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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 21, 1995
SOFTKEY INTERNATIONAL INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
Delaware 0-13069 94-2562108
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(STATE OR OTHER (COMMISSION (IRS EMPLOYER
JURISDICTION OF FILE NUMBER) IDENTIFICATION NO.)
INCORPORATION)
One Athenaeum Street, Cambridge, Massachusetts 02142
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (617) 494-1200
N/A
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT
Total Number of Pages: 32
Exhibit Index Appears on Page 5
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Item 2. Acquisition or Disposition of Assets
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On July 21, 1995, SoftKey International Inc., a
Delaware corporation (the "Company"), acquired all of the
aggregate share capital of tewi Verlag GmbH, a German
limited liability company ("tewi"), pursuant to a Share
Purchase Agreement (the "Share Purchase Agreement") dated
such date by and among the Company, Ziff-Davis Verlag
GmbH, a German limited liability company ("Ziff-Davis"),
and Helmut Kunkel ("Kunkel") in exchange for cash consid-
eration paid to Ziff-Davis of $11,564,070 and cash con-
sideration paid to Kunkel of $1,454,600 as well as the
issuance of 99,045 shares of common stock, par value $.01
per share, of the Company (the "Common Stock") to Kunkel.
Tewi is a publisher and distributor of CD-Rom software
and computer-related books. The foregoing description of
the Share Purchase Agreement is qualified in its entirety
by reference to the text of the Share Purchase Agreement,
which is filed as Exhibit 2.1 hereto and incorporated by
reference herein.
Additionally, on the same date, the Company and
Kunkel entered an Earn-Out Agreement (the "Earn-Out
Agreement") pursuant to which the Company shall pay
Kunkel up to DM 2,160,000 in Common Stock upon the satis-
faction of certain revenue and operating income targets
by tewi in fiscal year 1996 and fiscal year 1997. The
foregoing description of the Earn-Out Agreement is quali-
fied in its entirety by reference to the text of the
Earn-Out Agreement, which is filed as Exhibit 2.2 hereto
and incorporated by reference herein.
The Company funded the cash portion of the
purchase price for the aggregate share capital of tewi
with available cash.
The press release announcing, among other
things, the consummation of the transactions described
herein is attached as Exhibit 99.1 hereto and incorpo-
rated by reference herein.
2
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Item 7. Financial Statements, Pro Forma Financial Information and
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Exhibits.
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(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
At the time of the filing of this Form 8-
K, it is impracticable for the Company to
provide the financial statements required
by Rule 3-05(b) of Regulation S-X with
respect to the acquisition of the aggre-
gate share capital of tewi. Such required
financial information will be filed by
amendment under cover of Form 8-K/A not
later than October 4, 1995, in accordance
with Item 7(a)(4) of Form 8-K.
(b) PRO FORMA FINANCIAL INFORMATION. At the
time of the filing of this Form 8-K, it is
impracticable for the Company to provide
the pro forma financial information re-
quired by Rule 11-d(c) of Regulation S-X
with respect to the acquisition of the
aggregate share capital of tewi. Such
required financial information will be
filed by amendment under cover of Form 8-
K/A not later than October 4, 1995, in ac-
cordance with Item 7(b)(2) of Form 8-K.
(c) Exhibits.
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2.1 Share Purchase Agreement dated July
21, 1995 by and among the Company,
Ziff-Davis and Kunkel.
2.2 Earn-Out Agreement dated July 21,
1995 by and between the Company and
Kunkel.
99.1 Press release dated July 25, 1995.
3
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SIGNATURE
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.
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(Registrant)
By: /s/ R. Scott Murray
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R. Scott Murray
Chief Financial Officer
August 4, 1995
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(Date)
4
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<TABLE>
Exhibit Index
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<CAPTION>
Exhibit
No. Exhibit Description Sequential
Page No.
<S> <C> <C>
2.1 Share Purchase Agreement dated July
21, 1995 by and among the Company,
Ziff-Davis and Kunkel
2.2 Earn-Out Agreement dated July 21,
1995 by and between the Company and
Kunkel
99.1 Press release dated July 25, 1995
99.2 Financial Statements of Business
Acquired (to be filed by amendment)
99.3 Pro Forma Financial Information (to
be filed by amendment)
</TABLE>
5
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Exhibit 2.1
Deed No.
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SHARE PURCHASE AGREEMENT
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July 21, 1995
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The parties to this agreement are Ziff-Davis Verlag GmbH ("Ziff-Davis"), a
company with limited liability organized under the laws of Germany,
registered in the Commercial Register of Munich under No. HRB 92283, with
its principal offices at Riesstrasse 25, 80992 Munich and Helmut Kunkel
("Kunkel"), residing at Dietlindenstrasse 20b, 80802 Munich (each a
"Seller"; together, "Sellers"), on the one hand, and SoftKey International
Inc., a Delaware corporation ("Buyer"), on the other hand.
Sellers are the sole shareholders and own the aggregate share capital
(the "Shares") of tewi Verlag GmbH (the "Company"), a company with limited
liability organized under the laws of Germany, registered in the Commercial
Register of Munich under No. HRB 104319, with its principal office at
Riesstrasse 25, 80992 Munich. Sellers wish to sell, and Buyer wishes to
purchase and acquire, the Shares on the terms and conditions set forth in
this agreement. The sale of the Shares shall also be referred to as the
"Transactions".
Accordingly, it is agreed as follows:
1. Transactions.
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1.1 SALE OF SHARES. Sellers hereby sell to Buyer, and Buyer hereby
purchases from each of the Sellers, all of their respective Shares in the
Company, including earnings accrued and undistributed, as set forth below:
Kunkel: one share having a nominal value of DM 20,000
Ziff-Davis: one share having a nominal value of DM 30,000;
Sellers hereby assign to Buyer the Shares with all rights and obligations
relating thereto, such assignments and transfer to be effective the date
hereof (the Closing Date) subject to receipt of the Share Purchase Price
pursuant to section 1.2 hereof. Buyer hereby accepts these assignments and
transfers by Sellers.
1.2 CONSIDERATION. As aggregate consideration for the sale of the
Shares, Buyer shall
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pay Sellers for the Shares (i) by wire transfer to one or more accounts
to be designated by Ziff-Davis on behalf of Sellers, DM 17,900,000 in
immediately and irrevocably available funds (the "Cash Purchase Price")
on the date hereof, (ii) 99,045 shares (the SoftKey Shares) of common
stock, par value of $.01 per share, of Buyer (the Common Stock)
which shall be subject to the terms of the Stock Restriction and
Repurchase Agreement by and between Buyer and Kunkel (the Stock Restriction
and Repurchase Agreement) in the form attached hereto as Exhibit A, and
(iii) a number of additional shares of Common Stock (the Additional SoftKey
Shares) to be determined in accordance with the Earn-Out Agreement by and
between Buyer and Kunkel (the Earn-Out Agreement) in the form attached
hereto as Exhibit B and which shares shall be subject to the Earn-Out
Agreement and the Stock Repurchase and Restriction Agreement. The Cash
Purchase Price, the SoftKey Shares, and the Additional SoftKey Shares are
referred to collectively as the Share Purchase Price . The Cash Purchase
Price shall be allocated in accordance with Exhibit C. All payments to be
made under this agreement shall be made plus VAT, if applicable.
