UNITED STATES TAX COURT

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125 T.C. No. 8

UNITED STATES TAX COURT

TRIBUNE COMPANY, AS AGENT OF AND SUCCESSOR BY MERGER TO THE

FORMER THE TIMES MIRROR COMPANY, ITSELF AND ITS CONSOLIDATED

SUBSIDIARIES, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 17443-02.

Filed September 27, 2005.

In 1998, Times Mirror’s investment subsidiary,

TMD, divested itself of a legal publishing business

through the Bender transaction. The transaction was

intended and designed to qualify as a tax-free

reorganization under sec. 368, I.R.C. R determined

that the transaction was a taxable sale by TMD to Reed.

Held: The primary consideration received in the

transaction was control over $1.375 billion paid by

Reed. Held, further, the Bender transaction did not

qualify as a tax-free reorganization because the terms

and provisions of the contractual documents, as

interpreted and implemented by Times Mirror and Reed,

effected a sale.

- 2 Joel V. Williamson, Roger J. Jones, Gary S. Colton, Jr.,

Jeffrey Allan Goldman, Matthew C. Houchens, Daniel A. Dumezich,

Patricia Anne Yurchak, Andrew R. Roberson, Thomas Lee KittleKamp, Nathaniel Carden, and Monica Susana Melgarejo, for

petitioner.

Alan Summers, Cathy A. Goodson, William A. McCarthy,

Usha Ravi, Robert H. Schorman, Jr., Gretchen A. Kindel, and M.

Kendall Williams, for respondent.

CONTENTS

FINDINGS OF FACT

. . . . . . . . . . . . . . . . . . . . . . . 5

Background . . . . . . . . . . . . . . . . . . . . . . . . . . 5

A. Times Mirror . . . . . . . . . . . . . . . . . . . . . 5

B. Changes in the Legal Publishing Landscape . . . . . . 6

Events Leading Up to the Bender Transaction . . . . . . . . . . 7

A. November 7, 1997, GS Presentation . . . . . . . . . . 7

B. November 17, 1997, Special Meeting of Times Mirror’s

Board of Directors . . . . . . . . . . . . . . . . . 8

C. Times Mirror’s Announcement Sparks Interest by Reed

and Wolters Kluwer . . . . . . . . . . . . . . . . 10

D. February 5, 1998, Regular Meeting of Times Mirror’s

Board of Directors . . . . . . . . . . . . . . . . 11

E. March 5, 1998, Regular Meeting of Times Mirror’s

Board of Directors . . . . . . . . . . . . . . . . 14

F. Reed and Wolters Kluwer Call Off Merger . . . . . . 15

G. Melone, Sigler, and Walker Gain Access to the

“Domestic Sandwich” Structure . . . . . . . . . . 15

H. Reed and Wolters Kluwer Submit Preliminary Interest

Letters to Times Mirror . . . . . . . . . . . . . 16

I. The Corporate Joint Venture Structure Is Tabbed as

the Structure of Choice for the Bender

Transaction . . . . . . . . . . . . . . . . . . . 17

J. April 14, 1998, Regular Meeting of Reed’s Board of

Directors . . . . . . . . . . . . . . . . . . . . 18

K. Wolters Kluwer and Reed Attend Times Mirror’s

Presentations Regarding Bender . . . . . . . . . . 18

- 3 L.

Wolters Kluwer and Reed Submit Offers to Times

Mirror

. . . . . . . . . . . . . . . . . . . . . 22

Times Mirror Responds to Wolters Kluwer’s Offer . . 23

April 24, 1998, Special Meeting of Times Mirror’s

Board of Directors . . . . . . . . . . . . . . . . 24

Organization of CBM Acquisition Parent Co. and

CBM MergerSub Corp. . . . . . . . . . . . . . . . 26

Adoption of the Merger Agreement . . . . . . . . . . 28

GS Prepares “Fairness Package” for Bender

Transaction . . . . . . . . . . . . . . . . . . . 34

Melone Drafts Memorandum Regarding the Bender

Transaction for E&Y’s Files . . . . . . . . . . . 35

May 7, 1998, Regular Meeting of Times Mirror’s Board

of Directors . . . . . . . . . . . . . . . . . . . 37

May 7, 1998, Annual Meeting of Times Mirror’s

Shareholders . . . . . . . . . . . . . . . . . . . 37

Organization of Liberty Bell I . . . . . . . . . . . 38

July 9, 1998, Regular Meeting of Times Mirror’s Board

of Directors . . . . . . . . . . . . . . . . . . . 38

Execution of the LBI Limited Liability Company

Agreement (the management authority) . . . . . . . 42

Execution of MB Parent Stockholders Agreement and the

MergerSub Shareholders Agreement . . . . . . . . . 50

Filing of the Restated Certificates of Incorporation

for MB Parent and MergerSub . . . . . . . . . . . 55

The Mechanics of the Bender Transaction . . . . . . . . . . .

A. Capitalization of MergerSub and MB Parent . . . . .

B. Merger of MergerSub and Bender . . . . . . . . . . .

C. Capitalization of LBI (the LLC) . . . . . . . . . .

D. Closing . . . . . . . . . . . . . . . . . . . . . .

Times Mirror’s Management of LBI and the Development of Times

Mirror’s Investment Strategy Following the Closing of the

Bender Transaction . . . . . . . . . . . . . . . . . . . . .

Summary of the LLC’s Investment Activity During 1999

. . . .

Times Mirror’s and MB Parent’s Income Tax Returns for 1998

Times Mirror’s Financial Reporting Following the Close of

the Bender Transaction . . . . . . . . . . . . . . . . . . .

The LLC’s Financial Statements for the Fiscal Years Ended

December 31, 1999 and 1998 . . . . . . . . . . . . . . . . . 103

IRS Determinations

. . . . . . . . . . . . . . . . . . . . . 104

- 4 ULTIMATE FINDINGS OF FACT . . . . . . . . . . . . . . . . . . 106

OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

Factual Analysis of the Bender Transaction

. . . . . . . . . 109

Times Mirror’s View of the Bender Transaction . . . . . . . . 111

Fiduciary Obligations Among the Parties . . . . . . . . . . . 114

Consideration for the Transfer of Bender to Reed

. . . . . . 118

Valuation of MB Parent Common Stock . . . . . . . . . . . . . 121

Pertinent Precedents

. . . . . . . . . . . . . . . . . . . . 125

Evidentiary Matters . . . . . . . . . . . . . . . . . . . . . 133

COHEN, Judge:

Respondent determined a deficiency of

$551,510,819 with respect to petitioner’s Federal income tax for

1998.

The notice of deficiency recharacterized as taxable two

transactions treated by petitioner as tax-free reorganizations.

This opinion addresses the so-called Bender transaction only.

The principal issues for decision are:

(1) Whether the Bender transaction qualifies as a

reorganization under either section 368(a)(1)(A) and (2)(E) or

section 368(a)(1)(B) and, if so,

(2) whether section 269 nonetheless dictates that gain be

recognized on the Bender transaction.

Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the year in issue.

- 5 FINDINGS OF FACT

Some of the facts have been stipulated, and the stipulated

facts are incorporated in our findings by this reference.

Petitioner’s principal place of business was in Chicago,

Illinois, at the time that the petition was filed.

Petitioner is

a party to this case solely in its capacity as agent and

successor of The Times Mirror Co., Inc. (Times Mirror).

Background

Times Mirror

Before its merger with petitioner, Times Mirror was a

Los Angeles-based news and information company.

In June 1995,

Times Mirror hired Mark H. Willes (Willes) to serve as its

president and chief executive officer.

Willes became chairman of

Times Mirror’s board of directors in January 1996.

Willes’s

business philosophy favored a streamlined operation that

concentrated on “core” businesses.

After June 1995, Times Mirror embarked on a program of

restructuring its businesses, which included focusing on

newspaper publishing.

In late 1996, Times Mirror undertook a

series of transactions that resulted in its owning 50 percent of

the Shepard’s McGraw-Hill legal publishing unit (Shepard’s) in a

joint venture with Reed Elsevier (Reed), a publishing and

information enterprise not itself a legal entity but rather a

collective reference to Reed Elsevier plc, a United Kingdom

- 6 entity, and Reed Elsevier NV, a Dutch entity.

Times Mirror held

its 50-percent interest in Shepard’s through one of its

subsidiaries, Matthew Bender & Co., Inc. (Bender), a legal

publishing company.

As of December 31, 1997, Times Mirror comprised three

business segments:

Newspaper publishing, professional

information, and magazine publishing.

The professional

information business segment included Bender and Mosby, Inc.

(Mosby), a health sciences publishing company.

Times Mirror engaged in the legal publishing business

through Bender.

TMD, Inc. (TMD), a wholly owned subsidiary of

Times Mirror, owned the only class of issued and outstanding

stock of Bender until July 31, 1998.

Changes in the Legal Publishing Landscape

Between 1980 and 1997, the legal publishing industry

experienced significant consolidation.

During that period, the

legal publishing market contracted from 20 companies to 5:

Reed;

Wolters Kluwer NV (Wolters Kluwer), a Dutch publishing and

information company; West-Thomson; Bender; and the Bureau of

National Affairs.

On October 13, 1997, Reed and Wolters Kluwer announced a

plan to merge.

At the time of the announcement, Reed’s holdings

included Lexis-Nexis (Lexis), and Wolters Kluwer’s holdings

included Commerce Clearing House.

- 7 Shortly after the Reed-Wolters Kluwer announcement, Times

Mirror’s management analyzed Bender’s competitive position in the

legal publishing market.

Based upon its analysis, Times Mirror’s

management concluded that continued participation in the legal

publishing market was not the most effective use of Times

Mirror’s assets.

Accordingly, Times Mirror decided to divest

itself of Bender.

The law firm of Gibson, Dunn & Crutcher LLP (GD&C) acted as

outside legal counsel for Times Mirror, TMD, and Bender in

connection with the transaction pursuant to which Times Mirror

divested itself of Bender (Bender transaction).

Ernst & Young

LLP (E&Y), which served as independent auditor of Times Mirror’s

financial statements during 1994 through 1999, reviewed the tax

and accounting treatment and reporting of the Bender transaction

for Times Mirror.

Sometime before November 7, 1997, Times Mirror

engaged Goldman, Sachs & Co. (GS) as a financial adviser and

facilitator for the Bender transaction.

Events Leading Up to the Bender Transaction

November 7, 1997, GS Presentation

GS prepared a document, dated November 7, 1997, entitled

“Monetization of Medical/Publishing Assets”, in connection with a

presentation to Times Mirror’s management regarding the Bender

transaction (November 7, 1997, GS presentation).

The following

- 8 statements were included in the November 7, 1997, GS

presentation:

Given the dramatic change in the competitive

landscape of the professional information

publishing sector, this may be an opportune time

for TMC [Times Mirror] to monetize its * * * legal

[publishing] assets

Monetization of the * * * legal publishing assets

can be executed through a simple, taxable sale for

cash or through a number of tax-advantaged

structures

The ultimate structure utilized will be a function

of the type of buyer (ie. Strategic or financial)

as well as the nationality of the buyer (ie.

Domestic or foreign) as well as the amount of cash

proceeds TMC would like to receive upfront

The November 7, 1997, GS presentation provided a summary of

Bender’s potential buyers as well as descriptions of several of

GS’s proprietary “tax-advantaged” structures for the Bender

transaction.

None of the tax-advantaged structures set forth in

the November 7, 1997, GS presentation were ultimately recommended

by Times Mirror’s management or approved by Times Mirror’s board

of directors for the Bender transaction.

November 17, 1997, Special Meeting of Times Mirror’s

Board of Directors

A special meeting of Times Mirror’s board of directors was

convened on November 17, 1997.

In connection with this special

meeting, a document entitled “Briefing Packet On Mosby Matthew

Bender” (November 17, 1997, briefing packet) was prepared.

memorandum dated November 14, 1997, from Willes to the board of

- 9 directors was part of the November 17, 1997, briefing packet.

The section of the November 17, 1997, briefing packet entitled

“Executive Summary” contained the following statements:

The major strategic alternatives, or some combination

thereof, that are open to Times Mirror are the

following:

Hold

Divest

Swap

A key issue in any decision to divest or swap will be

the potentially large tax liability on the gain on the

sale due to our low basis in Matthew Bender. Our

preliminary work indicates that there may be a variety

of transaction structures which allow us to minimize

this tax expense.

Our preliminary analysis shows that with the very high

premiums currently being offered for legal * * *

publishing operations, more after-tax value could be

created through divestiture than by keeping these

companies. This value is enhanced considerably if the

divestiture could be accomplished through a

tax-advantaged structure.

The decision to explore strategic alternatives for

Mosby Matthew Bender is not easy nor a happy one.

* * * However, the facts are that the competitive

environment for * * * legal * * * publishing has

changed dramatically * * *. Matthew Bender is a very

distant third in U.S. legal publishing with a weakening

future competitive position. * * *

Considering these recent developments, we recommend to

the Board that it authorize the exploration of the

divestiture of Matthew Bender, including Shepard’s

* * *

- 10 Willes opened the special meeting of the board of directors

by noting that market consolidation in legal publishing presented

immediate strategic questions that needed to be evaluated fully.

Willes and Kathryn M. Downing, a corporate officer of Times

Mirror, then presented a lengthy review of the situation and the

issues to be addressed.

Following this presentation, there was a

substantive discussion among the board of directors.

At the

conclusion of this discussion, the board of directors unanimously

instructed Times Mirror’s management to proceed with a formal

review of the company’s options with respect to its ownership of

Bender and its joint ownership of Shepard’s.

Times Mirror’s Announcement Sparks Interest by Reed and

Wolters Kluwer

On November 24, 1997, Times Mirror released a statement to

the public that announced the company’s decision to explore

strategic alternatives with respect to its ownership of Bender

and its joint ownership of Shepard’s.

After Times Mirror made

this announcement, Reed, Wolters Kluwer, and many others

expressed an interest in acquiring Bender.

Parties that indicated an interest in Bender were initially

sent a standard confidentiality agreement.

These confidentiality

agreements set out the ground rules for obtaining confidential

information in connection with a possible sale or other

disposition of Bender.

On December 26, 1997, Times Mirror and

- 11 Reed executed a confidentiality agreement.

On January 9, 1998,

GS sent a confidentiality agreement to Wolters Kluwer.

On February 2, 1998, Reed signed an addendum to the

confidentiality agreement that it had executed with Times Mirror

and delivered that addendum to Times Mirror.

The addendum

expressed the desire of Reed and Times Mirror that Wolters Kluwer

and Reed would jointly investigate and prepare a bid for Bender

and/or Mosby.

February 5, 1998, Regular Meeting of Times Mirror’s

Board of Directors

A regular meeting of Times Mirror’s board of directors was

convened on February 5, 1998.

At this meeting, the board of

directors reviewed and discussed, among other topics, Times

Mirror’s strategic business plan for 1998 through 2000 and the

company’s financial structure.

These matters were also presented

to the board of directors in the form of a written report.

particular, the section entitled “Strategic Three-Year Plan”

contained the following statements:

Mosby Matthew Bender Process

Divestiture Process and Strategy

On November 17, 1997, the Board held a study session

that explored the changed strategic situation for

Matthew Bender legal publishing, including Shepard’s,

and Mosby health sciences publishing. * * *

- 12 Following the study session with the Board, we began

the divestiture process. Since that time, Mosby

Matthew Bender management and Times Mirror staff have

been actively working with Goldman Sachs to prepare

financial statements and the offering memorandum and to

identify potential buyers.

In this process, we have adopted the following

strategy:

•

Acquaint all interested parties with our desire

for a tax-efficient result and explore the

appropriate alternatives in detail in advance of

definitive bids with each party, because different

forms of transactions work with different bidders.

•

Since it could be the case that a leveraged spinoff would generate the same level of after-tax

cash proceeds as an asset sale, establish “strawman” values of a cash-for-assets sale and a

leveraged spin-off (much like our cable

transaction) to set a “floor” on the auction at a

high level.

Alternative Structures

The specific structure for the divestiture will depend

largely on the financial and operating profile of the

likely purchaser. With the assistance and advice of

Goldman Sachs, Ernst & Young, and Gibson, Dunn &

Crutcher, this process is being integrated with the

overall sale process to deliver the highest after-tax

value to Times Mirror and its shareholders. * * *

Planning Issues

Since we are early in the process, it is not clear what

the impact of this divestiture will be on Times

Mirror’s financial results. * * * The preferred taxefficient structures we will explore with potential

buyers would significantly lessen any potential

dilution. * * * [I]t is important to remember that

- 13 the model we developed for 10% or greater growth in

earnings per share did not anticipate continuing

contributions from Mosby Matthew Bender, and the

proceeds will give us a large body of resources to

invest to accelerate the Company’s growth.

CAPITALIZATION

Introduction

The new three year plan has five principal

capitalization policies:

Continue an active share repurchase plan,

buying shares when repurchase is the best

investment of our financial resources

Invest our cash flow and other capital

resources according to the following

priorities:

•

Internally in products and services

that build our established

operations

•

Attractive acquisitions that add to

or are complimentary [sic] to

existing businesses

•

Opportunistically in common stock

repurchase

•

Dividends

Our plan provides sufficient cash flow and other

resources to cover all of these applications. In

practice (and in the absence of a Mosby-Matthew Bender

transaction) for the plan period, the application of

these policies is expected to result in the following

actions:

•

Repurchases of * * * 4 million in 1998 and 3

million in each of 1999 and 2000 for an aggregate

of $570 million

- 14 •

We expect to borrow approximately $250 million to

use with our free cash flow to finance internal

development, acquisitions, and share repurchase

•

Our common dividend will increase by 20% and then

approximately 10% per year

•

We will maintain a reserve of borrowing capacity

and cash flow generation sufficient to fund our

internal investment and acquisition programs

If the form of the Mosby-Bender transaction is a cash

sale, we would undoubtedly increase the amount of the

share repurchase target and not borrow additional funds

during the plan period.

