<PAGE> 1
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 September 30, 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 [X] 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 October 27, 1995, there were 25,152,779 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>
<CAPTION>
Page
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<S> <C>
ITEM 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets at
September 30, 1995 and December 31, 1994 . . . . . . . . . . . 3
Condensed Consolidated Statements of
Operations for the Three and Nine Months
Ended September 30, 1995 and 1994 . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of
Cash Flows for the Nine Months
Ended September 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 . . . . . . . . . . . . . 9
Part II - Other Information
ITEM 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 14
ITEM 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 14
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
SOFTKEY INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 87,103 $ 12,205
Accounts receivable (less allowances for returns
and doubtful accounts of $8,292 and $6,744
respectively) 28,410 16,745
Inventories 13,732 9,795
Other current assets 12,176 8,247
-------- --------
141,421 46,992
Property and equipment, net 14,181 9,325
Goodwill, net 57,458 32,051
Other assets 5,359 2,447
-------- --------
$218,419 $ 90,815
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 31,139 $ 29,455
Current portion of long-term obligations 7,214 2,016
-------- --------
38,353 31,471
Long-term obligations 4,378 17,536
Deferred income taxes 4,339 4,323
-------- --------
47,070 53,330
STOCKHOLDERS' EQUITY 171,349 37,485
-------- --------
$218,419 $ 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 Nine Months Ended
September 30 September 30
------------ ------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $ 41,579 $ 28,029 $ 119,408 $ 90,123
COST OF REVENUES 12,656 8,318 38,563 30,065
------------ ------------ ------------ ------------
GROSS MARGIN 28,923 19,711 80,845 60,058
OPERATING EXPENSES:
Sales, marketing and support 9,425 6,854 27,570 19,794
General and administrative 5,929 5,572 18,284 16,687
Research and development 3,097 1,608 8,764 4,916
------------ ------------ ------------ ------------
18,451 14,034 54,618 41,397
------------ ------------ ------------ ------------
OPERATING INCOME 10,472 5,677 26,227 18,661
OTHER INCOME (EXPENSE), net 1,274 (626) 517 (313)
------------ ------------ ------------ ------------
INCOME BEFORE TAXES 11,746 5,051 26,744 18,348
PROVISION FOR INCOME TAXES 1,703 1,010 3,906 4,061
------------ ------------ ------------ ------------
NET INCOME $ 10,043 $ 4,041 $ 22,838 $ 14,287
============ ============ ============ ============
NET INCOME PER SHARE $ 0.36 $ 0.21 $ 0.83 $ 0.74
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING 28,266,000 20,850,000 27,447,000 20,355,000
</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>
Nine Months Ended
September 30,
-------------
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 22,838 $ 14,287
Adjustments to reconcile net income to net cash used for
operating activities:
Depreciation and amortization 7,938 2,510
Changes in operating assets and liabilities:
Accounts receivable (12,135) (907)
Accounts payable and accruals (1,841) (18,707)
Other (17,768) (4,204)
--------- ---------
(968) (7,021)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (23,325) --
Purchase of fixed assets, net (9,027) (2,175)
Other (1,706) (850)
--------- ---------
(34,058) (3,025)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under capital leases and long-term debt (310) (5)
Issuance of common stock, net 113,996 6,147
Proceeds from (repayment of) lines of credit (4,666) 5,000
Redemption of series B preferred stock -- (4,660)
Repayment of convertible note -- (500)
--------- ---------
109,020 5,982
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 904 (187)
--------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS 74,898 (4,251)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 12,205 22,797
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 87,103 $ 18,546
========= =========
</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 nine months
ended September 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 nine months ended
September 30, 1995 are not necessarily indicative of the results for the entire
year ending December 31, 1995.
The third quarter reporting period for 1995 ended on September 30, 1995 and the
third quarter reporting period for 1994 ended on October 1, 1994. For clarity of
presentation and comparison, the periods from January 1, 1995 to September 30,
1995 and from January 2, 1994 to October 1, 1994 are referred to as the "Nine
Months Ended September 30, 1995" and "Nine Months Ended September 30, 1994"
respectively, throughout these financial statements.
On August 31, 1995, the Company acquired all of the issued and outstanding
capital stock of Future Vision Holding, Inc. ("Future Vision"), a multimedia
software company, in exchange for the issuance of 1,088,149 shares of common
stock, par value $.01 per share, of the Company ("Common Stock"). The results
for the Nine Months Ended September 30, 1995 reflect the pooling-of-interest
accounting treatment of the transaction. The financial statements for periods
prior to the Nine Months ended September 30, 1995 do not include amounts for
this acquisition as they were deemed to be immaterial.
Summarized results of operations for the period prior to the consummation of the
transaction, which is the Six Months Ended June 30, 1995, on a separate company
and combined basis are as follows (in thousands):
<TABLE>
<CAPTION>
SoftKey FutureVision Combined
------- ------------ --------
<S> <C> <C> <C>
Revenues $74,721 $3,108 $77,829
Operating income (loss) 21,779 (6,024) 15,755
Net income (loss) 17,973 (5,178) 12,795
</TABLE>
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
September 30, 1995.
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3. LONG-TERM OBLIGATIONS
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
------------------ -----------------
<S> <C> <C>
Revolving lines of credit $ -- $ 7,700
Long term debt 3,034 --
Related party debt 3,003 2,123
Capital leases 2,024 2,411
Accrued minimum royalties -- 2,415
Other 3,531 4,903
-------- -------
11,592 19,552
Less: current portion (7,214) (2,016)
-------- -------
$ 4,378 $17,536
======== =======
</TABLE>
4. INVENTORIES
Inventories consist primarily of finished goods at September 30, 1995 and
December 31, 1994.
5. MERGERS AND ACQUISITIONS
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 with
a market value at the time of issuance of $3,640 and may issue additional shares
of Common Stock to a former shareholder of tewi pursuant to an earn-out
agreement. The Company also paid cash consideration of $12,688 for all of the
share capital of tewi. The transaction has been accounted for using the purchase
method of accounting.
The purchase price was allocated as follows:
<TABLE>
<S> <C>
Goodwill $19,699
Less: net liabilities (2,783)
-------
Stock issued and cash paid, including transaction costs $16,916
=======
</TABLE>
The amortization of goodwill resulting from the purchase is being amortized over
its estimated useful life of 20 years on a straight-line basis.
Summarized combined results of operations for the Nine Months Ended September
30, 1995 and the Nine Months Ended September 30, 1994 are shown as if the
transaction had occurred at the beginning of the period presented.
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1995 Nine Months Ended September 30, 1994
------------------------------------ ------------------------------------
SoftKey tewi Combined SoftKey tewi Combined
------- ---- -------- ------- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues $119,408 $ 3,720 $123,128 $90,123 $7,137 $97,260
Operating income (loss) 26,227 (3,589) 22,638 18,661 (263) 18,398
Net income 22,838 (3,643) 19,195 14,287 (321) 13,966
Net income per share 0.83 -- 0.69 0.74 -- 0.72
</TABLE>
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6. 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 Nine Months Ended
September 30, 1994 and stock options, warrants and other securities convertible
into Common Stock 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.
7. REDEMPTION OF WARRANTS
On July 31, 1995, the Company announced that it would redeem all of its
2,925,000 publicly traded warrants for $0.10 per warrant on August 31, 1995 in
accordance with the terms and conditions of the warrants. As of September 30,
1995, holders of such warrants received in exchange for the warrants an
aggregate of 289,959 shares of Common Stock. The remaining 25,410 warrants were
redeemed by the Company.
8. 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.
9. SUBSEQUENT EVENTS
(a) On October 23, 1995, the Company announced that it had completed a private
offering of $350,000 principal amount 5 1/2% Senior Convertible Notes due 2000.
The Notes will be redeemable by the Company on or after November 2, 1998 at
declining redemption prices and are convertible into Common Stock at a price of
$53 per share.
(b) On October 30, 1995, the Company announced it had entered into a definitive
merger agreement in which it will acquire the Minnesota Educational Computing
Corporation ("MECC"), a publisher and distributor of high-quality educational
software for children, in a merger valued at approximately $370 million. The
transaction will be accounted for as a purchase. The closing of the transaction
is subject to certain conditions, including stockholder approval, effectiveness
of the registration statement for the Common Stock to be issued in the merger
and expiration of applicable waiting periods under premerger notification
regulations.
(c) On October 30, 1995, the Company announced that through its wholly owned
subsidiary, Kidsco Inc., it had commenced a cash tender offer of $65 per share
for 4,642,507 shares of The Learning Company, representing a
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majority of The Learning Company's outstanding common stock on a fully diluted
basis. The offer is the first step in a proposed two-step acquisition of The
Learning Company by the Company. In the second step, the remaining shares of The
Learning Company common stock not owned by the Company would be converted into
Common Stock having the value, based on trading prices shortly prior to the
merger, of $65 per share, subject to a maximum exchange ratio of 1.8571 shares
of Common Stock per share of The Learning Company common stock. The Learning
Company has approximately 9.3 million shares outstanding on a fully diluted
basis, giving the transaction a total value of approximately $606 million. The
Company's offer expires on November 29, 1995 and is subject to a number of
conditions. A more full description of the Company's offer and the proposed
second-step merger transaction is included in the Company's Schedule 14D-1,
filed with the Securities and Exchange Commission on October 30, 1995, as
amended. The transaction, if completed, is expected to be accounted for as a
purchase.
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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 $10,043 ($0.36 per fully
diluted share) on revenues of $41,579 in Third Quarter 1995 and net income of
$22,838 ($0.83 per fully diluted share) on revenues of $119,408 in the Nine
Months Ended September 30, 1995 as compared to net income of $4,041 ($0.21 per
fully diluted share) on revenues of $28,029 in Third Quarter 1994 and net income
of $14,287 ($0.74 per fully diluted share) on revenues of $90,123 in the Nine
Months Ended September 30, 1994. The increase in both the Third Quarter 1995 as
compared to the Third Quarter 1994 and in the Nine Months Ended September 30,
1995 as compared to the Nine Months Ended September 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.
On August 31, 1995, the Company acquired all of the issued and outstanding
capital stock of Future Vision Holding, Inc. ("Future Vision") in exchange for
the issuance of 1,088,149 shares of Common Stock, par value $.01 per share, of
the Company ("Common Stock"). The results for the Nine Months Ended September
30, 1995 have been restated to reflect the pooling-of-interest accounting
treatment of the transaction. The financial statements for periods prior to the
Nine Months Ended September 30, 1995 do not include amounts for this acquisition
as they were deemed to be immaterial.
REVENUES. Revenues by distribution channel for the Third Quarter 1995 as
compared to the Third Quarter 1994 and for the Nine Months Ended September 30,
1995 as compared to the Nine Months Ended September 30, 1994 are as follows:
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
1995 % 1994 % 1995 % 1994 %
---- - ---- - ---- - ---- -
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Retail $20,430 49 $12,416 44 $ 53,038 45 $32,392 36
OEM 6,471 16 4,714 17 14,341 12 11,660 13
Catalog -- -- -- -- -- -- 3,176 3
Direct response 6,190 15 5,041 18 19,569 16 12,231 14
International 7,115 17 3,114 11 15,617 13 8,922 10
Tax software and services 1,373 3 975 4 16,843 14 16,804 19
Lansa software -- -- 1,769 6 -- -- 4,938 5
------- --- ------- --- -------- --- ------- ---
$41,579 100% $28,029 100% $119,408 100% $90,123 100%
======= === ======= === ======== === ======= ===
</TABLE>
Total revenues increased 48% in Third Quarter 1995 over Third Quarter 1994 and
32% for the Nine Months Ended September 30, 1995 over the Nine Months Ended
September 30, 1994, in both cases due to several factors. 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 acquisition of tewi Verlag
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GmbH ("tewi") on July 21, 1995 and the increased availability of additional
translated foreign language versions of English language products and the
continued shift to Windows-based applications on CD-ROM; original equipment
manufacturer ("OEM") revenues increased due to the availability of new product
offerings appropriate for this channel arising from the acquisition of Future
Vision; direct response 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 the Nine Months Ended September 30, 1994 include $3,176 of
revenues from the Company's Power Up catalog operation, which was closed in
1994. Revenues from the Third Quarter 1994 and from the Nine Months Ended
September 30, 1994 also include $1,769 and $4,938, 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 the Third Quarter 1995 were consistent with the margins
for the Third Quarter 1994 at 70%. Gross margins increased in the Nine Months
Ended September 30, 1995 to 68% compared to 67% in the Nine Months Ended
September 30, 1994 primarily because of the continuing shift in 1995 toward
CD-ROM based sales.
OPERATING EXPENSES. The Company's operating expenses and the respective
percentages of revenues for Third Quarter 1995 as compared to Third Quarter 1994
and for the Nine Months Ended September 30, 1995 as compared to the Nine Months
Ended September 30, 1994 are as follows:
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 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 $9,425 23% $6,854 24% $27,570 23% $19,794 22%
General and administrative 5,929 14% 5,572 20% 18,284 15% 16,687 19%
Research and Development 3,097 7% 1,608 6% 8,764 7% 4,916 5%
------- -- ------- -- ------- -- ------- --
$18,451 44% $14,034 50% $54,618 45% $41,397 46%
======= == ======= == ======= == ======= ==
</TABLE>
Total operating expenses decreased as a percentage of revenues to 44% and 45% in
Third Quarter 1995 and in the Nine Months Ended September 30, 1995,
respectively, compared with 50% and 46% in Third Quarter 1994 and in the Nine
Months Ended September 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 23% of revenues in Third
Quarter 1995 compared to 24% of revenues in Third Quarter 1994. The decrease in
these expenses as a percentage of revenues is attributable primarily to the
overall revenue growth of the Company. These expenses increased in the Nine
Months Ended September 30, 1995 to 23% of revenues compared to 22% of revenues
in the Nine Months Ended September 30, 1994. The increase in these expenses as a
percentage of revenues is attributable to higher sales and marketing costs of
Future Vision.
General and administrative expenses decreased to 14% and 15% of revenues in
Third Quarter 1995 and in the Nine Months Ended September 30, 1995,
respectively, compared to 20% and 19% of revenues in Third Quarter 1994 and in
the Nine Months Ended September 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% of revenues in both the Third
Quarter 1995 and in the Nine Months Ended September 30, 1995, compared to 6% of
revenues in the Third Quarter 1994 and 5% in the Nine Months Ended September 30,
1994. The increase in both periods is primarily the result of the development
and introduction
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to the market 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 $87,103
at September 30, 1995. This increase is attributable 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.
On October 23, 1995, the Company announced that it had completed a private
offering of $350,000 principal amount 5 1/2% Senior Convertible Notes due 2000
(The Senior Convertible Notes). The Senior Convertible Notes will be redeemable
by the Company on or after November 2, 1998 at declining redemption prices.
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.
There were no amounts drawn on the Line at September 30, 1995.
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, from time to time the Company has purchased
foreign exchange option contracts, none of which are outstanding at this time.
The Company believes that its existing cash is sufficient to meet its current
and planned requirements for the foreseeable future.
On October 30, 1995, the Company announced a $65 cash tender offer for 4,642,507
shares of The Learning Company common stock. The cash component of the offer is
currently valued at approximately $302,000. If successful, the Company expects
to use a portion of the proceeds from the private offering of Senior Convertible
Notes to pay for the tender offer and transaction costs.
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.
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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 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.
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(2)
3.2 Bylaws of the Company, as amended(3)
10.1 SoftKey Product Agreement dated April 6, 1994 by and between
the Company and R.R. Donnelley & Sons Company(4)
10.2 Employment Agreement dated May 27, 1994 by and between the
Company and Michael Perik(5)
10.3 Employment Agreement dated May 27, 1994 by and between the
Company and Kevin O'Leary(5)
10.4 Employment Agreement dated February 1, 1994 by and between the
Company and R. Scott Murray(4)
10.5 Employment Agreement dated October 8, 1993 by and between
SoftKey Software Products Inc. and David E. Patrick(3)
10.6 1991 Employee Payroll Stock Purchase Plan(4)
10.7 1994 Non-Employee Director Stock Option Plan(3)
</TABLE>
14
<PAGE> 15
<TABLE>
<S> <C>
10.8 Employment Agreement dated September 15, 1993 by and between
WordStar International Incorporated and Edward Sattizahn(5)
10.9 Employment Agreement dated June 20, 1994 by and between the
Company and Neal S. Winneg(5)
10.10 Credit Agreement dated as of September 30, 1994 between SoftKey
Inc. and Fleet Bank of Massachusetts, N.A.(7)
10.11 Employment Agreement dated March 1, 1994 by and between SoftKey
Software Products Inc. and Robert Gagnon(3)
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(4)
10.13 Sublease Agreement dated as of January 5, 1995 by and between
Mellon Financial Services Corporation #1 and SoftKey Inc.(3)
10.14 Continuing Guaranty of Lease dated as of January 5, 1995 by the
Company in favor of Mellon Financial Services Corporation
#1.(3)
10.15 1990 Long Term Equity Incentive Plan, as amended and restated
through June 2, 1995.(2)
10.16 1982 Employee and Consultant Stock Option and Purchase Plan(8)
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.(2)
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(2)
10.19 Share Purchase Agreement dated July 21, 1995 by and among the
Company, Ziff-Davis Verlag GmbH and Helmut Kunkel(9)
10.20 Earn-Out Agreement dated July 21, 1995 by and between the
Company and Helmut Kunkel(9)
10.21 Indenture dated as of October 16, 1995 between the Company and
State Street Bank and Trust Company, as Trustee, for 5 1/2%
Senior Convertible Notes due 2000.
10.22 Agreement and Plan of Merger by and among the Company, SchoolCo
Inc. and Minnesota Educational Computing Corporation (MECC)
dated as of October 30, 1995.
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
Quarterly Report on Form 10-Q for the quarterly period ended July 1,
1995.
(3) Incorporated by reference to exhibits filed with the Company's Annual
Report on Form 10-K for the year ended December 31, 1994.
15
<PAGE> 16
(4) Incorporated by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarterly period ended April 2,
1994.
(5) Incorporated by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarterly period ended July 2,
1994.
(6) Incorporated by reference to exhibits filed with the Company's Annual
Report on Form 10-K for the Transition period ended September 30, 1992.
(7) Incorporated by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarterly period ended October 1,
1994.
(8) Incorporated by reference to exhibits filed with the Company's Annual
Report on Form 10-K for the year ended June 30, 1991.
(9) 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 current report on Form 8-K reporting the
acquisition of tewi Verlag GmbH on July 21, 1995, as amended by Form
8-K/A filed October 4, 1995. The registrant also filed a current report
on Form 8-K reporting the acquisition of Future Vision Holding, Inc. on
August 31, 1995.
16
<PAGE> 17
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.
November 14, 1995
/s/ R. Scott Murray
--------------------------------------------
R. Scott Murray
Chief Financial Officer
(principal financial and accounting officer)
17
<PAGE> 18
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(2)
3.2 Bylaws of the Company, as amended(3)
10.1 SoftKey Product Agreement dated April 6, 1994 by and between
the Company and R.R. Donnelley & Sons Company(4)
10.2 Employment Agreement dated May 27, 1994 by and between the
Company and Michael Perik(5)
10.3 Employment Agreement dated May 27, 1994 by and between the
Company and Kevin O'Leary(5)
10.4 Employment Agreement dated February 1, 1994 by and between the
Company and R. Scott Murray(4)
10.5 Employment Agreement dated October 8, 1993 by and between
SoftKey Software Products Inc. and David E. Patrick(3)
10.6 1991 Employee Payroll Stock Purchase Plan(4)
10.7 1994 Non-Employee Director Stock Option Plan(3)
10.8 Employment Agreement dated September 15, 1993 by and between
WordStar International Incorporated and Edward Sattizahn(5)
10.9 Employment Agreement dated June 20, 1994 by and between the
Company and Neal S. Winneg(5)
10.10 Credit Agreement dated as of September 30, 1994 between SoftKey
Inc. and Fleet Bank of Massachusetts, N.A.(7)
10.11 Employment Agreement dated March 1, 1994 by and between SoftKey
Software Products Inc. and Robert Gagnon(3)
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(4)
10.13 Sublease Agreement dated as of January 5, 1995 by and between
Mellon Financial Services Corporation #1 and SoftKey Inc.(3)
10.14 Continuing Guaranty of Lease dated as of January 5, 1995 by the
Company in favor of Mellon Financial Services Corporation
#1.(3)
10.15 1990 Long Term Equity Incentive Plan, as amended and restated
through June 2, 1995.(2)
10.16 1982 Employee and Consultant Stock Option and Purchase Plan(8)
</TABLE>
18
<PAGE> 19
<TABLE>
<S> <C> <C>
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.(2)
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(2)
10.19 Share Purchase Agreement dated July 21, 1995 by and among the
Company, Ziff-Davis Verlag GmbH and Helmut Kunkel(9)
10.20 Earn-Out Agreement dated July 21, 1995 by and between the
Company and Helmut Kunkel(9)
10.21 Indenture dated as of October 16, 1995 between the Company and
State Street Bank and Trust Company, as Trustee, for 5 1/2%
Senior Convertible Notes due 2000.
10.22 Agreement and Plan of Merger by and among the Company, SchoolCo
Inc. and Minnesota Educational Computing Corporation (MECC)
dated as of October 30, 1995.
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
Quarterly Report on Form 10-Q for the quarterly period ended July 1,
1995.
(3) Incorporated by reference to exhibits filed with the Company's Annual
Report on Form 10-K for the year ended December 31, 1994.
(4) Incorporated by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarterly period ended April 2,
1994.
(5) Incorporated by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarterly period ended July 2,
1994.
(6) Incorporated by reference to exhibits filed with the Company's Annual
Report on Form 10-K for the Transition period ended September 30, 1992.
(7) Incorporated by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarterly period ended October 1,
1994.
(8) Incorporated by reference to exhibits filed with the Company's Annual
Report on Form 10-K for the year ended June 30, 1991.
(9) Incorporated by reference to exhibits filed with the Company's Current
Report on Form 8-K dated July 21, 1995.
19
<PAGE> 1
SOFTKEY INTERNATIONAL INC.
AND
STATE STREET BANK AND TRUST COMPANY
Trustee
INDENTURE
Dated as of October 16, 1995
5 1/2% Senior Convertible Notes Due 2000
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
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<S> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . 1
Section 1.1 Definitions . . . . . . . . . . . . . . . . 1
ARTICLE II
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES . . . . . . . . . 7
Section 2.1 Designation, Amount and Issue of Notes . . 7
Section 2.2 Form of Notes . . . . . . . . . . . . . . . 7
Section 2.3 Date and Denomination of Notes; Payments
of Interest . . . . . . . . . . . . . . . 8
Section 2.4 Execution of Notes . . . . . . . . . . . . 10
Section 2.5 Exchange and Registration of Transfer of
Notes; Restrictions on Transfer;
Depositary . . . . . . . . . . . . . . . 10
Section 2.6 Mutilated, Destroyed, Lost or Stolen
Notes . . . . . . . . . . . . . . . . . . 18
Section 2.7 Temporary Notes . . . . . . . . . . . . . . 19
Section 2.8 Cancellation of Notes Paid, Etc . . . . . . 19
ARTICLE III
REDEMPTION OF NOTES . . . . . . . . . 20
Section 3.1 Redemption Prices . . . . . . . . . . . . . 20
Section 3.2 Notice of Redemption; Selection of Notes . 20
Section 3.3 Payment of Notes Called for Redemption . . 22
Section 3.4 Conversion Arrangement on Call for
Redemption . . . . . . . . . . . . . . . 22
Section 3.5. Purchase of Notes Upon a Change of
Control . . . . . . . . . . . . . . . . . 23
ARTICLE IV
[RESERVED] . . . . . . . . . . . 24
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY . . . . . 24
Section 5.1 Payment of Principal, Premium and
Interest . . . . . . . . . . . . . . . . 24
Section 5.2 Maintenance of Office or Agency . . . . . . 25
Section 5.3 Appointments to Fill Vacancies in
Trustee's Office . . . . . . . . . . . . 25
Section 5.4 Provisions as to Paying Agent . . . . . . . 25
Section 5.5 Corporate Existence . . . . . . . . . . . . 26
</TABLE>
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<TABLE>
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Section 5.6 Rule 144A Information Requirement . . . . . 27
Section 5.7 Stay, Extension and Usury Laws . . . . . . 27
ARTICLE VI
NOTEHOLDERS' LISTS AND REPORTS BY
THE COMPANY . . . . . . . . . . . 27
Section 6.1 Noteholders' Lists . . . . . . . . . . . . 27
Section 6.2 Reports by Company . . . . . . . . . . . . 28
ARTICLE VII
DEFAULTS AND REMEDIES . . . . . . . . . 28
Section 7.1 Events of Default . . . . . . . . . . . . . 28
Section 7.2 Payments of Notes on Default; Suit
Therefor . . . . . . . . . . . . . . . . 30
Section 7.3 Application of Monies Collected by
Trustee . . . . . . . . . . . . . . . . . 32
Section 7.4 Proceedings by Noteholder . . . . . . . . . 33
Section 7.5 Proceedings by Trustee . . . . . . . . . . 34
Section 7.6 Remedies Cumulative and Continuing . . . . 34
Section 7.7 Direction of Proceedings and Waiver of
Defaults by Majority of Noteholders . . . 35
Section 7.8 Notice of Defaults . . . . . . . . . . . . 35
Section 7.9 Undertaking to Pay Costs . . . . . . . . . 35
ARTICLE VIII
CONCERNING THE TRUSTEE . . . . . . . . 36
Section 8.1 Duties and Responsibilities of Trustee . . 36
Section 8.2 Reliance on Documents, Opinions, Etc. . . 37
Section 8.3 No Responsibility for Recitals, Etc. . . . 38
Section 8.4 Trustee, Paying Agents, Conversion Agents
or Registrar May own Notes . . . . . . . 38
Section 8.5 Monies to Be Held in Trust . . . . . . . . 39
Section 8.6 Compensation and Expenses of Trustee . . . 39
Section 8.7 Officers' Certificate as Evidence . . . . 39
Section 8.8 Conflicting Interests of Trustee . . . . . 40
Section 8.9 Eligibility of Trustee . . . . . . . . . . 40
Section 8.10 Resignation or Removal of Trustee . . . . 40
Section 8.11 Acceptance by Successor Trustee . . . . . 41
Section 8.12 Successor, by Merger, Etc. . . . . . . . . 42
Section 8.13 Limitation on Rights of Trustee as
Creditor . . . . . . . . . . . . . . . . 42
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE IX
CONCERNING THE NOTEHOLDERS . . . . . . . 42
Section 9.1 Action by Noteholders . . . . . . . . . . . 42
Section 9.2 Proof of Execution by Noteholders . . . . . 43
Section 9.3 Who Are Deemed Absolute Owners . . . . . . 43
Section 9.4 Company-Owned Notes Disregarded . . . . . . 44
Section 9.5 Revocation of Consents, Future Holders
Bound . . . . . . . . . . . . . . . . . . 44
ARTICLE X
NOTEHOLDERS MEETINGS . . . . . . . . . 45
SECTION 10.1. Purposes for Which Meetings May be
Called . . . . . . . . . . . . . . . . 45
SECTION 10.2. Manner of Calling Meetings; Record Date . 45
SECTION 10.3. Call of Meeting by Company or
Noteholders . . . . . . . . . . . . . . 46
SECTION 10.4. Who may Attend and Vote at Meetings . . . 46
SECTION 10.5. Manner of voting at Meetings and Record
to be Kept . . . . . . . . . . . . . . 46
SECTION 10.6. Exercise of Rights of Trustee and
Noteholders not to be Hindered or
delayed . . . . . . . . . . . . . . . . 47
ARTICLE XI
SUPPLEMENTAL INDENTURES . . . . . . . . 47
Section 11.1 Supplemental Indentures Without Consent
of Noteholders . . . . . . . . . . . . 47
Section 11.2 Supplemental Indentures with Consent of
Noteholders . . . . . . . . . . . . . . 49
Section 11.3 Effect of Supplemental Indentures . . . . 49
Section 11.4 Notation on Notes . . . . . . . . . . . . 50
Section 11.5 Evidence of Compliance of Supplemental
Indenture to Be Furnished Trustee . . . 50
ARTICLE XII
CONSOLIDATION, MERGER, SALE, CONVEYANCE,
TRANSFER AND LEASE . . . . . . . . . 50
Section 12.1 Company May Consolidate, Etc. on Certain
Terms . . . . . . . . . . . . . . . . . 50
Section 12.2 Successor Company to Be Substituted . . . 51
Section 12.3 Opinion of Counsel to Be Given Trustee . . 51
</TABLE>
-iii-
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<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE XIII
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS . . . . . . . . . . 52
Section 13.1 Legal Defeasance and Covenant Defeasance
of the Notes . . . . . . . . . . . . . 52
Section 13.2 Termination of Obligations upon
Cancellation of the Notes . . . . . . . 54
Section 13.3 Survival of Certain Obligations . . . . . 55
Section 13.4 Acknowledgment of Discharge by Trustee . . 55
Section 13.5 Application of Trust Assets . . . . . . . 55
Section 13.6 Repayment to the Company; Unclaimed
Money . . . . . . . . . . . . . . . . . 56
Section 13.7 Reinstatement. . . . . . . . . . . . . . . 56
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS . . . . . . . . 56
Section 14.1 Indenture and Notes Solely Corporate
Obligations . . . . . . . . . . . . . . 56
ARTICLE XV
CONVERSION OF NOTES . . . . . . . . . 57
Section 15.1 Right to Convert . . . . . . . . . . . . 57
Section 15.2 Exercise of Conversion Privilege;
Issuance of Common Stock on
Conversion; No Adjustment for Interest
or Dividends . . . . . . . . . . . . . 57
Section 15.3 Cash Payments in Lieu of Fractional
Shares . . . . . . . . . . . . . . . . 59
Section 15.4 Conversion Price . . . . . . . . . . . . 59
Section 15.5 Adjustment of Conversion Price . . . . . 60
Section 15.6 Effect of Reclassification,
Consolidation, Merger or Sale . . . . . 69
Section 15.7 Taxes on Shares Issued . . . . . . . . . 71
Section 15.8 Reservation of Shares; Shares to Be
Fully Paid; Listing of Common Stock . . 71
Section 15.9 Responsibility of Trustee . . . . . . . . 71
Section 15.10 Notice to Holders Prior to Certain
Actions . . . . . . . . . . . . . . . . 72
</TABLE>
-iv-
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<TABLE>
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<S> <C> <C>
ARTICLE XVI
MISCELLANEOUS PROVISIONS . . . . . . . . 73
Section 16.1 Pooling of Interests . . . . . . . . . . 73
Section 16.2 Provisions Binding on Company's
Successors . . . . . . . . . . . . . . 73
Section 16.3 Official Acts by Successor Company . . . 73
Section 16.4 Addresses for Notices, Etc. . . . . . . . 73
Section 16.5 Governing Law . . . . . . . . . . . . . . 74
Section 16.6 Evidence of Compliance with Conditions
Precedent; Certificates to Trustee . . 74
Section 16.7 Legal Holidays . . . . . . . . . . . . . 74
Section 16.8 No Security Interest Created . . . . . . 75
Section 16.9 Trust Indenture Act . . . . . . . . . . . 75
Section 16.10 Benefits of Indenture . . . . . . . . . . 75
Section 16.11 Table of Contents, Headings Etc. . . . . 75
Section 16.12 Authenticating Agent . . . . . . . . . . 75
Section 16.13 Execution in Counterparts . . . . . . . . 76
</TABLE>
-v-
<PAGE> 7
INDENTURE dated as of October 16, 1995 between SOFTKEY
INTERNATIONAL INC., a Delaware corporation (hereinafter sometimes
called the "Company", as more fully set forth in Section 1.1),
and STATE STREET BANK AND TRUST COMPANY, a Massachusetts banking
corporation (hereinafter sometimes called the "Trustee", as more
fully set forth in Section 1.1).
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, for its lawful corporate purposes, the Company
has duly authorized the issuance of its 5 1/2% Senior Convertible
Notes Due 2000 (hereinafter sometimes called the "Notes"), in an
aggregate principal amount not to exceed $402,500,000 and, to
provide the terms and conditions upon which the Notes are to be
authenticated, issued and delivered, the Company has duly
authorized the execution and delivery of this Indenture; and
WHEREAS, the Notes, the certificate of authentication
to be borne by the Notes, a form of assignment, a form of option
to require repurchase by the Company upon a Change of Control (as
hereinafter defined), a form of conversion notice and a
certificate of transfer to be borne by the Notes are to be
substantially in the forms hereinafter provided for; and
WHEREAS, all acts and things necessary to make the
Notes, when executed by the Company and authenticated and
delivered by the Trustee or a duly authorized authenticating
agent, as in this Indenture provided, the valid, binding and
legal obligations of the Company, and to constitute these
presents a valid agreement according to its terms, have been done
and performed, and the execution of this Indenture and the
issuance hereunder of the Notes have in all respects been duly
authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon
which the Notes are, and are to be, authenticated, issued and
delivered, and in consideration of the premises and of the
purchase and acceptance of the Notes by the holders thereof, the
Company covenants and agrees with the Trustee for the equal and
proportionate benefit of the respective holders from time to time
of the Notes (except as otherwise provided below), as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. The terms defined in this
Section 1.1 (except as herein otherwise expressly provided or
unless the context otherwise requires) for all purposes of this
Indenture and of any indenture supplemental hereto shall have the
respective meanings specified in this Section 1.1. All other
<PAGE> 8
2
terms used in this Indenture which are defined in the Trust
Indenture Act (as hereinafter defined) or which are by reference
defined in the Securities Act, except as herein otherwise
expressly provided or unless the context otherwise requires,
shall have the meanings assigned to such terms in said Trust
Indenture Act and in said Securities Act as in force at the date
of the execution of this Indenture. The words "herein,"
"hereof," "hereunder" and words of similar import refer to this
Indenture as a whole and not to any particular Article, Section
or other Subdivision. The terms defined in this Article include
the plural as well as the singular.
ACCREDITED INVESTOR: The term "Accredited Investor"
shall have the meaning given it in Rule 501(a) under the
Securities Act.
ACQUISITION PRICE: The term "Acquisition Price" means
the volume weighted average of the per share prices paid by a
specified person or group in acquiring Voting Stock.
AFFILIATE: The term "Affiliate" of any specified
person shall mean an "affiliate" as defined in Rule 144(a) as
promulgated under the Securities Act.
BOARD OF DIRECTORS: The term "Board of Directors"
shall mean the Board of Directors of the Company or a committee
of such Board duly authorized to act for it hereunder.
BOARD RESOLUTION: The term "Board Resolution" means a
copy of a resolution certified by the Secretary or an Assistant
Secretary of the Company to have been duly adopted by the Board
of Directors, or a duly authorized committee thereof (to the
extent permitted by applicable law), and to be in full force and
effect on the date of such certification, and delivered to the
Trustee.
BUSINESS DAY: The term "Business Day" shall mean a
day, other than a Saturday, a Sunday or other day on which the
banking institutions in the State of New York, the State of
California or the Commonwealth of Massachusetts are authorized or
obligated by law or executive order to close or a day which is
declared a national or New York, California or Massachusetts
state holiday.
CHANGE OF CONTROL: The term "Change of Control" means
an event or series of events pursuant to which (i) any "person"
or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act) acquires beneficial ownership (as determined in
accordance with Rule 13d-3 under the Exchange Act), directly or
indirectly, of more than 50% of the total Voting Stock of the
Company at an Acquisition Price less than the conversion price
then in effect with respect to the Notes and (ii) holders of
Common Stock receive consideration which is not all or
substantially all common stock that is (or upon consummation of
<PAGE> 9
3
or immediately following such event or events will be) listed on
a United States national securities exchange or approved for
quotation on the Nasdaq National Market or any similar United
States system of automated dissemination of quotations of
securities prices; provided, however, that any such person or
group shall not be deemed to be the beneficial owner of, or to
beneficially own, any Voting Stock tendered into a tender offer
until such tendered Voting Stock is accepted for purchase under
the tender offer.
COMMISSION: The term "Commission" shall mean the
Securities and Exchange Commission.
COMMON STOCK: The term "Common Stock" shall mean any
stock of any class of the Company which has no preference in
respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up
of the Company and which is not subject to redemption by the
Company. Subject to the provisions of Section 15.6, however,
shares issuable on conversion of Notes shall include only shares
of the class designated as common stock of the Company at the
date of this Indenture or shares of any class or classes
resulting from any reclassification or reclassifications thereof
and which have no preference in respect of dividends or of
amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company and which
are not subject to redemption by the Company; PROVIDED that if at
any time there shall be more than one such resulting class, the
shares of each such class then so issuable shall be substantially
in the proportion which the total number of shares of such class
resulting from all such reclassifications bears to the total
number of shares of all such classes resulting from all such
reclassifications.
COMPANY: The term "Company" shall mean SoftKey
International Inc., a Delaware corporation, and subject to the
provisions of Article XII, shall include its successors and
assigns.
CONVERSION PRICE: The term "Conversion Price" shall
have the meaning specified in Section 15.4.
CORPORATE TRUST OFFICE OF THE TRUSTEE: The term
"Corporate Trust office of the Trustee," or other similar term,
shall mean the office of the Trustee at which at any particular
time its corporate trust business shall be principally
administered, which office is, at the date as of which this
Indenture is dated, located at 225 Franklin Street, Boston,
Massachusetts 02110 (Attention: Corporate Trust Department).
CUSTODIAN: The term "Custodian" means State Street
Bank and Trust Company, as custodian with respect to the Notes in
global form, or any successor entity thereto.
<PAGE> 10
4
DEFAULT: The term "default" shall mean any event that
is, or after notice or passage of time, or both, would be, an
Event of Default.
DEPOSITARY: The term "Depositary" means, with respect
to the Notes issuable or issued in whole or in part in global
form, the person specified in Section 2.5(d) as the Depositary
with respect to the Notes, until a successor shall have been
appointed and become such pursuant to the applicable provisions
of this Indenture, and thereafter, "Depositary" shall mean or
include such successor.
EXCHANGE ACT: The term "Exchange Act" means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
EVENT OF DEFAULT: The term "Event of Default" shall
mean any event specified in Section 7.1(a), (b), (c), (d) or (e).
INDENTURE: The term "Indenture" shall mean this
instrument as originally executed or, if amended or supplemented
as herein provided, as so amended or supplemented.
NOTE OR NOTES: The terms "Note" or "Notes " shall mean
any Note or Notes, as the case may be, authenticated and
delivered under this Indenture.
NOTEHOLDER; HOLDER: The terms "Noteholder" or "holder"
as applied to any Note, or other similar terms (but excluding the
term "beneficial holder"), shall mean any person in whose name at
the time a particular Note is registered on the Note registrar's
books.
NOTE REGISTER: The term "Note register" shall have the
meaning specified in Section 2.5.
OFFICERS' CERTIFICATE: The term "Officers'
Certificate," when used with respect to the Company, shall mean a
certificate signed by the President, the Chief Executive Officer,
the Chief Financial Officer or any Vice President or the
Secretary or any Assistant Secretary of the Company, which is
delivered to the Trustee. Each such certificate shall include
the statements provided for in Section 16.5 if and to the extent
required by the provisions of such Section.
OPINION OF COUNSEL: The term "Opinion of Counsel"
shall mean an opinion in writing signed by legal counsel, who may
be an employee of or counsel to the Company or other counsel
acceptable to the Trustee, which is delivered to the Trustee.
Each such opinion shall include the statements provided for in
Section 16.6 if and to the extent required by the provisions of
such Section.
<PAGE> 11
5
OUTSTANDING: The term "outstanding," when used with
reference to Notes, shall, subject to the provisions of Section
9.4, mean, as of any particular time, all Notes authenticated and
delivered by the Trustee under this Indenture, except
(a) Notes theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(b) Notes, or portions thereof, for which monies in
the necessary amount shall have been deposited in trust with
the Trustee for payment or redemption; PROVIDED that if such
Notes are to be redeemed prior to the maturity thereof,
notice of such redemption shall have been given as in
Article III provided, or provision satisfactory to the
Trustee shall have been made for giving such notice;
(c) Notes in lieu of or in substitution for which
other Notes shall have been authenticated and delivered
pursuant to the terms of Section 2.6 unless proof
satisfactory to the Trustee is presented that any such Notes
are held by bona fide holders in due course; and
(d) Notes converted into Common Stock pursuant to
Article XV and Notes not deemed outstanding pursuant to
Section 3.2.
PERSON: The term "person" shall mean a corporation, an
association, a partnership, an individual, a joint venture, a
joint stock company, a trust, an unincorporated organization or a
government or an agency or a political subdivision thereof.
PORTAL MARKET: The term "PORTAL Market" shall mean the
Private Offerings, Resales and Trading through Automated Linkages
Market operated by the National Association of Securities
Dealers, Inc. or any successor thereto.
PREDECESSOR NOTE: The term "Predecessor Note" of any
particular Note shall mean every previous Note evidencing all or
a portion of the same debt as that evidenced by such particular
Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 2.6 in lieu of a lost,
destroyed or stolen Note shall be deemed to evidence the same
debt as the lost, destroyed or stolen Note.
QIB: The term "QIB" shall mean a "qualified
institutional buyer" as defined in Rule 144A (as hereinafter
defined).
RESPONSIBLE OFFICER: The term "Responsible Officer,"
when used with respect to the Trustee, shall mean an officer of
the Trustee assigned and duly authorized by the Trustee to
administer its corporate trust matters.
<PAGE> 12
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RESTRICTED SECURITIES: The term "Restricted
Securities" has the meaning specified in Section 2.5(d).
RULE 144A: The term "Rule 144A" shall mean Rule 144A
as promulgated under the Securities Act.
