on the basis of the actual number of days elapsed over a 360-day year) for the appropriate reference period, as determined by Citibank, appearing (except as provided in the following sentence) on Telerate Page 3750 or any replacement of that page, two London business days prior to the start of a relevant period, provided that if the rate cannot be so determined, it shall be determined as if USD-LIBOR-Reference Banks (as defined in the 1991 ISDA Definitions) had been specified for purposes of determining the rate. If the relevant period is one 2 week or less, the reference period shall be one week, and the rate shall be as specified on Reuters Screen LIBO Page. LIBOR shall otherwise be determined by linear interpolation if the relevant period does not correspond exactly to a period for which rates appear on Telerate Page 3750 or its replacement. Except for the period ending on the Maturity Date or unless the parties otherwise agree, the relevant period for determining LIBOR shall be three months. Principal Market: means the principal national securities exchange or quotation system on which the Common Shares may be listed or otherwise included in the future should they cease to be quoted on such exchange or quotation system. All references to closing prices or sales prices for the Common Shares shall be to such prices on the Principal Market. Trading Day: means a day on which the Principal Market is open for trading. 5. General Terms of the Transaction: (a) General Terms of the Transaction. Trade Date: April 20, 2000 Effective Date: April 25, 2000; provided that this Confirmation shall not become effective until the sale of Common Shares under the Purchase Agreement is consummated. Number of Common Shares: 1,372,213 Notional Amount: $50,000,011.19 Initial Reset Date: July 25, 2000 (or, if such date is not a Trading Day, the next Trading Day). Optional Unwind Date: July 25, 2000 (or, if such date is not a Trading Day, the next Trading Day). Maturity Date: October 22, 2000 (or, if such date is not a Trading Day, the next Trading Day). Carrying Spread: 1.625% per annum. 3 Initial Price Per Share $36.4375 (b) Outstanding Aggregate Amount. The term "Outstanding Aggregate Amount" means, as of any date, a dollar amount equal to the original Notional Amount minus the sum of the Daily Delivery Amounts for each related Delivery Date (each as defined in paragraph 6) occurring prior to such date. 6. Unwind Period Settlement Obligations: (a) Counterparty Unwind Period Settlement Option. Counterparty shall be entitled to elect by timely written notice to Citibank whether settlement of the parties' respective obligations for a particular Unwind Period shall be by (i) "Net Share Settlement" or (ii) "Net Cash Settlement" (or if Counterparty fails to so elect, it shall be deemed to have elected Net Share Settlement). Counterparty shall notify Citibank of its election of Net Share Settlement or Net Cash Settlement not less than ten Trading Days (or such shorter period as the parties may agree) prior to the commencement of the relevant Unwind Period. The methods for determining the beginning and length of the "Unwind Period" for a "Maturity Termination" as well as for an "Optional Unwind," a "Credit Event" and a "Partial Termination Event" are set forth in paragraph 7. (b) Net Share Settlement. If Counterparty elects Net Share Settlement with respect to an Unwind Period, on each Delivery Date in such Unwind Period, (i) Citibank shall deliver to Counterparty a number of Common Shares equal to the Citibank Share Amount for such Delivery Date against payment by Counterparty to Citibank of cash equal to the Forward Amount for such Delivery Date and (ii) Counterparty shall deliver to Citibank a number of Common Shares equal to the Forward Amount for such Delivery Date divided by the Determination Price for such Delivery Date (the "Counterparty Share Amount") against payment by Citibank to Counterparty of cash equal to the Forward Amount for such Delivery Date (the Citibank Share Amount minus the Counterparty Share Amount is referred to herein as the "Net Share Amount"). (c) Net Cash Settlement. If Counterparty elects Net Cash Settlement with respect to an Unwind Period, on each Delivery Date in such Unwind Period, (i) if the Net Share Amount is positive, Citibank shall pay to Counterparty an amount equal to the Net Share Amount multiplied by the Determination Price for such Delivery Date and (ii) if the Net Share Amount is negative, Counterparty shall pay to Citibank an amount equal to the absolute value of the Net Share Amount multiplied by the Determination Price for such Delivery Date. 4 WHERE: "Citibank Share Amount" means, for any Delivery Date, the Daily Delivery Amount for such Delivery Date divided by the Initial Price Per Share. "Daily Delivery Amount" means, for any Delivery Date, the portion of the Outstanding Aggregate Amount subject to the related Unwind Period divided by the number of Unwind Period Days for such Unwind Period (each determined in accordance with paragraph 7) or such other amount as agreed to by the parties or by Citibank if an event as described in Paragraph 6(e) ("Citibank Unwind Period Settlement Option") has occurred. "Forward Amount" means, for any Delivery Date, a dollar amount equal to (i) the Daily Delivery Amount for such Delivery Date plus (ii) Carrying Costs for such Delivery Date minus (iii) Actual Dividends for such Daily Delivery Amount (subject to the provisions of Section 7(b) ("Optional Unwind"). "Delivery Date" means, in respect of each Unwind Period Day, the third Trading Day after such Unwind Period Day. "Unwind Period Day" means each Trading Day in an Unwind Period. "Carrying Costs" means, for any Delivery Date and subject to paragraph 9(e) ("Funding Cost Adjustment"), an amount equal to interest on the Daily Delivery Amount for such Delivery Date at the applicable Carrying Rate, compounded periodically each time LIBOR is reset on an actual/360 basis, for the period from and including the third Trading Day after the Trade Date to but excluding such Delivery Date. "Actual Dividends" means, for any Delivery Date, the amount of all dividends (other than dividends resulting in an adjustment pursuant to paragraph 8(c) ("Adjustment Events") or transferred to Counterparty pursuant to paragraph 9(f) ("Certain Dividends")) paid before the day on which the Unwind Period commences to which a holder of a number of Common Shares equal to the applicable Daily Delivery Amount (or portion thereof) outstanding on the applicable ex-dividend date divided by the Initial Price Per Share would be entitled. "Determination Price" means for any Delivery Date, the weighted average price at which Citibank or the Designated Citibank Affiliate sells Common Shares (net of Fees) on the relevant Unwind Period Day for net proceeds to Citibank or the Designated Citibank Affiliate equal to the Forward Amount for such Delivery Date. 5 "Fees" means $0.05 with respect to Common Shares sold in a Gradual Market Distribution (as defined below). (d) Final Dividend Amount. In connection with each Unwind Period, Citibank shall transfer to Counterparty, promptly after the related dividend payment date and in the same form in which the dividend was made, the amount of all dividends (other than dividends resulting in an adjustment pursuant to paragraph 8(c) ("Adjustment Events")) with an ex-dividend date before the last Trading Day in such Unwind Period and a dividend payment date on or after the first Trading Day in such Unwind Period to which a holder of a number of Common Shares equal to the Remaining Share Amount on the applicable ex-dividend date would be entitled. WHERE: "Remaining Share Amount" means, for any ex-dividend date, (i) the portion of the Outstanding Aggregate Amount that is the subject of the Unwind Period (determined in accordance with paragraph 7) outstanding on such ex-dividend date divided by the Initial Price Per Share minus (ii) the Citibank Share Amount for each Delivery Date with a related Unwind Period Day occurring on or before such ex-dividend date. (e) Citibank Unwind Period Settlement Option. If on a Trading Day or Delivery Date in connection with an Unwind Period, Counterparty fails to comply with or perform any agreement or obligation contained in paragraph 10(c) ("Securities Laws and Registration--Registration Statement") or paragraph 10(e) ("Securities Laws and Registration--Due Diligence") or if Counterparty's representations contained in paragraph 10(d) ("Securities Laws and Registration--Representations") are incorrect or misleading in any material respect, Citibank and its affiliates shall be entitled (in addition to any other remedies under the Agreement as modified herein) to immediately sell Common Shares used to hedge this Transaction or Common Shares received from Counterparty hereunder (including pursuant to this clause (e)), on a private placement basis and apply the proceeds of such sale toward the payment of the Forward Amount for the Relevant Delivery Date and, if Common Shares are so sold, Counterparty shall either deliver to Citibank an amount of cash such that the aggregate actual net proceeds of the Common Shares so sold plus such cash amount is equal to such Forward Amount or a number of Common Shares such that the aggregate actual net proceeds from the sale of Common Shares is equal to the Forward Amount. Counterparty shall deliver promptly upon request the number of Common Shares Citibank reasonably determines is adequate to realize actual net proceeds in such amount, and Counterparty's obligation to deliver Common Shares under this clause (e) shall be a continuing one until Citibank or its affiliates have received actual net proceeds equal to the Forward Amount together with interest at the applicable Default Rate. Counterparty agrees in connection with any sales 6 pursuant to this Section 6(e) that each of its filings under the Securities Act of 1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934, as amended (the "Exchange Act") or other applicable securities laws that are required to be filed have been filed, as of each day on which Citibank or its affiliates sell Common Shares pursuant to this clause (e) will have been filed and that such filing, as supplemented by any information provided by Counterparty to Citibank, will contain no misstatement of material fact or omission of a material fact required to be stated therein or necessary to make the statements therein not misleading. Citibank and its affiliates shall be entitled to disclose any material non-public information regarding Counterparty in their possession to purchasers in such a private placement. 