Our plan going forward, unless the Mosby-Bender

transaction produces an unanticipated result, is to

continue our repurchase activity in the same manner [as

pursued from 1995 through 1997]. * * *

Following the Mosby-Bender transaction we will, once

again, look at our repurchase volume target in light of

what could be significantly enhanced resources for

investment, and weigh the same factors to guide our

program. * * *

March 5, 1998, Regular Meeting of Times Mirror’s Board

of Directors

A regular meeting of Times Mirror’s board of directors was

convened on March 5, 1998.

At this meeting, Thomas Unterman

(Unterman), executive vice president and chief financial officer

of Times Mirror, with the assistance of several GS

representatives, reported on the status of the strategic review

regarding Bender.

These matters were also presented to the board

of directors in a written report.

In particular, the section

- 15 entitled “Structural Alternatives” contained the following

statements:

Structuring Goals

Maximize after-tax value to Times Mirror and

its shareholders

Integrate structural considerations into sale

process

Achieve desired accounting results at time of

sale (and possibly on an ongoing basis)

Reed and Wolters Kluwer Call Off Merger

On March 9, 1998, Reed and Wolters Kluwer called off their

previously announced merger.

On March 18, 1998, Wolters Kluwer

faxed to GS an executed confidentiality agreement regarding

Bender.

Melone, Sigler, and Walker Gain Access to the “Domestic

Sandwich” Structure

On March 24, 1998, three members of E&Y, Martin R. Melone

(Melone), Mary Ann Sigler (Sigler), and Kenneth M. Walker

(Walker), entered into an agreement entitled “Nondisclosure and

Confidentiality Agreement” with Price Waterhouse LLP (PW).

the time that they entered into the Nondisclosure and

Confidentiality Agreement with PW, Melone was the “Partner-inCharge” of E&Y’s audit of Times Mirror, Sigler was a tax partner

at E&Y, and Walker was an engagement partner at E&Y.

The

Nondisclosure and Confidentiality Agreement pertained to the

following:

- 16 PW has in the course of its business developed a

technique for restructuring a corporate group (known

within PW as the “Domestic Sandwich”) that is

confidential to PW and has substantial pecuniary value

to PW (the “Proprietary Technique”), which is the

subject of this agreement.

PW desires to provide to Individuals [Sigler, Melone,

and Walker], and Individuals desire to obtain from PW,

a full and complete description of the Proprietary

Technique to enable Individuals to review the

Proprietary Technique and determine whether it [sic]

wishes to use the Proprietary Technique.

As a result of entering into the Nondisclosure and

Confidentiality Agreement with PW, Melone, Sigler, and Walker

gained access to PW’s “Domestic Sandwich” structure.

Reed and Wolters Kluwer Submit Preliminary Interest

Letters to Times Mirror

On April 7, 1998, Wolters Kluwer submitted a letter to Times

Mirror that indicated Wolters Kluwer’s preliminary interest in

acquiring Bender and Times Mirror’s 50-percent interest in

Shepard’s.

In its preliminary interest letter, Wolters Kluwer

made the following statement regarding the offer price and form

of consideration for this acquisition:

“Wolters Kluwer is

prepared to acquire all of the outstanding stock of the Company

[Bender and Times Mirror’s 50-percent interest in Shepard’s] for

cash consideration of U.S. $1.5 billion.”

Reed also submitted a letter to Times Mirror on April 7,

1998, that indicated Reed’s preliminary interest in acquiring

Bender, Mosby, and Times Mirror’s 50-percent interest in

Shepard’s.

In its preliminary interest letter, Reed made the

- 17 following statement regarding the offer price and form of

consideration for this acquisition:

Based on the information contained in the information

memorandum on Matthew Bender and Mosby dated March 1998

and the supplemental information delivered to us on

April 2, 1998, and in particular the actual and

forecast financial results for the Properties contained

in those documents, our preliminary evaluation of the

Properties permits us to indicate that we would be

prepared to pay at least $1.2 Billion, which amount is

assumed to be payable in cash on completion.

The individuals involved in coordinating the Bender

transaction for Times Mirror were referred to as the Project

Philadelphia Group.

As of April 7, 1998, the Project

Philadelphia Group included officers, directors, and employees

from the following entities:

Times Mirror, Mosby, Bender, GS,

GD&C, E&Y, and PW.

The Corporate Joint Venture Structure Is Tabbed as the

Structure of Choice for the Bender Transaction

On April 10, 1998, Daniel Shefter (Shefter), an associate at

GS, faxed a revised copy of a document entitled “Presentation

Regarding Corporate Joint Venture Structure” (Shefter CJV

presentation) to members of the Project Philadelphia Group.

The

“Corporate Joint Venture Structure” (CJV structure) depicted in

this document was the transaction structure ultimately chosen to

accomplish the Bender transaction.

After Times Mirror had become comfortable with the CJV

structure, it incorporated that structure into the draft

agreements reflecting the details of the Bender transaction.

- 18 Times Mirror also informed prospective bidders that any bids for

Bender that did not incorporate the use of the CJV structure

would be severely disadvantaged in comparison to those bids that

did.

April 14, 1998, Regular Meeting of Reed’s Board of

Directors

A regular meeting of Reed’s board of directors was convened

on April 14, 1998, at which Herman S. Bruggink (Bruggink), cochairman of Reed, discussed Reed’s potential acquisition of

Bender, Mosby, and Times Mirror’s 50-percent interest in

Shepard’s.

During this discussion, Bruggink noted that Times

Mirror was conducting a competitive bidding process for these

businesses and that Reed’s ability to respond on extremely short

notice and Reed’s willingness to bid aggressively would be

crucial to a successful outcome.

Upon completing this

discussion, Reed’s board of directors approved resolutions

regarding Reed’s acquisition of Bender, Mosby, and Times Mirror’s

50-percent interest in Shepard’s for an aggregate purchase price

not in excess of $2 billion.

Reed’s board of directors

authorized this $2 billion purchase price based upon, inter alia,

Reed’s solid cash position at that time.

Wolters Kluwer and Reed Attend Times Mirror’s

Presentations Regarding Bender

Between April 13 and 17, 1998, Times Mirror’s management

held discussions with and made separate presentations regarding

- 19 Bender to Wolters Kluwer and to Reed at Times Mirror’s offices in

New York City.

During these meetings, PW and GS made

presentations regarding the CJV structure to Wolters Kluwer and

to Reed.

No other structures for potential acquisition of Bender

were discussed during these meetings.

The CJV structure presented to Wolters Kluwer and to Reed

depicted Times Mirror as owning 100 percent of the stock of the

“target”, i.e., Bender, and described the following five steps by

which the acquiror would acquire the target (with dollar amounts

for illustrative purposes only):

1. Acquiror capitalizes Newco at $1,000 with

voting and nonvoting common stock and preferred stock.

The voting common stock has a value of $950 and 20% of

the vote and represents approximately 98% of the total

common equity of Newco. The nonvoting common stock has

a value of $20, is non-voting and represents

approximately 2% of the total common equity of Newco.

The Preferred stock has a value of $30 and 80% of the

vote. Combined, the Newco preferred and non-voting

common will have a value equal to 5% of the total

equity value of Newco.

2. Acquiror contributes Newco preferred and NonVoting Common stock to MB Parent in exchange for MB

Parent preferred.

3. Newco buys MB parent common with 20% of the

vote for $1,000.

4. Target merges with Newco with Target

surviving. (Alternatively, Newco could be surviving

- 20 company.) In exchange for its Target Stock, Times

Mirror will receive 100% of MB Parent common stock.

5. [MB] Parent contributes $1,000 to LLC in

exchange for non-voting LLC interest.

Times Mirror is sole manager of LLC but is not a

member of the LLC.

An April 22, 1998, memorandum from Charles P. Fontaine

(Fontaine), director of taxes for Reed, to Ian Malcolm (“Mac”)

Highet, executive vice president of corporate development for

Reed, posed the following questions regarding the dividend

requirements of the CJV structure:

Are current dividends required to be paid on the MB

preferred stock or the MB Parent preferred stock?

Can dividends not be paid until the MB preferred stock

is redeemed?

Is a dividend rate of 5% acceptable?

Shefter, for GS, and Hatef Behnia (Behnia), a partner at GD&C,

responded to these questions in the following manner:

Current dividends are required to be paid on both

classes of preferred stock.

Dividends cannot be deferred until the preferred stocks

are redeemed.

A dividend rate in the range of 5.0 to 5.5% is

acceptable (5% is likely to be used). The dividend

rate will be some rate below Treasuries * * *

Fontaine posed the following questions regarding the restrictions

on transfers:

- 21 Can the Target [Bender] after the merger contribute its

assets to a partnership joint venture with another Reed

Elsevier company?

After two (2) years, can Reed Elsevier dispose of the

stock of Target by transferring the entire merger

structure to a third party?

After five (5) years, can Reed Elsevier unwind the

merger structure and dispose of the Target in any

manner?

Can Reed Elsevier dispose of certain assets and lines

of business within two (2) years without Seller’s

consent?

Shefter and Behnia responded to these questions in the following

manner:

The Target cannot contribute its assets to a

partnership following the merger.

As described in the revised documents, after two years

Reed could dispose of the company by transferring the

entire structure.

Note, however, that Reed must represent that at

the time of the acquisition it has no plan or

intent to dispose of the acquired company or its

assets and will covenant that it will not dispose

of the acquired company or its assets within two

years

After five years Reed cannot “unwind” the structure.

It will, however have the ability to sell all the stock

of Target, provided however, that the sale cannot be to

an affiliate of Reed.

Reed cannot dispose of assets or certain lines of

businesses within two years.

Fontaine posed the following questions regarding the terms of the

LLC agreement:

Will the agreement contain some restrictions on the use

of the cash?

- 22 Will LLC be obligated to distribute cash to MB Parent

in order to permit MB Parent to pay its tax and any

other liabilities?

Shefter and Behnia responded to these questions in the following

manner:

The LLC agreement will not contain any restrictions on

the use of the cash.

The LLC will be obligated to make cash distributions to

MB Parent in order to permit MB Parent to pay tax

liabilities, dividends on the MB Parent preferred stock

and other general expenses of MB Parent.

Wolters Kluwer and Reed Submit Offers to Times Mirror

By letter dated April 22, 1998, Wolters Kluwer submitted to

Times Mirror an offer to acquire Bender and Times Mirror’s

50-percent interest in Shepard’s for a total of $1.4 billion.

its offer letter, Wolters Kluwer made the following statement

regarding the offer price and form of consideration for this

acquisition:

Wolters Kluwer is prepared to acquire 100% of Matthew

Bender and TMC’s [Times Mirror’s] 50% interest in

Shepard’s for aggregate consideration of

US$ 1.400 billion, which we would propose to allocate

US$ 1.150 billion for Matthew Bender and

US$ 250 million for Shepard’s * * *.

Wolters Kluwer also stated that it was prepared to acquire Bender

substantially in the form of the CJV structure.

Wolters Kluwer’s

offer was conditioned on Times Mirror’s negotiating exclusively

with Wolters Kluwer.

After Times Mirror received Wolters Kluwer’s offer but

before Times Mirror entered into an exclusive negotiation period

- 23 with Wolters Kluwer, Times Mirror informed Reed that it had

received a significant offer from another bidder that had

accepted the use of the CJV structure for the Bender transaction.

Times Mirror also informed Reed that Reed would have to respond

promptly if it wished to remain in the running for Bender and

Times Mirror’s 50-percent interest in Shepard’s.

By letter dated April 23, 1998, Reed submitted to Times

Mirror an offer to acquire Bender and Times Mirror’s 50-percent

interest in Shepard’s “for a cash consideration of $1.65 billion

and on the terms and conditions reflected in the mark-up of the

Agreement and Plan of Merger.”

In its offer letter, Reed

accepted the use of the CJV structure for its purchase of Bender.

Reed’s offer was conditioned on Times Mirror’s acceptance of the

offer by Friday, April 24, 1998, at 5 p.m. “(Los Angeles time)”.

Times Mirror Responds to Wolters Kluwer’s Offer

On April 23, 1998, Unterman sent a letter to Wolters Kluwer

in response to Wolters Kluwer’s offer to acquire Bender and Times

Mirror’s 50-percent interest in Shepard’s.

Unterman included the

following statements in this letter:

there is one aspect of the proposal which is

structurally defective, and precludes us from complying

with the conditions set forth in your letter. The

insertion in your mark-up of a guaranty by MB Parent of

Matthew Bender’s post-Merger indebtedness to you

materially changes the economic and risk profile of the

transaction in that it creates a significant contingent

liability for MB Parent, the repository of our sales

proceeds. While we assume that you did not intend this

provision as a mechanism to place our sales proceeds at

- 24 risk, when questioned on the point, your counsel did

not withdraw it and your counsel did indicate that it

did represent an addition to our proposed structure

designed to create leverage for you in other

circumstances.

In addition, Unterman made the following statements in an

attachment to this letter:

Guaranty. The mark-up proposes that MB Parent

guaranty the secured debt of MergerSub to

Acquiror. This proposal would result in the

assets of the LLC being placed at risk and is

unacceptable.

April 24, 1998, Special Meeting of Times Mirror’s

Board of Directors

A special meeting of Times Mirror’s board of directors was

convened on April 24, 1998.

A document entitled “Mosby Matthew

Bender Update” was prepared for this meeting (April Bender

update).

The April Bender update listed the following as one of

Times Mirror’s major accomplishments since the March 5, 1998,

meeting of Times Mirror’s board of directors:

As part of our effort to minimize the tax liability on

the divestiture, we continued to look for tax-efficient

structures. A potential approach that is superior to

the structures reviewed at last month’s Board meeting

was brought to us by Price Waterhouse through Goldman

Sachs. This approach is proprietary to Price

Waterhouse and is subject to a confidentiality

agreement. * * *

The April Bender update also included a section entitled “New Tax

Minimization Approach” that contained the following:

The Price Waterhouse structure separates ownership and

control so that the acquiring company controls Matthew

Bender and Times Mirror controls an amount of cash

- 25 equivalent to Matthew Bender’s value, but without

having paid a tax for the shift in control.

The steps in this structure * * * involve the creation

of a special purpose corporation (referred to as

MB Parent * * *) that is owned partly by Times Mirror

and partly by the acquiring company. This special

purpose corporation is controlled by the acquiring

company through its ownership of relatively low value,

nonparticipating preferred stock with 80% voting

control. MB Parent in turn owns preferred stock and

nonvoting common stock in an acquisition subsidiary

that will merge with Matthew Bender and a nonvoting

interest in a single member limited liability company

that holds the cash referred to above. As a result of

the merger of Matthew Bender into the acquisition

subsidiary, Times Mirror will own all of the common

stock and remaining 20% voting power of MB Parent, the

special purpose corporation. However, even though

Times Mirror will not have voting control over

MB Parent, it will control the limited liability

corporation holding all of the cash by virtue of being

the sole (nonequity) manager of the LLC.

The results are as follows:

•

Times Mirror will control the LLC, thereby

controlling the cash in it and any assets or

businesses acquired with such cash.

•

Times Mirror and the LLC will be consolidated for

financial reporting purposes.

•

The acquiring company will control Matthew Bender

and will be able to consolidate for financial

reporting purposes.

•

The merger of Matthew Bender into the acquisition

subsidiary in exchange for MB Parent common stock

will qualify as a tax-free reorganization for tax

purposes (even though such common stock does not

carry with it voting control).

•

MB Parent, the LLC and Matthew Bender will not be

consolidated for tax purposes with either Times

Mirror or the acquiring company.

- 26 •

At some later date and upon mutual agreement, the

Matthew Bender and MB Parent preferred stock can

be redeemed at face value and the nonvoting common

can be redeemed at a formula price, which would

leave the acquiring company as the sole owner of

Matthew Bender and Times Mirror as the sole, and

controlling owner of MB Parent, with the ability

to liquidate MB Parent and the LLC without a tax

cost.

During the special meeting of the board of directors,

Willes, Unterman, and Behnia made presentations concerning the

proposed transaction and the competing bids received from Wolters

Kluwer and Reed.

At the conclusion of this discussion, the board approved

resolutions related to the Bender transaction.

As part of these

resolutions, the board accepted Reed’s offer for Bender and Times

Mirror’s 50-percent interest in Shepard’s.

Organization of CBM Acquisition Parent Co. and

CBM MergerSub Corp.

On April 24, 1998, two of Reed’s wholly owned subsidiaries,

Reed Elsevier Overseas BV (REBV), a Dutch private limited

liability company, and Reed Elsevier U.S. Holdings, Inc. (REUS),

a Delaware corporation, organized CBM Acquisition Parent Co.

(MB Parent) by filing a certificate of incorporation with the

secretary of state of the State of Delaware.

included the following provisions:

MB Parent’s bylaws

- 27 ARTICLE 2

MEETINGS OF STOCKHOLDERS

SECTION 2.05. Quorum. Unless otherwise provided

under the certificate of incorporation or these bylaws

and subject to Delaware Law, the presence, in person or

by proxy, of the holders of a majority of the

outstanding capital stock of the Corporation entitled

to vote at a meeting of stockholders shall constitute a

quorum for the transaction of business.