1.3 COMPANY INDEBTEDNESS. All indebtedness for borrowed money of
the Company to Ziff-Davis, Ziff-Davis Publishing Company or any of their
respective subsidiaries or affiliates or any of their respective successors
or assigns, including, without limitation, any amounts owed by the Company
to Ziff- Davis or any of its successors or assigns pursuant to the loan
agreement dated January 1, 1994 with Ziff- Davis (as supplemented by an
agreement dated June 9, 1995) and the pledge agreement dated June 10, 1994
in favor of Ziff-Davis are hereby canceled without any further action of,
or further payments by, the Company or any other party to any such
agreement. Ziff-Davis hereby releases the Company of any and all liability
for indebtedness for borrowed money. Any rights of Ziff-Davis under the
pledge agreement hereby revert to the Company. Assigned receivables and
assets transferred under the pledge agreement are herewith reassigned and
retransferred to the Company by Ziff-Davis.
1.4 ADJUSTMENT. The Share Purchase Price set forth in section 1.2
above shall be subject to adjustment in accordance with this section 1.4.
(a) Not later than 60 days following the Closing Date, Sellers
shall prepare, or cause to be prepared, and deliver to Buyer a balance sheet
(the "Closing Balance Sheet") which shall set forth the current assets and
current liabilities of the Company as of the Closing Date as if the Closing
Date were the Company's normal year end. Buyer shall provide Sellers with
access to the Company's books and records and all other information as may
be necessary in order to prepare the Closing Balance Sheet. The Closing
Balance Sheet shall be prepared in English in accordance with German
generally accepted accounting principles.
(b) The Closing Balance Sheet shall set forth the total current
assets and
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total current liabilities of the Company as of the Closing Date, and
the excess of total current assets over total current liabilities shall
be referred to as the "Closing Date Amount". If the Closing Date Amount is
greater than the corresponding amount shown on the Balance Sheet referred to
in section 2.5 below (the "Balance Sheet Amount"), then Buyer shall pay to
Sellers the amount by which the Closing Date Amount exceeds the Balance
Sheet Amount. If the Closing Date Amount is smaller than the Balance Sheet
Amount, then Sellers shall refund to Buyer the amount by which the Balance
Sheet Amount exceeds the Closing Date Amount.
(c) The Closing Balance Sheet shall be deemed accepted by Buyer
unless Buyer shall have objected in writing (which writing shall provide
reasonable details) to any item in the Closing Balance Sheet not later than
30 days following its receipt by Buyer from Sellers. If Buyer and Sellers
are unable to resolve in good faith all of their disagreements within 60
days of Buyer's objections, such disagreements shall be referred for
resolution to the Munich office of an internationally recognized independent
public accounting firm mutually agreed upon by Buyer and Sellers (or in the
absence of such agreement Buyer and Sellers shall, within 10 days following
the 60-day period referred to above, request the president of the Munich
chamber of commerce (Industrie- und Handelskammer f#r M#nchen und
Oberbayern) to determine such accounting firm). The determination of such
accounting firm shall be final and binding upon the Sellers and Buyer, and
the fees of such accounting firm shall be divided in accordance with
sections 91 et seq. of the German Code of Civil Procedure.
(d) For purposes of this section 1.4, (i) current assets shall
include only:
Cash and Cash Equivalents
Accounts Receivable (net of allowances including, without limitation,
provisions for bad debt) Inventories (net of allowances) Other Current
Assets (such as tax refunds, employee advances, deferred operating
expenses) Prepaid Expenses (author advances, licensing advances) and
(ii) current liabilities shall include only:
Accounts Payable
Accrued Expenses (trade invoices, payroll, vacation, bonus, author fees,
license fees Other Current Liabilities (such as payroll taxes, VAT, bank
liabilities)
1.5 COMPANY BY-LAWS. Sellers hereby waive their rights of first
refusal which they have under section 13 (1) as well as any option rights
under section 13 (2) and (3) of the by-laws (Gesellschaftsvertrag) of the
Company and will take all action necessary to cancel such by-laws effective
the Closing Date. On the Closing Date, Buyer will pass a shareholder
resolution adopting new Company by-
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laws in the form attached hereto as Exhibit F, and Kunkel hereby accepts
such new by-laws and hereby waives any right or privilege he may have had
under the by-laws of the Company in effect prior to the Closing Date.
2. REPRESENTATIONS AND WARRANTIES OF SELLERS. Sellers represent and
warrant, jointly and severally, to Buyer as follows:
2.1 ORGANIZATION AND CAPITALIZATION OF COMPANY; OWNERSHIP OF SHARES.
The Company is a limited liability company duly organized and validly
existing under the law of the Federal Republic of Germany. The Company's
registered share capital is DM 50,000, comprised of one share having a
nominal value of DM 30,000 and one share having a nominal value of DM
20,000. All of the Shares were validly created and have been fully paid.
There are no outstanding options, warrants, rights or commitments of any
kind to acquire or dispose of any of the Shares and there are no outstanding
securities convertible into any shares of the Company; nor does the Company
have any obligations to issue any such options, warrants, rights or
securities. Other than as set forth in the by-laws of the Company, in
agreements between Sellers entered into, or proxies granted, in connection
with this agreement or as required by applicable laws or regulations, there
are no voting agreements or arrangements, proxies or any existing agreements
or arrangements that require or permit any Shares to be voted by or at the
discretion of anyone other than the owner and there are no restrictions of
any kind on the transfer of any Shares.
Sellers are the owners of the Shares of the Company set forth
opposite their respective names in section 1.1 and those Shares represent,
in the aggregate, all of the registered share capital of the Company. Upon
receipt of the Share Purchase Price by Seller pursuant to Section 1.2, the
Buyer will receive good and valid title to all of the Shares of the
Company, free and clear of any claim, lien, charge, security interest or
encumbrances.
2.2 ORGANIZATION OF ZIFF-DAVIS; ENFORCEABILITY OF AGREEMENT.
Ziff-Davis is a limited liability company duly organized and validly
existing under the laws of the Federal Republic of Germany and has the full
power and authority to enter into and perform this agreement in accordance
with its terms. The execution, delivery and performance of this agreement by
each Seller and the Company has been duly authorized by all necessary
actions of each Seller and the Company, and this agreement has been duly
executed and delivered by such Seller and the Company and constitutes the
valid and binding obligation of such Seller and the Company, enforceable
against it or him in accordance with its terms, except as may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights in general.
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2.2A SUBSIDIARIES; INVESTMENTS. The Company does not own or hold any
shares or stock or any other security or interest in any other corporation,
partnership, association or joint venture or any rights to acquire any such
security or interest, and the Company has never had any subsidiary.
2.3 NO VIOLATION; CONSENTS OF THIRD PARTIES. The execution,
delivery and performance of this agreement by Sellers and the consummation
of the Transactions will not (i) conflict with or result in the breach of,
or constitute a default (or give rise to any right of payment, termination
or acceleration) under, any lease, agreement, commitment or other
instrument, or violate any order, judgment or decree, to which either Seller
or the Company is a party or by which he or it is bound; (ii) constitute a
violation by either Seller or the Company of any applicable law or
regulation affecting the validity of this agreement; or (iii) result in the
creation of any lien, charge or encumbrance upon any of the properties of
the Company. Except as set forth in section 6.8 of this agreement, no
consent, approval or authorization of, or designation, declaration or filing
with, any governmental authority is required on the part of Sellers in
connection with the execution, delivery and performance of this agreement.