7. Unwind Periods: (a) Maturity Termination. An Unwind Period will commence on the 60th Trading Day prior to the Maturity Date with respect to the entire Outstanding Aggregate Amount; provided that if a shorter Unwind Period is determined in accordance with the provisions set forth below, the Unwind Period will commence on a Trading Day prior to the Maturity Date so that the Unwind Period is scheduled to terminate on the Maturity Date. Counterparty may propose a number of Trading Days, from 1 to 60 consecutive Trading Days inclusive, and propose the Manner of Sale. Citibank shall not unreasonably reject the proposed length of the Unwind Period or Manner of Sale. If any such term is not reasonably acceptable to Citibank, the parties shall negotiate in good faith to modify the proposed term; provided that if the parties cannot agree regarding the Unwind Period length, the number of Trading Days in the Unwind Period or the Manner of Sale, then each disputed item shall be determined by Citibank; provided that Citibank shall not elect an Underwritten Offering unless it reasonably determines that Block Sales or Gradual Market Distribution is not feasible. (b) Optional Unwind. Counterparty (i) may notify Citibank of its desire to effect a settlement with respect to any portion (prior to October 1, 2000) or all of the Outstanding Aggregate Amount (at any time) over a number of Trading Days, from 1 to 60 consecutive Trading Days inclusive, as Counterparty may propose (an "Optional Unwind"), (ii) propose the Manner of Sale and (iii) shall include in such notice an irrevocable indication of its election pursuant to paragraph 6(a) ("Counterparty Unwind Period Settlement Option"). Citibank shall not unreasonably reject the proposed portion of such Outstanding Aggregate Amount, Unwind Period length, commencement date of the Unwind Period relating to such Optional Unwind or Manner of Sale. If any such term is not reasonably acceptable to Citibank, the parties shall negotiate in good faith to modify the proposed term, provided that if the parties cannot agree regarding the Unwind Period length, the number of Trading Days in the Unwind Period or the Manner of Sale, then each disputed item shall be determined by Citibank; provided that Citibank shall not elect 7 an Underwritten Offering unless it reasonably determines that Block Sales or Gradual Market Distribution is not feasible. If the first Trading Day in the Unwind Period is before the Optional Unwind Date, Counterparty shall pay Citibank by the second Business Day following such Trading Day an amount equal to the present value (calculated by Citibank using a discount rate equal to LIBOR minus 0.125% per annum) of the Carrying Spread that would have been earned on the portion of the Outstanding Aggregate Amount subject to such Optional Unwind had it remained outstanding through such date, or Counterparty may elect to increase the applicable Forward Amount by such amount. WHERE "Manner of Sale" means: (i) an underwritten fixed price or "at the market" public offering of the Common Shares through an underwriter or group of underwriters mutually acceptable to Citibank and Counterparty; provided that, subject to the consent of Counterparty, Citibank shall be entitled to designate Salomon Smith Barney Inc. ("SSB") as the sole book running manager (an "Underwritten Offering"); (ii) one or more privately negotiated sales involving at least a block of the Common Shares through a broker-dealer mutually acceptable to Citibank and Counterparty; provided that, subject to the consent of Counterparty, Citibank shall be entitled to designate SSB as the sole agent, executing dealer or other intermediary ("Block Sale"); or (iii) an offering of the Common Shares into the existing trading market for outstanding shares of the same class at other than a fixed price on the Principal Market or to or through a market maker or broker or dealer, with respect to which Citibank shall be entitled to designate SSB as the sole agent, executing dealer or other intermediary (a "Gradual Market Distribution"). (c) Credit Event. A "Credit Event" shall occur if Counterparty's unsecured and unsubordinated long-term debt rating (not supported by third party credit enhancement), if any, falls below BBB- by Standard & Poor's Ratings Services (including its successors, "S&P"), or Baa3 by Moody's Investors Service, Inc. (including its successors, "Moody's") or in any case is suspended or withdrawn. Upon the occurrence and continuation of a Credit 8 Event, Citibank shall be entitled to commence an Unwind Period with respect to the entire Outstanding Aggregate Amount. Such Unwind Period shall commence on a Trading Day and end on and include a Trading Day, each as designated by Citibank and Citibank shall determine the Manner of Sale; provided that Citibank shall not elect an Underwritten Offering unless it reasonably determines that Block Sales or Gradual Market Distribution is not feasible. At the option of Citibank, any Unwind Period that had commenced prior to the start of the Unwind Period for such Credit Event and not terminated shall terminate on the Trading Day prior to the start of the Unwind Period for such Credit Event. (d) Partial Termination Event. A "Partial Termination Event" shall occur if on any day (i) the Transaction Equity for such day exceeds 8.5% of the number of outstanding Common Shares on such day or (ii) the Net Settlement Balance for such day exceeds the Available Common Shares for such day. Upon the occurrence of a Partial Termination Event, Citibank shall be entitled to commence an Unwind Period with respect to a portion of the Outstanding Aggregate Amount equal to the amount determined by Citibank so that after completion of the Unwind Period related to the Partial Termination Event, (x) in the case of (i) above, the Transaction Equity would not exceed 8.5% of the number of outstanding Common Shares and (y) in the case of (ii) above, the Net Settlement Balance would not exceed the Available Common Shares. Such Unwind Period shall commence on a Trading Day and end on and include a Trading Day, each as designated by Citibank and Citibank shall determine the Manner of Sale; provided that Citibank shall not elect an Underwritten Offering unless it reasonably determines that Block Sales or Gradual Market Distribution is not feasible. At the option of Citibank upon notice to Counterparty, an Unwind Period that has commenced shall terminate on the Trading Day prior to the start of the Unwind Period for such Partial Termination Event. WHERE: "Transaction Equity" means, with respect to any day, a number of Common Shares equal to the sum of (i) the Counterparty Share Amount for such day (determined using the Closing Price for such day and assuming an Unwind Period of one day) and (ii) the number of Common Shares held by Citibank or its affiliates on such day to hedge other transactions with Counterparty. "Net Settlement Balance" means, with respect to any day, a number of Common Shares equal to the Counterparty Share Amount for such day (determined using the Closing Price for such day and assuming an Unwind Period of one day) minus the Citibank Share Amount for such day (assuming an Unwind Period of one day). 9 "Available Common Shares" means, with respect to any day, a number of Common Shares equal to (i) the number of authorized Common Shares on such day minus (ii) the sum of (x) the number of outstanding Common Shares on such day and (y) the number of Common Shares reserved for other purposes. (e) Suspension of Unwind Period. Counterparty may, by notice to Citibank by 8:30 a.m. New York time on any Trading Day, suspend an Unwind Period for up to 5 days in the aggregate based on the advice of counsel respecting applicable federal securities laws that such Unwind Period should be suspended. As promptly as practicable after such suspension, Citibank will adjust any term of this Transaction relating to an Unwind Period, Maturity Date or other Trading Day or otherwise to the extent appropriate to effectuate the fundamental economic terms of this Transaction. (f) Unwind Periods in Effect. For purposes of "Optional Unwind" and "Maturity Termination," and unless Citibank (in the case of a "Credit Event" or "Partial Termination Event") elects to terminate an Unwind Period in effect in accordance with the last sentence of such paragraphs, any Daily Delivery Amount for which an Unwind Period is in effect shall be deemed not outstanding for purposes of determining the Outstanding Aggregate Amount to be subject to such an Unwind Period. 8. Disruptions and Adjustments: (a) Market Disruption Events. If on any day that would otherwise be a Trading Day Citibank determines that there has been a material suspension or material limitation of trading in the Common Shares on the Principal Market, or that trading in securities in general on the Principal Market has been materially suspended or materially limited (a "Market Disruption Event"), then that day shall be deemed not to be a Trading Day (in whole or in part), and the next Trading Day shall be postponed to the first succeeding Trading Day on which, in Citibank's determination, there is no Market Disruption Event. As promptly as practicable after the occurrence of a Market Disruption Event, Citibank will adjust any term of this Transaction relating to an Unwind Period, Maturity Date or other Trading Day or otherwise to the extent appropriate to effectuate the fundamental economic terms of this Transaction. (b) Disruption of Settlement. If on any date there occurs an event beyond the control of the parties as a result of which The Depository Trust Company or any successor depository cannot effect a transfer of the Common Shares pursuant to this Transaction, the party obligated to deliver the Common Shares shall use its best efforts to cause the Common Shares to be delivered as promptly as practicable to the other party in any commercially reasonable manner. Each party agrees that if delivery of the Common Shares on any Delivery Date is subject to any restriction imposed by a regulatory 10 authority, the parties will negotiate in good faith a procedure to effect settlement of such Common Shares in a manner that complies with any relevant rules of such regulatory authority. (c) Adjustment Events. In the event of (i) a subdivision, consolidation or reclassification of the Common Shares into a different number or kind of shares of stock of Counterparty, (ii) a dividend on the Common Shares paid in Common Shares, (iii) a merger or other transaction whereby the outstanding Common Shares are exchanged for another class of securities, or securities of another issuer, or (iv) any other similar event (an "Adjustment Event"), then in each case, Citibank shall make appropriate adjustments to the terms of this Transaction, and/or amend the definition of Common Shares, such that the fundamental economic terms of this Transaction are equivalent to those in effect immediately prior to the Adjustment Event. 