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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 1, 1995
Commission File Number 0-13069
SOFTKEY INTERNATIONAL INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 94-2562108
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
ONE ATHENAEUM STREET
CAMBRIDGE, MASSACHUSETTS 02142
(Address of Principal Executive Offices)
(617) 494-1200
(Registrant's Telephone Number, Including Area Code)
Indicate by check whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
As of August 4, 1995, there were 23,289,499 outstanding shares of the
issuer's Common Stock, par value $.01 per share.
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SOFTKEY INTERNATIONAL INC.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
<TABLE>
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Page
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ITEM 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets at
June 30, 1995 and December 31, 1994...................................... 3
Condensed Consolidated Statements of
Operations for the Three and Six Months
Ended June 30, 1995 and 1994............................................. 4
Condensed Consolidated Statements of
Cash Flows for the Six Months
Ended June 30, 1995 and 1994............................................ 5
Notes to Condensed Consolidated Financial Statements..................... 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................................... 8
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings........................................................ 11
ITEM 4. Submission of Matters to a Vote of Security Holders ..................... 11
ITEM 6. Exhibits and Reports on Form 8-K......................................... 11
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
SOFTKEY INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
-------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 93,398 $ 12,205
Accounts receivable (less allowances for returns and
doubtful accounts of $6,385 and $6,744 respectively) 21,063 16,745
Inventories 9,982 9,795
Other current assets 7,882 8,247
-------- --------
132,325 46,992
Property and equipment, net 11,326 9,325
Goodwill, net 31,337 32,051
Other assets 2,648 2,447
-------- --------
$177,636 $ 90,815
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 16,958 $ 29,455
Current portion of long-term obligations 1,991 2,016
-------- --------
18,949 31,471
Long-term obligations 6,925 17,536
Deferred income taxes 4,339 4,323
-------- --------
30,213 53,330
STOCKHOLDERS' EQUITY 147,423 37,485
-------- --------
$177,636 $ 90,815
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
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SOFTKEY INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------- -------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $ 33,717 $ 26,786 $ 74,721 $ 62,090
COST OF REVENUES 9,953 9,333 22,414 21,743
------------- ------------- ------------- -------------
GROSS MARGIN 23,764 17,453 52,307 40,347
OPERATING EXPENSES:
Sales, marketing and support 6,702 6,442 15,416 12,941
General and administrative 4,945 5,154 10,336 11,117
Research and development 2,472 1,356 4,776 3,308
------------- ------------- ------------- -------------
14,119 12,952 30,528 27,366
------------- ------------- ------------- -------------
OPERATING INCOME 9,645 4,501 21,779 12,981
OTHER INCOME (EXPENSE), net
(342) 570 (689) 315
------------- ------------- ------------- -------------
INCOME BEFORE TAXES 9,303 5,071 21,090 13,296
PROVISION FOR INCOME TAXES 1,349 1,117 3,117 3,051
------------- ------------- ------------- -------------
NET INCOME $ 7,954 $ 3,954 $ 17,973 $ 10,245
============= ============= ============= =============
NET INCOME PER SHARE $ 0.35 $ 0.21 $ 0.79 $ 0.53
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING 23,012,000 20,228,000 22,713,000 20,079,000
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
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SOFTKEY INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 17,973 $ 10,275
Adjustments to reconcile net income to net cash used for
operating activities:
Depreciation and amortization 3,304 1,640
Changes in operating assets and liabilities:
Accounts receivable (4,318) (662)
Accounts payable and accruals (12,497) (5,332)
Other (1,733) (9,600)
--------- ---------
2,729 (3,679)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets, net (4,329) (1,409)
Other -- 518
--------- ---------
(4,329) (891)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under capital leases and long-term debt (1,472) (5)
Issuance of common stock, net 91,686 5,606
Repayment of line of credit (7,700) --
Redemption of series B preferred stock -- (4,660)
--------- ---------
82,514 941
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
279 684
--------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS 81,193 (2,945)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 12,205 22,797
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 93,398 $ 19,852
========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
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SOFTKEY INTERNATIONAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
1. BASIS OF PRESENTATION
The condensed consolidated financial statements for the three and six months
ended June 30, 1995 and 1994 are unaudited and reflect all adjustments,
consisting of normal recurring adjustments, which are, in the opinion of
management, necessary for a fair presentation of the results for the interim
periods. These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1994. The results of operations for the three and six months ended June 30,
1995 are not necessarily indicative of the results for the entire year ending
December 31, 1995.
The second quarter reporting period for 1995 ended on July 1, 1995 and the
second quarter reporting period for 1994 ended on July 2, 1994. For clarity of
presentation and comparison, the periods from January 1, 1995 to July 1, 1995
and from January 1, 1994 to July 2, 1994 are referred to as the "Six Months
Ended June 30, 1995" and "Six Months Ended June 30, 1994" respectively,
throughout these financial statements.
2. GOODWILL
Goodwill represents the excess of purchase price over fair market value of
identifiable assets acquired. The Company evaluates the carrying value of
goodwill for possible impairment on a quarterly basis. Based upon its most
recent analysis, the Company believes that no impairment of goodwill exists at
June 30, 1995.
3. LONG-TERM OBLIGATIONS
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
------------- -----------------
<S> <C> <C>
Revolving line-of-credit $ -- $ 7,700
Related party debt 964 2,123
Capital leases 2,098 2,411
Accrued minimum royalties 2,210 2,415
Other 3,644 4,903
--------- ---------
8,916 19,552
Less: current portion (1,991) (2,016)
--------- ---------
$ 6,925 $ 17,536
========= =========
</TABLE>
4. INVENTORIES
Inventories consist primarily of finished goods at June 30, 1995 and
December 31, 1994.
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5. COMPUTATION OF EARNINGS PER SHARE
Net income per share is computed using the weighted average number of common and
dilutive common stock equivalent shares outstanding during the period. Dilutive
common stock equivalent shares consist of convertible debentures and notes,
convertible Series A and Series B preferred stock in the Second Quarter 1994 and
stock options and warrants using the treasury stock method in both reporting
periods. The computations do not include common stock equivalents where the
effect would not be dilutive. Primary earnings per share computations do not
materially differ from fully diluted earnings per share.
6. COMMITMENTS AND CONTINGENCIES
Competition Act Inquiry (Canada)
On June 10, 1994, the Director of Investigation and Research under the
Competition Act (Canada) (the "Act") commenced an inquiry in Canada under the
non-criminal, reviewable practices provisions of the Act with respect to the
activities of SoftKey Software Products Inc. ("SoftKey Software") in the tax
preparation software business in Canada. On June 28, 1994, a court order
requiring SoftKey Software, along with other companies in the Canadian tax
preparation software business, to produce certain documents and information with
respect to the Canadian tax preparation software industry was issued by the
Federal Court of Canada Trial Division. SoftKey Software has had discussions
with the staff of the Canadian Bureau of Competition Policy and is currently
cooperating to provide the documents and information specified in the order. At
this time no formal application has been made seeking remedy under the Act.
Management does not currently expect that the outcome of this inquiry will have
a material adverse effect on the Company.
Other Litigation
The Company is involved in various legal proceedings involving copyrights,
breach of contract and various other claims incident to the conduct of its
business. Management does not expect the Company to suffer any material
liability by reason of such actions.
7. SUBSEQUENT EVENTS
Agreement to acquire of Future Vision Holding, Inc.
On July 17, 1995, the Company announced it had signed a definitive acquisition
agreement to acquire all the outstanding capital stock of Future Vision Holding,
Inc., a multimedia software company, in exchange for the issuance of up to
1,116,784 shares of common stock. The transaction is expected to be accounted
for as a pooling-of-interests. The closing of the transaction is subject to
certain conditions, including expiration of applicable waiting periods under
pre-merger notification regulations.
Acquisition of tewi Verlag GmbH
On July 21, 1995, the Company acquired tewi Verlag GmbH ("Tewi"), a publisher
and distributor of CD-ROM software and computer related books, located in
Munich, Germany. The purchase price was settled by a combination of cash and
issuance of common stock. The Company issued 99,045 shares of common stock and
paid $13,024 for all of the share capital of Tewi. The transaction will be
accounted for as a purchase.
Redemption of Warrants
On July 31, 1995, the Company announced that it would redeem all of its
2,925,000 publicly traded warrants for $.10 per warrant on August 31, 1995 in
accordance with the terms and conditions of the warrants. The redemption is
conditioned on the per share closing price of SoftKey's common stock being at
least equal to $37.50 for 20 of the 30 trading days preceding the redemption
date. In lieu of receiving $.10 per warrant, holders may exercise their warrants
at any time prior to the redemption in accordance with the terms of the
warrants.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following information should be read in conjunction with the consolidated
financial statements and the notes thereto and in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations in the
Company's Annual Report on Form 10-K for the year ended December 31, 1994. All
dollar amounts presented in this Management's Discussion and Analysis of
Financial Condition and Results of Operations are presented in thousands, except
per share amounts.
INTRODUCTION
SoftKey International Inc. (the "Company") is a leading developer and publisher
of value-priced, high quality consumer software for PC's, primarily produced on
CD-ROM. The Company develops, licenses, manufactures, distributes and markets a
wide range of consumer titles in the lifestyle, edutainment, productivity,
entertainment and education categories. In addition, the Company develops,
markets and distributes income tax software and provides comprehensive
nationwide tax processing for personal, corporate and trust tax returns in
Canada.
RESULTS OF OPERATIONS
NET INCOME. The Company generated net income of $7,954 ($0.35 per fully
diluted share) on revenues of $33,717 in Second Quarter 1995 and net income of
$17,973 ($0.79 per fully diluted share) on revenues of $74,721 in the Six Months
Ended June 30, 1995 as compared to net income of $3,954 ($0.21 per fully diluted
share) on revenues of $26,786 in Second Quarter 1994 and net income of $10,245
($0.53 per fully diluted share) on revenues of $62,090 in the Six Months Ended
June 30, 1994. The increase in both the Second Quarter 1995 as compared to the
Second Quarter 1994 and in the Six Months Ended June 30, 1995 as compared to the
Six Months Ended June 30, 1994 is a result of several factors, including
increases in revenues and gross margins, reductions in certain operating
expenses as a percentage of revenue and the introduction of new product
offerings.
REVENUES. Revenues by distribution channel for the Second Quarter 1995 as
compared to the Second Quarter 1994 and for the Six Months Ended June 30, 1995
as compared to the Six Months Ended June 30, 1994 are as follows:
<TABLE>
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
---------------------------------- -----------------------------------
1995 % 1994 % 1995 % 1994 %
------- ---- ------- ---- ------- ----- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Retail $16,708 50% $11,116 42% $31,965 43% $19,972 32%
OEM 2,440 7 3,550 13 5,404 7 6,946 11
Catalog -- -- 285 1 -- -- 3,176 5
Direct mail 6,611 20 3,538 13 13,379 18 7,190 12
International 4,433 13 2,856 11 8,502 11 5,808 9
Tax software and services 3,525 10 4,093 15 15,471 21 15,829 26
Lansa software -- -- 1,348 5 -- -- 3,169 5
------- --- ------- --- ------- --- ------- ---
$33,717 100% $26,786 100% $74,721 100% $62,090 100%
======= === ======= === ======= === ======= ===
</TABLE>
Total revenues increased 26% in Second Quarter 1995 over Second Quarter 1994 and
20% for the Six Month Ended June 30, 1995 over the Six Months Ended June 30,
1994, in both cases due to several factors including growth in the retail
channel resulted from new product offerings and from an increased number of
retail distribution outlets carrying the Company's products; international sales
increased primarily as a result of the availability of additional translated
foreign language versions of English language products and the continued shift
to Windows-based applications on CD-ROM; tax software sales and services
experienced lower revenue in Canadian dollar terms due to increased competition
in the Canadian computerized tax preparation market; original equipment
manufacturer ("OEM") revenues declined due to continuing pricing pressures and
from a decrease in the percentage of the Company's products being distributed in
this channel; direct mail revenues increased as a result of an increase in the
frequency of product mailings and growth in the number of registered product end
users. Revenues for Second Quarter 1994 and for the Six Months Ended June 30,
1994 include $285 and $3,176, respectively, of revenues from
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the Company's Power Up catalog operation, which was closed in 1994. Revenues
from the Second Quarter 1994 and from the Six Months Ended June 30, 1994 also
include $1,348 and $3,169, respectively, of revenues from the Company's
subsidiary, Lansa USA, Inc. ("Lansa"), which was sold by the Company on
September 30, 1994.
COST OF REVENUES. Cost of revenues includes the cost of manuals, packaging,
diskettes, duplication, assembly and fulfillment charges. In addition, cost of
revenues includes royalties paid to third-party developers, inventory
obsolescence reserves and amortization of capitalized software development
costs. Gross margins for both the Second Quarter 1995 and for the Six Months
Ended June 30, 1995 increased to 70% as compared to 65% for Second Quarter 1994
and the Six Months Ended June 30, 1994, respectively. The improvement in both
periods is due primarily to the higher percentage of CD-ROM based sales and
direct mail sales. Cost of revenues were also lower on a percentage basis in
both periods due to the closing of the Power Up catalog operation and the sale
of the Lansa operation, each of which generated lower gross margins than the
Company's current operations.
OPERATING EXPENSES. The Company's operating expenses and the respective
percentages of revenues for Second Quarter 1995 as compared to Second Quarter
1994 and for the Six Months Ended June 30, 1995 as compared to the Six Months
Ended June 30, 1994 are as follows:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------------------ ------------------------------------------
% of % of % of % of
1995 Revenues 1994 Revenues 1995 Revenues 1994 Revenues
------- -------- ------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales, marketing and support $ 6,702 20% $ 6,442 24% $15,416 21% $12,941 21%
General and administrative 4,945 15% 5,154 19% 10,336 14% 11,117 18%
Research and development 2,472 7% 1,356 5% 4,776 6% 3,308 5%
------- -- ------- -- ------- -- ------- --
$14,119 42% $12,952 48% $30,528 41% $27,366 44%
======= == ======= == ======= == ======= ==
</TABLE>
Total operating expenses decreased as a percentage of revenues to 42% and 41% in
Second Quarter 1995 and in the Six Months Ended June 30, 1995, respectively,
compared with 48% and 44% in Second Quarter 1994 and in the Six Months Ended
June 30, 1994, respectively. The decrease in both periods is primarily the
result of reductions in operating infrastructure since the Three-Party
Combination, closures of the Power Up catalog operations and the sale of Lansa.
Sales, marketing and support expenses decreased to 20% of revenues in Second
Quarter 1995 compared to 24% of revenues in Second Quarter 1994. The decrease in
these expenses as a percentage of revenues is attributable primarily to the
overall revenue growth of the Company.
General and administrative expenses decreased to 15% and 14% of revenues in
Second Quarter 1995 and in the Six Month Period Ended June 30, 1995,
respectively, compared to 19% and 18% of revenues in Second Quarter 1994 and in
the Six Month Period ended June 30, 1994, respectively. The decrease in both
periods is principally attributable to a reduction in the number of employees as
a result of closure of the Power Up catalog operation and facilities in Barbados
and Marina del Rey, California and the sale of Lansa.
Research and development costs increased to 7% and 6% of revenues in Second
Quarter 1995 and in the Six Month Period Ended June 30, 1995, respectively,
compared to 5% of revenues in both the Second Quarter 1994 and in the Six Month
Period ended June 30, 1994. The increase in both periods is primarily the result
of a number of new product offerings which have been developed and introduced to
the market in 1995 as compared to 1994 including development of Windows95
platform based software titles.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased from $12,205 at December 31, 1994 to $93,398
at June 30, 1995. This increase is attributed primarily to the issuance of
2,713,106 shares of common stock in an underwritten public offering which
generated net proceeds of $74,434 to the Company, cash generated from operations
and cash received from the exercise of employee stock options.
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On September 30, 1994, SoftKey Inc., a wholly owned subsidiary of the Company,
amended its revolving line of credit (the "Line"), as amended on May 17, 1995,
to provide for a maximum availability of $20,000, subject to eligible accounts
receivable limits. Borrowings under the Line become due on July 1, 1997 and bear
interest at the prime rate. The Line is subject to certain financial covenants,
is secured by a general security interest in the assets of SoftKey Inc. and
certain other subsidiaries of the Company and is guaranteed by the Company.
During Second Quarter 1995, the $7,700 outstanding on the Line was repaid.
Income generated by the Company's subsidiaries in certain foreign countries
cannot be repatriated to the Company in the United States without payment of
additional taxes since the Company does not currently receive a U. S. tax credit
with respect to income taxes paid by the Company (including its subsidiaries) in
those foreign countries. The Company also conducts its tax software business in
Canada, which has experienced foreign currency exchange rate fluctuation. In
order to mitigate this exposure, the Company has purchased a Cdn $2,000 180 day
foreign exchange option contract expiring July 28, 1995. The Company believes
the existing cash is sufficient to meet its current and planned requirements for
the foreseeable future.
Cash flow from operations on a short-term basis is positively impacted by the
seasonality of the income tax software business in the first two quarters of the
calendar year. At the present time, the Company expects that its cash flows from
operations will be sufficient to finance the Company's operations for at least
the next twelve months. Longer term cash requirements are dictated by a number
of external factors, which include the Company's ability to launch new and
competitive products, the strength of competition in the consumer software
industry and the growth of the home computer market. The Company is continuously
evaluating products and technologies for acquisitions, however, no estimation of
short-term or long-term cash requirements for such acquisitions can be made at
this time.
FUTURE OPERATING RESULTS
The Company's future operating results are subject to a number of uncertainties,
including its ability to develop and introduce new products, the introduction of
competitive products and general economic conditions. In addition, the Company
expects the level of competition in the consumer software industry to become
more intense and that companies with greater access to capital, new products and
retail shelf space may enter its market. The Company may plan to seek
acquisitions of businesses, products or technologies in the future that are
complementary to its current business. There can be no assurance that the
Company will not encounter difficulties in integrating any such business,
product or technology.
The information contained in this Management's Discussion and Analysis of
Financial Condition and Results of Operations is provided pursuant to applicable
regulations of the Securities and Exchange Commission and is not intended to
serve as a basis for projections of future events.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On June 10, 1994, the Director of Investigation and Research under the
Competition Act (Canada) (the "Act") commenced an inquiry in Canada under the
non-criminal, reviewable practices provisions of the Act respecting the
activities of SoftKey Software Products Inc. ("SoftKey Software") in the tax
preparation software business in Canada. SoftKey Software is an Ontario
corporation and a wholly owned subsidiary of the Company. On June 28, 1994, a
court order requiring SoftKey Software, along with other companies in the
Canadian tax preparation software business, to produce certain documents and
information respecting the Canadian tax preparation software industry was issued
by the Federal Court of Canada Trial Division. SoftKey Software has had
discussions with the staff of the Canadian Bureau of Competition Policy and is
currently cooperating to provide the documents and information specified in the
order. At this time no formal application has been made seeking a remedy under
the Act. Management does not currently expect that the outcome of this inquiry
will have a material adverse effect on the Company.
The Company is involved in various legal proceedings involving, breach of
contract and various other claims incident to the conduct of its business.
Management does not expect the company to suffer any material liability by
reason of such actions.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The Company's 1995 Annual Meeting of Stockholders was held on May 25,
1995.
(b) The following directors were elected at the meeting, and no other
directors' terms of office continued after the meeting: Michael A. Bell, Robert
Gagnon, Kevin O'Leary, Michael J. Perik, Robert Rubinoff and Scott M. Sperling.
(c) The first matter voted upon at the meeting was the election of
Directors. Upon motion duly made and seconded, each of the nominees was elected
as a director to serve until the Company's 1996 Annual Meeting and until his
successor is elected and qualified. The votes for each of the nominees were
reported as follows:
<TABLE>
<S> <C> <C>
Michael A. Bell For: 17,086,564
Withheld: 259,336
Robert Gagnon For: 17,063,528
Withheld: 284,880
Kevin O'Leary For: 17,064,028
Withheld: 284,380
Michael J. Perik For: 17,077,808
Withheld: 270,600
Robert Rubinoff For: 17,077,808
Withheld: 268,092
Scott M. Sperling For: 17,086,706
Withheld: 259,194
</TABLE>
The second matter voted upon at the meeting was the ratification of the
Board's appointment of Coopers & Lybrand L.L.P. as independent public
accountants for the 1995 fiscal year. Upon motion duly made and seconded, such
appointment was approved. The votes were reported as follows:
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<TABLE>
<S> <C>
Coopers & Lybrand L.L.P. For: 17,223,492
Against: 10,002
Abstain: 112,472
</TABLE>
The third matter voted upon at the meeting was the approval and adoption of
a proposed amendment to the Company's Restated Certificate of Incorporation to
increase the number of authorized shares of Common Stock of the Company from
24,500,000 to 60,000,000. Upon motion duly made and seconded, such proposal was
approved and adopted. The votes were reported as follows:
<TABLE>
<S> <C>
Increase of Authorized Shares For: 14,381,824
Against: 2,667,074
Abstain: 263,260
Non-Votes: 33,808
</TABLE>
The fourth matter voted upon at the meeting was a proposal to approve the
Company's 1994 Non-Employee Director Stock Option Plan (the "1994 Plan"). Upon
motion duly made and seconded, such proposal was approved. The votes were
reported as follows:
<TABLE>
<S> <C>
Approval of 1994 Plan For: 11,249,384
Against: 3,559,870
Abstain: 1,185,967
Non-Votes: 1,350,745
</TABLE>
The fifth matter voted upon at the meeting was a proposal to approve certain
amendments to the Company's Long Term Equity Incentive Plan (the "LTIP"),
including increasing the number of shares issuable under the LTIP from 3,000,000
to 5,000,000. Upon motion duly made and seconded, such proposal was approved.
The votes were reported as follows:
<TABLE>
<S> <C>
Approval LTIP Amendments For: 12,115,117
Against: 3,705,333
Abstain: 140,793
Non-Votes: 1,384,723
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
2.1 Amended and Restated Combination Agreement by and among
WordStar International Incorporated, SoftKey Software Products
Inc., Spinnaker Software Corporation and SSC Acquisition
Corporation dated as of August 17, 1993, as amended(1)
3.1 Restated Certificate of Incorporation, as amended
3.2 Bylaws of the Company, as amended(2)
10.1 SoftKey Product Agreement dated April 6, 1994 by and between
the Company and R.R. Donnelley & Sons Company(3)
</TABLE>
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<TABLE>
<S> <C>
10.2 Employment Agreement dated May 27, 1994 by and between the
Company and Michael Perik(4)
10.3 Employment Agreement dated May 27, 1994 by and between the
Company and Kevin O'Leary(4)
10.4 Employment Agreement dated February 1, 1994 by and between the
Company and R. Scott Murray(3)
10.5 Employment Agreement dated October 8, 1993 by and between
SoftKey Software Products Inc. and David E. Patrick(2)
10.6 1991 Employee Payroll Stock Purchase Plan(5)
10.7 1994 Non-Employee Director Stock Option Plan(2)
10.8 Employment Agreement dated September 15, 1993 by and between
WordStar International Incorporated and Edward Sattizahn(4)
10.9 Employment Agreement dated June 20, 1994 by and between the
Company and Neal S. Winneg(4)
10.10 Credit Agreement dated as of September 30, 1994 between
SoftKey Inc. and Fleet Bank of Massachusetts, N.A.(6)
10.11 Employment Agreement dated March 1, 1994 by and between
SoftKey Software Products Inc. and Robert Gagnon(2)
10.12 Amendment No. 1 dated as of March 1, 1995, to Employment
Agreement dated as of February 1, 1994 by and between R. Scott
Murray and the Company(3)
10.13 Sublease Agreement dated as of January 5, 1995 by and between
Mellon Financial Services Corporation #1 and SoftKey Inc.(2)
10.14 Continuing Guaranty of Lease dated as of January 5, 1995 by
the Company in favor of Mellon Financial Services Corporation
#1.(2)
10.15 1990 Long Term Equity Incentive Plan, as amended and restated
through June 2, 1995.
10.16 1982 Employee and Consultant Stock Option and Purchase Plan(7)
10.17 Amendment dated as of May 17, 1995 by and between SoftKey Inc.
and Fleet Bank of Massachusetts, N.A., to Credit Agreement
dated as of September 30, 1994.