SECURITIES ACT: The term "Securities Act" means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
SUBSIDIARY: The term "subsidiary" of any specified
person shall mean (i) a corporation a majority of whose capital
stock with voting power under ordinary circumstances, to elect
directors is at the time directly or indirectly owned by such
person or (ii) any other person (other than a corporation) in
which such person or such person and a subsidiary or subsidiaries
of such person or a subsidiary or subsidiaries of such person
directly or indirectly, at the date of determination thereof, has
at least majority ownership.
SUCCESSOR COMPANY: The term "Successor Company" shall
have the meaning specified in Section 12.1.
TRUST INDENTURE ACT: The term "Trust Indenture Act"
shall mean the Trust Indenture Act of 1939, as amended, as it was
in force at the date of execution of this Indenture, except as
provided in Sections 11.3 and 15.6; PROVIDED, HOWEVER, that in
the event said Trust Indenture Act of 1939 is amended after the
date hereof, the term "Trust Indenture Act" shall mean, to the
extent required by such amendment, said Trust Indenture Act of
1939 as so amended.
TRUSTEE: The term "Trustee" shall mean State Street
Bank and Trust Company, its successors and any corporation
resulting from or surviving any consolidation or merger to which
it or its successors may be a party and any successor trustee at
the time serving as successor trustee hereunder.
U.S. GOVERNMENT OBLIGATIONS: The term "U.S. Government
Obligations" means securities that are (i) direct obligations of
the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person
controlled or supervised by, and acting as an agency or
instrumentality of, the United States of America the timely
payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America, which, in
either case, are not callable or redeemable at the option of the
issuer hereof, and shall also include a depository receipt issued
by a bank (as defined in Section 3(a)(2) of the Securities Act of
1933, as amended) as custodian with respect to any such U.S.
Government Obligation or a specific payment of principal or
interest on any such U.S. Government Obligation held by such
custodian for the account of the holder of such depository
receipt; PROVIDED that (except as required by law) such custodian
<PAGE> 13
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is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received
by such custodian in respect of the U.S. Government Obligation or
the specific payment of principal of or interest on the U.S.
Government Obligation evidenced by such depository receipt.
VOTING STOCK: The term "Voting Stock" means stock of
the class or classes pursuant to which the holders thereof have
the general voting power under ordinary circumstances to elect at
least a majority of the board of directors, managers or trustees
of a corporation (irrespective of whether or not at the time
stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency).
The definitions of certain other terms are as specified
in Section 3.5 and Article XV.
ARTICLE II
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES
Section 2.1 DESIGNATION, AMOUNT AND ISSUE OF NOTES.
The Notes shall be designated as "5 1/2% Senior Convertible Notes
Due 2000." Notes not to exceed the aggregate principal amount of
$402,500,000 upon the execution of this Indenture, or from time
to time thereafter, may be executed by the Company and delivered
to the Trustee for authentication, and the Trustee shall
thereupon authenticate and deliver said Notes upon the written
order of the Company, signed by its (a) Chief Executive Officer
or President, and (b) Chief Financial Officer or Secretary or any
Assistant Secretary, without any further action by the Company
hereunder.
Section 2.2 FORM OF NOTES. The Notes in definitive
form and the Trustee's certificate of authentication to be borne
by such Notes shall be substantially in the form set forth in
Exhibit A, which is incorporated in and made a part of this
Indenture. The Notes may be issued in global form, substantially
in the form of Exhibit B, which is incorporated in and made a
part of this Indenture.
Any of the Notes may have such letters, numbers or
other marks of identification and such notations, legends and
endorsements as the officers executing the same may approve
(execution thereof to be conclusive evidence of such approval)
and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with
any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange on which the Notes may be
listed, or to conform to usage.
<PAGE> 14
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Any Note in global form shall represent such of the
outstanding Notes as shall be specified therein and shall provide
that it shall represent the aggregate amount of outstanding Notes
from time to time endorsed thereon and that the aggregate amount
of outstanding Notes represented thereby may from time to time be
increased or reduced to reflect transfers or exchanges permitted
hereby. Any endorsement of a Note in global form to reflect the
amount of any increase or decrease in the amount of outstanding
Notes represented thereby shall be made by the Trustee or the
Custodian, at the direction of the Trustee, in such manner and
upon instructions given by the holder of such Notes in accordance
with the Indenture. Payment of principal of and interest and
premium, if any, on any Note in global form shall be made to the
holder of such Note.
The terms and provisions contained in the forms of
Notes attached as Exhibits A and B hereto shall constitute, and
are hereby expressly made, a part of this Indenture and to the
extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such
terms and provisions and to be bound thereby.
Section 2.3 DATE AND DENOMINATION OF NOTES; PAYMENTS
OF INTEREST. The Notes shall be issuable in registered form
without coupons in denominations of $1,000 principal amount and
integral multiples thereof. Every Note shall be dated the date
of its authentication, shall bear interest from the applicable
date and shall be payable semiannually on each May 1 and November
1, commencing May 1, 1996, as specified on the faces of the forms
of Notes, attached as Exhibits A and B hereto.
The person in whose name any Note (or its Predecessor
Note) is registered at the close of business on any record date
with respect to any interest payment date (including any Note
that is converted after the record date and on or before the
interest payment date) shall be entitled to receive the interest
payable on such interest payment date notwithstanding the
cancellation of such Note upon any transfer, exchange or
conversion subsequent to the record date and prior to such
interest payment date. Interest may, at the option of the
Company, be paid by check mailed to the address of such person on
the registry kept for such purposes; PROVIDED that, with respect
to any holder of Notes with an aggregate principal amount equal
to or in excess of $5,000,000, at the request of such holder in
writing to the Trustee on or before the record date preceding any
interest payment date, interest on such holder's Notes shall be
paid by wire transfer in immediately available funds. The term
"record date" with respect to any interest payment date shall
mean the April 15 or October 15 preceding said May 1 or
November 1.
Interest on the Notes shall be computed on the basis of
a year of twelve 30-day months.
<PAGE> 15
9
Any interest on any Note which is payable, but is not
punctually paid or duly provided for, on any said May 1 or
November 1 (herein called "Defaulted Interest") shall forthwith
cease to be payable to the Noteholder on the relevant record date
by virtue of his having been such Noteholder; and such Defaulted
Interest shall be paid by the Company, at its election in each
case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any
Defaulted Interest to the Persons in whose names the Notes
(or their respective Predecessor Notes) are registered at
the close of business on a special record date for the
payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee
in writing of the amount of Defaulted Interest to be paid on
each Note and the date of the payment (which shall be not
less than 25 days after the receipt by the Trustee of such
notice, unless the Trustee shall consent to an earlier
date), and at the same time, the Company shall deposit with
the Trustee an amount of money equal to the aggregate amount
to be paid in respect of such Defaulted Interest or shall
make arrangements satisfactory to the Trustee for such
deposit prior to the date of the proposed payment, such
money when deposited to be held in trust for the benefit of
the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon, the Trustee shall fix a special
record date for the payment of such Defaulted Interest which
shall be not more than 15 days and not less than 10 days
prior to the date of the payment and not less than 10 days
after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the
Company of such special record date and, in the name and at
the expense of the Company, shall cause notice of the
payment of such Defaulted Interest and the special record
date therefor to be mailed, first-class postage prepaid, to
each Noteholder at his address as it appears in the Note
register, not less than 10 days prior to such special record
date. Notice of the proposed payment of such Defaulted
Interest and the special record date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons
in whose names the Notes (or their respective Predecessor
Notes) were registered at the close of business on such
special record date and shall no longer be payable pursuant
to the following clause (2).
(2) The Company may make payment of any Defaulted
Interest in any other lawful manner not inconsistent with
the requirements of any securities exchange on which the
Notes may be listed, and upon such notice as may be required
by such exchange, if, after notice given by the Company to
the Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the
Trustee.
<PAGE> 16
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Section 2.4 EXECUTION OF NOTES. The Notes shall be
signed in the name and on behalf of the Company by the facsimile
signature of its Chief Executive Officer, President or its Chief
Financial Officer and attested by the facsimile signature of its
Secretary or any of its Assistant Secretaries (which may be
printed, engraved or otherwise reproduced thereon, by facsimile
or otherwise). Only such Notes as shall bear thereon a
certificate of authentication substantially in the form set forth
on forms of Notes attached as Exhibits A and B hereto, manually
executed by the Trustee (or an authenticating agent appointed by
the Trustee as provided by Section 16.12), shall be entitled to
the benefits of this Indenture or be valid or obligatory for any
purpose. Such certificate by the Trustee (or such an
authenticating agent) upon any Note executed by the Company shall
be conclusive evidence that the Note so authenticated has been
duly authenticated and delivered hereunder and that the holder is
entitled to the benefits of this Indenture.
In case any officer of the Company who shall have
signed any of the Notes shall cease to be such officer before the
Notes so signed shall have been authenticated and delivered by
the Trustee, or disposed of by the Company, such Notes never-
theless may be authenticated and delivered or disposed of as
though the person who signed such Notes had not ceased to be such
officer of the Company; and any Note may be signed on behalf of
the Company by such persons as, at the actual date of the
execution of such Note, shall be the proper officers of the
Company, although at the date of the execution of this Indenture
any such person was not such an officer.
Section 2.5 Exchange and Registration of Transfer of
----------------------------------------
Notes; Restrictions on Transfer; Depositary.
- -------------------------------------------
(a) The Company shall cause to be kept at the
Corporate Trust Office of the Trustee a register (the register
maintained in such office and in any other office or agency of
the Company designated pursuant to Section 5.2 being herein
sometimes collectively referred to as the "Note register") in
which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of
Notes and of transfers of Notes. Such register shall be in
written form or in any form capable of being converted into
written form within a reasonable period of time. The Trustee is
hereby appointed "Note registrar" for the purpose of registering
Notes and transfers of Notes as herein provided. The Company may
appoint one or more co-registrars.
Upon surrender for registration of transfer of any Note
to the Note registrar or any co-registrar and satisfaction of the
requirements for such transfer set forth in this Section 2.5, the
Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees,
one or more new Notes of any authorized denominations and of a
<PAGE> 17
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like aggregate principal amount and bearing such restrictive
legends as may be required by Section 2.5(d).
Notes may be exchanged for other Notes of any
authorized denominations and of a like aggregate principal
amount, upon surrender of the Notes to be exchanged at any such
office or agency. Whenever any Notes are so surrendered for
exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Notes which the Noteholder making
the exchange is entitled to receive.
All Notes presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company,
the Trustee, the Note registrar or any co-registrar) be duly
endorsed, or be accompanied by a written instrument of transfer
in form satisfactory to the Company, and the Note shall be duly
executed by the Noteholder thereof or his attorney duly
authorized in writing.
No service charge shall be charged to the Noteholder
for any exchange or registration of transfer of Notes, but the
Company may require payment of a sum sufficient to cover any tax,
assessments or other governmental charges that may be imposed in
connection therewith.
None of the Company, the Trustee, the Note registrar or
any co-registrar shall be required to exchange or register a
transfer of (a) any Notes for a period of 15 days next preceding
any selection of Notes to be redeemed or (b) any Notes called for
redemption or, if a portion of any Note is selected or called for
redemption, such portion thereof selected or called for
redemption or (c) any Notes surrendered for conversion or, if a
portion of any Note is surrendered for conversion, such portion
thereof surrendered for conversion or (d) any Notes surrendered
for redemption pursuant to Section 3.5 or, if a portion of any
Note is surrendered for redemption pursuant to Section 3.5, such
portion thereof surrendered for redemption pursuant to Section
3.5.
All Notes issued upon any transfer or exchange of Notes
shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture
as the Notes surrendered upon such registration of transfer or
exchange.
(b) So long as the Notes are eligible for book-entry
settlement with the Depositary, or unless otherwise required by
law, all Notes to be traded on the PORTAL Market shall be
represented by a Note in global form registered in the name of
the Depositary or the nominee of the Depositary. The transfer
and exchange of beneficial interests in such Note in global form,
which does not involve the issuance of a definitive Note, shall
be effected through the Depositary (but not the Trustee or the
Custodian) in accordance with this Indenture (including the
<PAGE> 18
12
restrictions on transfer set forth herein) and the procedures of
the Depositary therefor. Neither the Trustee nor the Custodian
(in such respective capacities) will have any responsibility for
the transfer and exchange of beneficial interests in such Note in
global form that does not involve the issuance of a definitive
Note.
At any time at the request of the beneficial holder of
an interest in a Note in global form, such beneficial holder
shall be entitled to obtain a definitive Note upon written
request to the Trustee and the Custodian in accordance with the
standing instructions and procedures existing between the
Depositary and the Custodian for the issuance thereof. Upon
receipt of any such request, the Trustee or the Custodian, at the
direction of the Trustee, will cause, in accordance with the
standing instructions and procedures existing between the
Depositary and the Custodian, the aggregate principal amount of
the Note in global form to be reduced and, following such
reduction, the Company will execute and the Trustee will
authenticate and deliver to such beneficial holder (or its
nominee) a Note or Notes in the appropriate aggregate principal
amount in the name of such beneficial holder (or its nominee) and
bearing such restrictive legends as may be required by this
Indenture.
Any transfer of a beneficial interest in a Note in
global form which cannot be effected through book-entry
settlement must be effected by the delivery to the transferee (or
its nominee) of a definitive Note or Notes registered in the name
of the transferee (or its nominee) on the books maintained by the
Trustee. With respect to any such transfer, the Trustee or the
Custodian, at the direction of the Trustee, will cause, in
accordance with the standing instructions and procedures existing
between the Depositary and the Custodian, the aggregate principal
amount of the Note in global form to be reduced and, following
such reduction, the Company will execute and the Trustee will
authenticate and deliver to the transferee (or such transferee's
nominee, as the case may be), a Note or Notes in the appropriate
aggregate principal amount in the name of such transferee (or its
nominee) and bearing such restrictive legends as may be required
by this Indenture. In connection with any such transfer, the
Trustee or the Custodian, at the direction of the Trustee, may
request such representations and agreements relating to the
restrictions on transfer of such Note or Notes from such
transferee (or such transferee's nominee) as the Trustee (or the
Custodian) may reasonably require.
(c) So long as the Notes are eligible for book-entry
settlement, or unless otherwise required by law, upon any
transfer of a definitive Note to a QIB in accordance with Rule
144A, unless otherwise requested by the transferor, and upon
receipt of the definitive Note or Notes being so transferred,
together with a certification from the transferor that the
transferee is a QIB (or other evidence satisfactory to the
<PAGE> 19
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Trustee), the Trustee shall make or direct the Custodian to make,
an endorsement on the Note in global form to reflect an increase
in the aggregate principal amount of the Notes represented by the
Note in global form, the Trustee shall cancel such definitive
Note or Notes and cause, or direct the Custodian to cause, in
accordance with the standing instructions and procedures existing
between the Depositary and the Custodian, the aggregate principal
amount of Notes represented by the Note in global form to be
increased accordingly.
Any Note in global form may be endorsed with or have
incorporated in the text thereof such legends or recitals or
changes not inconsistent with the provisions of this Indenture as
may be required by the Custodian, the Depositary or by the
National Association of Securities Dealers, Inc. in order for the
Notes to be tradeable on the PORTAL Market or as may be required
for the Notes to be tradeable on any other market developed for
trading of securities pursuant to Rule 144A or required to comply
with any applicable law or any regulation thereunder or with the
rules and regulations of any securities exchange upon which the
Notes may be listed or traded or to conform with any usage with
respect thereto, or to indicate any special limitations or
restrictions to which any particular Notes are subject.
(d) Every Note that bears or is required under this
Section 2.5(d) to bear the legend set forth in this Section
2.5(d) (together with any Common Stock issued upon conversion of
the Notes and required to bear the legend set forth in Section
2.5(e), collectively, the "Restricted Securities") shall be
subject to the restrictions on transfer set forth in this Section
2.5(d), unless such restrictions on transfer shall have been
waived by the written consent of the Company or removed in
accordance with the provisions of Section 2.5(f), and the holder
of each such Restricted Security, by such holder's acceptance
thereof, agrees to be bound by such restrictions on transfer. As
used in this Section 2.5(d), the term "transfer" encompasses any
sale, pledge, transfer or other disposition of any Restricted
Security.
Until three years after the later of the original
issuance date of any Note and the last date on which the Company
or an Affiliate of the Company was the owner of such Note, any
certificate evidencing such Note (and all securities issued in
exchange therefor or substitution thereof, other than Common
Stock, if any, issued upon conversion thereof, which shall bear
the legend set forth in Section 2.5(e), if applicable) shall bear
a legend in substantially the following form, unless otherwise
agreed by the Company (with notice thereof to the Trustee):
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED
OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT
OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE
<PAGE> 20
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FOLLOWING SENTENCE. BY ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT
IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT)
("INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A
U.S. PERSON AND IS ACQUIRING THE NOTE EVIDENCED HEREBY IN AN
OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT PRIOR TO
THE DATE THAT IS THREE YEARS AFTER THE LATER OF THE ORIGINAL
ISSUANCE OF THE NOTE EVIDENCED HEREBY AND THE LAST DATE ON
WHICH SOFTKEY INTERNATIONAL INC. (THE "COMPANY") OR ANY
"AFFILIATE" (AS DEFINED IN RULE 144 UNDER THE SECURITIES
ACT) OF THE COMPANY WAS THE OWNER OF THE NOTE (THE
"RESTRICTION TERMINATION DATE") RESELL OR OTHERWISE TRANSFER
THE NOTE EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON
CONVERSION OF SUCH NOTE EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER
IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO STATE STREET BANK AND TRUST COMPANY,
AS TRUSTEE, A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS
ON TRANSFER OF THE NOTE EVIDENCED HEREBY (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM SUCH TRUSTEE), (D) OUTSIDE THE
UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT OR (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE); AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THE NOTE EVIDENCED HEREBY
BEFORE THE RESTRICTION TERMINATION DATE, THE HOLDER MUST
CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO STATE STREET BANK AND TRUST COMPANY, AS
TRUSTEE. IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE
(C), (D) OR (E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO STATE STREET BANK AND TRUST COMPANY, AS
TRUSTEE, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE
REMOVED UPON THE RESTRICTION TERMINATION DATE. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES"
AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
Any Note (or security issued in exchange or
substitution therefor) as to which such restrictions on transfer
shall have expired in accordance with their terms may, upon
satisfaction of the requirements of Section 2.5(f) and surrender
of such Note for exchange to the Note registrar in accordance
with the provisions of this Section 2.5, be exchanged for a new
<PAGE> 21
15
Note or Notes, of like tenor and aggregate principal amount,
which shall not bear the restrictive legend required by this
Section 2.5(d).
Notwithstanding any other provisions of this Indenture
(other than the provisions set forth in this Section 2.5(d)), a
Note in global form may not be transferred as a whole except by
the Depositary to a nominee of the Depositary or by a nominee of
the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
The Depositary shall be a clearing agency registered
under the Exchange Act. The Company initially appoints The
Depository Trust Company to act as Depositary with respect to the
Notes in global form. Initially, the global Note shall be issued
to the Depositary, registered in the name of Cede & Co., as the
nominee of the Depositary, and deposited with the Trustee as
Custodian for Cede & Co.
If at any time the Depositary for the Note in global
form notifies the Company that it is unwilling or unable to
continue as Depositary for such Note, the Company may appoint a
successor Depositary with respect to such Note. If a successor
Depositary for the Note is not appointed by the Company within 90
days after the Company receives such notice, the Company will
execute, and the Trustee, upon receipt of an Officers'
Certificate for the authentication and delivery of Notes, will
authenticate and deliver, Notes in definitive form, in an
aggregate principal amount equal to the principal amount of the
Note in global form, in exchange for such Note in global form.
Definitive Notes issued in exchange for all or a part
of a Note in global form pursuant to this Section 2.5(d) shall be
registered in such names and in such authorized denominations as
the Depositary, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Trustee.
Upon execution and authentication, the Trustee shall deliver such
definitive Notes to the persons in whose names such definitive
Notes are so registered.
At such time as all interests in a Note in global form
have been redeemed, converted, repurchased or canceled, such Note
in global form shall be, upon receipt thereof, canceled by the
Trustee in accordance with standing procedures and instructions
existing between the Depositary and the Custodian. At any time
prior to such cancellation, if any interest in a global Note is
exchanged for definitive Notes, redeemed, converted, canceled or
transferred to a transferee who receives definitive Notes
therefor or any definitive Note is exchanged or transferred for
part of a Note in global form, the principal amount of such Note
in global form shall, in accordance with the standing procedures
and instructions existing between the Depositary and the
Custodian, be reduced or increased, as the case may be, and an
<PAGE> 22
16
endorsement shall be made on such Note in global form by the
Trustee or the Custodian, at the direction of the Trustee, to
reflect such reduction or increase.
(e) Until three years after the later of the original
issuance date of any Note and the last date on which the Company
or an Affiliate of the Company was the owner of such Note, any
stock certificate representing Common Stock issued upon
conversion of such Note shall bear a legend in substantially the
following form, unless otherwise agreed by the Company (with
written notice thereof to the Trustee and any transfer agent for
the Common Stock):
THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, AND MAY NOT
BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF U.S. PERSONS EXCEPT AS SET FORTH
IN THE FOLLOWING SENTENCE. THE HOLDER HEREOF AGREES THAT
PRIOR TO THE DATE THAT IS THREE YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE OF THE NOTE UPON THE CONVERSION OF WHICH
THE COMMON STOCK EVIDENCED HEREBY WAS ISSUED AND THE LAST
DATE ON WHICH SOFTKEY INTERNATIONAL INC. (THE "COMPANY") OR
ANY "AFFILIATE" (AS DEFINED IN RULE 144 OF THE SECURITIES
ACT) OF THE COMPANY WAS THE OWNER OF THE NOTE UPON THE
CONVERSION OF WHICH THE COMMON STOCK EVIDENCED HEREBY WAS
ISSUED OR THE COMMON STOCK EVIDENCED HEREBY (THE
"RESTRICTION TERMINATION DATE"), (1) IT WILL NOT RESELL OR
OTHERWISE TRANSFER THE COMMON STOCK EVIDENCED HEREBY EXCEPT
(A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN COMPLIANCE WITH RULE 144A, (C)
TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT)
THAT PRIOR TO SUCH TRANSFER, FURNISHES TO THE FIRST NATIONAL
BANK OF BOSTON, AS TRANSFER AGENT, A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING
TO THE RESTRICTIONS ON TRANSFER OF THE COMMON STOCK
EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED
FROM SUCH TRANSFER AGENT), (D) OUTSIDE THE UNITED STATES IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT
TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT; (2) PRIOR TO ANY SUCH
TRANSFER PURSUANT TO CLAUSE (C), (D) OR (E) ABOVE, IT WILL
FURNISH TO THE FIRST NATIONAL BANK OF BOSTON, AS TRANSFER
AGENT, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT; AND (3) IT WILL DELIVER
TO EACH PERSON TO WHOM THE COMMON STOCK EVIDENCED HEREBY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
<PAGE> 23
17
LEGEND. THIS LEGEND WILL BE REMOVED UPON THE RESTRICTION
TERMINATION DATE. AS USED HEREIN, THE TERMS "UNITED STATES"
AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
Any such Common Stock as to which such restrictions on
transfer shall have expired in accordance with their terms may,
upon satisfaction of the requirements of Section 2.5(f) and
surrender of the certificates representing such shares of Common
Stock for exchange in accordance with the procedures of the
transfer agent for the Common Stock, be exchanged for a new
certificate or certificates for a like aggregate number of shares
of Common Stock, which shall not bear the restrictive legend
required by this Section 2.5(e).
(f) Upon any sale or transfer of any Restricted
Security (including any interest in a Note in global form) (i)
that is effected pursuant to an effective registration statement
under the Securities Act, (ii) in the case of the Common Stock
only, that is effected pursuant to Rule 144 as promulgated under
the Securities Act or (iii) in connection with which the Trustee
(or transfer agent for the Common Stock, in the case of shares of
Common Stock) receives certificates and other information
(including an opinion of counsel, if requested) reasonably
acceptable to the Company and the Trustee (or such transfer
agent, as the case may be) to the effect that such security will
no longer be subject to the resale restrictions under federal and
state securities laws, then (A) in the case of a Restricted
Security in definitive form, the Note registrar or co-registrar
(or transfer agent, in the case of Common Stock) shall permit the
holder thereof to exchange such Restricted Security for a
security that does not bear the legends set forth in Section
2.5(d) or 2.5(e), as applicable, and shall rescind any such
restrictions on transfer and (B) in the case of Restricted
Securities represented by a Note in global form, such Note shall
no longer be subject to the restrictions contained in the legend
set forth in Section 2.5(d) (but still subject to the other
provisions hereof). In addition, any Note (or security issued in
exchange or substitution therefor) or shares of Common Stock
issued upon conversion of any Note, in either case, as to which
the restrictions on transfer described in the legends set forth
in Section 2.5(d) and 2.5(e), respectively, have expired by their
terms, may, upon surrender thereof (in accordance with the terms
of this Indenture in the case of Notes) together with such
certifications and other information (including an opinion of
counsel having substantial experience in practice under the
Securities Act and otherwise reasonably acceptable to the
Company, addressed to the Company and the Trustee and in a form
acceptable to the Company, to the effect that the transfer of
such Restricted Security has been made in compliance with Rule
144 or such successor provision) acceptable to the Company and
the Trustee (or transfer agent, as the case may be) as either of
them may reasonably require, be exchanged for a new Note or Notes
of like tenor and aggregate principal amount (in the case of
<PAGE> 24
18
Notes), or a new certificate or certificates for a like aggregate
number of shares of Common Stock (in the case of Common Stock),
or a new certificate or other instrument of like tenor and amount
(in the case of securities issued in exchange or substitution for
Notes), which shall not bear the restrictive legends set forth in
Sections 2.5(d) and 2.5(e).
SECTION 2.6 MUTILATED, DESTROYED, LOST OR STOLEN
NOTES. In case any Note shall become mutilated or be destroyed,
lost or stolen, the Company in its discretion may execute, and
upon its request, the Trustee or an authenticating agent
appointed by the Trustee shall authenticate and deliver, a new
Note, bearing a number not contemporaneously outstanding, in
exchange and substitution for the mutilated Note, or in lieu of
and in substitution for the Note so destroyed, lost or stolen.
The Company may charge such applicant for the expenses of the
Company in replacing a Note. In every case the applicant for a
substituted Note shall furnish to the Company, to the Trustee
and, if applicable, to such authenticating agent such security or
indemnity as may be required by them to save each of them
harmless from any loss, liability, cost or expense caused by or
connected with such substitution, and in every case of
destruction, loss or theft, the applicant shall also furnish to
the Company, to the Trustee and, if applicable, to such
authenticating agent evidence to their satisfaction of the
destruction, loss or theft of such Note and of the ownership
thereof.
The Trustee or such authenticating agent may
authenticate any such substituted Note and deliver the same upon
the receipt of such security or indemnity as the Trustee, the
Company and, if applicable, such authenticating agent may
require. Upon the issuance of any substituted Note, the Company
may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto
and any other expenses connected therewith. In case any Note
which has matured or is about to mature or has been called for
redemption or is about to be converted into Common Stock shall
become mutilated or be destroyed, lost or stolen, the Company
may, instead of issuing a substitute Note, pay or authorize the
payment of or convert or authorize the conversion of the same
(without surrender thereof, except in the case of a mutilated
Note), as the case may be, if the applicant for such payment or
conversion shall furnish to the Company, to the Trustee and, if
applicable, to such authenticating agent such security or
indemnity as may be required by them to save each of them
harmless from any loss, liability, cost or expense caused by or
connected with such substitution, and in case of destruction,
loss or theft, evidence satisfactory to the Company, the Trustee
and, if applicable, any paying agent or conversion agent of the
destruction, loss or theft of such Note and of the ownership
thereof.
<PAGE> 25
19
Every substitute Note issued pursuant to the provisions
of this Section 2.6 in lieu of any Note which is destroyed, lost
or stolen shall constitute an additional contractual obligation
of the Company, whether or not the destroyed, lost or stolen Note
shall be enforceable by anyone, and shall be entitled to all the
benefits of (but shall be subject to all the limitations set
forth in) this Indenture equally and proportionately with any and
all other Notes duly issued hereunder. To the extent permitted
by law, all Notes shall be held and owned upon the express
condition that the foregoing provisions are exclusive with
respect to the replacement or payment or conversion of mutilated,
destroyed, lost or stolen Notes and shall preclude any and all
other rights or remedies notwithstanding any law or statute
existing or hereafter enacted to the contrary with respect to the
replacement or payment or conversion of negotiable instruments or
other securities without their surrender.
Section 2.7 TEMPORARY NOTES. Pending the preparation
of definitive Notes, the Company may execute and the Trustee or
an authenticating agent appointed by the Trustee shall, upon
written request of the Company, authenticate and deliver
temporary Notes (printed or lithographed). Temporary Notes shall
be issuable in any authorized denomination and shall be
substantially in the form of the definitive Notes but with such
omissions, insertions and variations as may be appropriate for
temporary Notes, all as may be determined by the Company. Every
such temporary Note shall be executed by the Company and
authenticated by the Trustee or such authenticating agent upon
the same conditions and in substantially the same manner, and
with the same effect, as the definitive Notes. Without
unreasonable delay the Company will execute and deliver to the
Trustee or such authenticating agent definitive Notes (other than
in the case of Notes in global form) and thereupon any or all
temporary Notes (other than any such Note in global form) may be
surrendered in exchange therefor, at each office or agency
maintained by the Company pursuant to Section 5.2 and the Trustee
or such authenticating agent shall authenticate and deliver in
exchange for such temporary Notes an equal aggregate principal
amount of definitive Notes. Such exchange shall be made by the
Company at its own expense and without any charge therefor.
Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits and subject to the same limitations
under this Indenture as definitive Notes authenticated and
delivered hereunder.
Section 2.8 CANCELLATION OF NOTES PAID, ETC. All
Notes surrendered for the purpose of payment, redemption,
conversion, exchange or registration of transfer shall, if
surrendered to the Company or any paying agent or any Note
registrar or any conversion agent, be surrendered to the Trustee
and promptly canceled by it or, if surrendered to the Trustee,
shall be promptly canceled by it and no Notes shall be issued in
lieu thereof except as expressly permitted by any of the
provisions of this Indenture. Upon written instructions of the
<PAGE> 26
20
Company, the Trustee shall destroy canceled Notes, in accordance
with the usual destruction procedures of the Trustee. If the
Company shall acquire any of the Notes, such acquisition shall
not operate as a redemption or satisfaction of the indebtedness
represented by such Notes unless and until the same are delivered
to the Trustee for cancellation.
ARTICLE III
REDEMPTION OF NOTES
Section 3.1 REDEMPTION PRICES. The Company may, at
its option, redeem all or from time to time any part of the Notes
on any date prior to maturity, upon notice as set forth in
Section 3.2, and at the optional redemption prices set forth in
the forms of Note attached as Exhibits A and B hereto, together
with accrued interest to the date fixed for redemption, PROVIDED,
HOWEVER, that no such redemption shall be effected before
November 2, 1998.
SECTION 3.2 NOTICE OF REDEMPTION; SELECTION OF NOTES.
In case the Company shall desire to exercise the right to redeem
all or, as the case may be, any part of the Notes pursuant to
Section 3.1, it shall fix a date for redemption and, in the case
of any redemption pursuant to Section 3.1, it or, at its request
accompanied by the proposed form of notice of redemption (which
must be received by the Trustee at least ten Business Days prior
to the date the Trustee is requested to give notice as described
below, unless a shorter period is agreed to by the Trustee), the
Trustee in the name of and at the expense of the Company, shall
mail or cause to be mailed a notice of such redemption at least
30 and not more than 60 days prior to the date fixed for
redemption to the holders of Notes so to be redeemed as a whole
or in part at their last addresses as the same appear on the
registry books of the Company, PROVIDED that if the Company shall
give such notice, it shall also give such notice, and notice of
the Notes to be redeemed, to the Trustee. Such mailing shall be
by first class mail. The notice, if mailed in the manner herein
provided, shall be conclusively presumed to have been duly given,
whether or not the holder receives such notice. In any case,
failure to give such notice by mail or any defect in the notice
to the holder of any Note designated for redemption as a whole or
in part shall not affect the validity of the proceedings for the
redemption of any other Note.
Each such notice of redemption shall specify the
aggregate principal amount of Notes to be redeemed, the date
fixed for redemption, the redemption price at which Notes are to
be redeemed, the place or places of payment, that payment will be
made upon presentation and surrender of such Notes, that interest
accrued to the date fixed for redemption will be paid as
specified in said notice and that on and after said date,
interest thereon or on the portion thereof to be redeemed will
<PAGE> 27
21
cease to accrue. Such notice shall also state the current
Conversion Price and the date on which the right to convert such
Notes or portions thereof into Common Stock will expire. If
fewer than all the Notes are to be redeemed, the notice of
redemption shall identify the Notes to be redeemed. In case any
Note is to be redeemed in part only, the notice of redemption
shall state the portion of the principal amount thereof to be
redeemed and shall state that on and after the date fixed for
redemption, upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion thereof will be
issued.
On or prior to the Business Day prior to the redemption
date specified in the notice of redemption given as provided in
this Section, the Company will deposit with the Trustee or with
one or more paying agents (or, if the Company is acting as its
own paying agent, set aside, segregate and hold in trust as
provided in Section 5.4) an amount of money sufficient to redeem
on the redemption date all the Notes so called for redemption
(other than those theretofore surrendered for conversion into
Common Stock) at the appropriate redemption price, together with
accrued interest to the date fixed for redemption. If any Note
called for redemption is converted pursuant hereto, any money
deposited with the Trustee or any paying agent or so segregated
and held in trust for the redemption of such Note shall be paid
to the Company upon its request or, if then held by the Company,
shall be discharged from such trust. If fewer than all the Notes
are to be redeemed, the Company will give the Trustee written
notice in the form of an Officers' Certificate not fewer than 45
days (or such shorter period of time as may be acceptable to the
Trustee) prior to the redemption date as to the aggregate
principal amount of Notes to be redeemed.
If fewer than all the Notes are to be redeemed, the
Trustee shall select the Notes or portions thereof to be redeemed
(in principal amounts of $1,000 or integral multiples thereof),
by lot or, in its sole discretion, on a pro rata basis. If any
Note selected for partial redemption is converted in part after
such selection, the converted portion of such Note shall be
deemed (so far as may be) to be the portion to be selected for
redemption. The Notes (or portions thereof) so selected shall be
deemed duly selected for redemption for all purposes hereof,
notwithstanding that any such Note is converted as a whole or in
part before the mailing of the notice of redemption.
Upon any redemption of less than all Notes, the Company
and the Trustee may treat as outstanding any Notes surrendered
for conversion during the period of 15 days next preceding the
mailing of a notice of redemption and need not treat as
outstanding any Note authenticated and delivered during such
period in exchange for the unconverted portion of any Note
converted in part during such period.
<PAGE> 28
22
SECTION 3.3 PAYMENT OF NOTES CALLED FOR REDEMPTION.
If notice of redemption has been given as above provided, the
Notes or portion of Notes with respect to which such notice has
been given shall, unless converted into Common Stock pursuant to
the terms hereof, become due and payable on the date and at the
place or places stated in such notice at the applicable
redemption price, together with interest thereon accrued to the
date fixed for redemption, and on and after said date (unless the
Company shall default in the payment of such Notes at the
redemption price, together with interest thereon accrued to said
date), interest on the Notes or portion of Notes so called for
redemption shall cease to accrue, and such Notes shall cease
after the close of business on the Business Day next preceding
the date fixed for redemption to be convertible into Common Stock
and, except as provided in Sections 8.5 and 13.4, to be entitled
to any benefit or security under this Indenture, and the holders
thereof shall have no right in respect of such Notes except the
right to receive the redemption price thereof and unpaid interest
thereon to the date fixed for redemption. On presentation and
surrender of such Notes at a place of payment in said notice
specified, the said Notes or the specified portions thereof shall
be paid and redeemed by the Company at the applicable redemption
price, together with interest accrued thereon to the date fixed
for redemption; PROVIDED that any semi-annual payment of interest
becoming due on the date fixed for redemption shall be payable to
the holders of such Notes registered as such on the relevant
record date subject to the terms and provisions of Section 2.3
hereof.
Upon presentation of any Note redeemed in part only,
the Company shall execute and the Trustee shall authenticate and
deliver to the holder thereof, at the expense of the Company, a
new Note or Notes, of authorized denominations, in principal
amount equal to the unredeemed portion of the Notes so presented.
Notwithstanding the foregoing, the Trustee shall not
redeem any Notes or mail any notice of optional redemption during
the continuance of a default in payment of interest or premium on
the Notes or of any Event of Default of which, in the case of any
Event of Default other than under Section 7.1(a) or (b), a
Responsible Officer of the Trustee has knowledge. If any Note
called for redemption shall not be so paid upon surrender thereof
for redemption, the principal and premium, if any, shall, until
paid or duly provided for, bear interest from the date fixed for
redemption at the rate borne by the Note and such Note shall
remain convertible into Common Stock until the principal and
premium, if any, shall have been paid or duly provided for.
Section 3.4 CONVERSION ARRANGEMENT ON CALL FOR
REDEMPTION. In connection with any redemption of Notes, the
Company may arrange for the purchase and conversion of any Notes
by an agreement with one or more investment bankers or other
purchasers to purchase such Notes by paying to the Trustee in
trust for the Noteholders, on or before the date fixed for
<PAGE> 29
23
redemption, an amount not less than the applicable redemption
price, together with interest accrued to the date fixed for
redemption, of such Notes. Notwithstanding anything to the
contrary contained in this Article III, the obligation of the
Company to pay the redemption price of such Notes, together with
interest accrued to the date fixed for redemption, shall be
deemed to be satisfied and discharged to the extent such amount
is so paid by such purchasers. If such an agreement is entered
into, a copy of which will be filed with the Trustee prior to the
date fixed for redemption, any Notes not duly surrendered for
conversion by the holders thereof may, at the option of the
Company, be deemed, to the fullest extent permitted by law,
acquired by such purchasers from such holders and
(notwithstanding anything to the contrary contained in Article
XV) surrendered by such purchasers for conversion, all as of
immediately prior to the close of business on the date fixed for
redemption (and the right to convert any such Notes shall be
deemed to have been extended through such time), subject to
payment of the above amount as aforesaid. At the direction of
the Company, the Trustee shall hold and dispose of any such
amount paid to it in the same manner as it would monies deposited
with it by the Company for the redemption of Notes. Without the
Trustee's prior written consent, no arrangement between the
Company and such purchasers for the purchase and conversion of
any Notes shall increase or otherwise affect any of the powers,
duties, responsibilities or obligations of the Trustee as set
forth in this Indenture, and the Company agrees to indemnify the
Trustee from, and hold it harmless against, any loss, liability
or expense arising out of or in connection with any such
arrangement for the purchase and conversion of any Notes between
the Company and such purchasers including the costs and expenses
incurred by the Trustee in the defense of any claim or liability
arising out of or in connection with the exercise or performance
of any of its powers, duties, responsibilities or obligations
under this Indenture.
Section 3.5. PURCHASE OF NOTES UPON A CHANGE OF CONTROL.
(a) If a Change of Control shall occur at any time,
then each holder of Notes shall have the right to require that
the Company purchase such holder's Notes in whole or in part in
integral multiples of $1,000 at a purchase price (the "Change of
Control Purchase Price") in cash in an amount equal to 101% of
the principal amount of such Notes, plus accrued and unpaid
interest thereon, if any, to the repurchase date (the "Change of
Control Purchase Date") pursuant to the offer described below
(the "Change of Control Offer") and in accordance with the other
procedures set forth in this Indenture.
(b) Within 30 days following any Change of Control,
the Company shall notify the Trustee thereof and give written
notice of such Change of Control to each holder of Notes, by
first-class mail, postage prepaid, at his address appearing in
<PAGE> 30
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the Note register, stating, among other things: that a Change of
Control has occurred; the Change of Control Purchase Price and
the Change of Control Purchase Date (which shall be a business
day no earlier than 30 days nor later than 60 days from the date
such notice is mailed, or such later date as is necessary to
comply with requirements under the Exchange Act); that any Note
not tendered will continue to accrue interest and to have all of
the benefits of this Indenture; that, unless the Company defaults
in the payment of the Change of Control Purchase Price, any Notes
accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest after the Change of Control
Purchase Date; and certain other procedures that a holder of
Notes must follow to accept a Change of Control Offer or to
withdraw such acceptance.
(c) The Company will comply with the applicable tender
offer rules, including Rule 13e-4 under the Exchange Act, and any
other applicable securities laws or regulations in connection
with a Change of Control Offer.
(d) The Company will not, and will not permit any
subsidiary to, create or permit to exist or become effective any
restriction that would materially impair the ability of the
Company to make a Change of Control Offer to purchase the Notes
or, if such Change of Control Offer is made, to pay for the Notes
tendered for purchase.
ARTICLE IV
[RESERVED]
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
SECTION 5.1 PAYMENT OF PRINCIPAL, PREMIUM AND
INTEREST. The Company covenants and agrees that it will duly and
punctually pay or cause to be paid the principal of and premium,
if any, and interest on each of the Notes at the places, at the
respective times and in the manner provided herein and in the
Notes. Each installment of interest on the Notes due on any
semi-annual interest payment date may be paid by mailing checks
for the interest payable to or upon the written order of the
holders of Notes entitled thereto as they shall appear on the
Note register; PROVIDED that, with respect to any holder of Notes
with an aggregate principal amount equal to or in excess of
$5,000,000, at the request of such holder in writing to the
Trustee, interest on such holder's Notes shall be paid by wire
transfer in immediately available funds. An installment of
principal or interest shall be considered paid on the date due if
the Trustee or Paying Agent (other than the Company, a Subsidiary
of the Company or any Affiliate of any of them) holds on that
<PAGE> 31
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date money designated for and sufficient to pay the installment
of principal or interest and is not prohibited from paying such
money to the holders of the Notes pursuant to the terms of this
Indenture.