9. Miscellaneous: (a) Early Termination. The parties agree that for purposes of Section 6(e) of the Agreement, Second Method and Loss will apply to this Transaction. The parties further agree that for purposes of calculating Citibank's Loss under Section 6(d) and (e) of the Agreement in connection with this Transaction, Citibank and its affiliates shall dispose of any Common Shares used to hedge the Transaction over a period consisting of (i) in the case of an Early Termination Date resulting from an Event of Default, any number of Trading Days as Citibank may determine and (ii) in the case of an Early Termination Date resulting from a Termination Event, any number of Trading Days as Citibank may determine and to which Counterparty shall not unreasonably object. If the Loss amount determined with respect to the Transaction is an amount owing to Citibank (the "Citibank Loss Amount"), Counterparty may elect to deliver a number of Common Shares to Citibank in lieu of the Citibank Loss Amount, in accordance with the following provisions: (i) the Citibank Loss Amount shall not be considered in determining any calculation, payment or delivery relating to the parties' other Transactions under Section 6(e) of the Agreement; (ii) the Citibank Loss Amount will be deemed to include (to the extent permitted under applicable law) interest thereon (before as well as after judgment) in USD from (and including) the Early Termination Date to (but excluding) the date that Citibank realizes actual net proceeds equal to such Citibank Loss Amount, or portion thereof, together with interest at the applicable Default Rate. Such 11 interest will be calculated on the basis of daily compounding and the actual number of days elapsed; (iii) the last sentence of the first paragraph of 6(e) of the Agreement shall not apply with respect to this Transaction; (iv) Counterparty shall deliver promptly upon request the number of Common Shares Citibank reasonably initially determines is adequate to realize actual net proceeds upon resale equal to the Citibank Loss Amount and Counterparty shall be obligated to deliver Common Shares to Citibank until Citibank or its affiliates have realized actual net cash proceeds equal to the Citibank Loss Amount, plus any amounts due pursuant to clause (ii) above. Counterparty and its affiliates shall be entitled to the benefit of the relevant provisions of this Confirmation applicable to the resale of Common Shares delivered by Counterparty, including but not limited to Sections 6(e), 9(h), 10(a), (c) (upon the request of Citibank), (d) and (e), and Section 11 (which shall be deemed to be modified to conform to the procedures set forth herein); provided that any failure to perform by Counterparty shall not limit Citibank's right to effect a sale of such Common Shares as modified herein; and (v) notwithstanding the foregoing, Counterparty may satisfy its obligations hereunder in cash in lieu of Common Shares. (b) Netting of Obligations; Rounding. The respective Common Share delivery and cash payment obligations on any day of Counterparty, on the one hand, and Citibank and the Designated Citibank Affiliate, on the other hand, shall be netted. The net Common Shares delivery obligation of either party shall be rounded down to the nearest number of whole shares, such that neither party shall be required to deliver any fractional shares. (c) Agreement regarding Common Shares. Each party agrees with the other that, in respect of any Common Shares delivered to the other party, (i) in the case of Citibank, the Designated Citibank Affiliate will, at the time of delivery, be the legal and beneficial owner thereof, free of liens and other encumbrances, and (ii) in the case of Counterparty, such shares shall be, upon such delivery, validly authorized, issued and outstanding, fully paid and nonassessable, and subject to no adverse claims of any other party. 12 (d) Default Interest. If a party defaults in the performance of any obligation required to be settled by delivery, it will indemnify the other party on demand, in accordance with the practice of the Principal Market for the Common Shares, for any costs, losses or expenses (including the costs of borrowing Common Shares, if applicable) resulting from such default. A certificate signed by the deliveree setting out such costs, losses or expenses in reasonable detail shall be conclusive evidence that they have been incurred, absent manifest error. (e) Funding Cost Adjustment. If for any reason the relevant interest period does not correspond with the reference period used for purposes of calculating the Carrying Costs, Citibank shall adjust the terms of this Transaction appropriately to reflect any additional funding costs incurred, or any reduction in funding costs received, by Citibank. (f) Certain Dividends. Citibank shall transfer to Counterparty, promptly after the related dividend payment date and in the same form in which the dividend was made, the amount of all dividends (other than cash dividends and dividends resulting in an adjustment pursuant to paragraph 8(c) ("Adjustment Events")) to which a holder of a number of Common Shares equal to the Dividend Share Amount on the applicable ex-dividend date would be entitled. WHERE: "Dividend Share Amount" means, for any ex-dividend date, a number of Common Shares equal to (i) the portion of the Outstanding Aggregate Amount outstanding on such ex-dividend date that is not, and has not been, the subject of an Unwind Period (determined in accordance with paragraph 7) when such dividend is paid divided by (ii) the Initial Price Per Share. (g) Increased Costs. If Citibank determines that from the Trade Date of the relevant Transaction (i) due to either (x) the introduction of or any change in or in the interpretation of any law or regulation or (y) compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to Citibank or its affiliates of engaging in this Transaction or related transactions, or (ii) compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) increases or would increase the amount of any capital required or expected to be maintained by Citibank or any affiliate of Citibank as a direct or indirect consequence of this Transaction ("Increased Costs"), then Counterparty shall from time to time until this Transaction is no longer outstanding (whether through Optional Unwind or otherwise), promptly upon demand by Citibank, convey to Citibank additional amounts sufficient to compensate Citibank for 13 such Increased Costs as are incurred. Such additional amounts may, at Counterparty's option, be paid in U.S. dollars or be satisfied by delivery of a number of Common Shares having an equivalent value; provided, however, that Counterparty shall be entitled to satisfy such obligation by delivery of Common Shares only if it provides twenty Trading Days' notice and complies with its obligations and makes the representations set forth in paragraph 10 ("Securities Laws and Registration") as if such delivery were in connection with a Delivery Date to which Net Share Settlement applied for purposes of paragraph 6(a) ("Counterparty Unwind Period Settlement Option"). A detailed and signed certificate outlining the amount of Increased Costs, submitted to Counterparty by Citibank, shall be conclusive and binding for all purposes absent manifest error. (h) Consent to Recording. Each party (i) consents to the recording of the telephone conversations of trading and marketing personnel of the parties and their affiliates in connection with this Transaction and (ii) agrees to obtain any necessary consent of, and give notice of such recording to, such personnel of it and its affiliates. (i) Severability; Illegality. If compliance by either party with any provision of this Transaction would be unenforceable or illegal, (i) the parties shall negotiate in good faith to resolve such unenforceability or illegality in a manner that preserves the economic benefits of the transactions contemplated hereby and (ii) the other provisions of this Transaction shall not be invalidated, but shall remain in full force and effect. (j) Calculation Agent. Citibank shall make all calculations, adjustments and determinations required pursuant to this Transaction. Citibank's calculations, adjustments and determinations shall be made in good faith and in a commercially reasonable manner. (k) Cash Payments. All references herein to "dollars" or "$" are to U.S. dollars. All amounts payable in cash shall be payable in dollars in immediately available funds. (l) Waiver of Trial by Jury. EACH OF COUNTERPARTY AND CITIBANK HEREBY IRREVOCABLY WAIVES (ON ITS OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF ITS STOCKHOLDERS) ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS TRANSACTION OR THE ACTIONS OF CITIBANK OR ITS AFFILIATES IN THE NEGOTIATION, PERFORMANCE OR ENFORCEMENT HEREOF. (m) Financial Statements. Counterparty will provide to Citibank promptly upon request copies of its most recent annual report containing audited or certified financial statements. 14 (n) Delivery of Opinion. On the date hereof, Counterparty will provide to Citibank an opinion of counsel regarding this Master Confirmation and the Transaction contemplated hereby in form and substance reasonably satisfactory to Citibank. (o) Piggyback Rights. Prior to the completion of the sale of Common Shares of Common Shares in connection with an Unwind Period or termination of the Transaction and subject to Section 9(t) below, Counterparty, without the prior consent of Citibank, shall not in a public offering sell any Common Shares or securities convertible into or exchangeable for Common Shares (other than offerings pursuant to a Registration Statement on Form S-8), unless Counterparty elects an Optional Unwind with respect to a number of Common Shares equal to the greater of (i) 50% of the number of Common Shares to be sold in such offering and (ii) 50% of the then outstanding Number of Common Shares in connection with the Transaction and Citibank or the Designated Citibank Affiliate participates in such offering as a selling shareholder and Counterparty otherwise complies with the applicable provisions of this Confirmation. (p) Limitations on Additional Forward Stock Purchase or Option Agreements. Until the expiration of the final Unwind Period, Counterparty and any of its Affiliates shall not enter into Forward Stock Purchase or Option Agreements other than this Confirmation. WHERE "Forward Stock Purchase or Option Agreement" means with respect to Counterparty and any of its Affiliates only, any forward stock purchase agreement, swap agreement, option (other than employee stock options) or similar agreement entered into by Counterparty and any of its Affiliates and one or more parties in the future relating, directly or indirectly, to Common Shares. (q) Transfer. Notwithstanding Sections 7 or 10(b) of the Agreement, Citibank may assign its rights and obligations hereunder to make or receive delivery of Common Shares to a Designated Citibank Affiliate to the extent provided in this Master Confirmation; provided that Counterparty shall have recourse to Citibank in the event of the failure by a Designated Citibank Affiliate to perform any of such obligations hereunder. Notwithstanding the foregoing, recourse to Citibank shall be limited to recoupment of Counterparty's monetary damages and Counterparty hereby waives any right to seek specific performance by Citibank of its obligations hereunder. Such failure after any applicable grace period shall be an Additional Termination Event with this Transaction as the sole Affected Transaction and Citibank as the sole Affected Party. 15 (r) Additional Share Delivery. (i) If on any Trading Day the Current Aggregate Value of the Underlying Shares plus any Additional Delivered Shares shall be an amount less than 70% of the Outstanding Aggregate Amount then outstanding, the Counterparty shall promptly, and in any event within two Business Days, at its option: (A) deliver a sufficient number of Common Shares to Citibank; or (B) effect an Option Unwind so that after giving effect thereto. so that the Current Aggregate Value of the Underlying Shares plus any Additional Delivered Shares shall be an amount equal to at least 100% of the Outstanding Aggregate Amount then outstanding; provided that Counterparty need not take any action hereunder if, and only if, the Current Aggregate Value of the Common Shares, as of such Trading Day that would be required to be delivered is less than $5.0 million. WHERE "Additional Delivered Shares" means as of any day, Common Shares previously delivered to Citibank from Counterparty pursuant to this Section 9(r). "Current Aggregate Value" as of any day means the amount equal to the relevant number of Common Shares multiplied by the Closing Price for such day. "Underlying Shares" means 1,372,213 Common Shares, subject to adjustment as provided herein in Section 8(c) ("Adjustment Events"). (ii) Any Common Shares delivered by Counterparty pursuant to Section 9(r) shall be deemed a payment in advance by Counterparty of the Counterparty Share Amount in connection with a Net Share Settlement with respect to the Unwind Period with respect to the full Outstanding Aggregate Amount. Any Additional Delivered Shares will be used by Citibank only to satisfy Counterparty's obligation on a Delivery Date during any Unwind Period with respect to which Counterparty elected Net Share Settlement; provided, that, with respect to an Unwind Period being effect in accordance with Section 6(b), such Common Shares are at such time in the form required pursuant to the Purchase Agreement dated the date hereof between Salomon Smith Barney, Inc., as agent for Citibank, 16 and Counterparty (the "Purchase Agreement"). After satisfaction of Counterparty's obligations under this Master Confirmation, Citibank shall return to Counterparty any Additional Delivered Shares that were not used to satisfy Counterparty's obligations to deliver Common Shares with respect to any Unwind Period where the Counterparty elected Net Share Settlement or with respect to an Unwind Period under Section 6(e). (s) Treatment of Payments. Payments made pursuant to Section 6 hereof will be treated as an adjustment to the purchase price of Shares provided for in the Purchase Agreement. (t) Sale of Common Shares. Counterparty agrees that it will not sell and will cause its subsidiaries not to sell any Common Shares or securities convertible into or exchangeable for Common Shares (i) for a period of 60 days prior to the termination of the Transaction and for a period of 30 days thereafter, (ii) after the occurrence of a Credit Event, or (iii) after the occurrence of a Partial Termination Event; provided that Counterparty may issue Common Shares in connection with the exercise of employee stock options and other awards pursuant to Counterparty employee incentive and other plans. 