REGISTRATION NO. 33-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SOFTKEY INTERNATIONAL INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 94-2562108
(State or other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
ONE ATHENAEUM STREET
CAMBRIDGE, MASSACHUSETTS 02142
(617) 494-1200
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
NEAL S. WINNEG
VICE PRESIDENT AND GENERAL COUNSEL
SOFTKEY INTERNATIONAL INC.
ONE ATHENAEUM STREET
CAMBRIDGE, MASSACHUSETTS 02142
(617) 494-1200
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box: ( )
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box: (X)
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: ( )
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: ( )
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: ( )
CALCULATION OF REGISTRATION FEE
Title of Amount Proposed Proposed
Each Class to be Maximum Maximum Amount of
of Securities Registered Offering Aggregate Registration
to be Price Offering Fee (1)
Registered Per Security Price
51/2% Senior $350,000,000 100% $350,000,000 $120,690
Convertible
Notes
Due 2000
Common Stock, 6,603,773(2) -- -- --
par value $.01
per share
(1) Calculated pursuant to Rule 457(i) of the Securities Act of 1933, as
amended.
(2) Based on a conversion price of $53.00 per share, but deemed to
include any additional shares of Common Stock that may be issuable
upon conversion of the Notes as a result of the antidilution
provisions thereof. Pursuant to Rule 457(i), no registration fee is
required for these shares.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGIS-
TRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
SUBJECT TO COMPLETION, DATED JANUARY 10, 1996
SOFTKEY
$350,000,000
51/2% Senior Convertible Notes Due 2000
The 51/2% Senior Convertible Notes Due 2000 (the "Notes")
of SoftKey International Inc., a Delaware corporation ("SoftKey"
or the "Company"), and the shares of the Company's common stock,
par value $.01 per share (the "Common Stock" and together with
the Notes, the "Securities"), issuable upon conversion thereof,
may be offered for sale from time to time for the account of
certain holders of the Securities (the "Selling Holders") as
described under "Selling Holders." The Selling Holders may from
time to time sell the Securities offered hereby to or through one
or more underwriters, directly to other purchasers or through
agents in ordinary brokerage transactions, in negotiated
transactions or otherwise, at market prices prevailing at the
time of sale, at prices related to then prevailing market prices
or at negotiated prices. See "Plan of Distribution."
The Notes will mature on November 1, 2000, unless
previously redeemed or converted. Interest on the Notes is
payable semi-annually on May 1 and November 1 each year
commencing May 1, 1996. Holders of the Notes are entitled
through November 1, 2000, subject to prior redemption, to convert
any Notes or portions thereof into Common Stock at a conversion
price of $53 per share, subject to certain adjustments. See
"Description of the Notes -- Conversion of Notes." The Notes
have been designated for trading in the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") market.
The Common Stock is quoted on the Nasdaq National Market under
the symbol "SKEY." On January 9, 1996, the last reported sale
price of the Common Stock on the Nasdaq National Market was
$22.375 per share.
The Notes are redeemable, in whole or in part, at the
option of the Company, on or after November 2, 1998, at the
declining redemption prices set forth herein plus accrued
interest. In the event of a Change of Control (as defined
herein), each holder of Notes may require the Company to
repurchase such holder's Notes in whole or in part at a
redemption price of 101% of the principal amount thereof plus
accrued interest. See "Description of Notes -- Change of
Control."
The Notes represent general unsecured obligations of
the Company. Because the Company's operations are conducted
primarily through its operating subsidiaries, claims of creditors
and holders of indebtedness of such subsidiaries have priority
with respect to the assets and earnings of such subsidiaries over
the claims of creditors of the Company, including holders of the
Notes.
The Notes were originally issued on October 17, 1995 in
a transaction exempt from registration under the Securities Act
of 1933, as amended (the "Securities Act").
The Company will not receive any of the proceeds from
the sale of any of the Notes or the Common Stock issuable upon
conversion thereof offered by the Selling Holders.
SEE "RISK FACTORS" ON PAGE 6 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
SECURITIES OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, files reports, proxy
statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and
other information filed by the Company can be inspected and copied
at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the Commission's Regional Offices at Seven World Trade Center,
Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material also can be obtained from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. In addition,
material filed by the Company can be inspected at the offices of
The Nasdaq Stock Market, Reports Section, 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has filed with the Commission a Registration
Statement on Form S-3 (together with any amendments or supplements
thereto, the "Registration Statement") under the Securities Act
with respect to the Securities to be offered and sold by means of
this Prospectus. This Prospectus omits certain of the information
contained in the Registration Statement and the exhibits and
schedules thereto in accordance with the rules and regulations of
the Commission. For further information regarding the Company and
the Securities offered hereby, reference is made to the
Registration Statement and the exhibits and schedules filed
therewith, which may be inspected without charge at the office of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
and copies of which may be obtained from the Commission at
prescribed rates. Statements contained in this Prospectus as to
the contents of any contract or other document referred to herein
are not necessarily complete, and in each instance reference is
made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference.
DOCUMENTS INCORPORATED BY REFERENCE
The Annual Report on Form 10-K of the Company for the fiscal
year ended December 31, 1994, the Current Report on Form 8-K of the
Company dated February 10, 1995, the Company's Quarterly Report on
Form 10-Q for the quarterly period ended April 1, 1995, the Current
Report on Form 8-K of the Company dated June 12, 1995, the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended July 1, 1995, the Current Report on Form 8-K of the Company
dated August 3, 1995, the Current Report on Form 8-K of the Company
dated September 6, 1995, the Company's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1995, the Current
Report on Form 8-K/A of the Company dated October 4, 1995, the
Current Report on Form 8-K of the Company dated October 12, 1995,
the Current Report on Form 8-K of the Company dated October 30,
1995, the Current Report on Form 8-K of the Company dated December
11, 1995, the Current Report on Form 8-K of the Company dated
December 29, 1995 and the description of the Common Stock contained
in the Company's registration statement filed pursuant to Section
12(g) of the Exchange Act, including any amendment or reports filed
for the purpose of updating such description filed by the Company,
all of which are on file with the Commission, are incorporated in
this Prospectus by reference and made a part hereof.
All documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of the offering of the Securities hereunder shall be
deemed to be incorporated herein by reference and shall be a part
hereof from the date of the filing of such documents. Any
statements contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or
replaced for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference
herein modifies or replaces such statement. Any such statement so
modified or replaced shall not be deemed, except as so modified or
replaced, to constitute a part of this Prospectus.
The Company will provide without charge to each person,
including any beneficial owner, to whom a Prospectus is delivered,
upon written or oral request of such person, a copy of the
documents incorporated by reference herein, other than exhibits to
such documents not specifically incorporated by reference. Such
requests should be directed to SoftKey International Inc., One
Athenaeum Street, Cambridge, Massachusetts 02142, Attention:
Secretary (telephone: (617) 494-1200).
PROSPECTUS SUMMARY
The following summary does not purport to be complete and is
qualified in its entirety by the more detailed information and
consolidated financial statements and related notes incorporated by
reference in this Prospectus. The Securities offered hereby
involve a high degree of risk. See "Risk Factors."
THE COMPANY
General. SoftKey is a leading developer and publisher of
value-priced, high-quality, consumer software for personal
computers ("PCs"), primarily produced on CD-ROM. The Company
currently offers over 500 software titles in consumer-oriented
categories, including education, lifestyle, edutainment, reference,
productivity and entertainment in North America and distributes
additional products internationally. The Company's products
include titles such as: Calendar Creator Plus , Infopedia , Sports
Illustrated Swimsuit Calendar, Time Almanac, BodyWorks 4.0, The
American Heritage Talking Dictionary, Leonardo -- the Inventor ,
PC Paintbrush , Key 3D Design Center and Compton's Interactive
Encyclopedia. As a result of the Company's recent acquisition of
The Learning Company, the Company added a number of educational
products, classified into several product "families," to its
offerings, including those in The Learning Company's "Rabbit"
family (Reader Rabbit 1, Reader Rabbit 2, Reader Rabbit 3, Reader
Rabbit's Ready for Letters, Reader Rabbit's Interactive Reading
Journey, Reader Rabbit's Reading Development Library, Math Rabbit
and MetroGnomes' Music), "Treasure" family (Treasure Mountain!,
Treasure MathStorm!, Treasure Cove! and Treasure Galaxy!), "Super
Solvers" family (Spellbound!, OutNumbered!, Midnight Rescues!,
Super Solvers Gizmos & Gadgets and Operation Neptune), "Writing
Tools" family (The Writing Center, The Children's Writing &
Publishing Center, Student Writing & Research Center with Compton's
Concise Encyclopedia and Read, Write & Type!), "College Prep"
family (ScoreBuilder for the SAT) and the "Foreign Languages"
family (the Learn to Speak . . . series, the Berlitz Think & Talk .
. . series, the Pronunciation Tutor . . . series and Vocabulary
Builder). School editions of certain of these products are also
now available through SoftKey. See "Recent Acquisitions."
The Company believes that in order to compete effectively,
successful companies will ultimately need to publish large numbers
of successful titles and introduce them to the market rapidly.
SoftKey's current product development strategy is to develop and
acquire products in high-growth categories for rapid release and
maintain development cycles that result in ongoing upgrades and
product rotations in short periods of time. This practice of
publishing a large number of titles in a broad range of categories
and refreshing those titles on an ongoing basis effectively reduces
the Company's dependence on any one "hit" title.
SoftKey's strategy is to develop, license and acquire a broad
range of quality software products with significant unit-volume
potential at the lowest possible cost and to continuously introduce
these new products through a wide variety of established and
emerging distribution channels worldwide, including retail
channels, direct mail and original equipment manufacturers
("OEMs"). Other key elements of this strategy include focusing on
high-growth consumer software, broadly distributing to the consumer
market at various price points, building strong relationships with
retail channels, acquiring complementary products, technologies and
businesses and enhancing brand awareness and loyalty.
The Company was created through a combination of three
corporations. On February 4, 1994, the Company (which was then
known as WordStar International Incorporated ("WordStar"))
completed a three-way business combination transaction with SoftKey
Software Products Inc. ("Former SoftKey") and Spinnaker Software
Corporation ( Spinnaker ). Effective February 4, 1994, the Company
changed its name to SoftKey International Inc.
SoftKey develops and publishes products through internal
development and licensing agreements with outside developers. The
Company's internal product development efforts are designed to
result in efficient and timely product introductions by focusing on
"core code" development. Where possible, the Company specifies,
develops and manages (or purchases) one base of source code from
which many products are created. The Company supplements its
development efforts through product acquisitions and royalty-
bearing licenses.
Recent Acquisitions. The Company has a history of acquiring
companies in order to broaden its product lines and geographic
sales channels. In 1995, the Company's acquisitions included The
Learning Company, a publisher of educational software, Compton's
NewMedia, Inc. and Compton's Learning Company, two former wholly
owned subsidiaries of Tribune Company, tewi Verlag GmbH, a German
publisher and distributor of CD-ROM software and computer-related
books ("tewi"), and Future Vision Holding, Inc., a multimedia
software company ("Future Vision").
Additionally, the Company has entered into a definitive merger
agreement to acquire Minnesota Educational Computing Corporation
(MECC) ("MECC"), a publisher and distributor of high quality
educational software for children. The closing of this transaction
is subject to certain conditions.