SECTION 5.2 MAINTENANCE OF OFFICE OR AGENCY. The
Company will maintain in the Borough of Manhattan, The City of
New York, an office or agency where the Notes may be surrendered
for registration of transfer or exchange or for presentation for
payment or for conversion or redemption and where notices and
demands to or upon the Company in respect of the Notes and this
Indenture may be served. The Company will give prompt written
notice to the Trustee of the location, and any change in the
location, of such office or agency not designated by the Trustee.
If at any time the Company shall fail to maintain any such office
or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may
be made or served at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or
more other offices or agencies where the Notes may be presented
or surrendered for any or all such purposes and may from time to
time rescind such designations; PROVIDED that no such designation
or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, for such purposes. The Company
will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of
any such other office or agency.
The Company hereby initially designates the Trustee as
paying agent, Note registrar and conversion agent and each of the
Corporate Trust Office of the Trustee and the office of State
Street Bank and Trust Company, N.A. in the Borough of Manhattan,
The City of New York, as one such office or agency of the Company
for the purposes set forth in the first paragraph of this Section
5.2.
So long as the Trustee is the Note registrar, the
Trustee agrees to mail, or cause to be mailed, the notices set
forth in Section 8.10(a) and the third paragraph of Section 8.11.
Section 5.3 APPOINTMENTS TO FILL VACANCIES IN
TRUSTEE'S OFFICE. The Company, whenever necessary to avoid or
fill a vacancy in the office of Trustee, will appoint, in the
manner provided in Section 8.10, a Trustee, so that there shall
at all times be a Trustee hereunder.
Section 5.4 PROVISIONS AS TO PAYING AGENT.
(a) If the Company shall appoint a paying agent other
than the Trustee, or if the Trustee shall appoint such a paying
agent, it will cause such paying agent to execute and deliver to
<PAGE> 32
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the Trustee an instrument in which such agent shall agree with
the Trustee, subject to the provisions of this Section 5.4:
(1) that it will hold all sums held by it as such
agent for the payment of the principal of, premium, if any,
or interest on the Notes (whether such sums have been paid
to it by the Company or by any other obligor on the Notes)
in trust for the benefit of the holders of the Notes;
(2) that it will give the Trustee notice of any
failure by the Company (or by any other obligor on the
Notes) to make any payment of the principal of, premium, if
any, or interest on the Notes when the same shall be due and
payable; and
(3) that at any time during the continuance of an
Event of Default, upon request of the Trustee, it will
forthwith pay to the Trustee all sums so held in trust.
The Company shall, before each due date of the
principal of, premium, if any, or interest on the Notes, deposit
with the paying agent a sum sufficient to pay such principal,
premium, if any, or interest, and (unless such paying agent is
the Trustee) the Company will promptly notify the Trustee of any
failure to take such action.
(b) If the Company shall act as its own paying agent,
it will, on or before each due date of the principal of, premium,
if any, or interest on the Notes, set aside, segregate and hold
in trust for the benefit of the holders of the Notes a sum
sufficient to pay such principal, premium, if any, or interest so
becoming due and will notify the Trustee of any failure to take
such action and of any failure by the Company (or any other
obligor under the Notes) to make any payment of the principal of,
premium, if any, or interest on the Notes when the same shall
become due and payable.
(c) Anything in this Section 5.4 to the contrary
notwithstanding, the Company may, at any time, for the purpose of
obtaining a satisfaction and discharge of this Indenture, or for
any other reason, pay or cause to be paid to the Trustee all sums
held in trust by the Company or any paying agent hereunder as
required by this Section 5.4, such sums to be held by the Trustee
upon the trusts herein contained and upon such payment by the
Company or any paying agent to the Trustee, the Company or such
paying agent shall be released from all further liability with
respect to such sums.
(d) Anything in this Section 5.4 to the contrary
notwithstanding, the agreement to hold sums in trust as provided
in this Section 5.4 is subject to Sections 13.3 and 13.4.
Section 5.5 CORPORATE EXISTENCE. Subject to Article
XII, the Company will do or cause to be done all things necessary
<PAGE> 33
27
to preserve and keep in full force and effect its corporate
existence.
Section 5.6 RULE 144A INFORMATION REQUIREMENT. During
the three-year period following the original issuance date of any
Note and during the three-year period following the last date on
which the Company or an Affiliate of the Company was the owner of
any Note (or shares of Common Stock issued upon conversion of any
Note), if the Company is subject neither to Section 13 nor
Section 15(d) of the Exchange Act, the Company shall at the
written request of any holder or beneficial holder of such Note
(or shares of Common Stock issued upon conversion of Notes)
provide to such holder or beneficial holder of such Note (or
shares of Common Stock issued upon conversion of Notes) and any
prospective transferee designated by such holder or beneficial
holder of such Note (or shares of Common Stock issued upon
conversion of Notes) such information, if any, required by Rule
144A(d)(4) under the Securities Act (so long as such information
is required to permit such transfer under Rule 144A).
Section 5.7 STAY, EXTENSION AND USURY LAWS. The
Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead or in any manner
whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law or other law which would prohibit or
forgive the Company from paying all or any portion of the
principal of or interest on the Notes as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which
may affect the covenants or the performance of this Indenture;
and the Company (to the extent it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and
covenants that it will not, by resort to any such law, hinder,
delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such
power as though no such law has been enacted.
ARTICLE VI
NOTEHOLDERS' LISTS AND REPORTS BY
THE COMPANY
Section 6.1 NOTEHOLDERS' LISTS. The Company covenants
and agrees that it will furnish or cause to be furnished to the
Trustee, semi-annually, not more than 15 days after April 15 and
October 15 in each year beginning with April 15, 1996, and at
such other times as the Trustee may request in writing, within 30
days after receipt by the Company of any such request (or such
lesser time as the Trustee may reasonably request in order to
enable it to timely provide any notice to be provided by it
hereunder), a list in such form as the Trustee may reasonably
require of the names and addresses of the holders of Notes as of
a date not more than 15 days (or such other date as the Trustee
may reasonably request in order to so provide any such notices)
<PAGE> 34
28
prior to the time such information is furnished, except that no
such list need be furnished so long as the Trustee is acting as
Note registrar or co-registrar.
Section 6.2 REPORTS BY COMPANY. The Company will
deliver to the Trustee (a) as soon as available and in any event
within 90 days after the end of each fiscal year of the Company
(i) a consolidated balance sheet of the Company and its
subsidiaries as of the end of such fiscal year and the related
consolidated statements of operations, stockholders' equity and
cash flows for such fiscal year, all reported on by an
independent public accountant of nationally recognized standing
and (ii) a report containing a management's discussion and
analysis of the financial condition and results of operations and
a description of the business and properties of the Company and
(b) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year
of the Company (i) an unaudited consolidated financial report for
such quarter and (ii) a report containing a management's
discussion and analysis of the financial condition and results of
operations of the Company; PROVIDED that the foregoing shall not
be required for any fiscal year or quarter, as the case may be,
with respect to which the Company files or expects to file with
the Trustee an annual report or quarterly report, as the case may
be, pursuant to the next paragraph of this Section 6.2.
The Company shall file with the Trustee, within 15 days
after it files such annual and quarterly reports with the
Commission such annual and quarterly reports as are required to
be filed by the Company with the Commission pursuant to Section
13 or 15(d) of the Exchange Act.
ARTICLE VII
DEFAULTS AND REMEDIES
Section 7.1 EVENTS OF DEFAULT. In case one or more of
the following Events of Default (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary
or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of
any administrative or governmental body) shall have occurred and
be continuing:
(a) default in the payment of any installment of
interest upon any of the Notes as and when the same shall
become due and payable, and continuance of such default for
a period of 30 days; or
(b) default in the payment of the principal of and
premium, if any, on any of the Notes as and when the same
shall become due and payable either at maturity or in
<PAGE> 35
29
connection with any redemption, by declaration or otherwise;
or
(c) a failure on the part of the Company duly to
observe or perform any other covenants or agreements on the
part of the Company in the Notes or in this Indenture (other
than a default in the performance or breach of a covenant or
agreement which is specifically dealt with) elsewhere in
this Section 7.1, which continues for a period of 90 days
after the date on which written notice of such failure,
requiring the Company to remedy the same, shall have been
given to the Company by the Trustee, or to the Company and a
Responsible Officer of the Trustee, by the holders of at
least 25 percent in aggregate principal amount of the Notes
at the time outstanding determined in accordance with
Section 9.4; or
(d) the Company shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter
in effect, or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, or shall consent
to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or
other proceeding commenced against it or shall make a
general assignment for the benefit of creditors or shall
fail generally to pay its debts as they become due; or
(e) an involuntary case or other proceeding shall be
commenced against the Company seeking liquidation,
reorganization or other relief with respect to it or its
debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 90 consecutive
days;
then, and in each and every such case (other than an Event of
Default specified in Section 7.1(d) or (e)), unless the principal
of all of the Notes shall have already become due and payable,
either the Trustee or the holders of not less than 25% in
aggregate principal amount of the Notes then outstanding
hereunder determined in accordance with Section 9.4, by notice in
writing to the Company (and to the Trustee if given by
Noteholders), may declare the principal of, premium, if any, on
all the Notes and the interest accrued thereon to be due and
payable immediately, and upon any such declaration the same shall
become and shall be immediately due and payable, anything in this
Indenture or in the Notes contained to the contrary
notwithstanding. If an Event of Default specified in Section
<PAGE> 36
30
7.1(d) or (e) occurs and is continuing, the principal of all the
Notes and the interest accrued thereon shall be immediately due
and payable. This provision, however, is subject to the
conditions that if, at any time after the principal of the Notes
shall have been so declared due and payable, and before any
judgment or decree for the payment of the monies due shall have
been obtained or entered as hereinafter provided, the Company
shall pay or shall deposit with the Trustee a sum sufficient to
pay all matured installments of interest upon all Notes and the
principal of and premium, if any, on any and all Notes which
shall have become due otherwise than by acceleration (with
interest on overdue installments of interest (to the extent that
payment of such interest is enforceable under applicable law) and
on such principal and premium, if any, at the rate borne by the
Notes, to the date of such payment or deposit) and amounts due to
the Trustee pursuant to Section 8.6, and if any and all defaults
under this Indenture, other than the nonpayment of principal of,
premium, if any, and accrued interest on Notes which shall have
become due by acceleration, shall have been cured or waived
pursuant to Section 7.7, then and in every such case the holders
of a majority in aggregate principal amount of the Notes then
outstanding, by written notice to the Company and to the Trustee,
may waive all defaults or Events of Default and rescind and annul
such declaration and its consequences; but no such waiver or
rescission and annulment shall extend to or shall affect any
subsequent default or Event of Default, or shall impair any right
consequent thereto. The Company shall notify a Responsible
Officer of the Trustee, promptly upon becoming aware thereof, of
any Event of Default.
In case the Trustee shall have proceeded to enforce any
right under this Indenture and such proceedings shall have been
discontinued or abandoned because of such waiver or rescission
and annulment or for any other reason or shall have been
determined adversely to the Trustee, then and in every such case
the Company, the holders of Notes and the Trustee shall be
restored respectively to their several positions and rights
hereunder, and all rights, remedies and powers of the Company,
the holders of Notes and the Trustee shall continue as though no
such proceeding had been taken.
SECTION 7.2 PAYMENTS OF NOTES ON DEFAULT; SUIT
THEREFOR. The Company covenants that (a) in case default shall
be made in the payment of any installment of interest upon any of
the Notes as and when the same shall become due and payable, and
such default shall have continued for a period of 30 days, or (b)
in case default shall be made in the payment of the principal of
or premium, if any, on any of the Notes as and when the same
shall have become due and payable, whether at maturity of the
Notes or in connection with any redemption, by declaration or
otherwise, then, upon demand of the Trustee, the Company will pay
to the Trustee, for the benefit of the holders of the Notes, the
whole amount that then shall have become due and payable on all
such Notes for principal premium, if any, or interest, or both,
<PAGE> 37
31
as the case may be, with interest upon the overdue principal,
premium, if any, and (to the extent that payment of such interest
is enforceable under applicable law) upon the overdue
installments of interest at the rate borne by the Notes; and, in
addition thereto, such further amount as shall be sufficient to
cover the costs and expenses of collection, including reasonable
compensation to the Trustee, its agents, attorneys and counsel,
and any expenses or liabilities incurred by the Trustee hereunder
other than through its negligence or bad faith. Until such
demand by the Trustee, the Company may pay the principal of and
premium, if any, and interest on the Notes to the registered
holders, whether or not the Notes are overdue.
In case the Company shall fail forthwith to pay such
amounts upon such demand, the Trustee, in its own name and as
trustee of an express trust, shall be entitled and empowered to
institute any actions or proceedings at law or in equity for the
collection of the sums so due and unpaid and may prosecute any
such action or proceeding to judgment or final decree, and may
enforce any such judgment or final decree against the Company or
any other obligor on the Notes and collect in the manner provided
by law out of the property of the Company or any other obligor on
the Notes wherever situated the monies adjudged or decreed to be
payable.
In the case there shall be pending proceedings for the
bankruptcy or for the reorganization of the Company or any other
obligor on the Notes under Title 11 of the United States Code or
any other applicable law, or in case a receiver, assignee or
trustee in bankruptcy or reorganization, liquidator, sequestrator
or similar official shall have been appointed for or taken
possession of the Company or such other obligor, the property of
the Company or such other obligor, or in the case of any other
judicial proceedings relative to the Company or such other
obligor upon the Notes, or to the creditors or property of the
Company or such other obligor, the Trustee, irrespective of
whether the principal of the Notes shall then be due and payable
as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand
pursuant to the provisions of this Section 7.2, shall be entitled
and empowered, by intervention in such proceedings or otherwise,
to file and prove a claim or claims for the whole amount of
principal, premium, if any, and interest owing and unpaid in
respect of the Notes and, in case of any judicial proceedings, to
file such proofs of claim and other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee
and of the Noteholders allowed in such judicial proceedings
relative to the Company or any other obligor on the Notes, its or
their creditors, or its or their property and to collect and
receive any monies or other property payable or deliverable on
any such claims and to distribute the same after the deduction of
any amounts due the Trustee under Section 8.6; and any receiver,
assignee or trustee in bankruptcy or reorganization, liquidator,
custodian or similar official is hereby authorized by each of the
<PAGE> 38
32
Noteholders to make such payments to the Trustee and, in the
event that the Trustee shall consent to the making of such
payments directly to the Noteholders, to pay to the Trustee any
amount due it for reasonable compensation, expenses, advances and
disbursements, including counsel fees incurred by it up to the
date of such distribution. To the extent that such payment of
reasonable compensation, expenses, advances and disbursements out
of the estate in any such proceedings shall be denied for any
reason, payment of the same shall be secured by a lien on, and
shall be paid out of, any and all distributions, dividends,
monies, securities and other property which the holders of the
Notes may be entitled to receive in such proceedings, whether in
liquidation or under any plan of reorganization or arrangement or
otherwise.
Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or adopt on behalf of any
Noteholder any plan of reorganization or arrangement affecting
the Notes or the rights of any Noteholder, or to authorize the
Trustee to vote in respect of the claim of any Noteholder in any
such proceeding.
All rights of action and of asserting claims under this
Indenture, or under any of the Notes, may be enforced by the
Trustee without the possession of any of the Notes or the
production thereof on any trial or other proceeding relative
thereto, and any such suit or proceeding instituted by the
Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment shall, after provision for
the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel, be for the ratable benefit of the holders of the Notes.
In any proceedings brought by the Trustee (and in any
proceedings involving the interpretation of any provision of this
Indenture to which the Trustee shall be a party), the Trustee
shall be held to represent all the holders of the Notes, and it
shall not be necessary to make any holders of the Notes parties
to any such proceedings.
Section 7.3 APPLICATION OF MONIES COLLECTED BY
TRUSTEE. Any monies collected by the Trustee pursuant to this
Article VII shall be applied in the order following, at the date
or dates fixed by the Trustee for the distribution of such
monies, upon presentation of the several Notes and stamping
thereon the payment, if only partially paid, and upon surrender
thereof, if fully paid:
First: To the payment of all amounts due the Trustee
under Section 8.6;
Second: Subject to the provisions of Article IV, in
case the principal of the outstanding Notes shall not have
become due and be unpaid, to the payment of interest on the
<PAGE> 39
33
Notes in default in the order of the maturity of the
installments of such interest, with interest (to the extent
that such interest has been collected by the Trustee) upon
the overdue installments of interest at the rate borne by
the Notes, such payments to be made ratably to the persons
entitled thereto; and
Third: Subject to the provisions of Article IV, in
case the principal of the outstanding Notes shall have
become due, by declaration or otherwise, and be unpaid, to
the payment of the whole amount then holding and unpaid upon
the Notes for principal, premium, if any, and interest, with
interest on the overdue principal and premium, if any, and
(to the extent that such interest has been collected by the
Trustee) upon overdue installments of interest at the rate
borne by the Notes; and in case such monies shall be
insufficient to pay in full the whole amounts so due and
unpaid upon the Notes, then to the payment of such
principal, premium, if any, and interest without preference
or priority of principal and premium, if any, over interest,
or of interest over principal and premium, if any, or of any
installment of interest over any other installment of
interest, or of any Note over any other Note, ratably to the
aggregate of such principal and premium, if any, and accrued
and unpaid interest.
Section 7.4 PROCEEDINGS BY NOTEHOLDER. No holder of
any Note shall have any right by virtue of or by availing of any
provision of this Indenture to institute any suit, action or
proceeding in equity or at law upon or under or with respect to
this Indenture, or for the appointment of a receiver, trustee,
liquidator, custodian or other similar official, or for any other
remedy hereunder, unless such holder previously shall have given
to the Trustee written notice of an Event of Default and of the
continuance thereof, as hereinbefore provided, and unless also
the holders of not less than 25 percent in aggregate principal
amount of the Notes then outstanding shall have made written
request upon the Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder and shall have
offered to the Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee for 60 days after
its receipt of such notice, request and offer of indemnity, shall
have neglected or refused to institute any such action, suit or
proceeding, and no direction inconsistent with such written
request shall have been given to the Trustee pursuant to Section
7.7; it being understood and intended, and being expressly
covenanted by the taker and holder of every Note with every other
taker and holder and the Trustee, that no one or more holders of
Notes shall have any right in any manner whatever by virtue of or
by availing of any provision of this Indenture to affect, disturb
or prejudice the rights of any other holder of Notes, to obtain
or seek to obtain priority over or preference to any other such
holder or to enforce any right under this Indenture, except in
<PAGE> 40
34
the manner herein provided and for the equal, ratable and common
benefit of all holders of Notes (except as otherwise provided
herein). For the protection and enforcement of this Section 7.4,
each and every Noteholder and the Trustee shall be entitled to
such relief as can be given either at law or in equity.
Notwithstanding any other provision of this Indenture
and any provision of any Note, the right of any holder of any
Note to receive payment of the principal of, premium, if any, and
interest on such Note, on or after the respective due dates
expressed in such Note, or to institute suit for the enforcement
of any such payment on or after such respective dates against the
Company shall not be impaired or affected without the consent of
such holder.
Anything in this Indenture or the Notes to the contrary
notwithstanding, the holder of any Note, without the consent of
either the Trustee or the holder of any other Note, in his own
behalf and for his own benefit, may enforce, and may institute
and maintain any proceeding suitable to enforce, his rights of
conversion as provided herein.
Section 7.5 PROCEEDINGS BY TRUSTEE. In case of an
Event of Default, the Trustee may in its discretion proceed to
protect and enforce the rights vested in it by this Indenture by
such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either
by suit in equity or by action at law or by proceeding in
bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Indenture or in aid
of the exercise of any power granted in this Indenture or to
enforce any other legal or equitable right vested in the Trustee
by this Indenture or by law.
Section 7.6 REMEDIES CUMULATIVE AND CONTINUING.
Except as provided in Section 2.6, all powers and remedies given
by this Article VII to the Trustee or to the Noteholders shall,
to the extent permitted by law, be deemed cumulative and not
exclusive of such powers and remedies or of any other powers and
remedies available to the Trustee or the holders of the Notes, by
judicial proceedings or otherwise, to enforce the performance or
observance of the covenants and agreements contained in this
Indenture, and no delay or omission of the Trustee or of any
holder of any of the Notes to exercise any right or power
accruing upon any default or Event of Default occurring and
continuing as aforesaid shall impair any such right or power or
shall be construed to be a waiver of any such default or any
acquiescence therein; and, subject to the provisions of Section
7.4, every power and remedy given by this Article VII or by law
to the Trustee or to the Noteholders may be exercised from time
to time, and as often as shall be deemed expedient, by the
Trustee or by the Noteholders.
<PAGE> 41
35
Section 7.7 DIRECTION OF PROCEEDINGS AND WAIVER OF
DEFAULTS BY MAJORITY OF NOTEHOLDERS. The holders of a majority
in aggregate principal amount of the Notes at the time
outstanding (determined in accordance with Section 9.4) shall
have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee; PROVIDED,
HOWEVER, that (a) such direction shall not be in conflict with
any rule of law or with this Indenture and (b) the Trustee may
take any other action deemed proper by the Trustee which is not
inconsistent with such direction. The holders of a majority in
aggregate principal amount of the Notes at the time outstanding
(determined in accordance with Section 9.4) may on behalf of the
holders of all of the Notes waive any past default or Event of
Default hereunder and its consequences except (i) a default in
the payment of interest or premium, if any, on, or the principal
of, the Notes, (ii) a failure by the Company to convert any Notes
into Common Stock or (iii) a default in respect of a covenant or
provisions hereof which under Article XI cannot be modified or
amended without the consent of the holders of all Notes then
outstanding. Upon any such waiver, the Company, the Trustee and
the holders of the Notes shall be restored to their former
positions and rights hereunder; but no such waiver shall extend
to any subsequent or other default or Event of Default or impair
any right consequent thereon. Whenever any default or Event of
Default hereunder shall have been waived as permitted by this
Section 7.7, said default or Event of Default shall for all
purposes of the Notes and this Indenture be deemed to have been
cured and to be not continuing; but no such waiver shall extend
to any subsequent or other default or Event of Default or impair
any right consequent thereon.
Section 7.8 NOTICE OF DEFAULTS. The Trustee shall,
within 90 days after the occurrence of a default, mail to all
Noteholders, as the names and addresses of such holders appear
upon the registry books of the Company, notice of all defaults
known to a Responsible Officer, unless such defaults shall have
been cured or waived before the giving of such notice; and
PROVIDED that, except in the case of default in the payment of
the principal of, premium, if any, or interest on any of the
Notes, the Trustee shall be protected in withholding such notice
if and so long as a trust committee of directors and/or
Responsible Officers of the Trustee in good faith determine that
the withholding of such notice is in the interests of the
Noteholders.
Section 7.9 UNDERTAKING TO PAY COSTS. All parties to
this Indenture agree, and each holder of any Note by his
acceptance thereof shall be deemed to have agreed, that any court
may, in its discretion, require, in any suit for the enforcement
of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken or omitted by it as
Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit and that such court may
<PAGE> 42
36
in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having
due regard to the merits and good faith of the claims or defenses
made by such party litigant; PROVIDED that the provisions of this
Section 7.9 shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Noteholder or group of
Noteholders holding in the aggregate more than ten percent in
principal amount of the Notes at the time outstanding determined
in accordance with Section 9.4 or to any suit instituted by any
Noteholder for the enforcement of the payment of the principal
of, premium, if any, or interest on any Note on or after the due
date expressed in such Note or to any suit for the enforcement of
the right to convert any Note in accordance with the provisions
of Article XV.
ARTICLE VIII
CONCERNING THE TRUSTEE
Section 8.1 DUTIES AND RESPONSIBILITIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise the rights and powers vested in it by this
Indenture and use the same degree of care and skill in its
exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of
Default:
(1) the Trustee need perform only those duties
that are specifically set forth in this Indenture and
no others; and
(2) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions
expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the
requirements of this Indenture; PROVIDED that the
Trustee shall examine such certificates and opinions to
determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liability for
its own negligent action, its own negligent failure to act or its
own willful misconduct, except that:
(1) this paragraph (c) does not limit the effect
of paragraph (b) of this Section 8.1;
(2) the Trustee shall not be liable for any error
of judgment made in good faith by an officer of the
<PAGE> 43
37
Trustee unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect
to any action it takes or omits to take in good faith
in accordance with a direction received by it pursuant
to Section 7.7.
(d) Every provision of this Indenture that in any way
relates to the Trustee is subject to paragraphs (a), (b), (c) and
(e) of this Section 8.1.
(e) The Trustee may refuse to perform any duty or
exercise any right or power or extend or risk its own funds or
otherwise incur any financial liability unless it receives
indemnity satisfactory to it against any loss, liability or
expense.
Section 8.2 RELIANCE ON DOCUMENTS, OPINIONS, ETC.
Except as otherwise provided in Section 8.1:
(a) The Trustee may rely and shall be protected in
acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent,
order, bond, debenture, coupon or other paper or document
believed by it in good faith to be genuine and to have been
signed or presented by the proper party or parties;
(b) Any request, direction, order or demand of the
Company mentioned herein shall be sufficiently evidenced by
an Officers' Certificate (unless other evidence in respect
thereof be herein specifically prescribed); and any
resolution of the Board of Directors may be evidenced to the
Trustee by a copy thereof certified by the Secretary or an
Assistant Secretary of the Company;
(c) The Trustee may consult with counsel and any
advice or Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken
or omitted by it hereunder in good faith and in accordance
with such advice or Opinion of Counsel;
(d) The Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys, and the
Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed by
it with due care hereunder; no Depositary, Custodian or
paying agent who is not the Trustee shall be deemed an agent
of the Trustee, and the Trustee (in its capacity as Trustee)
shall not be responsible for any act or omission by any such
Depositary, Custodian or paying agent;
<PAGE> 44
38
(e) The Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by the
Indenture at the request or direction of any of the holders
pursuant to this Indenture unless such holders have offered
the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which would be incurred by
it in compliance with such request or direction.
(f) Subject to the provisions of Section 8.1(c), the
Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or
within its rights or powers;
(g) In connection with any request to transfer or
exchange any Note, the Trustee may request a direction (in
the form of an Officers' Certificate) from the Company and
an Opinion of Counsel with respect to compliance with any
restrictions on transfer or exchange imposed by this
Indenture, the Securities Act, other applicable law or the
rules and regulations of any exchange on which the Notes or
the capital stock may be traded, and the Trustee may rely
and shall be protected in acting upon such direction and in
accordance with such Officers' Certificate and Opinion of
counsel;
(h) The Trustee may rely and shall be fully protected
in acting upon the determination and notice by the Company
of the Conversion Price, including any adjustment to the
Conversion Price pursuant to Section 15.5(j); and
(i) The Trustee shall not be deemed to have knowledge
of any Event of Default or other fact or event upon the
occurrence of which it may be required to take action
hereunder unless one of its Responsible Officers has actual
knowledge thereof.
Section 8.3 NO RESPONSIBILITY FOR RECITALS, ETC. The
recitals contained herein and in the Notes (except in the
Trustee's certificate of authentication) shall be taken as the
statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same. The Trustee
makes no representations as to the validity or sufficiency of
this Indenture or of the Notes. The Trustee shall not be
accountable for the use or application by the Company of any
Notes or the proceeds of any Notes authenticated and delivered by
the Trustee in conformity with the provisions of this Indenture.
Section 8.4 TRUSTEE, PAYING AGENTS, CONVERSION AGENTS
OR REGISTRAR MAY OWN NOTES. The Trustee, any paying agent, any
conversion agent or any Note registrar, in its individual or any
other capacity, may become the owner or pledgee of Notes with the
same rights it would have if it were not Trustee, paying agent,
conversion agent or Note registrar.
<PAGE> 45
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Section 8.5 MONIES TO BE HELD IN TRUST. Subject to
the provisions of Section 13.4, all monies received by the
Trustee shall, until used or applied as herein provided, be held
in trust for the purposes for which they were received. Money
held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The
Trustee shall be under no liability for interest on any money
received by it hereunder except as may be agreed in writing from
time to time by the Company and the Trustee.
Section 8.6 COMPENSATION AND EXPENSES OF TRUSTEE. The
Company covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to, reasonable
compensation for all services rendered by it hereunder in any
capacity (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust), and
the Company will pay or reimburse the Trustee upon its request
for all reasonable expenses, disbursements and advances incurred
or made by the Trustee in accordance with any of the provisions
of this Indenture (including the reasonable compensation and the
expenses and disbursements of its counsel and of all persons not
regularly in its employ) except any such expense, disbursement or
advance as may arise from its negligence or bad faith. The
Company also covenants to indemnify the Trustee in any capacity
under this Indenture and its agents and any authenticating agent
for, and to hold them harmless against, any loss, liability or
expense incurred without negligence or bad faith on the part of
the Trustee or such agent or authenticating agent, as the case
may be, and arising out of or in connection with the acceptance
or administration of this trust or in any other capacity
hereunder, including the costs and expenses of defending
themselves against any claim of liability in the premises. The
obligations of the Company under this Section 8.6 to compensate
or indemnify the Trustee and to pay or reimburse the Trustee for
expenses, disbursements and advances shall be secured by a lien
prior to that of the Notes upon all property and funds held or
collected by the Trustee as such, except funds held in trust for
the benefit of the holders of particular Notes. The obligation
of the Company under this Section shall survive the satisfaction
and discharge of this Indenture.
Section 8.7 OFFICERS' CERTIFICATE AS EVIDENCE. Except
as otherwise provided in Section 8.1, whenever in the
administration of the provisions of this Indenture the Trustee
shall deem it necessary or desirable that a matter be proved or
established prior to taking or omitting any action hereunder,
such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or bad
faith on the part of the Trustee, be deemed to be conclusively
proved and established by an Officers' Certificate delivered to
the Trustee, and such Officers' Certificate, in the absence of
negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken or omitted by it
under the provisions of this Indenture upon the faith thereof.
<PAGE> 46
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Section 8.8 CONFLICTING INTERESTS OF TRUSTEE. In the
event that the Trust Indenture Act is applicable hereto, the
Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act and there exists an Event of
Default hereunder (exclusive of any period of grace or
requirement of notice), the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and
this Indenture.
Section 8.9 ELIGIBILITY OF TRUSTEE. There shall at
all times be a Trustee hereunder which shall be a person that is
eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $50,000,000. If
such person publishes reports of condition at least annually,
pursuant to law or to the requirements of any supervising or
examining authority, then for the purposes of this Section, the
combined capital and surplus of such person shall be deemed to be
its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of
this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article VIII.
Section 8.10 RESIGNATION OR REMOVAL OF TRUSTEE. (a)
The Trustee may at any time resign by giving written notice of
such resignation to the Company; and the Company shall mail, or
cause to be mailed, notice thereof to the holders of Notes at
their addresses as they shall appear on the registry books of the
Company. Upon receiving such notice of resignation, the Company
shall promptly appoint a successor trustee by written instrument,
in duplicate, executed by order of the Board of Directors, one
copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor trustee. If no successor
trustee have been so appointed and have accepted appointment 60
days after the mailing of such notice of resignation to the
Noteholders, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor
trustee, or any Noteholder who has been a bona fide holder of a
Note or Notes for at least six months may, subject to the
provisions of Section 7.9, on behalf of himself and all others
similarly situated, petition any such court for the appointment
of a successor trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe, appoint a
successor trustee.
(b) In case at any time any of the following shall
occur:
(1) the Trustee shall fail to comply with Section 8.8
after written request therefor by the Company or by any
Noteholder who has been a bona fide holder of a Note or
Notes for at least six months; or
<PAGE> 47
41
(2) the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.9 and shall fail
to resign after written request therefor by the Company or
by any such Noteholder; or
(3) the Trustee shall become incapable of acting, or
shall be adjudged a bankrupt or insolvent, or a receiver of
the Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Trustee
or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, the Company may remove the Trustee and
appoint a successor trustee by written instrument, in duplicate,
executed by order of the Board of Directors, one copy of which
instrument shall be delivered to the Trustee so removed and one
copy to the successor trustee or, subject to the provisions of
Section 7.9, any Noteholder who has been a bona fide holder of a
Note or Notes for at least six months may, on behalf of himself
and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the
appointment of a successor trustee. Such court may thereupon,
after such notice, if any, as it may deem proper and prescribe,
remove the Trustee and appoint a successor trustee.
(c) The holders of a majority in aggregate principal
amount of the Notes at the time outstanding may at any time
remove the Trustee and nominate a successor trustee which shall
be deemed appointed as successor trustee unless within ten days
after notice to the Company of such nomination the Company
objects thereto, in which case the Trustee so removed or any
Noteholder, upon the terms and conditions and otherwise as in
Section 8.10(a) provided, may petition any court of competent
jurisdiction for an appointment of a successor trustee.
(d) Any resignation or removal of the Trustee and
appointment of a successor trustee pursuant to any of the
provisions of this Section 8.10 shall become effective upon
acceptance of appointment by the successor trustee as provided in
Section 8.11.
Section 8.11 ACCEPTANCE BY SUCCESSOR TRUSTEE. Any
successor trustee appointed as provided in Section 8.10 shall
execute, acknowledge and deliver to the Company and to its
predecessor trustee an instrument accepting such appointment
hereunder, and thereupon, the resignation or removal of the
predecessor trustee shall become effective and such successor
trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, duties and obligations
of its predecessor hereunder, with like effect as if originally
named as trustee herein; but, nevertheless, on the written
request of the Company or of the successor trustee, the Trustee
ceasing to act shall, upon payment of any amounts then due it
pursuant to the provisions of Section 8.6, execute and deliver an
<PAGE> 48
42
instrument transferring to such successor trustee all the rights
and powers of the Trustee so ceasing to act. Upon request of any
such successor trustee, the Company shall execute any and all
instruments in writing for more fully and certainly vesting in
and confirming to such successor trustee all such rights and
powers. Any Trustee ceasing to act shall, nevertheless, retain a
lien upon all property and funds held or collected by such
trustee as such, except for funds held in trust for the benefit
of holders of particular Notes, to secure any amounts then due it
pursuant to the provisions of Section 8.6.
No successor trustee shall accept appointment as
provided in this Section 8.11 unless at the time of such
acceptance such successor trustee shall be qualified under the
provisions of Section 8.8 and eligible under the provisions of
Section 8.9.
Upon acceptance of appointment by a successor trustee
as provided in this Section 8.11, the Company shall mail or cause
to be mailed notice of the succession of such Trustee hereunder
to the holders of Notes at their addresses as they shall appear
on the registry books of the Company. If the Company fails to
mail such notice within ten days after acceptance of appointment
by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Company.
Section 8.12 SUCCESSOR, BY MERGER, ETC. Any
corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee
shall be a party, or any corporation succeeding to all or
substantially all of the corporate trust business of the Trustee,
shall be the successor to the Trustee hereunder, provided such
corporation shall be qualified under the provisions of Section
8.8 and eligible under the provisions of Section 8.9 without the
execution or filing of any paper or any further act on the part
of any of the parties hereto.
Section 8.13 LIMITATION ON RIGHTS OF TRUSTEE AS
CREDITOR. If and when the Trustee shall be or become a creditor
of the Company (or any other obligor upon the Notes) and the
Trust Indenture Act is applicable hereto, the Trustee shall be
subject to the provisions of the Trust Indenture Act regarding
the collection of the claims against the Company (or any such
other obligor).
ARTICLE IX
CONCERNING THE NOTEHOLDERS
Section 9.1 ACTION BY NOTEHOLDERS. Whenever in this
Indenture it is provided that the holders of a specified
percentage in aggregate principal amount of the Notes may take
<PAGE> 49
43
any action (including the making of any demand or request, the
giving of any notice, consent or waiver or the taking of any
other action), the fact that at the time of taking any such
action, the holders of such specified percentage have joined
therein may be evidenced (a) by any instrument or any number of
instruments of similar tenor executed by Noteholders in person or
by agent or proxy appointed in writing (b) by the record of the
holders of Notes voting in favor thereof at any meeting of
Noteholders duly called and held in accordance with the
provisions of Article X or (c) by a combination of such
instrument or instruments and any such record of such a meeting
of Noteholders. Whenever the Company or the Trustee solicits the
taking of any action by the holders of the Notes, the Company or
the Trustee may fix in advance of such solicitation, a date as
the record date for determining holders entitled to take such
action. The record date shall be not more than 15 days prior to
the date of commencement of solicitation of such action.
Section 9.2 PROOF OF EXECUTION BY NOTEHOLDERS.
Subject to the provisions of Sections 8.1, 8.2 and 11.5, proof of
the execution of any instrument by a Noteholder or his agent or
proxy shall be sufficient if made in accordance with such
reasonable rules and regulations as may be prescribed by the
Trustee or in such manner as shall be satisfactory to the
Trustee. The holding of Notes shall be proved by the Note
register or by a certificate of the Note registrar.
The record of any Noteholders' meeting shall be proved
in the manner provided in Section 9.1.
Section 9.3 WHO ARE DEEMED ABSOLUTE OWNERS. The
Company, the Trustee, any paying agent, any conversion agent and
any Note registrar may deem the person in whose name such Note
shall be registered upon the books of the Company to be, and may
treat him as, the absolute owner of such Note (whether or not
such Note shall be overdue and notwithstanding any notation of
ownership or other writing thereon) for the purpose of receiving
payment of or on account of the principal of, premium, if any,
and interest on such Note, for conversion of such Note and for
all other purposes; and neither the Company nor the Trustee nor
any paying agent nor any conversion agent nor any Note registrar
shall be affected by any notice to the contrary. All such
payments so made to any holder for the time being, or upon his
order, shall be valid and, to the extent of the sum or sums so
paid, effectual to satisfy and discharge the liability for monies
payable upon any such Note.
The Depositary shall be deemed to be the owner of any
Note in global form for all purposes, including receipt of
notices to Noteholders and payment of principal of, premium, if
any, and interest on the Notes. None of the Company, the Trustee
(in its capacity as Trustee), any paying agent or the Note
registrar (or co-registrar) will have any responsibility for any
aspect of the records relating to or payments made on account of
<PAGE> 50
44
beneficial interests of a Note in global form or for maintaining,
supervising or reviewing any records relating to such beneficial
ownership interests; PROVIDED, HOWEVER, that the foregoing shall
not apply to the Trustee or any other person acting in its
capacity as Custodian.
Section 9.4 COMPANY-OWNED NOTES DISREGARDED. In
determining whether the holders of the requisite aggregate
principal amount of Notes have concurred in any direction,
consent, waiver or other action under this Indenture, Notes which
are owned by the Company or any other obligor on the Notes or by
any person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company or any
other obligor on the Notes shall be disregarded and deemed not to
be outstanding for the purpose of any such determination;
PROVIDED that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, consent,
waiver or other action, only Notes which a Responsible Officer
knows are so owned shall be so disregarded. Notes so owned which
have been pledged in good faith may be regarded as outstanding
for the purposes of this Section 9.4 if the pledgee shall
establish to the satisfaction of the Trustee the pledgers right
to vote such Notes and that the pledgee is not the Company, any
other obligor on the Notes or a person directly or indirectly
controlling or controlled by or under direct or indirect common
control with the Company or any such other obligor. In the case
of a dispute as to such right, any decision by the Trustee taken
upon the advice of counsel shall be full protection to the
Trustee. Upon request of the Trustee, the Company shall furnish
to the Trustee promptly an Officers' Certificate listing and
identifying all Notes, if any, known by the Company to be owned
or held by or for the account of any of the above described
persons; and subject to Section 8.1, the Trustee shall be
entitled to accept such Officers' Certificate as conclusive
evidence of the facts therein set forth and of the fact that all
Notes not listed therein are outstanding for the purpose of any
such determination.
Section 9.5 REVOCATION OF CONSENTS, FUTURE HOLDERS
BOUND. At any time prior to (but not after) the evidencing to
the Trustee, as provided in Section 9.1, of the taking of any
action by the holders of the percentage in aggregate principal
amount of the Notes specified in this Indenture in connection
with such action, any holder of a Note which is shown by the
evidence to be included in the Notes the holders of which have
consented to such action may, by filing written notice with the
Trustee at its Corporate Trust Office and upon proof of holding
as provided in Section 9.2, revoke such action so far as concerns
such Note. Except as aforesaid, any such action taken by the
holder of any Note shall be conclusive and binding upon such
holder and upon all future holders and owners of such Note and of
any Notes issued in exchange or substitution therefor,
irrespective of whether any notation in regard thereto is made
<PAGE> 51
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upon such Note or any Note issued in exchange or substitution
therefor.
ARTICLE X
NOTEHOLDERS MEETINGS
SECTION 10.1. PURPOSES FOR WHICH MEETINGS MAY BE
CALLED. A meeting of Noteholders may be called at any time and
from time to time pursuant to the provisions of this Article X
for any of the following purposes:
(i) to give any notice to the Company or to the
Trustee, or to give any directions to the Trustee, or to
consent to the waiving of any default hereunder and its
consequences, or to take any other action authorized to be
taken by Noteholders pursuant to any of the provisions of
Article VII;
(ii) to remove the Trustee and appoint a successor
trustee pursuant to the provisions of Article VIII;
(iii) to consent to the execution of an indenture or
indentures supplemental hereto pursuant to the provisions of
Section 11.2; or
(iv) to take any other action authorized to be taken by
or on behalf of the holders of any specified aggregate
principal amount of the Notes under any other provisions of
this Indenture or under applicable law.
SECTION 10.2. MANNER OF CALLING MEETINGS; RECORD DATE.