2.4 TITLE TO ASSETS; SUFFICIENCY OF ASSETS. The Company has, upon
the execution of this agreement, good and valid title to, or a valid
leasehold or license interest in, in each case, free and clear of any lien,
charge or encumbrance (other than liens, charges or encumbrances arising in
the ordinary course of business), all properties and assets, necessary to
continue the Company's business as conducted prior to the date of this
agreement.
2.5 FINANCIAL INFORMATION. Schedule 2.5 contains a complete copy of
the audited balance sheet as at December 31, 1994 (the "Balance Sheet") and
audited income statement of the Company for the fiscal year ending December
31, 1994 (together, the "Financial Statements"). The Financial Statements
are in agreement with the books and records of the Company as at the date
indicated, have been prepared in accordance with generally accepted
accounting principles in the Federal Republic of Germany consistently
applied except as may be stated on the notes or in the opinion to the
Financial Statements, and accurately and fairly present the assets, earnings
and financial position of the Company as of December 31, 1994.
2.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent
provided for in the Balance Sheet, as of December 31, 1994 the Company had
no liabilities or obligations of any kind, whether accrued, absolute,
contingent or otherwise that would have been required to be reflected in the
Balance Sheet in accordance with German generally accepted accounting
principles. Since December 31, 1994, except for obligations under leases,
commitments and other agreements referred to in Schedule 2.7 or otherwise
entered into in the ordinary course of business and involving amounts less
than DM 50,000
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individually, the Company has not incurred any liabilities or obligations
of any kind, whether accrued, absolute, contingent or otherwise.
2.7 AGREEMENTS. Schedule 2.7 contains a complete and correct list
of: (i) all leases, contracts, commitments and agreements to which the
Company is a party or by which it is bound that require a payment by the
Company of more than DM 50,000 per annum; (ii) all material software license
agreements and all material author agreements for books published by the
Company; and (iii) all distribution, joint venture, translation and license
agreements that are material to the conduct of the Company's business. The
leases, contracts, commitments and agreements listed on Schedule 2.7 include
all leases, contracts, commitments and agreements necessary to permit the
Company or Buyer to conduct the Company s business in the same manner as the
Company has conducted such business prior to the date hereof. Each of the
agreements listed on Schedule 2.7 is a valid and binding obligation of the
Company and is enforceable by the Company against the respective other party
or parties thereto in accordance with its terms and, except as set forth on
that schedule, there has not been any material breach of or default or event
of default under any such agreement by the Company and no notice of
termination has been given or received with respect to any such agreement.
Except as set forth on Schedule 2.7, to the best knowledge of the Sellers
and the Company, no other party to any of the agreements listed on Schedule
2.7 is in default in the performance of any material covenant or obligation
to be performed by it pursuant to any such agreement or has given notice
that it intends to terminate, or alter in any way adverse to the Company,
its performance under such agreement.
2.8 EMPLOYEES. Schedule 2.8 contains a true and complete list of
the names as well as a list of the positions and current monthly (i.e., 1/13
of the annual figure, consistent with customary practice) compensation of
all employees of the Company. The terms of the written employment
agreements with such employees have been made available for examination by
Buyer. Except as set forth in Schedule 2.8 the Company is not a party to or
bound by any pension, annuity, retirement, stock option, stock purchase,
savings, profit sharing or deferred compensation plan or agreement, or any
retainer, consultant, bonus, group insurance, severance or other incentive
or benefit contract, plan or arrangement. Except as set forth in Schedule
2.8, there have been no changes (from the terms disclosed to Buyer) in any
employment agreement with any of the employees other than changes resulting
from collective bargaining agreements and there are no promises or
commitments of the Company or either Seller regarding future salary or bonus
payments or any future benefits of any of the employees other than annual
increases in the ordinary course of not more than 5% over the current salary
of the employee that are not part of any general across-the-board salary
increase.
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2.9 TRANSACTIONS WITH AFFILIATES. Except as set forth in Schedule
2.9, the Company is not a party to any contract with either Seller or an
affiliate of either Seller. All transactions entered into between the
Company and either Seller or any affiliate of either Seller prior to the
date hereof have been entered into on an arm s length basis. For purposes
hereof, an affiliate of a Seller shall mean any corporation, partnership,
limited liability company or other entity controlled directly or indirectly
by such Seller, under common control with such Seller or directly or
indirectly controlling such Seller, or any officer or director of any such
entity, or any member of the immediate family of any such officer or
director; "control" shall mean ownership of a majority of the voting equity
of an entity or the power to otherwise direct its management.
2.10 LITIGATION; COMPLIANCE WITH LAWS; PERMITS. There are no
judicial or administrative actions, proceedings or investigations pending,
or to the best of Sellers' and the Company s knowledge threatened, that
question the validity of this agreement or any action taken or to be taken
by either Seller in connection with this agreement. Except as set forth on
Schedule 2.10, there is no litigation, proceeding or governmental
investigation pending or, to the best of Sellers' knowledge, threatened, or
any order, injunction or decree outstanding, against the Company which, if
resolved against the Company, would have a material adverse effect on the
financial condition or assets of the Company. The Company to the best of
Sellers and the Company s knowledge is not in violation of any applicable
law, regulation, ordinance, or any other requirement of any governmental
body or court the violation of which would have a material adverse effect on
the Company's business, operations or financial condition and no notice has
been received by the Company alleging any such violation. The Company has
full corporate power and authority and all material permits, licenses,
franchises and other authorizations necessary to own and operate its
properties and to carry on its business as now conducted and consistent with
past practices.
2.11 TRADEMARKS; INTELLECTUAL PROPERTY. Schedule 2.11 contains a
complete and correct list of all patents, trademarks, trade names, service
marks and logos owned by the Company (and all applications for any of the
foregoing). The Company owns or possesses the valid right to use all such
items listed on Schedule 2.11 as well as all copyrights and all patent,
trademark, software and know-how licenses (all the foregoing, Intellectual
Property) in a manner necessary for the continued conduct of its business
as now conducted and consistent with past practices. Those items of
Intellectual Property that are owned by the Company are owned free and clear
of all liens, security interests and other charges and encumbrances (other
than liens, security interests, charges and encumbrances arising in the
ordinary course of business). The Company is not infringing upon any
patent, trademark, trade name, service mark, logo or copyright or other
intellectual property right of any third party. No such proceedings have
been instituted or are pending
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or, to the Sellers' or the Company's knowledge, threatened, and no claim
has been received by the Company or either Seller alleging any such
violation. To the best of Sellers' and the Company s knowledge, there is
no violation by others of any patent, trademark, trade name, service mark,
logo or copyright owned or used by the Company.
2.12 ABSENCE OF CERTAIN CHANGES. Since December 31,1994 until the
date of this agreement the Company has been operated in the ordinary course
and consistent with past practice, and there has not been any material
adverse change in the Company's properties, assets, business, operations or
financial condition.
2.13 REAL PROPERTY. The Company does not own any real property. The
real property leased by the Company is in reasonably good operating
condition and is adequate, sufficient and suitable for its present uses and
purposes, and the Transactions will not adversely affect the Company's right
to use those properties for the same purpose and to the same extent as they
were being used by the Company prior to the date of this agreement.
2.14 TAXES. Except as set forth on Schedule 2.14, all tax returns
required to be filed by the Company prior to the Closing Date have been
filed (or extensions have been requested) and all taxes due (including
without limitation any required tax prepayments) have been fully paid. The
Company has paid, or made provision in its Financial Statements for payment
of, all taxes of the Company accrued through the date of the Financial
Statements and has withheld all amounts for taxes and mandatory
contributions to social security required to be withheld by it. The reserve
for taxes reflected in the Balance Sheet is and the reserve for taxes in the
Closing Balance Sheet will be adequate for the payment of all liabilities
for all taxes payable by the Company.