The Company's acquisition of The Learning Company and proposed
acquisition of MECC, which together would make the Company the
largest educational software company in the world, represent a new
product-content focus for the Company's business in the education
area. The Company believes this new focus will likely result in,
among other things, significant investments by the Company in
product planning and research and development and a higher degree
of product acceptance risk. In order for the Company to sell a
sufficient volume of products to offset the increased costs
associated with the development of educational software products,
SoftKey currently plans to continue its strategy of extending
product lines by offering multiple titles at various price points
(including by offering full-featured educational products in its
Premium product line) based on a common source code.
The Company is incorporated in Delaware. Its principal
executive offices are located at One Athenaeum Street, Cambridge,
Massachusetts 02142, and its telephone number is (617) 494-1200.
"SoftKey" and all of the Company's logos and product names are
trademarks of the Company.
THE OFFERING
Issuer . . . . . . SoftKey International Inc.
Securities Offered . . $350,000,000 of 51/2% Senior Convertible Notes
due November 1, 2000 issued under an
indenture (the "Indenture") between SoftKey
and State Street Bank and Trust Company, as
trustee (the "Trustee"), and Common Stock
issuable upon conversion thereof.
Interest Payment
Dates . . . . . . . May 1 and November 1 of each year, commencing
May 1, 1996.
Maturity . . . . . November 1, 2000.
Conversion Price . Convertible into Common Stock at $53 per
share, subject to adjustment as set forth
herein.
Redemption . . . . The Notes are redeemable, in whole or in
part, at the option of the Company, on or
after November 2, 1998, at the declining
redemption prices set forth herein plus
accrued interest.
Change of Control . In the event of a Change of Control, holders
of the Notes have the right to require that
the Company repurchase the Notes in whole or
in part at a redemption price of 101% of the
principal amount thereof plus accrued
interest. See "Description of Notes--Change
of Control."
Ranking . . . . . . The Notes are general unsecured obligations
of the Company and rank senior to or pari
passu with all existing and future unsecured
obligations of the Company. The Indenture
does not limit the amount of additional
indebtedness which the Company can create,
incur, assume or guarantee, nor does the
Indenture limit the amount of indebtedness
which any subsidiary of the Company can
create, incur, assume or guarantee.
Use of Proceeds . . The Company will not receive any of the
proceeds from the sale of any of the Notes or
the Common Stock issuable upon conversion
thereof.
Trading . . . . . . The Notes have been designated for trading in
the PORTAL market. The Company intends to
apply to have the shares of Common Stock
issuable upon conversion of the Notes listed
on the Nasdaq National Market (the "NNM").
The Common Stock is quoted on the NNM under
the symbol "SKEY." On January 9, 1996 the
last reported sale price of the Common Stock
on the NNM was $22.375 per share.
RISK FACTORS
Prospective purchasers of the Securities offered hereby should
carefully consider the following risk factors, in addition to other
information contained or incorporated by reference in this
Prospectus.
INTENSE COMPETITIVE ENVIRONMENT
The PC consumer software industry is intensely competitive and
is characterized by rapid changes in technology and customer
requirements. The changing nature of the consumer software
industry and rapidly changing demand for products make it difficult
to predict the future success of the Company in the business of
producing packaged software products for the retail market. The
Company competes for retail shelf space and general consumer
awareness with a number of companies that market software products.
The Company encounters competition from both established companies,
including the largest companies in the industry, and new companies
that may develop comparable products. A number of the Company's
competitors and potential competitors possess significantly greater
capital, marketing resources and brand recognition than the
Company. Rapid changes in technology, product obsolescence and
advances in computer software and hardware require the Company to
develop or acquire new products and to enhance its existing
products on a timely basis.
Many large companies with sophisticated product marketing and
technical abilities and financial resources that do not presently
compete with the Company may enter the PC software market. For
example, technology companies have begun to acquire greater access
to content, and content-oriented companies have begun to acquire
greater technological capabilities. Competitors in these areas
include Microsoft Corporation, Sony, The Walt Disney Company,
Viacom, IBM/Eduquest, Fisher-Price, Jostens, Electronic Arts,
Sierra On-Line, Inc., Davidson & Associates, Mindscape, Interactive
Software, Edmark and Broderbund Software, Inc. To the extent that
competitors achieve a performance, price or distribution advantage,
the Company could be adversely affected.
Microsoft Corporation is the dominant supplier of computer
operating systems and frequently coordinates its operating system
marketing efforts with those for its applications software.
Competition in Microsoft's Windows application segment from major
software publishers is intensifying, and the "competitive upgrade"
price discounting among the major firms is eroding the traditional
pricing structures that had previously existed in the software
industry. Recently, Microsoft Corporation announced that it was
reducing the price of a number of its common titles from $69.95 to
$49.95. Competitive pressures have resulted in price reductions
throughout the industry with the result that industry-wide
operating margins are likely to be adversely affected.
There is no assurance that the Company will have the resources
required to respond to market or technological changes or to
compete successfully in the future.
INTENSE COMPETITION FOR DISTRIBUTION CHANNELS
The Company competes with other companies for access to retail
shelf space and inclusion in OEM sales programs. Competition in
this aspect of the industry is intense, and the type and number of
distribution channels is increasing to include non-traditional
software retailers such as book, music, video, magazine, toy, gift,
convenience, drug and grocery store chains. Additionally, as
technology changes, the type and number of distribution channels
will further change and new types of competitors, such as cable or
telephone companies, are likely to emerge.
The traditional channels of distribution in the software
industry have experienced increasing concentration during the past
several years, in particular with respect to PC chain stores and
software distributors. With increasing concentration in the
traditional channels of distribution, the Company's customers have
increased leverage in negotiating favorable terms of sale,
including price discounts and product return policies. In
addition, a number of the Company's competitors, such as Davidson &
Associates (through New Media Express) and GT Interactive Software,
have attempted, with some success, to enter into exclusive software
distribution arrangements with certain retail outlets. Should the
occurrence of these exclusive arrangements increase and the Company
not be able to offer a competing product line or arrangement, the
Company's operating results may be negatively impacted. There can
be no assurance that the Company will be able to continue to have
access to sufficient retail marketing distribution channels or
obtain adequate distribution for all of its products in the future.
Accordingly, such concentration may have an adverse effect in the
future on the profitability of the Company's operations.
Regardless of the retail strategy chosen by the Company, the
retail channels of distribution available for products will be
subject to rapid changes as retailers and distributors enter and
exit the software market segments or alter their product inventory
preferences. Other types of retail outlets and methods of product
distribution may become important in the future. These new methods
may include delivery of software using on-line services or the
Internet which will necessitate certain changes in the Company's
business and operations including addressing operational challenges
such as improving download time for pictures, images and programs,
ensuring proper regulation of content quality and developing
sophisticated security for transmitting payments. It is critical
to the success of the Company that as these changes occur it
maintain access to those channels of distribution offering software
in its market segments.
ACQUISITIONS, BUSINESS COMBINATIONS AND STRATEGIC ALLIANCES
The Company has historically expanded its business through,
among other strategies, acquisitions, business combinations and
strategic alliances. Moreover, the consumer software industry as a
whole has recently experienced consolidation. The Company believes
that its customers will in the future demand that the Company offer
increasing numbers of titles throughout the Company's existing
product categories and, in particular, the education and
entertainment categories. The Company believes that in many cases
the most efficient means to acquire such titles or the ability to
develop or license such titles is to enter into acquisitions,
business combinations or strategic alliances with consumer software
companies.
The Company continuously evaluates and considers other
businesses of varying sizes as potential strategic partners and
candidates for acquisition (whether negotiated or non-negotiated)
and has engaged in discussions with certain businesses in pursuit
of possible transactions. Certain of these businesses may be
substantial in size as compared to the Company. Except as
otherwise disclosed in this Prospectus, there are currently no
understandings, agreements or commitments with respect to any
acquisition, business combination or strategic alliance. Moreover,
there can be no assurance that the Company will enter into any such
transaction or, if the Company does identify and consummate such a
transaction, that the transaction will enable the Company to
achieve its goals.
Acquisitions or business combination transactions that would
result in further expansion of the Company's business in the
entertainment and educational product areas may result in a higher
degree of product acceptance risk and longer development cycles for
the Company's products. In addition, companies that develop
entertainment software (for PC, Sega, Nintendo and 3DO platforms)
typically experience lower gross margins than the Company has
experienced from its current operations. Further, should purchase
accounting be used by the Company for future acquisitions or
business combination transactions, such accounting treatment may
result in large, one-time expense charges for in-process research
and development costs and short amortization periods for acquired
technology and other intangible assets acquired in the transaction.
Competition for suitable acquisitions, business combinations
and strategic alliances and the cost of these transactions have
recently been increasing. The future availability of desirable
prospects for these transactions in the computer software industry
is uncertain. In addition, assuming that the Company is able to
identify appropriate transaction prospects, the execution and
implementation of acquisitions, business combinations and strategic
alliances involves a significant time commitment from senior
management and can result in large restructuring costs. There can
be no assurance that suitable opportunities will be identified,
that transactions can be consummated or that assets, businesses or
relationships acquired in such transactions can be integrated
successfully into the Company's operations.
RISK OF NONPAYMENT
The Company anticipates that internally generated cash flow
will be sufficient to meet its operating expenses and to make
payments of interest under the Notes as they become due. There can
be no assurance, however, that the Company will generate sufficient
internal cash flow to cover all required interest payments on its
indebtedness, including that under the Notes.
To the extent that the Notes are not converted into Common
Stock prior to their maturity and the Company is unable to generate
sufficient cash flow from operations to cover its outstanding
obligations, the Company may be required to attempt to refinance
all or a portion of its then outstanding indebtedness under the
Notes, to dispose of assets or to seek additional financing. There
can be no assurance, however, that any necessary refinancing,
disposition of assets or additional financing will be available or
be able to be consummated on commercially reasonable terms.
MANAGEMENT OF GROWTH; KEY EMPLOYEES
The Company is currently experiencing a period of
exceptionally rapid growth that is placing and will likely continue
to place a strain on the Company's financial, management and other
resources in the future. The Company's ability to continue to
manage its growth effectively will require it, among other things,
to continue to improve its operational, financial and management
information systems and to continue to attract, train, motivate,
manage and retain key employees. If the Company's management
becomes unable to manage growth effectively, the Company's
business, operating results and financial condition could be
adversely affected. For example, the Company has recently
completed the acquisition of The Learning Company, Compton's
NewMedia and Compton's Learning Company and has entered into a
definitive merger agreement with MECC. Should certain key
employees not be retained, future operating results may be
adversely affected.
The ability of software companies with significant internal
development capabilities to continue to manage growth, develop
competitive new products and respond to rapid technological change
depends on an ability to attract, motivate, manage and retain
talented developers, product marketers and other employees with
valuable technological and marketing expertise. The Company's
educational software products will require a substantially larger
internal development and marketing staff than its operations have
previously required. If the Company is unable to attract,
motivate, manage and retain such employees, the Company's results
of operations will likely be adversely affected.
NEW PRODUCTS AND RAPID TECHNOLOGICAL CHANGE
Software companies must continue to develop or acquire new
products or upgrade existing products on a timely basis to sustain
revenues and profitable operations. Factors contributing to the
short life span of PC software have included rapid technological
change and an expanded demand for content-rich products. Software
companies must continue to create or acquire innovative new
products reflecting technological changes in hardware and software
and translate current products into newly accepted hardware and
software formats, in order to gain and maintain a viable market for
their products. PC hardware, in particular, is steadily advancing
in power and function, expanding the market for increasingly
complex and flexible software products. This has also resulted in
longer periods necessary for research and development of new
products and a greater degree of unpredictability in the time
necessary to develop products. Furthermore, the rapid changes in
the market and the increasing number of new products available to
consumers have increased the degree of consumer acceptance risk
with respect to any specific title that the Company may publish.