SECTION 2.06. Voting. (a) Unless otherwise

provided in the certificate of incorporation and

subject to Delaware Law, each stockholder shall be

entitled to one vote for each outstanding share of

capital stock of the Corporation held by such

stockholder. Unless otherwise provided in Delaware

Law, the certificate of incorporation or these bylaws,

the affirmative vote of a majority of the shares of

capital stock of the Corporation present, in person or

by proxy, at a meeting of stockholders and entitled to

vote on the subject matter shall be the act of the

stockholders.

SECTION 2.07. Action by Consent. (a) Unless

otherwise provided in the certificate of incorporation,

any action required to be taken at any annual or

special meeting of stockholders, or any action which

may be taken at any annual or special meeting of

stockholders, may be taken without a meeting, without

prior notice and without a vote, if a consent or

consents in writing, setting forth the action so taken,

shall be signed by the holders of outstanding capital

stock having not less than the minimum number of votes

that would be necessary to authorize or take such

action at a meeting at which all shares entitled to

vote thereon were present and voted and shall be

delivered to the Corporation by delivery to its

registered office in Delaware, its principal place of

business, or an officer or agent of the Corporation

having custody of the book in which proceedings of

meetings of stockholders are recorded. * * * Prompt

notice of the taking of the corporate action without a

- 28 meeting by less than unanimous written consent shall be

given to those stockholders who have not consented in

writing.

ARTICLE 3

DIRECTORS

SECTION 3.03. Quorum and Manner of Acting.

Unless the certificate of incorporation or these bylaws

require a different number, a majority of the total

number of directors shall constitute a quorum for the

transaction of business, and the affirmative vote of a

majority of the directors present at [a] meeting at

which a quorum is present shall be the act of the Board

of Directors. * * *

As of the time of trial of this case, MB Parent’s bylaws had

never been amended.

On April 27, 1998, REBV and REUS organized CBM MergerSub

Corp. (MergerSub) by filing a certificate of incorporation with

the secretary of state of the State of New York.

Adoption of the Merger Agreement

On April 26, 1998, a document entitled “Agreement and Plan

of Merger”, prepared by GD&C, was presented to representatives of

Times Mirror, TMD, Bender, REUS, REBV, MB Parent, and CBM

Acquisition Corp.

The Agreement and Plan of Merger set forth the

terms and details of the Bender transaction.

On that same date,

the boards of directors of TMD, Bender, REUS, REBV, and MB Parent

adopted resolutions that approved each of those corporation’s

engaging in the Bender transaction.

- 29 On April 27, 1998, representatives of Times Mirror, TMD,

Bender, REUS, REBV, MB Parent, and MergerSub executed an

agreement entitled “Amended and Restated Agreement and Plan of

Merger” (the Bender agreement).

Through the Bender agreement,

MergerSub replaced CBM Acquisition Corp. as a party to the Bender

transaction.

The Bender agreement superseded the Agreement and

Plan of Merger in its entirety.

The recitals to the Bender agreement stated, in pertinent

part, the following:

WHEREAS, the TM Parties [Times Mirror, TMD, and

Bender, collectively], Acquiror [REUS and REBV,

collectively], MB Parent, and CBM Acquisition Corp.

have entered into an Agreement and Plan of Merger dated

as of April 26, 1998 (the “Existing Merger Agreement”);

WHEREAS, the TM Parties and the Reed Parties

[REUS, REBV, MB Parent, and MergerSub, collectively]

desire to amend and restate the Existing Merger

Agreement on the terms and subject to the conditions

set forth in this Agreement;

WHEREAS, in anticipation of the Merger (as defined

in Section 1.1), MB Parent will file a Restated

Certificate of Incorporation of MB Parent * * * with

the Secretary of State of the State of Delaware;

WHEREAS, in anticipation of the Merger, MergerSub

will file a Restated Certificate of Incorporation of

MergerSub * * * with the Secretary of State of the

State of New York;

WHEREAS, immediately prior to the Effective Time

(as defined below), in consideration of an amount in

cash equal to $1,375,000,000 less the net proceeds

received by MergerSub from the MergerSub Debt (as

defined below) from REUS and REBV, MergerSub will issue

to REUS (i) seven hundred and ninety-two (792) shares

of Common Stock, par value $.01 per share, of MergerSub

(“MergerSub Common Stock”), which MergerSub Common

- 30 Stock will have 16% of the voting power of all of the

outstanding shares of capital stock entitled to vote in

an election of directors (“Voting Power”) and such

other designations, preferences, voting powers, rights

and qualifications as are set forth in the MergerSub

Certificate of Incorporation, (ii) 75% of the

authorized shares of Nonvoting Participating Preferred

Stock, par value $.01 per share, of MergerSub

(“MergerSub Participating Preferred Stock”), and

(iii) 75% of the authorized shares of Voting Preferred

Stock, par value $.01 per share, of MergerSub

(“MergerSub Preferred Stock”), which MergerSub

Preferred Stock will have 60% of the Voting Power and

such other designations, preferences, voting powers,

rights and qualifications as are set forth in the

MergerSub Certificate of Incorporation and MergerSub

will issue to REBV (i) one hundred and ninety-eight

(198) shares of MergerSub Common Stock, which MergerSub

Common Stock will have 4% of the Voting Power and such

other designations, preferences, voting powers, rights

and qualifications as are set forth in the MergerSub

Certificate of Incorporation, (ii) 25% of the

authorized shares of MergerSub Participating Preferred

Stock, which MergerSub Participating Preferred Stock

will have no Voting Power and such other designations,

preferences, voting powers, rights and qualifications

as are set forth in the MergerSub Certificate of

Incorporation and (iii) 25% of the authorized shares of

MergerSub Preferred Stock, which MergerSub Preferred

Stock will have 20% of the Voting Power and such other

designations, preferences, voting powers, rights and

qualifications as are set forth in the MergerSub

Certificate of Incorporation;

WHEREAS, immediately prior to the Effective Time

(as defined in Section 1.3), MergerSub will borrow

$600,000,000 on terms not inconsistent with the terms

set forth in Section 7.8 (“MergerSub Debt”) from an

affiliate of Acquiror;

WHEREAS, immediately prior to the Effective Time,

in consideration for 75% of the authorized and

outstanding shares of MergerSub Participating Preferred

Stock held by REUS, MB Parent will issue to REUS 75% of

the authorized shares of Voting Preferred Stock, par

value $.01 per share, of MB Parent (“MB Parent

Preferred Stock”), which MB Parent Preferred Stock will

have 60% of the Voting Power and such other

- 31 designations, preferences, voting powers, rights and

qualifications as are set forth in the MB Parent

Certificate of Incorporation;

WHEREAS, immediately prior to the Effective Time,

in consideration for 25% of the authorized and

outstanding shares of MergerSub Preferred Stock and 25%

of the authorized and outstanding shares of MergerSub

Participating Preferred Stock held by REBV, MB Parent

will issue to REBV 25% of the MB Parent Preferred

Stock, which MB Parent Preferred Stock will have 20% of

the Voting Power and such other designations,

preferences, voting powers, rights and qualifications

as are set forth in the MB Parent Certificate of

Incorporation;

WHEREAS, immediately prior to the Effective Time,

in consideration for $1,375,000,000, MB Parent will

issue to MergerSub 100% of the authorized shares of

Common Stock, par value $.01 per share, of MB Parent

(“MB Parent Common Stock”), which MB Parent Common

Stock will have 20% of the Voting Power and such other

designations, preferences, voting powers, rights and

qualifications as are set forth in the MB Parent

Certificate of Incorporation;

WHEREAS, in anticipation of the Merger, MB Parent

will cause Liberty Bell I, LLC, a single-member

Delaware limited liability company (“LLC”) to be formed

under the laws of the State of Delaware prior to the

Effective Time by filing with the Secretary of State of

the State of Delaware the Certificate of Formation of

LLC * * *;

WHEREAS, in anticipation of the Merger, MB Parent,

an affiliate of MB Parent and Times Mirror will enter

into a Limited Liability Company Agreement of LLC

pursuant to which the affiliate of MB Parent shall be

appointed the initial manager of LLC and, immediately

after the Effective Time, Times Mirror shall be

appointed the manager of LLC * * *;

WHEREAS, immediately after the Effective Time, in

accordance with the terms of the LLC Agreement,

MB Parent will make a contribution to LLC in the amount

of $1,375,000,000;

- 32 In the Bender agreement, Reed and Times Mirror agreed, in

pertinent part, to the following:

SECTION 1.1. The Merger. At the Effective Time

(as defined in Section 1.3) and upon the terms and

subject to the conditions of this Agreement and in

accordance with the New York Business Corporation Law

* * *, MergerSub shall be merged with and into * * *

[Bender] (the “Merger”). Following the Merger, * * *

[Bender] shall continue as the surviving corporation

(the “Surviving Corporation”) and the separate

corporate existence of MergerSub shall cease. The

Merger is intended to qualify as a tax-free

reorganization under Section 368 of the Code.

SECTION 1.8.

Conversion of Shares.

(a) Merger Consideration. At the Effective

Time, each share of common stock, par value $100.00 per

share, of * * * [Bender] (individually a “Share” and

collectively the “Shares”) issued and outstanding

immediately prior to the Effective Time (other than

Shares held in * * * [Bender’s] treasury or by any of

* * * [Bender’s] Subsidiaries), all of which are owned

by TMD, shall, by virtue of the Merger and without any

action on the part of MergerSub, * * * [Bender] or the

holder thereof, be converted into and shall become the

right to receive a number of the fully paid and

nonassessable shares of MB Parent Common Stock held by

MergerSub immediately prior to the Effective Time equal

to a fraction, the numerator of which is the number of

shares of MB Parent Common Stock held by MergerSub

immediately prior to the Effective Time and the

denominator of which is the number of Shares

outstanding immediately prior to the Effective Time

(the “Merger Consideration”).

SECTION 1.10.

Exchange of Certificates.

MB Parent Common Stock issued upon the surrender of

- 33 certificates representing Shares in accordance with the

terms hereof shall be deemed, to the fullest extent

permitted by applicable law, to have been issued in

full satisfaction of all rights pertaining to such

Shares * * *

SECTION 2.4. Conditions to TM Parties’

Obligations. The obligations of the TM Parties to

consummate the Merger are subject to the satisfaction

(or waiver by each of the TM Parties) as of the

Effective Time of the following conditions:

(f) Legal Opinions.

(ii) Times Mirror shall have received a

favorable opinion of its legal counsel, in form and

substance reasonably satisfactory to it, as to the

qualification of the Merger as a reorganization under

the provisions of Section 368 of the Code.

SECTION 2.5. Substitution Transaction. In the

event that the condition to the obligations of Times

Mirror, TMD and * * * [Bender] to consummate the

Closing contained in Section 2.4(f)(ii) is not

satisfied or waived by October 31, 1998 or such earlier

date on which all other conditions in Sections 2.1, 2.2

and 2.4 have been satisfied or waived (the “Revision

Date”) then * * * (iii) for a period of 45 days from

the Revision Date (the “Renegotiation Period”),

Acquiror and Times Mirror shall enter into bona-fide

negotiations with a view to determining whether

agreement can be reached as to the terms and conditions

upon which the transactions contemplated by this

Agreement may be structured so as to replicate as much

as practicable the relative economic benefits that each

party and their Affiliates would have derived from the

transactions contemplated by the Agreement (any such

restructured transaction hereafter referred to as the

“Substitution Transaction”), (iv) unless the parties

agree to the terms and conditions of a Substitution

Transaction during the Renegotiation Period, as soon as

practicable following the expiration of such period,

- 34 Times Mirror shall sell to REUS and REUS shall purchase

from Times Mirror, all the outstanding shares of * * *

[Bender] for a cash purchase price of $1,375,000,000

* * *

SECTION 7.7. Enforceability of LLC Agreement.

The Reed Parties will not commence, maintain, or join

any action (at law or otherwise) that asserts that the

LLC Agreement is unenforceable.

On April 28, 1998, the board of directors of MergerSub

adopted resolutions that approved MergerSub’s engaging in the

Bender transaction.

GS Prepares “Fairness Package” for Bender Transaction

On or about April 27, 1998, GS prepared a document entitled

“Fairness Package” with respect to the Bender transaction and

Times Mirror’s sale of its 50-percent interest in Shepard’s.

The

Fairness Package included a page entitled “Summary of Proposed

Transaction” that described the structure and consideration for

the Bender transaction and Times Mirror’s sale of its 50-percent

interest in Shepard’s in the following manner:

Purchase of 100% of the stock of * * * [Bender]

and Times Mirror’s 50% partnership interest in

* * * [Shepard’s] for $1.65 billion in cash

Purchase of * * * [Bender] for

$1.4 billion using the PW tax-advantaged

structure (“PW Structure”)

Purchase of * * * [Shepard’s] for

$250 million with a section 338(h)(10)

election

- 35 The Fairness Package also included a page entitled “Summary of

Financial Impact” that listed Times Mirror’s “After-tax Cash

Proceeds from Sale” using the CJV structure as $1,641,500,000.

GS determined this $1,641,500,000 amount by assuming (1) a

$1.4 billion “tax-free” purchase of Bender and (2) that the sale

of Times Mirror’s 50-percent interest in Shepard’s would generate

$241.5 million in after-tax proceeds.

Melone Drafts Memorandum Regarding the Bender

Transaction for E&Y’s Files

On or about April 29, 1998, Melone drafted a memorandum

entitled “Times Mirror Matthew Bender Sale” for E&Y’s files.

Melone included the following statements regarding the Bender

transaction and Times Mirror’s sale of its 50-percent interest in

Shepard’s in this memorandum:

Times Mirror has entered into an agreement with Reed

Elsevier for the sale of Matthew Bender for

$1,375,000,000 and the sale of Times Mirror’s interest

in Shepard’s Inc. for $225,000,000. The sale of

Matthew Bender is structured as a reorganization in

which the $1,375 million proceeds from the sale will

end up in an LLC whose ownership is as shown in the

attached chart. Through the various shareholder

agreements, certificates of incorporation and the LLC

management agreement, Times Mirror has total control

over the assets and operations of the LLC and Reed

Elsevier has total control over the assets and

operations of Matthew Bender. The structure is

designed to result in no tax due by Times Mirror on the

profit from the sale of Matthew Bender.

- 36 Consolidation

* * * Times Mirror controls the assets of the LLC

through the management agreement, which specifically

states that Times Mirror has no fiduciary duty to the

holder of Acquisition Parent [MB Parent] and may use

its discretion as to the use of the assets. Times

Mirror may have the LLC buy its own debt instruments or

Times Mirror stock, make business acquisitions or any

other transaction to the benefit of Times Mirror. The

only limitation is that Times Mirror may not upstream

LLC assets to itself.

Times Mirror owns all of the common stock of

Acquisition Parent and the 20% vote it carries. The

ownership of the common stock provides Times Mirror

with 100% of the residual ownership and value of

Acquisition Parent following redemption of the

preferred stock, which is virtually assured in at least

20 years due to the redemption rights and certain put

and call options. The equity value of the preferred

stock is limited to its stated (redemption) value and

fixed dividend payments.

Times Mirror has the ability to ensure that the Board

of Directors of Acquisition Parent may not do anything

that may affect the control or viability of the LLC.

Certain board actions require the unanimous vote of the

Board. These include:

•

the incurrence of indebtedness or guarantees of

indebtedness of Acquisition Parent

•

the sale, transfer or other disposition, pledge or

assignment of any portion or all of its LLC

interest

•

the issuance of any other securities of

Acquisition Parent

All of these factors indicate that Times Mirror not

only controls the assets of the LLC, but also is the

beneficiary of all of the ownership risks and rewards

of the LLC. * * *

- 37 S.

May 7, 1998, Regular Meeting of Times Mirror’s Board

of Directors

A regular meeting of Times Mirror’s board of directors was

convened on May 7, 1998.

A document entitled “Mosby Matthew

Bender Divestiture Update” was presented to Times Mirror’s board

of directors at this meeting (May Bender update).

The May Bender

update included the following statements:

Following the special Board meeting on Friday,

April 24, we began exclusive negotiations with Reed

Elsevier for the divestiture of Matthew Bender and our

50% interest in Shepard’s. Negotiations started Friday

afternoon and continued for most of the day Saturday.

Contracts and press releases were finalized Saturday

night and signed on Sunday, after all corrections to

the contracts had been made. The transaction was in

line with the parameters reviewed with the Board, with

a total value of $1.65 billion. Matthew Bender will be

divested through a merger that takes advantage of the

proprietary tax structure that was presented to the

Board. Pending the customary regulatory review, the

transaction is expected to be completed this summer.

May 7, 1998, Annual Meeting of Times Mirror’s

Shareholders

Times Mirror’s annual shareholder meeting was convened on

May 7, 1998.

At this meeting, Willes discussed, among other

topics, Times Mirror’s “decision to sell * * * [Mosby and Matthew

Bender] for strategic reasons.”

Willes made the following

remarks with respect to this topic:

“You have read in recent

days that we have reached agreements to sell Matthew Bender, and

our 50% interest in Shepard’s for $1.65 billion.

agreed to sell Mosby for $415 million.

We have also

This is a phenomenal

amount of money for some phenomenal businesses.”

- 38 U.

Organization of Liberty Bell I

On May 22, 1998, Michael S. Udovic (Udovic), assistant

general counsel for Times Mirror, filed the Certificate of

Formation for Liberty Bell I, LLC (LBI), with the secretary of

state of the State of Delaware.

On May 26, 1998, Udovic resigned

from his position as the authorized person of LBI.

LBI did not

have an authorized person between the time of Udovic’s

resignation and July 28, 1998.

July 9, 1998, Regular Meeting of Times Mirror’s Board

of Directors

A regular meeting of Times Mirror’s board of directors was

convened on July 9, 1998, at which the board of directors

discussed, among other topics, the pending Bender transaction.