2.15 TANGIBLE PROPERTY. Except as set forth on Schedule 2.15, as of
the date of this agreement, all machinery, equipment and other tangible
assets owned or used by the Company is in good operating condition and in
good condition of maintenance and repair, and adequate for the operation of
the Company's business as now conducted and consistent with past practices.
2.16 INSURANCE. Schedule 2.16 contains a complete list of all
insurance policies held by the Company. All of such insurance policies are
in full force and effect, and the Company is not in default with respect to
its obligations under any such insurance policies.
3. Representations and Warranties by Buyer.
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Buyer represents and warrants to the Sellers as follows:
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3.1 THE BUYER'S ORGANIZATION. The Buyer is a corporation duly
organized and validly existing and in good standing under the law of
Delaware and has the full power and authority to enter into and perform
this agreement in accordance with its terms.
3.2 ENFORCEABILITY OF AGREEMENT. The execution, delivery and
performance of this agreement by Buyer has been duly authorized by all
necessary action of Buyer and this agreement constitutes the valid and
binding obligation of Buyer enforceable against it in accordance with its
terms, except as may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights in general.
3.3 NO VIOLATION; CONSENTS OF THIRD PARTIES. The execution,
delivery and performance of this agreement by Buyer will not (i) conflict
with or result in the breach or termination of, or constitute a default
under, any lease, agreement, commitment or other instrument, or any order,
judgment or decree, to which Buyer is a party or by which it is bound; (ii)
constitute a violation by Buyer of any applicable law or regulation
affecting the validity of this agreement; or (iii) result in the creation of
any lien, charge or encumbrance upon any of the properties of the Company.
Except as stated in section 6.8, no consent, approval or authorization of,
or designation, declaration or filing with, any governmental authority is
required on the part of Buyer in connection with the execution, delivery and
performance of this agreement that has not been obtained.
3.4 FINANCING. Buyer has available to it sufficient cash to pay the
Share Purchase Price and any other amounts to be paid by it in order to
consummate the Transactions.
4. Further Agreements of the Parties.
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4.1 CONSENTS. Sellers shall use their best efforts to cooperate
with Buyer in obtaining any consents and approvals, if any, required to
carry out the Transactions.
4.2 EXPENSES; TRANSFER TAXES. Buyer and Sellers shall bear their
own respective expenses incurred in connection with this agreement and in
connection with all obligations required to be performed by each of them
under this agreement. Buyer shall pay any and all transfer taxes, value
added tax, and notarial fees in connection with the sale of the Shares.
4.3 Non-Competition.
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(a) Ziff-Davis shall not (except as stated in section 4.3(b) or
4.3(c)) for a period of three years following the Closing Date, directly or
indirectly, engage or be interested in any business or entity which engages,
anywhere in Germany, in German speaking cantons of Switzerland or in
Austria, in the business of (i) publishing print books in the German
language on the subject of computer technologies or (ii) publishing consumer
software products on CD-ROMs. Ziff-Davis shall be deemed
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to be interested in a business or entity if Ziff-Davis is engaged or
interested in that business or entity as a stockholder, agent, broker,
partner, lender, consultant or otherwise, but not if such interest is
limited solely to the ownership of 5% or less of the equity or debt
securities of any class of a corporation whose shares are publicly traded.
(b) Nothing in section 4.3 (a) shall be construed as a
restriction on Ziff- Davis' right to engage in the development, marketing,
publishing, selling, licensing, distributing and otherwise dealing with any
other type of publication (including but not limited to magazines,
newsletters, directories and databases and one-shot supplements and special
issues related to any of the foregoing) in print or any other medium now in
use or hereafter developed (including but not limited to CD-ROM and online
services); provided, for such purpose, software shall not be deemed to be a
publication .
(c) Notwithstanding the provisions of section 4.3(a) and
4.3(b), Ziff-Davis shall be permitted to engage in any or all of the
following activities:
(i) dealing with third parties that may compete with the
Company in the ordinary course of conducting Ziff-Davis' non-book businesses
(e.g., Ziff-Davis may accept advertising for books published by third
parties, may distribute third parties' books and software via its online
services, and may review and feature books and software products in its
magazines, online services and other publications);
(ii) publication of software manuals and user documentation
for software products that are owned by or developed for Ziff-Davis;
(iii) subject to section 3(d), publication of books and
CD-ROM or other portable electronic media that are not sold but are only
distributed as cover mounted newsstand premiums or subscription premiums
(even if such CD-ROMs and other media contain solely Restricted Software (as
defined below));
(iv) publication of transcripts of seminars, conferences,
audiovisual products (e.g., television programs) operated or produced by
Ziff-Davis;
(v) licensing editorial content from magazines and other
print and electronic publications and trademarks to third-party publishers
of books provided such arrangements are on terms and conditions that are
customary for such intellectual property licenses (i.e., do not grant
Ziff-Davis any rights to actively manage or participate in such third
party's book business); and
(vi) publication of software in CD-ROM; provided, the
principal contents of any CD-ROM permitted by this clause 4(c)(vi) shall not
be comprised of fully functional versions of any of the following (alone or
in combination with each other): lifestyle software (E.G., travel planners,
<PAGE> 11
11
recipe, gardening or home decoration software), entertainment software
(E.G., games or multimedia edutainment software), educational software
(E.G., dictionaries, encyclopedia, multimedia reference compendia or
children's software), or productivity software (e.g., calendars, CAD,
address book or label-making software) (all of the foregoing, Restricted
Software).
(d) The provisions of this section 4.3(d) shall apply during
the three-year period referred to in section 4.3(a) in the event that
Ziff-Davis publishes any CD-ROMs described in section 4.3(c)(iii) containing
principally Restricted Software (the Specified CD-ROMs ).
(I) For any Specified CD-ROM that Ziff-Davis produces
internally, Ziff- Davis shall offer to the Company the right to include on
such CD-ROM an interactive version of a Company (or other Buyer affiliate)
catalog or other promotional materials, not to exceed thirty megabytes, to
promote Company products or Restricted Software. The Company shall comply
with any formatting, content guidelines, copyright and trademark usage
guidelines, and other terms and conditions that Ziff-Davis customarily
imposes on providers of similar content to its CD-ROMs.
(ii) For any Specified CD-ROM that Ziff-Davis wishes to
hire a third party to produce, Ziff-Davis shall offer to the Company the
first opportunity to produce such Specified CD- ROM for Ziff-Davis. If the
Company does not notify Ziff-Davis within three business days following
receipt of any such offer from Ziff-Davis that it wishes to produce such
Specified CD-ROM, Ziff-Davis shall be free thereafter to deal with other
parties with respect to production of such Specified CD-ROM. If the Company
does notify Ziff-Davis that it wishes to produce such Specified CD-ROM, then
the parties shall negotiate financial and other terms of such production for
a period to be mutually agreed by the parties in view of Ziff-Davis s
publishing deadlines, and if the parties do not agree on such terms within
such period, then Ziff- Davis shall be free thereafter to deal with other
parties with respect to production of such Specified CD- ROM.
4.4 CERTAIN AGREEMENTS. Simultaneously with the execution of this
agreement, Ziff- Davis and the Company are entering into a Services
Agreement in the form attached hereto as Exhibit D, which replaces and
supersedes the Services Agreement between them dated as of January 1, 1994.