It is expected that this trend will continue and may become more
pronounced in the future.
The Company has in the past focused primarily on the
productivity, lifestyle and edutainment product categories. These
product categories have a lower development cost and are not
considered as "hit" driven as the high-end, 16-bit and 32-bit
entertainment and games software category (including products
offered on the Sega, Nintendo and 3DO platforms) and the high-end,
PC-based CD-ROM game category. Additionally, the high-end
entertainment and games category requires higher development and
marketing costs and a higher cost of goods sold than the Company's
traditional software business, is dominated by a number of very
large competitors and is subject to rapid change in consumer
preference. Should the Company substantially increase its presence
in the high-end entertainment and games industry segment, it will
experience these additional risks and competitive pressures.
Similarly, the Company's new product-content focus and
enhanced presence in the educational software market will require
the Company to evaluate and adopt appropriate development and
marketing strategies and methods, which may differ from those
historically employed by the Company and subject the Company to the
risks and competitive pressures associated with those new
strategies.
The Company's rights to license many of its software products
are non-exclusive and, generally, of limited duration, and there is
no assurance the Company will be able to continue to obtain new
products from developers or to maintain or expand its market share
in the event that a competitor offers the same or similar software
products. If the Company is unable to develop or acquire new
products in a timely manner as revenues decrease from products
reaching the end of their natural life cycle, the Company's results
of operations will be adversely affected.
SIGNIFICANT PRICE REDUCTIONS IN PERSONAL COMPUTER SOFTWARE
Recently, several major publishers of PC software have
significantly reduced the prices of their products with the goal of
gaining greater market share, to the extent that at least one
company (which is not a competitor of SoftKey) distributed its
product at no cost (except what it represented as shipping and
handling charges) in order to gain market share upon its entrance
into a new market. The retail and wholesale prices of many of the
Company's products have declined and the Company has introduced new
lines of lower-priced software products. There can be no assurance
that such price reductions or new product lines will result in an
increase in unit sales volume or that prices will not continue to
decline in the future. Such a decline would lead to a decrease in
the revenues from, and gross margin on, sales of such products in
the future and could result in lower cash flow or operating
margins.
RISK OF INTERNATIONAL OPERATIONS
The Company derived approximately 10% of its revenues in the
year ended December 31, 1994 from sales occurring outside North
America. The Company believes that revenues from such
international sales in 1995 increased slightly and should continue
to increase in 1996 as a result of the Company's acquisition of
tewi in July 1995 and of Personal Soft S.A., a French societe
anonyme, in December 1995. These revenues are subject to the risks
normally associated with international operations, including
currency conversion risks, limitations (including taxes) on the
repatriation of earnings, slower and more difficult accounts
receivable collection, greater difficulty and expense in
administering business abroad, complications in complying with
foreign laws and the necessity of obtaining requisite export
licenses, which on occasion may be delayed or difficult to obtain.
In addition, while U.S. copyright law, international conventions
and international treaties may provide meaningful protection
against unauthorized duplication of software, the laws of foreign
jurisdictions may not protect the Company's proprietary rights to
the same extent as the laws of the United States. Software piracy
has been, and can be expected to be, a persistent problem for
participants in the "shrinkwrap" software industry, including the
Company. These problems are particularly acute in certain
international markets such as South America, the Middle East, the
Pacific Rim and the Far East.
DEPENDENCE ON MAJOR SUPPLIER
All duplication, assembly and fulfillment, with certain
exceptions (including CD-ROMs and products reproduced by OEMs), for
all of the Company's U.S. products are provided by one supplier,
Stream International Inc., formerly known as the Global Software
Services business unit of R.R. Donnelley & Sons Company ("Stream"),
at facilities in Crawfordsville, Indiana. Any interruption in
Stream's manufacturing, assembly and fulfillment services could
have a material adverse impact on the Company's business. The
Company's agreement with Stream expires in April 1997, and there
can be no assurance that such agreement will be renewed or that the
terms of any renewal will be the same as those currently in effect.
Although the Company believes that suitable alternative suppliers
exist, there can be no assurance that any termination or
modification of the agreement with Stream would not result in a
short-term business interruption for the Company.
HISTORY OF OPERATING LOSSES
A variety of factors may cause period-to-period fluctuations
in the Company's operating results, including integration of
operations resulting from acquisitions of companies, products or
technologies, revenues and expenses related to the introduction of
new products or new versions of existing products, changes in
selling prices, delays in purchases in anticipation of upgrades to
existing products, currency fluctuations, dealer and distributor
order patterns, general economic trends or a slowdown of PC sales
and seasonality of customer buying patterns. Historical operating
results of the Company and its predecessors cannot be relied upon
as indicative of the future performance of the Company. On an
historical basis, the Company incurred net losses of $4,983,000 for
the year ended June 30, 1992, $57,250,000 for the year ended June
30, 1993 and $73,258,000 for the transition period from July 4,
1993 to January 1, 1994. The Company had net income of $21,145,000
for the year ended December 31, 1994 and $22,838,000 for the nine
months ended September 30, 1995. There can be no assurance that
the Company will continue to be profitable in the future.
CAPITAL RESOURCES
The expansion of the Company's current business involves
significant financial risk and capital investment. There is no
assurance that financing will be available in the future to meet
the needs of the Company for additional investment.
DEPENDENCE ON CONTINUED PERSONAL COMPUTER SALES
The success of the Company is dependent upon the continuing
use of PCs, and especially multimedia PCs, in the consumer and
school market. A general decrease in unit sales of PCs or shift to
an alternative means of delivery could adversely affect the
Company's future results of operations.
HOLDING COMPANY STRUCTURE
The Notes are obligations exclusively of the Company. Since
the operations of the Company are currently conducted primarily
through subsidiaries, the cash flow and the consequent ability to
service debt, including the Notes, of the Company, are dependent
upon the earnings of its subsidiaries and the distribution of those
earnings to, or upon loans or other payments of funds by those
subsidiaries to, the Company. The subsidiaries are separate and
distinct legal entities and have no obligation, contingent or
otherwise, to pay any amounts due pursuant to the Notes or to make
any funds available therefor, whether by dividends, loans or other
payments. In addition, the payment of dividends and the making of
loans and advances to the Company by its subsidiaries may be
subject to statutory or contractual restrictions, are dependent
upon the earnings of those subsidiaries and are subject to various
business considerations.
Any right of the Company to receive assets of any of its
subsidiaries upon their liquidation or reorganization (and the
consequent right of the holders of the Notes to participate in
those assets) is effectively subordinated to the claims of that
subsidiary's creditors (including trade creditors), except to the
extent that the Company is itself recognized as a creditor of such
subsidiary, in which case the claims of the Company would still be
subordinate to any security interests in the assets of such
subsidiary and any indebtedness of such subsidiary senior to that
held by the Company.
Because the Company's operations are conducted primarily
through its operating subsidiaries, claims of holders of
indebtedness of such subsidiaries, as well as claims of trade
creditors of such subsidiaries, have priority with respect to the
assets and earnings of such subsidiaries over the claims of
creditors of the Company, including holders of the Notes. As of
December 22, 1995, there was approximately $6 million of
indebtedness and other obligations of subsidiaries of the Company
(excluding intercompany liabilities) outstanding as to which the
Notes were structurally subordinated. The Indenture does not limit
the amount of additional indebtedness which the Company can create,
incur, assume or guarantee, nor does the Indenture limit the amount
of indebtedness which any subsidiaries can create, incur, assume or
guarantee.
CHANGE OF CONTROL
The Indenture provides that holders of the Notes have the
right, in the event of a Change of Control, to require that the
Company repurchase the Notes in whole or in part at a redemption
price equal to 101% of the principal amount thereof plus accrued
interest. There can be no assurance that the Company will have the
financial resources necessary to purchase the Notes upon a Change
of Control. See "Description of Notes."
SECURITIES TRADING; VOLATILITY
The Notes have been designated for trading in the PORTAL
market, and the Common Stock is quoted on the NNM. The market
price of the Common Stock, like the shares of many other high
technology companies, has been and may continue to be volatile.
Volatility in the price of the Common Stock, changes in prevailing
interest rates and changes in perceptions of the Company's
creditworthiness may in the future adversely affect the price of
the Notes. In addition, the stock market has experienced and
continues to experience extreme price and volume fluctuations which
have particularly affected the market price for many technology
companies. These broad market fluctuations, as well as general
economic and political conditions, may adversely affect the market
prices of the Common Stock and the Notes.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the
Notes or the Common Stock issuable upon conversion thereof by the
Selling Holders.
THE SELLING HOLDERS
The Notes were initially issued and sold pursuant to a
Purchase Agreement dated as of October 17, 1995 between the
Company, on the one hand, and Bear, Stearns & Co. Inc. and
Montgomery Securities (together, the "Initial Purchasers"), on the
other hand. The Notes were acquired from the Initial Purchasers by
the Selling Holders in compliance with Rule 144A, Regulation D or
Regulation S under the Securities Act, or in other permitted resale
transactions from the Initial Purchasers or holders who acquired
such Notes from the Initial Purchasers or other prior holders
thereof in further permitted resale transactions exempt from
registration under the Securities Act. The Company agreed to
indemnify and hold the Initial Purchasers harmless against certain
liabilities under the Securities Act that would arise in connection
with the sale of the Notes by the Initial Purchasers.
Except as otherwise indicated, the table below sets forth
certain information with respect to the Securities as of December
18, 1995. The term Selling Holders includes the beneficial owners
of the securities listed below and their transferees, pledgees,
donees or other successors. Other than as a result of the
ownership of Securities indicated below, none of the Selling
Holders has had any material relationship with the Company or any
of its affiliates within the past three years.