The Trustee may at any time call a meeting of Noteholders to take
any action specified in Section 10.1, to be held at such time and
at such place in the City of Boston, Commonwealth of
Massachusetts, as the Trustee shall determine. Notice of every
meeting of the Noteholders, setting forth the time and the place
of such meeting and in general terms the action proposed to be
taken at such meeting, shall be mailed not less than 30 nor more
than 60 days prior to the date fixed for the meeting to such
Noteholders at their addresses as such addresses appear in the
Note Register. For the purpose of determining Noteholders
entitled to notice of any meeting of Noteholders, the Trustee
shall fix in advance a date as the record date for such
determination, such date to be a business day not more than ten
days prior to the date of the mailing of such notice as
hereinabove provided. Only persons in whose name any Note shall
be registered in the Note Register at the close of business on a
record date fixed by the Trustee as aforesaid, or by the Company
or the Noteholders as in Section 10.3 provided, shall be entitled
to notice of the meeting of Noteholders with respect to which
such record date was so fixed.
<PAGE> 52
46
SECTION 10.3. CALL OF MEETING BY COMPANY OR
NOTEHOLDERS. In case at any time the Company, pursuant to a
resolution of its Board of Directors or the holders of at least
ten percent in aggregate principal amount of the Notes then
outstanding, shall have requested the Trustee to call a meeting
of Noteholders to take any action authorized in Section 10.1 by
written request setting forth in reasonable detail the action
proposed to be taken at the meeting, and the Trustee shall not
have mailed notice of such meeting within 20 days after receipt
of such request, then the Company or the holders of Notes in the
amount above specified, as the case may be, may fix the record
date with respect to, and determine the time and the place in
said City of Boston for, such meeting and may call such meeting
to take any action authorized in Section 10.1, by mailing notice
thereof as provided in Section 10.2. The record date fixed as
provided in the preceding sentence shall be set forth in a
written notice to the Trustee and shall be a business day not
less than 15 nor more than 20 days after the date on which such
notice is sent to the Trustee.
SECTION 10.4. WHO MAY ATTEND AND VOTE AT MEETINGS.
Only persons entitled to receive notice of a meeting of
Noteholders and their respective proxies duly appointed by an
instrument in writing shall be entitled to vote at such meeting.
The only persons who shall be entitled to be present or to speak
at any meeting of Noteholders shall be the persons entitled to
vote at such meeting and their counsel and any representatives of
the Trustee and its counsel and any representatives of the
Company and its counsel. When a determination of Noteholders
entitled to vote at any meeting of Noteholders has been made as
provided in this Section, such determination shall apply to any
adjournments thereof.
SECTION 10.5. MANNER OF VOTING AT MEETINGS AND RECORD
TO BE KEPT. The vote upon any resolution submitted to any
meeting of Noteholders shall be by written ballots on each of
which shall be subscribed the signature of the Noteholder or
proxy casting such ballot and the identifying number or numbers
of the Notes held or represented in respect of which such ballot
is cast. The permanent chairman of the meeting shall appoint two
inspectors of votes who shall count all votes cast at the meeting
for or against any resolution and who shall make and file with
the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record in
duplicate of the proceedings of each meeting of Noteholders shall
be prepared by the secretary of the meeting and there shall be
attached to said record the original reports of the inspectors of
votes on any vote by ballot taken thereat and affidavits by one
or more persons having knowledge of the facts setting forth a
copy of the notice of the meeting and showing that said notice
was mailed as provided in Section 10.2. The record shall show
the identifying numbers of the Notes voting in favor of or
against any resolution. Each counterpart of such record shall be
signed and verified by the affidavits of the permanent chairman
<PAGE> 53
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and secretary of the meeting and one of the counterparts shall be
delivered to the Company and the other to the Trustee to be
preserved by the Trustee.
Any counterpart record so signed and verified shall be
conclusive evidence of the matters therein stated and shall be
the record referred to in clause (b) of Section 9.1.
SECTION 10.6. EXERCISE OF RIGHTS OF TRUSTEE AND
NOTEHOLDERS NOT TO BE HINDERED OR DELAYED. Nothing in this
Article X contained shall be deemed or construed to authorize or
permit, by reason of any call of a meeting of Noteholders or any
rights expressly or impliedly conferred hereunder to make such
call, any hinderance or delay in the exercise of any right or
rights conferred upon or reserved to the Trustee or to the
Noteholders under any of the provisions of this Indenture or of
the Notes.
ARTICLE XI
SUPPLEMENTAL INDENTURES
Section 11.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT
OF NOTEHOLDERS. The Company, when authorized by a Board
Resolution, and the Trustee may from time to time and at any time
enter into an indenture or indentures supplemental hereto for one
or more of the following purposes:
(a) to make provision with respect to the conversion
rights of the holders of Notes pursuant to the requirements
of Section 15.6;
(b) subject to Article IV, to convey, transfer,
assign, mortgage or pledge to the Trustee as security for
the Notes, any property or assets;
(c) to evidence the succession of another person to
the Company, or successive successions, and the assumption
by the Successor Company of the covenants, agreements and
obligations of the Company pursuant to Article XII;
(d) to add to the covenants of the Company such
further covenants, restrictions or conditions as the Board
of Directors and the Trustee shall consider to be for the
benefit of the holders of Notes and to make the occurrence,
or the occurrence and continuance, of a default in any such
additional covenants, restrictions or conditions a default
or an Event of Default permitting the enforcement of all or
any of the several remedies provided in this Indenture as
herein set forth; PROVIDED, HOWEVER, that in respect of any
such additional covenant, restriction or condition, such
supplemental indenture may provide for a particular period
of grace after default (which period may be shorter or
longer than that allowed in the case of other defaults) or
<PAGE> 54
48
may provide for an immediate enforcement upon such default
or may limit the remedies available to the Trustee upon such
default;
(e) to provide for the issuance under this Indenture
of Notes in coupon form (including Notes registrable as to
principal only) and to provide for exchangeability of such
Notes with the Notes issued hereunder in fully registered
form and to make all appropriate changes for such purpose;
(f) to cure any ambiguity or to correct or supplement
any provision contained herein or in any supplemental
indenture which may be defective or inconsistent with any
other provision contained herein or in any supplemental
indenture, or to make such other provisions in regard to
matters or questions arising under this Indenture which
shall not materially adversely affect the interests of the
holders of the Notes;
(g) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee with respect to
the Notes;
(h) to modify, eliminate or add to the provisions of
this Indenture to such extent as shall be necessary to
effect the qualifications of this Indenture under the Trust
Indenture Act (if applicable), or under any similar federal
statute hereafter enacted (if applicable); or
(i) to modify, eliminate or add to the provisions of
this Indenture to allow for the issuance of one or more
Notes in global form, in addition to the global Note
provided for herein, representing beneficial interests in
Notes issued outside the United States in reliance on
Regulation S under the Securities Act, with such transfer
restrictions and legends as are consistent with such
Regulation, and to add provisions relating to the exchange
and transfer of beneficial interests in any Note or Notes
represented by any such global Note or Notes, any definitive
Note and any global Note referred to in Section 2.5(b)
hereof.
The Trustee is hereby authorized to join with the
Company in the execution of any such supplemental indenture, to
make any further appropriate agreements and stipulations which
may be therein contained and to accept the conveyance, transfer
and assignment of any property thereunder, but the Trustee shall
not be obligated to, but may in its discretion, enter into any
supplemental indenture which affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions
of this Section 11.1 may be executed by the Company and the
Trustee without the consent of the holders of any of the Notes at
<PAGE> 55
49
the time outstanding, notwithstanding any of the provisions of
Section 11.2.
Section 11.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF
NOTEHOLDERS. With the consent (evidenced as provided in Article
IX) of the holders of not less than a majority in aggregate
principal amount of the Notes at the time outstanding, the
Company, when authorized by a Board Resolution and the Trustee
may from time to time and at any time enter into an indenture or
indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or any supplemental indenture or of
modifying in any manner the rights of the holders of the Notes;
PROVIDED, HOWEVER, that no such supplemental indenture shall (i)
extend the fixed maturity of any Note, or reduce the rate or
extend the time of payment of interest thereon, or reduce the
principal amount thereof or premium, if any, thereon or reduce
any amount payable on redemption thereof, alter the obligation of
the Company to redeem the Notes at the option of the holder upon
the occurrence of a Change of Control or impair or affect the
right of any Noteholder to institute suit for the payment thereof
or make the principal thereof or interest or premium, if any,
thereon payable in any coin or currency other than that provided
in the Notes or impair the right to convert the Notes into Common
Stock subject to the terms set forth herein, including Section
15.6, without the consent of the holder of each Note so affected
or (ii) reduce the aforesaid percentage of Notes, the holders of
which are required to consent to any such supplemental indenture,
without the consent of the holders of all Notes then outstanding.
Upon the request of the Company, accompanied by a copy
of a Board Resolution certified by its Secretary or Assistant
Secretary authorizing the execution of any such supplemental
indenture, and upon the filing with the Trustee of evidence of
the consent of Noteholders as aforesaid, the Trustee shall join
with the Company in the execution of such supplemental indenture
unless such supplemental indenture affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise,
in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such supplemental indenture.
It shall not be necessary for the consent of the
Noteholders under this Section 11.2 to approve the particular
form of any proposed supplemental indenture, but it shall be
sufficient if such consent shall approve the substance thereof.
Section 11.3 EFFECT OF SUPPLEMENTAL INDENTURES. Any
supplemental indenture executed pursuant to the provisions of
this Article XI shall comply with the Trust Indenture Act, as
then in effect, if such supplemental indenture is then required
to so comply. Upon the execution of any supplemental indenture
pursuant to the provisions of this Article XI, this Indenture
shall be and be deemed to be modified and amended in accordance
therewith and the respective rights, limitation of rights,
<PAGE> 56
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obligations, duties and immunities under this Indenture of the
Trustee, the Company and the holders of Notes shall thereafter be
determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments and all the terms
and conditions of any such supplemental indenture shall be and be
deemed to be part of the terms and conditions of this Indenture
for any and all purposes.
Section 11.4 NOTATION ON NOTES. Notes authenticated
and delivered after the execution of any supplemental indenture
pursuant to the provisions of this Article XI may bear a notation
in form approved by the Trustee as to any matter provided for in
such supplemental indenture. If the Company or the Trustee shall
so determine, new Notes so modified as to conform, in the opinion
of the Trustee and the Board of Directors, to any modification of
this Indenture contained in any such supplemental indenture may,
at the Company's expense, be prepared and executed by the
Company, authenticated by the Trustee (or an authenticating agent
duly appointed by the Trustee pursuant to Section 16.12) and
delivered in exchange for the Notes then outstanding, upon
surrender of such Notes then outstanding.
Section 11.5 EVIDENCE OF COMPLIANCE OF SUPPLEMENTAL
INDENTURE TO BE FURNISHED TRUSTEE. The Trustee shall be
furnished with and, subject to the provisions of Sections 8.1 and
8.2, may rely upon an Officers' Certificate and an Opinion of
Counsel as conclusive evidence that any supplemental indenture
executed pursuant hereto complies with the requirements of this
Article XI.
ARTICLE XII
CONSOLIDATION, MERGER, SALE, CONVEYANCE,
TRANSFER AND LEASE
Section 12.1 COMPANY MAY CONSOLIDATE, ETC. ON CERTAIN
TERMS. The Company shall not consolidate with or merge with or
into, or convey, transfer or lease all or substantially all of
its assets to any person unless: (i) either the Company is the
resulting, surviving or transferee person (the "Successor
Company") or the Successor Company is a person organized and
existing under the laws of the United States or any State thereof
or the District of Columbia, and the Successor Company (if not
the Company) expressly assumes by a supplemental indenture,
executed and delivered to the Trustee, in form satisfactory to
the Trustee, all the obligations of the Company under this
Indenture and the Notes, including the rights pursuant to Article
XV hereof; (ii) immediately after giving effect to such
transaction, no Event of Default has happened and is continuing;
and (iii) the Company delivers to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture
(if any) comply with this Indenture.
<PAGE> 57
51
Section 12.2 SUCCESSOR COMPANY TO BE SUBSTITUTED. In
case of any such consolidation, merger, sale, conveyance,
transfer or lease and upon the assumption by the Successor
Company, by supplemental indenture, executed and delivered to the
Trustee and satisfactory in form to the Trustee, of the due and
punctual payment of the principal of, premium, if any, and
interest on all of the Notes and the due and punctual performance
of all of the covenants and conditions of this Indenture to be
performed by the Company, such Successor Company shall succeed to
and be substituted for the Company, with the same effect as if it
had been named herein as the party of the first part. Such
Successor Company thereupon may cause to be signed, and may issue
either in its own name or in the name of SoftKey International
Inc. any or all of the Notes issuable hereunder which theretofore
shall not have been signed by the Company and delivered to the
Trustee; and, upon the order of such Successor Company instead of
the Company and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee shall
authenticate and shall deliver, or cause to be authenticated and
delivered, any Notes which previously shall have been signed and
delivered by the officers of the Company to the Trustee for
authentication, and any Notes which such Successor Company
thereafter shall cause to be signed and delivered to the Trustee
for that purpose. All the Notes so issued shall in all respects
have the same legal rank and benefit under this Indenture as the
Notes theretofore or thereafter issued in accordance with the
terms of this Indenture as though all of such Notes had been
issued at the date of the execution hereof. In the event of any
such consolidation, merger, sale, conveyance, transfer or lease,
the person named as the "Company" in the first paragraph of this
Indenture or any successor which shall thereafter have become
such in the manner prescribed in this Article XII may be
dissolved, wound up and liquidated at any time thereafter and
such person shall be released from its liabilities as obligor and
maker of the Notes and from its obligations under this Indenture.
In case of any such consolidation, merger, sale,
conveyance, transfer or lease, such changes in phraseology and
form (but not in substance) may be made in the Notes thereafter
to be issued as may be appropriate.
Section 12.3 OPINION OF COUNSEL TO BE GIVEN TRUSTEE.
The Trustee subject to Sections 8.1 and 8.2, shall receive an
Officers' Certificate and an Opinion of Counsel as conclusive
evidence that any such consolidation, merger, sale, conveyance,
transfer or lease and any such assumption complies with the
provisions of this Article XII.
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ARTICLE XIII
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS
Section 13.1 LEGAL DEFEASANCE AND COVENANT DEFEASANCE OF THE NOTES.
(a) The Company may, at its option by Board
Resolution, at any time, with respect to the Notes, elect to have
either paragraph (b) or paragraph (c) below be applied to the
outstanding Notes upon compliance with the conditions set forth
in paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of
the option applicable to this paragraph (b), the Company shall be
deemed to have been released and discharged from its obligations
with respect to the outstanding Notes on the date the conditions
set forth below are satisfied (hereinafter, "legal defeasance").
For this purpose, such legal defeasance means that the Company
shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Notes, which shall
thereafter be deemed to be "outstanding" only for the purposes of
the Sections of and matters under this Indenture referred to in
(i) and (ii) below and to have satisfied all its other
obligations under such Notes and this Indenture insofar as such
Notes are concerned, except for the following which shall survive
until otherwise terminated or discharged hereunder: (i) the
rights of holders of outstanding Notes to receive solely from the
trust fund described in paragraph (d) below and as more fully set
forth in such paragraph, payments in respect of the principal of,
premium, if any, and interest on such Notes when such payments
are due and (ii) obligations listed in Section 13.3.
(c) Upon the Company's exercise under paragraph (a) of
the option applicable to this paragraph (c), the Company shall be
released and discharged from its obligations under any covenant
contained in Article XII and in Sections 3.5 and 5.3 through 5.7
with respect to the outstanding Notes on and after the date the
conditions set forth in paragraph (d) are satisfied (hereinafter,
"covenant defeasance"), and the Notes shall thereafter be deemed
to be not "outstanding" for the purpose of any direction, waiver,
consent or declaration or act of Holders (and the consequences of
any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes
hereunder. For this purpose, such covenant defeasance means
that, with respect to the outstanding Notes, the Company may omit
to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any
reference in any such covenant to any other provision herein or
in any other document, and such omission to comply shall not
<PAGE> 59
53
constitute a Default or an Event of Default under Section 7.1(c),
but, except as specified above, the remainder of this Indenture
and such Notes shall be unaffected thereby.
(d) The following shall be the conditions to
application of either paragraph (b) or paragraph (c) above to the
outstanding Notes:
(i) The Company shall have irrevocably deposited in
trust with the Trustee, pursuant to an irrevocable trust and
security agreement in form and substance satisfactory to the
Trustee, cash or U.S. Government Obligations maturing as to
principal and interest at such times, or a combination
thereof, in such amounts as are sufficient, without
consideration of the reinvestment of such interest and after
payment of all federal, state and local taxes or other
charges or assessments in respect thereof payable by the
Trustee, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written
certification thereof (in form and substance reasonably
satisfactory to the Trustee) delivered to the Trustee, to
pay the principal of, premium, if any, and interest on the
outstanding Notes on the dates on which any such payments
are due and payable in accordance with the terms of this
Indenture and of the Notes;
(ii) (A) No Event of Default shall have occurred or be
continuing on the date of such deposit, and (B) no Default
or Event of Default under Section 7.1(d) or 7.1(e) shall
occur on or before the 123rd day after the date of such
deposit;
(iii) Such deposit will not result in a Default under
this Indenture or a breach or violation of, or constitute a
default under, any other instrument or agreement to which
the Company is a party or by which it or its property is
bound;
(iv) In the case of a legal defeasance under paragraph
(b) above, the Company has delivered to the Trustee an
Opinion of Counsel stating that (A) the Company has received
from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the date of this Indenture,
there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon
such opinion shall confirm that, the holders of the Notes
will not recognize income, gain or loss for federal income
tax purposes as a result of such deposit, defeasance and
discharge and will be subject to federal income tax on the
same amounts and in the same manner and at the same times as
would have been the case if such deposit, defeasance and
discharge had not occurred; and, in the case of a covenant
defeasance under paragraph (c) above, the Company shall
deliver to the Trustee an Officers' Certificate and an
<PAGE> 60
54
Opinion of Counsel, in form and substance reasonably
satisfactory to the Trustee, to the effect that holders of
the Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and
defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as
would have been the case if such deposit and defeasance had
not occurred;
(v) The holders shall have a perfected security
interest under applicable law in the cash or U.S. Government
Obligations deposited pursuant to Section 13(d)(i) above;
(vi) The Company shall have delivered to the Trustee an
Opinion of Counsel, in form and substance reasonably
satisfactory to the Trustee, to the effect that, after the
passage of 123 days following the deposit, the trust funds
will not be subject to any applicable bankruptcy,
insolvency, reorganization or similar law affecting
creditors' rights generally;
(vii) Such defeasance shall not cause the Trustee to
have a conflicting interest with respect to any securities
of the Company; and
(viii) The Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each
stating that all conditions precedent specified herein
relating to the defeasance contemplated by this Section 13.1
have been complied with;
PROVIDED, HOWEVER, that no deposit under clause (d)(i) above
shall be effective to terminate the obligations of the Company
under the Notes or this Indenture prior to 123 days following any
such deposit.
Section 13.2 TERMINATION OF OBLIGATIONS UPON
CANCELLATION OF THE NOTES. In addition to the Company's rights
under Section 13.1, the Company may terminate all of its
obligations under this Indenture (subject to Section 13.3) when:
(a) (i) all Notes theretofore authenticated and
delivered (other than Notes which have been destroyed, lost
or stolen and which have been replaced or paid as provided
in Section 2.6) have been delivered to the Trustee for
cancellation;
(ii) the Company has paid or caused to be paid all
other sums payable hereunder and under the Notes by the
Company; and
(iii) the Company has delivered to the Trustee an
Officers' Certificate, stating that all conditions precedent
<PAGE> 61
55
specified herein relating to the satisfaction and discharge
of this Indenture have been complied with; or
(b) (i) the Notes not previously delivered to the
Trustee for cancellation will have become due and payable or
are by their terms to become due and payable within one year
or are to be called for redemption under arrangements
satisfactory to the Trustee upon delivery of notice; (ii)
the Company will have irrevocably deposited with the
Trustee, as trust funds, cash, in an amount sufficient to
pay principal of and interest on the outstanding Notes, to
maturity or redemption, as the case may be; (iii) such
deposit will not result in a breach or violation of, or
constitute a default under, any agreement or instrument
pursuant to which the Company is a party or by which it or
its property is bound; and (iv) and the Company has
delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions related
to such defeasance have been complied with.
Section 13.3 SURVIVAL OF CERTAIN OBLIGATIONS.
Notwithstanding the satisfaction and discharge of this Indenture
and of the Notes referred to in Section 13.1 or 13.2, the
respective obligations of the Company and the Trustee under
Sections 2.3, 2.4, 2.5, 2.6, 2.8, 2.9, 5.2, 6.1, 7.4, 7.9, 8.6,
8.10, 13.5, 13.6 and 13.7 shall survive until the Notes are no
longer outstanding, and thereafter, the obligations of the
Company and the Trustee under Sections 7.9, 8.6, 13.5, 13.6 and
13.7 shall survive. Nothing contained in this Article XIII shall
abrogate any of the rights, obligations or duties of the Trustee
under this Indenture.
Section 13.4 ACKNOWLEDGMENT OF DISCHARGE BY TRUSTEE.
Subject to Section 13.7, after (i) the conditions of
Section 13.1 or 13.2 have been satisfied, (ii) the Company has
paid or caused to be paid all other sums payable hereunder by the
Company and (iii) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent referred to in clause (i) above
relating to the satisfaction and discharge of this Indenture have
been complied with, the Trustee upon written request shall
acknowledge in writing the discharge of the Company's obligations
under this Indenture except for those surviving obligations
specified in Section 13.3.
Section 13.5 APPLICATION OF TRUST ASSETS. The Trustee
shall hold any cash or U.S. Government Obligations deposited with
it in the irrevocable trust established pursuant to Section 13.1
or 13.2, as the case may be. The Trustee shall apply the
deposited cash or the U.S. Government Obligations, together with
earnings thereon in accordance with this Indenture and the terms
of the irrevocable trust agreement established pursuant to
Section 13.1 or 13.2, as the case may be, to the payment of
<PAGE> 62
56
principal of, premium, if any, and interest on the Notes. The
cash or U.S. Government Obligations so held in trust and
deposited with the Trustee in compliance with Section 13.1 or
13.2, as the case may be, shall not be part of the trust estate
under this Indenture, but shall constitute a separate trust fund
for the benefit of all holders entitled thereto. Except as
specifically provided herein, the Trustee shall not be requested
to invest any amounts held by it for the benefit of the holders
or pay interest on uninvested amounts to any holder.
Section 13.6 REPAYMENT TO THE COMPANY; UNCLAIMED
MONEY. Upon termination of the trust established pursuant to
Section 13.1 or 13.2, as the case may be, the Trustee shall
promptly pay to the Company upon request any excess cash or U.S.
Government Obligations held by them. Additionally, if amounts
for the payment of principal, premium, if any, or interest
remains unclaimed for six years, the Trustee will pay such
amounts back to the Company forthwith. Thereafter, all liability
of the Trustee with respect to such amounts shall cease.
Subject to applicable laws governing escheat of such
property, the Trustee shall pay to the Company upon request, and,
if applicable, in accordance with the irrevocable trust
established pursuant to Section 13.1 or 13.2, any cash or U.S.
Government Obligations held by them for the payment of principal
of, premium, if any, or interest on the Notes that remain
unclaimed for six years after the date on which such payment
shall have become due. After payment to the Company, Holders
entitled to such payment must look to the Company for such
payment as general creditors unless an applicable abandoned
property law designates another person.
Section 13.7 REINSTATEMENT. If the Trustee is unable
to apply any cash or U.S. Government Obligations in accordance
with Section 13.1 or 13.2 by reason of any legal proceeding or by
reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and
the Notes shall be revived and reinstated as though no deposit
had occurred pursuant to Section 13.1 or 13.2 until such time as
the Trustee is permitted to apply all such cash or U.S.
Government Obligations in accordance with Section 13.1 or 13.2,
as the case may be; PROVIDED that if the Company makes any
payment of principal of, premium, if any, or interest on any
Notes following the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the amounts held by the Trustee.
<PAGE> 63
57
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
Section 14.1 INDENTURE AND NOTES SOLELY CORPORATE
OBLIGATIONS. No recourse for the payment of the principal of, or
premium, if any, or interest on any Note, or for any claim based
thereon or otherwise in respect thereof, and no recourse under or
upon any obligation, covenant or agreement of the Company in this
Indenture or in any supplemental indenture or in any Note, or
because of the creation of any indebtedness represented thereby,
shall be had against any incorporator, stockholder, officer or
director, as such, past, present or future, of the Company or of
any successor entity, either directly or through the Company or
any successor entity, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment
or penalty or otherwise; it being expressly understood that all
such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this
Indenture and the issue of the Notes.
ARTICLE XV
CONVERSION OF NOTES
Section 15.1 RIGHT TO CONVERT. Subject to and upon
compliance with the provisions of this Indenture, the holder of
any Note shall have the right, at his option, at any time after
60 days following the latest date of original issuance of the
Notes and prior to the close of business on November 1, 2000
(except that, with respect to any Note or portion of a Note which
shall be called for redemption or delivered for repurchase, such
right shall terminate, except as provided in the fourth paragraph
of Section 15.2, at the close of business on the last Trading Day
prior to the date fixed for redemption of such Note or portion of
a Note unless the Company shall default in payment due upon
redemption thereof) to convert the principal amount of any such
Note, or any portion of such principal amount which is $1,000 or
an integral multiple thereof, into that number of fully paid and
nonassessable shares of Common Stock (as such shares shall then
be constituted) obtained by dividing the principal amount of the
Note or portion thereof surrendered for conversion by the
Conversion Price in effect at such time, by surrender of the Note
so to be converted in whole or in part in the manner provided in
Section 15.2. A holder of Notes is not entitled to any rights of
a holder of Common Stock until such holder has converted his
Notes to Common Stock, and only to the extent such Notes are
deemed to have been converted to Common Stock under this Article
XV.
Section 15.2 EXERCISE OF CONVERSION PRIVILEGE;
ISSUANCE OF COMMON STOCK ON CONVERSION;
NO ADJUSTMENT FOR
<PAGE> 64
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INTEREST OR DIVIDENDS. In order to exercise the conversion
privilege with respect to any Note in definitive form, the holder
of any such Note to be converted in whole or in part shall
surrender such Note, duly endorsed, at an office or agency
maintained by the Company pursuant to Section 5.2, accompanied by
the funds, if any, required by the penultimate paragraph of this
Section 15.2, and shall give written notice of conversion in the
form provided on the Notes (or such other notice which is
acceptable to the Company) to the office or agency that the
holder elects to convert such Note or the portion thereof
specified in said notice. Such notice shall also state the name
or names (with address) in which the certificate or certificates
for shares of Common Stock which shall be issuable on such
conversion shall be issued and shall be accompanied by transfer
taxes, if required pursuant to Section 15.7. Each such Note
surrendered for conversion shall, unless the shares issuable on
conversion are to be issued in the same name as the registration
of such Note, be duly endorsed by, or be accompanied by
instruments of transfer in form satisfactory to the Company duly
executed by, the holder or his duly authorized attorney.
In order to exercise the conversion privilege with
respect to any interest in a Note in global form, the beneficial
holder must complete the appropriate instruction form for
conversion pursuant to the Depositary's book-entry conversion
program and follow the other procedures set forth in such
program.
As promptly as practicable after satisfaction of the
requirements for conversion set forth above, subject to
compliance with any restrictions on transfer if shares issuable
on conversion are to be issued in a name other than that of the
Noteholder (as if such transfer were a transfer of the Note or
Notes (or portion thereof) so converted), the Company shall issue
and shall deliver to such holder at the office or agency
maintained by the Company for such purpose pursuant to Section
5.2, a certificate or certificates for the number of full shares
issuable upon the conversion of such Note or portion thereof in
accordance with the provisions of this Article XV and a check or
cash in respect of any fractional interest in respect of a share
of Common Stock arising upon such conversion, as provided in
Section 15.3. In case any Note of a denomination greater than
$1,000 shall be surrendered for partial conversion, and subject
to Section 2.3, the Company shall execute and the Trustee shall
authenticate and deliver to the holder of the Note so
surrendered, without charge to him, a new Note or Notes in
authorized denominations in an aggregate principal amount equal
to the unconverted portion of the surrendered Note.
Each conversion shall be deemed to have been effected
as to any such Note (or portion thereof) on the date on which the
requirements set forth above in this Section 15.2 have been
satisfied as to such Note (or portion thereof), and the person in
whose name any certificate or certificates for shares of Common
<PAGE> 65
61
after the expiration or termination of such rights or
warrants, the Conversion Price shall be readjusted to the
Conversion Price which would then be in effect had the
adjustments made upon the issuance of such rights or
warrants been made on the basis of delivery of only the
number of shares of Common Stock actually delivered. In the
event that such rights or warrants are not so issued, the
Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such date
fixed for the determination of stockholders entitled to
receive such rights or warrants had not been fixed. In
determining whether any rights or warrants entitle the
holders to subscribe for or purchase shares of Common Stock
at less than such Current Market Price, and in determining
the aggregate offering price of such shares of Common Stock,
there shall be taken into account any consideration received
for such rights or warrants, the value of such
consideration, if other than cash, to be determined by the
Board of Directors.
(c) In case outstanding shares of Common Stock shall
be subdivided into a greater number of shares of Common
Stock, the Conversion Price in effect at the opening of
business on the day following the day upon which such
subdivision becomes effective shall be proportionately
reduced, and conversely, in case outstanding shares of
Common Stock shall be combined into a smaller number of
shares of Common Stock, the Conversion Price in effect at
the opening of business on the day following the day upon
which such combination becomes effective shall be
proportionately increased, such reduction or increase, as
the case may be, to become effective immediately after the
opening of business on the day following the day upon which
such subdivision or combination becomes effective.
(d) In case the Company shall, by dividend or
otherwise, distribute to all holders of its Common Stock
shares of any class of capital stock of the Company (other
than any dividends or distributions to which Section 15.5(a)
applies) or evidences of its indebtedness or assets
(including securities, but excluding any rights or warrants
referred to in Section 15.5(b), and excluding any dividend
or distribution (x) in connection with the liquidation,
dissolution or winding-up of the Company, whether voluntary
or involuntary, (y) exclusively in cash or (z) referred to
in Section 15.5(a) (any of the foregoing hereinafter in this
Section 15.5(d) called the "Securities")), then, in each
such case, the Conversion Price shall be reduced so that the
same shall be equal to the price determined by multiplying
the Conversion Price in effect immediately prior to the
close of business on the Record Date (as defined in Section
15.5(g)) with respect to such distribution by a fraction of
which the numerator shall be the Current Market Price
(determined as provided in Section 15.5(g)) on such date
<PAGE> 66
62
less the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and
described in a Board Resolution) on such date of the portion
of the Securities so distributed applicable to one share of
Common Stock and the denominator shall be such Current
Market Price, such reduction to become effective immediately
prior to the opening of business on the day following the
Record Date; PROVIDED, HOWEVER, that in the event the then
fair market value (as so determined) of the portion of the
Securities so distributed applicable to one share of Common
Stock is equal to or greater than the Current Market Price
on the Record Date, in lieu of the foregoing adjustment,
adequate provision shall be made so that each Noteholder
shall have the right to receive upon conversion the amount
of Securities such holder would have received had such
holder converted each Note on such date. In the event that
such dividend or distribution is not so paid or made, the
Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such
dividend or distribution had not been declared. If the
Board of Directors determines the fair market value of any
distribution for purposes of this Section 15.5(d) by
reference to the actual or when issued trading market for
any securities comprising all or part of such distribution,
it must in doing so consider the prices in such market over
the same period used in computing the Current Market Price
pursuant to Section 15.5(g) to the extent possible.
Notwithstanding the foregoing provisions of this
Section 15.5(d), no adjustment shall be made hereunder for
any distribution of Securities if the Company makes proper
provision so that each Noteholder who converts such Note (or
any portion thereof) after the date fixed for determination
of stockholders entitled to receive such distribution shall
be entitled to receive upon such conversion, in addition to
the shares of Common Stock issuable UPON such conversion,
the amount and kind of Securities that such holder would
have been entitled to receive if such holder had,
immediately prior to such determination date, converted such
Note into Common Stock; PROVIDED that, with respect to any
Securities that are convertible, exchangeable or
exercisable, the foregoing provision shall only apply to the
extent (and so long as) the Securities receivable upon
conversion of such Note would be convertible, exchangeable
or exercisable, as applicable, without any loss of rights or
privileges for a period of at least 60 days following
conversion of such Note.
Rights or warrants distributed by the Company to all
holders of Common Stock entitling the holders thereof to
subscribe for or purchase shares of the Company's capital
stock (either initially or under certain circumstances),
which rights or warrants, until the occurrence of a
specified event or events ("Trigger Event"): (i) are deemed
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to be transferred with such shares of Common Stock, (ii) are
not exercisable and (iii) are also issued in respect of
future issuances of Common Stock, shall not be deemed
distributed for purposes of this Section 15.5(d) (and no
adjustment to the Conversion Price under Section 15.5(d)
will be required) until the occurrence of the earliest
Trigger Event. In addition, in the event of any
distribution of rights or warrants, or any Trigger Event
with respect thereto, that shall have resulted in an
adjustment to the Conversion Price under this Section
15.5(d), (1) in the case of any such rights or warrants
which shall all have been redeemed or repurchased without
exercise by any holders thereof, the Conversion Price shall
be readjusted upon such final redemption or repurchase to
give effect to such distribution or Trigger Event, as the
case may be, as though it were a cash distribution, equal to
the per share redemption or repurchase price received by a
holder of Common Stock with respect to such rights or
warrants (assuming such holder had retained such rights or
warrants), made to all holders of Common Stock as of the
date of such redemption or repurchase, and (2) in the case
of such rights or warrants all of which shall have expired
or been terminated without exercise by any holder thereof,
the Conversion Price shall be readjusted as if such issuance
had not occurred.
For purposes of this Section 15.5(d) and Sections
15.5(a) and (b), any dividend or distribution to which this
Section 15.5(d) is applicable that also includes shares of
Common Stock, or rights or warrants to subscribe for or
purchase shares of Common Stock (or both), shall be deemed
instead to be (1) a dividend or distribution of the
evidences of indebtedness, assets or shares of capital stock
other than such shares of Common Stock or rights or warrants
(and any Conversion Price reduction required by this Section
15.5(d) with respect to such dividend or distribution shall
then be made) immediately followed by (2) a dividend or
distribution of such shares of Common Stock or such rights
or warrants (and any further Conversion Price reduction
required by Sections 15.5(a) and (b) with respect to such
dividend or distribution shall then be made, except (A) the
Record Date of such dividend or distribution shall be
substituted as "the date fixed for the determination of
stockholders entitled to receive such dividend or other
distribution" and "the date fixed for such determination"
within the meaning of Sections 15.5(a) and (b) and (B) any
shares of Common Stock included in such dividend or
distribution shall not be deemed "outstanding at the close
of business on the date fixed for such determination" within
the meaning of Section 15.5(a).
(e) In case the Company shall, by dividend or
otherwise, distribute to all holders of its Common Stock
cash (excluding any cash that is distributed upon a merger
<PAGE> 68
64
or consolidation to which Section 15.6 applies or as part of
a distribution referred to in Section 15.5(d)) in an
aggregate amount that, combined together with (1) the
aggregate amount of any other such distributions to all
holders of its Common Stock made exclusively in cash within
the twelve (12) months preceding the date of payment of such
distribution, and in respect of which no adjustment pursuant
to this Section 15.5(e) has been made, and (2) the aggregate
of any cash plus the fair market value (as determined by the
Board of Directors, whose determination shall be conclusive
and described in a Board Resolution) of consideration
payable in respect of any tender offer, by the Company or
any of its subsidiaries for all or any portion of the Common
Stock concluded within the twelve (12) months preceding the
date of payment of such distribution, and in respect of
which no adjustment pursuant to Section 15.5(f) has been
made, exceeds 20.0% of the product of the Current Market
Price (determined as provided in Section 15.5(g)) on the
Record Date with respect to such distribution times the
number of shares of Common Stock outstanding on such date,
then, and in each such case, immediately after the close of
business on such date, unless the Company elects to reserve
such cash for distribution to the holders of the Notes upon
the conversion of the Notes so that any such holder
converting Notes will receive upon such conversion, in
addition to the shares of Common Stock to which such holder
is entitled, the amount of cash which such holder would have
received if such holder had, immediately prior to the Record
Date for such distribution of cash, converted its Notes into
Common Stock, the Conversion Price shall be reduced so that
the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the close of
business on such date by a fraction (i) the numerator of
which shall be equal to the Current Market Price on the
Record Date less an amount equal to the quotient of (x) the
excess of such combined amount over such 20.0% and (y) the
number of shares of Common Stock outstanding on the Record
Date and (ii) the denominator of which shall be equal to the
Current Market Price on such date; PROVIDED, HOWEVER, that
in the event the portion of the cash so distributed
applicable to one share of Common Stock is equal to or
greater than the Current Market Price of the Common Stock on
the Record Date, in lieu of the foregoing adjustment,
adequate provision shall be made so that each Noteholder
shall have the right to receive upon conversion the amount
of cash such holder would have received had such holder
converted each Note on the Record Date. In the event that
such dividend or distribution is not so paid or made, the
Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such
dividend or distribution had not been declared.
(f) In case a tender offer made by the Company or any
of its subsidiaries for all or any portion of the Common
<PAGE> 69
65
Stock shall expire and such tender offer (as amended upon
the expiration thereof) shall require the payment to
stockholders (based on the acceptance (up to any maximum
specified in the terms of the tender offer) of Purchased
Shares (as defined below)) of an aggregate consideration
having a fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and
described in a Board Resolution) that combined together with
(1) the aggregate of the cash plus the fair market value (as
determined by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution), as
of the expiration of such tender offer, of consideration
payable in respect of any other tender offer, by the Company
or any of its subsidiaries for all or any portion of the
Common Stock expiring within the twelve (12) months
preceding the expiration of such tender offer, and in
respect of which no adjustment pursuant to this paragraph
(f) has been made, and (2) the aggregate amount of any
distributions to all holders of the Company's Common Stock
made exclusively in cash within twelve (12) months preceding
the expiration of such tender offer, and in respect of which
no adjustment pursuant to paragraph (e) of this Section has
been made, exceeds 20.0% of the product of the Current
Market Price (determined as provided in paragraph (g) of
this Section) as of the last time (the "Expiration Time")
tenders could have been made pursuant to such tender offer
(as it may be amended) times the number of shares of Common
Stock outstanding (including any tendered shares) on the
Expiration Time, then, and in each such case, immediately
prior to the opening of business on the day after the date
of the Expiration Time, the Conversion Price shall be
adjusted so that the same shall equal the price determined
by multiplying the Conversion Price in effect immediately
prior to close of business on the date of the Expiration
Time by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding (including any
tendered shares) on the Expiration Time multiplied by the
Current Market Price of the Common Stock on the Trading Day
next succeeding the Expiration Time and the denominator
shall be the sum of (x) the fair market value (determined as
aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum
specified in the terms of the tender offer) of all shares
validly tendered and not withdrawn as of the Expiration Time
(the shares deemed so accepted, up to any such maximum,
being referred to as the "Purchased Shares") and (y) the
product of the number of shares of Common Stock outstanding
(less any Purchased Shares) on the Expiration Time and the
Current Market Price of the Common Stock on the Trading Day
next succeeding the Expiration Time, such reduction to
become effective immediately prior to the opening of
business on the day following the Expiration Time. In the
event that the Company is obligated to purchase shares
pursuant to any such tender offer, but the Company is
<PAGE> 70
66
permanently prevented by applicable law from effecting any
such purchases or all such purchases are rescinded, the
Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such
tender offer had not been made.
(g) For purposes of this Section 15.5, the following
terms shall have the meaning indicated:
(1) "Closing Price" with respect to any
securities on any day shall mean the closing sale price
regular way on such day or, in case no such sale takes
place on such day, the average of the reported closing
bid and asked prices, regular way, in each case on the
New York Stock Exchange, or, if such security is not
listed or admitted to trading on such Exchange, on the
principal national security exchange or quotation
system on which such security is quoted or listed or
admitted to trading, or, if not quoted or listed or
admitted to trading on any national securities exchange
or quotation system, the average of the closing bid and
asked prices of such security on the over-the-counter
market on the day in question as reported by the
National Quotation Bureau Incorporated, or a similar
generally accepted reporting service, or if not so
available, in such manner as furnished by any New York
Stock Exchange member firm selected from time to time
by the Board of Directors for that purpose, or a price
determined in good faith by the Board of Directors,
whose determination shall be conclusive and described
in a Board Resolution.