Simultaneously with the execution of this agreement, Kunkel and Buyer are
entering into the Stock Restriction and Repurchase Agreement and the
Earn-Out Agreement and Kunkel and the Company are entering into an
employment agreement in the form attached hereto as Exhibit E, which
replaces and supersedes the employment agreement dated as of January 1, 1994
between Kunkel and the Company.
4.5 FURTHER OBLIGATIONS. At any time and from time to time after
this date, each party shall, without further consideration, execute and
deliver to the other such other instruments of transfer
<PAGE> 12
12
and assumption and shall take such other action as the other may reasonably
request to carry out the Transactions.
4.6 AUTHOR AGREEMENTS. Ziff-Davis hereby assigns to the Company all
of its right, title and interest in and to the author agreements and certain
other agreements listed on Schedule 4.6. To the extent the consent of any
third party is required to assign any such agreement and Sellers do not
obtain such consent (which Sellers may elect to seek or not seek at their
sole discretion), then Sellers (or as the case may be, Ziff-Davis) shall
keep the agreement in effect and shall give Buyer the full benefit of the
agreement to the same extent as if it had been assigned, and Buyer shall
perform the obligations under the agreement relating to the benefit obtained
by Buyer.
5. Survival of Representations and Related Matters.
------------------------------------------------
5.1 Survival; Determination of Damages.
-----------------------------------
All claims in connection with the representations and warranties of Buyer
and of Seller contained in this agreement shall be excluded if and to the
extent that they are not asserted in writing, enclosing substantiation by
December 31, 1996 notwithstanding any investigation made by or on behalf of
the other party; provided the representations and warranties in sections
2.1, 2.2, 2.4, 3.1 and 3.2 shall survive until March 31, 1997; and further
provided that any claims in connection with section 2.14 resulting from tax
audits or audits of the social security authorities conducted after the
Closing Date, may be asserted within six months after a final assessment of
taxes or of social security obligations has been issued and served upon the
Company. Any claim that is notified in writing in accordance with the
immediately preceding sentence and that has not either been resolved by the
parties or become the subject of court proceedings within six months
following the date of such written notice shall be deemed waived. Except as
specifically set forth in this agreement, there are no representations or
warranties, express or implied, made by either party in connection with the
Transactions. Without limiting the generality of the foregoing, Sellers do
not assume any further warranty as regards the legal and financial
conditions or prospects of the Company.
5.2 INDEMNIFICATION. Subject to the terms of this section 5,
Sellers shall indemnify Buyer and the Company and hold Buyer and the
Company, harmless from and against any loss, defect, deficiency, liability,
damage or expense (including reasonable attorneys' fees and legal costs)
("Damages") incurred by Buyer or the Company (i) resulting from or
constituting any breach of any representation or warranty made by Sellers in
this agreement or (ii) resulting from the proceedings listed on Schedule 5.2
(subject to the Buyer and the Company providing reasonable cooperation at
the Sellers expense in connection with such proceedings). Subject to the
terms of this section 5, Buyer shall indemnify and hold Seller harmless from
and against any Damages incurred by Seller as a result of (i) any breach of
any representation
<PAGE> 13
13
or warranty or failure to perform any covenant made by Buyer in this
agreement or (ii) the failure by Buyer to or to cause the Company to pay,
perform or discharge any obligation or liability of the Company that arises
after the Closing Date. Any payments to be made by Sellers pursuant to
this section 5.2 shall be payable, at the direction of Buyer, to either
Buyer or the Company.
5.3 TIME AND MANNER OF CLAIM. Buyer and Sellers shall be liable for
damages arising from their respective breaches of their representations and
warranties only to the extent that notice of a claim therefor is asserted by
the other in writing within the relevant period set forth in section 5.1.
Any notice of a claim alleging a breach of any of the representations and
warranties contained in this agreement shall state specifically the
representation or warranty with respect to which the claim is made, the
facts giving rise to an alleged basis for the claim, and the amount of
Damages asserted against the other party by reason of the claim.
5.4 DEFENSE OF CLAIMS BY THIRD PARTIES. If any claim is made by a
third party against the Company or Buyer, on the one hand, or Sellers on the
other hand (the "Indemnified Party") that, if sustained, would give rise to
a liability of any other party (the "Indemnifying Party") under this
agreement, the Indemnified Party shall promptly cause notice of the claim to
be delivered to the appropriate Indemnifying Party and shall afford such
Indemnifying Party and its counsel, at its sole expense, the opportunity to
defend or settle the claim. The Indemnified Party shall cooperate, and may
participate at its own expense, in the defense of the claim. If such notice
and opportunity are not given to the appropriate Indemnifying Party, or if a
claim is settled or compromised without the Indemnifying Party's consent, no
liability shall be imposed upon the Indemnifying Party by reason of such
claim. If the Indemnifying Party fails to defend the Indemnified Party
within a reasonable time after receiving notice of a claim, the Indemnified
Party shall be entitled to undertake the defense, compromise or settlement
of such claim at the expense of and for the account and risk of the
Indemnifying Party.
5.5 INDEMNIFICATION AMOUNTS. The Sellers shall not be liable for
any loss, liability, defect, deficiency, damage or expense (including
reasonable fees and expenses of counsel) pursuant to section 5.2 unless the
aggregate amount of loss, liability, damage or expense incurred by Buyer
exceeds DM 100,000, in which event the Sellers shall be liable only for the
losses, liabilities, defects, deficiencies, damages or expenses incurred by
the Buyer in excess of DM 100,000 and the Sellers' aggregate liability under
section 5.2 shall not exceed DM 12,050,000. The Indemnifying Party shall
be subrogated to the rights of the Indemnified Party in respect of any
insurance payments made by the Indemnified Party's insurers relating to
Damages incurred by the Indemnified Party.
5.6 SOLE REMEDY. In connection with any breach of a representation
or warranty
<PAGE> 14
14
in this agreement, the remedies provided in sections 5.1 through 5.5
shall be the exclusive remedies of the parties and Buyer shall be
limited to damage claims or a reduction of the Share Purchase Price within
the limits set forth in section 5.5 above but shall not be entitled to
rescind this agreement. Any other legal remedies of Buyer hereunder that
are outside the scope of the representations and warranties in section 2 of
this agreement (but subject to the last two sentences of section 5.1) shall
remain unaffected hereby; provided, however, that any right of rescission
shall be excluded from such remedies.
6. Miscellaneous.
--------------
6.1 FINDERS. Buyer and Seller respectively represent and warrant
that each party will be liable for its own fees of any investment banker,
broker or finder that such party may have engaged in connection with this
agreement or the transactions contemplated by it.
6.2 ENTIRE AGREEMENT. This agreement together with the Services
Agreement, the Stock Restriction and Repurchase Agreement, the Employment
Agreement and the Earn-Out Agreement constitutes, and is intended as, a
complete statement of all of the terms of the arrangements between the
parties with respect to the matters provided for, supersedes any previous
agreements and understandings between the parties with respect to those
matters, and cannot be changed or terminated orally.
6.3 GOVERNING LAW. This agreement shall be governed by and
construed in accordance with the laws of the Federal Republic of Germany.
Any dispute arising in connection with this agreement shall be exclusively
referred to the courts of competent jurisdiction in Munich.