10. Securities Laws and Registration: (a) Compliance with Securities Laws. Counterparty agrees that it will comply, in connection with this Transaction and all related or contemporaneous sales and purchases of Common Shares, with the applicable provisions of the Securities Act, the Exchange Act, and the rules and regulations thereunder, including, without limitation, Rules 10b-5 and 10b-18 and Regulation M under the Exchange Act. (b) [Reserved] (c) Registration Statement. Counterparty agrees to make available to Citibank and its affiliates an effective registration statement (the "Registration Statement") pursuant to Rule 415 under the Securities Act and one or more prospectuses as necessary to allow Citibank and its affiliates to comply with the applicable prospectus delivery requirements (the "Prospectus") for the resale by Citibank and its affiliates of such number of Common Shares as Citibank shall reasonably specify (or, if greater, the number of shares that Counterparty shall reasonably specify), such Registration Statement to be effective and Prospectus to be current for each day in the Unwind Period and for at least twenty Trading Days after the Unwind Period (excluding, for the avoidance of doubt, days on which the Unwind Period has been suspended pursuant to paragraph 7(f) ("Suspension of Unwind Period")). It is understood that the Registration Statement and 17 Prospectus will cover a number of Common Shares equal to all Common Shares acquired by Citibank or its affiliates pursuant to the Purchase Agreement plus all Common Shares delivered by Counterparty pursuant to this Transaction. Citibank shall provide, by a reasonable time in advance, such information regarding Citibank and its affiliates as Counterparty, upon advice from counsel, reasonably determines is required to be included in the Prospectuses. Counterparty shall pay the applicable registration fee and all costs in connection with the preparation of the Registration Statement and the Prospectus including, without limitation, Citibank and its affiliates' reasonable fees and legal expenses of outside counsel in connection with the preparation of the Registration Statement and the Prospectus (except if SSB is the sole underwriter in an Underwritten Offering in connection with an Unwind Period with respect to the full Outstanding Aggregate Amount) and the cost of printing the Prospectus. Counterparty agrees to take all required action so that all Common Shares covered by the Registration Statement are eligible for sale and otherwise to take such actions reasonably requested by Citibank to facilitate the disposition of the Common Shares. (d) Representations. Counterparty represents (A) on the Trade Date of this Transaction and (B) on each day described in paragraph (c) above in connection with an Unwind Period, that each of its filings, including the Registration Statement and Prospectus (with respect to clause (B), under the Securities Act and the Exchange Act that are required to be filed have been filed and that, as of the respective dates thereof and as of the date of this representation, there is no misstatement of material fact contained therein or omission of a material fact required to be stated therein or necessary to make the statements therein not misleading. (e) Due Diligence. Counterparty agrees to provide to Citibank and its affiliates by the 10th Trading Day before the commencement of the relevant Unwind Period an opinion of counsel, comfort letters, officers' certificates and representations and such other documents as may be reasonably requested by Citibank. Counterparty also agrees that beginning (x) no later than such 10th Trading Day before the commencement of the relevant Unwind Period and (y) at any time after 5 days' written notice, Citibank and its affiliates shall be entitled to perform such diligence as Citibank may reasonably request. In addition, from time to time, Citibank shall be entitled to attend, with notice, Counterparty's meetings with equity analysts and make reasonable inquiries of appropriate officers of Counterparty. (f) Additional Events of Default. The failure by Counterparty to comply with its obligations under paragraphs (a), (c) and (e) above or Section 9(r) ("Additional Share Delivery"), if such failure is not remedied on or before the third Business Day after notice of such failure is given to Counterparty, shall constitute an Event of Default under Section 5(a) of the Agreement with Counterparty as the Defaulting Party. 18 11. Indemnification and Contribution: (a) Indemnification by Counterparty. Counterparty agrees to indemnify and hold harmless Citibank, its affiliates, their respective directors, officers, employees, agents, advisors, brokers and representatives and each person who controls Citibank or its affiliates within the meaning of either the Securities Act or the Exchange Act against, and Counterparty agrees that no indemnified party shall have any liability to Counterparty or any of its affiliates, officers, directors, or employees for, any liability (whether direct or indirect, in contract, tort or otherwise) for, any losses, claims, damages, liabilities or expenses, joint or several, to which they or any of them may become subject under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions, claims, investigations or proceedings in respect thereof, whether commenced or threatened) arise out of or relate to (x) any misstatement or alleged misstatement of a material fact contained in the Registration Statement or the Prospectus (or in any offering materials or supplemental information, if any, provided by or on behalf of Counterparty in connection with any sales on a private placement basis pursuant to paragraph 6(e) ("Citibank Unwind Period Settlement Option"), or in any amendment thereof or supplement thereto, or omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading) or (y) actions or failures to act by an indemnified party with the consent of or in reliance on Counterparty, or (z) otherwise arise out of or relate to any breach or violation by Counterparty of, or misrepresentation by Counterparty under, this Confirmation or allegation by a third party that Counterparty acted or failed to act in a manner that, as alleged, would have constituted such a breach, violation or misrepresentation. Counterparty agrees, promptly on demand and upon presentment of a detailed invoice, to reimburse each such indemnified party for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, expense or action. Notwithstanding anything to the contrary in the foregoing, Counterparty will not be liable in any such case to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to Counterparty by or on behalf of Citibank specifically for use in connection with the preparation of the Registration Statement or the Prospectus or any amendment or supplement thereto. This indemnity agreement will be in addition to any liability which Counterparty may otherwise have. (b) Indemnification by Citibank. Citibank agrees to indemnify and hold harmless Counterparty, its affiliates, their respective directors, officers, employees and agents, and each person who controls Counterparty 19 within the meaning of either the Securities Act or the Exchange Act, to the same extent as the foregoing indemnity from Counterparty to Citibank, but only with respect to written information furnished to Counterparty by or on behalf of Citibank specifically for use in the preparation of the Registration Statement or the Prospectus or any amendment or supplement thereto. This indemnity agreement will be in addition to any liability which Citibank may otherwise have. (c) Legal Proceedings. Promptly after receipt by an indemnified party under paragraphs (a) or (b) above of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under paragraphs (a) or (b) above, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party will not relieve the indemnifying party from any liability which it may have to any indemnified party otherwise than under paragraphs (a) or (b) above or, in respect of paragraphs (a) or (b) above, to the extent that the indemnifying party was not materially prejudiced by such failure to notify. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein, and to the extent that it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party; provided that if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to represent such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of its election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under paragraphs (a) or (b) above for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (A) the indemnified party shall have employed separate counsel in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel (in addition to local counsel), representing the indemnified parties who are parties to such action), (B) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action or (C) the indemnifying party has authorized in writing the employment of counsel for the indemnified party at the expense of the indemnifying party; and except that, if clause (A) or (C) is applicable, such liability shall be only in respect of the counsel referred to in such clause (A) or (C). The 20 indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there shall be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability arising from such proceeding. (d) Contribution. If the indemnification provided for above is unavailable to an indemnified party in respect of any losses, claims, damages, expenses or liabilities referred to herein, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, expenses or liabilities, in such proportion as is appropriate to reflect not only the relative fault of Counterparty on the one hand and of Citibank on the other in connection with the statements or omissions which resulted in such losses, claims, damages, expenses or liabilities, but also any other relevant equitable considerations. The relative fault of Counterparty on the one hand and Citibank on the other shall be determined by reference to, among other things, whether the misstatement or alleged misstatement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by Counterparty or by Citibank and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages and liabilities referred to above shall be deemed to include, subject to the limitations set forth above, any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The parties agree that it would not be just and equitable if contribution pursuant to this paragraph (d) were determined by method of allocation which does not take account of the equitable considerations referred to in this paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 12. Modifications to the Agreement: The following provisions shall apply with respect to the Agreement. Upon execution of a Master Agreement and Schedule by the parties, the provisions in this Section 12 shall be deemed deleted and all references to the Agreement herein shall be deemed to refer to the Master Agreement. 