(2) "Current Market Price" shall mean the average
of the daily Closing Prices per share of Common Stock
for the ten consecutive Trading Days immediately prior
to the date in question; PROVIDED, HOWEVER, that (1) if
the "ex" date (as hereinafter defined) for any event
(other than the issuance or distribution or Change of
Control requiring such computation) that requires an
adjustment to the Conversion Price pursuant to Section
15.5(a), (b), (c), (d), (e) or (f) occurs during such
ten consecutive Trading Days, the Closing Price for
each Trading Day prior to the "ex" date for such other
event shall be adjusted by multiplying such Closing
Price by the same fraction by which the Conversion
Price is so required to be adjusted as a result of such
other event, (2) if the "ex" date for any event (other
than the issuance, distribution or Change of Control
requiring such computation) that requires an adjustment
to the Conversion Price pursuant to Section 15.5(a),
(b), (c), (d), (e) or (f) occurs on or after the "ex"
date for the issuance or distribution requiring such
computation and prior to the day in question, the
Closing Price for each Trading Day on and after the
<PAGE> 71
67
"ex" date for such other event shall be adjusted by
multiplying such Closing Price by the reciprocal of the
fraction by which the Conversion Price is so required
to be adjusted as a result of such other event and (3)
if the "ex" date for the issuance, distribution or
Change of Control requiring such computation is prior
to the day in question, after taking into account any
adjustment required pursuant to clause (1) or (2) of
this proviso, the Closing Price for each Trading Day on
or after such "ex" date shall be adjusted by adding
thereto the amount of any cash and the fair market
value (as determined by the Board of Directors in a
manner consistent with any determination of such value
for purposes of Section 15.5(d) or (f), whose
determination shall be conclusive and described in a
Board Resolution) of the evidences of indebtedness,
shares of capital stock or assets being distributed
applicable to one share of Common Stock as of the close
of business on the day before such "ex" date. For
purposes of any computation under Section 15.5(f), the
Current Market Price of the Common Stock on any date
shall be deemed to be the average of the daily Closing
Prices per share of Common Stock for such day and the
next two succeeding Trading Days; PROVIDED, HOWEVER,
that if the "ex" date for any event (other than the
tender or exchange offer requiring such computation)
that requires an adjustment to the conversion Price
pursuant to Section 15.5(a), (b), (c), (d), (e) or (f)
occurs on or after the Expiration Time for the tender
or exchange offer requiring such computation and prior
to the day in question, the Closing Price for each
Trading Day on and after the "ex" date for such other
event shall be adjusted by multiplying such Closing
Price by the reciprocal of the fraction by which the
Conversion Price is so required to be adjusted as a
result of such other event. For purposes of this
paragraph, the term "ex" date, (1) when used with
respect to any issuance or distribution, means the
first date on which the Common Stock trades regular way
on the relevant exchange or in the relevant market from
which the Closing Price was obtained without the right
to receive such issuance or distribution, (2) when used
with respect to any subdivision or combination of
shares of Common Stock, means the first date on which
the Common Stock trades regular way on such exchange or
in such market after the time at which such subdivision
or combination becomes effective and (3) when used with
respect to any tender or exchange offer means the first
date on which the Common Stock trades regular way on
such exchange or in such market after the expiration of
such offer. Notwithstanding the foregoing, whenever
successive adjustments to the Conversion Price are
called for pursuant to this Section 15.5, such
adjustments shall be made to the Current Market Price
<PAGE> 72
68
as may be necessary or appropriate to effectuate the
intent of this Section 15.5 and to avoid unjust or
inequitable results as determined in good faith by the
Board of Directors.
(3) "fair market value" shall mean the amount
which a willing buyer would pay a willing seller in an
arm's-length transaction.
(4) "Record Date" shall mean, with respect to any
dividend, distribution or other transaction or event in
which the holders of Common Stock have the right to
receive any cash, securities or other property or in
which the Common Stock (or other applicable security)
is exchanged for or converted into any combination of
cash, securities or other property, the date fixed for
determination of stockholders entitled to receive such
cash, securities or other property (whether such date
is fixed by the Board of Directors or by statute,
contract or otherwise).
(5) "Trading Day" shall mean (x) if the
applicable security is listed or admitted for trading
on the New York Stock Exchange or another national
security exchange, a day on which the New York Stock
Exchange or that other national security exchange is
open for business or (y) if the applicable security is
quoted on the Nasdaq National Market, a day on which
trades may be made thereon or (z) if the applicable
security is not so listed, admitted for trading or
quoted, any day other than a Saturday or Sunday or a
day on which banking institutions in the State of New
York are authorized or obligated by law or executive
order to close.
(h) The Company may make such reductions in the
Conversion Price, in addition to those required by Sections
15.5(a), (b), (c), (d), (e) and (f), as the Board of
Directors considers to be advisable to avoid or diminish any
income tax to holders of Common Stock or rights to purchase
Common Stock resulting from any dividend or distribution of
stock (or rights to acquire stock) or from any event treated
as such for income tax purposes. To the extent permitted by
applicable law, the Company from time to time may reduce the
Conversion Price by any amount for any period of time if the
period is at least 20 days, the reduction is irrevocable
during the period and the Board of Directors shall have made
a determination that such reduction would be in the best
interests of the Company, which determination shall be
conclusive and described in a Board Resolution. Whenever
the Conversion Price is reduced pursuant to the preceding
sentence, the Company shall mail to all holders of record of
the Notes a notice of the reduction at least 15 days prior
to the date the reduced Conversion Price takes effect, and
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69
such notice shall state the reduced Conversion Price and the
period it will be in effect.
(i) No adjustment in the Conversion Price shall be
required unless such adjustment would require an increase or
decrease of at least 1% in such price; PROVIDED, HOWEVER,
that any adjustments which by reason of this Section 15.5(i)
are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All
calculations under this Article XV shall be made by the
Company and shall be made to the nearest cent or to the
nearest one one-hundredth of a share, as the case may be.
No adjustment need be made for rights to purchase
Common Stock pursuant to a Company plan for reinvestment of
dividends or interest.
No adjustment need be made for a change in the par
value, or to or from no par value, of the Common Stock.
To the extent the Notes become convertible into cash,
assets, property or securities (other than Common Stock of
the Company), no adjustment need be made thereafter as to
the cash, assets, property or such securities (except as
such securities may otherwise by their terms provide), and
interest shall not accrue on such cash.
(j) Whenever the Conversion Price is adjusted as
herein provided, the Company shall promptly file with the
Trustee and any conversion agent other than the Trustee an
Officers' Certificate setting forth the Conversion Price
after such adjustment and setting forth a brief statement of
the facts requiring such adjustment. Promptly after
delivery of such certificate, the Company shall prepare a
notice of such adjustment of the Conversion Price setting
forth the adjusted Conversion Price and the date on which
each adjustment becomes effective and shall mail such notice
of such adjustment of the Conversion Price to the holder of
each Note at his last address appearing on the Note register
provided for in Section 2.5 of this Indenture, within 20
days after execution thereof. Failure to deliver such
notice shall not effect the legality or validity of any such
supplemental indenture.
(k) In any case in which this Section 15.5 provides
that an adjustment shall become effective immediately after
a Record Date for an event, the Company may defer until the
occurrence of such event (i) issuing to the holder of any
Note converted after such Record Date and before the
occurrence of such event the additional shares of Common
Stock issuable upon such conversion by reason of the
adjustment required by such event over and above the Common
Stock issuable upon such conversion before giving effect to
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70
such adjustment and (ii) paying to such holder any amount in
cash in lieu of any fraction pursuant to Section 15.3.
Section 15.6 EFFECT OF RECLASSIFICATION,
CONSOLIDATION, MERGER OR SALE. If any of the following events
occur, namely (i) any reclassification or change of outstanding
shares of Common Stock (other than a change in par value, or to
or from no par value, as a result of a subdivision or
combination), (ii) any consolidation, merger or combination of
the Company with another corporation as a result of which holders
of Common Stock shall be entitled to receive stock, securities or
other property or assets (including cash) with respect to or in
exchange for such Common Stock or (iii) any sale or conveyance of
the properties and assets of the Company as, or substantially as,
an entirety to any other corporation as a result of which holders
of Common Stock shall be entitled to receive stock, securities or
other property or assets (including cash) with respect to or in
exchange for such Common Stock, then the Company or the successor
or purchasing corporation, as the case may be, shall execute with
the Trustee a supplemental indenture (which shall comply with the
Trust Indenture Act as in force at the date of execution of such
supplemental indenture if such supplemental indenture is then
required to so comply) providing that such Note shall be
convertible into the kind and amount of shares of stock and other
securities or property or assets (including cash) receivable upon
such reclassification, change, consolidation, merger,
combination, sale or conveyance by a holder of a number of shares
of Common Stock issuable upon conversion of such Notes (assuming,
for such purposes, a sufficient number of authorized shares of
Common Stock available to convert all such Notes) immediately
prior to such reclassification, change, consolidation, merger,
combination, sale or conveyance, assuming such holder of Common
Stock did not exercise his rights of election, if any, as to the
kind or amount of securities, cash or other property receivable
upon such reclassification, change, consolidation, merger,
combination, sale or conveyance (provided that, if the kind or
amount of securities, cash or other property receivable upon such
reclassification, change, consolidation, merger, combination,
sale or conveyance is not the same for each share of Common Stock
in respect of which such rights of election shall not have been
exercised ("non-electing share"), then for the purposes of this
Section 15.6 the kind and amount of securities, cash or other
property receivable upon such reclassification, change,
consolidation, merger, combination, sale or conveyance for each
non-electing share shall be deemed to be the kind and amount so
receivable per share by a plurality of the non-electing shares).
Such supplemental indenture shall provide for adjustments which
shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article XV.
The Company shall cause notice of the execution of such
supplemental indenture to be mailed to each holder of Notes, at
his address appearing on the Note register provided for in
Section 2.5 of this Indenture, within 20 days after execution
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71
thereof. Failure to deliver such notice shall not affect the
legality or validity of such supplemental indenture.
The above provisions of this Section shall similarly
apply to successive reclassifications, changes, consolidations,
mergers, combinations, sales and conveyances.
If this Section 15.6 applies to any event or
occurrence, Section 15.5 shall not apply.
Section 15.7 TAXES ON SHARES ISSUED. The issue of
stock certificates on conversions of Notes shall be made without
charge to the converting Noteholder for any tax in respect of the
issue thereof. The Company shall not, however, be required to
pay any tax which may be payable in respect of any transfer
involved in the issue and delivery of stock in any name other
than that of the holder of any Note converted, and the Company
shall not be required to issue or deliver any such stock
certificate unless and until the person or persons requesting the
issue thereof shall have paid to the Company the amount of such
tax or shall have established to the satisfaction of the Company
that such tax has been paid.
Section 15.8 RESERVATION OF SHARES; SHARES TO BE FULLY
PAID; LISTING OF COMMON STOCK. The Company shall provide, free
from preemptive rights, out of its authorized but unissued shares
or shares held in treasury, sufficient shares to provide for the
conversion of the Notes from time to time as such Notes are
presented for conversion.
Before taking any action which would cause an
adjustment reducing the Conversion Price below the then par
value, if any, of the shares of Common Stock issuable upon
conversion of the Notes, the Company will take all corporate
action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue shares of
such Common Stock at such adjusted Conversion Price.
The Company covenants that all shares of Common Stock
which may be issued upon conversion of Notes will, upon issue, be
fully paid and nonassessable by the Company and free from all
taxes, liens and charges with respect to the issue thereof.
The Company further covenants that, if at any time the
Common Stock shall be listed on the New York Stock Exchange or
any other national securities exchange, the Company will, if
permitted by the rules of such exchange, list and keep listed, so
long as the Common Stock shall be so listed on such exchange, all
Common Stock issuable upon conversion of the Notes.
Section 15.9 RESPONSIBILITY OF TRUSTEE. The Trustee
and any other conversion agent shall not at any time be under any
duty or responsibility to any holder of Notes to determine
whether any facts exist which may require any adjustment of the
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72
Conversion Price, or with respect to the nature or extent or
calculation of any such adjustment when made, or with respect to
the method employed, or herein or in any supplemental indenture
provided to be employed, in making the same. The Trustee and any
other conversion agent shall not be accountable with respect to
the validity or value (or the kind or amount) of any shares of
Common Stock, or of any securities or property, which may at any
time be issued or delivered upon the conversion of any Note; and
the Trustee and any other conversion agent make no
representations with respect thereto. Subject to the provisions
of Section 8.1, neither the Trustee nor any conversion agent
shall be responsible for any failure of the Company to issue,
transfer or deliver any shares of Common Stock or stock
certificates or other securities or property or cash upon the
surrender of any debenture for the purpose of conversion or to
comply with any of the duties, responsibilities or covenants of
the Company contained in this Article XV. Without limiting the
generality of the foregoing, neither the Trustee nor any
conversion agent shall be under any responsibility to determine
the correctness of any provisions contained in any supplemental
indenture entered into pursuant to Section 15.6 relating either
to the kind or amount of shares of stock or securities or
property (including cash) receivable by Noteholders upon the
conversion of their Notes after any event referred to in such
Section 15.6 or to any adjustment to be made with respect
thereto, but, subject to the provisions of Section 8.1, may
accept as conclusive evidence of the correctness of any such
provisions, and shall be protected in relying upon, the Officers'
Certificate (which the Company shall be obligated to file with
the Trustee prior to the execution of any such supplemental
indenture) with respect thereto.
Section 15.10 NOTICE TO HOLDERS PRIOR TO CERTAIN
ACTIONS. In case:
(a) the Company makes any distribution or dividend
that would require an adjustment in the Conversion Price
pursuant to Section 15.5; or
(b) the Company takes any action that would require a
supplemental indenture pursuant to Section 15.6; or
(c) of the voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
the Company shall cause to be filed with the Trustee and to be
mailed to each holder of Notes at his address appearing on the
Note register provided for in Section 2.5 of this Indenture, as
promptly as possible but in any event at least 15 days prior to
the applicable date hereinafter specified, a notice stating (x)
the date on which a record date is to be taken for the purpose of
such dividend, distribution, rights or warrants, or, if a record
is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distribution,
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73
rights or warrants are to be determined or (y) the date on which
such reclassification, change, consolidation, merger, sale,
conveyance, transfer, dissolution, liquidation or winding-up is
expected to become effective or occur and the date as of which it
is expected that holders of record of Common Stock shall be
entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, change
consolidation, merger, sale, conveyance, transfer, dissolution,
liquidation or winding-up. Failure to give such notice, or any
defect therein, shall not affect the legality or validity of such
dividend, distribution, reclassification, change, consolidation,
merger, sale, conveyance, transfer, dissolution, liquidation or
winding-up. Neither the failure to give such notice nor any
defect therein shall affect the legality or validity of the
proceedings referenced in clauses (a) through (c) of this Section
15.10.
ARTICLE XVI
MISCELLANEOUS PROVISIONS
Section 16.1 POOLING OF INTERESTS. The Company
desires to preserve its ability to account for acquisition and
other business combination transactions using the pooling-of-
interests method where appropriate, and the provisions of this
Indenture shall be interpreted accordingly.
Section 16.2 PROVISIONS BINDING ON COMPANY'S
SUCCESSORS. All the covenants, stipulations, promises and
agreements in this Indenture made by the Company shall bind its
successors and assigns whether so expressed or not.
Section 16.3 OFFICIAL ACTS BY SUCCESSOR COMPANY. Any
act or proceeding by any provision of this Indenture authorized
or required to be done or performed by any board (including the
Board of Directors), committee or officer of the Company shall
and may be done and performed with like force and effect by the
like board, committee or officer of any corporation that shall at
the time be the lawful sole successor of the Company.
Section 16.4 ADDRESSES FOR NOTICES, ETC. Any notice
or demand which by any provision of this Indenture is required or
permitted to be given or served by the Trustee or by the holders
of Notes on the Company shall be deemed to have been sufficiently
given or made, for all purposes if given or served by being
deposited postage prepaid by registered or certified mail in a
post office letter box addressed (until another address is filed
by the Company with the Trustee) to SoftKey International Inc.,
One Athenaeum Street, Cambridge, MA 02142, Attention: Chief
Financial Officer. Any notice, direction, request or demand
hereunder to or upon the Trustee shall be deemed to have been
sufficiently given or made, for all purposes, if given or served
by being deposited postage prepaid by registered or certified
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74
mail in a post office letter box addressed to the Corporate Trust
Office of the Trustee, which office is, at the date as of which
this Indenture is dated, located at 225 Franklin Street, Boston,
MA 02110.
The Trustee, by notice to the Company, may designate
additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Noteholder
shall be mailed to him by first class mail, postage prepaid, at
his address as it appears on the Note register and shall be
sufficiently given to him if so mailed within the time
prescribed.
Failure to mail a notice or communication to a
Noteholder or any defect in it shall not affect its sufficiency
with respect to other Noteholders. If a notice or communication
is mailed in the manner provided above, it is duly given, whether
or not the addressee receives it.
Section 16.5 GOVERNING LAW. This Indenture and each
Note shall be deemed to be a contract made under the substantive
laws of New York and for all purposes shall be construed in
accordance with the substantive laws of New York.
Section 16.6 EVIDENCE OF COMPLIANCE WITH CONDITIONS
PRECEDENT; CERTIFICATES TO TRUSTEE. Upon any application or
demand by the Company to the Trustee to take any action under any
of the provisions of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, and an opinion of
Counsel stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
Each certificate or opinion provided for in this
Indenture and delivered to the Trustee with respect to compliance
with a condition or covenant provided for in this Indenture shall
include: (1) a statement that the person making such certificate
or opinion has read such covenant or condition; (2) a brief
statement as to the nature and scope of the examination or
investigation upon which the statement or opinion contained in
such certificate or opinion is based; (3) a statement that, in
the opinion of such person, he has made such examination or
investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition
has been complied with; and (4) a statement as to whether or not,
in the opinion of such person, such condition or covenant has
been complied with.
Section 16.7 LEGAL HOLIDAYS. In any case where the
date of maturity of interest on or principal of the Notes or the
date fixed for redemption of any Note will not be a Business Day,
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75
then payment of such interest on or principal of the Notes need
not be made an such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the
date of maturity or the date fixed for redemption, and no
interest shall accrue for the period from and after such date.
Section 16.8 NO SECURITY INTEREST CREATED. Nothing in
this Indenture or in the Notes, expressed or implied, shall be
construed to constitute a security interest under the Uniform
Commercial Code or similar legislation, as now or hereafter
enacted and in effect, in any jurisdiction where property of the
Company or its subsidiaries is located.
Section 16.9 TRUST INDENTURE ACT. This Indenture is
hereby made subject to, and shall be governed by, the provisions
of the Trust Indenture Act required to be part of and to govern
indentures qualified under the Trust Indenture Act; PROVIDED,
however, that, notwithstanding the foregoing, this Indenture and
the Notes issued hereunder shall not be subject to the provisions
of subsections (a)(1), (a)(2) and (a)(3) of Section 314 of the
Trust Indenture Act as now in effect or as hereafter amended or
modified.
Section 16.10 BENEFITS OF INDENTURE. Nothing in this
Indenture or in the Notes, expressed or implied, shall give to
any person, other than the parties hereto, any paying agent, any
authenticating agent, any Note registrar and their successors
hereunder and the holders of Notes, any benefit or any legal or
equitable right, remedy or claim under this Indenture.
Section 16.11 TABLE OF CONTENTS, HEADINGS ETC. The
table of contents and the titles and headings of the articles and
sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall
in no way modify or restrict any of the terms or provisions
hereof.
Section 16.12 AUTHENTICATING AGENT. The Trustee may
appoint an authenticating agent which shall be authorized to act
on its behalf and subject to its direction in the authentication
and delivery of Notes in connection with the original issuance
thereof and transfers and exchanges of Notes hereunder, including
under Sections 2.4, 2.5, 2.6, 2.7 and 3.3, as fully to all
intents and purposes as though the authenticating agent had been
expressly authorized by this Indenture and those Sections to
authenticate and deliver Notes. For all purposes of this
Indenture, the authentication and delivery of Notes by the
authenticating agent shall be deemed to be authentication and
delivery of such Notes "by the Trustee" and a certificate of
authentication executed on behalf of the Trustee by an
authenticating agent shall be deemed to satisfy any requirement
hereunder or in the Notes for the Trustee's certificate of
authentication. Such authenticating agent shall at all times be
<PAGE> 80
76
a person eligible to serve as Trustee hereunder pursuant to
Section 8.9.
Any corporation into which any authenticating agent may
be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, consolidation or
conversion to which any authenticating agent shall be a party, or
any corporation succeeding to the corporate trust business of any
authenticating agent, shall be the successor of the
authenticating agent hereunder, if such Successor Company is
otherwise eligible under this Section, without the execution or
filing of any paper or any further act on the part of the parties
hereto or the authenticating agent or such Successor Company.
Any authenticating agent may at any time resign by
giving written notice of resignation to the Trustee and to the
Company. The Trustee may at any time terminate the agency of any
authenticating agent by giving written notice of termination to
such authenticating agent and to the Company. Upon receiving
such a notice of resignation or upon such a termination, or in
case at any time any authenticating agent shall cease to be
eligible under this Section, the Trustee shall promptly appoint a
successor authenticating agent (which may be the Trustee), shall
give written notice of such appointment to the Company and shall
mail notice of such appointment to all holders of Notes as the
names and addresses of such holders appear on the Note register.
The Trustee agrees to pay to the authenticating agent
from time to time reasonable compensation for its services, and
the Trustee shall be entitled to be reimbursed for such payments,
subject to Section 8.6.
The provisions of Sections 8.2, 8.3, 8.4, 9.3 and this
Section 16.12 shall be applicable to any authenticating agent.
Section 16.13 EXECUTION IN COUNTERPARTS. This
Indenture may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together
constitute but one and the same instrument.
State Street Bank and Trust Company hereby accepts the
trusts in this Indenture declared and provided, upon the terms
and conditions hereinabove set forth.
<PAGE> 81
77
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly signed, and their respective corporate seals
to be hereunto affixed and attested, all as of the date first
written above.
SOFTKEY INTERNATIONAL INC.
By:
-------------------------
Name:
----------------------
Title:
----------------------
Attest:
- -----------------------------
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By:
-------------------------
Name:
----------------------
Title:
----------------------
Attest:
- -----------------------------
<PAGE> 82
EXHIBIT A - FORM OF DEFINITIVE-NOTE
[FORM OF FACE OF NOTE]
No. B-1 $
---------------
CUSIP 83402NAA7
---------
SOFTKEY INTERNATIONAL INC.
5 1/2% Senior Convertible Note Due 2000
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED
OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT
OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT
IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(A) (1), (2), (3) OR (7) UNDER THE SECURITIES ACT)
("INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A
U.S. PERSON AND IS ACQUIRING THE NOTE EVIDENCED HEREBY IN AN
OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT PRIOR TO
THE DATE THAT IS THREE YEARS AFTER THE LATER OF THE ORIGINAL
ISSUANCE OF THE NOTE EVIDENCED HEREBY AND THE LAST DATE ON
WHICH SOFTKEY INTERNATIONAL INC. (THE "COMPANY") OR ANY
"AFFILIATE" (AS DEFINED IN RULE 144 UNDER THE SECURITIES
ACT) OF THE COMPANY WAS THE OWNER OF THE NOTE (THE
"RESTRICTION TERMINATION DATE") RESELL OR OTHERWISE TRANSFER
THE NOTE EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON
CONVERSION OF SUCH NOTE EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER
IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO STATE STREET BANK AND TRUST COMPANY,
AS TRUSTEE, A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS
ON TRANSFER OF THE NOTE EVIDENCED HEREBY (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM SUCH TRUSTEE), (D) OUTSIDE THE
UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT OR (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE); AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THE NOTE EVIDENCED HEREBY
BEFORE THE RESTRICTION TERMINATION DATE, THE HOLDER MUST
CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO STATE STREET BANK AND TRUST COMPANY, AS
<PAGE> 83
2
TRUSTEE. IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE
(C), (D) OR (E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO STATE STREET BANK AND TRUST COMPANY, AS
TRUSTEE, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE
REMOVED UPON THE RESTRICTION TERMINATION DATE. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES"
AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
SOFTKEY INTERNATIONAL INC., a corporation duly
organized and validly existing under the laws of the State of
Delaware (herein) called the "Company"), which term includes any
Successor Company under the Indenture referred to on the reverse
hereof, for value received hereby promises to pay to
, or registered assigns,
the principal sum of
Dollars on November 1, 2000, at the office or agency of the
Company maintained for that purpose in the Borough of Manhattan,
The City of New York, or, at the option of the holder of this
Note, at the Corporate Trust Office of the Trustee, in such coin
or currency of the United States of America as at the time of
payment shall be legal tender for the payment of public and
private debts, and to pay interest, semi-annually on May 1 and
November 1 of each year, commencing May 1, 1996, on said
principal sum at said office or agency, in like coin or currency,
at the rate per annum specified in the title of this Note, from
the May 1 or November 1, as the case may be, next preceding the
date of this Note to which interest has been paid or duly
provided for, unless the date hereof is a date to which interest
has been paid or duly provided for, in which case from the date
of this Note, or unless no interest has been paid or duly
provided for on the Notes, in which case from October 23, 1995,
until payment of said principal sum has been made or duly
provided for. Notwithstanding the foregoing, if the date hereof
is after any April 15 or October 15, as the case may be, and
before the following May 1 or November 1 other than October 15,
1995, this Note shall bear interest from such May 1 or November
1, respectively; PROVIDED, HOWEVER, that if the Company shall
default in the payment of interest due on such May 1 or November
1, then this Note shall bear interest from the next preceding May
1 or November 1 to which interest has been paid or duly provided
for or, if no interest has been paid or duly provided for on such
Note, from October 23, 1995. The interest so payable on any May
1 or November 1 will be paid to the person in whose name this
Note (or one or more Predecessor Notes) is registered at the
close of business on the record date, which shall be the April 15
or October 15 (whether or not a Business Day) next preceding
such May 1 or November 1, respectively; PROVIDED THAT any such
interest not punctually paid or duly provided for shall be
payable as provided in the Indenture. Interest may, at the
option of the Company, be paid by check mailed to the registered
address of such person.
<PAGE> 84
3
Reference is made to the further provisions of this
Note set forth on the reverse hereof, including, without
limitation, provisions giving the holder of this Note the right
to convert this Note into Common Stock of the Company on the
terms and subject to the limitations referred to on the reverse
hereof and as more fully specified in the Indenture. Such
further provisions shall for all purposes have the same effect as
though fully set forth at this place.
This Note shall be deemed to be a contract made under
the laws of the State of New York, and for all purposes shall be
construed in accordance with and governed by the laws of said
State.
This Note shall not be valid or become obligatory for
any purpose until the certificate of authentication hereon shall
have been manually signed by the Trustee or a duly authorized
authenticating agent under the Indenture.
IN WITNESS WHEREOF, the Company has caused this Note to
be duly executed under its corporate seal.
SOFTKEY INTERNATIONAL INC.
By:
-------------------------
Name:
Title:
Dated:
-------------------------
Attest:
- --------------------------------
Secretary
<PAGE> 85
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within-named
indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By:
---------------------------
Authorized Officer
As Authenticating Agent
(if different from Trustee)
By:
---------------------------
Authorized Officer
[FORM OF REVERSE OF NOTE]
SOFTKEY INTERNATIONAL INC.
5 1/2% Senior Convertible Note Due 2000
This Note is one of a duly authorized issue of Notes of
the Company, designated as its 5 1/2% Senior Convertible Notes
due 2000 (herein called the "Notes"), limited to the aggregate
principal amount of $402,500,000 all issued or to be issued under
and pursuant to an Indenture dated as of October 16, 1995 (herein
called the "Indenture"), between the Company and State Street
Bank and Trust Company (herein called the "Trustee"), to which
Indenture and all indentures supplemental thereto reference is
hereby made for a description of the rights, limitations of
rights, obligations, duties and immunities thereunder of the
Trustee, the Company and the holders of the Notes.
In case an Event of Default, as defined in the
Indenture, shall have occurred and be continuing, the principal
of and accrued interest on all Notes may be declared, and upon
said declaration shall become, due and payable, in the manner,
with the effect and subject to the conditions provided in the
Indenture.
The Indenture contains provisions permitting the
Company and the Trustee, with the consent of the holders of not
less than a majority in aggregate principal amount of the Notes
at the time outstanding, evidenced as in the Indenture provided,
to execute supplemental indentures adding any provisions to or
changing in any manner or eliminating any of the provisions of
the Indenture or of any supplemental indenture or modifying in
<PAGE> 86
2
any manner the rights of the holders of the Notes; PROVIDED,
HOWEVER, that no such supplemental indenture shall (i) extend the
fixed maturity of any Note, or reduce the rate or extend the time
of payment of interest thereon, or reduce the principal amount
thereof or premium, if any, thereon, or reduce any amount payable
on redemption thereof, alter the obligation of the Company to
redeem the Notes at the option of the holders upon the occurrence
of a Change of Control or impair or affect the right of any
Noteholder to institute suit for the payment thereof, or make the
principal thereof or interest or premium, if any, thereon payable
in any coin or currency other than that provided in the Notes or
impair the right to convert the Notes into Common Stock subject
to the terms set forth in the Indenture, including Section 15.6
thereof, without the consent of the holder of each Note so
affected or (ii) reduce the aforesaid percentage of Notes, the
holders of which are required to consent to any such supplemental
indenture, without the consent of the holders of all Notes then
outstanding. It is also provided in the Indenture that, prior to
any declaration accelerating the maturity of the Notes, the
holders of a majority in aggregate principal amount of the Notes
at the time outstanding may on behalf of the holders of all of
the Notes waive any past default or Event of Default under the
Indenture and its consequences except a default in the payment of
interest or any premium on or the principal of any of the Notes,
a failure by the Company to convert any Notes into Common Stock
of the Company or a default in respect of a covenant or provision
of the Indenture which under Article XI thereof cannot be
modified or amended without the consent of the holders of all
Notes then outstanding. Any such consent or waiver by the holder
of this Note (unless revoked as provided in the Indenture) shall
be conclusive and binding upon such holder and upon all future
holders and owners of this Note and any Notes which may be issued
in exchange or substitution hereof, irrespective of whether or
not any notation thereof is made upon this Note or such other
Notes.
No reference herein to the Indenture and no provision
of this Note or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional,
to pay the principal of and any premium and interest on this Note
at the place, at the respective times, at the rate and in the
coin or currency herein prescribed.
Interest on the Notes shall be computed on the basis of
a year of twelve 30-day months.
The Notes are issuable in registered form without
coupons in denominations of $1,000 principal amount and integral
multiples thereof. At the office or agency of the Company
referred to on the face hereof, and in the manner and subject to
the limitations provided in the Indenture, without payment of any
service charge but with payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in
connection with any registration or exchange of Notes, Notes may
<PAGE> 87
3
be exchanged for a like aggregate principal amount of Notes of
other authorized denominations.
The Notes will not be redeemable at the option of the
Company prior to November 2, 1998. On or after such date and
prior to maturity the Notes may be redeemed at the option of the
Company as a whole, or from time to time in part, upon mailing a
notice of such redemption not less than 30 nor more than 60 days
before the date fixed for redemption to the holders of Notes at
their last registered addresses, all as provided in the
Indenture, at the following optional redemption prices (expressed
as percentages of the principal amount), together in each case
with accrued interest to the date fixed for redemption.
<TABLE>
If redeemed during the 12-month period beginning:
<CAPTION>
Date Percentage
---- ----------
<S> <C>
November 2, 1998 102.2%
November 1, 1999 101.1%
</TABLE>
and 100% at November 1, 2000; PROVIDED THAT if the date fixed for
redemption is a May 1 or November 1, then the interest payable on
such date shall be paid to the holder of record on the next
preceding April 15 or October 15, respectively.
If a Change of Control (as defined in the Indenture)
shall occur at any time, then each holder of Notes shall have the
right to require that the Company purchase such holder's Notes in
whole or in part in integral multiples of $1,000, at a purchase
price in cash in an amount equal to 101% of the principal amount
of such Notes, plus accrued and unpaid interest, if any, to the
repurchase date pursuant to an offer to be made by the Company
and in accordance with the procedures set forth in the Indenture.
Subject to the provisions of the Indenture, the holder
hereof has the right, at its option, at any time after 60 days
following the latest date of original issuance of the Notes and
prior to the close of business on November 1, 2000, or, as to all
or any portion hereof called for redemption, prior to the close
of business on the Business Day next preceding the date fixed for
redemption (unless the Company shall default in payment due upon
redemption thereof), to convert the principal hereof or any
portion of such principal which is $1,000 or an integral multiple
thereof, into that number of fully paid and non-assessable shares
of Company's Common Stock, as said shares shall be constituted at
the date of conversion, obtained by dividing the principal amount
of this Note or portion thereof to be converted by the conversion
price of $53.00 or such conversion price as adjusted from time to
time as provided in the Indenture, upon surrender of this Note,
together with a conversion notice as provided in the Indenture,
to the Company at the office or agency of the Company maintained
for that purpose in the Borough of Manhattan, The City of New
<PAGE> 88
4
York, or at the option of such holder, the Corporate Trust Office
of the Trustee, and, unless the shares issuable on conversion are
to be issued in the same name as this Note, duly endorsed by, or
accompanied by instruments of transfer in form satisfactory to
the Company duly executed by, the holder or by his duly
authorized attorney. No adjustment in respect of interest or
dividends will be made upon any conversion; PROVIDED, HOWEVER,
that if this Note shall be surrendered for conversion during the
period from the close of business on any record date for the
payment of interest through the close of business on the Business
Day next preceding the following interest payment date, this Note
(unless it or the portion being converted shall have been called
for redemption on a date in such period) must be accompanied by
an amount, in funds acceptable to the Company, equal to the
interest payable on such interest payment date on the principal
amount being converted. No fractional shares will be issued upon
any conversion, but an adjustment in cash will be made, as
provided in the Indenture, in respect of any fraction of a share
which would otherwise be issuable upon the surrender of any Note
or Notes for conversion.
Any Notes called for redemption, unless surrendered for
conversion on or before the close of business on the date fixed
for redemption, may be deemed to be purchased from the holder of
such Notes at an amount equal to the applicable redemption price,
together with accrued interest to the date fixed for redemption,
by one or more investment bankers or other purchasers who may
agree with the Company to purchase such Notes from the holders
thereof and convert them into Common Stock of the Company and to
make payment for such Notes as aforesaid to the Trustee in trust
for such holders.
Upon due presentment for registration of transfer of
this Note at the office or agency of the Company in the Borough
of Manhattan, The City of New York, or at the option of the
holder of this Note, at the Corporate Trust Office of the
Trustee, a new Note or Notes of authorized denominations for an
equal aggregate principal amount will be issued to the transferee
in exchange thereof, subject to the limitations provided in the
Indenture, without charge except for any tax or other
governmental charge imposed in connection therewith.
The Company, the Trustee, any authenticating agent, any
paying agent, any conversion agent and any Note registrar may
deem and treat the registered holder hereof as the absolute owner
of this Note (whether or not this Note shall be overdue and
notwithstanding any notation of ownership or other writing hereon
made by anyone other than the Company or any Note registrar), for
the purpose of receiving payment hereof, or on account hereof,
for the conversion hereof and for all other purposes, and neither
the Company nor the Trustee nor any other authenticating agent
nor any paying agent nor any other conversion agent nor any Note
registrar shall be affected by any notice to the contrary. All
payments made to or upon the order of such registered holder
<PAGE> 89
5
shall, to the extent of the sum or sums paid, satisfy and
discharge liability for monies payable on this Note.
No recourse for the payment of the principal of or any
premium or interest on this Note, or for any claim based hereon
or otherwise in respect hereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in the Indenture
or any indenture supplemental thereto or in any Note, or because
of the creation of any indebtedness represented thereby, shall be
had against any incorporator, stockholder, officer or director,
as such, past, present or future, of the Company or of any
Successor Company, either directly or through the Company or any
Successor Company, whether by virtue of any constitution, statute
or rule of law or by the enforcement of any assessment or penalty
or otherwise, all such liability being, by the acceptance hereof
and as part of the consideration for the issue hereof, expressly
waived and released.
Terms used in this Note and defined in the Indenture
are used herein as therein defined.
<PAGE> 90
ABBREVIATIONS
The following abbreviations, when used in the
inscription of the face of this Note, shall be construed as
though they were written out in full according to applicable laws
or regulations:
TEN COM -as tenants in common UNIF GIFT MIN ACT -
TEN ENT -as tenants by the ----------------- Custodian
entireties (Cust)
JT TEN - as joint tenants with ----------------- under
right of survivorship (Minor)
and not as tenants in
common
Uniform Gifts to
Minors Act
----------------- (State)
Additional abbreviations may also be used
though not in the above list.
<PAGE> 91
[FORM OF CONVERSION NOTICE)
CONVERSION NOTICE
To: SoftKey International Inc.
The undersigned registered owner of this Note hereby
irrevocably exercises the option to convert this Note, or the
portion hereof (which is $1,000 principal amount or an integral
multiple thereof) below designated, into shares of Common Stock,
par value $.01 per share, of the Company in accordance with the
terms of the Indenture referred to in this Note, and directs that
the shares issuable and deliverable upon such conversion,
together with any check in payment for fractional shares and any
Notes representing any unconverted principal amount hereof, be
issued and delivered to the registered holder hereof unless a
different name has been indicated below. If shares or any
portion of this Note not converted are to be issued in the name
of a person other than the undersigned, the undersigned will
check the appropriate box below and pay all transfer taxes
payable with respect thereto. Any amount required to be paid to
the undersigned on account of interest accompanies this Note.
Dated:
----------------------------
----------------------------
----------------------------
Signature(s)
Signature(s) must be guaranteed by an
eligible Guarantor Institution (banks,
stock brokers, savings and loan
associations and credit unions) with
membership in an approved signature
guarantee medallion program pursuant to
Securities and Exchange Commission Rule
17Ad-15 if shares of Common Stock are to
be issued, or Notes to be delivered, other
than to and in the name of the registered
holder.
- -----------------------------------
Signature Guarantee
<PAGE> 92
2
Fill in for registration of shares if to
be issued, and Notes if to be delivered,
other than to and in the name of the
registered holder:
- ---------------------------------------
(Name)
- ---------------------------------------
(Street Address)
- ---------------------------------------
(City, State and Zip Code)
Please print name and address
Principal amount to be converted
(if less than all) $____________
--------------------------------
Social Security or other Taxpayer
Identification Number
<PAGE> 93
[FORM OF OPTION TO ELECT REPAYMENT
UPON A CHANGE OF CONTROL]
To: SoftKey International Inc.
The undersigned registered owner of this Note hereby
irrevocably acknowledges receipt of a notice from SoftKey
International Inc. (the "Company") as to the occurrence of a
Change of Control with respect to the Company and requests and
instructs the Company to repay the entire principal amount of
this Note, or the portion thereof (which is $1,000 principal
amount or an integral multiple thereof) below designated, in
accordance with the terms of the Indenture referred to in this
Note, together with accrued interest to such date, to the
registered holder hereof.
Dated:
--------------------------------
--------------------------------
--------------------------------
Signature(s)
--------------------------------
Social Security or Other Taxpayer
Identification Number
Principal amount to be repaid (if less
than all): $________________________
<PAGE> 94
(FORM OF ASSIGNMENT)
For value received __________________________ hereby
sell(s), assign(s) and transfer(s) unto _______________________
(Please insert social security or other identifying number of
assignee) the within Note, and hereby irrevocably constitutes and
appoints ____________________________ attorney to transfer
the said Note on the books of the Company, with full power of
substitution in the premises.
In connection with any transfer of the within Note (or
any issuance of shares of Common Stock, par value $.01 per share,
of SoftKey International Inc. upon conversion of the within Note)
occurring prior to the third anniversary of the date of original
issuance of such Note, the undersigned confirms that such Note
(or shares of Common Stock, as the case may be) are being
transferred:
/ / To SoftKey International Inc. or a subsidiary thereof; or
/ / Pursuant to and in compliance with Rule 144A under the
Securities Act of 1933, as amended; or
/ / To an Institutional Accredited Investor pursuant to and in
compliance with the Securities Act of 1933, as amended; or
/ / Pursuant to and in compliance with Regulation S under the
Securities Act of 1933, as amended; or
/ / Pursuant to and in compliance with Rule 144 under the
Securities Act of 1933, as amended.
Unless one of the boxes above is checked, the Trustee
will refuse to register any of the within Notes (or such shares
of Common Stock, as the case may be) in the name of any person
other than the registered holder thereof (or hereof); PROVIDED,
HOWEVER, that the Trustee may, in its sole discretion, register
the transfer of such Notes (or such shares of Common Stock, as
the case may be) if it has received such certifications, legal
opinions and/or other information as the Company has reasonably
requested to confirm that such transfer is being made pursuant to
an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933, as
amended.
In addition, if the transferee is an institutional
accredited investor or a purchaser who is not a U.S. person, the
holder must furnish to the Trustee (i) in the case of an
institutional accredited investor, a signed letter containing
certain representations and agreements relating to the
restrictions on transfer of the security evidenced hereby and
(ii) such other certifications, legal opinions or other
information as it may reasonably require to confirm that such
transfer is being made pursuant to an exemption from, or in a
<PAGE> 95
2
transaction not subject to, the registration requirements of the
Securities Act of 1933, as amended.
Dated:
---------------------------------
- ---------------------------------------
- ---------------------------------------
Signature(s)
Signature(s) must be guaranteed
by an eligible Guarantor Institution
(banks, stock brokers, savings and loan
associations and credit unions) with
membership in an approved signature
guarantee medallion program pursuant to
Securities and Exchange
Commission Rule 17Ad-15.
- ---------------------------------------
Signature Guarantee
NOTICE: The signature on the conversion notice, the option to
elect payment upon a Change of Control or the assignment must
correspond with the name as written upon the face of the Note in
every particular without alteration or enlargement or any change
whatever.
<PAGE> 96
EXHIBIT B - FORM OF GLOBAL NOTE
[FORM OF FACE OF NOTE]
No. A-1 $_________________
CUSIP 83402NAA7
SOFTKEY INTERNATIONAL INC.