6.4 NOTICES. All notices and other communications under this
agreement shall be in writing and shall be deemed given when delivered
personally, or mailed by certified or registered mail, return receipt
requested, or sent by overnight courier, to the parties at the following
addresses (or to such other address as a party may have specified by notice
given to the other party pursuant to this provision):
If to Sellers, to:
Ziff-Davis Verlag GmbH
Riesstrasse 25
Block C-4th Floor
80992 Munchen
Attn: J.B. Holston
with a copy sent to:
Dr. Helmut Kunkel
Dietlindeustrasse 20b
80802 Munchen
<PAGE> 15
15
with a copy sent to:
Dr. Dirk-Reiner Martens
Beiten, Burkhardt, Mittl & Wegener
Leopoldstrasse 236
80807 Munchen
If to Buyer, to:
Neal S. Winneg
SoftKey International Inc.
One Athenaeum Street
Cambridge, MA 02142
6.5 SEPARABILITY. If any provision (including, but not limited to,
section 4.3) of this agreement is invalid or unenforceable, the balance of
this agreement shall remain in effect. In lieu of the invalid provision the
parties undertake to agree a valid provision which corresponds as closely as
possible to the intent and purpose of the invalid provision. In the event of
incompleteness such provision shall be agreed upon as, in accordance with
the intent and purpose of this agreement, would have been agreed upon had
the parties originally considered such matter.
6.6 WAIVER. Any party may waive compliance by another with any of
the provisions of this agreement. No waiver of any provision shall be
construed as a waiver of any other provision. Any waiver must be in
writing.
6.7 PUBLICITY. Neither Buyer nor Sellers shall issue any press
release or public announcement of any kind concerning the transactions
contemplated by this agreement without the prior written consent of the
other, which consent shall not be unreasonably withheld.
6.8 FEDERAL CARTEL OFFICE. The parties authorize each other to
give notice of this agreement to the competent cartel authority and shall
participate in such notification by making available necessary figures and
other details in the event that one of the parties deems it necessary to
give such a notification. The costs of any cartel filing requirements shall
be borne by Buyer.
6.9 ASSIGNMENT. Neither party may assign any of its rights or
delegate any of its duties under this agreement without the consent of the
other, except that Buyer or Ziff-Davis may assign its rights and delegate
its duties hereunder to an affiliate. Any attempted assignment in violation
of this provision shall be void.
6.10 PROCEEDS. Kunkel and Ziff-Davis hereby irrevocably agree that,
notwithstanding their respective percentage interests in the registered
share capital of the Company, the Cash Purchase Price shall be paid to
Ziff-Davis in accordance with this agreement and shall be allocated by
Ziff-Davis internally
<PAGE> 16
16
between Kunkel and Ziff-Davis; provided that the satisfaction of Buyer's
obligations hereunder shall not be affected by such allocation.
6.11 APPOINTMENT OF AGENT. Kunkel hereby irrevocably appoints
Ziff-Davis as his agent to act in his name in connection with all matters
relating to this agreement and the transactions contemplated by this
agreement, and Kunkel gives the Agent full power and authority to execute
amendments to this agreement, to give and receive all notices and other
communications relating to this agreement, and to execute any instruments
and documents that Ziff-Davis may determine necessary in the exercise of its
authority pursuant to this power of attorney, with the same effect as if he
had taken such action himself and Kunkel acknowledges that Buyer may rely
and act upon any action taken by Ziff-Davis and upon any instruments and
documents signed by Ziff-Davis with the same force and effect as if he had
himself so acted.
<PAGE> 17
17
SELLERS:
HELMUT KUNKEL ZIFF-DAVIS VERLAG GmbH
* By: *
- ------------------------- -------------------------
Name: Christoph Kuchman
BUYER: SOFTKEY INTERNATIONAL INC.
By: *
-------------------------
Name: Eckart Wilcke
Agreed and accepted with respect to sections 1.3, 4.3, 4.4 and 4.6:
TEWI VERLAG GMBH
By: *
-------------------------
Name: Helmut Kunkel
* Executed in the Federal Republic of Germany by Notarial Deed
<PAGE> 1
EXHIBIT 2.2
EARN-OUT AGREEMENT
This EARN-OUT AGREEMENT (the "Agreement") is entered
into this 21st day of July, 1995 by and between SoftKey
International Inc., a Delaware corporation ("SoftKey"), and
Helmut Kunkel ("Kunkel").
SoftKey is entering into a Share Purchase Agreement
(the "Purchase Agreement") on the date hereof with Kunkel and
Ziff-Davis Verlag GmbH, a German limited liability company,
providing for the acquisition by SoftKey of tewi Verlag GmbH, a
German limited liability company ("tewi"). SoftKey is also
entering into a Stock Restriction and Repurchase Agreement on the
date hereof with Kunkel (the "Restriction and Repurchase
Agreement"). Tewi is entering into an employment agreement on
the date hereof with Kunkel (the "Employment Agreement").
This Agreement is the Earn-Out Agreement referred to in
Section 1.2 of the Purchase Agreement.
In further consideration of the foregoing and the
respective representations, warranties, agreements and conditions
hereinafter set forth, and intending to be legally bound hereby,
SoftKey and Kunkel agree as follows:
1. DEFINITIONS. The following terms shall have the
following meanings when used herein:
"Adjusted Operating Income" shall mean Operating Income
adjusted to exclude any (i) intercorporate transfer pricing
adjustments over and above any direct manufacturing costs
(including normal fixed manufacturing overhead allocations),
royalties paid to third parties and any co-publishing or joint
venture allocations, (ii) intercorporate management or service
fees and (iii) any interest or financing charges on
intercorporate indebtedness
"Commission" shall mean the United States Securities
and Exchange Commission
"Common Stock" shall mean the common stock, par value
$.01 per share, of SoftKey
<PAGE> 2
"Earn-Out Amount" shall mean up to DM 2,160,000
"Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended
"Installment Calculation Price" shall mean the weighted
average closing price of the Common Stock during the first twenty
(20) days following the last completed fiscal year during which
the Common Stock is (i) quoted on the NNM or (ii) listed on a
national securities exchange, provided, that if the Common Stock
is not so quoted or listed during such period, the board of
directors of SoftKey shall determine a fair price for purposes of
this Agreement
"NNM" shall mean the Nasdaq National Market
"Operating Income" shall mean tewi's operating income
as reflected on the 1996 Income Statement or the 1997 Income
Statement, as the case may be
"Securities Act" shall mean the Securities Act of 1933,
as amended
"1996 Applicable Installment" shall mean an amount
equal to DM 900,000 multiplied by a fraction, the numerator of
which shall be tewi's 1996 bona fide gross revenue and the
denominator of which shall be the 1996 Revenue Target up to a
maximum amount in any case of DM 1,080,000
"1996 Income Statement" shall mean the income statement
of tewi for the fiscal year ending December 31, 1996, adjusted to
comply with the requirements of U.S. generally accepted
accounting principles, including, without limitation, Statement
of Accounting Standards No. 109
"1996 Prerequisite Conditions" shall mean the
conditions that (i) tewi's 1996 bona fide gross revenue shall
equal at least eighty percent (80%) of the 1996 Revenue Target
and (ii) tewi's 1996 Adjusted Operating Income shall equal at
least ten percent (10%) of tewi's 1996 bona fide gross revenue
"1996 Revenue Target" shall mean DM 5,750,000
2
<PAGE> 3
"1997 Applicable Installment" shall mean an amount
equal to DM 900,000 multiplied by a fraction, the numerator of
which shall be tewi's 1997 bona fide gross revenue and the
denominator of which shall be the 1997 Revenue Target up to a
maximum amount in any case of DM 1,080,000
"1997 Income Statement" shall mean the income statement
of tewi for the fiscal year ending December 31, 1997, adjusted to
comply with the requirements of U.S. generally accepted
accounting principles, including, without limitation, Statement
of Accounting Standards No. 109
"1997 Prerequisite Conditions" shall mean the
conditions that (i) tewi's 1997 bona fide gross revenue shall
equal at least eighty percent (80%) of the 1997 Revenue Target
and (ii) tewi's 1997 Adjusted Operating Income shall equal at
least ten percent (10%) of tewi's 1997 bona fide gross revenue
"1997 Revenue Target" shall mean a 1997 DM gross
revenue target amount for tewi mutually agreed upon by SoftKey
and Kunkel on or before August 1, 1996 or, if SoftKey and Kunkel
are unable in good faith to mutually agree upon such a target
amount, then DM 46,475,000
2. EARN-OUT. In addition to other payments by SoftKey
and/or tewi to Kunkel set forth in the Purchase Agreement and the
Employment Agreement, SoftKey shall pay Kunkel the Earn-Out
Amount in accordance with the terms of this Agreement as follows:
a. the 1996 Applicable Installment shall be paid on
April 30, 1997, provided, that the 1996 Prerequisite Conditions shall
have been satisfied (such satisfaction to be determined by SoftKey not
later than April 15, 1997); and
b. the 1997 Applicable Installment shall be paid on
April 30, 1998, provided, that the 1997 Prerequisite Conditions shall
have been satisfied (such satisfaction to be determined by SoftKey not
later than April 15, 1998).