According to the minutes of this meeting, Unterman discussed the

following matters with the board of directors:

Thomas Unterman * * * reviewed the pending transactions

involving Mosby and Matthew Bender and their impact

upon the Company’s financial projections, concluding

that Times Mirror remained on target to meet each of

its major financial objectives for the year. He noted

that the proceeds from the dispositions of these

businesses will be received by two limited liability

companies and, utilizing materials previously furnished

to the Board of Directors, discussed the short-term

investment strategies Times Mirror will follow in

connection with its management of those companies.

These matters were also presented to the board of directors in a

written report.

In particular, the section entitled “Finance

Report” contained the following statements:

- 39 FINANCE REPORT

INTRODUCTION

Our financial objectives for this year included:

earnings growth of 20%,

continued use of every available opportunity

to finance investment in the growth of our

businesses * * *,

optimization of the proceeds from the Mosby

Matthew Bender disposition so that future

year dilution is minimized, and

continuation of return on capital in excess

of 12%.

At mid-year we can report that we are still on this

course and all of our corporate objectives for the year

are both in sight and within reach. While there are

more “moving pieces” than usual, there are four major

items to note:

•

First, as expected, following the Mosby Matthew

Bender (MMB) agreements, we are required to treat

MMB as discontinued operations and the “street”

has recalibrated our performance to a continuing

earnings basis and will track us this way from now

on.

•

Third, in light of the very large MMB gain on

sale, we have begun to review our entire balance

sheet, our work processes, and all of our systems

to determine if appropriate charges, write-offs,

or buy-down/buy-outs of contracts might prove

beneficial. * * *

•

Fourth, as is discussed under a separate tab

entitled Capitalization/Investment, following the

MMB sale, we will have a very substantial level of

resources for redeployment over time in operating

assets and for recapitalization.

- 40 GAIN ON SALE AND DISCONTINUED EARNINGS REPORTING

* * * By divesting MMB, we are completely exiting the

legal and health sciences publishing business, and are

required to separately report MMB earnings as

discontinued operations. Similarly, the gain on sale

appears in the discontinued line.

* * * We will receive over $2.0 billion in cash from

the sale. * * *

BALANCE SHEET REVIEW

After the magnitude of the gain on the MMB sale became

apparent, we decided to use this opportunity to conduct

a thorough examination of our balance sheet, operations

and investments to see what actions we could take to

benefit the businesses in future years.

CAPITALIZATION AND

INVESTMENT STRATEGY

Introduction

The disposition of Mosby Matthew Bender (MMB) will

produce an unprecedented level of investible [sic]

capital for Times Mirror. Net proceeds of

approximately $2.0 billion will be deposited into our

accounts requiring immediate rigorous management.

The net proceeds of the MMB disposition, in conjunction

with our annual operating cash flow will provide the

company with enormous investment capacity over the next

few years. If we can successfully deploy this

investment capacity in assets that meet our return

criteria, our total 5 year investment capacity would be

as much as $5 billion. Investment at this level would

still enable us to retain our current solid credit

ratings and associated financial flexibility.

Our first responsibility upon receipt of the

disposition proceeds is to establish a short term

- 41 portfolio management framework. The primary objective

of this activity is to preserve principal value while

earning a return commensurate with the risk parameters

we establish through our investment policy.

Second, we will begin to redeploy these resources into

operating assets to drive revenue growth and into share

repurchases to start to return towards our target

capitalization. In the current high asset valuation

environment, in view of our well developed return

discipline, this program could require several years.

Most significantly, we are not looking at our resources

as a war chest for a big cash acquisition. Instead, we

are expecting increases of approximately 25%, a

doubling of our recent spending rate on acquisitions of

businesses that are closely related to or fill in gaps

in our core businesses, acceleration of our share

repurchase plans and, in general, an acceleration of

investments in our base businesses.

This stance leaves us with ample resources for pursuing

unexpected opportunities and will position us to try to

“make things happen” as important strategic initiatives

are identified. It also means that we will allocate a

portion of our surplus cash investment portfolio to

investments with medium term horizons in order to

increase the overall return on our cash. Examples of

this type of investing include the investment we made

in Target Media Partners in connection with the

Recycler purchase, and the Latin Communications Group

opportunity we discussed at the last meeting, as well

as increases in “new media” venture capital

investments. We will also allocate a portion of the

funds for tax-advantaged investments to enhance yield

and for “pre-funding” our charitable commitments with

contributions to our tax-exempt affiliates.

Short Term Portfolio Strategy

The following shows the gross amount of disposition

proceeds the company will be receiving:

- 42 ($ Millions)

Company Sold

Entity Receiving Funds

Amount (Gross)

Shepards

Bender

Mosby

Corporate

Liberty Bell I L.L.C.

Liberty Bell II L.L.C.

$275

1,375

415

Total:

$2,065

Immediately we will utilize the funds to pay necessary

transaction expenses, pay down short-term corporate

debt, and then invest the remaining funds under our

short-term investment policy * * *. This policy

ensures preservation of capital and maintenance of

liquidity through prudent standards for credit quality,

instrument type and overall portfolio limitations. At

the same time, it provides for sufficient flexibility

to allow us to search for yield advantages where

possible. The following table shows the net investible

[sic] funds that should be available to deploy in

short-term instruments:

($ Millions)

Funds Location

Corporate

Liberty Bell I

Liberty Bell II

Estimated Cash

Transaction Short-Term

Fees and

Debt

Expenses

Gross Funds

Reduction Net Funds

$275

1,375

415

-(64)

(22)

($275)

--Total:

1,311

393

$1,704

Execution of the LBI Limited Liability Company Agreement

(the management authority)

On July 28, 1998, representatives of Times Mirror, Lexis,

and MB Parent executed an agreement entitled “Limited Liability

Company Agreement of Liberty Bell I, LLC” (LBI LLC agreement).

The terms of the LBI LLC agreement included the following:

This Limited Liability Company Agreement

(together with the schedules attached hereto, this

- 43 “Agreement”) of LIBERTY BELL I, LLC (the “Company”), is

entered into by CBM ACQUISITION PARENT CO., a Delaware

corporation, as the sole member (the “Initial Member”),

LEXIS, INC., a Delaware corporation, as the initial

manager of the Company (the “Initial Manager”), and THE

TIMES MIRROR COMPANY, in its corporate capacity and as

the manager of the Company appointed pursuant to

Section 9(b) (“TMC”). * * *

The Initial Member, the Initial Manager and

TMC, by execution of this Agreement, hereby agree as

follows:

Name; Formation; Tax Treatment.

The name of the limited liability company

shall be LIBERTY BELL I, LLC or such other name as the

Manager may from time to time hereafter designate.

* * * The parties hereto intend that pursuant to

Treasury Regulations Sections 301.7701-3, the Company

be disregarded as an entity and not be treated as

separate from the Initial Member. * * *

Members; Member Rights; Meetings.

c. No Member shall have any right, power, or

duty, including the right to approve or vote on any

matter (including, without limitation, any vote,

approval or consent relating to the merger of the

Company with or into an “other business entity” (as

defined in the Act), the consolidation of the Company

with or into an other business entity, the

domestication of the Company to an other business

entity, the conversion of the Company to an other

business entity, the transfer of the Company to any

other jurisdiction or, to the fullest extent permitted

by law, the dissolution of the Company), except as

expressly required by this Agreement, the Act or other

applicable law.

- 44 7.

Purposes.

The purpose of the Company is to invest in

such property or securities and to conduct such

businesses and other legal activities as the Manager

determines is in the best interests of the Company.

Management.

a. The Manager shall have the sole right to

manage the business of the Company and shall have all

powers and rights necessary, appropriate or advisable

to effectuate and carry out the purposes and business

of the Company, and no Member or other person other

than the Manager shall have any authority to act for or

bind the Company or to vote on or approve any of the

actions to be taken by the Company (unless otherwise

expressly required by the Act or other applicable law).

Notwithstanding the foregoing, the Initial Manager

shall not take any action in respect of or on behalf of

the Company, other than the opening of one or more bank

accounts in the name of the Company, the appointment of

an agent for service of process for the Company and the

performance of other ministerial duties in connection

with the organization and formation of the Company.

Accordingly, as of the Effective Time of the Merger,

the Company shall have no liabilities or obligations

other than pursuant to this Agreement.

b. The Manager shall serve until an Event of

Withdrawal has occurred [the resignation or dissolution

of the Manager]. The removal of the Manager shall be

only at the request and direction of the Manager and

under no other circumstances, including, without

limitation, for cause. Upon any such Event of

Withdrawal, a new Manager shall be selected by the old

Manager prior to such resignation or dissolution,

provided that if the Manager does not make such

selection, Members holding a Majority in Interest shall

be entitled to select a new Manager. Notwithstanding

anything contained herein, immediately after the

Effective Time of the Merger and without any action on

the part of TMC, the Initial Manager or any Member, the

Initial Manager (or any other Manager, if applicable)

shall be automatically removed as Manager and TMC shall

become the Manager hereunder.

- 45 c. The Manager may appoint the Officers of

the Company, who need not be Members, to such terms and

to perform such functions as the Manager shall

determine in its sole discretion as set forth in

Section 10. The Manager may appoint, employ or

otherwise contract with such other persons or entities

for the transaction of the business of the Company or

the performance of services for or on behalf of the

Company as it shall determine in its sole discretion.

The Manager may delegate to any such Officer, person or

entity such authority to act on behalf of the Company

as the Manager may from time to time deem appropriate

in its sole discretion.

e. Without limiting the generality of the

foregoing, to the fullest extent permitted by law,

including Section 18-1101(c) of the Act, and without

creating any duties or obligations of the Manager by

implication or otherwise, it is expressly acknowledged

and agreed that to the extent the Manager owes any

fiduciary duties or similar obligations to the Initial

Member under any principles of law or equity or

otherwise, such duties and obligations shall be owed

solely to the holders of the Initial Member’s common

equity and not to the holders of any other class of the

Initial Member’s equity.

10.

Officers.

a. Officers. The Officers of the Company

shall be chosen by the Manager and shall consist of at

least a President, a Secretary and a Treasurer. * * *

The Manager may appoint such other Officers and agents

as it shall deem necessary or advisable who shall hold

their offices for such terms and shall exercise such

powers and perform such duties as shall be determined

from time to time by the Manager. The salaries of all

Officers and agents of the Company shall be fixed by or

in the manner prescribed by the Manager. * * * Any

Officer elected or appointed by the Manager may be

removed at any time, with or without cause, by the

Manager. Any vacancy occurring in any office of the

Company shall be filled by the Manager.

- 46 *

11.

Books and Records.

a. The Manager shall keep or cause to be

kept complete and accurate books of account and records

with respect to the Company’s business. The Company’s

books of account shall be kept using the method of

accounting determined by the Manager. The Company’s

independent auditor shall be an independent public

accounting firm selected by the Manager. The Manager

shall give each Member reasonable access during normal

business hours to the books and records of the Company.

12.

Capital Contributions.

The Initial Member was deemed admitted as the

sole Member of the Company upon the execution and

delivery of this Agreement. After the Effective Time

of the Merger and immediately after TMC shall have been

appointed Manager pursuant to Section 9(b), the Initial

Member will contribute the amount of cash to the

Company listed on Schedule B attached hereto [$1.375

billion].

15.

Distributions.

Distributions of cash or other assets of the

Company shall be made at such times and in such amounts

as the Manager may determine in its sole discretion;

provided, however, that notwithstanding the foregoing,

the Initial Member shall be entitled to receive, and

the Company and the Manager shall make, distributions

of cash (or other assets of the Company acceptable to

the Member) to the Initial Member in the amounts and at

the times sufficient to enable the Initial Member

(a) to pay all of its liabilities, obligations and

expenses as and when they come due and (b) to make any

payments on, or distributions in respect of, the issued

and outstanding shares of the Voting Preferred Stock of

the Initial Member in accordance with the terms

thereof. * * *

- 47 16.

Return of Capital.

The Manager shall not have any liability for

the return of each Member’s capital contribution, which

return shall be payable solely from the assets of the

Company at the absolute discretion of the Manager,

subject to the requirements of the Act and Section 15

hereof.

18.

Exculpation and Indemnification.

a. No Member, Manager, Officer, employee or

agent of the Company and no employee, representative,

agent, shareholder or Affiliate of the Member or the

Manager (collectively, the “Covered Persons”) shall be

liable to the Company or any other Person who has an

interest in or claim against the Company for any loss,

damage or claim incurred by reason of any act or

omission performed or omitted by such Covered Person in

good faith on behalf of the Company and in a manner

reasonably believed to be within the scope of the

authority conferred on such Covered Person by this

Agreement, except that a Covered Person shall be liable

for any such loss, damage or claim incurred by reason

of such Covered Person’s gross negligence or willful

misconduct. Notwithstanding anything herein to the

contrary, “Covered Person” shall include any person

that was a Member, Manager, Officer, employee or agent

of the Company or an employee, representative, agent,

shareholder or Affiliate of the Member or the Manager

at the time the act or omission described in this

Section 18(a) was performed or omitted even if such

person is no longer a Member, Manager, Officer,

employee or agent of the Company or an employee,

representative, agent, shareholder or Affiliate of a

Member or the Manager at the time the loss, damage or

claim is incurred as a result of such act or omission.

e. To the extent that, at law or in equity,

a Covered Person has duties (including fiduciary

duties) and liabilities relating thereto to the Company

or to any other Covered Person, a Covered Person acting

under this Agreement shall not be liable to the Company

or to any other Covered Person for its good faith

- 48 reliance on the provisions of this Agreement or any

approval or authorization granted by the Company or any

other Covered Person. The provisions of this

Agreement, to the extent that they restrict the duties

and liabilities of a Covered Person otherwise existing

at law or in equity, are agreed by the Member and the

Manager to replace such other duties and liabilities of

such Covered Person.

f. The foregoing provisions of this

Section 18 shall survive any termination of this

Agreement.

19.

Resignation.

No Member shall have the right to resign from

the Company except with the consent of the Manager and

upon such terms and conditions as may be specifically

agreed upon between the Manager and the resigning

Member.

21.

Dissolution.

Subject to the provisions of Section 22 of

this Agreement, the Company shall be dissolved and its

affairs wound up upon the first to occur of the

following:

a. The determination of the Manager to

dissolve the Company;

The occurrence of an Event of Withdrawal;

c. The occurrence of any event which

terminates the membership of the last remaining Member

of the Company unless the business of the Company is

continued in a manner permitted by the Act including,

without limitation, the appointment by the Manager of a

member of this Company within ninety (90) days after

the occurrence of such an event; or

d. The entry of a decree of judicial

dissolution under Section 18-802 of the Act.

- 49 23.

Assignments of Percentage Interest.

No Member may, directly or indirectly, sell,

assign, pledge or otherwise transfer or encumber any

portion of such Member’s Percentage Interest (a

“Transfer”) to any other person without the prior

written consent of the Manager, which may be given or

withheld in its sole discretion and which consent may

be subject to such terms and conditions as the Manager

may determine. Any purported Transfer in violation of

Section 23 shall be null and void and shall not be

recognized by the Company.

24.

Waiver of Partition; Nature of Interest.

Except as otherwise expressly provided in

this Agreement, to the fullest extent permitted by law,

each Member hereby irrevocably waives any right or

power that such Member might have to cause the Company

or any of its assets to be partitioned, to cause the

appointment of a receiver for all or any portion of the

assets of the Company, to compel any sale of all or any

portion of the assets of the Company pursuant to any

applicable law or to file a complaint or to institute

any proceeding at law or in equity to cause the

dissolution, liquidation, winding up or termination of

the Company. No Member shall have any interest in any

specific assets of the Company. The interest of each

Member in the Company is personal property.

29.

Amendments.

This Agreement may be amended by the Manager

at any time in its sole discretion, provided that

(a) any amendment to Section 9(d), Section 11, the

first sentence of Section 13, Section 14, the proviso

to the first sentence of Section 15, Section 17,

Section 18, Section 20, Section 24, this Section 29 or

Section 34 hereof shall not be effective without the

Initial Member’s prior written consent, which consent

shall not be unreasonably withheld and (b) any

amendment which materially and adversely affects the

rights of any Member shall not be effective without

such Member’s consent, such consent not to be

unreasonably withheld; provided further that, in

addition to any consent or approval otherwise required

- 50 under this Section 29 or applicable law, any amendment

which materially and adversely affects the rights of

all the Members in the same or similar manner shall

only be effective if such amendment has been approved

by Members holding a Majority in Interest, such

approval not to be unreasonably withheld; and provided

further that any amendment to Section 9 must be

approved by TMC in its sole discretion.

33.

Enforceability by TMC.

Notwithstanding any other provision of this

Agreement, the Member agrees that this Agreement

constitutes a legal, valid and binding agreement of the

Member, and is enforceable against the Member by TMC

(both in its corporate capacity, prior to the Effective

Time of the Merger, and in its capacity, as of

immediately after the Effective Time of the Merger, as

the Manager of the Company), in accordance with its

terms. In addition, TMC (both in its corporate

capacity, prior to the Effective Time of the Merger,

and in its capacity, as of immediately after the

Effective Time of the Merger, as the Manager of the

Company) is an intended beneficiary of this Agreement.

Execution of MB Parent Stockholders Agreement and the

MergerSub Shareholders Agreement

On July 28, 1998, representatives of Times Mirror, TMD,

REUS, REBV, and MB Parent executed an agreement entitled

“CBM Acquisition Parent Co. Stockholders Agreement” (MB Parent

stockholders agreement).