21 (a) Termination Provisions: (i) The "Cross-Default" provisions of Section 5(a)(vi) of the Agreement will apply to Citibank and Counterparty. WHERE "Threshold Amount" means (i) with respect to Citibank three percent (3%) of Stockholder's Equity of Citibank, and (ii) with respect to Counterparty USD 15,000,000. For purposes of (i) above, Stockholder's Equity shall be determined by reference to the relevant party's most recent consolidated (quarterly, in the case of a U.S. incorporated party) balance sheet and shall include, in the case of a U.S. incorporated party, legal capital, paid-in capital, retained earnings and cumulative translation adjustments. Such balance sheet shall be prepared in accordance with accounting principles that are generally accepted in the United States. (ii) The "Credit Event Upon Merger" provisions of Section 5(b)(iv) of the Agreement will apply to Citibank and Counterparty. (iii) "Termination Currency" means United States Dollars. 13. Representations: (a) Each party represents (which representations will be deemed to be repeated on each Tranche Date) to the other party that: (i) It is acting as principal for its own account and not as agent when entering into this Transaction; (ii) It has sufficient knowledge and expertise to enter into this Transaction and it is entering into this Transaction in reliance upon such tax, accounting, regulatory, legal, and financial advice as its deems necessary and not upon any view expressed by the other. It has made its own independent decision to enter into this Transaction, is acting at arm's length and is not relying on any communication (written or oral) of the other party as a recommendation or investment advice regarding this Transaction. It has the capability to evaluate and understand (on its own behalf or through independent professional advice), and does understand, the 22 terms, conditions and risks of this Transaction and is willing to accept those terms and conditions and to assume (financially and otherwise) those risks. It acknowledges and agrees that the other party is not acting as a fiduciary or advisor to it in connection with this Transaction. It is entering into this Transaction and the Purchase Agreement for the purpose of raising capital from the sale of Common Shares; and (iii) It is an "accredited investor" as defined in Section 2(15)(ii) of the Securities Act and an "eligible swap participant" as such term is defined in 17 C.F.R. Section 35.1(b)(2). (b) Counterparty represents as of the Trade Date to Citibank that: (i) It understands no obligations of Citibank to it hereunder will be entitled to the benefit of deposit insurance and that such obligations will not be guaranteed by any affiliate of Citibank or any governmental agency; (ii) Its investments in and liabilities in respect of this Transaction, which it understands are not readily marketable, is not disproportionate to its net worth, and it is able to bear any loss in connection with this Transaction, including the loss of its entire investment in this Transaction; (iii) It understands that this Transaction and, except as provided in paragraph 10 ("Securities Laws and Registration"), the transactions contemplated herein will not be registered under the Securities Act or any state securities law or other applicable federal securities law; and (iv) IT UNDERSTANDS THAT THIS TRANSACTION IS SUBJECT TO COMPLEX RISKS WHICH MAY ARISE WITHOUT WARNING AND MAY AT TIMES BE VOLATILE AND THAT LOSSES MAY OCCUR QUICKLY AND IN UNANTICIPATED MAGNITUDE AND IS WILLING TO ACCEPT SUCH TERMS AND CONDITIONS AND ASSUME (FINANCIALLY AND OTHERWISE) SUCH RISKS. (c) Counterparty represents that its entry into this Confirmation, the sale of Common Shares to Citibank pursuant to the Purchase Agreement dated as of the date hereof among the parties hereto and the use of the 23 proceeds of such sale by Counterparty will not result in a violation of or contravene any material agreement to which Counterparty is a party or subject to. (d) With respect to this Transaction, each representation under the Agreement made or deemed made on each date on which a Transaction is entered into shall be deemed made on the Trade Date. 14. Accounts for Payment: To Citibank: To be advised. To Counterparty: To be advised. 15. Delivery Instructions: Unless otherwise directed in writing, any Common Shares to be delivered hereunder shall be delivered as follows: To Citibank: Salomon Smith Barney DTC 418 Attn: Prime Broker Group For Account 768-00038 To Counterparty: To be advised. 16. Addresses for Notices: For purposes of Section 12(a) of the Agreement, unless otherwise directed in writing, all notices or communications to Counterparty or Citibank shall be delivered to the following addresses: To Citibank: Equity Derivatives Attn.: Herman Hirsch 390 Greenwich Street-3rd Floor Equity Derivatives New York, NY 10013 Facsimile: (212) 723-8750 Telephone: (212) 723-7357 with a copy to: Donald A. Bendernagel, Esq. Vice President 388 Greenwich Street -20th Floor New York, New York 10013 Facsimile: (212) 816-4223 Telephone: (212) 816-2747 24 To Counterparty: Harcourt General, Inc. 27 Boylston St. Chestnut Hill, MA 02467 Attn: Eric P. Geller, Esq. John R. Cook Facsimile: (617) 278-5567 Telephone: (617) 232-8200 With a copy to: Rise B. Norman, Esq. Simpson Thacher & Bartlett 425 Lexington Avenue NY, NY 10017 Facsimile: (212) 455-2502 Telephone: (212) 455-2000 25 Yours sincerely, CITIBANK, N.A. By: --------------------------------- Vice President Confirmed as of the date first above written: HARCOURT GENERAL, INC. By: Name: John R. Cook Title: Senior Vice President and Chief Financial Officer 26 EX-1.2 3 Exhibit 1.2 Harcourt General, Inc. 1,372,213 Shares of Common Stock Purchase Agreement New York, New York April 20, 2000 Salomon Smith Barney Inc. 390 Greenwich Street New York, New York 10013 Ladies and Gentlemen: Harcourt General, Inc. (the "Company") organized under the laws of Delaware, proposes to sell to Salomon Smith Barney Inc., acting as agent for and on behalf of Citibank, N.A. (the "Purchaser" and collectively with Salomon Smith Barney Inc. the "Citibank Parties"), 1,372,213 shares (the "Purchased Securities") of common stock of the Company (the "Common Stock"). In addition, the Company may deliver to the Purchaser additional shares of Common Stock (the "Additional Securities") in settlement of certain of its obligations under the Equity Swap Agreement dated as of April 20, 2000, between the Company and the Purchaser (the "Master Confirmation"). The Purchased Securities, and the Additional Securities are hereinafter referred to as the "Securities". Any reference herein to any Resale Registration Statement, a Preliminary Prospectus, or any Resale Prospectus (each as defined herein) shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 which were filed under the Securities Exchange Act of 1934, as amended (the "Exchange Act") on or before the Effective Date of such Resale Registration Statement or the issue date of such Preliminary Prospectus or Resale Prospectus, as the case may be; and any reference herein to the terms "amend", "amendment" or "supplement" with respect to any Resale Registration Statement, Preliminary Prospectus or Resale Prospectus shall be deemed to refer to and include the filing of any document under the Exchange Act after the applicable Effective Date or issue date, deemed to be incorporated therein by reference. Certain terms used herein are defined in Section 15 hereof. 1. Representations and Warranties of the Company. The Company represents and warrants to, and agrees with the Citibank Parties as set forth below in this Section 1. (a) The Company has prepared and filed with the Commission all reports that would be incorporated by reference into a Resale Registration Statement pursuant to Item 12 of Form S-3 as of the date hereof (the "Exchange Act Reports"). Each such Exchange Act Report, when filed with the Commission, complied in all material respects with the applicable requirements of the Exchange Act and the rules and regulations thereunder and did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Since January 31, 2000, there has been no material adverse change in the financial condition, earnings, business or properties of the Company and its subsidiaries considered as one enterprise ("Material Adverse Effect") whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Exchange Act Reports. (b) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction in which it is organized, with full corporate power and authority to conduct its business as described in the Exchange Act Reports, and is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction which requires such qualification, except where the failure to so qualify or be in good standing would not reasonably be expected to have a Material Adverse Effect. (c) The authorized equity capitalization of the Company is as set forth in the Exchange Act Reports; the capital stock of the Company conforms in all material respects to the description thereof contained in the Exchange Act Reports; the outstanding shares of Common Stock have been validly authorized and issued and are fully paid and nonassessable; the certificates for the Securities are (or, in the case of the Additional Securities, will be) in valid and sufficient form; and the holders of outstanding shares of capital stock of the Company are not entitled to preemptive or other rights to subscribe for the Securities; and, except as set forth on Schedule I hereto or in the Exchange Act Reports, no options, warrants or other rights to purchase, agreements or other obligations to issue, or rights to convert any obligations into or exchange any securities for, shares of capital stock of or ownership interests in the Company are outstanding. (d) There is no pending or, to the knowledge of the Company, threatened action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries or property of a character required to be disclosed in the Exchange Act Reports which is not adequately disclosed therein, and there is no franchise, contract or other document of a character required to be described therein, or to be filed as an exhibit thereto, which is not described or filed as required. 