10.18 Stock Purchase Agreement by and among the Company, Flextech
Holdings Pte Ltd, Harry Fox, Joseph Abrams, Sol Rosenberg,
Mathew Barlow, Samuel Zemsky, K.H. Trustees Ltd., Seth Altholz
and Shelly Abrahami dated July 17, 1995
10.19 Share Purchase Agreement dated July 21, 1995 by and among the
Company, Ziff-Davis Verlag GmbH and Helmut Kunkel(8)
10.20 Earn-Out Agreement dated July 21, 1995 by and between the
Company and Helmut Kunkel(8)
</TABLE>
13
<PAGE> 14
<TABLE>
<S> <C>
11.1 Statement re: Computation of Per Share Earnings
</TABLE>
--------------------
(1) Incorporated by reference to schedules included in the Company's
definitive Joint Management Information Circular and Proxy Statement
dated December 27, 1993.
(2) Incorporated by reference to exhibits filed with the Company's Annual
Report on Form 10-K for the year ended December 31, 1994.
(3) Incorporated by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarterly period ended April 2,
1994.
(4) Incorporated by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarterly period ended July 2,
1994.
(5) Incorporated by reference to exhibits filed with the Company's Annual
Report on Form 10-K for the Transition period ended September 30, 1992.
(6) Incorporated by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarterly period ended October 1,
1994.
(7) Incorporated by reference to exhibits filed with the Company's Annual
Report on Form 10-K for the year ended June 30, 1991.
(8) Incorporated by reference to exhibits filed with the Company's Current
Report on Form 8-K dated July 21 1995.
(b) REPORTS ON FORM 8-K
The registrant filed a report on Form 8-K dated June 9, 1995 reporting
the filing of a registration statement for a public offering of common
stock.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SOFTKEY INTERNATIONAL INC.
August 14, 1995
/s/ R. Scott Murray
-------------------------------------------
R. Scott Murray
Chief Financial Officer
(principal financial and accounting officer)
15
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION Number
------ ----------- ------
<S> <C> <C>
2.1 Amended and Restated Combination Agreement by and among
WordStar International Incorporated, SoftKey Software Products
Inc., Spinnaker Software Corporation and SSC Acquisition
Corporation dated as of August 17, 1993, as amended(1)
3.1 Restated Certificate of Incorporation, as amended
3.2 Bylaws of the Company, as amended(2)
10.1 SoftKey Product Agreement dated April 6, 1994 by and between
the Company and R.R. Donnelley & Sons Company(3)
10.2 Employment Agreement dated May 27, 1994 by and between the
Company and Michael Perik(4)
10.3 Employment Agreement dated May 27, 1994 by and between the
Company and Kevin O'Leary(4)
10.4 Employment Agreement dated February 1, 1994 by and between the
Company and R. Scott Murray(3)
10.5 Employment Agreement dated October 8, 1993 by and between
SoftKey Software Products Inc. and David E. Patrick(2)
10.6 1991 Employee Payroll Stock Purchase Plan(5)
10.7 1994 Non-Employee Director Stock Option Plan(2)
10.8 Employment Agreement dated September 15, 1993 by and between
WordStar International Incorporated and Edward Sattizahn(4)
10.9 Employment Agreement dated June 20, 1994 by and between the
Company and Neal S. Winneg(4)
10.10 Credit Agreement dated as of September 30, 1994 between
SoftKey Inc. and Fleet Bank of Massachusetts, N.A.(6)
10.11 Employment Agreement dated March 1, 1994 by and between
SoftKey Software Products Inc. and Robert Gagnon(2)
10.12 Amendment No. 1 dated as of March 1, 1995, to Employment
Agreement dated as of February 1, 1994 by and between R. Scott
Murray and the Company(3)
10.13 Sublease Agreement dated as of January 5, 1995 by and between
Mellon Financial Services Corporation #1 and SoftKey Inc.(2)
10.14 Continuing Guaranty of Lease dated as of January 5, 1995 by
the Company in favor of Mellon Financial Services Corporation
#1.(2)
</TABLE>
16
<PAGE> 17
<TABLE>
<S> <C> <C>
10.15 1990 Long Term Equity Incentive Plan, as amended and restated
through June 2, 1995.
10.16 1982 Employee and Consultant Stock Option and Purchase Plan(7)
10.17 Amendment dated as of May 17, 1995 by and between SoftKey Inc.
and Fleet Bank of Massachusetts, N.A., to Credit Agreement
dated as of September 30, 1994.
10.18 Stock Purchase Agreement by and between SoftKey International
Inc., Flextech Holdings Pte Ltd,Harry Fox, Joseph Abrams, Sol
Rosenberg, Mathew Barlow, Samuel Zemsky, K.H. Trustees Ltd.,
Seth Altholz and Shelly Abrahami dated July 17, 1995
10.19 Share Purchase Agreement dated July 21, 1995 by and among the
Company, Ziff-Davis Verlag GmbH and Helmut Kunkel(8)
10.20 Earn-Out Agreement dated July 21, 1995 by and between the
Company and Helmut Kunkel(8)
11.1 Statement re: Computation of Per Share Earnings
</TABLE>
--------------------
(1) Incorporated by reference to schedules included in the Company's
definitive Joint Management Information Circular and Proxy Statement
dated December 27, 1993.
(2) Incorporated by reference to exhibits filed with the Company's Annual
Report on Form 10-K for the year ended December 31, 1994.
(3) Incorporated by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarterly period ended April 2,
1994.
(4) Incorporated by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarterly period ended July 2,
1994.
(5) Incorporated by reference to exhibits filed with the Company's Annual
Report on Form 10-K for the Transition period ended September 30, 1992.
(6) Incorporated by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarterly period ended October 1,
1994.
(7) Incorporated by reference to exhibits filed with the Company's Annual
Report on Form 10-K for the year ended June 30, 1991.
(8) Incorporated by reference to exhibits filed with the Company's Current
Report on Form 8-K dated July 21, 1995.
17
<PAGE> 1
EXHIBIT 3.1
[NOTE: THE FOLLOWING RESTATED CERTIFICATE OF INCORPORATION HAS BEEN
FURTHER RESTATED, FOR PURPOSES OF FILING THE SAME WITH THE SECURITIES
AND EXCHANGE COMMISSION ONLY, TO GIVE EFFECT TO THE CERTIFICATE OF
AMENDMENT OF THE RESTATED CERTIFICATE OF INCORPORATION OF SOFTKEY
INTERNATIONAL INC. FILED WITH THE SECRETARY OF STATE OF THE STATE OF
DELAWARE ON MAY 25, 1995.]
RESTATED CERTIFICATE OF INCORPORATION
OF
SOFTKEY INTERNATIONAL INC.
SoftKey International Inc. a corporation organized and
existing under the laws of the State of Delaware (the "Corporation"), the
original Certificate of Incorporation of which was filed with the Secretary of
State of the State of Delaware on October 1, 1986 under the nam Orporcim
Corporation, HEREBY CERTIFIES that this Restated Certificate of Incorporation
restating, integrating and amending its Certificate of Incorporation was duly
adopted by its Board of Directors in accordance with Sections 242 and 245 of
the general Corporation Law of the State of Delaware.
1. NAME. The name of the Corporation is "SoftKey International Inc."
2. REGISTERED OFFICE. The address of the registered office of the
Corporation in the State of Delaware is 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
3. PURPOSES. The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
4. Capital Stock
-------------
4.1 AUTHORIZED CAPITAL STOCK. The total number of shares of
all classes of capital stock that the Corporation is authorized to issue is
65,000,001, of which 60,000,000 shares are to be designated shares of "Common
Stock", each such share of Common Stock to have a par value of $0.01, 5,000,000
shares are to be designated shares of "Preferred Stock", each such share of
Preferred Stock to have a par value of $0.01, and one share is to be designated
the share of "Special Voting Stock," such share of Special Voting Stock to have
a par value of $1.00.
<PAGE> 2
4.2 Rights, Privileges and Restrictions.
------------------------------------
4.2.1 COMMON STOCK AND SPECIAL VOTING STOCK. The
rights, privileges and restrictions of the Common Stock and the Special Voting
Stock shall be set forth in this Section 4.
4.2.2 PREFERRED STOCK. The Board of Directors is
expressly authorized to provide for the issuance of all or any shares of the
Preferred Stock in one or more classes or series, and to fix for each such
class or series such voting powers, full or limited, or no voting powers, and
such distinctive designations, preferences and relative, participating,
optional or other special rights and such qualifications, limitations or
restrictions thereof, as shall be stated and expressed in the resolution or
resolutions adopted by the Board of Directors providing for the issuance of
such class or series and as may be permitted by the General Corporation Law of
the State of Delaware, including, without limitation, the authority to provide
that any such class or series may be (i) subject to redemption at such time or
times and at such price or prices; (ii) entitled to receive dividends (which
may be cumulative or non-cumulative) at such rates, on such conditions, and at
such times, and payable in preference to, or in such relation to, the dividends
payable on any other class or classes of stock, or of any other series of the
same or any other class or classes of stock, of the Corporation; (iii) entitled
to such rights upon the dissolution of, or upon any distribution of the assets
of, the Corporation; or (iv) convertible into, or exchangeable for, shares of
any other class or classes of stock, or of any other series of the same or any
other class or classes of stock, of the Corporation at such price or prices or
at such rates of exchange and with such adjustments; all as may be stated in
such resolution or resolutions.
4.3 Voting Rights of Common Stock and Special Voting Stock.
-------------------------------------------------------
4.3.1 GENERAL. Except as otherwise required by law
or this Restated Certificate, (i) each holder of record of Common Stock shall
have one vote in respect of each share of stock held by the holder on the books
of the Corporation, and (ii) the holder of record of the share of Special
Voting Stock shall have a number of votes equal to the number of outstanding
Exchangeable Non-Voting Shares ("Exchangeable Shares") of SoftKey Software
Products Inc. from time to time which are not owned by the Corporation, any of
its subsidiaries or any person directly or indirectly controlled by or under
common control of the Corporation, in each case for the election of directors
and on all matters submitted to a vote of
2
<PAGE> 3
stockholders of the Corporation. Any vacancy in the Board of Directors
occurring because of the death, resignation or removal of a director elected by
the holders of Common Stock and Special Voting Stock shall be filled by the
vote or written consent of the holders of such Common Stock and Special Voting
Stock or, in the absence of action by such holders, such vacancy shall be
filled by action of the remaining directors. A director elected by the holders
of Common Stock and Special Voting Stock may be removed from the Board of
Directors with or without cause by the vote or consent of the holders of such
Common Stock and Special Voting Stock, as provided by the Delaware General
Corporation Law. For the purposes hereof, "control" (including the correlative
meanings, the terms "controlled by" and "under common control of") as applied
to any person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of that person
through the ownership of voting securities, by contract or otherwise.
4.3.2 COMMON STOCK AND SPECIAL VOTING STOCK IDENTICAL
IN VOTING. In respect of all matters concerning the voting of shares, the
Common Stock and the Special Voting Stock shall vote as a single class and
such voting rights shall be identical in all respects.
4.4 LIQUIDATION. In the event of any liquidation,
dissolution or winding up of the Corporation, and subject to any prior rights
of holders of shares of Preferred Stock, the holders of Common Stock shall be
entitled to receive, pro rata, all of the remaining assets of the Corporation
available for distribution to its stockholders and the holders of Special
Voting Stock shall not be entitled to receive any such assets.
4.5 DIVIDENDS. The holders of shares of Common Stock shall
be entitled to receive, when, as and if declared by the Board of Directors, out
of the assets of the Corporation which are by law available therefor, dividends
payable either in cash, in property or in shares of capital stock and the
holders of Special Voting Stock shall not be entitled to receive any such
dividends.
4.6 SPECIAL VOTING STOCK. (a) Pursuant to the terms of that
certain Combination Agreement, dated as of August 17, 1993, as amended and
restated, by and among the Corporation, SoftKey Software Products Inc., an
Ontario corporation, Spinnaker Software Corporation, a Minnesota corporation
and SSC Acquisition Corporation, a Delaware corporation, one share of Special
Voting Stock is being issued to the trustee (the "Trustee") under the Voting
and Exchange Trust Agreement, dated as of February 4, 1994,
3
<PAGE> 4
by and between the Corporation, SoftKey Software Products Inc. and the Trustee.
(b) The holder of the share of Special Voting Stock is
entitled to exercise the voting rights attendant thereto in such manner as
such holder desires.
(c) At such time as the Special Voting Stock has no
votes attached to it because there are no Exchangeable Shares of SoftKey
outstanding which are not owned by the Corporation, any of its subsidiaries or
any person directly or indirectly controlled by or under common control of the
Corporation, and there are no shares of stock, debt, options or other
agreements of SoftKey Software Products Inc. which could give rise to the
issuance of any Exchangeable Shares of SoftKey Software Products Inc. to any
person (other than the Corporation, any of its subsidiaries or any person
directly or indirectly controlled by or under common control of the
Corporation), the Special Voting Stock shall be cancelled.
5. MANAGEMENT OF BUSINESS. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors, and the
directors need not be elected by ballot unless required by the Bylaws of the
Corporation.
6. BY-LAWS. In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors and the stockholders of the Corporation are
each expressly authorized to adopt, amend, or repeal the Bylaws of the
Corporation.
7. ARRANGEMENT WITH CREDITORS. Whenever a compromise or arrangement is
proposed between this Corporation and its creditors or any class of them and/or
between this Corporation and its stockholders or any class of them, any court
of equitable jurisdiction within the State of Delaware may, on the application
in a summary way of this Corporation or of any creditor or stockholder thereof
or on the application of any receiver or receivers appointed for this
Corporation under the provisions of Section 291 of Title 8 of the Delaware Code
or on the application of trustees in dissolution or of any receiver or
receivers appointed for this Corporation under the provisions of Section 279 of
Title 8 of the Delaware Code order a meeting of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said
court directs. If a majority in number representing three-fourths in value of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any
4
<PAGE> 5
compromise or arrangement and to any reorganization of this Corporation as
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the creditors or
class of creditors, and/or on all the stockholders or class of stockholders, of
this Corporation, as the case may be, and also on this Corporation.
8. Limitation of Liability and Indemnification of Directors.
---------------------------------------------------------
8.1 ELIMINATION OF CERTAIN LIABILITIES OF DIRECTORS. A director
of the Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law, or (iv) for
any transaction from which the director derived an improper personal benefit.
If the Delaware General Corporation Law is amended after approval by the
stockholders of this Section to authorize corporate action further eliminating
or limiting the personal liability of directors, then the liability of a
director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended. Any
repeal or modification of this Section by the stockholders of the Corporation
shall not adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification.
8.2 Indemnification and Insurance.
------------------------------
8.2.1 RIGHT TO INDEMNIFICATION. Each person who was or is
made a party or is threatened to be made a party to or is involved in any
action, suit or proceeding, whether civil, criminal, administrative, or
investigative (hereinafter a "proceeding"), by reason of the fact that he or
she, or a person of whom he or she is the legal representative, is or was a
director or officer, of the Corporation or is or was serving at the request of
the Corporation, as a director, officer, employee, or agent of another
corporation or of a partnership, joint venture, trust, or other enterprise,
including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged action in an official capacity as a director,
officer, employee, or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to its fullest extent authorized by the Delaware
5
<PAGE> 6
General Corporation Law, as the same exists or may hereafter be amended (but,
in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), against all
expense, liability, and loss (including attorneys' fees, judgments, fines,
Employee Retirement Income Security Act of 1974 excise taxes or penalties, and
amounts paid or to be paid in settlement) reasonably incurred or suffered by
such person in connection therewith, and such indemnification shall continue as
to a person who has ceased to be a director, officer, employee, or agent and
shall inure to the benefit of his or her heirs, executors, and administrators;
provided, however, that the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation. The right to indemnification conferred
in this Section shall be a contract right and shall include the right to be
paid by the Corporation the expenses incurred in defending any such proceeding
in advance of its final disposition; provided, however, that, if the Delaware
General Corporation Law requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding, shall be
made only upon delivery to the Corporation of an undertaking, by or on behalf
of such director or officer, to repay all amounts so advance if it shall
ultimately be determined that such director or officer is not entitled to be
indemnified under this Section or otherwise. The Corporation may, by action of
its Board of Directors, provide indemnification to employees and agents of the
Corporation with the same scope and effect as the foregoing indemnification of
directors and officers.
8.2.2 NON-EXCLUSIVITY OF RIGHTS. The right to
indemnification and the payment of expenses incurred in defending a proceeding
in advance of its final disposition conferred in this Section shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, provision of this Restated Certificate, Bylaw, agreement,
vote of stockholders, or disinterested directors or otherwise.
8.2.3 INSURANCE. The Corporation may maintain insurance,
at its expense, to protect itself and any director, officer, employee, or agent
of the Corporation or another corporation, partnership, joint venture, trust,
or other enterprise
6
<PAGE> 7
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability,
or loss under the Delaware General Corporation Law.
9. AMENDMENTS. The Corporation reserves the right to
amend and repeal any provision contained in this Restated Certificate, and to
take other corporate action to the extent and in the manner now or hereafter
permitted or prescribed by the laws of the State of Delaware. All rights
herein conferred are granted subject to this reservation.
IN WITNESS WHEREOF, SoftKey International Inc. has caused this
Restated Certificate of Incorporation to be signed in its name and on its
behalf and attested on this 4th day of February, 1994.
SOFTKEY INTERNATIONAL INC.
By /S/ Michael J. Perik
----------------------
Name: Michael J. Perik
Title: Chairman
ATTEST:
By /S/ David L. Lewis
-----------------------
Name: David L. Lewis
Title: Secretary
7
<PAGE> 1
Exhibit 10.15
-------------
SOFTKEY INTERNATIONAL INC.
LONG TERM EQUITY INCENTIVE PLAN
1. PURPOSE; DEFINITIONS.
A. PURPOSE. The purpose of the Plan is to provide selected
eligible employees of, and consultants to, SoftKey International Inc., a
Delaware corporation, its Subsidiaries (as defined herein) and Affiliates (as
defined herein) an opportunity to participate in SoftKey International Inc.'s
future by offering them long-term, performance-based and other incentives and
equity interests in SoftKey International Inc. so as to retain, attract and
motivate management personnel.
B. DEFINITIONS. For purposes of the Plan, the following terms
have the following meanings:
1. "AFFILIATE" means a parent or subsidiary corporation,
as defined in the applicable provisions (currently Section 425) of the Code.
2. "ANNUAL BASE SALARY" with respect to a participant
who is a Covered Employee as of the end of the year shall mean the annual rate
of base salary of such participant as in effect as of the first day of any
year, without regard to any optional or mandatory deferral of base salary
pursuant to a salary deferral arrangement.
3. "AWARD" means any award under the Plan, including any
Option, Stock Appreciation Right, Restricted Stock, Stock Purchase Right, or
Performance Share Award.
4. "AWARD AGREEMENT" means, with respect to each Award,
the signed written agreement between the Company and the Plan participant
setting forth the terms and conditions of the Award.
5. "BOARD" means the Board of Directors of the Company.
6. "CHANGE IN CONTROL" has the meaning set forth in
Section 10A.
7. "CHANGE IN CONTROL PRICE" has the meaning set forth
in Section 10C.
8. "CODE" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor.
9. "COMMISSION" means the Securities and Exchange
Commission and any successor agency.
<PAGE> 2
10. "COMMITTEE" means the Committee referred to in
Section 2, or the Board in its capacity as administrator of the Plan in
accordance with Section 2.
11. "COMPANY" means SoftKey International Inc., a
Delaware corporation.
12. "COVERED EMPLOYEE" has the meaning set forth in
Section 162(m)(3) of the Code.
13. "DEEP DISCOUNT OPTION" means an Option described in
Section 5B.1 and Section 5B.3.
14. "DISABILITY" means permanent and total disability as
determined by the Committee for purposes of the Plan.
15. "DISINTERESTED PERSON" has the meaning set forth in
Rule 16b-3(d)(3) under the Exchange Act and any successor definition adopted by
the Commission.
16. "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended from time to time, and any successor.
17. "FAIR MARKET VALUE" means as of any given date:
(a) If the Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market, the closing sale price for the Stock or the closing
bid, if no sales are reported, as quoted on such system or exchange (or the
largest such exchange) for the date the value is to be determined (or if there
are no sales for such date, then for the last preceding business day on which
there were sales), as reported in the Wall Street Journal or similar
publication.
(b) If the Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the mean
between the high bid and low asked prices for the Stock on the date the value
is to be determined (or if there are no quoted prices for the date of grant,
then for the last preceding business day on which there were quoted prices).
(c) In the absence of an established market for
the Stock, as determined in good faith by the Committee, with reference to the
Company's net worth, prospective earning power, dividend-paying capacity, and
other relevant factors, including the goodwill of the Company, the economic
outlook in the Company's industry, the Company's position in the industry and
its management and the values of stock of other corporations in the same or a
similar line of business.
18. "INCENTIVE STOCK OPTION" means any Option intended to
be and designated as an "Incentive Stock Option" within the meaning of Section
422 of the Code.
2
<PAGE> 3
19. "NON-QUALIFIED STOCK OPTION" means any Option that is
not an Incentive Stock Option or a Deep Discount Option.
20. "OUTSIDE DIRECTOR" has the meaning set forth in
Section 162(m).
21. "OPTION" means an Option granted under Section 5.
22. "PERFORMANCE SHARE" means the equivalent, as of any
time such assessment is made, of the Fair Market Value of one share of Stock.
23. "Performance Share Award" means an Award under
Section 9.
24. "PLAN" means this SoftKey International Inc. Long
Term Equity Incentive Plan, as amended from time to time.
25. "PRE-TAX PROFIT" shall mean the net profit before
income taxes of the Company for each year determined in accordance with
generally accepted accounting principles and reported upon by the Company's
independent accountants.
26. "RESTRICTED STOCK" means an Award of Stock subject to
restrictions, as more fully described in Section 7.
27. "RULE 16b-3" means Rule 16b-3 under Section 16(b) of
the Exchange Act, as amended from time to time, and any successor rule.
28. "SECTION 162(m)" means Section 162(m) of the Code, as
amended from time to time, and any successor provision.
29. "STOCK" means the Common Stock, $0.01 par value, of
the Company, and any successor security.
30. "STOCK APPRECIATION RIGHT" means an Award granted
under Section 6.
31. "STOCK PURCHASE RIGHT" means an Award granted under
Section 8.
32. "SUBSIDIARY" has the meaning set forth in Section 425
of the Code.
33. "TERMINATION" means, for purposes of the Plan, with
respect to a participant, that the participant has ceased to be, for any
reason, with or without cause, an employee of, or a consultant to, the Company,
or a Subsidiary or Affiliate of the Company, such that such participant is
neither an employee of, or a consultant to, the Company, a Subsidiary, or any
Affiliate.
3
<PAGE> 4
2. ADMINISTRATION.
A. COMMITTEE. The Plan shall be administered by the Board or,
upon delegation by the Board, by a committee of the Board, composed, to the
extent required to comply with Rule 16b-3 (unless the Committee determines that
Rule 16b-3 is not applicable to the Plan), of not less than three Board
members, each of whom is a Disinterested Person and, to the extent required to
comply with Section 162(m) (unless the Committee determines that Section 162(m)
is not applicable to the Plan), each of whom is an Outside Director. In
connection with the administration of the Plan, the Committee shall have the
powers possessed by the Board. The Committee may act only by a majority of its
members, except that the Committee (i) may authorize any one or more of its
members or any officer of the Company to execute and deliver documents on
behalf of the Committee and (ii) so long as not otherwise required for the Plan
to comply with Rule 16b-3 (unless the Committee determines that Rule 16b-3 is
not applicable to the Plan) and so long as not otherwise required for the Plan
to comply with Section 162(m) (unless the Committee determines that Section
162(m) is not applicable to the Plan), may delegate to one or more officers or
directors of the Company authority to grant Awards to persons who are not
subject to Section 16 of the Exchange Act with respect to Stock and who are not
Covered Employees. The Board at any time may abolish the Committee and revest
in the Board the administration of the Plan.