3. PAYMENT. Payment of the 1996 Applicable Installment and the
1997 Applicable Installment pursuant
3
<PAGE> 4
to Section 2 hereof shall be satisfied by delivery of a number of
shares of Common Stock determined as follows:
a. the number of shares of Common Stock to be
delivered in satisfaction of the 1996 Applicable Installment shall
be calculated by dividing the DM amount of the 1996 Applicable
Installment by the DM amount which equals one U.S. dollar based
on the noon buying rate in New York City for cable transfers in
foreign currencies as certified for customs purposes by the
Federal Reserve Bank of New York (the "Noon Buying Rate") on the
first day of fiscal year 1996 on which such rate is quoted by the
Federal Reserve Bank of New York and dividing such quotient by
the Installment Calculation Price; and
b. the number of shares of Common Stock to be
delivered in satisfaction of the 1997 Applicable Installment shall
be calculated by dividing the DM amount of the 1997 Applicable
Installment by the DM amount which equals one US dollar based on
the Noon Buying Rate on the first day of fiscal year 1997 on
which such rate is quoted by the Federal Reserve Bank of New York
and dividing such quotient by the Installment Calculation Price.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS. Kunkel
represents and warrants to and covenants with SoftKey as follows:
a. SECURITIES ACT REGISTRATION. Kunkel understands that
any shares of Common Stock delivered pursuant hereto (the "Shares")
are not registered under the Securities Act and that such Shares
are being issued and sold to Kunkel based upon an exemption from
registration predicated in part on the accuracy and completeness
of Kunkel's representations and warranties made herein.
b. INVESTMENT INTENT. The Shares are being acquired
by Kunkel for investment for Kunkel's own account, not as a nominee or
agent for any other person, firm, corporation or other entity and
not with a view to the sale or distribution of all or any part
thereof in contravention of the Securities Act and the rules and
regulations promulgated thereunder; provided, however, that the
parties hereto acknowledge that Kunkel may dispose of some or all
of the Shares pursuant to an effective registration statement
under the Securities Act, as set forth herein. Kunkel does not
have any con-
4
<PAGE> 5
tract, undertaking, agreement or arrangement with any person,
firm, corporation or other entity to sell, transfer or grant
any participation in or otherwise distribute any or all of
such Shares to any person, firm, corporation or other entity.
Kunkel agrees that he will not sell or otherwise transfer the
Shares unless they are registered under the Securities Act or
unless an exemption from such registration is available.
c. TRANSFER OF SHARES. Kunkel and SoftKey agree that
subject to the terms and provisions hereof, Kunkel may sell, transfer,
assign, pledge or otherwise dispose of or encumber (a "Transfer")
any Shares. Prior to consummating any Transfer in accordance
with this Agreement, except pursuant to the registration
provisions of section 3 of the Restriction and Repurchase
Agreement, (1) Kunkel shall have furnished SoftKey with an
opinion of counsel satisfactory in form and content to SoftKey to
the effect that (A) such Transfer will not require registration
of the Shares under the Securities Act or compliance with
applicable state securities laws or (B) appropriate action
necessary for compliance with the Securities Act and applicable
state securities laws has been taken or (2) SoftKey shall have
waived, expressly and in writing, its right under clause (1) of
this subsection and the proposed transferee of the Shares shall
have provided SoftKey with a written agreement or undertaking by
which such transferee agrees to be bound by all terms, conditions
and limitations of this Agreement applicable to Kunkel (or other
person or entity Transferring such Shares to the transferee) as
if such transferee were Kunkel; provided, however, that the
requirement of a written agreement set forth in this subclause
(2) shall not apply to any Transfer (A) pursuant to an offering
registered under the Securities Act, (B) made in accordance with
Rule 144 promulgated under the Securities Act ("Rule 144") or (C)
effected in a transaction otherwise exempt from registration
under the Securities Act.
d. TRANSFERS PURSUANT TO RULE 144. Kunkel acknowledges
that Kunkel has been advised by SoftKey that if and when any Shares
may be Transferred without registration under the Securities Act
in reliance on Rule 144, such Transfer generally can be made only
in limited amounts in accordance with the terms and conditions
thereof. In the event that Kunkel intends to
5
<PAGE> 6
effect a Transfer of any Shares pursuant to this Agreement and in
accordance with Rule 144, Kunkel shall deliver to SoftKey, at or
prior to the time of such Transfer, such documentation as SoftKey may
reasonably request in connection with such Transfer. Kunkel
understands that SoftKey makes no representation or warranty
regarding the availability to Kunkel of the "safe harbor"
provided by Rule 144.
5. REGISTRATION. Any shares of Common Stock delivered pursuant
to this Agreement shall be subject to the registration provisions
set forth in section 3 of the Restriction and Repurchase
Agreement.
6. LEGENDS. Kunkel hereby agrees that the certificate or
certificates for the Shares shall have endorsed thereon, as
applicable, the following (or substantially equivalent) legends:
a. "The securities represented by this
certificate have not been registered under the Securities Act of
1933, as amended. These securities have been acquired for
investment and not with a view to distribution or resale, and may
not be sold, offered for sale, transferred, assigned or pledged
in the absence of an effective registration statement for such
shares under the Securities Act of 1933, as amended, and all
applicable state securities laws or an opinion of counsel
satisfactory in form and content to the issuer that such
registration is not required under such Act and such state
securities laws."
b. Any legend required to be placed thereon by
any applicable state securities law.
7. General Provisions.
-------------------
a. NO ASSIGNMENTS. Kunkel shall not transfer,
assign or encumber any of his rights, privileges, duties or
obligations under this Agreement without the prior written consent
of SoftKey, and any attempt to transfer, assign or encumber such
rights, privileges, duties or obligations shall be void.
b. NOTICES. All notices, requests and other
communications hereunder shall be in writing and shall be deemed
given if delivered personally, if sent by
6
<PAGE> 7
Federal Express or other overnight courier or delivery service or if
mailed by registered or certified mail (postage paid, return receipt
requested) to the parties at the following addresses (or to such other
address for a party as shall be specified by like notice):
If to SoftKey, to
SoftKey International Inc.