Aggregate Principal Number of Shares
Amount of Notes of Common Stock
Name That May Be Sold That May Be Sold*
Bankers Trust Company(1) . . . 48,000,000 905,660
Boston College
Endowment(2) . . . . . . 375,000 7,075
BT Securities
Corporation(3) . . . . . 3,250,000 61,320
Central States Southeast
and Southwest Pension Fund . . . 1,250,000 23,584
Christian Science Peck
Management
Stock . . . . . . . . . . 125,000 2,358
Christian Science Trustees
for Gifts and Endowments . . . . 125,000 2,358
Clarex Limited . . . . . 1,200,000 22,641
Columbus Life Insurance
Company . . . . . . . . . 2,175,000 41,037
Coutts & Co. AG - New York
Branch . . . . . . . . . 3,200,000 60,377
Custodial Trust Company . 3,010,000 56,792
Dean Witter Convertible
Securities Trust . . . . . 5,795,000 109,339
Declaration of Trust for
Defined Benefit Plan of
ICI American Holdings Inc. 700,000 13,207
Declaration of Trust for
Defined Benefit Plan of
Zeneca Holdings Inc. . . 455,000 8,584
Delaware State Employees'
Retirement Fund . . . . . . . . . 2,225,000 41,981
Delta Air Lines Master
Trust . . . . . . . . . . 2,895,000 54,622
Dreyfus Growth and Income
Fund, Inc.(4) . . . . . . 30,750,000 580,188
Eaton Vance Total Return
Portfolio . . . . . . . . 3,000,000 56,603
Fidelity Devonshire Trust:
Fidelity Equity-Income
Fund(5) . . . . . . . . . 4,030,000 76,037
Fidelity Financial Trust:
Fidelity
Convertible Securities
Fund(5) . . . . . . . . . 13,270,000 250,377
Fidelity Management Trust
Company, on behalf of
accounts managed by it(6) . . . 9,200,000 173,584
First Church of Christ,
Scientist - Endowments . . . . . 210,000 3,962
First National Bank of
Omaha . . . . . . . . . . 715,000 13,490
Firstar Trust Company . . 1,000,000 18,867
General Motors Investment
Management Corporation . 19,545,000 368,773
George Eastman House
Endowment . . . . . . . . 100,000 1,886
Guardian Life Insurance
Co. of America . . . . . 9,500,000 179,245
Guardian Pension Fund . . 500,000 9,433
HFS Total Return Fund . . 250,000 4,716
Hillside Industries
Corporate Account . . . . 150,000 2,830
Hillside Industries
Incorporated (Master
Trust) . . . . . . . . . 35,000 660
IDS Bond Fund, Inc.(7) . 11,250,000 212,264
IDS Extra Income Fund,
Inc.(7) . . . . . . . . . 2,000,000 37,735
IDS Life Managed Fund,
Inc.(7) . . . . . . . . . 8,000,000 150,943
IDS Life Special Income
Fund, Inc.(7) . . . . . . 4,750,000 89,622
Kellner, DiLeo & Co. . . 4,650,000 87,735
Lincoln National
Convertible Securities
Fund . . . . . . . . . . 2,430,000 45,849
Lincoln National Life
Insurance - Convertible
Securities Pool . . . . . . . . 5,650,000 106,603
Mass. Mutual Corporate
Investors . . . . . . . . 630,000 11,886
Massachusetts Financial
Services Total Return . . 250,000 4,716
Massachusetts Pension
Reserves Investment
Management Board . . . . 2,080,000 39,245
McCullough, Andrews &
Cappiello, Inc. . . . . . 7,900,000 149,056
Mellon Bank, N.A. . . . . 1,250,000 23,584
Mercantile, Safe Deposit
and Trust Company . . . . . . . . 3,895,000 73,490
Museum of Fine Art,
Boston(2) . . . . . . . . 165,000 3,113
New Hampshire Retirement
System(2) . . . . . . . . 980,000 18,490
Oaktree Capital Management
OCM Convertible Ltd . . . . . 250,000 4,716
OCM Convertible Trust . . 5,250,000 99,056
OCM Convertible L.P. . . 240,000 4,528
Pacific Horizon Capital
Income Fund . . . . . . . 1,100,000 20,754
Phoenix Home Life 8,750,000 165,094
PNC Bank National
Association . . . . . . . 285,000 5,377
Putnam Balanced Retirement
Fund(8) . . . . . . . . . 250,000 4,716
Putnam Convertible Income-
Growth Trust(8) . . . . . . . . 8,050,000 151,886
Putnam Convertible
Opportunities and
Income Trust(8) . . . . . 895,000 16,886
Putnam High Income
Convertible and Bond
Fund(8) . . . . . . . . . 2,000,000 37,735
Robertson, Stephens &
Company LLC(9) . . . . . 745,000 14,056
Rochester Fund Series -
The Bond Fund For Growth . . . 4,000,000 75,471
Royal Bank Investment
Management . . . . . . . 1,250,000 23,584
State Employees'
Retirement Fund of the
State of Delaware . . . . 1,035,000 19,528
Tennessee Consolidated
Retirement System . . . . 3,500,000 66,037
The TCW Group, Inc. . . . 6,720,000 126,792
Thermo Electron Corp.
Balanced Investment Fund. . . 275,000 5,188
Touchstone Portfolio
Growth & Income . . . . . 175,000 3,301
Touchstone Variable
Insurance Trust Growth &
Income 2 . . . . . . . . 150,000 2,830
TWA 401(K) - Balanced . . 200,000 3,773
Union Bank . . . . . . . 265,000 5,000
Wagner, Stott & Co. . . . 5,650,000 106,603
Weirton . . . . . . . . . 670,000 12,641
Wells Fargo Bank, N.A. . 4,000,000 75,471
Winchester Convertible
Plus Ltd. . . . . . . . . 500,000 9,433
*Assumes a conversion price of $53.00 per share, and a cash payment
in lieu of any fractional share interest.
(1) Information is as of January 5, 1996. Bankers Trust Company
holds Notes solely as custodian or trustee for accounts over
which other persons exercise investment and voting discretion.
BT Securities Corporation is an affiliate of Bankers Trust
Company. Bankers Trust Company disclaims beneficial ownership
of Notes and shares of Common Stock listed herein as held in
its name or the name of BT Securities Corporation.
(2) Shares investment authority with The Putnam Advisory Company,
Inc., the investment adviser.
(3) Information is as of January 5, 1996. BT Securities
Corporation is an affiliate of Bankers Trust Company. BT
Securities Corporation disclaims beneficial ownership of all
Notes and shares of Common Stock listed as owned by Bankers
Trust Company.
(4) Information as of January 4, 1996.
(5) Each of such entities is either an investment company or a
portfolio of an investment company registered under Section 8
of the Investment Company Act of 1940, as amended, or a
private investment account advised by Fidelity Management &
Research Company ("FMR Co."). FMR Co. is a Massachusetts
corporation and an investment advisor registered under Section
203 of the Investment advisers Act of 1940, as amended, and
provides investment advisory services to each of such entities
and to other registered investment companies and to certain
other funds which are generally offered to a limited group of
investors. FMR Co. is a wholly owned subsidiary of FMR Corp.
("FMR"), a Massachusetts corporation.
(6) Shares indicated as owned by such entity are owned directly by
various private investment accounts, primarily employee
benefit plans for which Fidelity Management Trust Company
("FMTC") serves as trustee or managing agent. FMTC is a
wholly-owned subsidiary of FMR and a bank as defined in
Section 3(a)(6) of the Securities Exchange Act of 1934, as
amended.
(7) Each of these funds is an investment company registered under
the Investment Company Act of 1940, as amended, and is a fund
in the IDS Mutual Fund Group (collectively, the IDS Funds").
American Express Financial Corporation, formerly known as IDS
Financial Corporation ("AEFC"), an investment adviser
registered under the Investment Advisers Act of 1940, as
amended, provides investment advisory services to each of the
IDS Funds and to certain other registered investment
companies. AEFC is a wholly owned subsidiary of American
Express Company. The information set forth in the table with
respect to each IDS Fund and the information set forth in this
footnote was provided by AEFC.
(8) Shares investment authority with Putnam Investment Management,
Inc., the investment adviser.
(9) Information as of December 29, 1995.
The preceding table has been prepared based upon information
furnished to the Company by the Depository Trust Company and by or
on behalf of the Selling Holders. Additional information
concerning ownership of the Securities offered hereby rests with
certain holders of the Securities who are not named in the
preceding table, with whom the Company believes it has no
affiliation and from whom the Company has received no response to
its request for such information.
In view of the fact that Selling Holders may offer all or a
portion of the Notes or shares of Common Stock held by them
pursuant to the offering contemplated by this Prospectus, and
because this offering is not being underwritten on a firm
commitment basis, no estimate can be given as to the amount of
Notes or the number of shares of Common Stock that will be held by
the Selling Holders after completion of the Offering.
Information concerning the Selling Holders may change from
time to time and any such changed information will be set forth in
supplements to this Prospectus if and when necessary. In addition,
the per share conversion price, and therefor the number of shares
issuable upon conversion of the Notes, is subject to adjustment
under certain circumstances. Accordingly, the aggregate principal
amount of Notes and the number of shares of Common Stock issuable
upon conversion thereof offered hereby may increase or decrease.
As of the date of this Prospectus, the aggregate principal amount
of Notes outstanding is $350,000,000.
DESCRIPTION OF THE NOTES
The Notes are issued under an indenture dated as of October
16, 1995, as amended by the First Supplemental Indenture dated as
of November 22, 1995 (the "Indenture"), between the Company and
State Street Bank and Trust Company, as trustee (the "Trustee"). A
copy of the Indenture and such First Supplemental Indenture are
being filed with the Commission as an exhibit to the Registration
Statement. The following summaries of certain provisions of the
Notes and the Indenture do not purport to be complete and are
subject to, and are qualified in their entirety by reference to,
the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"), and all the provisions of the Notes and the Indenture,
including the definitions therein of certain terms which are not
otherwise defined in this Prospectus and those terms made a part of
the Indenture by reference to the Trust Indenture Act. Wherever
particular provisions or defined terms of the Indenture (or of the
form of Notes which is a part thereof) are referred to, such
provisions or defined terms are incorporated herein by reference.
As used in this "Description of Notes," the "Company" refers to
SoftKey International Inc. and does not, unless the context
otherwise indicates, include its subsidiaries.
GENERAL
The Notes are general unsecured obligations of the Company
senior or pari passu in right of payment to all other unsecured
obligations of the Company as described below under the subheading
"Ranking" and are convertible into Common Stock as described below
under the subheading "Conversion of Notes." The Notes are limited
to $350,000,000 aggregate principal amount, will be issued in fully
registered form only in denominations of $1,000 or any multiple
thereof and will mature on November 1, 2000, unless earlier
redeemed at the option of the Company or at the option of the
holder upon a Change of Control.
The Indenture does not contain any restrictions on the payment
of dividends, the repurchase of securities of the Company (other
than the Notes) or the incurrence of debt by the Company or any of
its subsidiaries.
The Notes bear interest from October 23, 1995 at the annual
rate set forth on the cover page hereof, payable semi-annually on
May 1 and November 1, commencing on May 1, 1996, to holders of
record at the close of business on the preceding April 15 and
October 15, respectively. Interest is computed on the basis of a
360-day year comprised of twelve 30-day months.
Unless other arrangements are made, interest is paid by check
mailed to holders entitled thereto. Principal will be payable, and
the Notes may be presented for conversion, registration of transfer
and exchange, without service charge, at the office of the Trustee
in New York, New York.
CONVERSION OF NOTES
The holders of Notes are entitled at any time after 60 days
following the latest date of original issuance thereof through the
close of business on November 1, 2000, subject to prior redemption,
to convert any Notes or portions thereof (in denominations of
$1,000 or multiples thereof) into Common Stock, at the conversion
price set forth on the cover page of this Prospectus, subject to
adjustment as described below; provided that in the case of Notes
called for redemption, conversion rights will expire at the close
of business on the business day next preceding the date fixed for
redemption, unless the Company defaults in payment of the
redemption price. A Note (or portion thereof) in respect of which
a holder is exercising its option to require redemption upon a
Change of Control may be converted only if such holder withdraws
its election to exercise such option in accordance with the terms
of the Indenture. Except as described below, no adjustment will be
made on conversion of any Notes for interest accrued thereon or for
dividends on any Common Stock issued. If Notes not called for
redemption are converted after a record date for the payment of
interest and prior to the next succeeding interest payment date,
such Notes must be accompanied by funds equal to the interest
payable on such succeeding interest payment date on the principal
amount so converted. The Company is not required to issue
fractional shares of Common Stock upon conversion of Notes and, in
lieu thereof, will pay a cash adjustment based upon the market
price of the Common Stock on the last business day prior to the
date of conversion.
