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