Under the terms of the MB Parent

stockholders agreement, Times Mirror, TMD, REUS, REBV, and MB

Parent agreed, in pertinent part, to the following:

Section 1. Call Option with Respect to Voting

Preferred Stock.

(a) Grant of Call Option. Acquirors [REUS and

REBV] hereby grant to TMD an option, exercisable by TMD

no earlier than fifteen (15) days after the occurrence

- 51 of any Call Event (as defined below), to purchase, in

the manner provided in Section 1(d), all, but not less

than all, of the outstanding shares of [MB Parent]

Voting Preferred Stock, at a purchase price per share

equal to 100% of the Stated Value thereof on the date

of purchase, payable in cash.

(b) Definition of Call Event. A “Call Event”

shall mean (i) June 30, 2018, (ii) any voluntary

transfer or other disposition by the Company

[MB Parent] of all or any portion of the shares of

MergerSub Participating Preferred Stock or (iii) any

voluntary transfer or other disposition by the Company

of all or any portion of the shares of MergerSub Voting

Preferred Stock.

Redemption. Notwithstanding the foregoing, the right

of TMD to exercise the option granted pursuant to

Section 1(a) shall be subject to the Company’s right to

redeem the Voting Preferred Stock pursuant to

Section 3(g)(i) of Article V of the Restated

Certificate of Incorporation of the Company upon the

occurrence of a Redemption Event (as defined therein)

and to the Company’s obligation to redeem the Voting

Preferred Stock of a holder of Voting Preferred Stock

at the option of such holder pursuant to

Section 3(g)(ii) of Article V of the Restated

Certificate of Incorporation of the Company upon the

occurrence of an event specified therein.

Section 2. Put Option with Respect to Voting

Preferred Stock.

(a) Grant of Put Option. TMD hereby grants to

each Acquiror an option, exercisable after (i) June 30,

2018 or (ii) upon the occurrence of any failure of

Liberty Bell I, LLC (or a successor thereof) or its

manager to make distributions contemplated by

Section 15 of the Limited Liability Company Agreement

of Liberty Bell I, LLC, dated as of July 28, 1998

* * *, to require TMD to purchase, in the manner

provided in Section 2(b), the shares of the [MB Parent]

Voting Preferred Stock held by each Acquiror, at a

purchase price per share equal to 100% of the Stated

Value thereof on the date of purchase, payable in cash.

- 52 Section 3.

Restrictions on Transfer.

(a) General. No holder of shares of [MB Parent]

Voting Preferred Stock shall, directly or indirectly,

transfer or otherwise dispose of any shares of

[MB Parent] Voting Preferred Stock owned by such holder

or any interest therein prior to June 30, 2000. * * *

Also on July 28, 1998, representatives of REUS, REBV,

MB Parent, and MergerSub executed an agreement entitled

“CBM MergerSub Corp. Shareholders Agreement” (MergerSub

shareholders agreement).

Under the terms of the MergerSub

shareholders agreement, REUS, REBV, MB Parent, and MergerSub

agreed, in pertinent part, to the following:

Section 1. Call Option with Respect to Voting

Preferred Stock.

(a) Grant of Call Option. MB Parent hereby grants

to Acquirors [REUS and REBV] an option, exercisable by

Acquirors on or after July 15, 2018, to purchase, in

the manner provided in Section 1(c), all, but not less

than all, of the outstanding shares of [MergerSub]

Voting Preferred Stock, at a purchase price per share

equal to 100% of the Stated Value thereof on the date

of purchase.

(b) Call Option Subject to the Company’s Right of

Redemption. Notwithstanding the foregoing, the right

of Acquirors to exercise the option granted pursuant to

Section 1(a) shall be subject to the Company’s

[MergerSub’s] right or obligation, as the case may be,

to redeem the Voting Preferred Stock pursuant to

Section 4(g)(i) of Article V of the Restated

Certificate of Incorporation of the Company upon the

occurrence of an event specified therein and the

Company’s obligation to redeem the Voting Preferred

Stock of a holder of Voting Preferred Stock at the

option of such holder pursuant to Section 4(g)(ii) of

Article V of the Restated Certificate of Incorporation

of the Company upon the occurrence of an event

specified therein.

- 53 *

Section 2. Put Option with Respect to Voting

Preferred Stock.

(a) Grant of Put Option. Acquiror[s] hereby

grants [sic] to MB Parent an option, exercisable after

June 30, 2018, to require Acquirors to purchase, in the

manner provided in Section 2(b), all, but not less than

all, of the outstanding shares of the [MergerSub]

Voting Preferred Stock, at a purchase price per share

equal to 100% of the Stated Value thereof on the date

of purchase.

Section 3. Call Option with Respect to

Participating Preferred Stock.

(a) Grant of Call Option. MB Parent hereby grants

to Acquirors an option, exercisable by Acquirors on or

after July 15, 2018, to purchase, in the manner

provided in Section 3(c), all, but not less than all,

of the outstanding shares of [MergerSub] Participating

Preferred Stock, at a purchase price per share equal to

the dollar amount derived from the EBITDA Formula (as

defined in Section 3(g)(i)(B) of Article V of the

Restated Certificate of Incorporation of the Company).

(b) Call Option Subject to the Company’s Right of

Redemption. Notwithstanding the foregoing, the right

of Acquirors to exercise the option granted pursuant to

Section 3(a) shall be subject to the Company’s right to

redeem the Participating Preferred Stock pursuant to

Section 3(g)(i) of Article V of the Restated

Certificate of Incorporation of the Company upon the

occurrence of an event specified therein and the

Company’s obligation to redeem the Participating

Preferred Stock pursuant to Section 3(g)(ii) of

Article V of the Restated Certificate of Incorporation

of the Company upon the occurrence of an event

specified therein.

Section 4. Put Option with Respect to

Participating Preferred Stock.

- 54 (a) Grant of Put Option. Acquirors hereby grant

to MB Parent an option, exercisable after June 30,

2018, to require Acquirors to purchase, in the manner

provided in Section 2(b), all, but not less than all,

of the outstanding shares of the [MergerSub]

Participating Preferred Stock, at a purchase price per

share equal to the dollar amount derived from the

EBITDA Formula.

Section 5.

Certain Additional Call Options.

(a) Grant of Call Option. MB Parent hereby grants

to Acquirors an option, exercisable by Acquirors upon

the occurrence of a Call Event (as defined * * * below)

to purchase in the manner provided in Section 5(c),

all, but not less than all, of either or both of

(i) the shares of [MergerSub] Voting Preferred Stock,

at a purchase price per share equal to 100% of the

Stated Value thereof on the date of purchase and

(ii) the shares of [MergerSub] Participating Preferred

Stock, at a purchase price per share equal to the

dollar amount derived from the EBITDA Formula.

(b) Definition of Call Event. For purposes of

Section 5, a “Call Event” shall mean (i) that the Net

Worth of Liberty Bell I, LLC is less than $275 million,

(ii) the insolvency, liquidation, bankruptcy, or any

similar event, of MB Parent, (iii) any threatened or

actual involuntary transfer or disposition by MB Parent

of any shares of Participating Preferred Stock, (iv)

any threatened or actual involuntary transfer or

disposition by MB Parent of any shares of Voting

Preferred Stock or (v) any failure of Liberty Bell I,

LLC (or a successor thereof) or its manager to make

distributions contemplated by Section 15 of the Limited

Liability Company Agreement of Liberty Bell I, LLC

dated as of July 28, 1998 * * *

Section 6.

Drag-Along Rights.

(a) The Drag-Along Right. After June 30, 2003, if

Acquirors (together with any of their successors,

transferees and assigns, the “Selling Shareholders”)

propose to sell all of the shares of [MergerSub] Common

- 55 Stock to a single person or to any group of related

persons (the “Prospective Purchaser”), then such

Selling Shareholders shall have the right (the “DragAlong Right”) to compel MB Parent (together with its

successors, transferees and assigns, the “Drag-Along

Shareholders”) to sell all of the shares of [MergerSub]

Participating Preferred Stock and [MergerSub] Voting

Preferred Stock owned by them to the Prospective

Purchaser at, in the case of Voting Preferred Stock, a

price per share equal to 100% of the Stated Value of

the Voting Preferred Stock on the date of purchase and,

in the case of the Participating Preferred Stock, a

price per share equal to the dollar amount derived from

the EBITDA Formula, and otherwise on the same terms and

subject to the same conditions, as the Selling

Shareholders are able to obtain with respect to the

Common Stock. * * *

Section 7.

Restrictions on Transfer.

(a) General. Except as otherwise permitted or

required hereby, no holder of shares of Voting

Preferred Stock shall, directly or indirectly, transfer

or otherwise dispose of any shares of Voting Preferred

Stock owned by such holder or any interest therein

prior to June 30, 2003. Except as otherwise permitted

or required hereby, no holder of shares of

Participating Preferred Stock shall, directly or

indirectly, transfer or otherwise dispose of any shares

of Participating Preferred Stock owned by such holder,

or any interest therein prior to June 30, 2003. * * *

Filing of the Restated Certificates of Incorporation

for MB Parent and MergerSub

On July 29, 1998, a restated certificate of incorporation

for MB Parent was filed with the Secretary of State of the State

of Delaware.

The restated certificate of incorporation for MB

Parent established five directors, of whom three would constitute

a quorum, and included the following provisions:

- 56 ARTICLE V

AUTHORIZED CAPITAL STOCK

Section 1.

Authorized Shares.

The total number of shares of all classes of

capital stock which the corporation shall have the

authority to issue is Five Thousand (5,000) shares, of

which (1) One Thousand (1,000) shares, having a par

value of $.01 per share, shall be Common Stock (“Common

Stock”) and (ii) Four Thousand (4,000) shares, having a

par value of $.01 per share, shall be Voting Preferred

Stock (“Voting Preferred Stock”).

Section 2.

Common Stock.

(b) Voting Rights.

(i) Voting Power. Except as otherwise

provided in Section (3)(i)(ii) of this Article V, the

holders of shares of Common Stock shall be entitled to

vote on all matters presented to the stockholders of

the corporation. Except as otherwise provided herein

or required by law, the holders of Common Stock shall

vote together with the holders of shares of Voting

Preferred Stock. Each share of Common Stock shall be

entitled to one (1) vote per share.

(ii) Voting Rights with Respect to Election

or Removal of Directors. The holders of shares of

Common Stock shall be entitled, voting as a separate

class, to elect one (1) director of the corporation

(the “Common Stock Director”). The Common Stock

Director shall be removed only by a vote of the holders

of a majority of the shares of Common Stock, voting as

a separate class.

Section 3.

Voting Preferred Stock.

(b) Issuance and Stated Value. The shares of

Voting Preferred Stock shall be issued by the

corporation for their Stated Value (as defined below),

in such amounts, at such times and to such persons as

- 57 shall be specified by the corporation’s Board of

Directors, from time to time. For the purposes hereof,

the “Stated Value” of each share of Voting Preferred

Stock (regardless of its par value) shall be $17,187.50

per share plus the Unpaid Dividend Amount (as defined

below), which Stated Value shall be proportionately

increased or decreased for any subdivision,

combination, reclassification or stock split,

respectively, of the outstanding shares of Voting

Preferred Stock. For the purposes hereof, the “Unpaid

Dividend Amount” with respect to each share of the

Voting Preferred Stock shall be equal to the aggregate

of all Quarterly Dividends (as defined below) that the

holder of such share shall have theretofore become

entitled to receive for such share but that shall not

have been declared and paid by the Board of Directors

of the corporation.

respect to dividend rights and rights on liquidation,

winding up and dissolution, rank (i) senior to the

Common Stock and all other classes or series of stock

of the corporation now or hereafter authorized, issued

or outstanding that by their terms expressly provide

that they are junior to the Voting Preferred Stock or

which do not specify their rank with respect to the

Voting Preferred Stock (collectively with the Common

Stock, “Junior Securities”) and (ii) on a parity with

all classes or series of stock of the corporation now

or hereafter authorized, issued or outstanding that by

their terms expressly provide that they will rank on

parity with the Voting Preferred Stock as to dividend

distributions and distributions upon liquidation,

winding up and dissolution of the corporation

(collectively, “Parity Securities”).

(d) Dividends.

(i) Amount of Dividends. On the last

business day of each March, June, September and

December in each calendar year (the “Dividend Accrual

Date”), each holder of record as of the close of

business on the Dividend Accrual Date of shares of the

Voting Preferred Stock as their names appear in the

stock register of the corporation on such date shall

become entitled to receive (when, as and if declared by

the Board of Directors of the corporation) a dividend

(the “Quarterly Dividend”) equal to one and three

- 58 hundred seventy-five thousands percent (1.375%) of the

Stated Value of such share (pro-rated for any portion

of the full calendar quarter that such share shall have

been issued and outstanding).

(e) Restrictions on Junior Payments. So long as

any shares of Voting Preferred Stock are outstanding,

the corporation shall not (i) declare, pay or set apart

for payment any dividend on, or make any distribution

in respect of, Junior Securities or any warrants,

rights, calls or options exercisable or convertible

into any Junior Securities, either directly or

indirectly, whether in cash, obligations or shares of

the corporation or other property * * *, (ii) make any

payment on account of, or set apart for payment money

for a sinking or other similar fund for, the purchase,

redemption, retirement or other acquisition for value

of any of, or redeem, purchase, retire or otherwise

acquire for value any of, the Junior Securities * * *

or any warrants, rights, calls or options exercisable

for or convertible into any of the Junior Securities,

or (iii) permit any corporation or other entity

directly or indirectly controlled by the corporation to

purchase, redeem, retire, or otherwise acquire for

value any of the Junior Securities or any warrants,

rights, calls or options exercisable for or convertible

into any Junior Securities.

(f) Liquidation Preference.

(i) Liquidation Preference. In the event of

any voluntary or involuntary liquidation, dissolution

or winding up of the affairs of the corporation, the

holders of shares of Voting Preferred Stock then

outstanding shall be entitled to be paid out of the

assets of the corporation available for distribution to

its stockholders, whether such assets are capital or

surplus and whether or not any Quarterly Dividends are

declared, an amount equal to the Stated Value for each

share outstanding on the date fixed for liquidation,

dissolution or winding up (the “Liquidation

Preference”), before any payment shall be made or any

assets distributed to the holders of Junior Securities.

* * *

- 59 (g) Redemption.

(i) Redemption by the Corporation.

(A) The corporation may, at its option upon

or after the occurrence of any Redemption Event (as

defined below), redeem, out of funds legally available

therefor, in the manner provided in Section 3(g)(ii)(A)

of this Article V, all, but not less than all, of the

shares of Voting Preferred Stock, at a redemption price

equal to 100% of the Stated Value thereof on the date

of redemption payable in cash.

(B) For purposes of this Section 3(g)(i), a

“Redemption Event” shall mean (x) June 30, 2018, (y)

any transfer or other disposition by the corporation of

shares of Participating Preferred Stock, par value $.01

per share, of CBM MergerSub Corp., a New York

corporation (hereinafter “CBM MergerSub Corp.”)

[MergerSub], or the comparable securities of any

successor corporation to CBM MergerSub Corp. (the

“MergerSub Participating Preferred Stock”) or (z) any

transfer or other disposition by the corporation of

shares of Voting Preferred Stock, par value $.01 per

share, of CBM MergerSub Corp. or the comparable

securities of any successor corporation to

CBM MergerSub Corp. (the “MergerSub Voting Preferred

Stock”).

(ii) Redemption at Option of Holders.

(i) After June 30, 2018 or (ii) upon the occurrence of

any failure of Liberty Bell I, LLC (or a successor

thereof) or its manager to make distributions

contemplated by Section 15 of the Limited Liability

Company Agreement of Liberty Bell I, LLC dated as of

July 28, 1998 * * *, any holder of shares of Voting

Preferred Stock shall be entitled at its option, to

require the corporation to redeem, out of funds legally

available therefor, in the manner provided in

Section 3(g)(iii)(B) of this Article V, all of the

shares of the Voting Preferred Stock held by such

holder, at a redemption price per share equal to 100%

of the Stated Value thereof on the date of redemption

payable in cash.

- 60 (i) Voting Rights.

(i) Voting Power. Except as otherwise

provided in Section 2(b)(ii) of this Article V or as

required by law, the holders of Voting Preferred Stock

shall be entitled to vote on all matters presented to

the stockholders of the corporation. Except as

otherwise provided herein or required by law, the

holders of Voting Preferred Stock shall vote together

with the holders of shares of Common Stock. Each share

of Voting Preferred Stock shall be entitled to one (1)

vote per share.

(ii) Voting Rights with Respect to Election

of Directors. The holders of shares of Voting

Preferred Stock shall be entitled, voting as a separate

class, to elect four (4) directors of the corporation

(the “Preferred Stock Directors”). A Preferred Stock

Director shall be removed only by the vote of the

holders of a majority of the shares of Voting Preferred

Stock, voting as a separate class.

(j) Transfer Restrictions.