The conversion price is subject to adjustment (under formulae
set forth in the Indenture) upon the occurrence of certain events,
including: (i) the issuance of Common Stock as a dividend or
distribution on Common Stock; (ii) the issuance to all holders of
Common Stock of certain rights or warrants to purchase Common Stock
at less than the current market price; (iii) certain subdivisions,
combinations and reclassifications of Common Stock; (iv)
distributions to all holders of Common Stock of capital stock of
the Company (other than Common Stock) or evidences of indebtedness
of the Company or assets (including securities, but excluding those
dividends, rights, warrants and distributions referred to above and
dividends and distributions in connection with the liquidation,
dissolution or winding up of the Company and dividends and
distributions paid exclusively in cash); (v) distributions
consisting exclusively of cash (excluding any cash portion of
distributions referred to in clause (iv)) to all holders of Common
Stock in an aggregate amount that, combined together with all other
such all-cash distributions made within the preceding 12 months in
respect of which no adjustment has been made, exceeds 20% of the
Company's market capitalization (being the product of the then
current market price of the Common Stock times the number of shares
of Common Stock then outstanding) on the record date for such
distribution; and (vi) the purchase of Common Stock pursuant to a
tender offer made by the Company or any of its subsidiaries which
involves an aggregate consideration that, together with (x) any
cash and the fair market value of any other consideration payable
in any other tender offer by the Company or any of its subsidiaries
for Common Stock expiring within the 12 months preceding such
tender offer in respect of which no adjustment has been made and
(y) the aggregate amount of any such all-cash distributions
referred to in clause (v) above to all holders of Common Stock
within the 12 months preceding the expiration of such tender offer
in respect of which no adjustments have been made, exceeds 20% of
the Company's market capitalization on the expiration of such
tender offer. No adjustment of the conversion price will be made
for shares of Common Stock issued pursuant to a plan for
reinvestment of dividends or interest.
Except as stated above, the conversion price will not be
adjusted for the issuance of Common Stock or any securities
convertible into or exchangeable for Common Stock or carrying the
right to purchase any of the foregoing. No adjustment in the
conversion price will be required unless such adjustment would
require a change of at least 1% in the conversion price then in
effect; provided that any adjustment that would otherwise be
required to be made shall be carried forward and taken into account
in any subsequent adjustment.
In the case of (i) any reclassification or change of the
Common Stock (other than changes in par value or from par value to
no par value or resulting from a subdivision or a combination) or
(ii) a consolidation or merger involving the Company or a sale or
conveyance to another corporation of the property and assets of the
Company as an entirety or substantially as an entirety, in each
case as a result of which holders of Common Stock shall be entitled
to receive stock, other securities, other property or assets
(including cash) with respect to or in exchange for such Common
Stock, the holders of the Notes then outstanding will be entitled
thereafter to convert such Notes into the kind and amount of shares
of stock, other securities or other property or assets which they
would have owned or been entitled to receive upon such
reclassification, change, consolidation, merger, sale or conveyance
had such Notes been converted into Common Stock immediately prior
to such reclassification, change, consolidation, merger, sale or
conveyance assuming that a holder of Notes would not have exercised
any rights of election as to the stock, other securities or other
property or assets receivable in connection therewith.
In the event of a taxable distribution to holders of Common
Stock (or other transaction) which results in any adjustment of the
conversion price, the holders of Notes may, in certain
circumstances, be deemed to have received a distribution subject to
the United States income tax as a dividend; in certain other
circumstances, the absence of such an adjustment may result in a
taxable dividend to the holders of Common Stock.
The Company from time to time may to the extent permitted by
law reduce the conversion price by any amount for any period of at
least 20 days, in which case the Company shall give at least 15
days' notice of such decrease, if the Board of Directors has made a
determination that such decrease would be in the best interests of
the Company, which determination shall be conclusive. The Company
may, at its option, make such reductions in the conversion price,
in addition to those set forth above, as the Company deems
advisable to avoid or diminish any income tax to its stockholders
resulting from any dividend or distribution of stock (or rights to
acquire stock) or from any event treated as such for income tax
purposes.
OPTIONAL REDEMPTION BY THE COMPANY
The Notes are not redeemable at the option of the Company
prior to November 2, 1998. At any time on or after that date, the
Notes may be redeemed at the Company's option on at least 30 but
not more than 60 days' notice, in whole at any time or in part from
time to time, at the following prices (expressed in percentages of
the principal amount), together with accrued interest to the date
fixed for redemption:
If redeemed during the 12-month period beginning:
Redemption
Year Price
November 2, 1998 . . . . . . . . 102.2%
November 1, 1999 . . . . . . . . 101.1%
and 100% at November 1, 2000.
If fewer than all the Notes are to be redeemed, the Trustee
will select the Notes to be redeemed in principal amounts of $1,000
or integral multiples thereof by lot or, in its discretion, on a
pro rata basis. If any Note is to be redeemed in part only, a new
Note or Notes in principal amount equal to the unredeemed principal
portion thereof will be issued. If a portion of a holder's Notes
is selected for partial redemption and such holder converts a
portion of such Notes, such converted portion shall be deemed to be
taken from the portion selected for redemption. No sinking fund is
provided for the Notes.
CHANGE IN CONTROL
Upon the occurrence of a Change of Control, each holder of the
Notes shall have the right to require that the Company repurchase
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 thereof, together with accrued and unpaid
interest to the date of purchase, pursuant to an offer (the "Change
of Control Offer") made in accordance with the procedures described
below and the other provisions in the Indenture.
A "Change of Control" means an event or series of events in
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 (each
term as defined herein) less than the conversion price then in
effect with respect to the Notes and (ii) the holders of the Common
Stock receive consideration which is not all or substantially all
common stock that is (or upon consummation of or immediately
following such event or events will be) listed in 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 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. "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).
Within 30 days following any Change of Control, the Company
shall send by first-class mail, postage prepaid, to the Trustee and
to each holder of Notes, at such holder's address appearing in the
security register, a notice stating, among other things, that a
Change of Control has occurred, the purchase price, the 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, and certain
other procedures that a holder of the Notes must follow to accept a
Change of Control Offer or to withdraw such acceptance.
The Company will comply, to the extent applicable, with the
requirements of Rule 13e-4 under the Exchange Act and other
securities laws or regulations in connection with the repurchase of
the Notes as described above.
The occurrence of certain of the events which would constitute
a Change of Control would constitute a default under the revolving
line of credit of SoftKey Inc., a wholly owned subsidiary of the
Company (the "Credit Facility"). Future indebtedness of the
Company may contain prohibitions of certain events which would
constitute a Change of Control or require the Company to offer to
redeem such indebtedness upon a Change of Control. Moreover, the
exercise by the holders of the Notes of their right to require the
Company to purchase the Notes could cause a default under such
indebtedness, even if the Change of Control itself does not, due to
the financial effect of such purchase on the Company. Finally, the
Company's ability to pay cash to holders of the Notes upon a
purchase may be limited by the Company's then existing financial
resources. There can be no assurance that sufficient funds will be
available when necessary to make any required purchases.
Furthermore, the Change of Control provisions may in certain
circumstances make more difficult or discourage a takeover of the
Company and the removal of the incumbent management.
RANKING
The indebtedness evidenced by the Notes are senior unsecured
obligations of the Company. Because the Company's operations are
conducted primarily through its operating subsidiaries, claims of
holders of indebtedness of such subsidiaries, as well as claims of
trade creditors of such subsidiaries, have priority with respect to
the assets and earnings of such subsidiaries over the claims of
creditors of the Company, including holders of the Notes.
The Notes are obligations exclusively of the Company. Since
the operations of the Company are currently partially conducted
through subsidiaries, the cash flow and the consequent ability to
service debt, including the Notes, of the Company, are partially
dependent upon the earnings of its subsidiaries and the
distribution of those earnings to, or upon loans or other payments
of funds by those subsidiaries to, the Company. The subsidiaries
are separate and distinct legal entities and have no obligation,
contingent or otherwise, to pay any amounts due pursuant to the
Notes or to make any funds available therefor, whether by
dividends, loans or other payments. In addition, the payment of
dividends and the making of loans and advances to the Company by
its subsidiaries may be subject to statutory or contractual
restrictions, are dependent upon the earnings of those subsidiaries
and are subject to various business considerations.
Any right of the Company to receive assets of any of its
subsidiaries upon their liquidation or reorganization (and the
consequent right of the holders of the Notes to participate in
those assets) is effectively subordinated to the claims of that
subsidiary's creditors (including trade creditors), except to the
extent that the Company is itself recognized as a creditor of such
subsidiary, in which case the claims of the Company would still be
subordinate to any security interests in the assets of such
subsidiary and any indebtedness of such subsidiary senior to that
held by the Company.
As of December 31, 1995, subsidiaries of the Company had
approximately $6 million of indebtedness outstanding (excluding
accrued interest thereon) as to which the Notes were structurally
subordinated. The Indenture does not limit the amount of
additional indebtedness which the Company can create, incur, assume
or guarantee, nor does the Indenture limit the amount of
indebtedness which any subsidiary can create, incur, assume or
guarantee.
MERGER, CONSOLIDATION AND SALE OF ASSETS
The Company shall not consolidate with or merge with or into,
or convey, transfer or lease all or substantially all 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 Indenture and the Notes, including the
conversion rights described above under "Conversion of Notes;" (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 Officers' Certificate and an opinion of
counsel, each stating that such consolidation, merger or transfer
and such supplemental indenture (if any) comply with the Indenture.
EVENTS OF DEFAULT AND REMEDIES
An Event of Default is defined in the Indenture as being:
default in payment of the principal of or premium, if any, on the
Notes; default for 30 days in payment of any installment of
interest on the Notes; default by the Company for 90 days after
notice in the observance or performance of any other covenants in
the Indenture; or certain events involving bankruptcy, insolvency
or reorganization of the Company. The Indenture provides that the
Trustee may withhold notice to the holders of Notes of any default
(except in payment of principal, premium, if any, or interest with
respect to the Notes) if the Trustee considers it in the interest
of the holders of the Notes to do so.
The Indenture provides that if any Event of Default shall have
occurred and be continuing, the Trustee or the holders of not less
than 25% in principal amount of the Notes then outstanding may
declare the principal of and premium, if any, on the Notes to be
due and payable immediately, but if the Company shall cure all
defaults (except the nonpayment of interest on, premium, if any,
and principal of any Notes which shall have become due by
acceleration) and certain other conditions are met, such
declaration may be cancelled and past defaults may be waived by the
holders of a majority in principal amount of Notes then
outstanding.
The holders of a majority in principal amount of the Notes
then outstanding shall have the right to direct the time, method
and place of conducting any proceedings for any remedy available to
the Trustee, subject to certain limitations specified in the
Indenture.
The Company shall furnish to the Trustee at least annually
evidence as to compliance with the terms of the Indenture.
SATISFACTION AND DISCHARGE; DEFEASANCE
The Indenture will cease to be of further effect as to all
outstanding Notes (except as to (i) rights of registration of
transfer and exchange and the Company's right of optional
redemption; (ii) substitution of apparently mutilated, defaced,
destroyed, lost or stolen Notes; (iii) rights of holders of the
Notes to receive payments of principal and interest on the Notes;
(iv) rights, obligations and immunities of the Trustee under the
Indenture; and (v) rights of the holders of the Notes as
beneficiaries of the Indenture with respect to the property so
deposited with the Trustee payable to all or any of them), if (A)
the Company will have paid or caused to be paid the principal of
and interest on the Notes as and when the same will have become due
and payable or (B) all outstanding Notes (except lost, stolen or
destroyed Notes which have been replaced or paid) have been
delivered to the Trustee for cancellation or (C)(x) 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
and (y) 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 cause may be. Such trust may only be
established if such deposit will not result in a breach or
violation of, or constitute a default under, any agreement or
instrument to which the Company is party or by which it is bound
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.