2 (e) The execution and delivery of this Agreement has been duly authorized by all necessary corporate action of the Company, and this Agreement has been duly executed and delivered by the Company and constitutes the valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. (f) The execution and delivery of the Master Confirmation has been duly authorized by all necessary action of the Company, the Master Confirmation has been duly executed and delivered by the Company and constitutes the valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing and, with respect to indemnification, to public policy considerations. (g) The Company is not and, after giving effect to the sale of the Purchased Securities and the application of the proceeds thereof, will not be an "investment company" as defined in the U.S. Investment Company Act of 1940, as amended. (h) Other than filing of the Resale Registration Statement and compliance with the securities or "blue sky" laws of the various states, no consent, approval, authorization, filing with or order of any court or governmental agency or body is required in connection with the transactions contemplated herein and in the Master Confirmation. (i) None of the issue and sale of the Purchased Securities, the issue of any Additional Securities, the consummation of any other of the transactions contemplated herein, in the Master Confirmation or the fulfillment of the terms hereof or thereof will conflict with, result in a breach or violation of or imposition of any lien, charge or encumbrance upon any property or assets of the Company or its subsidiaries pursuant to, (A) the charter or by-laws of the Company or any of its subsidiaries; (B) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which the Company or its subsidiaries is a party or by which it is bound or to which its or their property is subject; or (C) any statute, law, rule, regulation, judgment, order or decree applicable to the Company or its 3 subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or its subsidiaries or any of its or their properties, other than (with respect to clauses (B) and (C)) any conflicts, breaches, violations or liens which would not reasonably be expected to have a Material Adverse Effect. (j) Any certificate signed by any officer of the Company and delivered to the Citibank Parties or counsel for the Citibank Parties shall be deemed a representation and warranty by the Company as to matters covered thereby. 2. Representations and Warranties of the Purchaser. The Purchaser represents and warrants to, and agrees with, the Company as set forth below in this Section 2. (a) The Purchaser (i) has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Securities and is able to bear the economic risk of investment in the Securities; (ii) it is an "accredited investor" as that term is defined in Regulation D promulgated under the Securities Act, and that it is a sophisticated investor, capable of evaluating the merits and risks of investing in the Company; and (iii) is purchasing the Purchased Securities for its own account (or the account of an affiliate) with no present intention of distributing any of the Securities or any arrangement or understanding with any other persons regarding the distribution of the Securities, it being understood that the foregoing representation does not limit the right of the Purchaser to resell the Securities pursuant to an effective Resale Registration Statement or as otherwise contemplated in the Master Confirmation. (b) The Purchaser shall, in connection with any transfer of Securities, provide to the transfer agent for the Common Stock prompt notice of any Securities sold pursuant to any Resale Registration Statement or otherwise. (c) The execution and delivery of this Agreement has been duly authorized by all necessary corporate action by the Purchaser, and this Agreement has been duly executed and delivered by the Purchaser and constitutes the valid and legally binding obligation of the Purchaser enforceable against the Purchaser in accordance with its terms subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles 4 (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. (d) No consent, approval, authorization, filing with or order of any court or governmental agency or body is required in connection with the transactions contemplated herein and in the Master Confirmation. (e) During the negotiation of the transactions contemplated herein, Purchaser and its representatives have been afforded full and free access to the Company's Exchange Act Reports, have been afforded an opportunity to ask questions of the Company's officers concerning the Company's business, operations, financial condition, assets, liabilities and other relevant matters, and have been given all such information as has been requested, in order to evaluate the merits and risks of the prospective investment contemplated herein. 3. Purchase and Sale. Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, the Company agrees to sell to the Purchaser, and the Purchaser agrees to purchase from the Company the Purchased Securities at a purchase price per share equal to $36.4375 per share. 4. Delivery and Payment. Delivery of and payment for the Purchased Securities shall be made at 10:00 AM, New York City time, on April 25, 2000 (such date and time of delivery and payment for the Purchased Securities being herein called the "Closing Date"). Delivery of the Purchased Securities shall be made to Salomon Smith Barney Inc., as agent for and on behalf of the Purchaser, against payment by the Purchaser of the purchase price therefor by wire transfer in immediately available funds. Certificates for the Purchased Securities shall be registered in such names and in such denominations as the Purchaser may request. 5. Certain Agreements. The Company agrees with the Citibank Parties that: (a) The Company shall promptly advise the Citibank Parties (i) of any request by the Commission or its staff for any amendment of any Exchange Act Report of the Company or for any additional information; and (ii) of the institution or threatening of any enforcement proceeding, including any stop order, by the Commission against the Company and relating to any Exchange Act Report or other document filed by the Company with the Commission, including any registration statement filed under the Act. (b) The Company will not take, directly or indirectly, any action designed to or which has constituted or which might reasonably be expected to cause or result, under the Exchange Act or otherwise, in 5 stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any Securities. (c) The Company shall notify in writing the Citibank Parties as promptly as practicable at any time that the Company determines that, as a result of a change in the capital stock of the Company, the Citibank Parties hold more than 4.9% of the common stock of the Company. (d) The Company shall, for so long as any Securities are owned by the Citibank Parties, (i) upon reasonable prior written notice, permit representatives of the Citibank Parties access to the books and records and to the principal executive and operating officers of the Company during normal business hours at such times as may be mutually agreed between the Citibank Parties and the Company, as the case may be, at any time during which the Citibank Parties may have an intention to resell any of the Securities; and (ii) furnish to the Citibank Parties such certificates of officers of the Company relating to the business, operations and affairs of the Company and its respective subsidiaries, any Resale Registration Statement or Resale Prospectus and any amendments or supplements thereto, this Agreement, the Master Confirmation and the performance by the Company of its respective obligations hereunder and thereunder as the Citibank Parties may from time to time reasonably request. (e) For so long as the Master Confirmation shall remain in effect, (i) not later than 90 days following the end of the fiscal year of the Company or 45 days following the end of each fiscal quarter of the Company, the Company shall provide the Citibank Parties (A) a copy of the applicable Annual Report on Form 10-K or Quarterly Report on Form 10-Q of the Company then required to be filed by the Company with the Commission; (B) a certificate of the Chief Financial Officer, General Counsel or other authorized officer of the Company to the effect that such Annual Report on Form 10-K or Quarterly Report on Form 10-Q complied in all material respects, as of the date of the filing thereof with the Commission, with the applicable requirements of the Exchange Act and the rules and regulations thereunder and did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (ii) promptly upon the filing thereof the Company shall provide the Citibank Parties with a copy of each other report filed with the Commission by the Company. (f) The Company agrees to pay all reasonable expenses incident to the performance of its obligations hereunder and under the Master Confirmation, including (i) the preparation and filing of any Resale Registration Statement and all amendments thereto; (ii) the cost of 6 printing and delivering certificates evidencing the Securities; (iii) the cost of printing and delivering any Resale Registration Statement, Preliminary Prospectus and Resale Prospectus in such quantities as the Citibank Parties may reasonably request; (iv) the fees and expenses of independent accountants for the Company and the Company's counsel; (v) the qualification of the Securities for sale under state securities or blue sky laws; (vi) the listing of the Securities on the New York Stock Exchange; and (vii) all transfer or other taxes (other than income taxes) payable in connection with the issuance, sale or transfer of the Securities, and (viii) the reasonable fees and disbursements of counsel to Citibank and its affiliates incurred in connection with any sales (other than in an Underwritten Offering in connection with an Unwind Period with respect to the full Outstanding Aggregate Amount, as such terms are defined in the Master Confirmation). 6. Conditions to the Obligations of the Purchaser. The obligations of the Purchaser to purchase the Purchased Securities shall be subject to the accuracy in all material respects of the representations and warranties on the part of the Company contained herein as of the Closing Date, to the accuracy of the statements of the Company made in any certificates pursuant to the provisions hereof, to the performance in all material respects by the Company of its obligations hereunder and to the following additional conditions: (a) No enforcement proceeding, including any stop order, by the Commission against the Company and relating to any Exchange Act Report or other document filed by the Company with the Commission, including any registration statement filed under the Act, shall have been instituted or, to the knowledge of the Company, threatened. (b) The Company shall have requested and caused Eric P. Geller and Simpson Thacher & Bartlett, counsel for the Company, to furnish to the Citibank Parties the opinions, dated the Closing Date and addressed to the Citibank Parties, substantially in the form agreed upon by Citibank and the Company. (c) The Company shall have furnished to the Citibank Parties, a certificate of the Company signed by its Chief Financial Officer, General Counsel or other authorized officer or manager, dated the Closing Date, to the effect that the signers of such certificate have carefully examined this Agreement and that: (i) the representations and warranties of the Company in this Agreement are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date, and the Company, has complied in all material respects with 7 all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Closing Date; and (ii) since the date of the most recent financial statements included in the Exchange Act Reports, there has been no Material Adverse Effect, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Exchange Act Reports. (d) The Company and the Purchaser shall have entered into the