(i) General. No holder of shares of Voting

Preferred Stock shall, directly or indirectly, transfer

or otherwise dispose of any shares of Voting Preferred

Stock owned by such holder, or any interest therein

prior to June 30, 2000. * * *

ARTICLE VI

POWERS OF THE BOARD OF DIRECTORS

Except as otherwise provided by law, the Board of

Directors is expressly authorized and empowered by

majority vote to determine all matters relating to the

business and management of the corporation; provided,

however, the following actions shall be taken by the

corporation only upon the unanimous vote of the Board

of Directors including, in each case, the Common Stock

Director: (a) the incurrence of indebtedness or any

other similar obligation, including in the form of any

guaranty of the indebtedness of another person; (b) the

- 61 sale, transfer or other disposition, pledge,

encumbering or assignment by the corporation of all or

any portion of its limited liability company interest

in Liberty Bell I, LLC; (c) the amendment of this

Restated Certificate of Incorporation; (d) the issuance

by the corporation of any shares of capital stock, or

any other securities or options or warrants to purchase

any shares of capital stock or other securities;

(e) the declaration of any dividends with respect to

the Common Stock; (f) the sale or redemption of the

shares of MergerSub Participating Preferred Stock held

by the corporation prior to June 30, 2003 other than in

accordance with the terms thereof or of the

CBM MergerSub Corp. Shareholders Agreement among

CBM MergerSub Corp., Reed Elsevier U.S. Holdings Inc.,

Reed Elsevier Overseas BV and the corporation dated as

of July 28, 1998 * * * (the “MergerSub Shareholders

Agreement”); (g) the sale or redemption of the shares

of MergerSub Voting Preferred Stock held by the

corporation prior to June 30, 2003 other than in

accordance with the terms of the Shareholder Agreement;

(h) the approval by the Board of Directors of any

action taken by the corporation with respect to any

shareholder resolution relating to a change in the

Restated Certificate of Incorporation of CBM MergerSub

Corp. or any successor entity, or a modification of the

terms of the MergerSub Participating Preferred Stock or

the MergerSub Voting Preferred Stock, except for an

increase in the authorized shares of Common Stock of

CBM MergerSub Corp., (i) the approval by the Board of

Directors of any action taken by the corporation with

respect to any shareholder resolution relating to the

liquidation or dissolution of CBM MergerSub Corp. or

any successor corporation, the merger into or

consolidation with another entity of CBM MergerSub

Corp. or any successor corporation unless the

certificate of incorporation of the surviving

corporation in such merger or consolidation is the

Restated Certificate of Incorporation of Matthew Bender

& Company, Incorporated, immediately after giving

effect to the merger of CBM MergerSub Corp. with and

into Matthew Bender & Company, Incorporated, without

any amendment or restatement; (j) the amendment of the

Stockholders Agreement or (k) the amendment of the

MergerSub Shareholders Agreement.

- 62 (On August 6, 1998, a certificate of correction was filed with

the secretary of state of the State of Delaware with respect to

MB Parent’s restated certificate of incorporation.

The minor

corrections that were made to MB Parent’s restated certificate of

incorporation as a result of this filing are reflected in the

preceding excerpt.)

Also on July 29, 1998, a restated certificate of

incorporation for MergerSub was filed with the Department of

State of the State of New York.

The restated certificate of

incorporation for MergerSub established five directors, of whom

three would constitute a quorum, and included the following

provisions:

ARTICLE V

AUTHORIZED CAPITAL STOCK

Section 1.

Authorized Shares.

The total number of shares of all classes of

capital stock which the corporation shall have

authority to issue is Twenty-Three Thousand Nine

Hundred Seventy (23,970) shares, of which (i) Twenty

Thousand (20,000) shares, having a par value of

$.01 per share, shall be Common Stock (“Common Stock”)

having the rights, preferences and privileges set forth

in Section 2 of this Article V, (ii) Ten (10) shares,

having a par value of $.01 per share, shall be

Nonvoting Participating Preferred Stock (“Participating

Preferred Stock”) having the rights, preferences and

privileges set forth in Section 3 of this Article V and

(iii) Three Thousand Nine Hundred Sixty (3,960) shares,

having a par value of $.01 per share, shall be Voting

Preferred Stock (“Voting Preferred Stock” and, together

with the Participating Preferred Stock, “Preferred

Stock”) having the rights, preferences and privileges

set forth in Section 4 of this Article V.

- 63 Section 2.

Common Stock.

(i) Voting Power. Except as otherwise

provided in Sections 4(i)(ii) of this Article V, the

holders of shares of Common Stock shall be entitled to

vote on all matters presented to the shareholders of

the corporation. Except as otherwise provided herein

or required by law, holders of shares of Common Stock

shall vote together with holders of shares of Voting

Preferred Stock. Except as otherwise provided in

Section 2(a)(ii), the shares of Common Stock shall

represent, in the aggregate, twenty (20) votes and each

share of Common Stock outstanding on the relevant

record date shall have a vote equal to twenty (20)

divided by the number of shares of Common Stock

outstanding on such record date.

(ii) Voting Rights with Respect to Election

or Removal of Directors and Certain Other Matters. The

holders of shares of Common Stock shall be entitled,

voting as a separate class, to elect one (1) director

of the corporation (the “Common Stock Director”). The

Common Stock Director shall be removed only by the vote

of the holders of a majority of the shares of Common

Stock, voting as a separate class. In voting for the

election or removal of the Common Stock Director or in

any other matter on which the Common Stock shall vote

as a separate class, each share of Common Stock shall

be entitled to one vote per share.

Section 3.

Participating Preferred Stock.

(a) Issuance. The shares of Participating

Preferred Stock shall be issued by the corporation for

their par value, without stated value.

(b) Rank. The Participating Preferred Stock

shall, (i) with respect to rights with respect to the

Quarterly Preferred Dividends (as defined below) and

rights with respect to the Participating Preferred

Liquidation Preference (as defined below) upon

liquidation, winding up and dissolution, rank

(x) senior to the Common Stock and all other classes or

series of stock of the corporation now or hereafter

authorized, issued or outstanding that by their terms

expressly provide that they are junior to the

- 64 Participating Preferred Stock as to Quarterly Preferred

Dividend distributions or as to the Participating

Preferred Liquidation Preference upon liquidation,

winding up or dissolution or which do not specify their

rank with respect to the Participating Preferred Stock

(collectively with the Common Stock, “Participating

Junior Securities”) and (y) on a parity with the Voting

Preferred Stock and all other classes or series of

stock of the corporation now or hereafter authorized,

issued or outstanding that by their terms expressly

provide that they will rank on parity with the Voting

Preferred Stock as to the dividend distributions and

distributions upon liquidation, winding up and

dissolution of the corporation (collectively with the

Voting Preferred Stock, “Preferred Parity Securities”)

and (ii) with respect to the Participating Dividends

(as defined below) and all other rights with respect to

distributions upon liquidation, winding up or

dissolution, on a parity with the Common Stock.

(i) Amount of Quarterly Preferred Dividends.

On the last business day of each March, June, September

and December in each calendar year (the “Preferred

Dividend Accrual Date”), each holder of record as of

the close of business on the Preferred Dividend Accrual

Date of shares of the Participating Preferred Stock as

their names appear in the stock register of the

corporation on such date shall become entitled to

receive (when, as and if declared by the Board of

Directors of the corporation) a dividend (the

“Quarterly Preferred Dividend”) equal to one cent

($.01) per share (pro-rated for any portion of a full

calendar quarter that such share shall have been issued

and outstanding).

(d) Restrictions on Participating Junior Payments.

So long as any shares of Participating Preferred Stock

are outstanding, the corporation shall not (i) declare,

pay or set apart for payment any dividend on, or make

any distribution in respect of, Participating Junior

Securities or any warrants, rights, calls or options

exercisable or convertible into any Participating

Junior Securities, either directly or indirectly,

whether in cash, obligations or shares of the

- 65 corporation or other property * * *, (ii) make any

payment on account of, or set apart for payment money

for a sinking or other similar fund for, the purchase,

redemption, retirement or other acquisition for value

of any of, or redeem, purchase, retire or otherwise

acquire for value any of, the Participating Junior

Securities * * * or any warrants, rights, calls or

options exercisable for or convertible into any of the

Participating Junior Securities, or (iii) permit any

corporation or other entity directly or indirectly

controlled by the corporation to purchase, redeem,

retire or otherwise acquire for value any of the

Participating Junior Securities or any warrants,

rights, calls or options exercisable for or convertible

into any Participating Junior Securities, in each case,

at any time when there is an Unpaid Preferred Dividend

Amount. For the purposes hereof, the “Unpaid Preferred

Dividend Amount” with respect to each share of the

Participating Preferred Stock shall be equal to the

aggregate of all Quarterly Preferred Dividends that the

holder of such share shall have theretofore become

entitled to receive for such share but that shall not

have been declared and paid by the Board of Directors

of the corporation.

(e) Participating Dividends. Each holder of

record as of the close of business on the record date

set therefor of shares of Participating Preferred Stock

* * * shall become entitled to receive on a pro rata

basis with the holders of shares of Common Stock any

dividend (when, as and if declared by the Board of

Directors of the corporation) with respect to the

Common Stock (the “Participating Dividend”).

(f) Participating Preferred Liquidation

Preference.

(i) Participating Preferred Liquidation

Preference. In the event of any voluntary or

involuntary liquidation, dissolution or winding up of

the affairs of the corporation, the holders of shares

of Participating Preferred Stock then outstanding shall

be entitled to be paid out of the assets of the

corporation available for distribution to its

shareholders, whether such assets are capital or

surplus and whether or not any Quarterly Preferred

Dividends are declared, an amount equal to the par

value for each share outstanding on the date fixed for

- 66 liquidation, dissolution or winding up (the

“Participating Preferred Liquidation Preference”),

before any payment shall be made or any assets

distributed to the holders of Participating Junior

Securities. * * *

(ii) Additional Rights Upon Liquidation. In

addition to the Participating Preferred Liquidation

Preference, each holder of shares of Participating

Preferred Stock will be entitled to participate on a

pro rata basis with holders of shares of the Common

Stock in any distribution of the assets of the

corporation upon liquidation, winding up or

dissolution.

(g) Redemption.

(i) Redemption by the Corporation.

(A) After (i) June 30, 2018, (ii) the

insolvency, liquidation, bankruptcy or any similar

event, of CBM Acquisition Parent Co. (hereinafter

referred to as “MB Parent”), (iii) any threatened or

actual involuntary transfer or disposition by MB Parent

of any shares of Participating Preferred Stock,

(iv) any threatened or actual involuntary transfer or

disposition by MB Parent of any shares of Voting

Preferred Stock or (v) any failure of Liberty Bell I,

LLC (or a successor thereof) or its manager to make

distributions contemplated by Section 15 of the Limited

Liability Company Agreement of Liberty Bell I, LLC

dated as of July __, 1998 * * * (each of the events

described in clauses (ii) through (v), a “Trigger

Event”), the corporation may, at its option, redeem,

out of funds legally available therefor, in the manner

provided in Section 3(g)(iii)(A) of Article V, all, but

not less than all, of the shares of Participating

Preferred Stock, at a redemption price per share,

payable in cash, equal to the dollar amount derived

from the EBITDA Formula (as defined below).

(B) “EBITDA Formula” means (x)(I) 8.5

multiplied by Trailing Four Quarter EBITDA less

(II) Debt less (III) the aggregate Stated Value of the

Voting Preferred Stock multiplied by (y).01 divided by

- 67 (z) the number of shares of Participating Preferred

Stock then outstanding or, expressed algebraically

.01 x (8.5 x Trailing Four Quarter EBITDA - Debt - Aggregate Stated Value of the Voting Preferred

Stock)

number of shares of Participating Preferred Stock then outstanding

“Trailing Four Quarter EBITDA” means the sum of the

earnings before interest, taxes, depreciation and

amortization of the corporation as of the last day of

each of the preceding four fiscal quarters of the

corporation ended prior to the date of determination

* * *. “Debt” means all indebtedness for borrowed

money of the corporation * * *

(ii) Redemption at Option of Holders. After

June 30, 2018, any holder of shares of Participating

Preferred Stock shall be entitled, at its option, to

require the corporation to redeem, out of funds legally

available therefor, in the manner provided in Section

3(g)(iii)(B) of this Article V, all of the shares of

the Participating Preferred Stock held by it, at a

redemption price per share, payable in cash, equal to

the dollar amount derived from the EBITDA Formula.

(i) Voting Rights. Except as specifically set

forth in the NYBCL [the Business Corporation Law of the

State of New York], the holders of shares of

Participating Preferred Stock shall not be entitled to

any voting rights with respect to any matters voted

upon by shareholders of the corporation.

(j) Restrictions on Transfer.

(i) No holder of shares of Participating

Preferred Stock shall, directly or indirectly, transfer

or otherwise dispose of any shares of Participating

Preferred Stock owned by such holder, or any interest

therein prior to June 30, 2003. * * *

Section 4.

Voting Preferred Stock.

(b) Issuance and Stated Value. The shares of

Voting Preferred Stock shall be issued by the

- 68 corporation for their Stated Value (as defined below),

in such amounts, at such times and to such persons as

shall be specified by the corporation’s Board of

Directors, from time to time. For the purposes hereof,

the “Stated Value” of each share of Voting Preferred

Stock (regardless of its par value) shall be

$15,559.6369 per share plus the Unpaid Dividend Amount

(as defined below), which Stated Value shall be

proportionately increased or decreased for any

subdivision, combination, reclassification, or stock

split, respectively, of the outstanding shares of

Voting Preferred Stock. For the purposes hereof, the

“Unpaid Dividend Amount” with respect to each share of

Voting Preferred Stock shall be equal to the aggregate

of all Quarterly Dividends (as defined below) that the

holder of such share shall have theretofore become

entitled to receive for such share but that shall not

have been declared and paid by the Board of Directors

of the corporation.

respect to dividend rights and rights on liquidation,

winding up and dissolution, rank (i) senior to the

Common Stock, the Participating Preferred Stock with

respect to the Participating Dividend rights of the

Participating Preferred Stock, and all other classes or

series of stock of the corporation now or hereafter

authorized, issued or outstanding that by their terms

expressly provide that they are junior to the Preferred

Stock or which do not specify their rank with respect

to the Voting Preferred Stock (collectively with the

Common Stock, “Junior Securities”) and (ii) on a parity

with the Participating Preferred Stock with respect to

the Preferred Dividend rights of the Participating

Preferred Stock and all other classes or series of

stock of the corporation now or hereafter authorized,

issued or outstanding that by their terms expressly

provide that they will rank on parity with the Voting

Preferred Stock as to dividend distributions and

distributions upon the liquidation, winding up and

dissolution of the corporation (collectively, “Parity

Securities”).

(d) Quarterly Dividends.

(i) Amount of Quarterly Dividends. On the

last business day of each Preferred Dividend Accrual

Date, each holder of record as of the close of business

- 69 on the Preferred Dividend Accrual Date of shares of the

Voting Preferred Stock as their names appear in the

stock register of the corporation on such date shall

become entitled to receive (when, as and if declared by

the Board of Directors of the corporation) a dividend

(the “Quarterly Dividend”) equal to one and one-quarter

percent (1¼%) of the Stated Value of such share (prorated for any portion of a full calendar quarter that

such share shall have been issued and outstanding).

(e) Restrictions on Junior Payments. So long as

any shares of Voting Preferred Stock are outstanding,

the corporation shall not (i) declare, pay or set apart

for payment any dividend on, or make any distribution

in respect of, Junior Securities or any warrants,

rights, calls or options exercisable or convertible

into any Junior Securities, either directly or

indirectly, whether in cash, obligations or shares of

the corporation or other property * * * (ii) make any

payment on account of, or set apart for payment money

for a sinking or other similar fund for, the purchase,

redemption, retirement or other acquisition for value

of any of, or redeem, purchase, retire or otherwise

acquire for value any of, the Junior Securities * * *

or any warrants, rights, calls or options exercisable

for or convertible into any of the Junior Securities,

or (iii) permit any corporation or other entity

directly or indirectly controlled by the corporation to

purchase, redeem, retire or otherwise acquire for value

any of the Junior Securities or any warrants, rights,

calls or options exercisable for or convertible into

any Junior Securities at any time when there is an

Unpaid Dividend Amount with respect to the Voting

Preferred Stock. * * *

(f) Liquidation Preference.

(i) Liquidation Preference. In the event of

any voluntary or involuntary liquidation, dissolution

or winding up of the affairs of the corporation, the

holders of shares of Voting Preferred Stock then

outstanding shall be entitled to be paid out of the

assets of the corporation available for distribution to

its shareholders, whether such assets are capital or

surplus and whether or not any Quarterly Dividends are

declared, an amount equal to the Stated Value for each

- 70 share outstanding on the date fixed for liquidation,

dissolution or winding up (the “Liquidation

Preference”), before any payment shall be made or any

assets distributed to the holders of Junior Securities.

* * *

(g) Redemption.

(i) Redemption by the Corporation. After

(A) June 30, 2018, the corporation may, at its option,

in the manner provided in Section 4(g)(iii)(A), and

(B) upon the occurrence of a Trigger Event, the

corporation shall, in the manner provided in Section

4(g)(iii)(B) of this Article V, redeem, out of funds

legally available therefor, all, but not less than all,

of the shares of Voting Preferred Stock, at a

redemption price per share equal to 100% of the Stated

Value thereof on the date of redemption payable in

cash.

(ii) Redemption at Option of Holders. After

June 30, 2018, any holder of shares of Voting Preferred

Stock shall be entitled, at its option, to require the

corporation to redeem, out of funds legally available

therefor, in the manner provided in Section

4(g)(iii)(C) of this Article V, the shares of the

Preferred Stock held by it, at a redemption price per

share equal to 100% of the Stated Value thereof on the

date of redemption payable in cash.

(i) Voting Rights.

(i) Voting Power. Except as otherwise

provided in Section 2(a)(ii) of this Article V or as

required by law, the holders of Voting Preferred Stock

shall be entitled to vote on all matters presented to

the shareholders of the corporation. Except as

otherwise provided herein or required by law, the

holders of shares of Voting Preferred Stock shall vote

together with the holders of shares of Common Stock.

Except as otherwise provided in Section 4(i)(ii) and

4(i)(iii) of this Article V, the shares of Voting

Preferred Stock shall represent, in the aggregate,

eighty (80) votes * * *

- 71 (ii) Voting Rights With Respect to Election

or Removal of Directors and Certain Other Matters. The

holders of Voting Preferred Stock shall be entitled,

voting as a separate class, to elect four (4) directors

of the corporation (the “Preferred Stock Directors”).