B. AUTHORITY. The Committee shall grant Awards to eligible
employees and consultants. In particular and without limitation, the
Committee, subject to the terms of the Plan, shall:
1. Select the officers, other employees and consultants
to whom Awards may be granted;
2. Determine whether and to what extent Awards are to be
granted under the Plan;
3. Determine the number of shares to be covered by each
Award granted under the Plan;
(a) determine the terms and conditions of any
Award granted under the Plan and any related loans to be made by the Company,
based upon factors determined by the Committee;
(b) determine to what extent and under what
circumstances any Award payments may be deferred by a Plan participant; and
4. Make adjustments in the Performance Goals (as
hereinafter defined) in recognition of unusual or non- recurring events
affecting the Company or the financial statements of the Company, or in
response to changes in applicable laws, regulations, or accounting principles.
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C. COMMITTEE DETERMINATIONS BINDING. The Committee may adopt,
alter and repeal administrative rules, guidelines and practices governing the
Plan as it from time to time shall deem advisable, interpret the terms and
provisions of the Plan, any Award, any Award Agreement and otherwise supervise
the administration of the Plan. Any determination made by the Committee
pursuant to the provisions of the Plan with respect to any Award shall be made
in its sole discretion at the time of the grant of the Award or, unless in
contravention of any express term of the Plan or Award, at any later time. All
decisions made by the Committee under the Plan shall be binding on all persons,
including the Company and Plan participants.
3. STOCK SUBJECT TO PLAN.
A. NUMBER OF SHARES. The total number of shares of Stock
reserved and available for issuance pursuant to Awards under the Plan shall be
5,450,000 shares. Such shares may consist, in whole or in part, of authorized
and unissued shares or shares reacquired in private transactions or open market
purchases, but all shares issued under the Plan regardless of source shall be
counted against the 5,450,000 share limitation. If any Option terminates or
expires without being exercised in full or if any shares of Stock subject to an
Award are forfeited or if an Award otherwise terminates without a payment being
made to the participant in the form of Stock, the shares issuable under such
Option or Award shall again be available for issuance in connection with
Awards; provided that, to the extent required for the Plan to comply with Rule
16b-3, in the case of forfeiture, cancellation, exchange or surrender of shares
of Restricted Stock, the number of shares with respect to such Awards shall not
be available for Awards hereunder unless dividends paid on such shares are also
forfeited, canceled, exchanged or surrendered. If any shares of Stock subject
to an Award are repurchased by the Company, the shares issuable under such
Award shall again be available for issuance in connection with Awards other
than Options and Stock Appreciation Rights. To the extent an Award is paid in
cash, the number of shares of Stock representing, at Fair Market Value on the
date of the payment, the value of the cash payment shall not be available for
later grant under the Plan.
B. INDIVIDUAL LIMITS. In any year during the term of this Plan
(commencing January 1, 1995), no Plan participant can receive stock-based
Awards including Options, Stock Appreciation Rights which are granted without
reference to an Option, Restricted Stock, Stock Purchase Rights and Performance
Shares, relating to shares of Stock which in the aggregate exceed 20% of the
total number of shares of Stock authorized pursuant to the Plan, as adjusted
pursuant to the terms hereof.
C. ADJUSTMENTS. In the event of any merger, reorganization,
consolidation, recapitalization, stock dividend, stock split, spin-off, sale of
substantial assets or other change in corporate structure affecting the Stock,
such substitution or adjustments shall be made in the aggregate number and kind
of shares of Stock reserved for issuance under the Plan, in the number, kind
and exercise price of shares subject to outstanding Options, in the number,
kind and purchase price of shares subject to outstanding Stock Purchase Rights
and in the number and kind of shares subject to other outstanding Awards, as
may be determined to be
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appropriate by the Committee in its sole discretion; provided that the number
and kind of shares subject to any Award shall always be rounded down to the
nearest whole number; and provided further that with respect to Incentive Stock
Options, such adjustment shall be made in accordance with Section 424 of the
Code. Such adjusted exercise price shall also be used to determine the amount
payable by the Company upon the exercise of any Stock Appreciation Right
associated with any Option.
4. ELIGIBILITY.
Awards may be granted to officers and other employees of, and
consultants to, the Company, its Subsidiaries and its Affiliates (excluding any
person who serves only as a director).
5. STOCK OPTIONS.
A. TYPES. Any Option granted under the Plan shall be in such
form as the Committee may from time to time approve. The Committee shall have
the authority to grant to any Plan participant Incentive Stock Options, Deep
Discount Options, Non- Qualified Stock Options, or any type of Option (in each
case with or without Stock Appreciation Rights). No more than 625,000 shares
may be subject to Deep Discount Options. Incentive Stock Options may be
granted only to employees of the Company, its parent (within the meaning of
Section 425 of the Code) or its Subsidiaries. Any portion of an Option that
does not qualify as an Incentive Stock Option shall constitute a Non-Qualified
Stock Option.
B. TERMS AND CONDITIONS. Options granted under the Plan shall be
subject to the following terms and conditions:
1. OPTION TERM. The term of each Option shall be fixed
by the Committee, but no Incentive Stock Option shall be exercisable more than
ten years after the date the Option is granted, no Deep Discount Option shall
be exercisable more than 15 years after the date the Option is granted and no
Non-Qualified Stock Option shall be exercisable more than 11 years after the
date the Option is granted. If, at the time the Company grants an Incentive
Stock Option, the optionee owns directly or by attribution stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company or any Affiliate of the Company, the Incentive Stock Option shall not
be exercisable more than five years after the date of grant.
2. GRANT DATE. The Company may grant Options under the Plan at
any time and from time to time before the Plan terminates. The Committee shall
specify the date of grant or, if it fails to do so, the date of grant shall be
the date of action taken by the Committee to grant the Option; provided that no
Option may be exercised prior to execution of the applicable Award Agreement.
However, if an Option is approved in anticipation of employment, the date of
grant shall be the date the intended optionee is first treated as an employee
for payroll purposes.
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3. EXERCISE PRICE. The exercise price per share of Stock
purchasable under a Non-Qualified Stock Option shall be equal to at least 50%,
and not more than 100%, of the Fair Market Value on the date of grant, provided
that no Option granted to an employee whom the Committee determines is likely
to be a Covered Employee at the end of the year shall have an exercise price
below 100% of Fair Market Value on the date of grant. The exercise price per
share of Stock purchasable under a Deep Discount Option shall be equal to at
least 10% (or such other minimum price as may be established by the Internal
Revenue Service as a "safe harbor" against constructive receipt of income upon
grant of the Option by the recipient of the Option), and not more than 40%, of
the Fair Market Value on the date of grant, provided that no Deep Discount
Option may be granted to an employee who the Committee determines is likely to
be a Covered Employee at the end of the year. The exercise price per share of
Stock purchasable under an Incentive Stock Option shall be equal to at least
the Fair Market Value on the date of grant; provided that if at the time the
Company grants an Incentive Stock Option, the optionee owns directly or by
attribution stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company or any Affiliate of the Company the
exercise price shall be not less than 110% of the Fair Market Value on the date
the Incentive Stock Option is granted.
4. EXERCISABILITY. Subject to the other provisions of the Plan,
an Option shall be exercisable in its entirety at the time of grant or at such
times and in such amounts as are specified in the Award Agreement evidencing
the Option. The Committee, in its absolute discretion, at any time may waive
any limitations respecting the time at which an Option first becomes
exercisable in whole or in part.
5. METHOD OF EXERCISE; PAYMENT. To the extent the right to
purchase shares has accrued, Options may be exercised, in whole or in part,
from time to time, by written notice from the optionee to the Company stating
the number of Shares being purchased, accompanied by payment of the exercise
price for the shares. The Committee, in its discretion, may elect at the time
of Option exercise that any Non-Qualified Stock Option be settled in cash
rather than Stock.
6. NO DISQUALIFICATION. Notwithstanding any other provision in
the Plan, no term of the Plan relating to Incentive Stock Options shall be
interpreted, amended or altered nor shall any discretion or authority granted
under the Plan be exercised so as to disqualify the Plan under Section 422 of
the Code or, without the consent of the optionee affected, to disqualify any
Incentive Stock Option under such Section 422.
6. STOCK APPRECIATION RIGHTS.
A. RELATIONSHIP TO OPTIONS; NO PAYMENT BY PARTICIPANT. A Stock
Appreciation Right may be awarded either (i) with respect to Stock subject to
an Option held by a participant or (ii) without reference to an Option. If an
Option is an Incentive Stock Option, a Stock Appreciation Right granted with
respect to such Option may be granted only at the time of grant of the related
Incentive Stock Option, but if the Option is a Non-Qualified Stock Option, the
Stock Appreciation Right may be granted either simultaneously with the
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grant of the related Non-Qualified Stock Option or at any time during the term
of such related Non-Qualified Stock Option. No consideration shall be paid by
a participant with respect to a Stock Appreciation Right.
B. WHEN EXERCISABLE. A Stock Appreciation Right shall be
exercisable at such times and in whole or in part, each as determined by the
Committee, subject, with respect to Plan participants subject to Section 16(b)
of the Exchange Act, to Rule 16b-3. Any exercise by the participant of a Stock
Appreciation Right for cash shall be made only during the window period
specified in Rule 16b-3(e)(3)(iii) and any successor rule (the "Window
Period"), unless the Committee determines that Rule 16b-3 is not applicable to
the Plan. If a Stock Appreciation Right is granted with respect to an Option,
unless the Award Agreement otherwise provides, the Stock Appreciation Right may
be exercised only to the extent to which shares covered by the Option are not
at the time of exercise subject to repurchase by the Company.
C. EFFECT ON RELATED RIGHT; TERMINATION OF STOCK APPRECIATION
RIGHT. If a Stock Appreciation Right granted with respect to an Option is
exercised, the Option shall cease to be exercisable and shall be canceled to
the extent of the number of shares with respect to which the Stock Appreciation
Right was exercised. Upon the exercise or termination of an Option, related
Stock Appreciation Rights shall terminate to the extent of the number of shares
as to which the Option was exercised or terminated, except that, unless
otherwise determined by the Committee at the time of grant, a Stock
Appreciation Right granted with respect to less than the full number of shares
covered by a related Option shall not be reduced until the number of shares
covered by exercise or termination of the related Option exceeds the number of
shares not covered by the Stock Appreciation Right. A Stock Appreciation Right
granted independently from an Option shall terminate and shall be no longer
exercisable at the time determined by the Committee at the time of grant, but
not later than 10 years from the date of grant. Upon the Termination of the
participant, a Stock Appreciation Right granted with respect to an Option shall
be exercisable only to the extent to which the Option is then exercisable.
D. FORM OF PAYMENT UPON EXERCISE. Despite any attempt by a Plan
participant to elect payment in a particular form upon exercise of a Stock
Appreciation Right, the Committee, in its discretion, may elect to cause the
Company to pay cash, Stock, or a combination of cash and Stock upon exercise of
the Stock Appreciation Right.
E. AMOUNT OF PAYMENT UPON EXERCISE. Upon the exercise of a Stock
Appreciation Right, the Plan participant shall be entitled to receive one of
the following payments, as determined by the Committee under Section 6D.
hereof:
1. STOCK. That number of whole shares of Stock equal to
the number computed by dividing (A) an amount (the "Stock Appreciation Right
Spread"), rounded to the nearest whole dollar, equal to the product computed by
multiplying (x) the excess of (1) if the Stock Appreciation Right may only be
exercised during the Window Period, the highest Fair Market Value on any day
during the Window Period, and otherwise, the Fair Market
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Value on the date the Stock Appreciation Right is exercised, over (2) the
exercise price per share of Stock of the related Option, or in the case of a
Stock Appreciation Right granted without reference to an Option, such other
price as the Committee establishes at the time the Stock Appreciation Right is
granted, by (y) the number of shares of Stock with respect to which a Stock
Appreciation Right is being exercised by (B) (1) if the Stock Appreciation
Right may only be exercised during the Window Period, the highest Fair Market
Value during the Window Period in which the Stock Appreciation Right was
exercised, and (2) otherwise, the Fair Market Value on the date the Stock
Appreciation Right is exercised; plus, if the foregoing calculation yields a
fractional share, an amount of cash equal to the applicable Fair Market Value
multiplied by such fraction (such payment to be the difference of the
fractional share); or
2. CASH. An amount in cash equal to the Stock
Appreciation Right Spread; or
3. CASH AND STOCK. A combination of cash and Stock, the
combined value of which shall equal the Stock Appreciation Right Spread.
7. RESTRICTED STOCK.
Shares of Restricted Stock shall be subject to the following terms and
conditions:
A. PRICE. Plan participants awarded Restricted Stock, within 45
days of receipt of the applicable Award Agreement, which in no event shall be
later than ten (10) days after the Award grant date, shall pay to the Company,
if required by applicable law, an amount equal to the par value of the Stock
subject to the Award. If such payment is not made and received by the Company
by such date, the Award of Restricted Stock shall lapse.
B. RESTRICTIONS. Subject to the provisions of the Plan and the
Award Agreement, during a period set by the Committee, commencing with, and not
exceeding 10 years from, the date of such award (the "Restriction Period"), the
Plan participant shall not be permitted to sell, assign, transfer, pledge or
otherwise encumber shares of Restricted Stock. Within these limits, the
Committee may in its discretion provide for the lapse of such restrictions in
installments and may accelerate or waive such restrictions, in whole or in
part, based on service, performance or such other factors or criteria as the
Committee may determine.
C. DIVIDENDS. Unless otherwise determined by the Committee, cash
dividends with respect to shares of Restricted Stock shall be automatically
reinvested in additional Restricted Stock, and dividends payable in Stock shall
be paid in the form of Restricted Stock.
D. TERMINATION. Except to the extent otherwise provided in the
Award Agreement and pursuant to Section 7B., upon termination of a Plan
participant's employment for any reason during the Restriction Period, all
shares still subject to restriction shall be forfeited by the participant.
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E. SPECIAL PROVISIONS REGARDING AWARDS. Notwithstanding anything
to the contrary contained in this Section 7, (i) all awards of Restricted Stock
granted pursuant to this Section 7 to participants who are employees whom the
Committee determines are likely to be Covered Employees at the end of the year
shall have restrictions which will lapse contingent on the attainment of
performance goals based on the attainment of an amount of Pre-tax Profit of the
Company during a tax year and (ii) in no event shall the grant of Restricted
Stock in any fiscal year be made to an employee whom the Committee determines
is likely to be a Covered Employee at the end of the year with a Fair Market
Value as of the date of grant which exceeds the lesser of (i) 100% of such
Participant's Annual Base Salary and (ii) $500,000.
F. TIME AND FORM OF PAYMENT. In the case of Plan participants
who are Covered Employees as of the end of the year, unless otherwise
determined by the Committee, shares of Restricted Stock shall be released from
restrictions only after achievement of the applicable performance goals has
been certified by the Committee.
8. STOCK PURCHASE RIGHTS.
A. PRICE. The Committee may grant Stock Purchase Rights which
shall enable the recipients to purchase Stock at a price equal to not less than
50%, and not more than 100%, of Fair Market Value on the date of grant.
B. EXERCISABILITY. Stock Purchase Rights shall be exercisable
for a period determined by the Committee not exceeding 30 days from the date of
grant. The Committee, however, may provide that, if required under Rule 16b-3,
Stock Purchase Rights granted to persons subject to Section 16(b) of the
Exchange Act shall not become exercisable until six months and one day after
the grant date and shall then be exercisable for 10 trading days at the
purchase price specified by the Committee in accordance with Section 8A.
C. SPECIAL PROVISIONS REGARDING AWARDS. In no event shall any
awards be granted under this Section 8 to an employee who the Committee
determines is likely to be a Covered Employee at the end of the year.
9. PERFORMANCE SHARES.
A. AWARDS. The Committee shall determine the nature, length
(which shall in no event be greater than 10 years) and starting date of the
performance (the "Performance Period") for each Performance Share Award. The
consideration payable to a participant with respect to a Performance Share
Award shall be an amount determined by the Committee in the exercise of the
Committee's discretion at the time of the Award; provided that the amount of
consideration may be zero and may in no event exceed 50% of a Plan
participant's Annual Base Salary at the time of grant. The Committee shall
determine the performance objectives to be used in awarding Performance Shares
(the "Performance Goals") and the extent to which such Performance Shares have
been earned. Performance Periods may overlap and participants may participate
simultaneously with respect to Performance Share Awards that
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are subject to different Performance Periods and different performance factors
and criteria. At the beginning of each Performance Period, the Committee shall
determine for each Performance Share Award subject to such Performance Period
the number of shares of Stock (which may constitute Restricted Stock) to be
awarded to the participant at the end of the Performance Period if and to the
extent that the relevant measures of performance for such Performance Share
Award are met. Such number of shares of Stock may be fixed or may vary in
accordance with such performance or other criteria as may be determined by the
Committee. The Committee may provide that amounts equivalent to interest at
such rates as the Committee may determine or amounts equivalent to dividends
paid shall be payable with respect to Performance Share Awards. In addition
to the provisions set forth in Section 11J., the Committee, in its discretion,
may modify the terms of any Performance Share Award (except for those
Participants who are Covered Employees), including the specification and
measurement of performance goals.
B. TERMINATION OF EMPLOYMENT. Except as otherwise provided in
the Award Agreement or determined by the Committee, in the event of Termination
during a Performance Period for any reason, then the Plan participant shall not
be entitled to any payment with respect to the Performance Shares subject to
the Performance Period.
C. FORM OF PAYMENT. Payment shall be made in the form of cash or
whole shares of Stock as the Committee, in its discretion, shall determine.
D. SPECIAL PROVISIONS REGARDING AWARDS. In no event shall any
awards be granted under this Section 9 to an employee whom the Committee
determines is likely to be a Covered Employee at the end of the year.
10. CHANGE IN CONTROL.
A. DEFINITION OF "CHANGE IN CONTROL". For purposes of Section
1B., a "Change in Control" means the occurrence of either of the following:
1. Any "person", as such term is used in Sections 13(d)
and 14(d) of the Exchange Act (other than the Company, a Company Subsidiary, a
Company Affiliate, or a Company employee benefit plan, including any trustee of
such plan acting as trustee) is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company (or a successor to the Company) representing 35% or more of the
combined voting power of the then outstanding securities of the Company or such
successor; or
2. At any time that the Company has registered shares
under the Exchange Act, at least 40% of the directors of the Company constitute
persons who were not at the time of their first election to the Board,
candidates proposed by a majority of the Board in office prior to the time of
such first election; or
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3. The dissolution of the Company or liquidation of more
than 50% in value of the Company or a sale of assets involving 50% or more in
value of the assets of the Company, (x) any merger or reorganization of the
Company whether or not another entity is the survivor, (y) a transaction
pursuant to which the holders, as a group, of all of the shares of the Company
outstanding prior to the transaction hold, as a group, less than 50% of the
combined voting power of the Company or any successor company outstanding after
the transaction, or (z) any other event which the Board determines, in its
discretion, would materially alter the structure of the Company or its
ownership.
B. IMPACT OF EVENT. Except as expressly provided in any Award
agreement, in the event of a "Change in Control" as defined in Section 10A, the
following provisions shall apply:
1. Any Stock Appreciation Rights and Options outstanding
as of the date such Change in Control is determined to have occurred and not
then exercisable and vested shall become fully exercisable and vested;
provided, that in the case of the holder of Stock Appreciation Rights who is
actually subject to Section 16(b) of the Exchange Act, such Stock Appreciation
Rights shall have been outstanding for at least six months at the date such
Change in Control is determined to have occurred;
2. The restrictions and limitations applicable to any
Restricted Stock and Stock Purchase Rights shall lapse and such Restricted
Stock shall become fully vested;
3. The value (net of any exercise price and required tax
withholdings) of all outstanding Options, Stock Appreciation Rights, Restricted
Stock, and Stock Purchase Rights, unless otherwise determined by the Committee
at or after grant and subject to Rule 16b-3, shall be cashed out on the basis
of the "Change in Control Price," as defined in Section 11C., as of the date
such Change in Control is determined to have occurred or such other date as the
Board may determine prior to the Change in Control;
4. Any outstanding Performance Share Awards shall be
vested and paid in full as if all performance criteria had been met; provided,
however, that the foregoing provision shall only apply, with respect to the
events described in Section 10A.1, 10A.3(x), 10A.3(z), and 10A.4, if and to the
extent so specifically determined by the Committee in the exercise of the
Committee's discretion, which determination may be amended or reversed only by
the affirmative vote of a majority of the persons who were directors at the
time such determination was made.
C. CHANGE IN CONTROL PRICE. For purposes of this Section 10,
"Change in Control Price" means the highest price per share paid in any
transaction reported on any established stock exchange, national market system
or other established market for the Stock, or paid or offered in any bona fide
transaction related to a potential or actual Change in Control of the Company
at any time during the preceding 60-day period as determined by the Committee,
except that in the case of Incentive Stock Options and Stock Appreciation
Rights relating to Incentive Stock Options, such price shall be based only on
transactions reported for the date on which the Board decides to cash out such
Options.
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11. GENERAL PROVISIONS.
A. AWARD GRANTS. Any Award may be granted either alone or in
addition to other Awards granted under the Plan. Subject to the terms and
restrictions set forth elsewhere in the Plan, the Committee shall determine the
consideration, if any, payable by the participant for any Award and, in
addition to those set forth in the Plan, any other terms and conditions of the
Awards. The Committee may condition the grant or payment of any Award upon the
attainment of Performance Goals or such other factors or criteria, including
vesting based on continued employment or consulting, as the Committee shall
determine. Performance Goals may vary from Plan participant to Plan
participant and among groups of Plan participants and shall be based upon such
Company, subsidiary, group or division factors or criteria as the Committee may
deem appropriate, including, but not limited to, earnings per share or return
on equity (except as otherwise required for Plan participants who are Covered
Employees as of the end of the year in order to comply with Section 162(m)).
The other provisions of Awards also need not be the same with respect to each
recipient. Unless otherwise specified in the Plan or by the Committee, the
date of grant of an Award shall be the date of action by the Committee to grant
the Award. The Committee may also substitute new Options for previously
granted Options, including previously granted Options having higher exercise
prices.
B. TYPES OF SHARES. The Committee, in its discretion, may
determine at the time of an Award that in lieu of Stock there shall be issuable
under, or applicable to the measurement of, any Award any of the following:
(i) Restricted Stock; (ii) shares of any series of common stock of the Company
other than Stock and shares of any series of common stock of any Subsidiary or
Affiliate of the Company ("Common Shares"); or (iii) shares of any series of
preferred stock of the Company ("Preferred Shares"); provided that (A) with
respect to shares issuable upon exercise of Incentive Stock Options, Common
Shares and Preferred Shares shall be limited to shares of any Subsidiary
authorized as of the date the Plan is approved by the Board and (B) with
respect to shares issuable upon exercise of Deep Discount Options,
Non-Qualified Stock Options and Stock Appreciation Rights, Common Shares and
Preferred Shares shall be limited to shares of any Subsidiary or Affiliate of
the Company. In such event, the Committee shall determine the number of shares
of Stock equivalent to such Restricted Stock, Common Shares or Preferred Shares
for the purpose of calculating the shares of Stock issued under the Plan;
provided that a Common Share or a Preferred Share in no event shall be deemed
equal to less than one share of Stock.
C. AWARD AGREEMENT. As soon as practicable after the date of an
Award grant, the Company and the participant shall enter into a written Award
Agreement specifying the date of grant and the terms and conditions of the
Award.
D. CERTIFICATES. All certificates for shares of Stock or other
securities delivered under the Plan shall be subject to such stock transfer
orders, legends and other restrictions as the Committee may deem advisable
under the rules, regulations and other requirements of the Commission, any
stock exchange upon which the Stock is then listed, any national market system
over which the Stock is then quoted and any applicable federal, state or
foreign securities law.