5 1/2% Senior Convertible Note Due 2000
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE
DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE
DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE
DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT
IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT)
("INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A
U.S. PERSON AND IS ACQUIRING THE NOTE EVIDENCED HEREBY IN AN
OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT PRIOR TO
THE DATE THAT IS THREE YEARS AFTER THE LATER OF THE ORIGINAL
ISSUANCE OF THE NOTE EVIDENCED HEREBY AND THE LAST DATE ON
WHICH SOFTKEY INTERNATIONAL INC. (THE "COMPANY") OR ANY
"AFFILIATE" (AS DEFINED IN RULE 144 UNDER THE SECURITIES
ACT) OF THE COMPANY WAS THE OWNER OF THE NOTE (THE
"RESTRICTION TERMINATION DATE") RESELL OR OTHERWISE TRANSFER
THE NOTE EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON
CONVERSION OF SUCH NOTE EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER
IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
<PAGE> 97
2
TRANSFER, FURNISHES TO STATE STREET BANK AND TRUST COMPANY,
AS TRUSTEE, A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS
ON TRANSFER OF THE NOTE EVIDENCED HEREBY (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM SUCH TRUSTEE), (D) OUTSIDE THE
UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT OR (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE); AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THE NOTE EVIDENCED HEREBY
BEFORE THE RESTRICTION TERMINATION DATE, THE HOLDER MUST
CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO STATE STREET BANK AND TRUST COMPANY, AS
TRUSTEE. IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE
(C), (D) OR (E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO STATE STREET BANK AND TRUST COMPANY, AS
TRUSTEE, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE
REMOVED UPON THE RESTRICTION TERMINATION DATE. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES"
AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
SOFTKEY INTERNATIONAL INC., a corporation duly
organized and validly existing under the laws of the State of
Delaware (herein called the "Company"), which term includes any
Successor Company under the Indenture referred to on the reverse
hereof, for value received hereby promises to pay to
_________________________________________________________________
, or registered assigns, the principal sum of
_________________________________________________________________
_______________ Dollars (subject to adjustment as set forth in
the next paragraph hereof) on November 1, 2000, at the office or
agency of the Company maintained for that purpose in the Borough
of Manhattan, The City of New York, or, at the option of the
holder of this Note, at the Corporate Trust Office of the
Trustee, in such coin or currency of the United States of America
as at the time of payment shall be legal tender for the payment
of public and private debts, and to pay interest, semi-annually
on May 1 and November 1 of each year, commencing May 1, 1996, on
said principal sum at said office or agency, in like coin or
currency, at the rate per annum specified in the title of this
Note, from the May 1 or November 1, as the case may be, next
preceding the date of this Note to which interest has been paid
or duly provided for, unless the date hereof is a date to which
interest has been paid or duly provided for, in which case from
the date of this Note, or unless no interest has been paid or
<PAGE> 98
3
duly provided for on the Notes, in which case from October 23,
1995, until payment of said principal sum has been made or duly
provided for. Notwithstanding the foregoing, if the date hereof
is after any April 15 or October 15, as the case may be, and
before the following May 1 or November 1 other than October 15,
1995, this Note shall bear interest from such May 1 or November
1, respectively; PROVIDED, HOWEVER, that if the Company shall
default in the payment of interest due on such May 1 or November
1, then this Note shall bear interest from the next preceding May
1 or November 1 to which interest has been paid or duly provided
for or, if no interest has been paid or duly provided for on such
Note, from October 23, 1995. The interest so payable on any May
1 or November 1 will be paid to the person in whose name this
Note (or one or more Predecessor Notes) is registered at the
close of business on the record date, which shall be the April 15
or October 15 (whether or not a Business Day) next preceding such
May 1 or November 1, respectively; PROVIDED THAT any such
interest not punctually paid or duly provided for shall be
payable as provided in the Indenture. Interest may, at the
option of the Company, be paid by check mailed to the registered
address of such person.
The aggregate principal amount of the Note in global
form represented hereby may from time to time be reduced or
increased to reflect exchanges of a part of this Note in global
form for definitive Notes or exchanges of definitive Notes for a
part of this Note in global form or conversions or redemptions of
a part of this Note in global form or cancellations of a part of
this Note in global form or transfers of definitive Notes in
return for a part of this Note in global form or transfers of a
part of this Note in global form effected by delivery of
definitive Notes, in each case, and in any such case, by means of
notations on the Schedule of Exchanges, Conversions, Redemptions,
Cancellations and Transfers on the last page hereof.
Notwithstanding any provision of this Note to the contrary, (i)
exchanges of a part of this Note in global form for definitive
Notes, (ii) exchanges of definitive Notes for a part of this Note
in global form, (iii) conversions or redemptions of a part of
this Note in global form, (iv) cancellations of a part of this
Note in global form, (v) transfers of definitive Notes in return
for a part of this Note in global form and (vi) transfers of a
part of this Note in global form effected by delivery of
definitive Notes may be effected without the surrendering of this
Note in global form, PROVIDED that appropriate notations on the
Schedule of Exchanges, Conversions, Redemptions, Cancellations
and Transfers are made by the Trustee, or the Custodian at the
direction of the Trustee, to reflect the appropriate reduction or
increase, as the case may be, in the aggregate principal amount
of this Note in global form resulting therefrom or as a
consequence thereof.
Reference is made to the further provisions of this
Note set forth on the reverse hereof, including, without
limitation, provisions giving the holder of this Note the right
to convert this Note into Common Stock of the Company on the
<PAGE> 99
4
terms and subject to the limitations referred to on the reverse
hereof and as more fully specified in the Indenture. Such
further provisions shall for all purposes have the same effect as
though fully set forth at this place.
This Note shall be deemed to be a contract made under
the laws of the State of New York, and for all purposes shall be
construed in accordance with and governed by the laws of said
State.
This Note shall not be valid or become obligatory for
any purpose until the certificate of authentication hereon shall
have been manually signed by the Trustee or a duly authorized
authenticating agent under the Indenture.
IN WITNESS WHEREOF, the Company has caused this Note to
be duly executed under its corporate seal.
SOFTKEY INTERNATIONAL INC.
By:
--------------------------------
Name:
Title:
Dated:
--------------------------------
Attest:
- --------------------------------------
Secretary
<PAGE> 100
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within-named
indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By:
Authorized Officer
As Authenticating Agent
(if different from Trustee)
By:
Authorized Officer
[FORM OF REVERSE OF NOTE]
SoftKey International Inc.
5 1/2% Senior Convertible Note Due 2000
This Note is one of a duly authorized issue of Notes of
the Company, designated as its 5 1/2% Senior Convertible Notes
due 2000 (herein called the "Notes"), limited to the aggregate
principal amount of $402,500,000 all issued or to be issued under
and pursuant to an Indenture dated as of October 16, 1995 (herein
called the "Indenture"), between the Company and State Street
Bank and Trust Company (herein called the "Trustee"), to which
Indenture and all indentures supplemental thereto reference is
hereby made for a description of the rights, limitations of
rights, obligations, duties and immunities thereunder of the
Trustee, the Company and the holders of the Notes.
In case an Event of Default, as defined in the
Indenture, shall have occurred and be continuing, the principal
of and accrued interest on all Notes may be declared, and upon
said declaration shall become, due and payable, in the manner,
with the effect and subject to the conditions provided in the
Indenture.
The Indenture contains provisions permitting the
Company and the Trustee, with the consent of the holders of not
less than a majority in aggregate principal amount of the Notes
at the time outstanding, evidenced as in the Indenture provided,
to execute supplemental indentures adding any provisions to or
changing in any manner or eliminating any of the provisions of
the Indenture or of any supplemental indenture or modifying in
any manner the rights of the holders of the Notes; PROVIDED,
HOWEVER, that no such supplemental indenture shall (i) extend the
<PAGE> 101
2
fixed maturity of any Note, or reduce the rate or extend the time
of payment of interest thereon, or reduce the principal amount
thereof or premium, if any, thereon, or reduce any amount payable
on redemption thereof, alter the obligation of the Company to
redeem the Notes at the option of the holders upon the occurrence
of a Change of Control or impair or affect the right of any
Noteholder to institute suit for the payment thereof, or make the
principal thereof or interest or premium, if any, thereon payable
in any coin or currency other than that provided in the Notes or
impair the right to convert the Notes into Common Stock subject
to the terms set forth in the Indenture, including Section 15.6
thereof, without the consent of the holder of each Note so
affected or (ii) reduce the aforesaid percentage of Notes, the
holders of which are required to consent to any such supplemental
indenture, without the consent of the holders of all Notes then
outstanding. It is also provided in the Indenture that, prior to
any declaration accelerating the maturity of the Notes, the
holders of a majority in aggregate principal amount of the Notes
at the time outstanding may on behalf of the holders of all of
the Notes waive any past default or Event of Default under the
Indenture and its consequences except a default in the payment of
interest or any premium on or the principal of any of the Notes,
a failure by the Company to convert any Notes into Common Stock
of the Company or a default in respect of a covenant or provision
of the Indenture which under Article XI thereof cannot be
modified or amended without the consent of the holders of all
Notes then outstanding. Any such consent or waiver by the holder
of this Note (unless revoked as provided in the Indenture) shall
be conclusive and binding upon such holder and upon all future
holders and owners of this Note and any Notes which may be issued
in exchange or substitution hereof, irrespective of whether or
not any notation thereof is made upon this Note or such other
Notes.
No reference herein to the Indenture and no provision
of this Note or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional,
to pay the principal of and any premium and interest on this Note
at the place, at the respective times, at the rate and in the
coin or currency herein prescribed.
Interest on the Notes shall be computed on the basis of
a year of twelve 30-day months.
The Notes are issuable in registered form without
coupons in denominations of $1,000 principal amount and integral
multiples thereof. At the office or agency of the Company
referred to on the face hereof, and in the manner and subject to
the limitations provided in the Indenture, without payment of any
service charge but with payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in
connection with any registration or exchange of Notes, Notes may
be exchanged for a like aggregate principal amount of Notes of
other authorized denominations.
<PAGE> 102
3
The Notes will not be redeemable at the option of the
Company prior to November 2, 1998. On or after such date and
prior to maturity the Notes may be redeemed at the option of the
Company as a whole, or from time to time in part, upon mailing a
notice of such redemption not less than 30 nor more than 60 days
before the date fixed for redemption to the holders of Notes at
their last registered addresses, all as provided in the
Indenture, at the following optional redemption prices (expressed
as percentages of the principal amount), together in each case
with accrued interest to the date fixed for redemption.
<TABLE>
If redeemed during the 12-month period beginning:
<CAPTION>
Date Percentage
---- ----------
<S> <C>
November 2, 1998 102.2%
November 1, 1999 101.1%
</TABLE>
and 100% at November 1, 2000; PROVIDED THAT if the date fixed for
redemption is a May 1 or November 1, then the interest payable on
such date shall be paid to the holder of record on the next
preceding April 15 or October 15, respectively.
If a Change of Control (as defined in the Indenture)
shall occur at any time, then each holder of Notes shall have the
right to require that the Company purchase such holder's Notes in
whole or in part in integral multiples of $1,000, at a purchase
price in cash in an amount equal to 101% of the principal amount
of such Notes, plus accrued and unpaid interest, if any, to the
repurchase date pursuant to an offer to be made by the Company
and in accordance with the procedures set forth in the Indenture.
Subject to the provisions of the Indenture, the holder
hereof has the right, at its option, at any time after 60 days
following the latest date of original issuance of the Notes and
prior to the close of business an November 1, 2000, or, as to all
or any portion hereof called for redemption, prior to the close
of business on the Business Day next preceding the date fixed for
redemption (unless the Company shall default in payment due upon
redemption thereof), to convert the principal hereof or any
portion of such principal which is $1,000 or an integral multiple
thereof, into that number of fully paid and non-assessable shares
of Company's Common Stock, as said shares shall be constituted at
the date of conversion, obtained by dividing the principal amount
of this Note or portion thereof to be converted by the conversion
price of $53.00 or such conversion price as adjusted from time to
time as provided in the Indenture, upon surrender of this Note,
together with a conversion notice as provided in the Indenture,
to the Company at the office or agency of the Company maintained
for that purpose in the Borough of Manhattan, The City of New
York, or at the option of such holder, the Corporate Trust Office
of the Trustee, and, unless the shares issuable on conversion are
to be issued in the same name as this Note, duly endorsed by, or
<PAGE> 103
4
accompanied by instruments of transfer in form satisfactory to
the Company duly executed by, the holder or by his duly
authorized attorney. No adjustment in respect of interest or
dividends will be made upon any conversion; PROVIDED, HOWEVER,
that if this Note shall be surrendered for conversion during the
period from the close of business on any record date for the
payment of interest through the close of business on the Business
Day next preceding the following interest payment date, this Note
(unless it or the portion being converted shall have been called
for redemption on a date in such period) must be accompanied by
an amount, in funds acceptable to the Company, equal to the
interest payable on such interest payment date on the principal
amount being converted. No fractional shares will be issued upon
any conversion, but an adjustment in cash will be made, as
provided in the Indenture, in respect of any fraction of a share
which would otherwise be issuable upon the surrender of any Note
or Notes for conversion.
Any Notes called for redemption, unless surrendered for
conversion on or before the close of business on the date fixed
for redemption, may be deemed to be purchased from the holder of
such Notes at an amount equal to the applicable redemption price,
together with accrued interest to the date fixed for redemption,
by one or more investment bankers or other purchasers who may
agree with the Company to purchase such Notes from the holders
thereof and convert them into Common Stock of the Company and to
make payment for such Notes as aforesaid to the Trustee in trust
for such holders.
Upon due presentment for registration of transfer of
this Note at the office or agency of the Company in the Borough
of Manhattan, The City of New York, or at the option of the
holder of this Note, at the Corporate Trust Office of the
Trustee, a new Note or Notes of authorized denominations for an
equal aggregate principal amount will be issued to the transferee
in exchange thereof, subject to the limitations provided in the
Indenture, without charge except for any tax or other
governmental charge imposed in connection therewith.
The Company, the Trustee, any authenticating agent, any
paying agent, any conversion agent and any Note registrar may
deem and treat the registered holder hereof as the absolute owner
of this Note (whether or not this Note shall be overdue and
notwithstanding any notation of ownership or other writing hereon
made by anyone other than the Company or any Note registrar), for
the purpose of receiving payment hereof, or on account hereof,
for the conversion hereof and for all other purposes, and neither
the Company nor the Trustee nor any other authenticating agent
nor any paying agent nor any other conversion agent nor any Note
registrar shall be affected by any notice to the contrary. All
payments made to or upon the order of such registered holder
shall, to the extent of the sum or sums paid, satisfy and
discharge liability for monies payable on this Note.
<PAGE> 104
5
No recourse for the payment of the principal of or any
premium or interest on this Note, or for any claim based hereon
or otherwise in respect hereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in the Indenture
or any indenture supplemental thereto or in any Note, or because
of the creation of any indebtedness represented thereby, shall be
had against any incorporator, stockholder, officer or director,
as such, past, present or future, of the Company or of any
Successor Company, either directly or through the Company or any
Successor Company, whether by virtue of any constitution, statute
or rule of law or by the enforcement of any assessment or penalty
or otherwise, all such liability being, by the acceptance hereof
and as part of the consideration for the issue hereof, expressly
waived and released.
Terms used in this Note and defined in the Indenture
are used herein as therein defined.
<PAGE> 105
ABBREVIATIONS
The following abbreviations, when used in the
inscription of the face of this Note, shall be construed as
though they were written out in full according to applicable laws
or regulations:
TEN COM -as tenants in common UNIF GIFT MIN ACT -
TEN ENT -as tenants by the ___________________ Custodian
entireties (Cust)
JT TEN - as joint tenants with ___________________ under
right of survivorship (Minor)
and not as tenants in
common
Uniform Gifts to
Minors Act ______________________
(State)
Additional abbreviations may also be used
though not in the above list.
<PAGE> 106
[FORM OF CONVERSION NOTICE)
CONVERSION NOTICE
To: SoftKey International Inc.
The undersigned registered owner of this Note hereby
irrevocably exercises the option to convert this Note, or the
portion hereof (which is $1,000 principal amount or an integral
multiple thereof) below designated, into shares of Common Stock
in accordance with the terms of the Indenture referred to in this
Note, and directs that the shares issuable and deliverable upon
such conversion, together with any check in payment for
fractional shares and any Notes representing any unconverted
principal amount hereof, be issued and delivered to the
registered holder hereof unless a different name has been
indicated below. If shares or any portion of this Note not
converted are to be issued in the name of a person other than the
undersigned, the undersigned will check the appropriate box below
and pay all transfer taxes payable with respect thereto. Any
amount required to be paid to the undersigned on account of
interest accompanies this Note.
Dated:
----------------------------------
------------------------------
------------------------------
Signature(s)
Signature(s) must be guaranteed by an
eligible Guarantor Institution (banks,
stock brokers, savings and loan
associations and credit unions) with
membership in an approved signature
guarantee medallion program pursuant to
Securities and Exchange Commission Rule
17Ad-15 if shares of Common Stock are to
be issued, or Notes to be delivered, other
than to and in the name of the registered
holder.
- -----------------------------------------
Signature Guarantee
<PAGE> 107
2
Fill in for registration of shares if to
be issued, and Notes if to be delivered,
other than to and in the name of the
registered holder:
- ---------------------------------------
(Name)
- ---------------------------------------
(Street Address)
- ---------------------------------------
(City, State and Zip Code)
Please print name and address
Principal amount to be converted
(if less than all) $____________
--------------------------------
<PAGE> 108
[FORM OF OPTION TO ELECT REPAYMENT
UPON A CHANGE OF CONTROL]
To: SoftKey International Inc.
The undersigned registered owner of this Note hereby
irrevocably acknowledges receipt of a notice from SoftKey
International Inc. (the "Company") as to the occurrence of a
Change of Control with respect to the Company and requests and
instructs the Company to repay the entire principal amount of
this Note, or the portion thereof (which is $1,000 principal
amount or an integral multiple thereof) below designated, in
accordance with the terms of the Indenture referred to in this
Note, together with accrued interest to such date, to the
registered holder hereof.
Dated:
---------------------------------
---------------------------------------
---------------------------------------
Signature(s)
---------------------------------------
Social Security or Other Taxpayer
Taxpayer Identification Number
Principal amount to be repaid (if less
than all): $________________________
<PAGE> 109
(FORM OF ASSIGNMENT)
For value received __________________________ hereby
sell(s), assign(s) and transfer(s) unto ____________________
(Please insert social security or other identifying number of
assignee) the within Note, and hereby irrevocably constitutes and
appoints ______________________________ attorney to transfer
the said Note on the books of the Company, with full power of
substitution in the premises.
In connection with any transfer of the within Note (or
any issuance of shares of Common Stock upon conversion of the
within Note) occurring prior to the third anniversary of the date
of original issuance of such Note, the undersigned confirms that
such Note (or shares of Common Stock, as the case may be) are
being transferred:
To SoftKey International Inc. or a subsidiary thereof; or
Pursuant to and in compliance with Rule 144A under the
Securities Act of 1933, as amended; or
To an Institutional Accredited Investor pursuant to and in
compliance with the Securities Act of 1933, as amended; or
Pursuant to and in compliance with Regulation S under the
Securities Act of 1933, as amended; or
Pursuant to and in compliance with Rule 144 under the
Securities Act of 1933, as amended.
Unless one of the boxes above is checked, the Trustee
will refuse to register any of the within Notes (or such shares
of Common Stock, as the case may be) in the name of any person
other than the registered holder thereof (or hereof); PROVIDED,
HOWEVER, that the Trustee may, in its sole discretion, register
the transfer of such Notes (or such shares of Common Stock, as
the case may be) if it has received such certifications, legal
opinions and/or other information as the Company has reasonably
requested to confirm that such transfer is being made pursuant to
an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933, as
amended.
In addition, if the transferee is an institutional
accredited investor or a purchaser who is not a U.S. person, the
holder must furnish to the Trustee (i) in the case of an
institutional accredited investor, a signed letter containing
certain representations and agreements relating to the
restrictions on transfer of the security evidenced hereby, and
(ii) such other certifications, legal opinions or other
information as it may reasonably require to confirm that such
transfer is being made pursuant to an exemption from, or in a
<PAGE> 110
2
transaction not subject to, the registration requirements of the
Securities Act of 1933, as amended.
Dated:
---------------------------------
- ----------------------------------------
- ----------------------------------------
Signature(s)
Signature(s) must be guaranteed
by an eligible Guarantor Institution
(banks, stock brokers, savings and loan
associations and credit unions) with
membership in an approved signature
guarantee medallion program pursuant to
Securities and Exchange
Commission Rule 17Ad-15.
- ----------------------------------------
Signature Guarantee
NOTICE: The signature on the conversion notice, the option to
elect payment upon a Change of Control or the assignment must
correspond with the name as written upon the face of the Note in
every particular without alteration or enlargement or any change
whatever.
<PAGE> 1
CONFORMED COPY
__________________________________________________
AGREEMENT AND PLAN OF MERGER
by and among
SOFTKEY INTERNATIONAL INC.,
SCHOOLCO INC.
and
MINNESOTA EDUCATIONAL COMPUTING CORPORATION (MECC)
Dated as of October 30, 1995
__________________________________________________
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
ARTICLE I
THE MERGER
<S> <C> <C>
Section 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Articles of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.2 By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.3 Directors and Officers of
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 3.2 Exchange of Company Common
Stock; Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.3 Dividends; Escheat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.4 No Fractional Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.5 Closing of Company Transfer
Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.6 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.1 Corporate Organization;
Related Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.3 Authority Relative to This
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.4 Consents and Approvals;
No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.5 Reports and Financial
Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.6 Absence of Certain Changes
or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
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<TABLE>
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Section 4.8 Absence of Undisclosed
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.9 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.11 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.12 Stockholder Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.13 Information in Disclosure Documents
and Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.14 Employee Benefit Plans; ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.15 Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.16 Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.17 MBCA Sections 302A.671
and 302A.673 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.18 Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.19 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Section 5.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5.3 Authority Relative to This
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.4 Consents and Approvals;
No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.5 Reports and Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.6 Absence of Certain Changes or
Events; Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.7 Absence of Undisclosed
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.8 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.9 Information in Disclosure Documents
and Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.10 Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 5.11 Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Business by the Company
Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.2 Conduct of Business by Parent
Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.3 Conduct of Business of Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
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ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access and Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.2 No Other Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.3 Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 7.4 Proxy Statement-Prospectus;
Stockholder Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 7.5 Compliance with the Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 7.6 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 7.7 Voting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 7.8 Company Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 7.9 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 7.10 Directors' and Officers'
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 7.11 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 7.12 Listing Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 7.13 Supplemental Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 7.14 Letters of Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 7.15 Conveyance Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.16 Non-solicitation of Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.17 Exchange Act Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 8.1 Conditions to Each Party's
Obligation to Effect the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 8.2 Conditions to Obligations of Parent
and Sub to Effect the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 8.3 Conditions to Obligation of the
Company to Effect the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE IX
TERMINATION
Section 9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 9.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Amendment and Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.2 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.3 Survivability; Investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
</TABLE>
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Section 10.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 10.5 Descriptive Headings; Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 10.6 Entire Agreement; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 10.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Exhibits
A Voting Agreement
B Form of Affiliate Letter
</TABLE>
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<TABLE>
Glossary of Defined Terms
-------------------------
<CAPTION>
Term Section
- ---- -------
<S> <C>
Acquisition Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2(b)
Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5(a)
Affiliate Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5(b)
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Allen & Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.16
Alternative Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2(a)
Bear Stearns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.11
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(b)
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Company Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(d)
Company Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.14(a)
Company SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5
Company Stock Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(d)
Confidentiality Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1
Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(a)
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.14(a)
ERISA Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.14(a)
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(a)
Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(a)
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5
Gardner, Carton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.3(c)
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4
Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.11
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4
MBCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
NASD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4
New Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8
NNM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
North American . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.7
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Parent Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(a)
Parent Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1
Parent SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5
</TABLE>
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Parent Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2(a)
Parent Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(b)
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.5
Proxy Statement-Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.13
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.13
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10(b)(iv)
Skadden, Arps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2(d)
Stockholder Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.12
Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Sub Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(c)
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(b)
Superior Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2(a)
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Tax(es) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10(c)
Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10(b)(i)
Voting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
</TABLE>
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<PAGE> 8
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 30, 1995
(this "AGREEMENT"), by and among SoftKey International Inc., a Delaware
corporation ("PARENT"), SchoolCo Inc., a Minnesota corporation and a wholly
owned subsidiary of Parent ("SUB"), and Minnesota Educational Computing
Corporation (MECC), a Minnesota corporation (the "COMPANY").
WHEREAS, the Boards of Directors of Parent and Sub and the
Company deem it advisable and in the best interests of their respective
stockholders that Parent acquire the Company pursuant to the terms and
conditions of this Agreement, and, in furtherance of such acquisition, such
Boards of Directors (and Parent as the sole stockholder of Sub) have approved
this Agreement and the merger of Sub with and into the Company in accordance
with the terms of this Agreement and, in the case of Parent, the General
Corporation Law of the State of Delaware (the "DGCL") and, in the case of Sub
and the Company, the Minnesota Business Corporation Act (the "MBCA"); and
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to Parent's willingness to enter
into this Agreement, a holder of shares of the Common Stock, par value $.01 per
share (the "COMPANY COMMON STOCK"), of the Company, is entering into an
agreement with Parent in the form attached hereto as Exhibit A (the "VOTING
AGREEMENT") to vote certain shares of Company Common Stock according to the
terms set forth in the Voting Agreement; and
WHEREAS, for federal income tax purposes, it is intended that
the Merger shall qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "CODE");
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, the parties hereto agree as follows:
<PAGE> 9
ARTICLE ARTICLE I
THE MERGER
----------
Section 1.1 THE MERGER. In accordance with the provisions
of this Agreement and the MBCA, at the Effective Time (as defined
in Section 1.2), Sub shall be merged with and into the Company (the "MERGER"),
the separate existence of Sub shall thereupon cease, and the Company shall be
the surviving corporation in the Merger (sometimes hereinafter called the
"SURVIVING CORPORATION") and shall continue its corporate existence
under the laws of the State of Minnesota. The Merger shall have the effects
set forth in Section 302A.641 of the MBCA. At Parent's option, the Merger may
be structured so that (i) any direct subsidiary of Parent other than Sub is
merged with and into the Company or (ii) the Company is merged with and into
Parent or any direct subsidiary of Parent. In the event of such an election by
Parent, the parties hereto agree to execute an appropriate amendment to this
Agreement in order to reflect such election.
Section 1.2 EFFECTIVE TIME OF THE MERGER. The Merger
shall become effective at the time of filing of properly executed Articles of
Merger in the form required by and executed in accordance with the provisions of
Section 302A.615 of the MBCA. The parties hereto shall cause such filing to be
made as soon as practicable after the Closing (as defined in Section 1.3). When
used in this Agreement, the term "EFFECTIVE TIME" shall mean the date and time
at which the Merger shall become effective.
Section 1.3 CLOSING. The closing of the transactions
contemplated by this Agreement (the "CLOSING") shall take place at the offices
of Skadden, Arps, Slate, Meagher & Flom, One Beacon Street, Boston,
Massachusetts, at 10:00 a.m., local time, on the day on which all of the
conditions set forth in Article VIII are satisfied or waived or on such other
date and at such other time and place as Parent and the Company shall agree
(such date, the "CLOSING DATE").
2
<PAGE> 10
ARTICLE ARTICLE II
THE SURVIVING CORPORATION
-------------------------
Section 2.1 ARTICLES OF INCORPORATION. The Articles of
Incorporation of Sub in effect at the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation until amended in accordance with
applicable law, except that the name of the Surviving Corporation shall be
"Minnesota Educational Computing Corporation (MECC)."
Section 2.2 BY-LAWS. The By-Laws of Sub as in effect at
the Effective Time shall be the By-Laws of the Surviving Corporation until
amended in accordance with applicable law.
Section 2.3 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION.
(a) The directors of Sub at the Effective Time
shall be the initial directors of the Surviving Corporation and shall hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualified in the manner provided in the Articles of
Incorporation or By-Laws of the Surviving Corporation or as otherwise provided
by law.
(b) The officers of the Company at the Effective
Time shall be the initial officers of the Surviving Corporation and shall hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualified in the manner provided in the Articles of
Incorporation or By-Laws of the Surviving Corporation or as otherwise provided
by law.
ARTICLE ARTICLE III
CONVERSION OF SHARES
--------------------
Section 3.1 EXCHANGE RATIO. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder thereof:
(a) Each share of Company Common Stock issued and
outstanding immediately prior to the Effective
3
<PAGE> 11
Time (other than (i) shares to be cancelled in accordance with Section 3.1(b)
and (ii) shares as to which dissenters rights shall have been duly demanded
pursuant to Sections 302A.471 and 302A.473 of the MBCA ("DISSENTING SHARES"))
shall be converted into the right to receive a number of shares of Common
Stock, par value $.01 per share (the "PARENT COMMON STOCK"), of Parent, equal
to the result obtained by dividing $40 by the volume weighted average of the
closing prices for the Parent Common Stock on the Nasdaq National Market
("NNM") for the twenty full trading days ending on the third full trading day
prior to the Effective Time (the "EXCHANGE RATIO"), payable upon the surrender
of the certificate formerly representing such share of Company Common Stock in
accordance with Section 3.2 hereof; PROVIDED, HOWEVER, that in no event shall
the Exchange Ratio be greater than 1.14286 or less than .88889;
(b) All shares of Company Common Stock that, in
either case, are (i) held by the Company as treasury shares or (ii) owned by
Parent or any wholly-owned Subsidiary of Parent, shall be cancelled and
retired and cease to exist, and no securities of Parent or other consideration
shall be delivered in exchange therefor. As used in this Agreement, the term
"SUBSIDIARY" means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which (x) such party or
any other Subsidiary of such party is a general partner (excluding partnerships,
the general partnership interests of which held by such party or any Subsidiary
of such party do not have a majority of the voting interest in such partnership)
or (y) at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the board of directors or
others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party and/or
one or more of its Subsidiaries.
(c) The share of Common Stock, no par value per
share ("SUB COMMON STOCK"), of Sub issued and outstanding immediately prior to
the Effective Time shall be converted into and become one fully paid and
nonassessable share of Common Stock, par value $.01 per share, of the Surviving
Corporation.
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(d) Each outstanding option to purchase Company
Common Stock (each, a "COMPANY STOCK OPTION") shall be assumed by Parent as
more specifically provided in Section 7.8.
(e) The holders of Dissenting Shares, if any, shall
be entitled to payment by the Surviving Corporation (or at the election of
Parent, by Parent or an affiliate of Parent) of the fair value of such shares
in cash to the extent permitted by and in accordance with the provisions of
Sections 302A.471 and 302A.473 of the MBCA; PROVIDED, HOWEVER, that (i) if any
holder of Dissenting Shares shall deliver a written withdrawal of such holder's
demand for fair value of such shares, or (ii) if any holder fails to establish
such holder's entitlement to rights to payment as provided in such Section
302A.473, such holder or holders (as the case may be) shall forfeit such right
to payment for such shares and such shares shall thereupon be deemed to have
been converted into the right to receive shares of Parent Common Stock pursuant
to Section 3.1(a) as of the Effective Time. Unless Parent shall have made the
election referred to in the first sentence of this Section 3.2(e), the Surviving
Corporation shall be solely responsible for, and shall pay out of its own funds,
any amounts which become due and payable to holders of Dissenting Shares, and
such amounts shall not be paid directly or indirectly by Parent. The Company
shall notify Parent of each demand for dissenters' rights under the MBCA
promptly after such demand is received by the Company.
Section 3.2 EXCHANGE OF COMPANY COMMON STOCK; PROCEDURES.
(a) Prior to the Closing Date, Parent shall
designate a bank or trust company reasonably acceptable to the Company to act as
Exchange Agent hereunder (the "EXCHANGE AGENT"). As soon as practicable
after the Effective Time, Parent shall deposit with or for the account of the
Exchange Agent stock certificates representing the number of shares of Parent
Common Stock issuable pursuant to Section 3.1 in exchange for outstanding shares
of Company Common Stock, which shares of Parent Common Stock shall be deemed to
have been issued at the Effective Time.
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(b) As soon as practicable after the Effective Time,
Parent shall cause the Exchange Agent to mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "CERTIFICATES") that
were converted pursuant to Section 3.1 into the right to receive shares of
Parent Common Stock (i) a form of letter of transmittal specifying that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Exchange Agent and (ii)
instructions for use in surrendering such Certificates in exchange for
certificates representing shares of Parent Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor (x) a certificate representing that number of whole
shares of Parent Common Stock which such holder has the right to receive
pursuant to the provisions of this Article III, (y) cash in lieu of any
fractional shares of Parent Common Stock to which such holder is entitled
pursuant to Section 3.4, after giving effect to any required tax withholdings,
and the Certificate so surrendered shall forthwith be cancelled and (z) any
dividends or distributions to which such holder may be entitled pursuant to
Section 3.3. In the event of a transfer of ownership of Company Common Stock
which is not registered in the transfer records of the Company, a certificate
representing the proper number of shares of Parent Common Stock may be issued to
a transferee if the Certificate representing such Company Common Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer, and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this
Section 3.2(b), each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender a certificate
representing shares of Parent Common Stock, cash in lieu of any fractional
shares of Parent Common Stock and any dividends or distributions, which may be
payable pursuant to Section 3.3 hereof.
Section 3.3 DIVIDENDS; ESCHEAT. No dividends or
distributions that are declared on shares of Parent Common Stock will be paid
to persons entitled to receive
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certificates representing shares of Parent Common Stock until such persons
surrender their Certificates. Upon such surrender, there shall be paid to the
person in whose name the certificates representing such shares of Parent Common
Stock shall be issued, any dividends or distributions with respect to such
shares of Parent Common Stock which have a record date on or after the
Effective Time and shall have become payable between the Effective Time and the
time of such surrender. In no event shall the person entitled to receive such
dividends or distributions be entitled to receive interest thereon. Promptly
following the date which is six months after the Effective Time, the Exchange
Agent shall deliver to the Surviving Corporation all cash, certificates and
other documents in its possession relating to the transactions described in
this Agreement, and any holders of Company Common Stock who have not
theretofore complied with this Article III shall look thereafter only to the
Surviving Corporation for the shares of Parent Common Stock, any dividends or
distributions thereon, and any cash in lieu of fractional shares thereof to
which they are entitled pursuant to this Article III. Notwithstanding the
foregoing, neither the Exchange Agent nor any party hereto shall be liable to a
holder of Company Common Stock for any shares of Parent Common Stock, any
dividends or distributions thereon or any cash in lieu of fractional shares
thereof delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
Section 3.4 NO FRACTIONAL SECURITIES. No certificates or
scrip representing fractional shares of Parent Common Stock shall be issued upon
the surrender for exchange of Certificates, and such fractional interests
shall not entitle the owner thereof to vote or to any rights of a security
holder. In lieu of any such fractional securities, each holder of Company
Common Stock who would otherwise have been entitled to a fraction of a share of
Parent Common Stock upon surrender of such holder's Certificates will be
entitled to receive a cash payment (without interest) determined by multiplying
(i) the fractional interest to which such holder would otherwise be entitled
(after taking into account all shares of Company Common Stock then held of
record by such holder) and (ii) the average of the per share closing prices for
Parent Common Stock on the NNM for the five trading days immediately preceding
the Effective Time.
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Section 3.5 CLOSING OF COMPANY TRANSFER BOOKS. At the
Effective Time, the stock transfer books of the Company shall be closed and no
transfer of shares of Company Common Stock shall thereafter be made. If, after
the Effective Time, Certificates are presented to the Surviving Corporation,
they shall be cancelled and exchanged as provided in this Article III.
Section 3.6 FURTHER ASSURANCES. If, at any time after the
Effective Time, the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or things
are necessary or desirable to vest, perfect or confirm of record or otherwise in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, properties or assets of either of Sub or the Company acquired or to
be acquired by the Surviving Corporation as a result of, or in connection with,
the Merger or otherwise to carry out this Agreement, the officers of the
Surviving Corporation shall be authorized to execute and deliver, in the name
and on behalf of each of Sub and the Company or otherwise, all such deeds, bills
of sale, assignments and assurances and to take and do, in such names and on
such behalves or otherwise, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title and
interest in, to and under such rights, properties or assets in the Surviving
Corporation or otherwise to carry out the purposes of this Agreement.
ARTICLE ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to Parent and Sub as follows:
Section 4.1 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 Minnesota
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. Schedule 4.1(a)
lists, and the Company is duly qualified
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or licensed as a foreign corporation to do business and is in good standing in,
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 Company Material Adverse Effect (as
hereinafter defined).
(b) Except as set forth on Schedule 4.1(b), 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.
(c) The copies of the Articles of Incorporation and
By-Laws of the Company heretofore delivered to Parent 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 "COMPANY MATERIAL ADVERSE EFFECT" shall
mean that such event, change or effect is, individually or in the aggregate,
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 or to the
ability of the Company to consummate the Merger and the other transactions
contemplated by this Agreement.
Section 4.2 CAPITALIZATION.
(a) As of the date of this Agreement, the
authorized capital stock of the Company consists of 20,000,000 shares of Company
Common Stock, 8,023,080 of which are issued and outstanding; 1,000,000 shares of
Series A redeemable preferred shares, par value $5.00 per share, none of which
are issued or outstanding; and 9,000,000 undesignated preferred shares, par
value $5.00 per share, none of which are issued or outstanding. As of the date
of this Agreement, 1,365,002 shares of Company Common Stock are reserved for
issuance pursuant to the Company Stock Options and all other employee benefit
plans of the Company. All of the issued and outstanding
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shares of Company Common Stock are validly issued, fully paid and
nonassessable.
(b) Except as disclosed in this Section 4.2 or on
Schedule 4.2(b), (i) there is no outstanding right, subscription, warrant, call,
unsatisfied preemptive right, option or other agreement or arrangement of any
kind to purchase or otherwise to receive from the Company any of the outstanding
authorized but unissued or treasury shares of the capital stock or any other
security of the Company, (ii) there is no outstanding security of any kind
convertible into or exchangeable for such capital stock, and (iii) there is no
voting trust or other agreement or understanding to which the Company is a party
or is bound with respect to the voting of the capital stock of the Company.
(c) Except as set forth on Schedule 4.2(c), none of
the awards, grants or other agreements pursuant to which Company Stock Options
were issued have provisions which accelerate the vesting or right to
exercise such options upon the execution of this Agreement (including the
documents attached as Exhibits hereto), the consummation of the transactions
contemplated hereby (or thereby) or any other "change of control" or similar
events.
Section 4.3 AUTHORITY RELATIVE TO THIS AGREEMENT. The
Company has the requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Company and the consummation
by the Company of the transactions contemplated on its part hereby have been
duly authorized by the Company's Board of Directors and, except for the approval
of its stockholders to be sought at the stockholders meeting contemplated by
Section 7.4(a) with respect to this Agreement, no other corporate proceedings on
the part of the Company are necessary to authorize this Agreement or for the
Company to consummate the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by the Company and constitutes a
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms.
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Section 4.4 CONSENTS AND APPROVALS; NO VIOLATIONS.
Neither the execution, delivery and performance of this Agreement by the
Company, nor the consummation by the Company of the transactions
contemplated hereby, will (i) conflict with or result in any breach of any
provisions of the charter, by-laws or other organizational documents of the
Company, (ii) require a filing with, or a permit, authorization, consent or
approval of, any federal, state, local or foreign court, arbitral tribunal,
administrative agency or commission or other governmental or other regulatory
authority or administrative agency or commission (a "GOVERNMENTAL ENTITY"),
except in connection with or in order to comply with the applicable provisions
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR ACT"), for the filing of a registration statement on Form S-4 under the
Securities Act of 1933, as amended (the "SECURITIES ACT") with respect to Parent
Common Stock to be offered to the Company stockholders, the filing of the Proxy
Statement-Prospectus under the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), filings or approvals required under state securities or "blue
sky" laws, the By-Laws of the National Association of Securities Dealers (the
"NASD") and the filing and recordation of Articles of Merger as required by the
MBCA, (iii) except as set forth on Schedule 4.4 hereto, result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, or result in the creation of any mortgage, pledge, security interest,
encumbrance, lien, claim or charge of any kind or right of others of whatever
nature ("LIENS"), on any property or asset of the Company pursuant to, any of
the terms, conditions or provisions of any material note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
(each, a "CONTRACT") to which the Company is a party or by which it or any of
its properties or assets may be bound or (iv) violate any law, order, writ,
injunction, decree, statute, rule or regulation of any Governmental Entity
applicable to the Company or any of its properties or assets, except, in the
case of clauses (ii), (iii) and (iv), where failures to make such filing or
obtain such authorization, consent or approval would not have, or where such
violations, breaches or defaults or Liens would not have, in the aggregate, a
Company Material Adverse Effect.
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Section 4.5 REPORTS AND FINANCIAL STATEMENTS. The
Company has timely filed all reports required to be filed with the
Securities and Exchange Commission (the "SEC") pursuant to the Exchange Act
or the Securities Act since March 31, 1994 (collectively, the "COMPANY SEC
REPORTS"), and has previously made available to Parent true and complete copies
of all such Company SEC Reports. Such Company SEC Reports, as of their
respective dates, complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be,
and none of such Company SEC Reports, as of their respective dates, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the Company SEC Reports have
been prepared in accordance with United States generally accepted accounting
principles ("GAAP") consistently applied throughout the periods indicated
(except as otherwise noted therein or, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) and fairly present (subject, in the case of
unaudited statements, to normal recurring year-end adjustments and any other
adjustments described therein) the financial position of the Company as at the
dates thereof and the results of operations and cash flows of the Company for
the periods then ended. Since March 31, 1994, there has been no change in any
of the significant accounting (including tax accounting) policies, practices or
procedures of the Company.
Section 4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except
as set forth on Schedule 4.6 or in the Company SEC Reports filed as of the
date of this Agreement, since March 31, 1995, (i) the Company has not conducted
its business and operations other than in the ordinary course of business and
consistent with past practices or taken any actions that, if it had been in
effect, would have violated or been inconsistent with the provisions of Section
6.1 and (ii) there has not been any fact, event, circumstance or change
affecting or relating to the Company which has had or is reasonably likely to
have a Company Material Adverse Effect. Except as set forth on Schedule 4.6 or
as would not represent a Company Material Adverse Effect, the transactions
contemplated by this Agreement will not constitute a change of control
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under or require the consent from or the giving of notice to a third party
pursuant to the terms, conditions or provisions of any Contract to which the
Company is a party.