On Athenaeum Street
Cambridge, Massachusetts 02142
Attention: Neal S. Winneg, Esq.
With a copy to:
Skadden, Arps, Slate, Meagher & Flom
One Beacon Street
Boston, Massachusetts 02108
Attention: Louis A. Goodman, Esq.
If to Kunkel, to
Helmut Kunkel
Dietlindenstrasse 20b
80802 Munich
The address of a party, for the purposes of this Section 6(b),
may be changed by any party by giving written notice to the other
party 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 in
effect for all purposes hereunder.
c. CHOICE OF LAW; CONSENT TO JURISDICTION. This
Agreement shall be governed by and construed in accordance with the
internal laws (without giving effect to the conflicts of law
principles) of the Commonwealth of Massachusetts. SoftKey and
Kunkel agree that the jurisdiction and venue of any claim, suit,
action or proceeding brought hereunder shall be the domicile of
the defendant in such claim, suit, action or proceedings.
SoftKey and Kunkel further agree that they will not object to
such jurisdiction or venue.
d. SEVERABILITY. The parties hereto agree that the
terms and provisions in this Agreement are
7
<PAGE> 8
reasonable and that the terms and provisions of this Agreement shall be
enforced to the fullest extent permissible under law. In the event that
any term or provision of this Agreement shall for any reason be adjudged to
be unenforceable or invalid, then such unenforceable or invalid term or
provision shall not affect the enforceability or validity of the remaining
terms and provisions of this Agreement, and the parties hereto hereby
agree to replace such unenforceable or invalid term or provision with an
enforceable and valid arrangement which, in its effect (economic or other),
shall be as close as possible to the unenforceable or invalid term or
provision.
e. SUCCESSORS. All references in this Agreement to either
party shall include any and all successors in interest to either
party whether by merger, consolidation, sale of all or
substantially all of either party's capital stock, business or
assets or otherwise, and this Agreement shall inure to the
benefit of the successors and assigns of either party and,
subject to the terms set forth herein, shall be binding upon
either party, their respective heirs, executors, administrators,
successors and permitted assigns.
f. COUNTERPARTS. This Agreement may be executed in two
counterparts, each of which shall be deemed an original, but
which together shall constitute one and the same instrument.
g. MODIFICATION, AMENDMENT AND WAIVER. No modification,
amendment or waiver of any provision of this Agreement shall be
effective against SoftKey unless the same shall be in a written
instrument signed by an officer of SoftKey on its behalf. Except
as otherwise set forth expressly herein, the failure at any time
to enforce any of the provisions of this Agreement shall in no
way be construed as a waiver of such provisions and shall not
affect the right of either party thereafter to enforce each and
every provision hereof in accordance with its terms.
h. FURTHER ASSURANCES. The parties agree to execute
such further instruments and to take such further action as may
reasonably be necessary to carry out the intent of this
Agreement, and each party specifically agrees to cooperate
affirmatively with the other party, to the extent reasonably
requested by such
8
<PAGE> 9
other party, to enforce the rights of such other party hereunder.
i. INTEGRATION. This Agreement, together with the
Purchase Agreement, the Employment Agreement and the Restriction and
Repurchase Agreement, constitutes the entire agreement of the parties
with respect to the subject matter hereof.
j. HEADINGS. The headings of the Sections and paragraphs
of this Agreement have been inserted for convenience of reference only
and do not constitute a part of this Agreement.
The parties hereto have executed this Agreement under
seal as of the date and year first set forth above.
SOFTKEY INTERNATIONAL INC.
By: *
------------------------
Name: Eckart Wilcke
Title: attorney-in-fact
*
------------------------
Helmut Kunkel
* Executed in the Federal Republic of Germany by Notarial Deed.
9
<PAGE> 1
SOFTKEY Exhibit 99.1
- --------------------------------------------------------------------------------
CONTACT: R. SCOTT MURRAY
CHIEF FINANCIAL OFFICER
617-494-5861
FOR IMMEDIATE RELEASE
- ---------------------
SOFTKEY INTERNATIONAL INC.
REPORTS SECOND QUARTER EARNINGS PER SHARE GROWTH OF 67%
AND
THE ACQUISITION OF TEWI VERLAG GmbH, A GERMAN SOFTWARE PUBLISHER
Cambridge, MA, July 25, 1995 -- SoftKey International Inc. (Nasdaq: SKEY and
TSE: SSK) today announced both its second quarter June 30, 1995 results and
the acquisition of Tewi Verlag GmbH, a software publisher and distributor
located in Munich, Germany.
Net income for the quarter increased by 101% to $7,954,000 compared to
$3,954,000 in the prior year. Net income for the six months ended June 30,
1995 increased by 75% to $17,973,000 as compared to $10,275,000 in the prior
year. Earnings per fully diluted share increased by 67% in the second quarter
1995 to $.35 per share from $.21 in the prior year. Earnings per fully diluted
share for the six month period ended June 30, 1995 were $.79 versus $.54 in the
prior year. Revenues for the three and six month periods ended June 30, 1995
were $33,717,000 and $74,721,000 as compared to $26,786,000 and $62,090,000 in
the prior year.
Softkey also announced today the acquisition of Tewi Verlag GmbH, a German
software publisher and distributor. Tewi, which was privately held, had
revenues of approximately $15 million in its most recently completed fiscal
year. The purchase price was settled by a combination of cash and issuance of
SoftKey common stock totaling approximately $16 million. Tewi publishes over
110 German language software titles sold in over 11,000 retail stores in
Germany.
Michael Perik, SoftKey's Chairman and Chief Executive Officer said, "The
results of our most recent quarter confirm that consumers have a strong demand
for quality consumer software at affordable prices. SoftKey has seen revenues
in its core publishing business grow in the first six months of 1995 by 47%
over revenues of the prior year. This growth has been fueled by the strong
demand for CD-ROM titles, which now comprise over 90% of our retail sales." In
addition, Mr. Perik said, "SoftKey's balance sheet now reflects the proceeds
from its recent common stock offering. Our strong capital and cash base has
positioned the company to be a leader in the consolidation of the consumer
software industry."
Kevin O'Leary, SoftKey's President said, "SoftKey's acquisition of Tewi
positions the company to become a leader in the German language software
market. We believe that Europe is just beginning the growth that the software
industry in the United States has been enjoying for the last three years. We
plan to consolidate our current German facilities with the Tewi operations.
Tewi's strong retail relationships will enable us to increase market
penetration of our 40 German sofware titles."
SoftKey International Inc. is ranked as one of the world's largest consumer
software publishers by the 1995 Soft-Letter 100. SoftKey develops, publishes
and markets over 300 consumer software titles targeted at the home user in the
edutainment, lifestyle and productivity categories. SoftKey's product
offerings include popular titles such as Calendar Creator Plus, BodyWorks 4.0,
The American Heritage Talking Dictionary, Sports Illustrated Swimsuit Calendar,
MPC Wizard, KeyCAD Complete, Mosby's Medical Encyclopedia, Time Almanac and the
Platinum jewel case, KeyKids and PowerPak lines. SoftKey's products are sold
in over 15,000 stores in over 40 countries in the retail, direct mail and OEM
sales channels.
SOFTKEY INTERNATIONAL INC. ONE ATHENAEUM STREET CAMBRIDGE, MA 02142
UNITED STATES OF AMERICA TEL 617 494-1200 FAX 617 494-1219