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E. TERMINATION. With respect to Awards (other than Options), in
the event of Termination for any reason other than death or Disability, Awards
held at the date of Termination (and only to the extent then exercisable or
payable, as the case may be) may be exercised in whole or in part at any time
within 90 days after the date of Termination, or such lesser period specified
in the Award Agreement (but in no event after the expiration date of the
Award), but not thereafter. With respect to Options, in the event of
Termination for any reason other than death or Disability, Options held at the
date of Termination (to the extent then exercisable) may be exercised in whole
or in part within 90 days after the date of Termination, or such other period
(which may be longer or shorter than 90 days) which shall be specified in the
Award Agreement (but in no event shall any Option remain exercisable after the
expiration date of such Option). If Termination is due to death or Disability,
or a participant dies or becomes disabled within the period that the Award
remains exercisable or payable, as the case may be, after Termination, only
Awards (including Options) held at the date of death or Disability (and only to
the extent then exercisable or payable, as the case may be) may be exercised in
whole or in part by the participant in the case of Disability, by the
participant's personal representative or by the person to whom the Award is
transferred by will or the laws of descent and distribution, at any time within
18 months after the death or one year after the Disability, as the case may be,
of the participant (or such other period which shall be specified in the Award
Agreement, but in no event shall any Award remain exercisable after the
expiration of such Award). In the event of Termination by reason of the
participant's retirement (as determined in the exercise of the Committee's sole
discretion), Awards (including Options) may be exercised in whole or in part at
any time within two years after the date of Termination (or such other period
which shall be specified in the Award Agreement, but in no event shall any
Award remain exercisable after the expiration date of such Award).
F. DELIVERY OF PURCHASE PRICE. Plan participants shall make all
or any portion of any payment due to the Company with respect to the
consideration payable for, upon exercise of, or for federal, state, local or
foreign tax payable in connection with, an Award by delivery of cash; and if
and only to the extent authorized by the Committee, all or any portion of such
payment may be made by delivery of any property (including without limitation a
promissory note of the participant or shares of Stock or other securities and,
in the case of an Option, surrender of shares issuable upon exercise of that
Option) other than cash, so long as, if applicable, such property constitutes
valid consideration for the Stock under applicable law. To the extent
participants may make payments due to the Company upon grant or exercise of
Awards by the delivery of shares of Stock or other securities, the Committee,
in its discretion, may permit participants constructively to deliver for any
such payment securities of the Company held by the participant for at least
three months. Constructive delivery shall be effected by (i) identification by
the participant of shares intended to be delivered constructively, (ii)
confirmation by the Company of participant's ownership of such shares (for
example, by reference to the Company's stock records, or by some other means of
verification) and (iii) if applicable, upon exercise, delivery to the
participant of a certificate for that number of shares equal to the number of
shares for which the Award is exercised less the number of shares
constructively delivered.
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G. TAX WITHHOLDING. If and to the extent authorized by the
Committee in its discretion, a person who has received an Award or payment
under an Award may make an election to deliver to the Company a promissory note
of the Plan participant on the terms set forth in Section 11F. or to have
shares of Stock or other securities of the Company withheld by the Company or
to tender any such securities to the Company to pay the amount of tax that the
Committee in its discretion determines to be required to be withheld by the
Company subject to the following limitations:
1. Such election shall be irrevocable;
2. Such election shall be subject to the disapproval of
the Committee;
3. In the case of participants subject to Section 16(b)
of the Exchange Act, the election and the exercise of the Award may not be made
within six months after the grant of the Award (and in the case of a Stock
Appreciation Right, any related Award) to be exercised (except that this
limitation shall not apply in the event of death or Disability of such person
before the six-month period expires); and
4. In the case of participants subject to Section 16(b)
of the Exchange Act, such election may be made either (A) at least six months
before the date that the amount of tax to be withheld in connection with such
exercise is determined or (B) in any ten-day period beginning on the third
business day following the date of release for publication of quarterly or
annual summary statements of sales and earnings.
Any shares or other securities so withheld or tendered will be valued by the
Committee as of the date they are withheld or tendered; provided, that Stock
shall be valued at the Fair Market Value on such date. The value of the shares
withheld or tendered may not exceed the required federal, state, local and
foreign withholding tax obligations as computed by the Company. Unless the
Committee permits otherwise, the Plan participant shall pay to the Company in
cash, promptly when the amount of such obligations becomes determinable, all
applicable federal, state, local and foreign withholding taxes that the
Committee in its discretion determines to result from the lapse of restrictions
imposed upon an Award or upon exercise of an Award or from a transfer or other
disposition of shares acquired upon exercise or payment of an Award or
otherwise related to the Award or the shares acquired in connection with an
Award.
H. NO TRANSFERABILITY. No Award shall be assignable or otherwise
transferable by the participant other than by will or by the laws of descent
and distribution and, during the life of a participant, an Award shall be
exercisable, and any elections with respect to an Award may be made, only by
the Plan participant or such participant's guardian or legal representative.
I. RIGHTS OF FIRST REFUSAL. At the time of grant, the Committee
may provide in connection with any Award that the shares of Stock received as a
result of such Award shall be subject to a right of first refusal pursuant to
which the participant shall be required to offer
15
<PAGE> 16
to the Company any shares that the participant wishes to sell at the then Fair
Market Value subject to such other terms and conditions as the Committee may
specify at the time of grant
J. ADJUSTMENT OF AWARDS; WAIVERS. The Committee may adjust the
Performance Goals and measurements applicable to Awards (i) to take into
account changes in law and accounting and tax rules, (ii) to make such
adjustments as the Committee deems necessary or appropriate to reflect the
inclusion or exclusion of the impact of extraordinary or unusual items, events,
or circumstances in order to avoid windfalls or hardships, (iii) to make such
adjustments as the Committee deems necessary or appropriate to reflect any
material changes in business conditions and (iv) in any other manner determined
in its discretion. In the event of hardship or other special circumstances of
a participant and otherwise in its discretion, the Committee may waive in whole
or in part any or all restrictions, conditions, vesting, or forfeiture with
respect to any Award granted to such Plan participant.
K. ELECTION TO DEFER PAYMENT. To the extent, if any, permitted
by the Committee, a Plan participant may elect, at such time as the Committee
may in its discretion specify, to defer payment of all or a portion of an
Award.
L. NON-COMPETITION. The Committee may condition the Committee's
discretionary waiver of a forfeiture or vesting acceleration at the time of
Termination of a Plan participant holding any unexercised or unearned Award or
the waiver of restrictions upon any Award upon a requirement that such
participant agree to and actually (i) not engage in any business or activity
competitive with any business or activity conducted by the Company and (ii) be
available, unless such participant shall have died, for consultations at the
request of the Company's management, all on such terms and conditions
(including conditions in addition to (i) and (ii)) as the Committee may
determine.
M. DIVIDENDS. The reinvestment of dividends in additional Stock
or Restricted Stock at the time of any dividend payment shall only be
permissible if sufficient shares of Stock are available under Section 3 for
such reinvestment (taking into account then outstanding Awards).
N. REGULATORY COMPLIANCE. Each Award under the Plan shall be
subject to the condition that, if at any time the Committee shall determine
that (i) the listing, registration or qualification of the shares of Stock upon
any securities exchange or under any state or federal law, (ii) the consent or
approval of any government or regulatory body, or (iii) an agreement or
representations by the participant with respect thereto, is necessary or
desirable, then such Award shall not be consummated in whole or in part unless
such listing, registration, qualification, consent, approval, agreement or
representations shall have been effected or obtained free of any conditions not
acceptable to the Committee.
O. RIGHTS AS STOCKHOLDER. Unless the Plan or the Committee
expressly specifies otherwise, a Plan participant shall have no rights as a
stockholder with respect to any shares covered by an Award until the
participant is entitled, under the terms of the Award, to
16
<PAGE> 17
receive such shares. Subject to Sections 3B. and 7C., no adjustment shall be
made for dividends or other rights for which the record date is prior to the
date the certificates are delivered.
P. BENEFICIARY DESIGNATION. The Committee, in its discretion,
may establish procedures for a participant to designate a beneficiary to whom
any amounts payable in the event of the participant's death are to be paid.
Q. ADDITIONAL PLANS. Nothing contained in the Plan shall prevent
the Company or a Subsidiary or Affiliate of the Company from adopting other or
additional compensation arrangements for its employees.
R. NO EMPLOYMENT RIGHTS. The adoption of the Plan shall not
confer upon any employee any right to continued employment nor shall it
interfere in any way with the right of the Company or a Subsidiary or Affiliate
of the Company to terminate the employment of any employee at any time.
S. INTERPRETATION. Notwithstanding any provision of the Plan,
the Plan shall always be administered, and Awards shall always be granted and
exercised, in such a manner as to conform to the provisions of Rule 16b-3 and
Section 162(m), unless the Committee determines that Rule 16b-3 or Section
162(m) are not applicable to the Plan. The Plan is designed and intended to
comply with Rule 16b-3 and, to the extent applicable, with Section 162(m), and
all provisions hereof shall be construed in a manner to so comply.
T. GOVERNING LAW. The Plan and all Awards shall be governed by
and construed in accordance with the laws of the Commonwealth of Massachusetts.
U. USE OF PROCEEDS. All cash proceeds to the Company under the
Plan shall constitute general funds of the Company.
V. UNFUNDED STATUS OF PLAN. The Plan shall constitute an
"unfunded" plan for incentive and deferred compensation. The Committee may
authorize the creation of trusts or arrangements to meet the obligations
created under the Plan to deliver Stock or make payments; provided, that unless
the Committee otherwise determines, the existence of such trusts or other
arrangements shall be consistent with the "unfunded" status of the Plan.
W. ASSUMPTION BY SUCCESSOR. The obligations of the Company under
the Plan and under any outstanding Award may be assumed by any successor
corporation, which for purposes of the Plan shall be included within the
meaning of "Company".
X. PLAN DESIGNATION AND STATUS. Notwithstanding the designation
of this document as a plan for convenience of reference and to standardize
certain provisions applicable to all types of Awards, each type of Award shall
be deemed to be a separate "plan" for purposes of Section 16 of the Exchange
Act and any applicable state securities laws.
17
<PAGE> 18
12. AMENDMENTS AND TERMINATION.
The Board may amend, alter or discontinue the Plan, but no amendment,
alteration or discontinuance shall be made which would impair the rights of a
participant under an outstanding Award without the Plan participant's consent.
In addition, to the extent required for the Plan to comply with Rule 16b-3 or
Section 162(m) or, with respect to provisions solely as they relate to
Incentive Stock Options, to the extent required for the Plan to comply with
Section 422A of the Code, the Board may not amend or alter the Plan without the
approval of a majority of the votes cast at a duly held stockholders' meeting
at which a quorum of the voting power of the Company is represented in person
or by proxy, where such amendment or alteration would:
A. Except as expressly provided in the Plan, increase the total
number of shares reserved for issuance pursuant to Awards under the Plan;
B. Except as expressly provided in the Plan, change the minimum
price terms of Section 5B.3 or Section 8A;
C. Change the class of employees and consultants eligible to
participate in the Plan;
D. Extend the maximum Option term under Section 5B. or the
maximum exercise period under Section 8B.; or
E. Materially increase the benefits accruing to participants
under the Plan.
The Board of Directors may, at any time without stockholder approval,
amend the Plan and the terms of any Award outstanding under the Plan, provided
that such amendment is designed to maximize federal income tax benefits
accorded to Awards or, if the Committee determines that Rule 16b-3 is
applicable to the Plan, to comply with Rule 16b-3 and provided further that
with respect to outstanding Awards, the Plan participant consents to such
amendment.
13. EFFECTIVE DATE OF PLAN.
The Plan, and any amendments thereto, shall be effective on the date
the same is adopted by the Board, but all Awards shall be conditioned upon
approval of the Plan, and any amendment thereto requiring such approval, at a
duly held stockholders' meeting by the affirmative vote of the holders of
shares representing a majority of the voting power of the Company represented
in person or by proxy and entitled to vote at the meeting.
18
<PAGE> 19
14. TERM OF PLAN.
No Award shall be granted on or after July 1, 2000, but Awards granted
prior to July 1, 2000 (including, without limitation, Performance Share Awards
for Performance Periods commencing prior to July 1, 2000) may extend beyond
that date.
19
<PAGE> 1
EXHIBIT 10.17
SECOND AMENDMENT TO LOAN DOCUMENTS
AMENDMENT dated as of May 17, 1995 by and between SOFTKEY
INC., a Minnesota corporation (the "Borrower") and FLEET BANK OF
MASSACHUSETTS, N.A., a national banking association (together
with its successors, the "Bank".
PRELIMINARY STATEMENT
1. The Bank and the Borrower entered into a Credit
Agreement dated as of September 30, 1994, as previously amended
by a letter amendment dated as of December 5, 1994 (the "CREDIT
AGREEMENT"), pursuant to which the Bank agreed to make Revolving
Line of Credit Loans to the Borrower up to a maximum aggregate
amount of $10,000,000. Unless otherwise defined herein,
capitalized terms used herein shall have the same respective
meanings as set forth in the Credit Agreement.
2. The Bank and the Borrower wish to amend certain
provisions of the Credit Agreement and the other Loan Documents
on the terms set forth herein.
NOW THEREFORE, in consideration of the foregoing premises
and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. Amendments to Credit Agreement.
------------------------------
1.1 Section 1.1 of the Credit Agreement is hereby amended
as follows: (a) deleting the date "June 30, 1996" appearing in
the fourth line thereof and substituting the date "June 30, 1997"
and (b) deleting the amount "$10,000,000" appearing in the sixth
line thereof and substituting the amount of "$20,000,000."
1.2 Section 1.5 of the Credit Agreement is hereby amended
by deleting the date "July 1, 1996" appearing in the third line
thereof and substituting the date "July 1, 1997."
1.3 Section 7.4 of the Credit Agreement is hereby amended
by inserting immediately following subparagraph (c) the following
new paragraph:
"Notwithstanding the provisions of the letter of the Bank to
the Borrower dated December 9, 1994, the Borrower shall not
make any further sale or disposition to the Borrower's
wholly-owned subsidiary Softkey Software Products Inc. of
<PAGE> 2
-2-
accounts receivable due to the Borrower from debtors located
in Canada."
1.4 Section 7.12 through 7.15 of the Credit are hereby
restated in their entirety as follows:
<TABLE>
"7.12 CURRENT RATIO. The Borrower will not permit the
Current Ratio at the end of any of the following fiscal
quarters to be less than the ratio set forth below opposite
such quarter:
<CAPTION>
Minimum
Fiscal Quarters Ending Current Ratio
---------------------- -------------
<S> <C>
10/1/94 0.90 to 1
12/31/94 1.00 to 1
4/1/95, 7/1/95 and 10/1/95 1.10 to 1
1/6/96 and thereafter 1.25 to 1
</TABLE>
7.13 MINIMUM PROFITABILITY. The Borrower will not
permit Adjusted Net Income to be less than $2,500,000 for
the fiscal quarters ending 10/1/94 and 12/31/94 or
$10,000,000 for the fiscal year ending 12/31/94. In
addition, the Borrower will not permit Adjusted Net Income
to be less than (a) $3,000,000 for the fiscal quarters
ending 4/1/95 and 7/1/95; (b) $4,000,000 for the fiscal
quarter ending 10/1/95 or any fiscal quarter thereafter; or
(c) $15,000,000 for the fiscal years ending 1/6/96 and
1/4/97.
7.14 LEVERAGE. The Borrower will not permit the ratio
of Total Liabilities to Stockholders Equity at the end of
any of the following fiscal quarters to be greater than the
ratio opposite such fiscal quarters:
<TABLE>
<CAPTION>
Fiscal Quarters Ending Maximum Leverage
---------------------- ----------------
<S> <C>
10/1/94 and 12/31/94 2.5 to 1
4/1/95 and thereafter 2.0 to 1
</TABLE>
7.15 STOCKHOLDERS EQUITY. The Borrower will not
permit its Stockholders Equity at the end of any fiscal
quarter to be less than $20,000,000 plus (a) 75% of Net
Income earned in each fiscal quarter commencing with the
fiscal quarter ending December 31, 1994 (with no reduction
or offset for Net Losses); and (b) 100% through 4/1/95 and
75% thereafter of any increase in Stockholders' Equity in
accordance with GAAP resulting from the issuance of any
shares of capital stock of the Guarantor, the Borrower or
any of their Subsidiaries, less, solely in the case of this
item (b), Eligible Write-Off Expenses. For purposes hereof,
"ELIGIBLE WRITE-OFF EXPENSES" shall mean the dollar amount
of research and development or other intangible assets of
any business or business assets acquired in consideration
<PAGE> 3
-3-
for the issuance of capital stock of the Guarantor or the
Borrower but only to the extent that such write-offs occur
within 90 days of the effective date of such acquisition.
In addition, for purposes of calculating compliance with the
requirements of this Section 7.15 for the fiscal quarter
ending October 1, 1994, the Called Convertible Debt shall be
included in stockholders equity."
1.5 The definition of "Eligible Domestic Accounts
Receivable" appearing in Section 9.1 of the Credit Agreement is
hereby amended by restating subparagraph (o) thereunder in its
entirety as follows:
"(o) The account debtor is a person or entity located
in the United States or Canada and the account arose
out of services rendered or goods delivered in the
United States or Canada."
1.6 The form of Compliance Certificate attached to the
Credit Agreement as Exhibit D and the form of Borrowing Base
Certificate attached to the Credit Agreement as Exhibit E are
hereby restated in the forms of Exhibit D and Exhibit E hereto."
Section 2. Conditions of Effectiveness.
---------------------------
This Amendment shall be deemed effective as of May 17, 1995
provided that the Bank shall have received on or before May 26,
1995 two copies of this Amendment executed by the Borrower
with the accompanying Consent duly executed by the Guarantor; and
an amended and restated promissory note in the form enclosed
duly executed by the Borrower (the "Amended Note"); and (c) a
certificate of the Secretary or Assistant Secretary of the
Borrower as to resolutions of the Board of Directors of the
Borrower authorizing this amendment. In addition, the Borrower
agrees that the Bank shall be furnished on or before May 31, 1995
a certificate of the Assistant Secretary of the Guarantor as to
resolutions of the Board of Directors authorizing the Consent.
Section 3. Confirmation of Representations, Absence of Default.
---------------------------------------------------
The Borrower hereby confirms that the representations set
forth in the Loan Documents, as amended by this Amendment are
true and correct as of the date hereof, subject to the exceptions
and further disclosures set forth in EXHIBIT A hereto. The
Borrower hereby confirms that, except as set forth in EXHIBIT A
hereto, no Event of Default has occurred and is continuing under
the Credit Agreement. In addition, the Borrower (and the
guarantor signing below) agrees that, as of this date, it has no
defenses against its obligations to pay any amounts under the
Credit Agreement and the other Loan Documents.
<PAGE> 4
-4-
Section 4. Reference to and Effect on the Credit
Agreement and the other Loan Documents.
--------------------------------------
4.1 Upon the Effective Date, each reference in the Credit
Agreement to "this Credit Agreement", "hereunder", "hereof",
"herein", or words of like import referring to the Credit
Agreement, and each reference in the Notes and each of the other
Loan Documents to "the Credit Agreement", "thereunder",
"thereof", "therein", or words of like import referring to the
Credit Agreement, shall mean and be a reference to the Credit
Agreement as amended hereby.
4.2 Except as specifically amended above, the Credit
Agreement shall remain in full force and effect and is hereby
ratified and confirmed. Each of the other Loan Documents is in
full force and effect and is hereby ratified and confirmed. The
Borrower (and Softkey International Inc. in consenting hereto as
guarantor by signing below) agrees that, as of the date hereof,
it has no defenses against the obligations represented by the
Credit Agreement, the Note, the Guaranty or the other Loan
Documents.
4.3 The amendments set forth above in Section 1 hereof (i)
do not constitute a waiver or modification of any term, condition
or covenant of the Credit Agreement, the Note, any other Loan
Documents or any of the instruments or documents referred to by
the foregoing documents, other than as expressly set forth
herein, and (ii) shall not prejudice any rights which the Bank
may now or hereafter have under or in connection with the Credit
Agreement, the Note, the other Loan Documents or any of the
instruments or documents referred to therein.
Section 5. Cost and Expenses.
-----------------
The Borrower agrees to pay on demand all costs and expenses
of the Bank in connection with the preparation, reproduction,
execution and delivery of this Amendment and any other
instruments and documents to be delivered hereunder, including
the reasonable fees and out-of-pocket expenses of Sullivan &
Worcester, special counsel for the Bank with respect thereto.
Section 6. Governing Law.
-------------
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
<PAGE> 5
-5-
Section 7. Counterparts.
------------
This Amendment may be signed in one or more counterparts
each of which taken together shall constitute one and the same
instrument.
<PAGE> 6
-6-
IN WITNESS WHEREOF the parties hereto have caused this
Amendment to be executed under seal by their respective officers
thereunto duly authorized as of the date first above written.
SOFTKEY INC.
By:
------------------------------
Name: R. Scott Murray
Title: Chief Financial Officer
FLEET BANK OF MASSACHUSETTS, N.A.
By:
------------------------------
Name: Thomas W. Davies
Title: Vice President
<PAGE> 7
EXHIBIT A
---------
Exceptions and Qualifications to Representations
------------------------------------------------
None.
<PAGE> 1
EXHIBIT 10.18
FUTURE VISION HOLDING, INC.
STOCK PURCHASE AGREEMENT
by and among
SOFTKEY INTERNATIONAL INC.,
FLEXTECH HOLDINGS PTE LTD,
HARRY FOX, JOSEPH ABRAMS, SOL ROSENBERG,
MATHEW BARLOW, SAMUEL ZEMSKY,
K.H. TRUSTEES LTD., SETH ALTHOLZ
and
SHELLY ABRAHAMI
dated as of July 17, 1995
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
ARTICLE I
PURCHASE AND SALE OF SHARES
<S> <C>
1.1. Company Shares to be Sold .......................................... 1
1.2. Consideration ...................................................... 2
1.3. Escrow ............................................................. 2
1.4. Registration ....................................................... 3
1.5. Closing ............................................................ 5
1.6. Deliveries by the Sellers .......................................... 5
1.7. Deliveries by the Buyer ............................................ 6
1.8. Accounting Consequences ............................................ 6
1.9. Deliveries by Accountants .......................................... 6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
2.1. Corporate Organization; Related Entities .......................... 7
2.2. Authorization ..................................................... 8
2.3. Capitalization .................................................... 9
2.4. Ownership of Company Shares ....................................... 10
2.5. Consents and Approvals; Non-Contravention ......................... 10
2.6. Financial Statements .............................................. 11
2.7. Interim Change .................................................... 11
2.8. No Undisclosed Liabilities ........................................ 14
2.9. Litigation ........................................................ 14
2.10. No Violation ...................................................... 15
2.11. Title to Assets ................................................... 16
2.12. Intellectual Property ............................................. 16
2.13. Contracts and Commitments ......................................... 19
2.14. Customers and Suppliers ........................................... 23
2.15. Products .......................................................... 23
2.16. Competition ....................................................... 24
2.17. Insurance ......................................................... 24
2.18. Access to Buyer Information ....................................... 25
2.19. Sellers' Investment Intent ........................................ 25
2.20. Securities Legend; Stop Transfer Instructions ..................... 25
2.21. Environmental Matters ............................................. 26
2.22. Taxes ............................................................. 27
2.23. Benefit Plans ..................................................... 30
2.24. Pooling Matters ................................................... 31
</TABLE>
<PAGE> 3
<TABLE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE BUYER
<S> <C>
3.1. Corporate Organization ............................................ 32
3.2. Authorization ..................................................... 32
3.3. SEC Filings ....................................................... 32
3.4. Authorization and Issuance of SoftKey Shares ...................... 33
3.5. Consents and Approvals; Non-Contravention ......................... 33
3.6. Litigation ........................................................ 33
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1. Consents and Approvals ............................................ 34
4.2. Further Assurances ................................................ 35
4.3. Access ............................................................ 35
ARTICLE V
CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATIONS
5.1. Performance of Obligations; Representations and
Warranties ........................................................ 36
5.2. No Injunction or Restraints ....................................... 36
5.3. Regulatory Approvals .............................................. 37
5.4. Section 1445 Certificates ......................................... 37
5.5. Escrow Agreement .................................................. 37
5.6. Affiliate Letters ................................................. 37
5.7. Accountants' Letters .............................................. 37
5.8. Terminations and Assignments ...................................... 37
5.9. Conversion of Note ................................................ 39
5.10. Stockholder Approval .............................................. 39
5.11. Cancelled Promissory Notes ........................................ 39
5.12. Translation of Documents .......................................... 39
ARTICLE VI
CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS
6.1. Performance of Obligations; Representations and
Warranties ........................................................ 40
6.2. No Injunction or Restraints ....................................... 40
6.3. Regulatory Approvals .............................................. 40
</TABLE>
ii
<PAGE> 4
<TABLE>
ARTICLE VII
SURVIVAL AND INDEMNIFICATION
<S> <C>
7.1. Survival .......................................................... 40
7.2. Indemnification ................................................... 41
7.3. Procedure for Indemnification ..................................... 42
7.4. Remedies Cumulative ............................................... 44
ARTICLE VIII
TERMINATION PRIOR TO CLOSING
8.1. Termination of Agreement .......................................... 45
8.2. Effect of Termination ............................................. 46
ARTICLE IX
GENERAL PROVISIONS
9.1. Amendment and Waiver .............................................. 46
9.2. Expenses .......................................................... 47
9.3. Broker's and Finder's Fees ........................................ 47
9.4. Notices ........................................................... 47
9.5. Entire Agreement; Binding Effect .................................. 48
9.6. Applicable Law .................................................... 49
9.7. Parties in Interest ............................................... 49
9.8. Counterparts ...................................................... 49
9.9. Headings; Pronouns and Conjunctions ............................... 49
9.10. Announcements ..................................................... 49
9.11. Severability ...................................................... 49
Schedule I -- Sellers' Information
Exhibit A -- Form of Escrow Agreement
Exhibit B -- Form of Affiliate Letter
</TABLE>
iii
<PAGE> 5
STOCK PURCHASE AGREEMENT
------------------------
THIS AGREEMENT is made and entered into as of this 17th day of
July, 1995, by and among SoftKey International Inc., a Delaware corporation (the
"Buyer"), and Flextech Holdings Pte Ltd, a Singapore corporation ("Flextech"),
Harry Fox ("Fox"), Joseph Abrams ("Abrams"), Sol Rosenberg ("Rosenberg"), Mathew
Barlow ("Barlow"), Samuel Zemsky ("Zemsky"), K.H. Trustees Ltd. ("KHT"), Seth
Altholz ("Altholz") and Shelly Abrahami ("Abrahami"). Flextech, Fox, Abrams,
Rosenberg, Barlow, Zemsky, KHT, Altholz and Abrahami are each sometimes referred
to herein as a "Seller" and are together referred to herein as the "Sellers."