A Preferred Stock Director shall be removed only by the

vote of the holders of a majority of the shares of

Voting Preferred Stock, voting as a separate class. In

voting for the election or removal of a Preferred Stock

Director or in any other matter on which the Voting

Preferred Stock shall vote as a separate class, each

share of Voting Preferred Stock shall be entitled to

one vote per share.

(j) Restrictions on Transfer. No holder of shares

of Voting Preferred Stock shall, directly or

indirectly, transfer or otherwise dispose of any shares

of Voting Preferred Stock owned by such holder, or any

interest therein prior to June 30, 2003. * * *

ARTICLE X

RESTRICTIONS ON MERGERS, ETC.

The corporation may not be liquidated, dissolved,

merged into or consolidated with another entity and no

other entity may be merged into or consolidated with

the corporation without the unanimous approval of all

of the shareholders of the corporation entitled to

vote.

ARTICLE XI

CERTAIN WAIVERS

The holders of the Preferred Stock hereby

acknowledge and agree that their rights against the

corporation, the directors of the corporation and

holders of Common Stock are only those explicitly

provided by this Restated Certificate of Incorporation

or in any shareholders agreement executed among the

shareholders of this corporation and to the extent

that, at law or in equity, the corporation, the

- 72 directors of the corporation or holders of Common Stock

would otherwise have any other duties (including

fiduciary duties) or obligations to the holders of the

Preferred Stock, either at law or in equity, such

duties and obligations are waived.

The Mechanics of the Bender Transaction

The mechanics of the Bender transaction are set forth below.

All of the events described in this section occurred on July 31,

1998, in accordance with detailed instructions prepared by GD&C.

Capitalization of MergerSub and MB Parent

As the first step in the capitalization of MergerSub,

MergerSub borrowed $600 million from the Luxembourg branch of

Elsevier, S.A., an affiliate of Reed.

The Luxembourg branch of

Elsevier, S.A., transferred the $600 million to a bank account

that MergerSub maintained at Citibank (MergerSub Citibank

account).

In addition to MergerSub’s borrowing $600 million from the

Luxembourg branch of Elsevier, S.A., REUS and REBV contributed

$616,562,500 and $158,437,500, respectively, to MergerSub.

REUS

and REBV transferred their respective contributions to MergerSub

to the MergerSub Citibank account.

After making their respective contributions to MergerSub,

REUS and REBV owned all of the issued and outstanding common

stock of MergerSub, all of the voting preferred stock of

MergerSub, and all of the participating preferred stock of

MergerSub.

- 73 After the capitalization of MergerSub was completed, REUS

and REBV contributed all of their shares of MergerSub voting

preferred stock and MergerSub participating preferred stock to

MB Parent in exchange for 100 percent of MB Parent voting

preferred stock.

As a class, the MB Parent voting preferred

stock held by REUS and REBV was entitled to 80 percent of the

voting power of MB Parent and had the power to elect four of the

five directors of MB Parent.

In addition to REUS and REBV’s contributions to MB Parent,

MergerSub contributed $1.375 billion to MB Parent.

In return,

MB Parent issued 1,000 shares, i.e., all, of its common stock to

MergerSub.

The 1,000 shares of MB Parent common stock received

by MergerSub were entitled to 20 percent of the voting power of

MB Parent.

As a class, the MB Parent common stock held by

MergerSub had the power to elect one of the five directors of

MB Parent.

MergerSub transferred the $1.375 billion from the

MergerSub Citibank account to a bank account that MB Parent

maintained at Citibank (MB Parent Citibank account).

After the capitalization transactions described above had

been completed, REUS, REBV, and MB Parent together owned all of

the issued and outstanding common stock of MergerSub, all of the

voting preferred stock of MergerSub, and all of the participating

preferred stock of MergerSub.

In addition, REUS, REBV, and

MergerSub together owned all of the issued and outstanding common

- 74 stock of MB Parent and all of the voting preferred stock of MB

Parent.

Merger of MergerSub and Bender

After the capitalization transactions described above had

been completed, MergerSub merged with and into Bender under the

relevant provisions of the New York Business Corporation Law,

with Bender continuing as the surviving corporation.

At the time

that the merger of MergerSub with and into Bender became

effective, all outstanding MergerSub stock was converted into

Bender stock, in the same number of shares, in the same classes,

and with the same voting power, rights, and qualifications as the

previously issued MergerSub common stock, Mergersub voting

preferred stock, and MergerSub participating preferred stock.

After the merger of MergerSub with and into Bender, REUS,

REBV, and TMD held the following interests in MB Parent:

MB Parent Stock

REUS

REBV

TMD

Common stock

Shares owned

Percentage of class

Percentage of vote

----

1,000

100%

20%

Voting preferred stock

Shares owned

Percentage of class

Percentage of vote

3,000

75%

60%

1,000

25%

20%

----

In addition, REUS, REBV, and MB Parent held the following

interests in Bender:

- 75 Bender Stock

REUS

REBV

MB Parent

Common stock

Shares owned

Percentage of class

Percentage of vote

792

80%

16%

198

20%

----

Voting preferred stock

Shares owned

Percentage of class

Percentage of vote

----

3,960

100%

80%

Participating preferred stock

Shares owned

Percentage of class

Percentage of vote

----

100%

Capitalization of LBI (the LLC)

Pursuant to section 9.b. of the LBI LLC agreement, Times

Mirror became the manager of LBI immediately following when the

merger of MergerSub with and into Bender became effective.

As of

that time, Lexis informed Mellon Trust and Bank of America that

Times Mirror had replaced Lexis as manager of LBI and that they

were to take instructions directly from Times Mirror on any

administrative and operational aspects relating to LBI’s bank

accounts.

Immediately following Times Mirror’s appointment as manager

of LBI, MB Parent contributed $1.375 billion to LBI.

MB Parent

transferred the $1.375 billion from the MB Parent Citibank

account to a bank account that LBI maintained at Citibank (LBI

Citibank account).

The $1.375 billion was then transferred from

the LBI Citibank account to a bank account that LBI maintained at

- 76 Bank of America.

Times Mirror maintained its bank accounts at

Bank of America as well.

Closing

The Bender transaction closed on July 31, 1998.

Times

Mirror’s sale of its 50-percent interest in Shepard’s also closed

on that date.

From the time that the Bender transaction closed to the time

of trial of this case, Bender continued as a going concern in the

legal publishing business.

The parties have agreed that the

merger of MergerSub with and into Bender, with Bender as the

surviving corporation, under the terms of the Bender agreement

and in accordance with New York Business Corporation Law,

satisfied the continuity of business enterprise requirement for

qualification as a tax-free reorganization under section 368.

Times Mirror’s Management of LBI and the Development of Times

Mirror’s Investment Strategy Following the Closing of the Bender

Transaction

On July 31, 1998, the law firm of Richards, Layton & Finger

(RL&F) prepared an opinion regarding LBI for Times Mirror,

MB Parent, REUS, and REBV.

With respect to the LBI LLC

agreement, RL&F was of the opinion that:

2. The LLC Agreement constitutes a legal, valid

and binding agreement of the Member [MB Parent] and

Manager [Times Mirror], and is enforceable against the

Member and the Manager, in accordance with its terms.

3. If properly presented to a Delaware court, a

Delaware court applying Delaware law, would conclude

that (i) the removal of the Manager shall be only at

- 77 the request and direction of the Manager and under no

other circumstances, including, without limitation, for

cause, as provided for in Section 9(b) of the LLC

Agreement and (ii) such provision, contained in

Section 9(b) of the LLC Agreement, that requires the

removal of the Manager to be only at the request and

direction of the Manager, constitutes a legal, valid

and binding agreement of the Member, and is enforceable

against the Member, in accordance with its terms.

On September 1, 1998, Times Mirror, acting in its capacity

as manager of LBI, approved a purchase agreement into which LBI

had entered with Merrill Lynch International on August 17, 1998

(LBI-MLI purchase agreement).

Pursuant to the LBI-MLI purchase

agreement, LBI agreed to purchase 1.5 million shares of Series A

common stock of Times Mirror from Merrill Lynch International for

an initial price of approximately $92 million.

On September 30, 1998, Times Mirror, acting in its capacity

as manager of LBI, approved the change of LBI’s name to Eagle New

Media Investments, LLC (hereinafter referred to as the LLC).

A meeting of the officers of the LLC was convened on

October 5, 1998.

As of that date, the officers of the LLC were

Unterman; Debra A. Gastler (Gastler), vice president of taxes for

Times Mirror; Steven J. Schoch, vice president and treasurer of

Times Mirror; William A. Niese (Niese); Kay D. Leyba; Anne M.

Bacher; and Udovic.

At this meeting, Unterman informed the other

LLC officers of plans to invest the LLC’s funds in shares of

Series A common stock of Times Mirror and in three companies:

Northern Lights, Sinanet, and Homeshark.com.

- 78 A regular meeting of Times Mirror’s board of directors was

convened on October 8, 1998.

A written report for this meeting

contained the following statements:

Mosby and Matthew Bender Update

Since our last Board meeting in July, substantial

progress has been made in the divestiture of Mosby and

Matthew Bender.

The divestiture of Matthew Bender/Shepard’s * * *

closed on July 31. Times Mirror received $275 million

in cash for the sale of our 50% interest in Shepard’s

and Liberty Bell I was funded with $1,375 million

through the merger of Matthew Bender. As indicated at

the last Board meeting, the cash received by Times

Mirror was used to repay short-term debt and the funds

held by Liberty Bell will be invested in the repurchase

of Times Mirror stock and in high-quality short-term

investments.

In addition, the section of the October 8, 1998, board report

entitled “Capital Planning Discussion” contained the following

statements:

Introduction

Since the July Board meeting, we have continued to

sharpen our focus on our intended use of the proceeds

from the Mosby and Matthew Bender dispositions as well

as our continuing significant free cash flow. It had

not been our assumption that we would immediately turn

around and use these resources as a war chest to

finance a major acquisition program, and over the past

several months we tested this presumption by examining

in detail the prospect for value creation and the

acceleration of earnings growth through acquisitions.

* * *

- 79 Background

In August, with the closing of the Matthew Bender and

Shepards divestitures, we began what we expect will be

an extensive period of managing surplus capital. * * *

Ultimately, our planning challenge is to assess

realistically what the levels of spending might be in

the primary areas of priority which we have stated to

the Board before:

Capital investments in existing businesses to

drive growth

Acquisitions that enhance our existing lines

of business

Dividends necessary to maintain a payout

ratio commensurate with our peer group

average

Consistent with long-term capitalization

goals, opportunistic stock repurchase

Sizing Our Resources

In August, the closing of the divestiture of Matthew

Bender resulted in the deposit of $1,375 million of

gross proceeds into the account of Liberty Bell I,

L.L.C., an investment affiliate of Times Mirror.

Additionally, the divestiture of our share of the

Shepards joint venture resulted in the deposit in Times

Mirror’s account of $275 million. While the cash

received by Times Mirror has all been used to retire

short-term debt, the following approximately depicts

the current deployment of capital within Liberty Bell:

$ Millions

Short-term Money Market Assets

Times Mirror Common Stock¹

Other

Total Liberty Bell Assets

¹ At cost

$1,000

384

$1,386

- 80 *

Looked at from a spending capacity viewpoint, the

following shows our 1999-2001 total resources for

investment:

$ Millions

Current Surplus Balance¹

1999-2001 Capex

1999-2001 Acquisitions

Excess Debt Capacity Estimate

Total 3-year Resources

$1,400

375

900

500

$3,175

¹ Includes Mosby proceeds

Share Repurchase Status and Outlook

As previously discussed, we expect to have

approximately $3.2 billion of investment capacity over

the next few years. Because our realistic expectations

are to spend about $1.5 billion on acquisitions,

capital projects and dividends, this leaves

$1.5-$2 billion to be deployed in share repurchase,

which is our highest return alternative in the absence

of additional high-return acquisitions or capital

projects.

Investment Plans

Most immediately, we have concerned ourselves with

establishing a short-term investment plan that

emphasizes safety and liquidity. Over time, any L.L.C.

funds not deployed in acquisitions, capital investments

or Times Mirror stock shall be managed under our ShortTerm Investment Policy.

After the board of directors had considered the materials

that had been presented to it regarding the LLC and Eagle

Publishing (an LLC created for the Mosby transaction), the board

approved resolutions with respect to the use of the LLC and Eagle

- 81 Publishing in Times Mirror’s share repurchase program and in

transactions involving the purchase of Times Mirror’s outstanding

debt securities.

During the period August 1 through December 31, 1998, Times

Mirror directed the LLC to purchase (1) approximately

13.3 million shares of Times Mirror for between $750 million and

$760 million and (2) interests in several Internet media

companies for approximately $9 million.

In a finance report presented to the Times Mirror board of

directors on February 4, 1999, the following statement appeared:

Resources-Background

In 1998, with the closing of the Matthew Bender, Mosby

and Shepards divestitures, we began what we expect will

be an extensive period of managing surplus capital. As

we have articulated in the past, our initial

responsibility is to manage this cash under a shortterm investment policy, which stresses preservation of

capital. This naturally results in returns

commensurate with the low tolerance for risk.

Ultimately, our planning challenge is to assess

realistically what the levels of spending might be in

the primary areas of priority, which we have

articulated before:

•

Capital investments in existing businesses to

drive growth

•

Acquisitions that enhance our existing lines of

business

•

Dividends necessary to maintain a payout ratio

commensurate with our peer group average

•

Consistent with long-term capitalization goals,

opportunistic stock repurchase

- 82 *

Sizing Our Resources

In the second half of 1998, the closing of the

divestiture of Matthew Bender and Mosby resulted in the

deposit of $1,790 million of gross proceeds into the

accounts of the two Eagle LLC’s, both investment

affiliates of Times Mirror. Additionally, the

divestiture of our share of the Shepards joint venture

resulted in the deposit in Times Mirror’s account of

$275 million. While the cash received by Times Mirror

has all been used to retire short-term debt, the

following approximately depicts the 1/12/99 deployment

of capital within the Eagle LLC’s:

$ Millions

Short-term Money Market Assets

Times Mirror Common Stock (13.3M shares)

Tax Credit Partnerships¹

New Media Investments¹

Total Eagle Assets

$1,025

780

$1,831

¹ At cost

A preliminary cash flow analysis for the 1999-2001

period enables us to forecast total resources available

to us. The following table shows how much net cash is

used under our plans for spending in our major

investment categories:

($ Millions)

2000

1999

Cash From Operations

$383

$401

Capital Expenditures

(201) (131)

Acquisitions, Net

(300) (300)

Dividends

(80)

(83)

Annual Surplus/(deficit) ($198) ($113)

2001 3-year Total

$434

$1,218

(120)

(452)

(300)

(900)

(89)

(252)

($75)

($386)

Thus over the 3 years of our plan, before repurchase,

our total spending would be around $400 million out of

the $1.0 billion held by the investment LLCs.

- 83 Conclusion

In consideration of the resources we have available and

the capital and acquisition spending we anticipate, we

are recommending a gross repurchase level of

approximately 4-5 million shares per year for the plan

period. With approximately 3-4 million shares expected

to be issued each year through options and other equity

incentive programs, our planned repurchase level should

result in a net retirement of 1-2 million shares per

year in each of the next 3 years. This will allow us

to invest for our continued growth while returning us

to an optimal capital mix.

After the board of directors had considered the materials

that had been presented regarding these matters, the board

approved resolutions regarding the use of the LLC and Eagle

Publishing in Times Mirror’s share repurchase program.

On May 3, 1999, Udovic distributed a memorandum to, among

others, Unterman, Gastler, Niese, and Behnia regarding the

amendment of MB Parent’s restated certificate of incorporation to

permit the payment of dividends on the shares of MB Parent’s

common stock.

Udovic’s memorandum contained the following

statements:

In connection with distributing to Times Mirror the

income of Eagle New Media Investments, LLC, attached is

a draft of a Restated Certificate of Incorporation of

CBM Acquisition Parent Co., Section 3(e) of Article V

of which has been amended to permit the payment of

dividends on shares of common stock. * * * Also

attached are drafts of Board and shareholder

resolutions approving the Restated Certificate of

Incorporation.

I have sent these drafts to Charlie Fontaine at Reed

who has agreed to coordinate having the Restated

Certificate approved and filed and dividends paid to

Times Mirror. The amounts currently proposed to be

- 84 paid to Times Mirror as dividends are $14,808,000 for

the period ended December 31, 1998 and $4,536,000

(which is 65% of Eagle New Media’s post-preferred

dividend net income) for the quarter ended March 31,

1999. * * *

Reed agreed to the proposed amendment to MB Parent’s

restated certificate of incorporation because (1) Reed had no

interest in the profits generated by the LLC and (2) Reed

understood that none of the $1.375 billion that had been

contributed to the LLC would ever be returned to Reed.

On June 24, 1999, the board of directors of MB Parent

adopted resolutions that approved (1) the amendment of

MB Parent’s restated certificate of incorporation to permit the

payment of dividends on the shares of MB Parent’s common stock

and (2) the declaration and payment of dividends on MB Parent’s

common stock and voting preferred stock.

These resolutions

stated, in pertinent part, the following:

Amendment of the Restated Certificate of

Incorporation of the Corporation.