Section 4.7 LITIGATION. Except as disclosed on
Schedule 4.7 and except for litigation disclosed in the notes to the
financial statements included in the Company's Annual Report to
Stockholders for the fiscal year ended March 31, 1995 or in the Company SEC
Reports filed subsequent thereto, as of the date hereof, there is no suit,
action, proceeding or investigation pending or, to the best knowledge of the
Company, threatened against the Company or with respect to which the Company
could be required to provide indemnification or to otherwise contribute to
liabilities or damages relating thereto, the outcome of which could reasonably
be expected to have a Company Material Adverse Effect; nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity
outstanding against the Company having, or which, insofar as can reasonably be
foreseen, in the future may have a Company Material Adverse Effect.
Section 4.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except
for liabilities or obligations which are accrued or reserved against in the
Company's financial statements (or reflected in the notes thereto) included
in the Company SEC Reports or which were incurred after June 30, 1995 in the
ordinary course of business and consistent with past practice, and except as set
forth on Schedule 4.8, the Company has no liabilities or obligations (whether
absolute, accrued, contingent or otherwise) of a nature required by GAAP to be
reflected in a balance sheet (or reflected in the notes thereto) or which could
reasonably be expected to have a Company Material Adverse Effect.
Section 4.9 NO DEFAULT. Except as set forth in
Schedule 4.9, the Company is not 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) the Company's Articles of Incorporation or
By-Laws, or (b) (x) any order, writ, decree, statute, rule or regulation of any
Governmental Entity applicable to the Company or any of its properties or
assets or (y) any Contract to which the Company is a
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party or by which the Company or any of its properties or assets may be bound,
except in the case of this clause (b), which breaches, violations or defaults,
individually or in the aggregate, would not have a Company Material Adverse
Effect. The Company 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 currently
proposed to be conducted by the Company 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 hereby or (y) could reasonably be expected to result in the
material impairment of the continued use or exercise by the Company after the
date hereof of any material right used or exercised (or reasonably expected to
be used or exercised) by the Company, in the conduct of the Company's business
as currently conducted and as currently proposed to be conducted by the Company
or (z) could reasonably be expected to have a Company Material Adverse Effect.
Section 4.10 TAXES.
(a) The Company has heretofore delivered or will
make available to Parent true, correct and complete copies of the federal,
state, local and foreign income, franchise sales and other Tax Returns (as
hereinafter defined) filed by the Company for the period from January 3, 1991 to
March 31, 1991, and for each of the Company's years ended March 31, 1992, 1993
and 1994, inclusive.
(b) Except as disclosed in Schedule 4.10(b):
(i) All returns, declarations,
reports, estimates, statements, schedules or other information or document
with respect to Taxes (as hereinafter defined)(collectively, "TAX RETURNS")
required to be filed by the Company have been timely filed (giving effect to
extensions granted with respect thereto), and all such Tax Returns are true,
correct and complete. The Company is not required to file any state Tax Returns
other than in the State of Minnesota.
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(ii) The Company has timely paid
all Taxes due or claimed to be due from it by any federal, state, local,
foreign or other taxing authority.
(iii) There are no liens for Taxes
upon the assets of the Company except Liens for Taxes not yet due and payable.
(iv) No Tax Returns of the
Company have been examined by the Internal Revenue Service (the "SERVICE"). No
deficiency for any Taxes has been proposed, asserted or assessed against
the Company which has not been resolved and paid in full. There are no
outstanding waivers, extensions 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 (including the time for filing of Tax Returns or
paying Taxes).
(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 could reasonably be expected
to have a Company Material Adverse Effect.
(vi) The Company has 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 has, 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) Other than as set forth in
Schedule 4.10(b)(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, and the Company has not received a written notice of any pending audits
or proceedings. Schedule 4.10(b)(vii) shall set forth the nature of any such
audit or proceeding, the type of Tax Return, any deficiencies proposed, asserted
or assessed and the amount thereof and the tax year in question.
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(viii) The Company is not a
party to, is bound by or has any obligation under, any Tax sharing,
allocation or indemnity agreement or similar contract or arrangement.
(ix) 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.
(x) No power of attorney granted
by the Company with respect to any Taxes is currently in force.
(xi) The Company has not, 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.
(xii) The Company has identified
for Parent all agreements, contracts and arrangements with the Company, and
has provided to Parent all such information as of the date hereof concerning the
Company and its employees as may be necessary to enable Parent to determine the
amount, if any, of any "excess parachute payment" within the meaning of Section
280G of the Code that could result solely from the transactions contemplated by
this Agreement.
(xiii) The Company is not and has not been
during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code a "United States real property holding company" (as defined in
Section 897(c)(2) of the Code).
(xiv) The Company has not
participated in, or cooperated with, an "international boycott" within the
meaning of Section 999 of the Code.
(xv) The charges, accruals and
reserves for Taxes reflected on the books of the Company are adequate under
GAAP to cover the Tax liabilities accruing or payable by the Company in respect
of periods prior to the date hereof.
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(xvi) The Company is not subject
to any joint venture, partnership or other arrangement or contract that is
treated as a partnership for U.S. federal income tax purposes.
(xvii) The Company is not
subject to liability for Taxes of any other person (other than with
respect to the Company), including, without limitation, liability arising from
the application of U.S. Treasury Regulation Section 1.1502-6 or any analogous
provision of Tax law.
(xviii) The shares of Company Common Stock
are of "a class of stock that is regularly traded on an established
securities market" within the meaning of Section 1445(b)(6) of the Code.
(c) For purposes of this Agreement, "TAXES"
(including, with correlative meaning, the term "Tax") shall include 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 with respect thereto imposed by
any taxing authority (domestic or foreign).
Section 4.11 INTELLECTUAL PROPERTY. The Company owns,
licenses or otherwise has such rights 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") as are material to the conduct of the
business
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of the Company as currently conducted. Set forth on Schedule 4.11 is a true
and complete listing of (i) all titles currently marketed by the Company,
whether owned by the Company or licensed from others, indicating which are
owned by the Company and, for any that are licensed from others, the identity
of the licensor, (ii) all of the Company's registered trademarks and pending
applications for trademark registrations, (iii) trademarks that are used in
conjunction with the titles currently marketed by the Company and are licensed
from third parties, indicating the identity of the licensor, and (iv) the
Company's registered copyrights and pending applications for copyright
registration. The rights of the Company to all such Intellectual Property are
in full force. Except as set forth on Schedule 4.11:
(a) the Company has the rights to bring
actions for the infringement of its rights to the Intellectual Property
necessary to protect such rights in the Intellectual Property, with
such exceptions as could not reasonably be expected to have in the aggregate a
Company Material Adverse Effect; Schedule 4.11(a) sets forth a list, for the
period from April 1, 1995 through September 30, 1995, of the twenty-one titles
the distribution of which generated for the Company the highest net revenue
during such period, such twenty-one titles accounting for at least 65% of the
net revenue generated from distribution of titles during such period,
indicating the net revenue generated during such period attributable to each of
such titles, and the aggregate amount of all ongoing, periodic royalties,
honoraria, fees or other payments paid by the Company during such period for
each such title to any individual, corporation, partnership, joint venture,
association, organization or other entity by reason of ownership, use,
licensure, sale or disposition of any Intellectual Property contained in or
relating to the use, sale or license of such title; 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 Company Material Adverse Effect or (ii) in any way impair any
currently existing right of the Company to use, sell, license or dispose of or
to bring any action for the in-
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fringement of any of the rights of the Company to the Intellectual
Property or any portion thereof;
(b) none of the former or present employees,
officers or directors of the Company holds any right, title or interest,
directly or indirectly, in whole or in part, in or to any Intellectual Property
owned by the Company; the Company does not license from any present or, to the
Company's knowledge, former employees, officers or directors of the Company any
Intellectual Property which is necessary for the business of the Company as
presently conducted; the Company is not a party to any employment contract,
patent disclosure agreement or any other contract or agreement with any employee
of the Company relating to any Intellectual Property;
(c) each license and other agreement with respect
to the use of any Intellectual Property currently used in the Company's business
is a valid, legally binding obligation of the Company and, to the best
knowledge of the Company, 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 Company 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 the Company is not 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 the
Company has no 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 Company 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 in the manner currently
proposed to be used, sold, licensed or disposed of by the
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Company does not and will not violate any license or agreement between the
Company and any third party or to the knowledge of the Company based on
representations and warranties from third parties from whom Intellectual
Property is licensed by the Company, infringe on the rights of any person, nor
has such an infringement been alleged within three years preceding the date of
this Agreement (other than such as have been resolved); there is no pending or
threatened claim or litigation challenging or questioning the validity,
ownership or right to use, sell, license or dispose of any Intellectual
Property in the manner in which currently used, sold, licensed or disposed of
by the Company, nor is there a valid basis for any such claim or litigation,
nor has the Company received any notice asserting that the proposed use, sale,
license or disposition by the Company of any of the Intellectual Property of
the Company conflicts or will conflict with the rights of any other party, nor
is there a valid basis for any such assertion in each case, with such
exceptions as could not reasonably be expected in the aggregate to have a
Company Material Adverse Effect; and the Company has not asserted any claim of
infringement, misappropriation or misuse within the past three years.
Section 4.12 STOCKHOLDER RIGHTS PLAN. The Company has
not proposed, adopted, approved or implemented any stockholder rights plan, or
authorized the issuance of any similar dividend or the distribution of any
securities to its stockholders, or entered into any agreement with respect to
the foregoing (any such plan, authorization, dividend, distribution or agreement
being referred to herein as a "STOCKHOLDER RIGHTS PLAN"), which could have the
effect of restricting, prohibiting, impeding or otherwise affecting the
consummation of the transactions contemplated by this Agreement or the Voting
Agreement, in each case by the respective parties thereto.
Section 4.13 INFORMATION IN DISCLOSURE DOCUMENTS AND
REGISTRATION STATEMENT. None of the information to be supplied by the Company
for inclusion in (i) the Registration Statement to be filed with the SEC by
Parent on Form S-4 under the Securities Act for the purpose of registering the
shares of Parent Common Stock to be issued in connection with the Merger (the
"REGISTRATION STATEMENT") or (ii) the joint proxy statement-
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prospectus to be distributed in connection with Parent's and the Company's
meetings of stockholders to vote upon this Agreement (the "PROXY
STATEMENT-PROSPECTUS") will, in the case of the Registration Statement, at the
time it becomes effective and at the Effective Time, or, in the case of the
Proxy Statement-Prospectus or any amendments thereof or supplements thereto, at
the time of the mailing of the Proxy Statement-Prospectus and any amendments or
supplements thereto, and at the time of the meeting of stockholders of the
Company to be held in connection with the Merger, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Proxy
Statement-Prospectus will comply as to form in all material respects with the
applicable provisions of the Exchange Act, and the rules and regulations
promulgated thereunder, except that no representation is made by the Company
with respect to statements made therein based on information supplied by Parent
or its representatives for inclusion in the Proxy Statement-Prospectus or with
respect to information concerning Parent or any of the Parent Subsidiaries
incorporated by reference in the Proxy Statement-Prospectus.
Section 4.14 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Schedule 4.14 hereto sets forth a true and
complete list of each employee benefit plan, arrangement or agreement that is
maintained, or was maintained or contributed to at any time during
the six (6) calendar years preceding the date of this Agreement
(the "COMPANY PLANS"), by the Company or by any trade or business, whether or
not incorporated (an "ERISA AFFILIATE"), which together with the Company would
be deemed a "single employer" within the meaning of Section 4001 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Neither
the Company nor any ERISA Affiliate has any formal plan or commitment to create
any additional plan or modify any existing Company Plan.
(b) Each of the Company Plans that is subject to
ERISA is in compliance with ERISA in all material respects; each of the
Company Plans intended to be "qualified" within the meaning of
Section 401(a) of the Code is so qualified, no event has occurred which may
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affect such qualification and the trusts maintained thereunder are exempt from
taxation under Section 501(a) of the Code; no Company Plan has an accumulated
or waived funding deficiency within the meaning of Section 412 of the Code;
neither the Company nor an ERISA Affiliate has incurred, directly or
indirectly, any material liability (including any material contingent
liability) to or on account of a Company Plan pursuant to Title IV of ERISA; no
proceedings have been instituted to terminate any Company Plan that is subject
to Title IV of ERISA; no "reportable event," as such term is defined in Section
4043(b) of ERISA, has occurred with respect to any Company Plan; and no
condition exists that presents a material risk to the Company or an ERISA
Affiliate of incurring a liability to or on account of a Company Plan pursuant
to Title IV of ERISA.
(c) The current value of the assets of
each of the Company Plans that are subject to Title IV of ERISA,
based upon the actuarial assumptions (to the extent reasonable) presently used
by the Company Plans, exceeds the present value of the accrued benefits under
each such Company Plan; no Company Plan is a multiemployer plan (within the
meaning of Section 4001(a)(3) of ERISA) and no Company Plan is a multiple
employer plan as defined in Section 413 of the Code; and all contributions or
other amounts payable by the Company as of the Effective Time with respect to
each Company Plan in respect of current or prior plan years have been either
paid or accrued on the balance sheet of the Company. There are no pending,
threatened or anticipated claims (other than routine claims for benefits) by,
on behalf of or against any of the Company Plans or any trusts related thereto.
(d) Neither the Company nor any ERISA
Affiliate, nor any Company Plan, nor any trust created thereunder, nor
any trustee or administrator thereof has engaged in a transaction in
connection with which the Company or any ERISA Affiliate, any Company
Plan, any such trust, or any trustee or administrator thereof, or any
party dealing with any Company Plan or any such trust could be subject to
either a material civil penalty assessed pursuant to Section 409 or 502(i) of
ERISA or a material tax imposed pursuant to Section 4975 or 4976 of the Code.
No amounts payable under the Company Plans will, individually or in the
aggregate, fail to be de-
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ductible for federal income tax purposes by virtue of Section 280G of the Code.
No Company Plan provides death or medical benefits (whether or not insured),
with respect to current or former employees of the Company or any ERISA
Affiliate beyond their retirement or other termination of service other than
(i) coverage mandated by applicable law or (ii) death benefits under any
"employee pension plan," as that term is defined in section 3(2) of ERISA. The
consummation of the transactions contemplated by this Agreement will not (i)
entitle any current or former employee or officer of the Company or any ERISA
Affiliate to severance pay, unemployment compensation or any other payment,
except as expressly provided in this Agreement or (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due any such
employee or officer.
Section 4.15 VOTE REQUIRED. The affirmative vote
of the holders of a majority of the outstanding shares of Company Common
Stock is the only vote of the holders of any class or series of
the Company's capital stock necessary to approve the Merger. The Board of
Directors of the Company (at a meeting duly called and held) has unanimously
(i) approved this Agreement, (ii) determined that the transactions contemplated
hereby are in the best interests of the holders of Company Common Stock and
(iii) determined to recommend this Agreement, the Merger and the other
transactions contemplated hereby to such holders for approval and adoption.
Section 4.16 OPINION OF FINANCIAL ADVISOR. The Company
has received the opinion of Allen & Company Incorporated ("Allen & Company"),
dated October 30, 1995, substantially to the effect that the consideration to be
received in the Merger by the holders of Company Common Stock is fair to such
holders from a financial point of view, a copy of which opinion has been
delivered to Parent.
Section 4.17 MBCA SECTIONS 302A.671 AND 302A.673. Prior
to the date hereof, the full Board of Directors of the Company has approved
this Agreement and, assuming that Parent is not, and prior to the Effective Time
will not be, the "beneficial owner" (as such term is defined in Section 302A.011
of the MBCA) of any shares of Company Common Stock other than pursuant to the
Voting Agreement, the Merger and the other transactions contem-
23
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plated hereby will not be subject to the provisions of Section 302A.671 or
Section 302A.673 of the MBCA.
Section 4.18 AFFILIATE TRANSACTIONS. Except as
disclosed in the Company SEC Reports, there are no material Contracts or
other transactions between the Company, on the one hand, and any (i) officer or
director of the Company, (ii) record or beneficial owner of five percent
or more of the voting securities of the Company or (iii) affiliate (as such term
is defined in Regulation 12b-2 promulgated under the Exchange Act) of any such
officer, director or beneficial owner, on the other hand.
Section 4.19 BROKERS. Except for its financial advisor,
Allen & Company, no broker, finder or financial advisor is entitled to any
brokerage, finder's or other fee or commission in connection with the Merger or
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company.
ARTICLE ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
----------------------------------------
Parent represents and warrants to the Company as follows:
Section 5.1 ORGANIZATION. (a) Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power to carry on its business as
it is now being conducted or presently proposed to be conducted. Parent is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities make such qualification necessary, except
where the failure to be so qualified will not have a Parent Material Adverse
Effect (as hereinafter defined). Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Minnesota. Sub has
not engaged in any business (other than in connection with this Agreement and
the transactions contemplated hereby) since the date of its incorporation.
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(b) Schedule 5.1(b) lists all of the Subsidiaries
of Parent which would be required to be set forth as an exhibit to Parent's
Annual Report on Form 10-K pursuant to the rules and regulations under the
Exchange Act (the "PARENT SUBSIDIARIES"). Each of the Parent Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization or incorporation 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, except for failures, if any, to be so organized,
validly existing or in good standing or to have such corporate power and
authority which would not in the aggregate have a Parent Material Adverse
Effect.
(c) The copies of the Certificate of
Incorporation and By-Laws of Parent heretofore delivered to the Company
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 "PARENT MATERIAL ADVERSE EFFECT" shall
mean that such event, change or effect is, individually or in the
aggregate, 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 Parent and the Parent Subsidiaries taken as a whole or to the ability of
Parent to consummate the Merger and the other transactions contemplated by this
Agreement.
Section 5.2 CAPITALIZATION.
(a) As of the date of this Agreement, the
authorized capital stock of Parent consists of 60,000,000 shares of
Parent Common Stock, of which 25,152,779 shares are issued and outstanding;
5,000,000 shares of Preferred Stock, par value $.01 per share, none of
which are issued and outstanding and one share of special voting stock,
par value $1.00 per share (the "Special Voting Share") which is issued and
outstanding. The Special Voting Share entitles the holder thereof, a Parent
Subsidiary, to vote, together with the holders of Parent Common Stock, on all
matters submitted for the vote of the holders of Parent Common Stock. The
number of votes represented by the Special Voting Share is equal to the
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<PAGE> 33
number of shares of such Parent Subsidiary outstanding which are exchangeable
into shares of Parent Common Stock. As of the date of this Agreement, options
to acquire 3,317,331 shares of Parent Common Stock (the "PARENT STOCK OPTIONS")
are outstanding under all stock option plans of Parent; 4,128,719 shares of
Parent Common Stock are reserved for issuance pursuant to the Parent Stock
Options and all other employee benefit plans of Parent and Parent Common Stock
warrants; 1,641,082 shares of Parent Common Stock are reserved for issuance
related to shares of capital stock of a Parent Subsidiary exchangeable into
shares of Parent Common Stock; and 7,594,340 shares of Parent Common Stock are
reserved for issuance in exchange for Parent's 5 1/2% Senior Convertible Notes
due 2000. All of the shares of Parent Common Stock issuable in exchange for
shares of Company Common Stock at the Effective Time in accordance with this
Agreement will be, when so issued, duly authorized, validly issued, fully paid
and nonassessable.
(b) The authorized capital stock of Sub
consists of one share of Sub Common Stock, which share, as of the date hereof,
is issued and outstanding, owned by Parent and is validly issued, fully
paid and nonassessable.
(c) Except as disclosed in this Section 5.2 or in
the Parent SEC Reports (as hereinafter defined), (i) there is no outstanding
right, subscription, warrant, call, unsatisfied preemptive right, option or
other agreement or arrangement of any kind to purchase or otherwise to receive
from Parent or Sub any of the outstanding authorized but unissued or treasury
shares of the capital stock or any other security of Parent or Sub, (ii) there
is no outstanding security of any kind convertible into or exchangeable for such
capital stock, and (iii) other than the Voting and Exchange Trust Agreement
dated as of February 4, 1994 among Parent, SoftKey Software Products Inc. and
the R-M Trust Company with respect to the Special Voting Share, there is no
voting trust or other agreement or understanding to which Parent or Sub is a
party or is bound with respect to the voting of the capital stock of Parent or
Sub.
(d) Except for qualifying shares required by
certain foreign jurisdictions, all of the issued and outstanding capital stock
of each of the Parent Subsid-
26
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iaries has been validly issued, is fully paid and nonassessable and is owned of
record and beneficially, directly or indirectly, by Parent, free of any Liens,
preemptive rights or other restrictions with respect thereto.
Section 5.3 AUTHORITY RELATIVE TO THIS AGREEMENT. Each
of Parent and Sub has the requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by each of Parent and Sub and the
consummation by Parent and Sub of the transactions contemplated on their part
hereby have been duly authorized by their respective Boards of Directors, and by
Parent as the sole stockholder of Sub, and, except for the approval of Parent's
stockholders (including the votes represented by the Special Voting Share) to be
sought at the stockholders' meeting contemplated by Section 7.4(b), no other
corporate proceedings on the part of Parent or Sub are necessary to authorize
this Agreement or for Parent and Sub to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by each
of Parent and Sub and constitutes a valid and binding agreement of each of
Parent and Sub, enforceable against Parent and Sub in accordance with its terms.
Section 5.4 CONSENTS AND APPROVALS; NO VIOLATIONS.
Neither the execution, delivery and performance of this Agreement by Parent or
Sub, nor the consummation by Parent or Sub of the transactions contemplated
hereby will (i) conflict with or result in any breach of any provisions of (x)
the Certificate of Incorporation or By-Laws of Parent or of Sub or (y) the
organizational documents of the Parent Subsidiaries, (ii) require a filing with,
or a permit, authorization, consent or approval of, any Governmental Entity
except in connection with or in order to comply with the applicable provisions
of the HSR Act, the filing of the Proxy Statement-Prospectus under the Exchange
Act, filings or approvals required under state or foreign laws relating to
takeovers, if applicable, state securities or "blue sky" laws, the By-Laws of
the NASD, and the filing and recordation of Articles of Merger as required by
the MBCA, (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, or result in the
creation of a Lien on any
27
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property or asset of Parent or any Parent Subsidiaries pursuant to, any of the
terms, conditions or provisions of any material Contract to which Parent or Sub
or any other Parent Subsidiary is a party or by which any of them or any of
their properties or assets may be bound or (iv) violate any law, order, writ,
injunction, decree, statute, rule or regulation of any Governmental Entity
applicable to Parent, Sub or any other Parent Subsidiary or any of their
properties or assets, except, in the case of clauses (ii), (iii) and (iv),
where the failure to make such filing or obtain such authorization, consent or
approval would not have, or where such violations, breaches or defaults or
Liens would not have, in any such case, a Parent Material Adverse Effect.
Section 5.5 REPORTS AND FINANCIAL STATEMENTS. Parent
has timely filed all reports required to be filed with the SEC pursuant to the
Exchange Act or the Securities Act since January 1, 1994 (collectively,
the "PARENT SEC REPORTS"), and has previously made available to the Company true
and complete copies of all such Parent SEC Reports. Such Parent SEC Reports, as
of their respective dates, complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be, and
none of such SEC Reports contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of Parent included in the Parent
SEC Reports have been prepared in accordance with GAAP consistently applied
throughout the periods indicated (except as otherwise noted therein or, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC) and fairly
present (subject, in the case of unaudited statements, to normal, recurring
year-end adjustments and any other adjustments described therein) the
consolidated financial position of Parent and its consolidated Subsidiaries as
at the dates thereof and the consolidated results of operations and cash flows
of Parent and its consolidated Subsidiaries for the periods then ended. Since
January 1, 1994, there has been no change in any of the significant accounting
(including tax accounting) policies, practices or procedures of the Parent or
any of its consolidated Subsidiaries.
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Section 5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS;
MATERIAL AGREEMENTS. Except as set forth in the Parent SEC Reports filed as of
the date of this Agreement, since December 31, 1994, (i) neither Parent
nor the Parent Subsidiaries has conducted its business and operations other than
in the ordinary course of business and consistent with past practices (except
for the discontinuation of operations in certain Subsidiaries acquired by
Parent) and (ii) there has not been any fact, event, circumstance or change
affecting or relating to Parent and the Parent Subsidiaries which has had or is
reasonably likely to have a Parent Material Adverse Effect.
Section 5.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except
for liabilities or obligations which are accrued or reserved against in Parent's
financial statements (or reflected in the notes thereto) included in the
Parent SEC Reports filed as of the date of this Agreement or which were incurred
after June 30, 1995 in the ordinary course of business and consistent with past
practices, none of Parent and the Parent Subsidiaries has any liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of a nature
required by GAAP to be reflected in a consolidated balance sheet (or reflected
in the notes thereto) or which could reasonably be expected to have a Parent
Material Adverse Effect.
Section 5.8 NO DEFAULT. Neither Parent nor any Parent
Subsidiary is in breach or violation, or in default under (and no event has
occurred which with notice or the lapse of time or both would constitute such
a breach, default or violation) of any term, condition or provision of (a) the
Parent's Certificate of Incorporation or By-Laws, or (b) (x) any order, writ,
decree, statute, rule or regulation of any Governmental Entity applicable to
Parent or any Parent Subsidiary or any of their properties or assets or (y) any
Contract to which the Parent or a Parent Subsidiary is a party or by which
Parent or a Parent Subsidiary or any of their properties or assets may be bound
except in the case of this clause (b), which breaches, violations or defaults,
individually or in the aggregate, would not have a Parent Material Adverse
Effect.
Section 5.9 INFORMATION IN DISCLOSURE DOCUMENTS AND
REGISTRATION STATEMENT. None of the information to be supplied by Parent
or Sub for inclusion in (i)
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the Registration Statement or (ii) the Proxy Statement-Prospectus will in the
case of the Registration Statement, at the time it becomes effective and at the
Effective Time, or, in the case of the Proxy Statement-Prospectus or any
amendments thereof or supplements thereto, at the time of the mailing of the
Proxy Statement-Prospectus and any amendments or supplements thereto, and at
the time of the meeting of stockholders of Parent to be held in connection with
the Merger, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are
made, not misleading. The Registration Statement and the Proxy Statement-
Prospectus will comply as to form in all material respects with the applicable
provisions of the Securities Act and the Exchange Act, and the rules and
regulations promulgated thereunder, except that no representation is made by
Parent with respect to statements made therein based on information supplied by
the Company or its representatives for inclusion in the Registration Statement
or the Proxy Statement-Prospectus or with respect to information concerning the
Company incorporated by reference in the Registration Statement or the Proxy
Statement-Prospectus.
Section 5.10 VOTE REQUIRED. The affirmative vote of
the holders of a majority of the shares of Parent Common Stock (including
the votes represented by the Special Voting Share) present in person or
represented by proxy at the stockholders meeting of Parent contemplated by
Section 7.4(b) (provided that the shares so present or represented constitute a
majority of the outstanding shares of Parent Common Stock) is the only vote of
the holders of any class or series of Parent capital stock necessary to approve
the issuance of shares of Parent Common Stock pursuant to the Merger. The
affirmative vote of Parent, as the sole stockholder of all outstanding shares of
Sub Common Stock, is the only vote of the holders of any class or series of Sub
capital stock necessary to approve the Merger. The Board of Directors of Parent
(at a meeting duly called and held) has unanimously (i) approved this Agreement,
(ii) determined that the transactions contemplated hereby are fair to and in the
best interests of Parent and the holders of Parent Common Stock, and (iii)
determined to cause Parent, as the sole stockholder of Sub, to approve and adopt
this
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Agreement. The Board of Directors of Sub (by unanimous written consent) has
approved this Agreement.
Section 5.11 OPINION OF FINANCIAL ADVISOR. Parent has
received the opinion of Bear, Stearns & Co. Inc. ("BEAR STEARNS"), dated
October 30, 1995, substantially to the effect that the Merger is fair to
the stockholders of Parent from a financial point of view, a copy of which
opinion has been delivered to the Company.
ARTICLE ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
--------------------------------------
Section 6.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING
THE MERGER. Prior to the Effective Time, unless Parent shall otherwise agree
in writing, or as set forth on Schedule 6.1 or as otherwise expressly
contemplated by this Agreement:
(a) the Company shall conduct its business only in
the ordinary and usual course consistent with past practice, and the
Company shall use its reasonable efforts to preserve intact the present business
organization, keep available the services of its present officers and key
employees, and preserve the goodwill of those having business relationships with
it; the Company shall not hire any person to any position within the Company or
as a consultant to the Company where the total annual compensation payable to
such person, whether in cash or otherwise, would exceed $75,000;
(b) the Company shall not (i) amend its charter,
by-laws or other organizational documents, (ii) split, combine or reclassify any
shares of its outstanding capital stock, (iii) declare, set aside or pay any
dividend or other distribution payable in cash, stock or property, or (iv)
directly or indirectly redeem or otherwise acquire any shares of its capital
stock;
(c) the Company shall not (i) authorize for
issuance, issue or sell or agree to issue or sell any shares of, or rights or
securities of any kind to acquire, rights or securities convertible into any
shares of, its capital stock (whether through the issuance or granting of
options, warrants, commitments, subscrip-
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tions, rights to purchase or otherwise), except for the issuance of shares of
Company Common Stock upon the exercise of Company Stock Options outstanding on
the date of this Agreement; (ii) merge or consolidate with another entity
(other than transactions pending as of the date hereof that have been disclosed
to Parent); (iii) acquire or purchase an equity interest in or a substantial
portion of the assets of another corporation, partnership or other business
organization or otherwise acquire any assets outside the ordinary and usual
course of business and consistent with past practice or otherwise enter into
any material contract, commitment or transaction outside the ordinary and usual
course of business consistent with past practice; (iv) sell, lease, license,
waive, release, transfer, encumber or otherwise dispose of any of its assets
outside the ordinary and usual course of business and consistent with past
practice; (v) incur, assume or prepay any material indebtedness or any other
material liabilities other than in the ordinary course of business and
consistent with past practice; (vi) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person in the ordinary course of business and
consistent with past practice; (vii) make any loans, advances or capital
contributions to, or investments in, any other person; (viii) authorize or make
capital expenditures in excess of the amounts currently budgeted therefor; (ix)
permit any insurance policy naming the Company as a beneficiary or a loss payee
to be cancelled or terminated other than in the ordinary course of business; or
(x) enter into any contract, agreement, commitment or arrangement with respect
to any of the foregoing;
(d) the Company shall not (i) adopt, enter into,
terminate or amend (except as may be required by applicable law) any
Company Plan or other arrangement for the current or future benefit or welfare
of any director, officer or current or former employee, (ii) increase in any
manner the compensation or fringe benefits of, or pay any bonus to, any
director, officer or employee (except for normal increases in salaried
compensation in the ordinary course of business consistent with past practice),
or (iii) take any action to fund or in any other way secure, or to accelerate or
otherwise remove restrictions with respect to, the payment of compensation or
benefits under any employee plan, agreement,
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contract, arrangement or other Company Plan (including the Company Stock
Options);
(e) the Company shall not take any action with
respect to, or make any material change in, its accounting policies or
procedures;
(f) the Company shall not knowingly take any
action which would jeopardize qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code;
(g) the Company shall not make any Tax election
or settle or compromise any income Tax liability or file any income tax
return prior to the last day (including extensions) prescribed by law, in the
case of any of the foregoing, material to the business, financial condition or
results of operations of the Company;
(h) the Company shall not propose, adopt, approve
or implement any Stockholder Rights Plan which could have the effect of
restricting, prohibiting, impeding or otherwise affecting the consummation of
the transactions contemplated by this Agreement or the Voting Agreement, in each
case by the respective parties thereto.
Section 6.2 CONDUCT OF BUSINESS BY PARENT PENDING THE
MERGER. Prior to the Effective Time, unless the Company shall otherwise
agree in writing, or as otherwise expressly contemplated by this Agreement:
(a) the business of Parent and the Parent
Subsidiaries shall be conducted only in the ordinary and usual course
consistent with past practice, and Parent shall use its reasonable efforts to
preserve intact the present business organization, to keep available the
services of its present officers and key employees, and preserve the goodwill of
those having business relationships with it;
(b) Parent shall not declare, set aside or pay
any dividend or other distribution payable in cash, stock or property;
(c) Parent shall not split, combine or reclassify
the outstanding Parent Common Stock;
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(d) neither Parent nor Sub shall take any action
with respect to, or make any material change in, its accounting policies
or procedures;
(e) neither Parent nor Sub shall knowingly take any
action which would jeopardize qualification of the Merger as a reorganization
within the meaning of Section 368(a) of the Code.
Section 6.3 CONDUCT OF BUSINESS OF SUB. During the period
from the date of this Agreement to the Effective Time, Sub shall not engage in
any activities of any nature except as provided in or contemplated by
this Agreement.
ARTICLE ARTICLE VII
ADDITIONAL AGREEMENTS
---------------------
Section 7.1 ACCESS AND INFORMATION. Each of the Company
and Parent shall (and shall cause its Subsidiaries and its and their
respective officers, directors, employees, auditors and agents to) afford to the
other and to the other's officers, employees, financial advisors, legal counsel,
accountants, consultants and other representatives reasonable access during
normal business hours throughout the period prior to the Effective Time to all
of its books and records (other than privileged documents and subject to any
confidentiality provisions applicable to communications between any party and
its counsel) and its properties, plants and personnel and, during such period,
each shall furnish promptly to the other a copy of each report, schedule and
other document filed or received by it pursuant to the requirements of federal
securities laws, provided that no investigation pursuant to this Section 7.1
shall affect any representations or warranties made herein or the conditions to
the obligations of the respective parties to consummate the Merger. Unless
otherwise required by law, each party agrees that it (and its Subsidiaries and
its and their respective representatives) shall hold in confidence all
non-public information so acquired in accordance with the terms of the
confidentiality agreement, dated October 18, 1995 between Parent and the Company
(the "CONFIDENTIALITY AGREEMENT").
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Section 7.2 NO OTHER NEGOTIATIONS. (a) Upon execution of
this Agreement, the Company is not engaged in or shall immediately terminate,
any discussions with any third party concerning an Alternative Acquisition
(as defined below). From and after the date of this Agreement until the earlier
of the Effective Time or the termination of this Agreement in accordance with
its terms, the Company shall not, directly or indirectly, (a) solicit, engage in
discussions or negotiate with any person (whether such discussions or
negotiations are initiated by the Company or otherwise) or take any other action
intended or designed to facilitate the efforts of any person, other than Parent,
relating to the possible acquisition of the Company (whether by way of merger,
purchase of capital stock, purchase of assets or otherwise) or any material
portion of its capital stock or assets (with any such efforts by any such
person, including a firm proposal to make such an acquisition, to be referred to
as an "ALTERNATIVE ACQUISITION"), (b) provide information with respect to the
Company to any person, other than Parent, relating to a possible Alternative
Acquisition by any person, other than Parent, (c) enter into an agreement with
any person, other than Parent, providing for a possible Alternative Acquisition,
or (d) make or authorize any statement, recommendation or solicitation in
support of any possible Alternative Acquisition by any person, other than by
Parent.
Notwithstanding the foregoing, the restrictions set forth in
this Agreement shall not prevent the Board of Directors of the Company (or its
agents pursuant to its instructions) from taking any of the following actions:
(a) furnishing information concerning the Company and its business, properties
and assets to any third party or (b) negotiating with such third party
concerning an Alternative Acquisition provided that all of the following events
shall have occurred: (1) such third party has made a written proposal to the
Board of Directors of the Company (which proposal may be conditional) to
consummate an Alternative Acquisition which proposal identifies a price or
range of values to be paid for the outstanding securities or substantially all
of the assets of the Company, and if consummated, based on the advice of the
Company's investment bankers, the Board of Directors of the Company has
determined is financially more favorable to the stockholders of the Company
than the terms of the Merger (a "SUPERIOR PROPOSAL"); (2) the
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Company's Board of Directors has determined, based on the advice of its
investment bankers, that such third party is financially capable of
consummating such Superior Proposal; (3) the Board of Directors of the Company
shall have determined, after consultation with its outside legal counsel, that
the fiduciary duties of the Board of Directors of the Company require the
Company to furnish information to and negotiate with such third party; and (4)
Parent shall have been notified in writing of such Superior Proposal, including
all of its terms and conditions, and shall have been given copies of such
proposal. Notwithstanding the foregoing, the Company shall not provide any
non-public information to such third party unless (1) the Company has prior to
the date thereof provided such information to Parent's representatives; (2) the
Company has notified Parent in advance of any such proposed disclosure of
non-public information to any such third party, with a description of the
information proposed to be disclosed; and (3) the Company provides such
non-public information pursuant to a nondisclosure agreement with terms which
are at least as restrictive as the nondisclosure agreement heretofore entered
into between Parent and the Company.
In addition to the foregoing, the Company shall not accept or
enter into any agreement concerning an Alternative Acquisition for a period of
not less than 48 hours after Parent's receipt of a copy of such proposal of an
Alternative Acquisition. Upon compliance with the foregoing, the Company shall
be entitled to (1) not recommend or change its recommendation concerning the
Merger; and (2) enter into an agreement with such third party concerning an
Alternative Acquisition provided that the Company shall immediately make
payment in full to Parent of the Termination Fee as defined in Section 9.2(b)
below.
(b) If the Company receives any unsolicited offer
or proposal to enter into discussions or negotiations relating to an
Alternative Acquisition, the Company shall notify Parent thereof within
twenty-four hours of the Company's receipt thereof, including information as to
the identity of the party making any such offer or proposal and the specific
terms of such offer or proposal, as the case may be.
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The Company shall be entitled to provide copies of this
Section 7.2 to third parties who on an entirely unsolicited basis after the
date hereof, contact the Company concerning an Alternative Acquisition;
provided that Parent shall concurrently be notified of such contact and the
delivery of such copy.
Section 7.3 REGISTRATION STATEMENT. As promptly as
practicable, Parent and the Company shall in consultation with each other
prepare and file with the SEC the Proxy Statement-Prospectus and Parent, in
consultation with the Company, shall prepare and file with the SEC the
Registration Statement. Each of Parent and the Company shall use its reasonable
best efforts to have the Registration Statement declared effective as soon as
practicable. Parent shall also use its reasonable best efforts to take any
action required to be taken under state securities or blue sky laws in
connection with the issuance of the shares of Parent Common Stock pursuant to
this Agreement in the Merger. The Company shall furnish Parent with all
information concerning the Company and the holders of its capital stock and
shall take such other action as Parent may reasonably request in connection with
the Registration Statement and the issuance of shares of Parent Common Stock.
If at any time prior to the Effective Time any event or circumstance relating to
Parent, any Subsidiary of Parent, the Company, or their respective officers or
directors, should be discovered by such party which should be set forth in an
amendment or a supplement to the Registration Statement or the Proxy
Statement-Prospectus, such party shall promptly inform the other thereof and
take appropriate action in respect thereof.
Section 7.4 PROXY STATEMENT-PROSPECTUS; STOCKHOLDER
APPROVALS.
(a) The Company, acting through its Board
of Directors, shall, subject to and in accordance with applicable law and its
Articles of Incorporation and By-Laws, promptly and duly call, give notice of,
convene and hold as soon as practicable following the date upon which the
Registration Statement becomes effective a meeting of the holders of Company
Common Stock for the purpose of voting to approve and adopt this Agreement and
the transactions contemplated hereby, and, subject to the fiduciary duties of
the Board of Directors of the Company under
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applicable law as advised by outside legal counsel, (i) recommend approval and
adoption of this Agreement and the transactions contemplated hereby by the
stockholders of the Company and include in the Proxy Statement-Prospectus such
recommendation, and (ii) take all reasonable and lawful action to solicit and
obtain such approval.
(b) Parent, acting through its Board of Directors,
shall, subject to and in accordance with applicable law and its
Certificate of Incorporation and By-Laws, promptly and duly call, give notice
of, convene and hold as soon as practicable following the date upon which the
Registration Statement becomes effective a meeting of the holders of Parent
Common Stock for the purpose of voting to approve the issuance of the shares of
Parent Common Stock to be issued in the Merger, and, subject to the fiduciary
duties of the Board of Directors of Parent under applicable law as advised by
outside counsel, (i) recommend approval of such issuance by the stockholders of
Parent and include in the Proxy Statement-Prospectus such recommendation, and
(ii) take all reasonable and lawful action to solicit and obtain such approval.
(c) Parent and the Company, as promptly as
practicable (or with such other timing as Parent and the Company mutually
agree), shall cause the definitive Proxy Statement-Prospectus to be mailed to
the Company's stockholders.
(d) At or prior to the Closing, each of Parent
and the Company shall deliver to the other a certificate of its Secretary
setting forth the voting results from its stockholder meeting.
Section 7.5 COMPLIANCE WITH THE SECURITIES ACT.
(a) At least 30 days prior to the Effective Time,
the Company shall cause to be delivered to Parent a list identifying all
persons who were, in its reasonable judgment, at the record date for the
Company's stockholders' meeting convened in accordance with Section 7.4(a)
hereof, "affiliates" of the Company as that term is used in paragraphs (c) and
(d) of Rule 145 under the Securities Act (the "AFFILIATES").
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(b) The Company shall use its reasonable best
efforts to cause each person who is identified as one of its Affiliates in its
list referred to in Section 7.5(a) above to deliver to Parent (with a copy to
the Company), at or prior to the Effective Time, a written agreement, in the
form attached hereto as Exhibit B, (the "AFFILIATE LETTERS").