WHEREAS, the Sellers are the owners of all of the issued and
outstanding capital stock of Future Vision Holding, Inc., a New York corporation
(the "Company"), and certain of the Sellers are officers and directors of the
Company; and
WHEREAS, the Sellers desire to sell to the Buyer, and the
Buyer desires to purchase from the Sellers, all of the issued and outstanding
shares of capital stock of the Company, upon the terms and subject to conditions
set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants, agreements and conditions
hereinafter set forth, and intending to be legally bound hereby, the parties
hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1 COMPANY SHARES TO BE SOLD. Upon the terms and subject to
the conditions contained herein, at the Closing (as hereinafter defined), each
Seller shall sell and transfer to the Buyer, and the Buyer shall purchase and
accept from each Seller, the number of shares of the Company's common stock, par
value $.01 per share ("Company Common Stock"), set forth on Schedule I hereto,
which collectively will constitute all of the issued and outstanding shares of
capital stock of the Company immediately prior to the Closing (the "Company
Shares").
1
<PAGE> 6
2 CONSIDERATION.
(a) Upon the terms and subject to the conditions
contained herein and in consideration of, and in full payment for, the aforesaid
sale and transfer of the Company Shares, at the Closing, the Buyer shall sell to
the Sellers and issue and deliver or cause to be delivered to the Sellers and
the Escrow Agent (as hereinafter defined) an aggregate of 1,116,784 shares,
subject to adjustment as set forth in paragraph (b) of this Section 1.2 (the
"SoftKey Shares"), of common stock, par value $.01 per share, of the Buyer
("SoftKey Common Stock"), less any shares required to be withheld by the Buyer
to pay Taxes of any Seller.
(b) In the event that:
(i) the expenses of the Company set forth in
paragraphs (a) and (b) of Section 9.2 hereof exceed $50,000 in the aggregate as
of the day immediately prior to the Closing Date (as hereinafter defined), then
the aggregate number of SoftKey Shares to be delivered to the Sellers pursuant
to paragraph (a) of this Section 1.2 shall be reduced by an amount equal to the
dollar amount of such excess over $50,000 divided by $31.34, and the number of
SoftKey Shares to be issued in the name of each Seller at the Closing (as set
forth in Schedule I hereto) shall be accordingly proportionately reduced; and
(ii) the indebtedness of the Company other than
trade indebtedness, including specifically all indebtedness to Flextech (other
than the Secured Convertible Note referred to in Section 5.9 hereof), all
indebtedness to other stockholders and affiliates, indebtedness under banking
arrangements, indebtedness under factoring arrangements and indebtedness
relating to the Company's acquisition of SuperStudio Ltd., a wholly owned
subsidiary of the Company ("SuperStudio"), exceeds $6,000,000 in the aggregate
as of the day immediately prior to the Closing Date, then the aggregate number
of SoftKey Shares to be delivered to the Sellers pursuant to paragraph (a) of
this Section 1.2 shall be reduced by an amount equal to the dollar amount of
such excess over $6,000,000 divided by $31.34, and the number of SoftKey Shares
to be issued in the name of each Seller at the Closing (as set forth in Schedule
I hereto) shall be accordingly proportionately reduced.
3 ESCROW. At the Closing, 148,373 of the SoftKey
Shares, subject to adjustment as set forth below in the event
2
<PAGE> 7
of a reduction in the number of SoftKey Shares to be delivered to the Sellers
pursuant to Section 1.2(b) hereof (the "Escrow Shares"), shall be issued in the
name of BOB and Co. and delivered to The First National Bank of Boston (the
"Escrow Agent"), as Escrow Agent under an Escrow Agreement dated the Closing
Date among the Buyer, the Sellers and the Escrow Agent substantially in the form
attached hereto as Exhibit A (the "Escrow Agreement"), which Escrow Agreement,
among other things, provides for the Escrow Shares to be set aside and held by
the Escrow Agent to satisfy (a) the Buyer's claims for indemnification hereunder
from and against the Sellers and (b) certain specified legal disputes and
proceedings involving the Company or the Subsidiaries (as hereinafter defined),
all subject to the terms and conditions set forth in the Escrow Agreement. The
Escrow Shares held by the Escrow Agent shall be set aside and held by the Escrow
Agent and distributed to the Sellers or the Buyer at the times, and upon the
terms and conditions, set forth in the Escrow Agreement. In the event that the
number of SoftKey Shares to be delivered to the Sellers is reduced pursuant to
Section 1.2(b) hereof, the number of Escrow Shares to be held in the Indemnity
Fund (as defined in the Escrow Agreement) shall be reduced to equal no more than
10% of the SoftKey Shares to be delivered to the Sellers after such reduction.
4 REGISTRATION.
(a) The Buyer agrees to file a registration statement
on Form S-3 (or another appropriate form) with respect to the resale by each
Seller of all of the SoftKey Shares acquired by it hereby, (the "Registration
Statement"), with the Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "Securities Act"), as soon as
practicable and to use reasonable efforts to cause the Registration Statement to
become effective as soon as practicable thereafter. The Buyer will promptly
prepare and file with the SEC such amendments and supplements to the
Registration Statement and the prospectus used in connection therewith as may be
necessary to keep the Registration Statement effective and to comply with the
provisions of the Securities Act with respect to the disposition of all of the
SoftKey Shares offered thereby until the earlier of (x) such time as all of the
SoftKey Shares offered thereby have been disposed of in accordance with the
intended methods of disposition set forth in the Registration Statement or (y)
the expiration of 90 days after the later to occur of (i) the date on which the
Registration Statement becomes effective or (ii) the date on
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which the Sellers are first permitted to Transfer (as defined therein) the
SoftKey Shares under paragraph 1(b) of the Affiliate Letters (as hereinafter
defined).
(b) (i) The Buyer shall promptly notify the Sellers
of the issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose.
The Buyer shall use reasonable efforts to obtain the withdrawal of any such stop
order. In the event of any stop order suspending the effectiveness of the
Registration Statement, the Buyer shall be required to keep the Registration
Statement effective until the earlier of (A) such time as all of the SoftKey
Shares offered thereby have been disposed of in accordance with the intended
methods of distribution by Flextech and Fox set forth in the Registration
Statement or (B) the period required by Section 1.4(a)(y) plus an extended
period equal to the number of days during which any such suspension was in
effect.
(ii) Notwithstanding anything to the contrary
set forth in this Agreement, the Buyer's obligations under this Section
1.4 to file the Registration Statement and to use its reasonable efforts to
cause the Registration Statement to become effective shall be suspended in the
event and during such period as unforeseen circumstances (including without
limitation pending negotiations relating to, or the consummation of, a
transaction or the occurrence of any event) which, based upon the advice of
outside counsel reasonably acceptable to the Sellers, would require additional
disclosure of material information by the Buyer in the Registration Statement as
to which the Buyer has a bona fide business purpose for preserving
confidentiality or which, based upon the advice of such counsel, renders the
Buyer unable to comply with SEC requirements (in either case, a "Suspension
Event"). Any such suspension shall continue only for so long as such event is
continuing. The Buyer shall notify the Sellers promptly in writing of the
existence of any Suspension Event and represents that no such Suspension Event
exists on the date hereof. In the event of any such suspension occurring prior
to the filing of the Registration Statement, the Buyer shall be required to file
the Registration Statement as soon as practicable after the conclusion of the
Suspension Event. In the event of any such suspension occurring after
effectiveness of the Registration Statement, the Buyer shall be required to keep
the Registration Statement effective until the earlier of (x) such time as all
of the SoftKey Shares offered thereby have been disposed of in accordance with
the intended methods of distribution set
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forth in the Registration Statement or (y) the period required by Section
1.4(a)(y) plus an extended period equal to the number of days during which any
such suspension was in effect.
(iii) Following the effectiveness of the
Registration Statement, each Seller agrees that it will not effect any sales of
SoftKey Common Stock at any time after he or it has received notice from the
Buyer to suspend sales as a result of a stop order or the occurrence or
existence of any Suspension Event or so that the Buyer may correct or update the
Registration Statement. The Sellers may recommence effecting sales of SoftKey
Common Stock following further notice to such effect from the Buyer, which
notice shall be given by the Buyer promptly after the withdrawal of any stop
order or the conclusion of any such Suspension Event.
5 CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall occur at the offices of Skadden, Arps,
Slate, Meagher & Flom, One Beacon Street, Boston, Massachusetts, at 10:00 A.M.,
local time, on the later to occur of (a) August 1, 1995 or (b) the date which is
two business days after the later to occur of (i) satisfaction of the condition
set forth in Section 5.3 hereof and (ii) satisfaction of the condition set forth
in Section 5.10 hereof, or at such other time and place as may be agreed upon by
the parties. The time and date of the Closing is sometimes referred to herein as
the "Closing Date." Upon consummation of the transactions contemplated hereby,
the Closing shall be deemed to have taken place as of the close of business on
the Closing Date.
6 DELIVERIES BY THE SELLERS. On the Closing Date, the
Sellers shall deliver or cause to be delivered to the Buyer the following:
(a) one or more stock certificates evidencing the
Company Shares duly endorsed in blank or accompanied by stock powers duly
executed in blank, in proper form for transfer and with all requisite stock
transfer stamps attached;
(b) the stock book, stock ledger, minute book and
corporate seal of the Company;
(c) written resignations of all of the officers and
directors of the Company from their positions as officers or directors,
effective as of the Closing Date; and
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(d) such other instruments or documents as may be
reasonably necessary to carry out the transactions contemplated by this
Agreement and to comply with the terms hereof.
7 DELIVERIES BY THE BUYER. On the Closing Date,
the Buyer shall deliver or cause to be delivered the following:
(a) to the Sellers, stock certificates evidencing
the SoftKey Shares other than the Escrow Shares, less any shares required to be
withheld by the Buyer to pay Taxes of any Seller, issued in the name of each of
the Sellers in the amounts set forth in Schedule I hereto;
(b) to the Escrow Agent, one or more stock
certificates evidencing the Escrow Shares issued in the name of BOB and Co.; and
(c) such other instruments or documents as may be
reasonably necessary to carry out the transactions contemplated by this
Agreement and to comply with the terms hereof.
8 ACCOUNTING CONSEQUENCES. It is intended that the purchase
of the Company Shares from the Sellers (a) be accounted for as a pooling of
interests and (b) constitute a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and that
this Agreement constitute a "plan of reorganization" for the purposes of Section
368 of the Code. The Buyer agrees to use reasonable efforts not to jeopardize
the qualification of the purchase of the Company Shares from Sellers as a
reorganization within the meaning of Section 368(a) of the Code. Except as set
forth in the preceding sentence, the parties hereto shall have no liability to
each other in the event that the transaction provided for herein does not
constitute a reorganization within the meaning of Section 368(a) of the Code.
9 DELIVERIES BY ACCOUNTANTS. On the Closing Date, Coopers &
Lybrand L.L.P. and Ernst & Young LLP, independent accountants for the Buyer
and the Company, respectively, shall each deliver or cause to be delivered to
the Buyer a letter, satisfactory to the Buyer, to the effect that, based upon
the information respectively presented to them as of the Closing Date, the
business combination to be effected by this Agreement conforms in substance with
the principles, guides, rules and criteria of Accounting Principles Board
Opinion No. 16 setting forth the criteria for the pooling of interests method of
ac-
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counting, and that such accountants concur in the accounting treatment of the
business combination to be effected by this Agreement as a pooling of interests.
In the event that this Agreement includes a term or provision which would
prevent either Coopers & Lybrand L.L.P. or Ernst & Young LLP from delivering or
causing to be delivered such a letter, the Buyer and each of the Sellers agree
that each will use its respective reasonable efforts to amend or cause the
amendment of this Agreement so that such a letter may be delivered by each such
accounting firm.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each Seller other than Abrams, Barlow and KHT hereby severally
represents, warrants and agrees as follows:
1 CORPORATE ORGANIZATION; RELATED ENTITIES. (a) The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of New York and has the corporate power and authority to own
or lease its properties and to carry on its business as it is presently being
conducted. The Company is duly qualified or licensed as a foreign corporation to
do business and is in good standing in the respective jurisdictions listed in
Section 2.1(a) of the disclosure schedule delivered by the Sellers to the Buyer
on or prior to the date hereof (the "Disclosure Schedule"), which constitute
every jurisdiction where the character of the Company's properties (owned or
leased) or the nature of its activities makes such qualification or licensure
necessary, except for failures, if any, to be so qualified or licensed which
would not in the aggregate have a Material Adverse Effect (as hereinafter
defined).
(b) Except as set forth in Section 2.1(b) of the
Disclosure Schedule, the Company does not own, directly or indirectly, any
capital stock of any corporation or have any direct or indirect equity or
ownership interest of any kind in any business, joint venture, partnership or
other entity. The term "Subsidiaries" means all of the corporations set forth in
Section 2.1(b) of the Disclosure Schedule. Each of the Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of its respective jurisdiction of organization and has the corporate power and
authority to own or lease its properties and to carry on its business as it is
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presently being conducted. Each of the Subsidiaries is duly qualified or
licensed as a foreign corporation to do business and is in good standing in the
respective jurisdictions listed in Section 2.1(b) of the Disclosure Schedule,
which constitute every jurisdiction where the character of the Subsidiary's
properties (owned or leased) or the nature of its activities makes such
qualification or licensure necessary except for failures, if any, to be so
qualified or licensed which would not in the aggregate have a Material Adverse
Effect.
(c) The copies of the Certificate of Incorporation
and By-Laws of the Company and the Subsidiaries heretofore delivered to the
Buyer are complete and correct copies of such instruments as presently in
effect.
(d) As used in this Agreement, any reference to any
event, change or effect having a "Material Adverse Effect" shall mean that such
event, change or effect is materially adverse to the business, operations,
prospects, properties, assets (including intangible assets), liabilities
(including contingent liabilities), condition (financial or other) or results of
operations of the Company and the Subsidiaries taken as a whole.
2 AUTHORIZATION. Such Seller, (a) if organized in corporate
form, has the requisite corporate power and authority, (b) if organized as a
trust, has the requisite power and authority or (c) if an individual, has the
requisite capacity, to enter into this Agreement and the other agreements,
documents and instruments to be executed and delivered or filed by such Seller
pursuant hereto (the "Additional Sellers' Documents") and to carry out the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and the Additional Sellers' Documents and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by the Board of Directors of Flextech and, prior to the Closing Date,
will be duly authorized by the stockholders of Flextech, and no other corporate
proceedings on the part of Flextech or its stockholders are necessary to
authorize this Agreement and the Additional Sellers' Documents with respect to
Flextech and the transactions contemplated hereby and thereby with respect to
Flextech. No other action of any Seller is necessary to authorize this Agreement
and the Additional Sellers' Documents with respect to such Seller and the
transactions contemplated hereby and thereby with respect to such Seller. When
fully executed and delivered, this Agreement and each of the Additional Sellers'
Documents will consti-
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tute the valid and binding agreements of such Seller, enforceable against such
Seller in accordance with their respective terms.
3 CAPITALIZATION.
(a) As of the date of this Agreement, the authorized
capital stock of the Company consists of 25,000,000 shares of Company Common
Stock, 19,200,150 shares of which are issued and outstanding (the "Outstanding
Company Shares"). Except as set forth in Section 2.3 of the Disclosure Schedule,
all of the Outstanding Company Shares have been, and as of the Closing Date, all
of the Company Shares will have been, validly issued, and the Outstanding
Company Shares are, and as of the Closing Date, all of the Company Shares will
be fully paid, nonassessable and free of any mortgage, pledge, security
interest, encumbrance, lien, claim or charge of any kind or right of others of
whatever nature ("Liens"), preemptive rights or other restrictions with respect
thereto. The Outstanding Company Shares are, and, as of the Closing Date, the
Company Shares will be, owned of record and beneficially by the Sellers. Except
as set forth in Section 2.3 of the Disclosure Schedule, there are no securities
outstanding which are convertible into or exercisable or exchangeable for shares
of capital stock of the Company, and there are no outstanding options, rights,
contracts, warrants, subscriptions, conversion rights or other agreements or
commitments pursuant to which the Company may be required to purchase, redeem,
issue or sell any shares of capital stock or other securities of the Company or
in any way relating to the issuance or voting of any capital stock or other
securities of the Company.
(b) Except as set forth in Section 2.3 of the
Disclosure Schedule, all of the issued and outstanding capital stock of each of
the Subsidiaries has been validly issued, is fully paid and nonassessable and is
owned of record and beneficially, directly or indirectly, by the Company free of
any Liens, preemptive rights or other restrictions with respect thereto. There
are no securities outstanding which are convertible into or exercisable or
exchangeable for shares of capital stock of any of the Subsidiaries, and there
are no outstanding options, rights, contracts, warrants, subscriptions,
conversion rights or other agreements or commitments pursuant to which the
Company or any Subsidiary may be required to purchase, redeem, issue or sell any
shares of capital stock or other securities of any Subsidiary or in any way
relating to
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the issuance or voting of any capital stock or other securities of any
Subsidiary.
4 OWNERSHIP OF COMPANY SHARES. Such Seller has good and
valid title to the Outstanding Company Shares owned by such Seller, and, as of
the Closing Date, such Seller will have good and valid title to the Company
Shares owned by such Seller, in each case free and clear of any Liens, except as
set forth in Section 2.4 of the Disclosure Schedule, and at the Closing, upon
delivery by the Buyer to the Sellers and the Escrow Agent of the consideration
given pursuant to Section 1.2 hereof, the Buyer will acquire good and valid
title to the Company Shares owned by such Seller, free and clear of any Liens.
5 CONSENTS AND APPROVALS; NON-CONTRAVENTION. Except as set
forth in Section 2.5 of the Disclosure Schedule and except for any required
filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder (the "HSR Act"),
neither the execution, delivery or performance of this Agreement or of any of
the Additional Sellers' Documents, nor the consummation by the Sellers of the
transactions contemplated hereby or thereby, nor compliance by the Sellers with
any of the provisions hereof or thereof will (a) violate any provision of the
Certificate of Incorporation or By-Laws of the Company or any Subsidiary, (b)
require any filing with, or permit, authorization, consent or approval of, any
court, arbitral tribunal, administrative agency or commission or other
governmental or regulatory authority or agency (a "Governmental Entity"), (c)
require any consent, approval or authorization under any contract, lease or
other agreement, (d) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to such Seller or the Company or any Subsidiary or any
of their respective properties or assets or (e) result in a violation or breach
of, or constitute (with or without notice or lapse of time or both) a default
(or give rise to any right of termination, amendment, cancellation or
acceleration or any loss of a material benefit) under, or result in the creation
or imposition of (or the obligation to create or impose) any Lien upon any of
the respective properties or assets of any Seller or the Company or any
Subsidiary under, any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which such Seller or the Company
or any Subsidiary is a party or by which such Seller or the Company or any
Subsidiary or any of their respective properties or assets may be bound, except
in the case of clause (d) of this Section 2.5, as to rules and regulations only,
and clauses (b), (c) and
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(e) of this Section 2.5: (i) for such filings, permits, authorizations, consents
or approvals which, if not made or obtained, would not materially impair the
ability of any Seller to perform its obligations hereunder and which would not,
either individually or in the aggregate, have a Material Adverse Effect; or (ii)
for such violations, breaches, defaults or Liens which would not materially
impair the ability of any Seller to perform its obligations hereunder and which
would not, either individually or in the aggregate, have a Material Adverse
Effect.
6 FINANCIAL STATEMENTS. The (a) audited consolidated
balance sheets of the Company and the Subsidiaries (other than SuperStudio)
dated December 31, 1994 and the audited consolidated statements of operations
and statements of cash flows of the Company and the Subsidiaries (other than
SuperStudio) for the year ended December 31, 1994, (b) unaudited consolidated
balance sheets of the Company and the Subsidiaries (other than SuperStudio)
dated March 31, 1995 and the unaudited consolidated statements of operations and
statements of cash flows of the Company and the Subsidiaries (other than
SuperStudio) for the three months ended March 31, 1995 and (c) the unaudited
balance sheets of SuperStudio dated December 31, 1994 and March 31, 1995 and
the statements of operations and statements of cash flows of SuperStudio for the
year ended December 31, 1994 and the three months ended March 31, 1995
heretofore delivered to the Buyer and included in Schedule 2.6 of the Disclosure
Schedule (collectively, the "Financial Statements"), fairly present the
financial condition of the Company and the Subsidiaries or SuperStudio, as the
case may be, as of the dates and for the periods indicated (subject, in the case
of interim statements, to normal, recurring, year-end adjustments) and have been
prepared in accordance with generally accepted accounting principles as
historically and consistently applied (subject, in the case of interim
statements, to the absence of footnote disclosure). The revenue recognition
policies of the Company and the Subsidiaries are and for all periods covered by
the Financial Statements have been in accordance with Statement of Position 91-1
on Software Revenue Recognition (dated December 12, 1991) as prepared by the
American Institute of Certified Public Accountants.