The Indenture will also cease to be in effect (except as
described in clauses (i) through (v) in the immediately preceding
paragraph) and the indebtedness on all outstanding Notes will be
discharged on the 123rd day after the irrevocable deposit by the
Company with the Trustee, in trust, specifically pledged as
security for, and dedicated solely to, the benefit of the holders
of the Notes, of cash, U.S. Government Obligations (as defined in
the Indenture) or a combination thereof, in an amount sufficient,
in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof
delivered to the Trustee, to pay the principal of an interest on
the Notes then outstanding in accordance with the terms of the
Indenture and the Notes ("legal defeasance"). Such legal
defeasance may only be effected if (i) such deposit will not result
in a breach or violation of, or constitute a default under, any
agreement or instrument to which the Company is party or by which
it is bound; (ii) 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, based thereon, 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 by the Company and
will be subject to federal income tax on the same amount 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; (iii) the
Company has delivered to the trustee an opinion of counsel to the
effect that after the 123rd day following the deposit, the trust
funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; and (iv) the Company has delivered to
the Trustee an Officer's Certificate and an opinion of counsel
stating that all conditions related to the defeasance have been
complied with.
The Company may also be released from its obligations under
the covenants described above under "Change of Control" and
"Merger, Consolidation and Sale of Assets" with respect to the
Notes outstanding on the 123rd day after the irrevocable deposit by
the Company with the Trustee, in trust, specifically pledged as
security for, and dedicated solely to, the benefit of the holders
of the Notes, cash, U.S. Government Obligations or a combination
thereof, in an amount sufficient in the opinion of a nationally
recognized firm of independent public accounts expressed in a
written certification thereof delivered to the Trustee, to pay the
principal of and interest on the Notes then outstanding in
accordance with the terms of the Indenture and the Notes ("covenant
defeasance"). Such covenant defeasance may only be effected if (i)
such deposit will not result in a breach or violation of, or
constitute a default under, any agreement or instrument to which
the Company is a party or by which it is bound; (ii) the Company
has delivered to the Trustee an opinion of counsel to the effect
that the holders of the Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such deposit
and covenant defeasance by the Company and will be subject to
federal income tax on the same amount, in the same manner and at
the same times as would have been the case if such deposit and
covenant defeasance had not occurred; (iii) the Company has
delivered to the Trustee an opinion of counsel to the effect that
after 123rd day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights
generally; and (iv) the Company has delivered to the Trustee an
Officers' Certificate and an opinion of counsel stating that all
conditions related to the covenant defeasance have been complied
with. Following such covenant defeasance, the Company will no
longer be required to comply with and will have no obligation to
repurchase the Notes pursuant to the provisions described under
"Change of Control."
Notwithstanding any satisfaction and discharge or defeasance
of the Indenture, the obligations of the Company described under
"Conversion of Notes" will survive.
MODIFICATIONS OF 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 principal amount of the Notes at the time outstanding,
to modify the Indenture or any supplemental indenture or the rights
of the holders of the Notes, except that no such modification shall
(i) extend the fixed maturity of any Note, reduce the rate or
extend the time or payment of interest thereon, reduce the
principal amount thereof or premium, if any, thereon, reduce any
amount payable upon redemption thereof, change the obligation of
the Company to make redemption of any Note upon the happening of a
Change of Control, impair or affect the right of a holder to
institute suit for the payment thereof, change the currency in
which the Notes are payable or impair the right to convert the
Notes into Common Stock subject to the terms set forth in the
Indenture, without the consent of the holder of each Note so
affected or (ii) reduce the aforesaid percentage of Notes, without
the consent of the holders of all of the Notes then outstanding.
CONCERNING THE TRUSTEE
State Street Bank and Trust Company, the Trustee under the
Indenture, has been appointed by the Company as the paying agent,
conversion agent, registrar and custodian with regard to the Notes.
The Trustee and/or its affiliates may in the future provide banking
and other services to the Company in the ordinary course of their
respective businesses.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 60,000,000
shares of Common Stock, par value $.01 per share, 5,000,000 shares
of Preferred Stock, par value $.01 per share (the "Preferred
Stock"), and one share of special voting stock, par value $1.00 per
share (the "Special Voting Share").
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on
all matters to be voted upon by the stockholders. Subject to the
rights of holders of outstanding Preferred Stock, if any, the
holders of Common Stock are entitled to receive such dividends, if
any, as may be declared by the Board of Directors out of funds
legally available therefor. In the event of a liquidation,
dissolution, or winding up of the Company, holders of Common Stock
have the right to a ratable portion of the assets remaining after
payment of liabilities, subject to preferential payments required
to be made to holders of outstanding Preferred Stock, if any.
Holders of Common Stock do not have cumulative voting, preemptive,
redemption or conversion rights. All outstanding shares of Common
Stock are, and the shares to be sold in this offering will be,
fully paid and nonassessable. The preferences and rights of holders
of shares of Common Stock may become subject to those of holders of
shares of any series of Preferred Stock which the Company may issue
in the future.
PREFERRED STOCK
The Board of Directors has the authority, without further
stockholder approval, to issue available shares of Preferred Stock
in one or more series from time to time and to fix the powers,
designations, preferences, and rights, and the qualifications,
limitations, or restrictions of such preferences and/or rights.
3,300,000 shares of the Preferred Stock have been retired and are
no longer available for issuance. Of the remaining 1,700,000
shares of Preferred Stock available for issuance, 150,000 have been
designated as 51/2% Series C Convertible Preferred Stock (the "Series
C Preferred Stock"), all of which are reserved for issuance upon
exchange of the Company's 51/2% Senior Convertible/Exchangeable Notes
due 2000 (the "Additional Notes").
SERIES C PREFERRED STOCK
Dividend Rights. The holders of shares of the Series C
Preferred Stock are entitled to receive, in preference to the
holders of shares of Common Stock, dividends in an amount equal to
51/2% per annum of the liquidation preference of $1,000 per share of
Series C Preferred Stock. Dividends are payable on May 1 and
November 1 of each year (each such date a "Dividend Payment Date")
to the persons in whose names the Series C Preferred Stock is
registered at the close of business on the April 15 and October 15
immediately preceding such Dividend Payment Date.
Conversion Rights. The holder of any shares of Series C
Preferred Stock has the right to convert any number of such shares
into that number of shares of Common Stock obtained by dividing
$1,000 for each share of Series C Preferred Stock to be converted
by the conversion price in effect at such time (the "Conversion
Price"). The Conversion Price may be adjusted from time to time
upon the occurrence of certain events, including, but not limited
to, the payment of certain dividends and distributions to the
holders of Common Stock. The Conversion Price is currently $53.00.
A holder of Series C Preferred Stock is not entitled to any rights
of a holder of Common Stock until such holder has converted his
Series C Preferred Stock to Common Stock.
Redemption. The Company may, at its option, redeem all or,
from time to time, any part of the Series C Preferred Stock at the
redemption prices set forth below; provided, however, that no such
redemption shall be effected before November 2, 1998; and provided,
further, that on November 1, 2000, the Company shall redeem all of
the Series C Preferred Stock then outstanding. The redemption
prices (expressed as percentages of the liquidation value of
$1,000) shall be as follows:
If redeemed during the 12-month period beginning:
Date Percentage
November 1, 1998 102.2%
November 1, 1999 101.1%
and 100% on and after November 1, 2000.
If dividends payable on shares of Series C Preferred Stock are
not paid in full, then until all unpaid dividends have been paid in
full or declared and set aside for payment, the Company may not,
subject to certain exceptions, redeem, purchase or otherwise
acquire any shares of Series C Preferred Stock or any shares of
capital stock of the Company ranking on a parity with ("Parity
Stock"), or junior to, the Series C Preferred Stock.
Voting Rights. Each share of Series C Preferred Stock
entitles the holder thereof to vote on all matters voted on by
holders of Common Stock, voting together as a single class. With
respect to any such vote, each share of Series C Preferred Stock
shall entitle the holder thereof to cast the number of votes equal
to the number of votes which could be cast in such vote by a holder
of the shares of capital stock of the Company into which such share
of Series C Preferred Stock is convertible on the record date for
such vote. The affirmative vote of the holders of at least 66-2/3%
of the outstanding shares of Series C Preferred Stock is necessary
for certain actions that would affect the Series C Preferred Stock,
including, but not limited to, changing the number of authorized
shares of Series C Preferred Stock, increasing or decreasing the
par value of such shares, or altering the powers, preferences and
rights of such shares so as to affect them adversely.
If on any date dividends payable on the Series C Preferred
Stock shall have been in arrears and not paid in full for three
semi-annual periods, whether or not consecutive, the number of
directors constituting the Board of Directors of the Company shall
be increased by two and the holders of shares of Series C Preferred
Stock shall have the right, voting separately as a single class
(or as a class with the holders of shares of Parity Stock, if such
holders are similarly entitled to elect additional directors), to
elect directors to fill such newly created directorships. Such
additional directors shall continue as directors until such time as
all dividends accumulated on the Series C Preferred Stock (and on
the Parity Stock, if applicable) have been paid in full or all
necessary funds have been set aside for payment.
At each meeting of stockholders at which the holders of shares
of Series C Preferred Stock shall have the right to take any
action, the presence in person or by proxy of the holders of record
of one-third of the total number of shares of Series C Preferred
Stock then outstanding and entitled to vote shall be necessary to
constitute a quorum.
Transfer Restrictions. Under the terms of the Securities
Resale Registration Rights Agreement dated as of December 22, 1995
between the Company and Tribune Company, the Company is to use its
best efforts to register the Series C Preferred Stock under the
Securities Act within 90 days of such agreement. Until such time
as the Series C Preferred Stock is so registered, then until the
date that is three years after the later of the issuance of the
Additional Note upon the exchange of which Series C Preferred Stock
was issued and the last date on which the Company or any affiliate
of the Company was the owner of such Additional Note, such Series C
Preferred Stock may only be sold (i) to the Company or any
subsidiary thereof, (ii) pursuant to Rule 144A, Rule 904 or Rule
144 under the Securities Act or (iii) to an institutional
"accredited investor" (as defined in the Securities Act) who makes
certain representations in connection with such sale. In addition,
the transferor must furnish to the transfer agent for the Series C
Preferred Stock such 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.
The Company has no current plans to issue any Preferred Stock
other than the Series C Stock. While the issuance of Preferred
Stock could provide needed flexibility in connection with possible
acquisitions and other corporate purposes, such issuance could also
make it more difficult for a third party to acquire a majority of
the outstanding voting stock of the Company or discourage an
attempt to gain control of the Company.