Master Confirmation. (e) Prior to the Closing Date, the Company shall have furnished to the Citibank Parties such further information, certificates and documents as the Citibank Parties may reasonably request. If any of the conditions specified in this Section 6 shall not have been fulfilled in all material respects when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be in all material respects reasonably satisfactory in form and substance to the Citibank Parties and counsel for the Citibank Parties, this Agreement and all obligations of the Citibank Parties hereunder may be canceled at the Closing Date by Salomon Smith Barney Inc., as agent for and on behalf of the Purchaser. Notice of such cancellation shall be given to the Company in writing or by telephone or facsimile confirmed in writing. The documents required to be delivered by this Section 6 shall be delivered at the office of Salomon Smith Barney, Inc., 390 Greenwich Street, New York, NY on the Closing Date. 7. Registration of the Securities. (a) The Company agrees: (i) as soon as practicable after the Closing Date, but in no event later than 30 days after the Closing Date, to prepare and file with the Commission a Resale Registration Statement covering the resale by the Citibank Parties, from time to time of a number of shares of Common Stock at least equal to the number of Purchased Securities and 588,091 Additional Securities in any manner of distribution specified in the Master Confirmation (the "Initial Resale Registration Statement"), but in any event permitting distribution by underwritten public offering, direct sales from time to time and block trades, and use its best efforts to obtain effectiveness of the Initial Resale Registration Statement as promptly as practicable following such filing, but in no event later than 120 days after the Closing Date. If the aggregate number of Purchased Securities plus any Additional 8 Securities exceeds the number of shares of Common Stock covered by the Initial Resale Registration Statement, then the Company shall promptly prepare and file with the Commission such additional Resale Registration Statement or Statements as shall be necessary to cover the resale by the Citibank Parties of such Additional Securities in the same manner as contemplated by the Initial Resale Registration Statement, (ii) to use its best efforts to maintain each Resale Registration Statement continuously effective until the later to occur of (A) the termination of the Master Confirmation; and (B) the final disposition by the Citibank Parties of all Purchased Securities, Additional Securities and Securities received by it under the Master Confirmation; provided, however, that the Company shall be entitled to suspend for a period of up to 5 Business Days during an Unwind Period (as defined in the Master Confirmation) the rights of the Citibank Parties to make sales pursuant to any Resale Registration Statement otherwise required to be kept effective by it hereunder, if the Board of Directors of the Company determines in good faith that there is a material undisclosed development in the business or affairs of the Company (including any pending or proposed financing, recapitalization, acquisition or disposition), the disclosure of which at such time could be adverse to the Company's interests. The Company shall be deemed not to have used its best efforts to maintain a Resale Registration Statement effective during the requisite period if it voluntarily takes any action that would result in the Citibank Parties' inability to effect public sales of the Securities thereunder, unless (X) such action is required by applicable law; or (Y) such action is taken by the Company in good faith and for valid business reasons (not including avoidance of its respective obligations under this Agreement), including any pending or proposed financing, recapitalization, acquisition or disposition, so long as the Company promptly thereafter prepares and files with the Commission a post-effective amendment to such Resale Registration Statement or an amendment or supplement to the related Resale Prospectus and such other documents so that such Resale Prospectus shall not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Nothing in this Section 7 shall preclude the Citibank Parties from exercising its right to declare an Early Termination Date under the Master Confirmation; (ii) to cause (A) any Resale Registration Statement and any amendment thereto and any Resale Prospectus forming a part thereof and any amendment or supplement thereto to comply in all material respects with the Act and the Exchange Act and the respective rules and regulations thereunder; (B) any Resale Registration Statement 9 and any amendment thereto not, when it becomes effective, to contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and (C) any Resale Prospectus forming a part of any Resale Registration Statement and any amendment or supplement thereto not to include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (iii) to advise the Citibank Parties in writing (A) when a Resale Registration Statement or any post-effective amendment thereto shall have been filed with the Commission and when such Resale Registration Statement or any post-effective amendment thereto shall have become effective; (B) of any request by the Commission for any amendment or supplement to any Resale Registration Statement or related Resale Prospectus or for additional information; (C) of the issuance by the Commission of any stop order suspending the effectiveness of any Resale Registration Statement or the initiation of any proceedings for that purpose; (D) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction designated by the Citibank Parties in accordance with clause (ix) below or the initiation or threatening of any proceeding for such purpose; and (E) the happening of any event that requires the making of any changes in any Resale Registration Statement or related Resale Prospectus so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of any such Resale Prospectus, in the light of the circumstances under which they were made) not misleading, which notice shall be accompanied by an instruction to suspend the use of such Resale Prospectus until the requisite changes shall have been made; (iv) to make generally available to its security holders as soon as practicable after the Effective Date of each Resale Registration Statement and after the date of each underwriting or similar agreement relating to a disposition of any Securities, including any confirmation relating to a block trade, an earning statement satisfying the provisions of Section 11(a) of the Act and Rule 158 thereunder; (v) to (A) make reasonably available for inspection during normal business hours by any underwriter or executing dealer participating in any disposition of Securities pursuant to any Resale Registration Statement (whether through an underwritten 10 offering, an "at the market offering", a block transaction or otherwise) and any attorney, accountant or other agent retained by such underwriter or executing dealer all relevant financial and other records, pertinent corporate documents and properties of the Company and its respective subsidiaries; (B) cause the officers, directors and employees of the Company and its respective subsidiaries to supply all relevant information reasonably requested by any such underwriter, executing dealer, attorney, accountant or agent in connection with any such Resale Registration Statement as is customary for due diligence examinations; (C) make such representations and warranties to such underwriter or executing dealer in form, substance and scope as are customarily made by issuers to underwriters in primary underwritten offerings; (D) request and cause counsel to the Company to furnish to the Citibank Parties opinions and updates thereof (which counsel and opinions (in form, substance and scope) shall be reasonably satisfactory to the Citibank Parties), addressed to the Citibank Parties and any such underwriter or executing dealer, covering such matters as are customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by the Citibank Parties or such underwriter or executing dealer; (E) request and cause the independent certified public accountants of the Company (and, if necessary, of any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, including in any Resale Registration Statement) to furnish to the Citibank Parties "cold comfort" letters and updates thereof addressed to the Citibank Parties and any such underwriter or executing dealer, in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with primary underwritten offerings; (F) deliver such documents and certificates as may be reasonably requested by the Citibank Parties or any such underwriter or executing dealer and to evidence compliance with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company; and (G) to enter into an agreement in connection with the resale of the Securities in form and substance reasonably satisfactory to each of them and containing such terms as are customary for the applicable disposition of the Common Stock including provisions for the indemnification of, and contribution in connection with the liability of any underwriters of the Securities, and their respective control persons and affiliates. The foregoing actions set forth in clauses (C), (D), (E), (F) and (G) shall be performed, unless waived by the Citibank Parties, upon or at (1) the effectiveness of each Resale Registration Statement and each post-effective amendment thereto; (2) each closing under 11 any underwriting, purchase or similar agreement as and to the extent required thereunder; and (3) the confirmation of any block trade or direct resale by the Citibank Parties; and the commencement of any Unwind Period; (vi) to cause the transfer agent for the Common Stock to issue, promptly upon the effectiveness of the Initial Resale Registration Statement, certificates evidencing the Purchased Securities bearing no legends evidencing restrictions on the sale of such Purchased Securities and to cooperate with the Citibank Parties in issuing to persons purchasing from the Citibank Parties certificates evidencing the Securities in such names and denominations as they may request; (vii) to use its best efforts to prevent the issuance and to obtain the withdrawal of any order suspending the effectiveness of each Resale Registration Statement or Resale Prospectus or suspending the qualification (or exemption from qualification) of any of the Securities for sale in any jurisdiction designated by the Citibank Parties in accordance with clause (ix) below; (viii) to furnish to the Citibank Parties with respect to the Securities registered under any Resale Registration Statement such reasonable number of copies of such Resale Registration Statement and the related Resale Prospectus, including any supplements and amendments thereto and any documents incorporated by reference therein; (ix) to qualify the Securities for sale under the securities or blue sky laws in such jurisdictions as shall be designated to the Company in writing by the Citibank Parties; provided, however, that the Company shall not be required to qualify to do business, subject itself to taxation or consent to service of process in any jurisdiction in which it is not now so qualified or has not so consented; (x) to file promptly any necessary listing applications or amendments or supplements to existing listing applications to cause any shares of Common Stock covered by any Resale Registration Statement to be listed or admitted to trading, on or prior to the