7 INTERIM CHANGE. Except as set forth in Section 2.7 of the
Disclosure Schedule, since March 31, 1995, the Company and the Subsidiaries have
been operating only in, and have not engaged in any material transaction other
than in, the
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ordinary course of business and consistent with past practice, and neither the
Company nor any Subsidiary has:
(a) suffered any change, nor has there occurred or
arisen any event, having or which in the future could reasonably be expected to
have a Material Adverse Effect;
(b) forgiven or cancelled any debts or claims or
waived, released or relinquished any contract right or any other rights of the
business of the Company or any of the Subsidiaries (other than in the ordinary
course of business and consistent with past practice);
(c) paid, discharged or satisfied any liens,
encumbrances, liabilities or obligations (absolute, accrued, contingent or
otherwise) other than in the ordinary course of business and consistent with
past practice;
(d) suffered any damage, destruction or loss of
property, whether or not covered by insurance, which has had or could reasonably
be expected to have a Material Adverse Effect;
(e) accelerated the collection of, granted any
discounts (other than in the ordinary course of business and consistent with
past practice) with respect to or sold or assigned to third parties any accounts
receivable or delayed the payment of any payables of the Company or any
Subsidiary or, other than in the ordinary course of business and consistent with
past practice, written off as uncollectible any accounts receivable or any
portion thereof;
(f) changed its policy with respect to the recording
of return reserve provisions or provisions for bad debt;
(g) created, incurred or assumed any long-term debt
(including obligations in respect of capital leases), or assumed, guaranteed,
endorsed or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other individual,
corporation, partnership, joint venture, association, organization or other
entity (a "Person"), except for the endorsement of checks in the ordinary course
of collection, or made any loans, advances or capital contributions to, or
investment in, any other Person;
(h) mortgaged, pledged or subjected to any mortgage,
pledge, lien, charge or other encumbrance of any kind
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or, except for liens for current Taxes (as defined in Section 2.22(b) hereof)
not yet due and except for sales of inventory in the ordinary course of business
and consistent with past practice, sold, assigned or transferred any of its
properties or assets (real, personal or mixed, tangible or intangible);
(i) (i) increased in any manner the wages, salaries
or compensation of any officer, employee or other person, except as required
under any written plan, agreement or arrangement in effect as of December 31,
1994, (ii) paid or agreed to pay any pension, retirement allowance or other
employee benefit not required or contemplated by any plan, agreement or
arrangement in effect as of December 31, 1994 to any such officer, employee or
other person or (iii) committed itself to any additional pension,
profit-sharing, bonus, severance pay, retirement or other benefit plan,
agreement or arrangement, or to any employment or consulting agreement with or
for the benefit of any person or to amend any such plan, agreement or
arrangement in effect as of December 31, 1994, except as may have been required
to comply with applicable law;
(j) experienced any work stoppage or other concerted
activity or labor difficulty;
(k) acquired (i) by merger or consolidation with, or
by the purchase of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or division
thereof or (ii) any assets that are material in the aggregate to the Company and
the Subsidiaries taken as a whole, except purchases of inventory, materials and
supplies in the ordinary course of business and consistent with past practice
and capital expenditures for additions to property, plant, equipment or
intangible capital assets not exceeding $50,000 in the aggregate;
(l) entered into any agreement, contract or
commitment, other than (i) in the ordinary course of business or (ii) as
contemplated by this Agreement, with respect to the manufacture of any software
product of the Company or any of the Subsidiaries or any update, upgrade or
derivative thereof, whether now in process, under contract or in publication,
which has ever been or is currently being developed, licensed, manufactured,
sold, distributed or otherwise published by the Company or any of the
Subsidiaries (collectively, the "Products");
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(m) declared, paid or set aside for payment any
dividend or other distribution (whether in cash, stock or property or any
combination thereof) directly or indirectly to any Seller;
(n) made any change in its accounting principles or
methods, except as may have been required by a change in generally accepted
accounting principles;
(o) amended the Certificate of Incorporation or
By-Laws of the Company or the charter or by-laws or other equivalent
organizational documents of any Subsidiary; or
(p) authorized, or committed or agreed, whether in
writing or otherwise, to take, any of the actions described elsewhere in this
Section 2.7.
8 NO UNDISCLOSED LIABILITIES. Except (a) as set forth in
Section 2.8 of the Disclosure Schedule, (b) as and to the extent of the amounts
specifically reflected or reserved against in the Financial Statements, (c) for
any contingent liabilities disclosed in the footnotes (if any) to the Financial
Statements, (d) for write-offs or discounts of receivables and actual returns
taken, made or accepted by the Company or the Buyer after the Closing or (e) for
current liabilities which were incurred, and obligations under agreements,
commitments or contracts entered into, in the ordinary course of business and
consistent with past practice, neither the Company nor any Subsidiary has
liabilities or obligations of any nature (whether absolute, accrued, known or
unknown, contingent or otherwise and whether due or to become due). Without
limiting the foregoing, to the extent minimum royalties under any contract,
agreement, arrangement or understanding have not been paid in full, such
royalties are adequately accrued for in the Financial Statements. The Sellers
shall not be liable for any Loss (as hereinafter defined) incurred or sustained
by the Buyer as a result of any breach of this Section 2.8 relating to an
undisclosed Intellectual Property (as hereinafter defined) liability or
obligation unless such Loss also constitutes a breach of Section 2.12 hereof.
9 LITIGATION. Except as set forth in Section 2.9
of the Disclosure Schedule, there is no claim, action, suit, inquiry, proceeding
or investigation by or before any Governmental Entity pending or, to the
knowledge of such Seller or the Company or any Subsidiary, threatened against or
involving any Seller or the Company or any Subsidiary or affecting any of
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the respective properties or assets of any Seller or the Company or any
Subsidiary which, if adversely determined, would, either individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect, or
which in any manner seeks injunctive or other non-monetary relief which relief
could reasonably be expected to cause a Material Adverse Effect or seeks to
prevent, enjoin, alter or delay any transaction contemplated hereby, nor, to the
best knowledge of such Seller, is there any basis for any such claim, action,
suit, inquiry, proceeding or investigation. None of the Sellers or the Company
or any Subsidiary is subject to any order, writ, injunction or decree which,
individually or in the aggregate, has or in the future could reasonably be
expected to have a Material Adverse Effect or a material adverse effect on the
ability of any Seller to consummate the transactions contemplated hereby.
10 NO VIOLATION. Except as set forth in Section 2.10 of the
Disclosure Schedule, neither such Seller nor the Company or any Subsidiary is in
breach or violation of, or in default under (and no event has occurred which
with notice or lapse of time or both would constitute such a breach, violation
or default), any term, condition or provision of (a) in the case of the Company,
its Certificate of Incorporation or ByLaws, (b) in the case of a Subsidiary, its
charter or by-laws or other equivalent organizational documents, (c) any order,
writ, decree, statute, rule or regulation applicable to such Seller or the
Company or any Subsidiary or any of their respective properties or assets or (d)
any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which such Seller or the Company or any
Subsidiary is a party or by which such Seller or the Company or any Subsidiary
or any of their respective properties or assets may be bound, which breaches,
violations or defaults, individually or in the aggregate, would have a Material
Adverse Effect. The Company and each Subsidiary has, and is in compliance with,
all licenses, permits, variances, exemptions, orders, approvals and other
authorizations of all Governmental Entities as are necessary in order to enable
it to own its business and conduct its business as currently conducted and as
proposed to be conducted and to enter into the transactions contemplated hereby,
the lack of which, under applicable law, rule or regulation, (x) would render
legally impermissible the transactions contemplated by this Agreement or (y)
could reasonably be expected to result in the material impairment of the
continued use or exercise by the Company or any Subsidiary after the date hereof
of any material right used or exercised (or reasonably
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expected to be used or exercised) by the Company or the Subsidiary,
respectively, in the conduct of the Company's business or the Subsidiary's
business, respectively, in any case, as currently conducted and as proposed to
be conducted or (z) could reasonably be expected to have a Material Adverse
Effect.
11 TITLE TO ASSETS. Except as set forth in Section 2.11 of
the Disclosure Schedule, the Company or a Subsidiary has good and marketable
title, free and clear of all Liens (other than Liens for current Taxes not yet
due and minor imperfections of title or minor encumbrances, if any, which in the
aggregate do not materially detract from the value of the Assets (as hereinafter
defined) or impair in any material respect the conduct of the business of the
Company and the Subsidiaries taken as a whole as heretofore conducted or the
continued use by the Company or any Subsidiary of the property subject thereto
for the use being made thereof), to all of the assets, real property, interests
in real property, rights, franchises, copyrights, trademarks, trade names,
licenses and properties tangible or intangible, real or personal, wherever
located which are used in the conduct of the business conducted by the Company
or the Subsidiaries (the "Assets"), other than property that is leased or
licensed. Except as set forth in Section 2.11 of the Disclosure Schedule, the
Company or a Subsidiary has valid and enforceable leases or licenses, as the
case may be, with respect to the Assets consisting of property that is leased or
licensed, under which there exists no default, event of default or event which,
with notice or lapse of time or both, would constitute a default, except for
such defaults which could not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.
12 INTELLECTUAL PROPERTY. The Company or a Subsidiary owns,
licenses or otherwise has the right to use, sell, license or dispose of all
industrial and intellectual property rights, including without limitation all
patents, patent applications, patent rights, trademarks, trademark applications,
trade names, service marks, service mark applications, copyrights, copyright
registrations, computer programs, content and other computer software (including
CD-ROMs), source code and object code for the software programs already
published, currently being published, or proposed to be published by the
Company, technology, know-how, trade secrets, proprietary processes and formulae
(collectively, "Intellectual Property") material to the conduct of the business
of the Company or the Subsidiaries as heretofore conducted. A true and complete
listing labeled by owner or licensee, as the case may be, set-
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ting forth all patents, federal, foreign, state or common law trademarks or
service marks, trade names or brand name registrations, copyrights and copyright
registrations, and all pending applications and applications to be filed, if
any, therefor, owned by, or licensed to, the Company or any Subsidiary, and the
status thereof, is contained in Section 2.12 of the Disclosure Schedule, and the
rights of the Company or the Subsidiary to all such Intellectual Property are in
full force. Except as set forth in Section 2.12 of the Disclosure Schedule:
(a) the Company or a Subsidiary has the sole and
exclusive right to use, sell, license, dispose of or bring actions for the
infringement of its rights to the Intellectual Property, subject to such
third-party rights as are set forth in Section 2.12 of the Disclosure Schedule,
with such exceptions as could not reasonably be expected to have in the
aggregate a Material Adverse Effect; there are no royalties, honoraria, fees or
other payments payable by the Company or any Subsidiary to any Person by reason
of ownership, use, licensure, sale or disposition of any Intellectual Property;
and the consummation of the transactions contemplated hereby will not (i) give
rise to any right of termination, amendment, renegotiation, cancellation or
acceleration with respect to any license or other agreement to use, sell,
license or dispose of such Intellectual Property which could reasonably be
expected to have in the aggregate a Material Adverse Effect or (ii) in any way
impair the right of the Company or any Subsidiary to use, sell, license or
dispose of or to bring any action for the infringement of any of the rights of
the Company or the Subsidiary to the Intellectual Property or any portion
thereof;
(b) none of the former or present employees, officers
or directors of the Company or any Subsidiary holds any right, title or
interest, directly or indirectly, in whole or in part, in or to any Intellectual
Property which the Company or any Subsidiary currently uses, sells, licenses or
of which it disposes, or the use, sale, licensure or disposal of which is
necessary for the business of the Company or any Subsidiary as presently
conducted; neither the Company nor any Subsidiary is a party to any employment
contract, patent disclosure agreement or any other contract or agreement
relating to the relationship of any employee of the Company with the Company,
any Subsidiary or any other party;
(c) each license and other agreement with respect to
any Intellectual Property is a valid, legally binding obligation of the
Company or a Subsidiary and, to the best
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knowledge of the Company and such Seller, all other parties thereto, enforceable
in accordance with its terms, with such exceptions as could not reasonably be
expected to have in the aggregate a Material Adverse Effect and except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally, and neither the Company nor
any Subsidiary is in breach, violation or default thereof (and no event has
occurred which with the giving of notice or the passage of time or both would
constitute such a breach, violation or default or give rise to any right of
termination, amendment, renegotiation, cancellation or acceleration under any
such license or agreement), and neither such Seller nor the Company nor any
Subsidiary has reason to believe that any other party to any such license or
other agreement is in breach, violation or default thereof, other than, in each
case, such breaches, violations and defaults as could not reasonably be expected
to have in the aggregate a Material Adverse Effect;
(d) the manufacture, marketing, use, sale, licensure
or disposition of any Intellectual Property in the manner currently used, sold,
licensed or disposed of by the Company or any Subsidiary or proposed to be used,
sold, licensed or disposed of by the Company or any Subsidiary does not and will
not violate any license or agreement with any third party or infringe on the
rights of any Person, nor has such an infringement been alleged within three
years preceding the date of this Agreement; there is no pending or, to the best
knowledge of such Seller, the Company and the Subsidiaries, threatened claim or
litigation challenging or questioning the validity, ownership or right to use,
sell, license or dispose of any Intellectual Property nor, to the best knowledge
of such Seller, the Company and the Subsidiaries, is there a valid basis for any
such claim or litigation, nor has the Company or any Subsidiary received any
notice asserting that the proposed use, sale, license or disposition by the
Company or any Subsidiary of any of the Intellectual Property of the Company or
any Subsidiary conflicts or will conflict with the rights of any other party,
nor is there, to the best knowledge of such Seller and the Company and the
Subsidiaries, a valid basis for any such assertion; and
(e) neither the Company nor any Subsidiary has been
alleged in writing to have, nor, to the best knowledge of such Seller and the
Company and the Subsidiaries, has it, infringed any copyright, patent, trademark
or trade name or
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misappropriated or misused any invention, trade secret or other proprietary
information entitled to legal protection, with such exceptions as could not
reasonably be expected in the aggregate to have a Material Adverse Effect; and
none of such Seller or the Company or any Subsidiary has asserted any claim of
infringement, misappropriation or misuse within the past three years.
13 CONTRACTS AND COMMITMENTS.
(a) Section 2.13(a) of the Disclosure Schedule sets
forth, labeled by the subparagraph of this Section 2.13(a) to which each listed
item is responsive, a complete and accurate list of all of the following
contracts, agreements, arrangements or understandings (whether written or oral)
of the Company or any of its Subsidiaries (such contracts, agreements,
arrangements or understandings as set forth in Section 2.13(a) of the Disclosure
Schedule and all agreements relating to Intellectual Property set forth in
Section 2.12 of the Disclosure Schedule being "Material Contracts"):
(i) royalty or other payment obligations (A)
relating to any of the Products which has generated revenue within the Company's
last three fiscal years or which is reasonably anticipated to generate revenue
in fiscal year 1995 or fiscal year 1996 and (B) under any license, development
or other contract, agreement, arrangement or understanding providing for minimum
royalty or other payments not fully paid by the Company or any Subsidiary as of
the date of this Agreement;
(ii) advances made with respect to or on
account of the Products which remain outstanding and which have not been written
off;
(iii) (A) editorial and other development
agreements relating to the Products which have involved or are reasonably
anticipated to involve commitments of over $50,000 and which have not been fully
performed and (B) distributor, dealer or manufacturer's representative contracts
or agreements relating to the Products which are currently offered for sale by
the Company or any of its Subsidiaries (to the extent the obligations under such
agreements are not reflected on the Disclosure Schedule lists provided pursuant
to Section 2.13(a)(i) and (ii));
(iv) distributor, dealer or manufacturer's
representative contracts, agreements, arrangements or under-
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standings which are not terminable on less than 90 days notice without cost or
other liability to the Company or any of its Subsidiaries (except for contracts
which, in the aggregate, are not material to the business of the Company and the
Subsidiaries taken as a whole);
(v) sales contracts which entitle any customer
to a rebate or right of set-off, to return any product to the Company or any
Subsidiary after acceptance thereof or to delay the acceptance thereof,
including without limitation any consignment arrangements;
(vi) contracts or other commitments with any
supplier containing any provision permitting any party other than the Company or
any of its Subsidiaries to renegotiate the price or other terms, or containing
any pay-back or other similar provision, upon either the occurrence of a failure
by the Company or any Subsidiary to meet its obligations under the contract when
due or the occurrence of any other event;
(vii) all manufacturing contracts or
arrangements to which the Company or any Subsidiary is a party;
(viii) credit agreements, notes, indentures,
security agreements, pledges, guarantees of or agreements to acquire any such
debt obligation of others or similar documents relating to indebtedness for
borrowed money (including without limitation interest rate or currency swaps,
hedges or straddles or similar transactions) to which the Company or any
Subsidiary is a party or by which any of its assets are bound, restricted or
encumbered;
(ix) all employment, consulting, severance or
termination agreements, commitments or understandings which require or may
require the Company or any Subsidiary to pay more than $50,000 (in base salary
in the case of employment contracts) in any 12-month period;
(x) agreement, or group of related agreements
with the same party or any group of affiliated parties, under which the Company
or any Subsidiary has or has agreed to lease (A) any real property or (B) any
other property requiring aggregate annual payments of at least $25,000, in the
case of either (A) or (B) as lessee or lessor; and
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(xi) all deeds, title documents, title reports
or similar documents related to any real property owned by the Company or any
Subsidiary.
(b) Except as set forth in Section 2.13(b) of the
Disclosure Schedule:
(i) no purchase contract of the Company or any
Subsidiary (or group of related contracts with the same party) (A) continues for
a period of more than 6 months (including renewals or extensions at the option
of another party); (B) requires payment of more than $50,000 in any 12-month
period; or (C) is not terminable by the Company or any Subsidiary without
penalty upon notice of 60 days or less (excluding any contract or group of
contracts with a customer of the Company or any Subsidiary for the sale, lease,
license or rental of Products if such contract or group of contracts was entered
into by the Company or any Subsidiary in the ordinary course of business);
(ii) neither the Company nor any of its
Subsidiaries has any outstanding contract with respect o the employment of any
officer, individual, employee, agent, consultant, adviser, salesperson,
representative or other Person (whether of a legally binding nature or in the
nature of informal understandings) on a full-time, part-time, contract or
consulting basis which is not terminable by the Company or the Subsidiary, as
the case may be, on notice without cost or other liability to the Company or the
Subsidiary, including without limitation any penalty or premium or provision for
the payment of any bonus or commission based on the Company's (and not the
Person's) sales or earnings (except for payments required by applicable
statutes);
(iii) neither the Company nor any of its
Subsidiaries has any pension, profit-sharing, bonus, severance pay, retirement,
hospitalization, insurance, stock purchase, stock option or other benefit plan,
arrangement, understanding or agreement, commitment or understanding with or for
the benefit of any Person (a "Benefit Plan") or any other employment or
consulting agreement that contains any severance or termination pay, liability
or obligation;
(iv) neither the Company nor any of its
Subsidiaries has any Benefit Plan other than group insurance plans applicable to
employees generally;
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(v) neither the Company nor any of its
Subsidiaries has any employee to whom it is paying a base salary at an annual
rate of more than $75,000 for services rendered;
(vi) neither the Company nor any of its
Subsidiaries is restricted by any agreement (including without limitation any
distribution, marketing or sales contract or agreement) from carrying on its
business in any material respect anywhere in the world (other than by geographic
or use restrictions contained in licenses relating to Intellectual Property);
(vii) neither the Company nor any of its
Subsidiaries has any outstanding loan to any Person, other than reasonable
travel advances to employees for travel and reasonable entertainment expenses in
the ordinary course of business;
(viii) neither the Company nor any of its
Subsidiaries has any power of attorney outstanding or any obligation or
liability (whether absolute, accrued, contingent or otherwise) as surety,
co-signer, endorser, co-maker, indemnitor or otherwise in respect of the
obligation of any Person, except as an endorser of checks in the ordinary course
of collection;
(ix) there exists no voting trust,
stockholders' agreement, pledge agreement or buy-sell agreement relating to any
securities of the Company or any Subsidiary which is in effect or will be in
effect as of the Closing;
(x) neither the Company nor any of its
Subsidiaries has any agreement or obligation (contingent or otherwise) to issue
or sell or to repurchase or otherwise acquire or retire any shares of its
capital stock or any of its other equity securities; and
(xi) neither the Company nor any of its
Subsidiaries has any other contract which is material to its business,
operations or prospects or any other contract, instrument, commitment, plan or
arrangement, a copy of which would be required to be filed with the SEC as an
exhibit to a registration statement on Form S-1, if the Company were registering
securities under the Securities Act.
(c) Except as disclosed in Section 2.13(c) of the
Disclosure Schedule, each Material Contract: (i) is, to the best knowledge of
such Seller and the Company and the Subsid-
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iaries, valid and binding on the other party or parties thereto and is in full
force and effect and (ii) upon consummation of the transactions contemplated by
this Agreement, shall continue in full force and effect without penalty or other
adverse consequence. Neither the Company or any Subsidiary nor, to the best
knowledge of such Seller and the Company and the Subsidiaries, any other party
to any Material Contract is in breach of, or default under, any Material
Contract.
14 CUSTOMERS AND SUPPLIERS. Sections 2.14(a) and (b),
respectively, of the Disclosure Schedule set forth (a) a list of the ten largest
customers of the Company and the Subsidiaries in terms of net sales during the
fiscal year ended December 31, 1994, showing the approximate total sales by the
Company and the Subsidiaries to each such customer during the fiscal year ended
December 31, 1994 and the year-to-date 1995 net sales figure for each such
customer through May 31, 1995; and (b) a list of the ten largest suppliers of
goods and materials to the Company and the Subsidiaries in terms of purchases
during the fiscal year ended December 31, 1994, showing the approximate total
purchases by the Company and the Subsidiaries from each such supplier during the
fiscal year ended December 31, 1994 and the year-to-date 1995 purchase figure
for each such supplier through May 31, 1995. There has not been any adverse
change in the business relationship of the Company and the Subsidiaries with any
customer or supplier named in Section 2.14(a) or 2.14(b) of the Disclosure
Schedule since December 31, 1994 which could reasonably be expected to have in
the aggregate a Material Adverse Effect.
15 PRODUCTS.
(a) Set forth in Section 2.15(a) of the Disclosure
Schedule is (i) a complete and accurate list of all Products currently
developed, licensed, manufactured, sold, distributed or otherwise published by
the Company or any of the Subsidiaries ("Current Products"), (ii) if applicable,
the current version number of each Current Product and (iii) information as to
whether all rights to each Current Product and its software code are owned by
the Company or any Subsidiary or are licensed from one or more third parties,
naming any such third party.
(b) Set forth in Section 2.15(b) of the Disclosure
Schedule is a list of all license or other agreements pursuant to which any part
or component of any Current Product
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is licensed from a third party and a detailed description of the part or
component so licensed.
(c) Set forth in Section 2.15(c) of the Disclosure
Schedule is a detailed description of the video clips, audio clips, photography,
animations and other "content" files utilized or incorporated in any Current
Product, including information as to (i) whether such files are owned by the
Company or any Subsidiary or licensed from a third party and (ii) the sources of
such files.
(d) The general returns policy of the Company and
the Subsidiaries with respect to Current Products is as set forth in Section
2.15(d) of the Disclosure Schedule.
16 COMPETITION. Except as set forth in Section 2.16 of the
Disclosure Schedule and except for ownership of publicly traded shares of a
company, not in excess of 1% of such company's outstanding publicly traded
shares, such Seller does not own, directly or indirectly, any capital stock or
other equity securities of, has any direct or indirect equity or ownership
interest in, and is serving as a director, officer, employee, consultant or
agent of any individual, partnership, corporation, association, trust or
unincorporated association which competes with, or conducts the same business
as, the Company or any of its Subsidiaries.
17 INSURANCE. Section 2.17 of the Disclosure Schedule sets
forth all policies or binders of insurance held by or on behalf of the Company
and the Subsidiaries (specifying the insurer, amount of the coverage, type of
insurance, expiration date of each policy, risks insured and any pending claims
thereunder). There has not been any failure to give any notice or present any
claim under any such policy or binder in a timely fashion or in the manner or
detail required by the policy or binder. There are no outstanding past due
premiums or claims, and there are no provisions for retroactive or retrospective
premium adjustments. No notice of cancellation or nonrenewal with respect to, or
disallowance of any claim under, any such policy or binder has been received by
the Company or any Subsidiary or any officer or director thereof. Section 2.17
of the Disclosure Schedule also sets forth a description of all outstanding
bonds and other surety arrangements issued or entered into in connection with
the business of the Company and the Subsidiaries.
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18 ACCESS TO BUYER INFORMATION. Each Seller hereby
represents that (a) she or he has been furnished by the Buyer during the course
of this transaction with all information regarding the Buyer which she or he had
requested, (b) all documents that have been reasonably requested by any Seller
have been made available for such Seller or such Seller's counsel's inspection
and review, (c) she or he has been afforded the opportunity to ask questions of
and receive answers from duly authorized officers or other representatives of
the Buyer concerning the terms and conditions of the sale of the SoftKey Shares
to her or him by the Buyer, as consideration for her or his sale of the Company
Shares to the Buyer, and (d) any other additional information which she or he
has requested has been provided. Each Seller hereby agrees and acknowledges that
the terms of this Agreement represent the definitive terms of its acquisition of
the SoftKey Shares and shall supersede any terms set forth in any letter,
memorandum, document or term sheet and any discussion, agreement or
understanding of any and every nature among the parties hereto.