SPECIAL VOTING SHARE
The Company's sole authorized and outstanding Special Voting
Share is held of record by The R-M Trust Company, as Trustee (the
"Special Voting Share Trustee"), under a Voting and Exchange Trust
Agreement pursuant to which each holder of Exchangeable Non-Voting
Shares of SoftKey Software Products Inc. (the "Exchangeable
Shares"), other than the Company or any entity controlled by the
Company (a "Controlled Entity"), is entitled to instruct the
Special Voting Share Trustee to exercise one of the votes attached
to the Special Voting Share for each Exchangeable Share held by
such holder. Except as otherwise required by law or the Company's
Restated Certificate of Incorporation, as amended, the holder of
record of the Special Voting Share will have a number of votes
equal to the number of Exchangeable Shares outstanding from time to
time not owned by the Company or any Controlled Entity. The holders
of shares of the Common Stock and the Special Voting Share vote
together as a single class on all matters, except as may be
required by applicable law. The holder of the Special Voting Share
is not entitled to receive dividends. In the event of any
liquidation, dissolution or winding-up of the Company, the holder
of the Special Voting Share will not be entitled to receive any
assets of the Company available for distribution to its
stockholders. At such time as the Special Voting Share has no votes
attached to it because there are no Exchangeable Shares outstanding
not owned by the Company or a Controlled Entity, and there are no
shares of stock, debt, options or other agreements of the Company
which could give rise to the issuance of any Exchangeable Shares to
any person (other than the Company or a Controlled Entity), the
Special Voting Share will be cancelled.
The Exchangeable Shares were originally issued to certain
holders of common shares of Former SoftKey in the Three-Party
Combination. All Exchangeable Shares not exchanged for an
equivalent number of shares of Common Stock by February 4, 2005
(the "Redemption Date") will be redeemed by SoftKey Software for a
price per share equal to the current market price of a share of
Common Stock (which shall be paid in Common Stock) plus a cash
amount equivalent to the full amount of all unpaid dividends
thereon, and the Special Voting Share will thereupon be cancelled.
The Board of Directors of SoftKey Software may extend the
Redemption Date or, if at any time there are less than 50,000
outstanding Exchangeable Shares (other than Exchangeable Shares
held by the Company or any Controlled Entity, subject to adjustment
to reflect permitted changes to the Exchangeable Shares),
accelerate the Redemption Date.
TRANSFER AGENT AND REGISTRAR
The Company has appointed The First National Bank of Boston as
transfer agent and registrar of the Common Stock.
PLAN OF DISTRIBUTION
The Securities covered hereby may be offered and sold from
time to time by the Selling Holders. The Selling Holders will act
independently of the Company in making decisions with respect to
the timing, manner and size of each sale. Such sales may be made
in the over-the-counter market or otherwise, at market prices
prevailing at the time of sale, at prices related to the then
prevailing market prices or in negotiated transactions, including
without limitation pursuant to an underwritten offering or pursuant
to one or more of the following methods: (a) purchases by a
broker-dealer as principal and resale by such broker or dealer for
its account pursuant to this Prospectus; (b) ordinary brokerage
transactions and transactions in which a broker solicits
purchasers; and (c) block trades in which a broker-dealer so
engaged will attempt to sell the shares as agent but may take a
position and resell a portion of the block as principal to
facilitate the transaction.
The Company has been advised that, as of the date hereof, the
Selling Holders have made no arrangement with any broker for the
offering or sale of the Notes or the shares of Common Stock
issuable upon conversion thereof. Underwriters, brokers, dealers
or agents may participate in such transactions as agents and may,
in such capacity, receive brokerage commissions from the Selling
Holders or purchasers of such securities. Such underwriters,
brokers, dealers or agents may also purchase the Notes or shares of
Common Stock issuable upon conversion thereof and resell such
securities for their own account. The Selling Holders and such
underwriters, brokers, dealers or agents may be considered
"underwriters" as that term is defined by the Securities Act,
although the Selling Holders disclaim such status. Any
commissions, discounts or profits received by such underwriters,
brokers, dealers or agents in connection with the foregoing
transactions may be deemed to be underwriting discounts and
commissions under the Securities Act.
To comply with the securities laws of certain jurisdictions,
if applicable, the Notes and Common Stock issuable upon conversion
thereof will be offered or sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain
jurisdictions, the Notes and Common Stock issuable upon conversion
thereof may not be offered or sold unless they have been registered
or qualified for sale in such jurisdictions or unless an exemption
from registration or qualification in available and is complied
with.
Under applicable rules and regulations under the Exchange Act,
any person engaged in a distribution of the Notes or the shares of
Common Stock issuable upon conversion thereof may be limited in its
ability to engage in market activities with respect to such Notes
or the shares of Common Stock issuable upon conversion thereof. In
addition and without limiting the foregoing, each Selling Holder
will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without
limitation, rules 10b-2, 10b-5, 10b-6 and 10b-7, which provisions
may limit the timing of purchases and sales of any of the Notes and
shares of Common Stock issuable upon conversion thereof by the
Selling Holders. All of the foregoing may affect the marketability
of the Notes and shares of Common Stock issuable upon conversion
thereof.
The Company may suspend the use of this Prospectus and any
supplements hereto in certain circumstances due to pending
corporate developments, public filings with the commission or
similar events. The Company is obligated in the event of such
suspension to use its reasonable efforts to ensure that the use of
the Prospectus may be resumed as soon as practicable.
The Company has agreed to pay substantially all of the
expenses incident to the registration, offering and sale of the
Notes or the shares of Common Stock issuable upon conversion
thereof to the public other than commissions and discounts of
agents, dealers or underwriters. Such expenses (excluding such
commissions and discounts) are estimated to be approximately
$350,000. The Company has also agreed to indemnify the Selling
Holders against certain liabilities, including certain liabilities
under the Securities Act.
LEGAL MATTERS
The validity of the Securities offered hereby will be passed
upon for the Company by Neal S. Winneg, General Counsel of the
Company. Mr. Winneg owns options to purchase an aggregate of
99,375 shares of Common Stock, which are or become exercisable in
periodic installments through January 1999.
EXPERTS
The consolidated financial statements and related schedules of
the Company as of and for the year ended December 31, 1994,
included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1994, have been audited by Coopers & Lybrand
L.L.P., independent public accountants, as set forth in their
report therein dated March 3, 1995 and incorporated herein by
reference in reliance on such report, given on the authority of
that firm as experts in accounting and auditing. The consolidated
financial statements and related schedules of the Company as of
December 31, 1993 and June 30, 1993 and for the six month
transition period from July 4, 1993 to January 1, 1994 and for each
of the two years in the period ended June 30, 1993, included in the
Company's Annual Report on Form 10-K for the year ended December
31, 1994, have been audited by Arthur Andersen LLP, independent
public accountants, as set forth in their report therein dated
January 16, 1995 and incorporated herein by reference. In its
report, Arthur Andersen LLP states that with respect to the
consolidated financial statements and related schedules of WordStar
as of June 30, 1993 and for each of the two years in the period
ended June 30, 1993, Spinnaker as of June 30, 1993 and for the year
then ended and Spinnaker as of June 30, 1992 and for the year then
ended, its opinion is based on the reports of other independent
accountants, namely KPMG Peat Marwick LLP, Price Waterhouse LLP and
Deloitte & Touche LLP, respectively. The consolidated financial
statements and related schedules of the Company have been included
therein in reliance upon such reports given upon the authority of
those firms as experts in accounting and auditing. The report of
Price Waterhouse LLP on the consolidated financial statements of
Spinnaker as of June 30, 1993 and for the year then ended contains
an explanatory paragraph relating to Spinnaker's ability to
continue as a going concern as described in Note 12 of the
consolidated financial statements of Spinnaker (not included
herein). The report of Deloitte & Touche LLP on the consolidated
financial statements of Spinnaker for the year ended June 30, 1992
expresses an unqualified opinion and includes an explanatory
paragraph referring to an uncertainty in connection with an
arbitration proceeding referred to in Note 12 of the consolidated
financial statements of Spinnaker (not included herein).
SOFTKEY
No dealer, salesman or
any other person has been
authorized to give any
information or to make any
representation not contained
in this Prospectus, and, if
given or made, such
information or representation
must not be relied upon as
having been authorized by the
Company or any Selling Holder.
This Prospectus does not
constitute an offer to sell or
a solicitation of an offer to
buy any of the securities
offered hereby in any
jurisdiction to any person to
whom it is unlawful to make
such offer in such
jurisdiction. Neither the $350,000,000
delivery of this Prospectus 5 1/2% SENIOR
nor any sale made hereunder CONVERTIBLE NOTES
shall, under any DUE 2000
circumstances, create any AND
implication that the COMMON STOCK
information herein is correct
as of any time subsequent to
the date hereof or that there
has been no change in the
affairs of the Company since
such date.
____________________
____________
PROSPECTUS
____________________
TABLE OF CONTENTS
Page
Available Information . 2
Documents Incorporated by
Reference . . . . . . . 2
Prospectus Summary . . 3
Risk Factors . . . . . 6
Use of Proceeds . . . . 11
The Selling Holders . . 11
Description of the Notes 15
Description of Capital Stock 22
Plan of Distribution . . . 25
Legal Matters . . . . . 26
Experts . . . . . . . . 26 JANUARY 10, 1996
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the distribution of the
securities being registered (all of which (other than selling
commissions) will be borne by the Company and not the Selling
Holders), are estimated as follows:
Securities and Exchange Commission Registration Fee . . $ 120,690
NASD Filing Fee . . . . . . . . . . . . . . . . . . . . . . 30,500
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . 50,000
Accounting Fees and Expenses . . . . . . . . . . . . . . . 50,000
State Securities Laws Registration Fees and Expenses . . 15,000
Trustee and Registrar Fees and Expenses . . . . . . . . . 12,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 46,810
Total . . . . . . . . . . . . . . . . . . . . . . . $ 350,000
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102 of the Delaware General Corporation Law, as
amended, allows a corporation to eliminate the personal liability
of directors of a corporation to the corporation or its
stockholders for monetary damage for a breach of fiduciary duty as
a director, except where the director breached his duty of loyalty,
failed to act in good faith, engaged in intentional misconduct or
knowingly violated a law, authorized the payment of a dividend or
approved a stock repurchase in violation of Delaware corporate law
or obtained an improper personal benefit.
Section 145 of the Delaware General Corporation Law, as
amended, provides that a corporation may indemnify any person who
was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation), by reason of
the fact that he is or was a director, officer, employee or agent
of the corporation or is or was serving at its request in such
capacity in another corporation, partnership, joint venture, trust
or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful.
Section 8 of the Company's Restated Certificate of
Incorporation, as amended, provides for elimination of directors'
personal liability and indemnification as follows:
"8. LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS
8.1 ELIMINATION OF CERTAIN LIABILITIES OF DIRECTORS. A
director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any
breach of the directors' duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is
amended after approval by the stockholders of this Section to
authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so
amended. Any repeal or modification of this Section by the
stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at
the time of such repeal or modification.