RESOLVED, that the Restated Certificate of

Incorporation of the Corporation be further amended by

changing subsection (e) of Section 3 of the Article

thereof numbered “Article V” so that, as amended, said

subsection of said Article shall be and read as

follows:

“(e) Restrictions on Junior Payments. So long as

any shares of Voting Preferred Stock are

outstanding, the corporation shall not, except

only upon the unanimous vote of the Board of

Directors, (i) declare, pay or set apart for

payment any dividend on, or make any distribution

- 85 in respect of, Junior Securities or any warrants,

rights, calls or options exercisable for, or

convertible into, any Junior Securities, either

directly or indirectly, whether in cash,

obligations or shares of the corporation or other

property (other than distributions or dividends

solely in the form of a particular class or series

of Junior Securities, or warrants, rights, calls

or options exercisable for, or convertible into,

such Junior Securities, to holders of such Junior

Securities), (ii) make any payment on account of,

or set apart for payment money for a sinking or

other similar fund for the purchase, redemption,

retirement or other acquisition for value of any

of, or redeem, purchase, retire or otherwise

retire for value any of, Junior Securities (other

than as a result of a reclassification of Junior

Securities or the exchange or conversion of one

class or series of Junior Securities for or into

another class or series of Junior Securities) or

any warrants, rights, calls or options exercisable

for, or convertible into, any of the Junior

Securities, or (iii) permit any corporation or

other entity directly or indirectly controlled by

the corporation to purchase, redeem, retire or

otherwise acquire for value any of the Junior

Securities or any warrants, rights, calls or

options exercisable for, or convertible into, any

Junior Securities.”

Declaration of Dividends.

RESOLVED, that, subject to the receipt of dividends due

to the Corporation upon the shares of capital stock of

MB held by the Corporation in respect of the period

from August 1, 1998 through June 30, * * * [1999], the

Corporation declare and pay dividends upon its capital

stock in respect of the period from August 1, 1998,

through June 30, 1999 as set forth below:

Class of Shares

Common Stock, par value

$0.01 per share

Voting Preferred Stock,

par value $0.01

per share

Gross Amount

Amount per Share

$21,160,000.00

$21,160.00

$ 3,466,145.20

866.5653

- 86 ; and further

RESOLVED, that, in accordance with Section 15 of that

certain Limited Liability Company Agreement dated as of

July 28, 1998 (the “LLC Agreement”) among CBM

Acquisition Parent Co., LEXIS Inc. and The Times Mirror

Company (“TMC”), all Delaware corporations, the

Corporation demand from Eagle New Media Investments,

LLC, a Delaware limited liability company, a

distribution in the amount of Twenty-One Million Eight

Hundred Two Thousand Seventy Dollars and Eighty-Seven

Cents ($21,802,070.87), to be paid not later than

July 1, 1999 to partially fund the aforesaid dividends;

* * *

Also on June 24, 1999, MB Parent’s stockholders, i.e., REUS,

REBV, and TMD, adopted resolutions that approved of the amendment

to MB Parent’s restated certificate of incorporation.

On June 30, 1999, Times Mirror, acting in its capacity as

manager of the LLC, approved a distribution of $21,802,070.87

from the LLC to MB Parent.

MB Parent used this distribution to

pay the dividends that had been declared on its common stock and

its preferred stock on June 24, 1999.

In this regard, MB Parent

distributed $21,160,000 to TMD and $642,070.87 (i.e., the

difference between the $3,466,145.20 dividend that MB Parent had

declared on its preferred stock and the $2,824,074.33 dividend

that had accumulated on the Bender participating preferred stock

owned by MB Parent between August 1, 1998, and June 30, 1999) to

REUS and REBV.

MB Parent neither declared nor made any other

dividend distributions from the time of MB Parent’s organization

to the end of 2000.

- 87 Summary of the LLC’s Investment Activity During 1999

During 1999, Times Mirror directed the LLC to purchase

(1) approximately 2.1 million shares of Times Mirror common stock

for between $125 million and $135 million; (2) interests in

several Internet media companies; (3) Newport Media, Inc., for

$132 million; (4) Airspace Safety Analysis Corp. and ASAC

International, LLC, for $14.5 million; and (5) ValuMail, Inc.

Times Mirror also directed the LLC to contribute $233,252,000 to

TMCT II, LLC, an entity formed for the purpose of retiring stock

held by the Chandler Trusts.

Times Mirror’s and MB Parent’s Income Tax Returns for 1998

On September 14, 1999, Gastler signed Times Mirror’s Form

1120, U.S. Corporation Income Tax Return, for 1998.

Times Mirror

did not disclose any information concerning the Bender

transaction on this Form 1120 or on any attachments to this

Form 1120.

On September 15, 1999, Vera Lang, treasurer of MB Parent,

signed MB Parent’s Form 1120 for 1998.

Attached to MB Parent’s

Form 1120 for 1998 was Schedule L, Balance Sheet per Books, on

which MB Parent reported its total assets.

According to the

Schedule L, the following amounts comprised MB Parent’s total

assets as of the end of 1998:

(1) $1,613,268 of “Other current

assets” and (2) $1,457,251,204 of “Other investments”.

Furthermore, the following amounts comprised MB Parent’s “Other

- 88 investments” as of the end of 1998:

(1) $61,616,016 of “OTHER

INVESTMENTS” held by MB Parent; (2) $867,197,048 of “OTHER

INVESTMENTS” held by the LLC; and (3) $528,438,140 of “Marketable

securities” held by the LLC.

MB Parent also reported the value

of its capital stock on this Schedule L.

According to the

Schedule L, $68,750,000 of preferred stock comprised the total

value of MB Parent’s capital stock as of the end of 1998.

MB Parent did not report a value for its common stock on this

Schedule L.

In addition, MB Parent reported its additional paid-

in capital on this Schedule L.

According to the Schedule L, the

value of MB Parent’s additional paid-in capital was

$1.375 billion as of the end of 1998.

The Internal Revenue Service (IRS) began its audit of Times

Mirror’s Form 1120 for 1998 sometime during February 2000.

March 15, 2000, Gastler signed the cover sheet to a packet of

documents that Times Mirror provided to the IRS as part of this

audit.

Included in this packet of documents was Form 8275,

Disclosure Statement, for the period January 1, 1997, through

December 31, 1998, for Times Mirror and its subsidiaries.

Referenced in an attachment to the Form 8275 were “Statements

previously submitted on February 18, 2000, indicating

reorganization of Matthew Bender and Company, per IRC

Section 368.”

These statements included the following:

- 89 MATTHEW BENDER & COMPANY

STATEMENT PURSUANT TO IRC

REG. 1.368-3

Matthew Bender & Company was disposed of pursuant to an

agreement and plan of merger dated April 27, 1998 by

and between The Times Mirror Company, TMD Inc, a wholly

owned subsidiary of Times Mirror and Reed Elsevier U.S.

Holdings Inc., Reed Elsevier Overseas BV,

CBM Acquisition Parent Co, MB Parent and CBM MergerSub

Corp. The transactions are fully described in the plan

of merger attached. The purpose of the transaction was

to dispose of Matthew Bender in a transaction that

would qualify as reorganization under Section 368 of

the Internal Revenue Code of 1986 as amended.

Times Mirror’s Financial Reporting Following the Close of the

Bender Transaction

On August 13, 1998, Unterman signed Times Mirror’s

Form 10-Q, Quarterly Report Pursuant To Section 13 or 15(d) of

the Securities Exchange Act of 1934, for the company’s quarterly

period ended June 30, 1998 (August 13, 1998, Form 10-Q).

Included in the August 13, 1998, Form 10-Q were condensed

consolidated financial statements for Times Mirror, notes to the

condensed consolidated financial statements, all of which were

unaudited, and management’s discussion and analysis of the

company’s financial condition and the results of the company’s

operations.

The notes to these financial statements contained,

in pertinent part, the following comments:

Note 3–-Discontinued Operations

The Company signed definitive agreements with Reed

Elsevier plc on April 26, 1998 for the disposition of

Matthew Bender & Company, Incorporated (Matthew

Bender), the Company’s legal publisher, in a tax-free

reorganization and the sale of Times Mirror’s 50%

- 90 ownership interest in Shepard’s. The two transactions

were valued at $1.65 billion in the aggregate and were

completed on July 31, 1998. The disposition of Matthew

Bender was accomplished through the merger of an

affiliate of Reed Elsevier with and into Matthew Bender

with Matthew Bender as the surviving corporation in the

merger. As a result of the merger, TMD, Inc., a wholly

owned subsidiary of Times Mirror, received all of the

issued and outstanding common stock of CBM Acquisition

Parent Co. (MB Parent). MB Parent is a holding company

that owns controlling voting preferred stock of Matthew

Bender with a stated value of $61,616,000 and

participating stock of Matthew Bender. MB Parent is

also the sole member of Liberty Bell I, LLC (Liberty

Bell I). Affiliates of Reed Elsevier own voting

preferred stock of MB Parent with a stated value of

$68,750,000 which affords them voting control over

MB Parent, subject to certain rights held by Times

Mirror with respect to Liberty Bell I. Concurrently

with the closing of the merger, the Company became the

sole manager of Liberty Bell I and controls its

operations and assets. At the time of the merger, the

principal asset of Liberty Bell I was $1,375,000,000 of

cash. The consolidated financial statements of Times

Mirror will include the accounts of Liberty Bell I.

The portion of the August 13, 1998, Form 10-Q entitled

“Management’s Discussion and Analysis of Financial Condition and

Results of Operations” included the following statements:

General

In the second quarter of 1998, the Company reached

agreements to divest its legal publisher

Matthew Bender & Company, Incorporated (Matthew

Bender), its 50% ownership interest in legal citation

provider Shepard’s, and its health sciences publisher

Mosby, Inc. (Mosby). On July 31, 1998, the Company

completed the divestiture of Matthew Bender in a taxfree reorganization and the sale of the Company’s

interest in Shepard’s to Reed Elsevier plc. The two

transactions were valued at $1.65 billion in the

aggregate. * * *

In anticipation of the expected impact of the

divestitures, the Company has begun a comprehensive

- 91 review of its business configurations, operating

systems and other investments to determine economically

attractive actions it can take to prepare for future

growth. * * *

In addition, the pace of share repurchase activity

will be accelerated to result in the repurchase of

approximately 9.0 million shares of Series A common

stock in 1998. The Company purchased 2.1 million

shares through the 1998 second quarter. On July 27,

1998, the Company entered into a forward purchase

contract to purchase 2.0 million shares of Series A

common stock. Additionally, 2.7 million shares of

Series A common stock were purchased subsequent to

June 30, 1998.

Liquidity and Capital Resources

Acquisitions and Dispositions

* * * Concurrently with the closing of the Matthew

Bender transaction, the Company became the sole manager

of Liberty Bell I, LLC (Liberty Bell I), the principal

asset of which was approximately $1.38 billion of cash.

Subsequent to such closing, Liberty Bell I purchased

2.7 million shares of the Company’s Series A common

stock. The Company intends to deploy the remaining

assets of Liberty Bell I to finance acquisitions and

investments, including purchases of the Company’s

common stock, and does not intend to use those funds

for the Company’s working capital purposes or to retire

the Company’s debt. * * *

Common Share Repurchases

The Company repurchased 2.1 million and

6.5 million shares of its Series A common stock during

the year to date periods ended June 30, 1998 and 1997,

respectively. On July 27, 1998, the Company entered

into a forward purchase contract to purchase

- 92 2.0 million shares of Series A common stock.

Additionally, Liberty Bell I purchased 2.7 million

shares of Series A common stock subsequent to June 30,

1998. The Company believes that the purchase of shares

of its common stock by Liberty Bell I is an attractive

investment for Liberty Bell I that will also enhance

Times Mirror shareholder value as well as offset

dilution from the shares of common stock issued under

the Company’s stock-based employee compensation and

benefit programs. * * *

On August 17, 1998, Unterman signed Times Mirror’s Form 8-K,

Current Report Pursuant To Section 13 or 15(d) of the Securities

Exchange Act of 1934, which reported the events of July 31, 1998,

to the Securities and Exchange Commission (SEC) (August 17, 1998,

Form 8-K).

Included in the August 17, 1998, Form 8-K was an

unaudited pro forma condensed consolidated balance sheet that

reflected Times Mirror’s disposition of Bender and its 50-percent

interest in Shepard’s.

The adjustments shown in the pro forma

condensed consolidated balance sheet gave effect to Times

Mirror’s disposition of Bender and its 50-percent interest in

Shepard’s as if those transactions had occurred on June 30, 1998.

In so doing, the pro forma condensed consolidated balance sheet

recorded the gain on Times Mirror’s disposition of Bender and its

50-percent interest in Shepard’s by debiting “Cash and cash

equivalents”, an asset category, $1,649,650,000.

On February 22, 1999, Willes signed Times Mirror’s annual

shareholder report for 1998.

In the section entitled “Letter to

Shareholders”, Willes made the following statements:

- 93 1998 was a record year for Times Mirror. * * *

Clearly our biggest accomplishment last year was the

divestiture of Matthew Bender and Mosby for over

$2 billion in value, a whopping 17 times cash flow.

These transactions eliminated a major strategic

vulnerability for the company. And because they were

done in a tax-efficient way, we can redeploy the

resources in ways that will enhance the earnings power

of Times Mirror.

In addition, the section entitled “A Crisis of Growth” contained

the following statements:

In 1998 * * * [Newsday] again increased

circulation and revenue, partly because it employed

innovative ventures to do so. * * * It has organized

a separate effort to distribute advertising shoppers

throughout Long Island and New York City and a Times

Mirror affiliate just recently acquired a chain of

weekly papers to increase Newsday’s role in printed

advertising in its circulation area.

Fortunately for a company responding to a changing

world, Times Mirror has immense resources. The sale in

1998 of the Matthew Bender and Mosby legal and medical

publishing units has given Times Mirror a gain of

$1.35 billion.

That enormous chunk of capital awaits redeployment

in Times Mirror operations or in acquisition of other

companies. * * *

* * * Times Mirror is budgeting $300 million for

acquisitions in 1999. * * *

* * * Chains of small newspapers are being

acquired in the circulation areas of Newsday and The

Baltimore Sun. Up to $50 million a year is being

invested in venture capital backing for Internet startups to gain expertise and give the company expertise

and participation in developing technologies.

* * * The big $1.3-billion proceeds from the

Mosby-Bender sale would be brought into play if

newspaper acquisition opportunity came up in adjacent

- 94 markets, such as San Diego or Las Vegas. Times Mirror

could swing a very big acquisition: With its own

capital plus borrowing power, the company could easily

finance a $4-billion, even a $5-billion acquisition.

The section entitled “Financial Questions and Answers” contained

the following statements:

Following the 1998 divestitures, Times Mirror has

considerable cash resources. What are your priorities

for reinvestment?

Times Mirror has significant financial flexibility as

we enter 1999. With control over more than $1 billion

of cash resources and further debt capacity available,

we are very well positioned to pursue new

opportunities.

Unterman and Times Mirror’s board of directors signed Times

Mirror’s 1998 Form 10-K on March 4, 1999.

Part I contained the

following statements:

During 1998, Times Mirror engaged in several

strategic transactions including the divestiture of

Matthew Bender & Company, Incorporated, a publisher of

legal information, the Company’s 50% interest in

Shepard’s, a legal citation provider, and Mosby, Inc.,

a publisher of health science information. * * * In

February 1999, an investment affiliate of the Company

acquired Newport Media, Inc., a publisher of shopper

publications in the Long Island and New Jersey areas.

The Company continued to have an active share

purchase program with a total of 16.7 million shares of

Series A Common Stock acquired by the Company or its

affiliates during 1998 * * *. In 1998, the Company, in

anticipation of the expected impact of divestitures,

also began a comprehensive review of its business

configurations, operating systems and other investments

to determine economic actions it could take to prepare

for future growth. * * *

Part II contained, among other information, management’s

discussion and analysis of the company’s financial condition and

- 95 results of operations, the audited consolidated financial

statements for Times Mirror, and the notes to the company’s

consolidated financial statements.

According to Times Mirror’s

consolidated balance sheets, the company’s current assets totaled

$1,629,259,000 as of December 31, 1998, and its total assets

amounted to $4,218,306,000 as of that time.

Both of these

amounts included the “proceeds of reorganization”, i.e., the

proceeds from (1) the Bender transaction, (2) the sale of Times

Mirror’s 50-percent interest in Shepard’s, and (3) the Mosby

transaction.

The portion of part II of Times Mirror’s 1998 Form 10-K that

comprised management’s discussion and analysis of Times Mirror’s

financial condition and results of operations contained the

following statements:

OVERVIEW

The Company achieved record earnings in 1998 with

net income of $1.42 billion, or $16.06 per share on a

diluted basis, compared with 1997 net income of

$250.3 million, or $2.29 per share. The 1998 results

reflect:

•

An after-tax gain of $1.35 billion, or $15.50

per share, on the disposition of Matthew

Bender/Shepard’s and Mosby and $30.8 million,

or $.35 per share, of after-tax losses

associated with discontinuance of certain

other businesses.

•

Share purchases in 1998 which reduced

the number of shares of common stock

outstanding for financial reporting

- 96 purposes to 73.4 million at December 31,

1998 compared with 87.9 million at

December 31, 1997.

Discontinued Operations

On July 31, 1998, the Company completed the

divestiture of Matthew Bender & Company, Incorporated

and its 50% ownership in legal citation provider

Shepard’s to an affiliate of Reed Elsevier, Inc. in a

transaction valued at $1.65 billion. Additionally, on

October 9, 1998, the Company completed the divestiture

of Mosby, Inc., its health science and medical

publisher, to Harcourt General, Inc. in a transaction

valued at $415.0 million.

Share Purchases

Share purchases continued in 1998 through open

market transactions, accelerated purchases and

purchases by an affiliated limited liability co

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