19 SELLERS' INVESTMENT INTENT. Each Seller represents that
the SoftKey Shares to be issued and delivered to her or him hereunder are being
acquired for her or his own account (or, in the case of KHT, for the account of
certain specified employees of SuperStudio Ltd., one of the Subsidiaries), for
investment for an indefinite period of time, not as nominee or agent for any
other person, firm or corporation and not for distribution or resale to others
in contravention of the Securities Act and the rules and regulations promulgated
thereunder; provided, however, that the parties hereto acknowledge that the
Sellers may dispose of some or all of the SoftKey Shares pursuant to an
effective registration statement under the Securities Act. Each Seller agrees
that she or he will not sell or otherwise transfer the SoftKey Shares unless
they are registered under the Securities Act or unless an exemption from such
registration is available.
20 SECURITIES LEGEND; STOP TRANSFER INSTRUCTIONS. Each
Seller consents to the placement of a legend on any certificate or other
document evidencing the SoftKey Shares, stating that such SoftKey Shares have
not been registered under the Securities Act or any state securities or "Blue
Sky" laws and setting forth or referring to the restrictions on transferability
and sale thereof, including the restrictions set forth herein. Each Seller is
aware that the Buyer will make a notation in its appropriate records with
respect to the restrictions on the transferability of such SoftKey Shares. Each
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Seller also consents and acknowledges that "stop transfer" instructions may be
noted against the SoftKey Shares received by him as consideration hereunder. The
Buyer hereby undertakes to remove any legend described in this Section 2.20 or
to rescind any "stop transfer" instructions described in this Section 2.20 as to
any Seller's SoftKey Shares (a) if such Seller furnishes the Buyer with an
opinion of counsel or other written information reasonably satisfactory in form
and content to the Buyer that such legend or any such instructions are no longer
required (as applicable) or (b) with respect to and at the time of the
disposition of any such SoftKey Shares pursuant to an effective registration
statement under the Securities Act.
21 ENVIRONMENTAL MATTERS.
(a) Except as set forth in 2.21 of the Disclosure
Schedule, during any period that the Company or any Subsidiary has leased or
owned its properties or owned or operated any facilities, there have been no
disposals, releases or threatened releases of oil or petroleum or Hazardous
Materials (as hereinafter defined) on, from or under such properties or
facilities by the Company or any Subsidiary or, to the best knowledge of such
Seller, by any third party. Except as set forth in Section 2.21 of the
Disclosure Schedule, neither the Company nor any Subsidiary nor such Seller has
knowledge of any presence, disposals, releases or threatened releases of oil or
petroleum or Hazardous Materials on, from or under any of such properties or
facilities (including without limitation the presence of oil or petroleum or
Hazardous Materials in the outdoor environment of such properties or facilities,
whether or not the oil or petroleum or Hazardous Material originated from such
properties or facilities), which may have occurred prior to the Company or any
Subsidiary having taken possession of any of such properties or facilities. For
the purposes of this Agreement, the terms "facility," "disposal," "release" and
"threatened release" shall have the definitions assigned thereto by the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. Section 9601 et seq., as amended ("CERCLA"). For the purposes of this
Agreement, "Hazardous Materials" shall mean any hazardous or toxic substance,
material or waste which is or becomes prior to the Closing regulated under, or
defined as a "hazardous substance," "pollutant," "contaminant," "toxic
chemical," "hazardous materials," "toxic substance" or "hazardous chemical"
under (i) CERCLA; (ii) any similar federal, state or local law; or (iii)
regulations promulgated under any of the above laws or statutes.
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(b) None of the properties, facilities or operations
of the Company or any Subsidiary is in violation of any federal, state or local
law, ordinance, regulation or order relating to industrial hygiene or to the
environmental conditions on, under or about such properties or facilities,
including, but not limited to, soil and ground water condition. Except as set
forth in Section 2.21 of the Disclosure Schedule, during the time that the
Company or any Subsidiary has owned or leased its properties and facilities,
neither the Company or any Subsidiary nor, to the best knowledge of such Seller
and the Company and the Subsidiaries, any third party, has used, generated,
manufactured or stored on, under or about such properties or facilities or
transported to or from such properties or facilities any Hazardous Materials.
(c) During the time that the Company or any
Subsidiary has owned or leased its properties and facilities, there has been no
litigation brought or threatened against and no request for information made to
the Company or any Subsidiary by, or any settlement reached by the Company or
any Subsidiary with, any party or parties alleging the presence, disposal,
release or threatened release of any oil or petroleum or Hazardous Materials on,
from or under any of such properties or facilities.
22 TAXES.
(a) Except as disclosed in Section 2.22 of the
Disclosure Schedule:
(i) All returns, declarations, reports,
estimates, information returns, and statements (collectively, "Tax Returns")
required to be filed by the Company or any Subsidiary on or before the date
hereof for all periods ending on or before the Closing Date have been (or will
be) timely filed, and all such Tax Returns are true, correct and complete,
except for such failures to be true, correct and complete which would not create
aggregate liability for the Company or the Subsidiaries in excess of $20,000.
Neither the Company nor any Subsidiary is required to file any state Tax Returns
other than in the State of New York.
(ii) The Company and each Subsidiary have
timely paid all Taxes reasonably believed to be due or claimed to be due from
any of them by any federal, state, local or foreign taxing authority in respect
to periods (or any portion thereof) ending on or before the date hereof.
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(iii) There are no liens for Taxes upon the
assets of the Company or any Subsidiary except liens for Taxes not yet due and
payable.
(iv) The Tax Returns of the Company and each
Subsidiary are closed by statute for the periods set forth in Section 2.22 of
the Disclosure Schedule. No deficiency for any Taxes has been proposed, asserted
or assessed against the Company or any Subsidiary which has not been resolved
and paid in full. There are no outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns that have been given by the Company or any Subsidiary.
(v) The Company has not made any change in
accounting methods, received a ruling from any taxing authority or signed an
agreement with any taxing authority which is reasonably likely to have a
Material Adverse Effect.
(vi) The Company and the Subsidiaries have
complied in all material respects with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes (including, without
limitation, withholding of Taxes pursuant to Sections 1441 and 1442 of the Code
or similar provisions under any foreign laws) and have, within the time and the
manner prescribed by law, withheld from employee wages and paid over to the
proper governmental authorities all amounts required to be so withheld and paid
over under applicable laws.
(vii) No audit or other proceeding by any
federal, state, local or foreign court, governmental, regulatory, administrative
or similar authority is presently pending with respect to any Taxes or Tax
Return of the Company or any Subsidiary, and neither the Company nor any
Subsidiary has received a written notice of any pending audits or proceedings.
(viii) Neither the Company nor any Subsidiary
is a party to, is bound by or has any obligation under, any Tax sharing
agreement or similar contract or arrangement. No power of attorney has been
granted by the Company with respect to any matter relating to Taxes which is
currently in force.
(ix) No deficiency for any Taxes has been
proposed, asserted or assessed against the Company or any Subsidiary which has
not been resolved or paid in full.
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(x) There are no outstanding requests,
agreements, consents or waivers to extend the statutory period of limitations
applicable to the assessment of any Taxes or deficiencies against the Company or
any of its Subsidiaries.
(xi) No power of attorney granted by either the
Company or any of the Subsidiaries with respect to any Taxes is currently in
force.
(xii) Neither the Company nor any of the
Subsidiaries is a party to, is bound by or has any obligation under, any
agreement providing for the allocation or sharing of Taxes.
(xiii) Neither the Company nor any of the
Subsidiaries has, with regard to any assets or property held, acquired or to be
acquired by any of them, filed a consent to the application of Section 341(f) of
the Code, or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by the Company or any of the Subsidiaries.
(xiv) Neither the Company nor any Subsidiary
is a party to any agreement, contract or arrangement that could result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code.
(xv) The Company is not and has not been during
the applicable period specified in Section 897(c)(1)(ii) of the Code a United
States real property holding company (as defined in Section 897(c)(2) of the
Code).
(b) For purposes of this Agreement, "Taxes"
(including, with correlative meaning, the term "Tax") shall mean all taxes,
charges, fees, levies or other assessments, including, without limitation, all
net income, gross income, gross receipts, sales, use, service, service use, ad
valorem, transfer, franchise, profits, license, withholding, social security,
payroll, employment, excise, estimated, severance, stamp, recording, occupation,
property or other taxes, customs duties, fees, assessments or charges of any
kind whatsoever, whether computed on a separate consolidated, unitary, combined
or other basis, together with any interest, fines, penalties, additions to tax
or other additional amounts imposed thereon or
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with respect thereto imposed by any taxing authority (domestic or foreign).
23 BENEFIT PLANS.
(a) Section 2.23 of the Disclosure Schedule sets
forth a true and complete list of each Benefit Plan, and each other "employee
benefit plan" (within the meaning of Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended, and the rules and regulations
promulgated thereunder ("ERISA")), that is or was maintained or contributed to
by the Company or any affiliate (including any Subsidiary) of the Company or by
any trade or business, whether or not incorporated, which together with the
Company or any affiliate (including any Subsidiary) would be deemed a "single
employer" within the meaning of Section 4001 of ERISA (an "ERISA Affiliate")
within the last six years, for the benefit of any employee, former employee,
consultant, officer or director of the Company or any Subsidiary or any ERISA
Affiliate (an "ERISA Plan"). Neither the Company nor any Subsidiary has any
commitment, whether formal or informal and whether legally binding or not, to
create any additional ERISA Plan which could have a Material Adverse Effect.
(b) No ERISA Plan is a "multiemployer plan," as such
term is defined in Section (3)(37) of ERISA; no ERISA Plan is subject to Section
412 of the Code or Title IV of ERISA; each of the ERISA Plans is, and has always
been, operated in all material respects in accordance with the requirements of
all applicable laws, and all persons who participate in the operation of such
ERISA Plans and all ERISA Plan "fiduciaries" (within the meaning of Section
3(21) of ERISA) have always acted substantially in accordance with the
provisions of all applicable law. None of the ERISA Plans is intended to be
"qualified" within the meaning of Section 401(a) of the Code; no ERISA Plan has
an accumulated or waived funding deficiency within the meaning of Section 412 of
the Code; within the past six years no "reportable event," as such term is
defined in Section 4043(b) of ERISA, has occurred with respect to any ERISA
Plan; and no condition exists that presents a material risk to the Company or
any ERISA Affiliate of incurring a liability to or on account of an ERISA Plan
pursuant to Title IV of ERISA.
(c) Full payment has been made, or will be made in
accordance with section 404(a)(6) of the Code, of all amounts which the Company
or any Subsidiary or any ERISA
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Affiliate is required to pay under the terms of each of the ERISA Plans as of
the last day of the most recent plan year thereof ended prior to the date of
this Agreement, and all such amounts properly accrued through the Closing Date
with respect to the current plan year thereof have been paid by the Company or
any Subsidiary or are properly reflected in accordance with generally accepted
accounting principles on the financial statements of the Company and the
Subsidiaries.
(d) No ERISA Plan provides benefits, including,
without limitation, death or medical benefits (whether or not insured), with
respect to current or former employees of the Company or any Subsidiary or any
ERISA Affiliates for periods extending beyond their retirement or other
termination of service for which the Company or any Subsidiary is or could be
liable. No amounts payable under the ERISA Plans will fail to be deductible for
federal income tax purposes by virtue of Section 280G of the Code.
(e) There has been no prohibited transaction (within
the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to
any ERISA Plan; neither the Company nor any Subsidiary has incurred any material
liability for any excise tax arising under Section 4972 or 4980B of the Code,
and no fact or event exists that could reasonably give rise to any such
liability with respect to the filing of reports with respect to any ERISA Plan;
there are no pending, threatened or anticipated claims (other than routine
claims for benefits) by, on behalf of or against any of the ERISA Plans, or any
trusts related thereto or any trustee or administrator thereof, and no material
litigation or administrative or other proceeding (including, without limitation,
any litigation or proceeding under Title IV of ERISA) has occurred or, to the
best knowledge of the Sellers, is threatened involving any ERISA Plan or any
trusts related thereto or any trustee or administrator thereof.
24 POOLING MATTERS. Neither the Company nor any affiliate
(including any Subsidiary), to the best knowledge of such Seller and the Company
and the Subsidiaries, based upon inquiries of responsible officers of the
Company, has taken or agreed to take any action that (without giving effect to
this Agreement, the transactions contemplated hereby or actions related thereto,
or any action taken or agreed to be taken by the Buyer or any of its affiliates)
would affect the ability of the Buyer to account for the business combination to
be effected by this Agreement and the transactions contemplated hereby as a
pooling of interests.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE BUYER
The Buyer hereby represents and warrants to each Seller as
follows:
1 CORPORATE ORGANIZATION. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
2 AUTHORIZATION. The Buyer has the requisite corporate
power and authority to enter into this Agreement and the other agreements,
documents and instruments to be executed and delivered by the Buyer pursuant
hereto (the "Additional Buyer's Documents") and to carry out the transactions
contemplated hereby and thereby. The execution, delivery and performance of this
Agreement and the Additional Buyer's Documents and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by the
Board of Directors of the Buyer, and no other corporate proceedings on the part
of the Buyer or its stockholders are necessary to authorize this Agreement and
the Additional Buyer's Documents and transactions contemplated hereby and
thereby. When fully executed and delivered, this Agreement and each of the
Additional Buyer's Documents will constitute the valid and binding agreements of
the Buyer, enforceable against the Buyer in accordance with their respective
terms.
3 SEC FILINGS.
(a) The Buyer has filed all forms, reports and
documents required to be filed by it with the SEC since January 1, 1995. Such
forms, reports and documents and all registration statements filed under the
Securities Act since January 1, 1995 (the "SEC Reports") (i) were prepared in
accordance with the requirements of the Securities Act or the Securities
Exchange Act of 1934, as amended, as the case may be, and the rules and
regulations thereunder, as amended (collectively, the "Rules and Regulations"),
and (ii) did not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made or incorporated by reference
therein, in the light of the circumstances under
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which they were made or incorporated by reference, not misleading.
(b) Each of the consolidated financial statements
(including, in each case, any notes thereto) contained or incorporated by
reference in the SEC Reports was prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto) and each fairly presented the consolidated financial position, results
of operations and changes in cash flow of the Buyer and its consolidated
subsidiaries as of the respective dates thereof and for the respective periods
indicated therein, except as otherwise noted therein (subject, in the case of
unaudited statements, to normal and recurring year-end adjustments which were
not and are not expected, individually or in the aggregate, to have a material
adverse effect on the Buyer).
4 AUTHORIZATION AND ISSUANCE OF SOFTKEY SHARES. The
issuance of the SoftKey Shares has been duly authorized by the Buyer and, upon
delivery to the Sellers and the Escrow Agent of the certificate or certificates
therefor against receipt of the Company Shares being purchased by the Buyer and
the other deliveries by each Seller pursuant hereto, the SoftKey Shares will be
validly issued, fully paid and nonassessable, free and clear of all Liens and
restrictions other than the restrictions imposed herein or in the Escrow
Agreement, on the certificate or certificates or by the Rules and Regulations.
5 CONSENTS AND APPROVALS; NON-CONTRAVENTION. Except for any
required filings under the HSR Act, neither the execution, delivery or
performance of this Agreement or any of the Additional Buyer's Documents by the
Buyer nor the consummation by the Buyer of the transactions contemplated hereby
or thereby nor compliance by the Buyer with any of the provisions hereof or
thereof will (a) violate any provision of the Certificate of Incorporation or
By-Laws of the Buyer, (b) require any filing with, or permit, authorization,
consent or approval of, any Governmental Entity or (c) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Buyer or any
of its properties or assets.
6 LITIGATION. There is no claim, action, suit, inquiry,
proceeding or investigation by or before any Governmental Entity pending or,
to the Buyer's knowledge, threatened against or involving the Buyer which in any
manner seeks injunctive or other non-monetary relief or seeks to prevent,
enjoin, alter or delay any transaction contemplated hereby, nor
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is there any basis for any such claim, action, suit, inquiry, proceeding or
investigation. The Buyer is not subject to any order, writ, injunction or decree
which, individually or in the aggregate, has or in the future would have a
material adverse effect on the ability of the Buyer to consummate the
transactions contemplated hereby.
ARTICLE IV
ADDITIONAL AGREEMENTS
1 CONSENTS AND APPROVALS. The Buyer and each Seller shall,
and each Seller shall cause the Company and the Subsidiaries to, take all
reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on themselves with respect to the transactions contemplated
hereby (which actions shall include, without limitation, furnishing all
information required in connection with approvals of or filings with any other
Governmental Entity) and will promptly cooperate with and furnish information to
each other in connection with any such requirements imposed on any of them in
connection with the transactions contemplated hereby. The Buyer and each Seller
shall, and each Seller shall cause the Company and the Subsidiaries to, take all
reasonable actions necessary to obtain (and shall cooperate with each other in
obtaining) any consent, authorization, order or approval of, or any exemption
by, any Governmental Entity or other public or private third party, required to
be obtained or made by the Buyer, any Seller, the Company or any of the
Subsidiaries in connection with the transactions contemplated hereby; provided,
however, that neither the Buyer nor any of its affiliates shall be under any
obligation to (a) make proposals, execute or carry out agreements or submit to
judicial or administrative orders, providing for the sale or other disposition
or holding separate (through the establishment of a trust or otherwise) of any
assets or categories of assets of the Buyer or any of its affiliates or the
Company or any of the Subsidiaries or the holding separate of the Company Shares
or imposing or seeking to impose any limitation on the ability of the Buyer or
any of its subsidiaries or affiliates to conduct their business or own such
assets or to acquire, hold or exercise full rights of ownership of the Company
Shares or (b) otherwise take any step to avoid or eliminate any impediment which
may be asserted under any law of the United States or any state governing
competition, monopolies or restrictive trade practices which, in the reasonable
judgment of the Buyer, could reasonably be
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expected to result in a material limitation of the benefit expected to be
derived by the Buyer as a result of the transactions contemplated hereby or
might adversely affect the Company or any Subsidiary or the Buyer or any of the
Buyer's affiliates.
2 FURTHER ASSURANCES.
(a) From time to time after the Closing, each Seller
will use all reasonable efforts (a) to obtain any licenses, permits, waivers,
consents, authorizations, qualifications and orders of Governmental Entities or
other Persons or entities as the Buyer shall reasonably request to enable the
Company and the Subsidiaries to enjoy after the Closing the rights and benefits
presently enjoyed by the Company and the Subsidiaries in the operation of the
business conducted by the Company or by any Seller in respect of the Company and
(b) to transfer to the Company or any Subsidiary, at the expense of the Sellers,
all rights in respect of any leases, licenses or other contracts, commitments or
agreements held by any Seller or any of its respective affiliates or other
subsidiaries relating to any real or other property used in the conduct of the
business conducted by the Company and the Subsidiaries or otherwise use all
reasonable efforts to provide benefits to the Company or any Subsidiary or their
respective assignees under any such leases, licenses and other contracts,
commitments and agreements which are at least as favorable as those in effect
immediately prior to the Closing hereunder.
(b) After the Closing, the Buyer will (i) use all
reasonable efforts to assist Fox, Rosenberg and Flextech in obtaining the
release of any personal guarantees by Fox, Rosenberg or Flextech of lease
obligations and other obligations of the Company or the Subsidiaries and
(ii) indemnify Fox, Rosenberg or Flextech, as the case may be from and
against any and all of such obligations.
3 ACCESS. For a period of at least five years after the
Closing Date, (a) the Buyer agrees to cause the Company and the Subsidiaries to
retain all financial and Tax records and minute books of the Company and the
Subsidiaries relating to the period on or before the Closing Date and (b) the
Sellers agree to retain any documents and other materials relating to the
Company which are not conveyed pursuant to this Agreement. After such five-year
period, none of the Company or any Subsidiary or the Sellers will dispose of
such materials without first giving the other party the opportunity, at such
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other party's expense, to remove and retain all or any part of such materials as
it may select. During the period such materials are so retained, each party
shall, on reasonable notice, afford representatives of the other party access
thereto, during regular business hours, to examine and copy such materials.
After the Closing, the Buyer and Sellers shall, and the Buyer shall cause the
Company and the Subsidiaries to, provide the requesting party with such
assistance at the expense of the requesting party as may reasonably be requested
by such party in connection with the preparation of any Tax Return, any audit,
or any judicial or administrative proceeding or determination relating to
liability for Taxes of Buyer, Sellers, the Company or any Subsidiary and shall
provide the requesting party at such party's expense with any reasonable
assistance (including, without limitation, making employees available to such
party during regular business hours) which may be relevant to such Tax Return,
audit, proceeding or determination.
ARTICLE V
CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATIONS
All obligations of the Buyer to consummate the transactions
contemplated by this Agreement are subject to the satisfaction or waiver prior
to or at the Closing of the following conditions:
1 PERFORMANCE OF OBLIGATIONS; REPRESENTATIONS AND
WARRANTIES. The Sellers shall have performed all obligations contained herein to
be performed by the Sellers at or prior to the Closing and the representations
and warranties of the Sellers contained herein shall be true and accurate on and
as of the date of this Agreement, and the Buyer shall have received a
certificate of the Sellers to that effect.
2 NO INJUNCTION OR RESTRAINTS. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction (an "Injunction") shall be in effect and no request for
an Injunction shall be pending before any Governmental Entity and remain
undecided for a period of ten business days to restrain, prohibit or otherwise
challenge the legality of this Agreement or the transactions contemplated
hereby.
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3 REGULATORY APPROVALS. All applicable waiting periods
under the HSR Act with respect to the transactions contemplated hereby shall
have expired or been terminated, and Flextech shall have received the approval
of the Singapore Stock Exchange for the transactions contemplated hereby.
4 SECTION 1445 CERTIFICATES. Each of the Sellers shall have
delivered to the Buyer a certificate satisfying the requirements of Section
1445(b)(2) or Section 1445(b)(3) of the Code, as the case may be, in either
case, in form and substance satisfactory to the Buyer.
5 ESCROW AGREEMENT. The Sellers, the Buyer and the Escrow
Agent shall have entered into the Escrow Agreement.
6 AFFILIATE LETTERS. To ensure that the business
combination to be effected by this Agreement and the transactions contemplated
hereby will be accounted for as a pooling of interests, and to ensure compliance
with the Securities Act, each Seller shall have signed and delivered to the
Buyer a letter in the form attached hereto as Exhibit B (collectively, the
"Affiliate Letters"), agreeing, among other things, that such persons will not
sell, pledge, transfer or otherwise dispose of any of the SoftKey Shares
received as consideration pursuant to Section 1.2 hereof, except in compliance
with Rule 144 under the Securities Act or pursuant to an exemption from the
registration requirements of the Securities Act or an effective registration
statement under the Securities Act.
7 ACCOUNTANTS' LETTERS. The Buyer shall have received from
Coopers & Lybrand L.L.P. and Ernst & Young LLP the letters described in Section
1.9 hereof, unless the Buyer's failure to receive one or both of such letters
results from a willful action taken by the Buyer which prevents either Coopers &
Lybrand L.L.P. or Ernst & Young LLP from delivering or causing to be delivered
its respective letter.
8 TERMINATIONS AND ASSIGNMENTS.
(a) The following contracts shall have been
terminated (with, where requested by the Buyer, appropriate waivers of past
noncompliance) without cost or other adverse effect on the Buyer:
(i) Agreement of Shareholders of Future Vision
Holding, Inc. dated April 8, 1994 by and among Fox, Rosenberg and Flextech;
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(ii) Security and Pledge Agreement dated as of
April 8, 1994 between the Company and Flextech;
(iii) Employment Agreement dated as of January
1, 1994 by and between the Company and Fox;
(iv) Employment Agreement dated as of January
1, 1994 by and between the Company and Rosenberg;
(v) Employment Agreement dated January 1, 1995
by and between the Company and Scott Tobin;
(vi) Employment Agreement dated January 1, 1995
by and between the Company and Eva Rosenstein;
(vii) Agreement of Shareholders of Inter-
active Publishing Corporation dated March 5, 1993 among Fox, Rosenberg, Joseph
Au Sai Chuen and Interactive Publishing Corporation;
(viii) Share Swap Agreement dated as of April
8, 1994 between Flextech, Fox and Rosenberg;
(ix) Agreement dated November 14, 1993 by and
between Altholz and Shelly Avrahami;
(x) the license agreement between Electec Pte.