(c) If any Affiliate of the Company refuses to
provide an Affiliate Letter, Parent may place appropriate legends on the
certificates evidencing the shares of Parent Common Stock to be received by such
Affiliate pursuant to the terms of this Agreement and to issue appropriate stop
transfer instructions to the transfer agent for shares of Parent Common Stock to
the effect that the shares of Parent Common Stock received by such Affiliate
pursuant to this Agreement only may be sold, transferred or otherwise conveyed
(i) pursuant to an effective registration statement under the Securities Act,
(ii) in compliance with Rule 145 promulgated under the Securities Act, or (iii)
pursuant to another exemption under the Securities Act.
Section 7.6 BEST EFFORTS. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use its best
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including, without limitation, the obtaining of all necessary
waivers, consents and approvals and the effecting of all necessary registrations
and filings. Without limiting the generality of the foregoing, as promptly as
practicable, the Company, Parent and Sub shall make all filings and submissions
under the HSR Act as may be reasonably required to be made in connection with
this Agreement and the transactions contemplated hereby. Subject to the
Confidentiality Agreement, the Company will furnish to Parent and Sub, and
Parent and Sub will furnish to the Company, such information and assistance as
the other may reasonably request in connection with the preparation of any such
filings or submissions. Subject to the Confidentiality Agreement, the Company
will provide Parent and Sub, and Parent and Sub will provide the Company, with
copies of all material written correspondence, filings and communications (or
memoranda setting forth the sub-
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stance thereof) between such party or any of its representatives and any
Governmental Entity, with respect to the obtaining of any waivers, consent or
approvals and the making of any registrations or filings, in each case that is
necessary to consummate the Merger and the other transactions contemplated
hereby. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers or directors of Parent and the Surviving Corporation shall take all
such necessary action. Each of the parties will use its reasonable efforts to
ensure that the tax opinion to be delivered by its counsel pursuant to Section
8.2(d) or 8.3(c), as the case may be, be delivered and not withdrawn or
modified in any material respect (including with respect to any restructuring
of the Merger contemplated by Section 1.1 hereof).
Section 7.7 VOTING AGREEMENT. Concurrently herewith,
and as an essential inducement for Parent's entering into this Agreement,
Parent is entering into the Voting Agreement with North American Fund II, L.P.
("NORTH AMERICAN") with respect to certain shares of Company Common Stock owned
(beneficially or of record) by North American.
Section 7.8 COMPANY STOCK OPTIONS. At the Effective Time,
each of the Company Stock Options which is outstanding immediately prior to
the Effective Time shall be assumed by Parent and converted automatically into
an option to purchase shares of Parent Common Stock (a "NEW OPTION") in an
amount and at an exercise price determined as provided below:
(a) The number of shares of Parent Common Stock
to be subject to the New Option shall be equal to the product of the number of
shares of Company Common Stock remaining subject (as of immediately prior to the
Effective Time) to the original option and the Exchange Ratio, provided that any
fractional shares of Parent Common Stock resulting from such multiplication
shall be rounded down to the nearest share; and
(b) The exercise price per share of Parent
Common Stock under the New Option shall be equal to the exercise price per share
of Company Common Stock under the original option divided by the Exchange Ratio,
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provided that such exercise price shall be rounded up to the nearest cent.
The adjustment provided herein with respect to any options which are "incentive
stock options" (as defined in Section 422 of the Code) shall be and is intended
to be effected in a manner which is consistent with Section 424(a) of the Code.
After the Effective Time, each New Option shall be exercisable and shall vest
upon the same terms and conditions as were applicable to the related Company
Stock Option immediately prior to the Effective Time, except that all
references to the Company shall be deemed to be references to Parent and
provided that as to each employee of the Company identified on SCHEDULE 7.8,
Parent agrees to take all necessary action to provide that upon such employee's
termination of employment with Parent or with any Subsidiary of Parent for any
reason, other than a voluntary termination by such employee or termination for
Cause (as defined herein), each New Option held by each such employee shall
become fully vested. As used herein the term "Cause" means (x) the willful and
continued failure of the employee to perform his duties and responsibilities
with the Surviving Corporation or to comply with reasonable directions of his
superiors that is not cured to the Surviving Corporation's satisfaction within
15 days after written notice to the employee by such superiors specifying in
reasonable detail the manner in which the employee has failed to perform such
duties and responsibilities or comply with such directions; (y) the conviction
of the employee of a criminal offense involving fraud, dishonesty or moral
turpitude; or (z) the engaging by the employee in any act which is intended to
be, and is, materially injurious to the Parent, monetarily or otherwise which
is not cured (if curable) to the Surviving Corporation's satisfaction within 15
days after notice to the employee by such employee's superiors. Parent shall
file with the SEC a registration statement on Form S-8 (or other appropriate
form) or a post-effective amendment to the Registration Statement for purposes
of registering all shares of Parent Common Stock issuable after the Effective
Time upon exercise of the New Options, and use all reasonable efforts to have
such registration statement or post-effective amendment become effective with
respect thereto as promptly as practicable after the Effective Time.
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Section 7.9 PUBLIC ANNOUNCEMENTS. Each of Parent,
Sub, and the Company agrees that it will not issue any press release or
otherwise make any public statement with respect to this Agreement (including
the Exhibits hereto) or the transactions contemplated hereby or thereby without
the prior consent of the other party, which consent shall not be unreasonably
withheld or delayed; PROVIDED, HOWEVER, that such disclosure can be made without
obtaining such prior consent if (i) the disclosure is required by law or by
obligations imposed pursuant to any listing agreement with the NNM or any
national securities exchange and (ii) the party making such disclosure has first
used its best efforts to consult with the other party about the form and
substance of such disclosure.
Section 7.10 DIRECTORS' AND OFFICERS' INDEMNIFICATION.
All rights to indemnification, advancement of litigation expenses and
limitation of personal liability existing in favor of the directors and officers
of the Company under the provisions existing on the date hereof in the Company's
Articles of Incorporation or By-Laws shall, with respect to any matter existing
or occurring at or prior to the Effective Time (including the transactions
contemplated by this Agreement), survive the Effective Time, and, as of the
Effective Time, the Surviving Corporation shall assume all obligations of the
Company in respect thereof as to any claim or claims asserted prior to or within
a six-year period immediately after the Effective Time.
Section 7.11 EXPENSES. Except as otherwise set forth in
Section 9.2(b), whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement (including the Exhibits
hereto) and the transactions contemplated hereby shall be paid by the party
incurring such expenses, except that sixty percent (60%) and forty percent (40%)
of the following expenses shall be borne by Parent and the Company,
respectively: (i) the filing fee in connection with filings under the HSR Act,
(ii) the expenses incurred in connection with printing the Registration
Statement and the Proxy Statement and (iii) the filing fee with the SEC relating
to the Registration Statement or the Proxy Statement.
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Section 7.12 LISTING APPLICATION. Parent will use
its reasonable best efforts to cause the shares of Parent Common Stock to
be issued pursuant to this Agreement in the Merger to be listed for quotation on
the NNM.
Section 7.13 SUPPLEMENTAL DISCLOSURE. The Company shall give prompt notice
to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence, or non-occurrence, of any event the occurrence, or non-occurrence,
of which would be likely to cause (x) any representation or warranty contained
in this Agreement to be untrue or inaccurate or (y) any covenant, condition or
agreement contained in this Agreement not to be complied with or satisfied and
(ii) any failure of the Company or Parent, as the case may be, to comply with
or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; PROVIDED, HOWEVER, that the delivery of any notice
pursuant to this Section 7.13 shall not have any effect for the purpose of
determining the satisfaction of the conditions set forth in Article VIII of
this Agreement or otherwise limit or affect the remedies available hereunder to
any party.
Section 7.14 LETTERS OF ACCOUNTANTS.
(a) Parent shall use all reasonable efforts to
cause to be delivered to the Company a letter of Coopers & Lybrand
L.L.P., Parent's independent auditors, dated a date within two business days
before the date on which the Registration Statement shall become effective and
addressed to the Company, in form and substance reasonably satisfactory to the
Company and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Registration Statement, which letter shall be brought down to the
Effective Time.
(b) The Company shall use all reasonable best
efforts to cause to be delivered to Parent a letter of Deloitte & Touche, the
Company's independent auditors, dated a date within two business days before the
date on which the Registration State shall become effective and addressed to
Parent, in form and substance reasonably satisfactory to Parent and customary in
scope and substance for letters delivered by independent public accountants in
connection with registration statements
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similar to the Registration Statement, which letter shall be brought down to
the Effective Time.
Section 7.15 CONVEYANCE TAXES. Parent and the
Company shall cooperate in the preparation, execution and filing of all
returns, questionnaires, applications, or other documents regarding (i) any real
property transfer gains, sales, use, transfer, value-added, stock transfer, and
stamp taxes, (ii) any recording, registration and other fees, and (iii) any
similar taxes or fees that become payable in connection with the transactions
contemplated hereby that are required or permitted to be filed on or before the
Effective Time.
Section 7.16 NON-SOLICITATION OF EMPLOYEES. Each of
Parent and the Company agree, for a period of one year from the date hereof,
not to directly or indirectly solicit any employee of the other or to induce or
encourage any employee of the other to terminate such employee's employment.
Section 7.17 EXCHANGE ACT FILINGS. For so long as Parent
may be required to do so pursuant to the Purchase Agreements with the
purchasers of its 5 1/2% Senior Convertible Notes Due 2000, Parent shall timely
file with the SEC all reports required to be filed with the SEC pursuant to the
Exchange Act.
ARTICLE ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
----------------------------------------
Section 8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO
EFFECT THE MERGER. The respective obligations of each party to effect the
Merger shall be subject to the satisfaction at or prior to the Effective Time of
the following conditions:
(a) HSR Approval. Any waiting period applicable to
the consummation of the Merger under the HSR Act shall have expired or
been terminated, and no action shall have been instituted by the Department of
Justice or Federal Trade Commission challenging or seeking to enjoin the
consummation of this transaction, which action shall have not been withdrawn or
terminated.
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(b) Stockholder Approval. This Agreement and
the transactions contemplated hereby shall have been approved and adopted by the
requisite vote (as described in Section 4.15) of the stockholders of the Company
in accordance with applicable law and the issuance of the shares of Parent
Common Stock to be issued in the Merger shall have been approved by the
requisite vote (as described in Section 5.10) of the stockholders of Parent in
accordance with the requirements of the rules of the NNM.
(c) NNM Listing for Quotation. The shares
of Parent Common Stock issuable to the holders of Company Common Stock
pursuant to this Agreement in the Merger shall have been authorized for listing
on the NNM, upon official notice of issuance.
(d) Registration Statement. The Registration
Statement shall have become effective under the Securities Act and shall not be
the subject of any stop order or proceeding by the SEC seeking a stop order.
(e) No Order. No Governmental Entity (including
a federal or state court) of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and which materially restricts, prevents or
prohibits consummation of the Merger or any transaction contemplated by this
Agreement; PROVIDED, HOWEVER, that the parties shall use their reasonable best
efforts to cause any such decree, judgment, injunction or other order to be
vacated or lifted.
(f) Approvals. Other than the filing of Merger
documents in accordance with the MBCA, all authorizations, consents,
waivers, orders or approvals of, or declarations or filings with, or expirations
of waiting periods imposed by, any Governmental Entity that are listed on
Schedule 8.1(f), or the failure of which to obtain, make or occur would have a
material adverse effect at or after the Effective Time on Parent or the
Surviving Corporation shall have been obtained, been filed or have occurred.
Parent shall have received all state securities or "blue sky" permits and other
authorizations necessary to issue the shares of Parent Common Stock pursuant to
this Agreement in the Merger.
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Section 8.2 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB
TO EFFECT THE MERGER. The obligations of Parent and Sub to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of
the following additional conditions, unless waived in writing by Parent:
(a) Representations and Warranties. (i) The
aggregate effect of all inaccuracies in the representations and warranties of
the Company set forth in this Agreement does not and will not have a material
adverse effect on 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 (ii)
the representations and warranties of the Company that are qualified with
reference to a Company Material Adverse Effect or materiality shall be true and
correct and the representations and warranties that are not so qualified shall
be true and correct in all material respects, in each case as of the date
hereof, and, except to the extent such representations and warranties speak as
of an earlier date, as of the Effective Time as though made at and as of the
Effective Time, and Parent shall have received a certificate signed on behalf of
the Company by the chief executive officer or the chief financial officer of the
Company to such effect.
(b) Performance of Obligations of the Company. The
Company shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the Effective
Time, and Parent shall have received a certificate signed on behalf of the
Company by the chief executive officer or the chief financial officer of the
Company to such effect.
(c) Affiliate Letters. Parent shall have received
the Affiliate Letters from each of the Affiliates of the Company, as
contemplated in Section 7.5.
(d) Tax Opinion of Counsel. Parent shall have
received an opinion of Skadden, Arps, Slate, Meagher & Flom ("SKADDEN, ARPS")
dated on or about the date that is two business days prior to the date the Proxy
Statement-Prospectus is first mailed to stockholders of the Company to the
effect that the Merger will constitute a
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reorganization for federal income tax purposes within the meaning of Section
368(a) of the Code, which opinion shall not have been withdrawn or modified in
any material respect.
In rendering such opinion, Skadden, Arps may require and rely upon
representations contained in certificates of officers of Parent, Sub and the
Company, certain stockholders and others dated on or before the date of such
opinion and shall not have been withdrawn or modified in any material respect;
PROVIDED, HOWEVER, that the condition set forth in this Section 8.2(d) shall be
deemed to be satisfied if Skadden, Arps is unable to render such opinion solely
by reason of any of the holders of Company Common Stock refusing or failing to
provide Skadden, Arps with requested representations. The specific provisions
of each such certificate and representation shall be in form and substance
satisfactory to Skadden, Arps.
Section 8.3 CONDITIONS TO OBLIGATION OF THE COMPANY TO
EFFECT THE MERGER. The obligation of the Company to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following additional conditions:
(a) Representations and Warranties. (i) The
aggregate effect of all inaccuracies in the representations and warranties
of Parent set forth in this Agreement does not and will not have a material
adverse effect on the business, operations, prospects, properties, assets
(including intangible assets), liabilities (including contingent liabilities),
condition (financial or other) or results of operations of the Parent and (ii)
the representations and warranties of Parent contained in this Agreement that
are qualified with reference to a Parent Material Adverse Effect or materiality
shall be true and correct and the representations and warranties that are not so
qualified shall be true and correct in all material respects as of the date
hereof, and, except to the extent such representations and warranties speak as
of an earlier date, as of the Effective Time as though made on and as of the
Effective Time, and the Company shall have received a certificate signed on
behalf of Parent by the chief executive officer or the chief operating officer
of Parent to such effect.
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(b) Performance of Obligations of Parent and Sub.
Each of Parent and Sub shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Effective Time, and the Company shall have received a certificate signed on
behalf of Parent by the chief executive officer or the chief operating officer
of Parent to such effect.
(c) Tax Opinion of Counsel. The Company shall
have received an opinion of Gardner, Carton & Douglas ("GARDNER, CARTON") dated
on or about the date that is two business days prior to the date the Proxy
Statement-Prospectus is first mailed to stockholders of the Company to the
effect that the Merger will constitute a reorganization for federal income tax
purposes within the meaning of Section 368(a) of the Code, which opinion shall
not have been withdrawn or modified in any material respect.
In rendering such opinion, Gardner, Carton may require and
rely upon representations contained in certificates of officers of Parent, Sub
and the Company, certain stockholders and others dated on or before the date of
such opinion and shall not have been withdrawn or modified in any material
respect; PROVIDED, HOWEVER, that the condition set forth in this Section 8.3(c)
shall be deemed to be satisfied if Gardner, Carton is unable to render such
opinion solely by reason of any of the holders of Company Common Stock refusing
or failing to provide Gardner, Carton with requested representations. The
specific provisions of each such certificate and representation shall be in
form and substance satisfactory to Gardner, Carton.
ARTICLE ARTICLE IX
TERMINATION
-----------
Section 9.1 TERMINATION. This Agreement may be
terminated at any time prior to the Effective Time, whether before or after
approval by the stockholders of Parent or the Company:
(a) by mutual consent of Parent and the Company;
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(b) by either Parent or the Company, if the
Merger shall not have been consummated before June 30, 1996 (unless the
failure to so consummate the Merger by such date shall be due to the action or
failure to act of the party (or its Subsidiaries, if any) seeking to terminate
this Agreement, which action or failure to act constitutes a breach of this
Agreement);
(c) by either Parent or the Company, if any
permanent injunction or action by any Governmental Entity of competent
jurisdiction preventing the consummation of the Merger shall have become final
and nonappealable;
(d) by Parent, if (i) there has been a breach of
any representations or warranties of the Company set forth herein the effect
of which is a Company Material Adverse Effect, (ii) there has been a breach in
any material respect of any of the covenants or agreements set forth in this
Agreement on the part of the Company, which breach is not curable or, if
curable, is not cured within 30 days after written notice of such breach is
given by Parent to the Company, or (iii) the Board of Directors of the Company
(x) fails to recommend approval and adoption of this Agreement and the Merger by
the stockholders of the Company or withdraws or amends or modifies in a manner
adverse to Parent and Sub its recommendation or approval in respect of this
Agreement or the Merger, (y) makes any recommendation with respect to an
Alternative Acquisition other than a recommendation to reject such Alternative
Acquisition, or (z) takes any action prohibited by Section 7.2;
(e) by the Company, if (i) there has been a
breach of any representations or warranties of Parent set forth herein the
effect of which is a Parent Material Adverse Effect, (ii) there has been a
breach in any material respect of any of the covenants or agreements set forth
in this Agreement on the part of Parent, which breach is not curable or, if
curable, is not cured within 30 days after written notice of such breach is
given by the Company to Parent or (iii) such termination is necessary to allow
the Company to enter into an agreement with respect to a Superior Proposal
(provided that the termination described in this clause (iii) shall not be
effective unless and until the Company shall have paid to
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Parent in full the fee and expense reimbursement described in Section 9.2(b))
Section 9.2 EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement
pursuant to this Article IX, the Merger shall be deemed abandoned and
this Agreement shall forthwith become void, without liability on the part of any
party hereto, except as provided in this Section 9.2, Section 7.1 and Section
7.11, and except that nothing herein shall relieve any party from liability for
any breach of this Agreement, except that Parent and the Company shall have no
rights with respect to the recovery of expenses, except as provided for in
Sections 9.2(b)(i) and 9.2(b)(ii), respectively.
(b)(i) If Parent shall have terminated this
Agreement pursuant to Section 9.1(d)(i) or (ii) or if this Agreement is
terminated pursuant to Section 9.1(a) or 9.1(b) and this Agreement and the
Merger shall have failed to receive the requisite vote of the stockholders of
the Company at the meeting of the stockholders of the Company called to vote
thereon, then the Company shall promptly reimburse Parent for all out-of-pocket
expenses, up to an amount of Two Million Dollars ($2,000,000), incurred in
connection with the transactions contemplated hereby.
(ii) If the Company shall have terminated
this Agreement pursuant to Section 9.1(e)(i) or (ii) or if this Agreement is
terminated pursuant to Section 9.1(a) or 9.1(b) and this Agreement and the
issuance of shares of Parent Common Stock pursuant hereto shall have failed to
receive the requisite vote of the stockholders of Parent called to vote
thereon, then Parent shall promptly reimburse the Company for all out-of-pocket
expenses, up to an amount of Two Million Dollars ($2,000,000), incurred in
connection with the transactions contemplated hereby.
(iii) If Parent shall have terminated this
Agreement pursuant to Section 9.1(d)(iii) or the Company shall have terminated
this Agreement pursuant to Section 9.1(e)(iii), then in any such case the
Company shall promptly, but in no event later than two business days after the
date of such termination, pay Parent a
50
<PAGE> 58
termination fee of Ten Million Dollars ($10,000,000) and shall have no
obligation to pay any amounts under Section 9.2(b)(i).
(iv) If this Agreement is terminated
pursuant to Section 9.1(a) or 9.1(b) and the Board of Directors of Parent (A)
withdraws or amends or modifies in any manner adverse to the Company its
recommendation with respect to this Agreement or (B) makes any recommendation
with respect to any proposed acquisition of Parent (whether by way of merger,
purchase of capital stock, purchase of assets or otherwise) or any material
portion of its capital stock or assets (an "ACQUISITION TRANSACTION") other
than a recommendation to reject such Acquisition Transaction and in either such
case the stockholders of Parent shall not approve the issuance of the shares of
Parent Common Stock in the Merger, then Parent shall promptly, but in no event
later than two business days after the date of such termination, pay the
Company a termination fee of Ten Million Dollars ($10,000,000) and shall have
no obligation to pay any amounts under Section 9.2(b)(ii).
(v) Notwithstanding any other provision
hereof, no fee or expense reimbursement shall be paid pursuant to this Section
9.2(b) to any party who shall be in material breach of its obligations
hereunder.
ARTICLE ARTICLE X
GENERAL PROVISIONS
------------------
Section 10.1 AMENDMENT AND MODIFICATION. At any time
prior to the Effective Time, this Agreement may be amended, modified or
supplemented only by written agreement (referring specifically to this
Agreement) of Parent, Sub and the Company with respect to any of the terms
contained herein; PROVIDED, HOWEVER, that after any approval and adoption of
this Agreement by the stockholders of the Company, no such amendment,
modification or supplementation shall be made which under applicable law
requires the approval of such stockholders, without the further approval of such
stockholders.
Section 10.2 WAIVER. At any time prior to the
Effective Time, Parent and Sub, on the one hand, and the
51
<PAGE> 59
Company, on the other hand, may (i) extend the time for the performance of any
of the obligations or other acts of the other, (ii) waive any inaccuracies in
the representations and warranties of the other contained herein or in any
documents delivered pursuant hereto and (iii) waive compliance by the other
with any of the agreements or conditions contained herein which may legally be
waived. Any such extension or waiver shall be valid only if set forth in an
instrument in writing specifically referring to this Agreement and signed on
behalf of such party.
Section 10.3 SURVIVABILITY; INVESTIGATIONS. The
respective representations and warranties of Parent and the Company contained
herein or in any certificates or other documents delivered prior to or as
of the Effective Time (i) shall not be deemed waived or otherwise affected by
any investigation made by any party hereto and (ii) shall not survive beyond the
Effective Time.
Section 10.4 NOTICES. All notices and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally or by next-day courier or telecopied with confirmation of
receipt, to the parties at the addresses specified below (or at such other
address for a party as shall be specified by like notice; provided that notices
of a change of address shall be effective only upon receipt thereof). Any such
notice shall be effective upon receipt, if personally delivered or telecopied,
or one day after delivery to a courier for next-day delivery.
(a) If to Parent or Sub, to:
SoftKey International Inc.
One Athenaeum Street
Cambridge, MA 02142
Attention: Office of the General
Counsel
Telecopier No.: (617) 494-5660
52
<PAGE> 60
with copies to:
Skadden, Arps, Slate, Meagher & Flom
One Beacon Street
Boston, MA 02108
Attention: Louis A. Goodman, Esq.
Telecopier No.: (617) 573-4822
and
(b) if to the Company, to:
Minnesota Educational Computing
Corporation (MECC)
6160 Summit Drive North
Minneapolis, MN 5540-4003
Attention: Chief Executive Officer
Telecopier No.: (612) 569-1551
with a copy to:
Gardner, Carton & Douglas
321 North Clark Street
Chicago, IL 60610-4795
Attention: Charles R. Manzoni, Jr., Esq.
Telecopier No.: (312) 644-3381
Section 10.5 DESCRIPTIVE HEADINGS; INTERPRETATION. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
References in this Agreement to Sections, Schedules, Exhibits or Articles mean a
Section, Schedule, Exhibit or Article of this Agreement unless otherwise
indicated. References to this Agreement shall be deemed to include the Exhibits
and Schedules hereto, unless the context otherwise requires. The term "person"
shall mean and include an individual, a partnership, a joint venture, a
corporation, an association, a trust, a Governmental Entity or an unincorporated
organization or other entity.
Section 10.6 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement
(including the Schedules and other documents and instruments referred to
herein), together with the Confidentiality Agreement, constitute the entire
agreement and supersede all other prior agreements and understandings, both
written and oral, among the parties
53
<PAGE> 61
or any of them, with respect to the subject matter hereof. Except for Sections
7.8, 7.10 and 7.17, this Agreement is not intended to confer upon any person
not a party hereto any rights or remedies hereunder. This Agreement shall not
be assigned by operation of law or otherwise; PROVIDED that Parent or Sub may
assign its rights and obligations hereunder to a direct or indirect subsidiary
of Parent, but no such assignment shall relieve Parent or Sub, as the case may
be, of its obligations hereunder.
Section 10.7 GOVERNING LAW. This Agreement shall be
governed by and construed in accordance with the laws of the State of
Delaware without giving effect to the provisions thereof relating to
conflicts of law.
Section 10.8 SEVERABILITY. In case any one or more of
the provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect against a party hereto, the validity, legality
and enforceability of the remaining provisions contained herein shall not
in any way be affected or impaired thereby and such invalidity, illegality or
unenforceability shall only apply as to such party in the specific
jurisdiction where such judgment shall be made.
Section 10.9 COUNTERPARTS. This Agreement may be
executed in two or more counterparts, each of which shall be deemed to be an
original but all of which shall constitute one and the same agreement.
54
<PAGE> 62
IN WITNESS WHEREFORE, each of Parent, Sub and the Company has caused
this Agreement to be executed under seal on its behalf by its officers
thereunto duly authorized, all as of the date first above written.
PARENT:
------
SOFTKEY INTERNATIONAL INC.
By: /s/ Michael J. Perik
----------------------------
Name: Michael J. Perik
Title: Chairman and Chief
Executive Officer
SUB:
---
SCHOOLCO INC.
By: /s/ Michael J. Perik
----------------------------
Name: Michael J. Perik
Title: Chairman and Chief
Executive Officer
THE COMPANY:
-----------
MINNESOTA EDUCATIONAL COMPUTING
CORPORATION (MECC)
By: /s/ Charles L. Palmer
----------------------------
Name: Charles L. Palmer
Title: Chairman
55
<PAGE> 63
EXHIBIT A
---------
VOTING AGREEMENT
----------------
VOTING AGREEMENT (the "Agreement"), dated as of October 30,
1995, between North American Fund II, L.P., a Delaware limited partnership and
a stockholder (the "Stockholder") of Minnesota Educational Computing
Corporation (MECC), a Minnesota corporation (the "Company"), and SoftKey
International Inc., a Delaware corporation ("Parent").
WHEREAS, concurrently with the execution of this Agreement,
the Company, Parent and SchoolCo Inc., a Minnesota corporation and a wholly
owned subsidiary of Parent ("Sub"), have entered into an Agreement and Plan of
Merger (as the same may be amended from time to time, the "Merger Agreement"),
providing for the merger (the "Merger") of Sub with and into the Company
pursuant to the terms and conditions of the Merger Agreement; and
WHEREAS, upon consummation the Merger, the stockholders of the
Company will receive a number of shares of common stock, par value $.01 per
share, of Parent ("Parent Common Stock") equal to the Exchange Ratio (as
defined in the Merger Agreement) for each share of common stock, par value $.01
per share (the "Company Common Stock") of the Company owned by them;
WHEREAS, the Stockholder owns of record and beneficially
1,461,762 shares of Company Common Stock wishes to enter into this Agreement
with respect to 794,284 of such shares (such 794,284 shares of Company Common
Stock being referred to as the "Shares"); and
WHEREAS, in order to induce Parent to enter into the Merger
Agreement, the Stockholder has agreed, upon the terms and subject to the
conditions set forth herein, to vote the Shares and to deliver an irrevocable
proxy to Parent to vote the Shares at a meeting of the Company's stockholders,
in favor of approval and adoption of the Merger Agreement.
NOW, THEREFORE, for good and valuable consideration, the
receipt, sufficiency and adequacy of which is hereby acknowledged, the parties
hereto agree as follows:
<PAGE> 64
1. AGREEMENT TO VOTE SHARES. The Stockholder agrees
during the term of this Agreement to vote the Stockholder's Shares, in person
or by proxy, (a) in favor of approval and adoption of the Merger Agreement and
the Merger at every meeting of the stockholders of the Company at which such
matters are considered and at every adjournment thereof, and (b) against an
Alternative Acquisition (as such term is defined in the Merger Agreement). The
Stockholder agrees to deliver to Parent upon request immediately prior to any
vote contemplated by clause (a) or (b) above a proxy substantially in the form
attached hereto as Annex A (a "Proxy"), which Proxy shall be irrevocable during
the term of this Agreement to the extent permitted under Minnesota law, and
Parent agrees to vote the Shares subject to each such Proxy in favor of
approval and adoption of the Merger Agreement and the Merger. Notwithstanding
anything herein to the contrary, the obligation of the Stockholder to vote its
Shares in accordance with the terms of this Agreement and to deliver the Proxy,
and the validity of a Proxy delivered hereunder, will be conditional on the
Parent Price (as hereinafter defined) being at least $30. The "Parent Price,"
as used herein, refers to the volume weighted average of the closing prices of
Parent Common Stock on the Nasdaq National Market for the twenty full trading
days immediately preceding the meeting of the stockholders of the Company (or
adjournment thereof) at which the Merger and the Merger Agreement are
considered.
2. NO VOTING TRUSTS. The Stockholder agrees that the
Stockholder will not, nor will the Stockholder permit any entity under the
Stockholder's control to, deposit any of the Stockholder's Shares in a voting
trust or subject any of its Shares to any arrangement with respect to the
voting of the Shares inconsistent with this Agreement.
3. LIMITATION ON DISPOSITIONS AND PROXIES. During the
term of this Agreement, the Stockholder agrees not to sell, assign, pledge,
transfer or otherwise dispose of, or grant any proxies with respect to
(except for a Proxy or a proxy which is not inconsistent with the terms of this
Agreement) any of the Stockholder's Shares.
2
<PAGE> 65
4. SPECIFIC PERFORMANCE. Each party hereto acknowledges
that it will be impossible to measure in money the damage to the other party if
a party hereto fails to comply with the obligations imposed by this Agreement,
that, in the event of any such failure, the other party will not have an
adequate remedy at law or in damages. Accordingly, each party hereto agrees
that injunctive relief or other equitable remedy, in addition to remedies at
law or damages, is the appropriate remedy for any such failure and will not
oppose the granting of such relief on the basis that the other party has an
adequate remedy at law. Each party hereto agrees that it will not seek, and
agrees to waive any requirement for, the securing or posting of a bond in
connection with any other party's seeking or obtaining such equitable relief.
5. TERM OF AGREEMENT; TERMINATION. Subject to Section
9(e), the term of this Agreement shall commence on the date hereof and such
term and this Agreement shall terminate upon the earliest to occur of (i) the
Effective Time, and (ii) the date on which the Merger Agreement is terminated
in accordance with its terms. Upon such termination, no party shall have any
further obligations or liabilities hereunder; provided, that such termination
shall not relieve any party from liability for any breach of this Agreement
prior to such termination.
6. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.
Each Stockholder represents and warrants to Parent that, as of the date
hereof, (a) such Stockholder has full legal power and authority to execute and
deliver this Agreement and the Proxy, and (b) such Stockholder's Shares are free
and clear of all proxies (except for a proxy which is not inconsistent with the
terms of this Agreement).
7. ENTIRE AGREEMENT. This Agreement supersedes all
prior agreements, written or oral, among the parties hereto with respect to the
subject matter hereof and contains the entire agreement among the parties with
respect to the subject matter hereof. This Agreement may not be amended,
supplemented or modified, and no provisions hereof may be modified or waived,
except by an instrument in writing signed by all parties hereto. No waiver of
any provisions hereof by any party shall be deemed a waiver of any other
provisions hereof by any
3
<PAGE> 66
such party, nor shall any such waiver be deemed a continuing waiver of any
provision hereof by such party.
8. NOTICES. All notices, requests, claims, demands or other
communications hereunder shall be in writing and shall be deemed given when
delivered personally, upon receipt of a transmission confirmation if sent by
telecopy or like transmission (with confirmation) and on the next business day
when sent by Federal Express, Express Mail or other reputable overnight courier
service to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
If to Parent:
SoftKey International Inc.
One Athenaeum Street
Cambridge, MA 02142
Attention: Office of the General Counsel
Telecopy: (617) 494-5660
With a copy to:
Skadden, Arps, Slate, Meagher & Flom
One Beacon Street
Boston, Massachusetts 02108
Attention: Louis A. Goodman, Esq.
Telecopy: (617) 573-4822
If to Stockholder:
North American Fund II, L.P.
135 South LaSalle Street, Suite 4000
Chicago, IL 60603
Attention: Charles L. Palmer
Telecopy: (312) 332-1540
With a copy to:
Gardner, Carton & Douglas
Quaker Tower, Suite 3400
321 North Clark Street
Chicago, IL 60160-4795
Attention: Charles R. Manzoni, Jr., Esq.
Telecopy: (312) 644-3381
4
<PAGE> 67
9. MISCELLANEOUS.
(a) This Agreement shall be deemed a contract made
under, and for all purposes shall be construed in accordance with, the laws of
the State of Delaware, without reference to its conflicts of law principles.
(b) If any provision of this Agreement or the
application of such provision to any person or circumstances shall be held
invalid or unenforceable by a court of competent jurisdiction, such provision or
application shall be unenforceable only to the extent of such invalidity or
unenforceability, and the remainder of the provision held invalid or
unenforceable and the application of such provision to persons or circumstances,
other than the party as to which it is held invalid, and the remainder of this
Agreement, shall not be affected.
(c) This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
(d) All Section headings herein are for convenience of
reference only and are not part of this Agreement, and no construction or
reference shall be derived therefrom.
(e) The obligations of the Stockholder set forth in
this Agreement shall not be effective or binding upon the Stockholder until
after such time as the Merger Agreement is executed and delivered by the
Company, Parent and Sub, and the parties agree that there is not and has not
been any other agreement, arrangement or understanding between the parties
hereto with respect to the matters set forth herein.
5
<PAGE> 68
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first written above.
SOFTKEY INTERNATIONAL INC.
By:________________________
Name: Michael J. Perik
Title: Chairman and Chief
Executive Officer
NORTH AMERICAN FUND II, L.P.
By:________________________
Name:
Title:
6
<PAGE> 69
(ANNEX A)
FORM OF PROXY
The undersigned, for consideration received, hereby appoints
SoftKey International Inc., a Delaware corporation ("Parent"), its proxy to
vote 794,284 shares of Common Stock, par value $.01 per share, of Minnesota
Educational Computing Corporation (MECC), a Minnesota corporation (the
"Company"), owned by the undersigned and described in the Voting Agreement
referred to below and which the undersigned is entitled to vote at any meeting
of stockholders of the Company, and at any adjournment thereof, to be held for
the purpose of considering and voting upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of October 30, 1995 (the "Merger
Agreement"), by and among the Company, Parent, and SchoolCo Inc., a Minnesota
corporation and a wholly owned subsidiary of Parent ("Sub"), providing for the
merger (the "Merger") of Sub with and into the Company, FOR such proposal and
AGAINST any Alternative Acquisition (as such term is defined in the Merger
Agreement). This proxy is subject to the terms of the Voting Agreement, is
coupled with an interest and revokes all prior proxies granted by the
undersigned with respect to such 794,284 shares, is irrevocable and shall
terminate and be of no further force or effect automatically at such time as
the Voting Agreement, dated as of October 30, 1995 between the undersigned and
Parent, a copy of such Agreement being attached hereto, terminates in
accordance with its terms.
Dated __________________, 199_
NORTH AMERICAN FUND II, L.P.
By:________________________
Name:
Title:
<PAGE> 70
EXHIBIT B
---------
FORM OF AFFILIATE LETTER
[ ], 1995
SoftKey International Inc.
One Athenaeum Street
Cambridge, Massachusetts 02142
ATTENTION: General Counsel
Gentlemen:
I have been advised that as of the date of this letter I may
be deemed to be an "affiliate" of Minnesota Educational Computing Corporation
(MECC), a Minnesota corporation (the "Company"), as the term "affiliate" is
defined for purposes of paragraphs (c) and (d) of Rule 145 of the rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act"). Pursuant to the terms of the Agreement and Plan of Merger dated as of
October 30, 1995 (the "Agreement"), by and among SoftKey International Inc., a
Delaware corporation ("Parent"), SchoolCo Inc., a Minnesota corporation and a
wholly owned subsidiary of Parent ("Sub"), and the Company, Parent will acquire
all of the issued and outstanding shares of common stock, par value $.01 per
share, of the Company ("Company Common Stock") and Sub will merge with and into
the Company (the "Merger").
As a result of the Merger, I may receive shares of Common
Stock, par value $.01 per share of Parent ("Parent Common Stock"). I would
receive the Parent Common Stock in exchange for shares (or options for shares)
owned by me of Company Common Stock.
I represent, warrant and covenant to Parent that in the event
I receive Parent Common Stock as a result of the Merger:
<PAGE> 71
SoftKey International Inc.
[ ], 1995
Page 2 of 4 Pages
A. I shall not make any sale, transfer or other disposition of the
Parent Common Stock in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Agreement and discussed
the requirements of such documents and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of Parent Common Stock to the
extent I felt necessary, with my counsel or counsel for the Company.
C. I have been advised that the issuance of Parent Common Stock to me
pursuant to the Merger has been registered with the Commission under the Act on
a Registration Statement Form S-4. However, I have also been advised that,
because at the time the Merger is submitted for a vote of the stockholders of
the Company, (a) I may be deemed to be an affiliate of the Company and (b) the
distribution by me of the Parent Common Stock has not been registered under the
Act, I may not sell, transfer or otherwise dispose of Parent Common Stock
issued to me in the Merger unless (i) such sale, transfer or other disposition
is made in conformity with the volume and other limitations of Rule 145
promulgated by the Commission under the Act, (ii) such sale, transfer or other
disposition has been registered under the Act or (iii) in the opinion of
counsel reasonably acceptable to Parent, such sale, transfer or other
disposition is otherwise exempt from registration under the Act.
D. I understand that Parent is under no obligation to register the
sale, transfer or other disposition of the Parent Common Stock by me or on my
behalf under the Act or to take any other action necessary in order to make
compliance with an exemption from such registration available solely as a
result of the Merger.
E. I also understand that there will be placed on the certificates
for the Parent Common Stock issued to me, or any substitutions therefor, a
legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES. THE
<PAGE> 72
SoftKey International Inc.
[ ], 1995
Page 3 of 4 Pages
SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED , 1995 BETWEEN
THE REGISTERED HOLDER HEREOF AND SOFTKEY INTERNATIONAL INC., A COPY OF
WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF SOFTKEY
INTERNATIONAL INC."
F. I also understand that unless a sale or transfer is made in
conformity with the provisions of Rule 145, or pursuant to a registration
statement, Parent reserves the right to put the following legend on the
certificates issued to any transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN
ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth in paragraphs E
and F above shall be removed by delivery of substitute certificates without
such legend if the undersigned shall have delivered to Parent a copy of a
letter from the staff of the Commission, or an opinion of counsel reasonably
satisfactory to Parent in form and substance reasonably satisfactory to Parent,
to the effect that such legend is not required for purposes of the Act.
*[We understand, and you agree, that, notwithstanding anything
herein to the contrary, we may distribute the Parent Common Stock received by
us in the Merger to our partners in accordance with the terms of our
partnership agreement so long as each partner receiving a
__________________________________
* To be inserted only into the Affiliate Letter to be executed by North
American Fund II, L.P.
<PAGE> 73
SoftKey International Inc.
[ ], 1995
Page 4 of 4 Pages
distribution of Parent Common Stock from us agrees to execute a letter
agreement addressed to you containing substantially the same terms as this
letter agreement.]
Execution of this letter should not be considered an admission
on my part that I am an "affiliate" of the Company as described in the first
paragraph of this letter, as or a waiver of any rights I may have to object to
any claim that I am such an affiliate or on after the date of this letter.
Very truly yours,
------------------------
Name:
Accepted this day of
, 1995, by
SOFTKEY INTERNATIONAL INC.
By
----------------------
Name:
Title:
<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 Nine Months Ended
September 30, September 30,
------------- -------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Fully Diluted
Net Income $ 10,043 $ 4,041 $ 22,838 $ 14,287
Add:
Interest on convertible debentures and notes -- 233 -- 625
Amortization of convertible debenture issue costs -- 35 -- 105
----------- ----------- ----------- -----------
Adjusted net income $ 10,043 $ 4,309 $ 22,838 15,017
=========== =========== =========== ===========
Weighted Average Common and Exchangeable
Shares outstanding 26,534,000 19,748,000 25,918,000 19,748,000
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 1,732,000 1,102,000 1,529,000 607,000
----------- ----------- ----------- -----------
Common and common share equivalents
outstanding for purposes of calculating fully
diluted earnings per share 28,266,000 20,850,000 27,447,000 20,355,000
=========== =========== =========== ===========
Fully diluted earnings per share $ 0.36 $ 0.21 $ 0.83 $ 0.74
=========== =========== =========== ===========
</TABLE>
20
<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 SEPTEMBER 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> DEC-31-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 87,103,000
<SECURITIES> 0
<RECEIVABLES> 28,410,000
<ALLOWANCES> 8,292,000
<INVENTORY> 13,732,000
<CURRENT-ASSETS> 141,421,000
<PP&E> 14,181,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 218,419,000
<CURRENT-LIABILITIES> 38,353,000
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 171,349,000
<TOTAL-LIABILITY-AND-EQUITY> 171,349,000
<SALES> 41,579,000
<TOTAL-REVENUES> 41,579,000
<CGS> 12,656,000
<TOTAL-COSTS> 18,451,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,274,000
<INCOME-PRETAX> 11,746,000
<INCOME-TAX> 1,703,000
<INCOME-CONTINUING> 10,043,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,043,000
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
</TABLE>