effectiveness of such Resale Registration Statement, on any national stock exchange or automated quotation system on which the Common Stock is then listed or traded and to cause the same to be so listed not later than the effective date of such Resale Registration Statement; and 12 (xi) not to file any Resale Registration Statement (including the Initial Resale Registration Statement) or Resale Prospectus or any amendment or supplement thereto, unless a copy thereof shall have been first submitted to the Purchaser and the Purchaser shall not have objected thereto in good faith; provided, however, that if the Purchaser does not object within three Business Days of receiving any such material, there shall be deemed to have been no objections thereto; and provided further that the foregoing shall not limit the obligations the Company under Section 5(d) hereof. (b) The Citibank Parties shall notify the Company at least one Business Day prior to the earlier of the date on which they intend to commence effecting any resales of Securities under a Resale Registration Statement or the date of pricing with respect to the public resale or other disposition of any Shares under a Resale Registration Statement effected through an underwritten offering or a block trade and, if the Company does not, within such one-day period, advise the Citibank Parties of the existence of any facts of the type referred to in subsection 7(a)(iii)(E) above, then the Company shall be deemed to have jointly and severally represented to each of the Citibank Parties that no such facts then exist and each of the Citibank Parties may rely on such representation in making such resales. The Citibank Parties agree that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 7(a)(iii)(E) hereof they will forthwith discontinue disposition pursuant to such Resale Registration Statement or prospectus until their receipt of the copies of the supplemented or amended prospectus relating to such Resale Registration Statement or prospectus or until they are advised in writing by the Company that the use of the applicable prospectus may be resumed. The preceding sentence shall not limit the obligations of the Company under Section 5(e) or subsections (a)(ii) and (a)(vii) of this Section 7 or the terms of the Master Confirmation. (c) The Citibank Parties agree with the Company that it shall be a condition to the obligations of the Company to take any action pursuant to Section 7 with respect to the Securities of the Citibank Parties that such Citibank Parties shall furnish to the Company such information regarding themselves, the Securities held by them, and the intended method of disposition of such Securities as shall be required to effect the registration of such Citibank Parties' Securities. 8. Representations and Indemnities to Survive. The respective agreements, representations, warranties, indemnities and other statements of the Company, or its respective officers and of the Citibank Parties set forth in or made pursuant to this Agreement or the Master Confirmation will remain in full force and effect, regardless of any investigation made by or on behalf of the Citibank Parties or the Company or any of the officers, 13 directors or controlling persons of the Company, and will survive the execution of this Agreement and the Master Confirmation and the delivery of and payment for the Securities. The indemnity provisions of Paragraph 11 of the Master Confirmation shall survive the termination or cancellation of this Agreement, and/or the termination or cancellation of the Master Confirmation. 9. Notices. All communications hereunder will be in writing and effective only on receipt, and, if sent to either of the Citibank Parties, will be mailed, delivered or telefaxed to Donald Bendernagel, Esq., c/o Citibank at 388 Greenwich Street , New York, New York 10013; or, if sent to the Company will be mailed, delivered or telefaxed to Eric P. Geller, Esq. c/o Harcourt General, Inc. at 27 Boylston Street, Chestnut Hill, MA 02467. 10. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers and directors and controlling persons of the Company and the Citibank parties, and, in the case of Section 7 hereof, each person who purchases any Securities from the Citibank Parties otherwise than pursuant to an effective Resale Registration Statement or in accordance with Rule 144 under the Act, if available, and no other person will have any right or obligation hereunder. Any assignee or transferee of rights or obligations of the Citibank Parties under the Master Confirmation shall be subject to all of the terms of this Agreement. 11. Amendments. This Agreement may not be amended or modified except pursuant to an instrument in writing signed by the Company and the Citibank Parties. 12. Applicable Law. This Agreement will be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed within the State of New York. 13. Counterparts. This Agreement may be signed in one or more counterparts, each of which shall constitute an original and all of which together shall constitute one and the same agreement. 14. Headings. The section headings used herein are for convenience only and shall not affect the construction hereof. 15. Definitions. The terms which follow, when used in this Agreement, shall have the meanings indicated. "Act" shall mean the U.S. Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. 14 "Business Day" shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in New York City. "Commission" shall mean the U.S. Securities and Exchange Commission. "Effective Date" shall mean each date and time any Resale Registration Statement, any post-effective amendment or amendments thereto and any Rule 462(b) Registration Statement, as the case may be, became or become effective. "Exchange Act" shall mean the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Execution Time" shall mean the date and time that this Agreement is executed and delivered by the parties hereto. "Initial Resale Registration Statement" shall have the meaning set forth in Section 7(a) hereof. "Preliminary Prospectus" shall mean any preliminary prospectus included in a Resale Registration Statement at the applicable Effective Date that omits Rule 430A Information. "Resale Prospectus" shall mean the prospectus relating to the Securities that is first filed pursuant to Rule 424(b) or, if no filing pursuant to Rule 424(b) is required, shall mean the form of final prospectus relating to the Securities included in a Resale Registration Statement at the applicable Effective Date. "Resale Registration Statement" shall mean each registration statement relating to the resale by the Citibank Parties of the Securities, including exhibits and financial statements, as amended at the Effective Date and, in the event any post-effective amendment thereto or any Rule 462(b) Registration Statement becomes effective, shall also mean such registration statement as so amended or such Rule 462(b) Registration Statement, as the case may be. Such term shall include any Rule 430A Information deemed to be included therein at the Effective Date as provided by Rule 430A. "Rule 424", "Rule 430A" and "Rule 462" refer to such rules under the Act. "Rule 430A Information" shall mean information with respect to the Securities and the offering thereof permitted to be omitted from the 15 Resale Registration Statement when it becomes effective pursuant to Rule 430A. "Rule 462(b) Registration Statement" shall mean a registration statement and any amendments thereto filed pursuant to Rule 462(b) relating to the resale of Securities covered by the applicable Resale Registration Statement. Capitalized terms not defined herein shall have the meanings provided for such terms in the Master Confirmation. * * * 16 If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall represent a binding agreement between the Company and the Citibank Parties. Very truly yours, Harcourt General, Inc. By: . . . . . . . . . . . . . . . . . . . Name: John R. Cook Title: Senior Vice President and Chief Financial Officer The foregoing Agreement is hereby confirmed and accepted as of the date first above written. Citibank, N.A. By: Salomon Smith Barney Inc. By: . . . . . . . . . . . . . . . Name: Title 17 Schedule I Options Granted in FY00 under the Company's 1997 Incentive Plan Options Grant Date Granted * ------------ -------------- 12/8/99 1,828,150 12/14/99 470,000 1/18/00 4,000 ---------- TOTAL 2,302,150 ---------- * All options were granted at an exercise price equal to the fair market value of the Common Stock on the date of grant. 18 EX-4.2 4 Exhibit 4.2 COMMON STOCK NUMBER ____________ Shares HARCOURT GENERAL Incorporated under the laws of the State of Delaware This certificate is transferable in Boston, Massachusetts or in New York, New York HARCOURT GENERAL, INC. CUSIP 41163G 10 1 This certifies that is the owner of Fully paid and non-assessable shares of the common stock, one dollar ($1.00) par value, of Harcourt General, Inc. (herein called the "Corporation") transferable upon the books of the Corporation in person or by attorney upon surrender of this certificate duly endorsed or assigned. This certificate and the shares represented hereby are subject to the laws of the State of Delaware, and to the Restated Certificate of Incorporation and the By-Laws of the Corporation, as amended from time to time (copies of which are on file with the Transfer Agents). This certificate is not valid until countersigned by a Transfer Agent and registered by a Registrar. In Witness Whereof, Harcourt General, Inc. has caused its facsimile corporate seal and the facsimile signatures of its duly authorized officers to be hereunto affixed. Dated: Richard A. Smith Chairman Countersigned and Registered: By BankBoston, N.A. Transfer Agent and Registrar Authorized Signature Eric Geller Secretary The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT - _________ (Cust) Custodian _________ (Minor) under Uniform Gifts to Minors Act _________(State) Additional abbreviations may also be used though not in the above list. For Value Received, ___________ hereby sell, assign and transfer unto _____________ (Please insert social security or other identifying number of assignee) - ------------------------------------------------------------------------------ (Please print or typewrite name and address, including zip code, of assignee) - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ _____________________________________________________________________ Shares of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint __________________________ Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises. Dated __________________________ ______________________________________________________ NOTICE: The signature to this assignment must correspond with the name as written on the face of the certificate in every particular, without alteration or enlargement or any change whatever. SIGNATURE(S) GUARANTEED: _________________________________________ The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved -2- signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15. -3- EX-23.1 5 Exhibit 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Registration Statement of Harcourt General, Inc. on Form S-3 of our reports dated December 9, 1999, appearing in and incorporated by reference in the Annual Report on Form 10-K of Harcourt General, Inc. for the year ended October 31, 1999 and to the reference to us under the heading "Experts" in the Prospectus, which is part of this Registration Statement. /s/ DELOITTE & TOUCHE LLP Boston, Massachusetts May 1, 2000 -----END PRIVACY-ENHANCED MESSAGE-----