Ltd. ("Electec") and Future Vision Holding, Inc. and its subsidiaries, Future
Vision Multimedia, Inc. and Multimedia Products Corporation, evidenced by (i) a
facsimile dated August 31, 1994 from Joseph Au to Fox, (ii) a facsimile dated
September 5, 1994 from Fox to Joseph Au and (iii) a Letter of Authorization
dated October 19, 1994, signed by Joseph B. Tuchinsky, General Counsel of the
Company;
(xi) Sales Distribution Agreement dated
December 15, 1993 by and between the Company and Flextech Holdings Pte Ltd; and
(xii) Stock Pledge Agreement dated as of July
10, 1995 by and between FVH Asia Pte Ltd., a Singapore corporation, and Altholz
and Abrahami, and the stock power issued in connection therewith.
(b) Fox shall have caused Advanced Strategies
Corporation, a New York corporation ("ASC"), to transfer to the
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Company any and all assets of ASC relating to the business of the Company or any
Subsidiary identified by Buyer for transfer.
9 CONVERSION OF NOTE. The $2,000,000 principal amount
Secured Convertible Note dated April 8, 1994 made by the Company to Flextech
shall have been converted into 2,807,429 shares of Company Common Stock in
accordance with its terms and cancelled.
10 STOCKHOLDER APPROVAL. Flextech shall have received the
approval of its stockholders for the transactions contemplated hereby.
11 CANCELLED PROMISSORY NOTES. Evidence, satisfactory to
the Buyer, of payment and cancellation of the following promissory notes shall
have been delivered to the Buyer:
(a) Promissory Note for $500,000 dated September
1, 1994 held by Flextech (maturity date: June 1, 1995);
(b) Promissory Note for $500,000 dated February
21, 1995 held by Flextech (maturity date: June 21, 1995);
(c) Promissory Note for $500,000 dated August 18,
1994 held by Joseph Au (maturity date: May 31, 1995);
(d) Promissory Note for $500,000 dated December 8,
1994 held by Flextech (maturity date: April 8, 1995); and
(e) Promissory Note for $250,000 dated April 8, 1994
held by Kentfield Associates (maturity date: June 1, 1995).
12 TRANSLATION OF DOCUMENTS. The Company shall have
provided an accurate summary in the English language of all documents included
in the Disclosure Schedule which are in the Hebrew language
ARTICLE VI
CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS
All obligations of Sellers to consummate the transac-
tions contemplated by this Agreement are subject to the satis-
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faction or waiver prior to or at the Closing of the following conditions:
1 PERFORMANCE OF OBLIGATIONS; REPRESENTATIONS AND
WARRANTIES. The Buyer shall have performed all obligations contained herein to
be performed by the Buyer at or prior to the Closing and the representations and
warranties of the Buyer contained herein shall be true and accurate on and as of
the date of this Agreement, and the Sellers shall have received a certificate of
the Buyer to that effect.
2 NO INJUNCTION OR RESTRAINTS. No Injunction shall be in
effect and no request for an Injunction shall be pending before any Governmental
Entity and remain undecided for a period of ten business days to restrain,
prohibit or otherwise challenge the legality of this Agreement or the
transactions contemplated hereby.
3 REGULATORY APPROVALS. All applicable waiting periods
under the HSR Act with respect to the transactions contemplated hereby shall
have expired or been terminated, and Flextech shall have received the approval
of the Singapore Stock Exchange for the transactions contemplated hereby.
ARTICLE VII
SURVIVAL AND INDEMNIFICATION
1 SURVIVAL. All representations and warranties contained in
this Agreement shall survive the Closing until (a) for items expected to be
encountered in the audit process, as determined by the Buyer's independent
auditors in their reasonable judgment, the earlier to occur of (i) one year
after the Closing or (ii) the issuance of the first independent audit report on
the Buyer's financial statements after the Closing, which financial statements
include the financial results of the Company, or (b) for all other items, one
year after the Closing, but thereafter shall be of no further force or effect.
This Section 7.1 shall not limit any covenant or agreement of the parties which
by its terms contemplates performance after the Closing.
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2 INDEMNIFICATION.
(a) Each Seller other than Abrams and Barlow agrees
to indemnify and hold harmless the Buyer and its subsidiaries and affiliates and
their respective officers, directors, employees and agents against and in
respect of any loss, liability (including without limitation any liability for
Taxes), damage, deficiency, cost and expense (including without limitation
reasonable expenses of investigation and reasonable attorneys' fees incurred in
connection with any claim, suit or proceeding brought against an indemnified
party and including without limitation all costs and expenses incurred in
connection with any threatened claim of a third party relating to any patent
application, patent right, trademark, trademark application, trade name, service
mark, service mark application, copyright, copyright registration or trade
secret infringement including without limitation all costs and expenses incurred
in connection with any recalls (such as costs of returns, freight, costs to
receive returns, costs of returning content, royalties not recovered and other
similar costs), editing, modifying or repackaging of existing Products)
(collectively, "Losses") incurred or sustained by any of them as a result of (i)
any breach by such Seller of this Agreement, including its or his
representations, warranties and covenants contained herein or in any agreement,
document or other instrument delivered pursuant hereto or in connection herewith
or (ii) any threatened or actual infringement by the Intellectual Property
currently used, sold, licensed or disposed of by the Company or any Subsidiary
or proposed to be used, sold, licensed or disposed of by the Company on the
rights of any Person, regardless of whether such infringement constitutes a
breach by such Seller of this Agreement; provided, however, that (x)
indemnification under clause (ii) of this Section 7.2(a) as a result of any
threatened infringement shall be available only for Losses incurred or sustained
based upon any action taken by the Buyer in the exercise of reasonable business
judgment, taking into account the gravity of the threatened infringement that
occurred, is occurring or would occur if the Buyer failed to take any action and
(y) no indemnification shall be available under this Section 7.2(a) for any
actions taken by the Buyer or the Company or any Subsidiary after the Closing,
including without limitation any change by the Buyer or the Company or any
Subsidiary in any use of any Intellectual Property from the use of such
Intellectual Property made by the Company or any such Subsidiary prior to the
Closing. The Sellers shall not be required to indemnify the Buyer (and the other
indemnified parties set forth in this Section 7.2(a)) hereunder for a
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breach of Section 2.12 hereof (or any other Section of this Agreement which is
also breached by such event) or under clause (ii) of this Section 7.2(a) unless
and until the aggregate Losses in connection therewith exceed $35,000, provided
that the aforementioned $35,000 basket shall not apply in respect of Losses
related to, or arising out of, conditions, events or circumstances known to the
Sellers prior to the Closing and not disclosed in this Agreement or the
Disclosure Schedule. No investigation made by the Buyer or any other Person
shall affect any representation or warranty of any Seller contained in this
Agreement or the indemnification obligation of the Sellers set forth herein.
(b) The Buyer agrees to indemnify and hold harmless
each Seller and its respective affiliates and agents and, as to any Seller
organized in corporate form, its officers, directors and employees, against and
in respect of any Losses incurred or sustained by any of them as a result of any
breach by the Buyer of this Agreement, including the representations, warranties
and covenants contained herein or in any agreement, document or other instrument
delivered pursuant hereto or in connection herewith.
(c) No party shall be entitled to make any claim for
indemnification under this Article VII on account of any representation,
warranty or covenant contained herein after the date on which the same ceases to
survive pursuant to Section 7.1 hereof; provided, however, that if prior to such
date, the Indemnitor (as hereinafter defined) shall have received written notice
of a claim or event in accordance with Section 7.3 hereof, such claim or event,
if diligently pursued, shall continue as a basis for indemnity until it is
finally resolved.
(d) Losses as defined in Section 7.2(a) hereof shall
be limited to the amount of actual Losses sustained by the Indemnitee (as
hereinafter defined), net of any insurance proceeds recovered by the Indemnitee
under its insurance policies.
3 PROCEDURE FOR INDEMNIFICATION.
(a) Any Person or entity entitled to assert a claim
for indemnification under this Agreement (the "Indemnitee") shall give prompt
written notice to the indemnifying party (the "Indemnitor") of any claim or
event known to it which does or may give rise to a claim for indemnification
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hereunder by the Indemnitee against the Indemnitor; provided that the failure of
any Indemnitee to give notice as provided in this Section 7.3 shall not relieve
the Indemnitor of its obligations under this Article VII, except to the extent
that such failure has materially and adversely affected the rights of the
Indemnitor. In the case of any claim for indemnification hereunder arising out
of a claim, action, suit or proceeding brought by any Person who is not a party
to this Agreement (a "Third-Party Claim"), the Indemnitee shall also give the
Indemnitor copies of any written claims, process or legal pleadings with respect
to such Third-Party Claim promptly after such documents are received by the
Indemnitee.
(b) An Indemnitor may elect to compromise or defend,
at such Indemnitor's own expense and by such Indemnitor's own counsel, any
Third-Party Claim. If an Indemnitor elects to compromise or defend a Third-Party
Claim, it shall, within 30 days of its receipt of the notice provided pursuant
to Section 7.3(a) hereof (or sooner, if the nature of such Third-Party Claim so
requires), notify the related Indemnitee of its intent to do so, and such
Indemnitee shall reasonably cooperate in the compromise of, or defense against,
such Third-Party Claim. Such Indemnitor shall pay such Indemnitee's actual
out-of-pocket expenses incurred in connection with such cooperation. After
notice from an Indemnitor to an Indemnitee of its election to assume the defense
of a Third-Party Claim, such Indemnitor shall not be liable to such Indemnitee
under this Article VII for any legal expenses subsequently incurred by such
Indemnitee in connection with the defense thereof; provided that such Indemnitee
shall have the right to employ one counsel of its choice to represent such
Indemnitee if, in such Indemnitee's reasonable judgment, a conflict of interest
between such Indemnitee and such Indemnitor exists in respect of such claim, and
in that event the reasonable fees and expenses of such separate counsel shall be
paid by such Indemnitor. If an Indemnitor elects not to compromise or defend
against a Third-Party Claim, or fails to notify an Indemnitee of its election as
provided in this Section 7.3, such Indemnitee may pay, compromise or defend such
Third-Party Claim on behalf of and for the account and risk of the Indemnitor.
No Indemnitor shall consent to entry of any judgment or enter into any
settlement without the written consent of each related Indemnitee (which consent
shall not be unreasonably withheld), unless such judgment or settlement provides
solely for money damages or other money payments for which such Indemnitee is
entitled to indemnification hereunder and includes as an unconditional term
thereof the giving by the claimant or
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plaintiff to such Indemnitee of a release from all liability in respect of such
Third-Party Claim.
(c) If there is a reasonable likelihood that a
Third-Party Claim may have a material adverse effect on an Indemnitee, other
than as a result of money damages or other money payments for which such
Indemnitee is entitled to indemnification hereunder, such Indemnitee will have
the right, after consultation with the Indemnitor and at the cost and expense of
the Indemnitor, to defend such Third-Party Claim.
(d) If the amount of any Losses shall, at any time
subsequent to payment pursuant to this Agreement, be reduced by recovery,
settlement or otherwise, the amount of such reduction, less any expenses
incurred in connection therewith, shall promptly be repaid by the Indemnitee to
the related Indemnitor.
4 REMEDIES CUMULATIVE.
(a) The Buyer's recourse against each of the Sellers
with respect to damages resulting from the breach of any representation,
warranty or covenant contained in this Agreement, whether such recourse is
sought under Section 7.3 or otherwise, shall be limited to the SoftKey Shares
or, as to any of the SoftKey Shares which have been sold or otherwise disposed
of by such Seller at or prior to the time such damages are payable, the proceeds
of the sale or disposition of such SoftKey Shares.
(b) The Sellers hereby acknowledge and agree that
money damages would not be a sufficient remedy for, and the Buyer would be
irreparably harmed by, certain breaches by any of them of this Agreement and
that the Buyer shall be entitled to specific performance and injunctive relief,
without payment of bond or security, as remedies for any such breach.
(c) The remedies available to any party for any
breach of this Agreement by any other party shall be cumulative and shall not
preclude the assertion by any such party of any other rights or the seeking of
any other legal, equitable or statutory remedies against any other party.
(d) In the event that any party to this Agreement
shall be in default of any covenant, agreement or other continuing obligation
hereunder, any nondefaulting party shall send a written notice to the defaulting
party informing the
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defaulting party, in reasonable detail, of the existence and nature of such
default. The defaulting party shall then have 30 days (after receipt of such
notice) to cure such default. If, immediately after the end of that 30-day
period, the default has not been cured, then the nondefaulting party may declare
this Agreement in default and pursue all remedies against the defaulting party.
ARTICLE VIII
TERMINATION PRIOR TO CLOSING
1 TERMINATION OF AGREEMENT. This Agreement and the
transactions contemplated hereby may be terminated prior to the Closing Date, as
follows:
(a) by mutual written consent of the Buyer and the
Sellers;
(b) by the Buyer if: (i) Fox, Rosenberg, Altholz or
Abrahami shall have died or become permanently disabled; (ii) a temporary
restraining order, preliminary or permanent injunction or other order shall be
in effect or a request therefor shall be pending and remain undecided for a
period of ten business days to restrain, prohibit or otherwise challenge the
rights of the Company or any of the Subsidiaries to manufacture, market, sell or
distribute (A) Infopedia or (B) any product or products which, individually or
in the aggregate, were responsible for net sales of at least $2,000,000 in the
twelve months ended June 30, 1995; (iii) a bona fide, written claim, action,
suit, inquiry, proceeding or investigation shall be brought after the date of
this Agreement asserting damages against the Company or any of the Subsidiaries
in an amount equal to or exceeding $5,000,000; (iv) the facility leased by the
Company or a Subsidiary located in: Great Neck, New York, Nanuet, New York or
the State of Israel shall be substantially or totally impaired by a casualty
loss or act of God; (v) additional material governmental restrictions, not in
force and effect on the date hereof, shall have been imposed upon purchases or
sales of or trading in securities generally and is reasonably expected to cause
a Material Adverse Effect; (vi) the declaration of a banking moratorium or any
suspension of payments in respect of banks of the United States or any
limitation by any governmental authority on, or any other event which has a
reasonable likelihood of adversely affecting, the extension of credit by banks
or lending institutions in the
45
<PAGE> 50
United States generally shall have occurred, which declaration, suspension or
limitation shall be reasonably expected to cause a Material Adverse Effect; or
(vii) an outbreak of major hostilities or other national or international
calamity or any substantial change in national or international political,
financial or economic conditions shall have occurred or shall have accelerated
or escalated and shall be reasonably likely to cause a Material Adverse Effect;
(c) by the Sellers or the Buyer by written notice to
the other party or parties at any time prior to the Closing Date in the event
that (i) any representation or warranty made by such other party or parties in
this Agreement proves to have been materially incorrect or misleading when made
or (ii) such other party or parties has or have materially failed to perform and
observe any of the covenants or agreements in this Agreement; or
(d) by the Sellers or the Buyer, if the Closing has
not occurred on or before September 30, 1995 and this Agreement has not
previously been terminated; provided, however, that the right to terminate the
Agreement under this Section 8.1(d) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or before such date.
2 EFFECT OF TERMINATION. In the event this Agreement is
terminated pursuant to Section 8.1 hereof, this Agreement shall become wholly
void and of no force or effect, without any liability or further obligation on
the part of the Sellers or the Buyer, except that the provisions and obligations
set forth in Sections 9.2, 9.3, 9.6 and 9.10 shall survive such termination. No
termination of this Agreement shall terminate or otherwise impair the
Confidentiality Agreement between the Buyer and the Company.
ARTICLE IX
GENERAL PROVISIONS
1 AMENDMENT AND WAIVER. No amendment of any provision of
this Agreement shall in any event be effective, unless the same shall be in
writing and signed by the parties hereto. Any failure of any party to comply
with any obligation, agreement or condition hereunder may only be waived in
writing
46
<PAGE> 51
by the other parties, but such waiver shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure. No failure by any
party to take any action against any breach of this Agreement or default by the
other parties shall constitute a waiver of such party's right to enforce any
provision hereof or to take any such action.
2 EXPENSES. Whether or not the transactions contemplated by
this Agreement shall be consummated, each of the parties hereto agrees to pay
all costs and expenses incurred by it in connection with this Agreement and the
transactions contemplated hereby, including without limitation the fees of its
counsel, accountants and consultants. Notwithstanding the foregoing, the Sellers
shall bear the following costs and expenses of the Company and the Subsidiaries
in connection with this Agreement to the extent that such costs and expenses
exceed $50,000 in the aggregate:
(a) the fees and expenses of Morrison & Foerster,
counsel to the Company; and
(b) the fees and expenses of Ernst & Young LLP,
accountants to the Company.
3 BROKER'S AND FINDER'S FEES. Each Seller hereby represents
and warrants to the Buyer with respect to each Seller and the Company and the
Subsidiaries, and the Buyer hereby represents and warrants to each Seller with
respect to the Buyer, that no Person or entity is entitled to receive from any
Seller or the Company or any Subsidiary, on the one hand, or from the Buyer, on
the other hand, any investment banking, brokerage or finder's fee or fees for
financial consulting or advisory services in connection with this Agreement or
the transactions contemplated hereby; except that Robertson, Stephens & Company,
L.P. is entitled to receive an investment banking fee of $500,000 from the
Buyer.
4 NOTICES. All notices, requests and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
telecopied (if confirmed) or mailed by registered or certified mail (postage
prepaid, return receipt requested) to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice, as
specified below):
47
<PAGE> 52
(a) If to the Buyer:
SoftKey International Inc.
One Athenaeum Street
Cambridge, Massachusetts 02142
Attention: Neal S. Winneg, Esq.
Facsimile No.: (617) 494-5660
With a copy to:
Skadden, Arps, Slate, Meagher & Flom
One Beacon Street
Boston, Massachusetts 02108
Attention: Louis A. Goodman, Esq.
Facsimile No.: (617) 573-4822
(b) If to the Sellers:
c/o Future Vision Holding, Inc.
60 Cutter Mill Road, Suite 502
Great Neck, New York 11021
Attention: Harry Fox
Facsimile No: (516) 773-0990
With a copy to:
Morrison & Foerster
345 California Street
San Francisco, California 94104-2675
Attention: Bruce Alan Mann, Esq.
Facsimile No.: (415) 677-7522
The address of a party for the purposes of this Section 9.4 may be changed by
giving written notice to the other party or parties of such change in the manner
provided herein for giving notice. Unless and until such written notice is
received, the addresses as provided herein shall be deemed to continue to effect
for all purposes hereunder.
5 ENTIRE AGREEMENT; BINDING EFFECT. This Agreement and the
documents referred to herein (a) constitute the entire agreement and supersede
all other agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof (provided that any
confidentiality agreement shall survive the execution of this Agreement), and
(b) shall not be assigned by any party (by operation of law or otherwise)
without the prior written consent of the
48
<PAGE> 53
other parties, except that the Buyer may assign, in its sole discretion, any of
its rights, interests and obligations hereunder to any affiliate of the Buyer;
provided, however, that no such assignment shall relieve the Buyer of its
obligations hereunder.
6 APPLICABLE LAW. This Agreement shall be governed by and
be construed in accordance with the laws of the Commonwealth of Massachusetts,
without giving effect to the principles thereof relating to conflicts of laws.
The parties hereby consent to the jurisdiction of Massachusetts state and
federal courts over all matters relating to this Agreement.
7 PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and, subject to Section
9.5(b) hereof, their respective successors and assigns, and nothing in this
Agreement, express or implied, is intended to confer upon any other Person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
8 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
9 HEADINGS; PRONOUNS AND CONJUNCTIONS. The section and
other headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Unless otherwise indicated herein or the context otherwise requires, the
masculine pronoun shall include the feminine and neuter and the singular shall
include the plural. The word "or" shall not be deemed exclusive.
10 ANNOUNCEMENTS. Except as required by law or the rules of
the Nasdaq National Market or any national securities exchange, for so long as
this Agreement is in effect, no announcement of this Agreement or the
transactions contemplated hereby shall be made by any of the parties without the
written consent of the other party or parties, which consent shall not be
unreasonably withheld.
11 SEVERABILITY. In case any term, provision, covenant or
restriction of this Agreement is held to be invalid, illegal or unenforceable
in any jurisdiction, the validity,
49
<PAGE> 54
legality and enforceability of the remaining terms, provisions, covenants or
restrictions, or of such term, provision, covenant or restriction in any other
jurisdiction, shall not in any way be affected or impaired thereby.
50
<PAGE> 55
IN WITNESS WHEREOF, the parties hereto have signed this
Agreement under seal as of the date first written above.
SOFTKEY INTERNATIONAL INC.
By:
------------------------
Name:
Title:
FLEXTECH HOLDINGS PTE LTD
By:
------------------------
Name:
Title:
---------------------------
Harry Fox
---------------------------
Joseph Abrams
---------------------------
Sol Rosenberg
---------------------------
Mathew Barlow
---------------------------
Seth Altholz
---------------------------
Shelly Abrahami
K.H. TRUSTEES LTD.
By:
------------------------
Name:
Title:
---------------------------
Samuel Zemsky
<PAGE> 56
<TABLE>
SCHEDULE I
SELLERS' INFORMATION
<CAPTION>
================================================================================
Number of SoftKey
Number of Company Shares to be
Shares to be Sold Issued in the Name
Name of Seller at Closing of Seller at Closing*
--------------------------------------------------------------------------------
<S> <C> <C>
Flextech 10,211,359.51** 449,336
--------------------------------------------------------------------------------
Fox 5,892,923.78 259,309
--------------------------------------------------------------------------------
Abrams 465,687.13 20,492
--------------------------------------------------------------------------------
Rosenberg 2,548,893.89 112,160
--------------------------------------------------------------------------------
Barlow 138,715.31 6,104
--------------------------------------------------------------------------------
Zemsky 250,000 11,001
--------------------------------------------------------------------------------
KHT 595,750 26,215
--------------------------------------------------------------------------------
Altholz 1,142,500 50,274
--------------------------------------------------------------------------------
Abrahami 761,750 33,520
================================================================================
<FN>
-------------------
* These amounts are gross of any withholding Taxes. If the Buyer must
withhold from any Seller, the number of SoftKey Shares to be issued in
the name of that Seller will be decreased by the number of SoftKey
Shares required to be withheld by the Buyer. In addition, these amounts
do not reflect any proportional adjustments which may be made at the
Closing under Section 1.2(b) of the Agreement.
** Includes 2,807,429 shares to be issued to Flextech upon conversion of
the Secured Convertible Note dated April 8, 1994 referred to in Section
5.9 of the Agreement.
</TABLE>
<PAGE> 1
EXHIBIT 11.1
SOFTKEY INTERNATIONAL INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Fully Diluted
Net Income $ 7,954 $ 3,954 $ 17,973 10,245
Add:
Interest on convertible debentures and notes -- 160 -- 392
Amortization of convertible debenture issue costs -- 35 -- 70
----------- ----------- ----------- ----------
Adjusted net income $ 7,954 $ 4,149 $ 17,973 10,707
----------- ----------- ----------- ----------
Weighted Average Common and Exchangeable
Shares outstanding 21,782,000 18,133,000 21,402,000 18,133,000
Incremental shares calculated by the Treasury
Stock
Method applied to options, convertible
debentures and warrants issued, using the
greater of the closing and average fair value 1,230,000 2,095,000 1,311,000 1,946,000
----------- ----------- ----------- ----------
Common and common share equivalents
outstanding for purposes of calculating fully
diluted earnings per share 23,012,000 20,228,000 22,713,000 20,079,000
=========== =========== =========== ==========
Fully diluted earnings per share $ .35 $ .21 $ .79 $ .53
=========== =========== =========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF SOFTKEY INTERNATIONAL, INC. FOR
THE QUARTER ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 93,398,000
<SECURITIES> 0
<RECEIVABLES> 21,063,000
<ALLOWANCES> 6,385,000
<INVENTORY> 9,982,000
<CURRENT-ASSETS> 132,325,000
<PP&E> 11,326,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 177,636,000
<CURRENT-LIABILITIES> 18,949,000
<BONDS> 0
<COMMON> 229,000
0
0
<OTHER-SE> 147,194,000
<TOTAL-LIABILITY-AND-EQUITY> 177,636,000
<SALES> 33,717,000
<TOTAL-REVENUES> 33,717,000
<CGS> 9,953,000
<TOTAL-COSTS> 14,119,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 342,000
<INCOME-PRETAX> 9,303,000
<INCOME-TAX> 1,349,000
<INCOME-CONTINUING> 7,954,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,954,000
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
</TABLE>