8.2 INDEMNIFICATION AND INSURANCE
8.2.1 RIGHT TO INDEMNIFICATION. Each person who was or
is made a party or is threatened to be made a party to or is
involved in any action, suit or proceeding, whether civil,
criminal, administrative, or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person of
whom he or she is the legal representative, is or was a director or
officer, of the Corporation or is or was serving at the request of
the Corporation, as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust, or
other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee, or
agent or in any other capacity while serving as a director,
officer, employee or agent, shall be indemnified and held harmless
by the Corporation to its fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to
provide prior to such amendment), against all expense, liability,
and loss (including attorneys' fees, judgments, fines, Employee
Retirement Income Security Act of 1974, excise taxes or penalties,
and amounts paid or to be paid in settlement) reasonably incurred
or suffered by such person in connection therewith, and such
indemnification shall continue as to a person who has ceased to be
a director, officer, employee, or agent and shall inure to the
benefit of his or her heirs, executors, and administrators;
provided, however, that the Corporation shall indemnify any such
person seeking indemnification in connection with a proceeding (or
part thereof) initiated by such person only if such proceeding (or
part thereof) was authorized by the Board of Directors of the
Corporation. The right to indemnification conferred in this
Section shall be a contract right and shall include the right to be
paid by the Corporation the expenses incurred defending any such
proceeding in advance of its final disposition; provided, however,
that, if the Delaware General Corporation Law requires, the payment
of such expenses incurred by a director or officer in his or her
capacity as a director or officer (and not in any other capacity in
which service was or is rendered by such person while a director or
officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding,
shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such director or officer, to repay
all amounts so advanced if it shall ultimately be determined that
such director or officer is not entitled to be indemnified under
this Section or otherwise. The Corporation may, by action of its
Board of Directors, provide indemnification to employees and agents
of the Corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
8.2.2 NON-EXCLUSIVITY OF RIGHTS. The right to
indemnification and the payment of expenses incurred in defending a
proceeding in advance of its final disposition conferred in this
Section shall not be exclusive of any other right which any person
may have or hereafter acquire under any statute, provision of this
Restated Certificate, Bylaw, agreement, vote of stockholders, or
disinterested directors or otherwise.
8.2.3 INSURANCE. The Corporation may maintain insurance,
at its expense, to protect itself and any director, officer,
employee, or agent of the Corporation or another corporation,
partnership, joint venture, trust, or other enterprise against any
such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense,
liability, or loss under the Delaware General Corporation Law."
SoftKey has purchased directors' and officers' liability
insurance which would indemnify the directors and officers of
SoftKey against damages arising out of certain kinds of claims
which might be made against them based on their negligent acts or
omissions while acting in their capacity as such.
16. EXHIBITS
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
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)
4.1 Indenture dated as of October 16,
1995 between the Company and State
Street Bank and Trust Company, as
Trustee, for 51/2% Senior Convertible
Notes due 2000 (the "Indenture").(2)
4.2 First Supplemental Indenture to the
Indenture, dated as of November 22,
1995 by and between the Company and
State Street Bank and Trust Company,
as Trustee.
4.3 Note Resale Registration Rights
Agreement dated as of October 17,
1995 by and between the Company, on
the one hand, and the Initial
Purchasers on the other hand.
4.4 Securities Purchase Agreement dated
November 30, 1995 by and between the
Company and Tribune.(3)
5.1 Opinion of Neal S. Winneg, Esq.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Arthur Anderson LLP.
23.3 Consent of KPMG Peat Marwick LLP.
23.4 Consent of Deloitte & Touche LLP.
23.5 Consent of Price Waterhouse LLP.
23.6 Consent of Neal S. Winneg, Esq.
(included in Exhibit 5.1).
24.1 Power of Attorney (included on the
signature page of this Registration
Statement).
25.1 Statement of eligibility of trustee.
_____________
(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 Exhibit 10.21 of the Company's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1995.
(3) Incorporated by reference to Exhibit 4.1 of the Company's
Current Report on Form 8-K dated December 11, 1995.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file during any period in which offers or
sales are being made, a post-effective amendment to this
registration statement to include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information
in the registration statement;
(2) That, for the purpose of determining any
liability under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in this
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
The registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the
prospectus, to each person to whom the prospectus is sent or given,
the latest annual report, to security holders that is incorporated
by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or rule 14c-3 under the
Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation S-X
is not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial
information.
Insofar as indemnification for liabilities under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions
described in Item 15 above, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable. In
the event that a claim of indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant
in a successful defense of any action, suit or proceeding) is
asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to file an
application for the purpose of determining the eligibility of the
trustee to act under subsection (a) of Section 310 of the Trust
Indenture Act in accordance with the rules and regulations
prescribed by the Commission under Section 305(b)(2) of the Act.
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the Registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-
3 and has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the
City of Cambridge, the Commonwealth of Massachusetts on January 10,
1996.
SOFTKEY INTERNATIONAL INC.
By:/s/ Michael J. Perik
______________________________
Michael J. Perik
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated. Each person
whose signature appears below hereby authorizes Neal S. Winneg and
R. Scott Murray and each of them, with full power of substitution,
to execute in the name and on behalf of such person any amendment
(including any post-effective amendment) to this Registration
Statement (or any other registration statement for the same
offering that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act) and to file the same, with
exhibits thereto, and other documents in connection therewith,
making such changes in this Registration Statement as the person(s)
so acting deems appropriate, and appoints each of such persons,
each with full power of substitution, attorney-in-fact to sign any
amendment (including any post-effective amendment) to this
Registration Statement (or any other registration statement for the
same offering that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act) and to file the same, with
exhibits thereto, and other documents in connection therewith.
Signature Title Date
/s/ Michael J. Perik Chairman of the January 10, 1996
____________________ Board and
Michael J. Perik Chief Executive
Officer
(principal executive
officer)
/s/ R. Scott Murray Chief Financial January 10, 1996
____________________ Officer
R. Scott Murray (principal financial
and accounting
officer)
/s/ Kevin O'Leary President and January 10, 1996
___________________ Director
Kevin O'Leary
____________________ Director January , 1996
Michael Bell
/s/ James C. Dowdle Director January 10, 1996
____________________
James C. Dowdle
/s/ Robert Gagnon Director January 10, 1996
____________________
Robert Gagnon
/s/ Robert Rubinoff Director January 10, 1996
____________________
Robert Rubinoff
____________________ Director January , 1996
Scott M. Sperling
EXHIBIT INDEX
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
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)
4.1 Indenture dated as of October 16,
1995 between the Company and State
Street Bank and Trust Company, as
Trustee, for 51/2% Senior Convertible
Notes due 2000 (the "Indenture").(2)
4.2 First Supplemental Indenture to the
Indenture, dated as of November 22,
1995 by and between the Company and
State Street Bank and Trust Company,
as Trustee.
4.3 Note Resale Registration Rights
Agreement dated as of October 17,
1995 by and between the Company, on
the one hand, and the Initial
Purchasers on the other hand.
4.4 Securities Purchase Agreement dated
November 30, 1995 by and between the
Company and Tribune.(3)
5.1 Opinion of Neal S. Winneg, Esq.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Arthur Anderson LLP.
23.3 Consent of KPMG Peat Marwick LLP.
23.4 Consent of Deloitte & Touche LLP.
23.5 Consent of Price Waterhouse LLP.
23.6 Consent of Neal S. Winneg, Esq.
(included in Exhibit 5.1).
24.1 Power of Attorney (included on the
signature page of this Registration
Statement).
25.1 Statement of eligibility of trustee.
(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 Exhibit 10.21 of the Company's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1995.
(3) Incorporated by reference to Exhibit 4.1 of the Company's
Current Report on Form 8-K dated December 11, 1995.
SOFTKEY INTERNATIONAL INC.
AND
STATE STREET BANK AND TRUST COMPANY,
as Trustee
FIRST SUPPLEMENTAL INDENTURE
Dated as of November 22, 1995
to
INDENTURE
Dated as of October 16, 1995
FIRST SUPPLEMENTAL INDENTURE dated as of November 22,
1995, between SOFTKEY INTERNATIONAL INC., a Delaware corporation
(the "Company"), and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts banking corporation (the "Trustee").
W I T N E S S E T H :
WHEREAS, the Company and the Trustee have heretofore
executed and delivered a certain indenture dated as of
October 16, 1995 (the "Indenture"), pursuant to which 5 1/2% Senior
Convertible Notes Due 2000 (the "Notes") in an aggregate
principal amount not to exceed $402,500,000 have been issued;
WHEREAS, Section 11.1(i) of the Indenture provides,
among other things, that, without the consent of the holders of
the Notes (each a "Noteholder; holder"), the Company and the
Trustee, when authorized by Board Resolutions and the Trustee,
may enter into an indenture supplemental to the Indenture to
modify, eliminate or add to the provisions of the Indenture to
allow for the issuance of one or more global Notes, in addition
to the global Note provided for therein, 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) thereof;
WHEREAS, the Company and the Trustee join in the
execution of this First Supplemental Indenture for the purpose of
amending certain provisions of the Indenture as hereinafter set
forth;
WHEREAS, the execution and delivery of this First
Supplemental Indenture has been authorized by Board Resolutions
and the Trustee; and
WHEREAS, all conditions precedent and requirements
necessary to make this First Supplemental Indenture a valid and
legally binding instrument in accordance with its terms have been
complied with, performed and fulfilled and the execution and
delivery hereof have been in all respects duly authorized;
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE
WITNESSETH:
For and in consideration of the premises and intending
to be legally bound hereby, it is mutually covenanted and agreed,
for the equal and proportionate benefit of all holders of the
Notes, as follows:
ARTICLE I.
AMENDMENTS
SECTION 1.1. Section 1.1 of the Indenture is hereby
amended by adding the following definitions in the appropriate
alphabetical order:
Cedel: The term "Cedel" means Cedel, S.A.
Closing Date: The term "Closing Date" means
October 23, 1995.
DWAC: The term "DWAC" means Deposit and Withdrawal At
Custodian Service.
Euroclear: The term "Euroclear" means Morgan Guaranty
Trust Company of New York, Brussels office, as operator of
the Euroclear System.
global Note: The term "global Note" means any and all
notes in global form.
Regulation S: The term "Regulation S" means Regulation
S under the Securities Act and any successor regulation
thereto.
Regulation S Global Note: The term "Regulation S
Global Note" shall have the meaning specified in Section
2.2.
Restricted Global Note: The term "Restricted Global
Note" shall have the meaning specified in Section 2.2.
Restricted Period: The term "Restricted Period" shall
have the meaning specified in Section 2.2.
SECTION 1.2. The first paragraph of Section 2.2 of the
Indenture is hereby amended by deleting the last sentence thereof
and adding the following paragraphs thereafter:
"Notes initially offered and sold in reliance on
Rule 144A shall be issued in the form of one or more
permanent global Notes (the "Restricted Global Note") in
definitive, fully registered form without interest coupons,
substantially in the form of Exhibit B hereto, with the
legends in substantially the form indicated in Exhibit B
hereto and such other legends as may be applicable thereto,
which Restricted Global Note shall be deposited on behalf of
the holders of the Notes represented thereby with the
Trustee, as custodian for the Depositary, and registered in
the name of a nominee of the Depositary, duly executed by
the Company and authenticated by the Trustee or the
authenticating agent as provided herein.
Notes offered and sold outside the United States
in reliance on Regulation S may be evidenced in the form of
one or more permanent global Notes (the "Regulation S Global
Note") in definitive, fully registered form without interest
coupons, substantially in the form of Exhibit C hereto, with
the legend in substantially the form set forth in Exhibit C
hereto and such other legends as may be applicable thereto,
which Regulation S Global Note shall be deposited on behalf
of the holders of the Notes represented thereby with the
Trustee, as custodian for the Depositary, and registered in
the name of a nominee of the Depositary, duly executed by
the Company and authenticated by the Trustee or an
authenticating agent as provided herein, for credit to the
accounts of the respective depositaries for Euroclear and
Cedel (or such other accounts as they may direct). Prior to
or on the 40th day after the later of the commencement of
the offering of the Notes and the Closing Date (the
"Restricted Period"), beneficial interests in the Regulation
S Global Note may only be held through Morgan Guaranty Trust
Company of New York, Brussels office, as operator of
Euroclear or Cedel or another agent member of Euroclear and
Cedel acting for and on behalf of them, unless delivery is
made through the Restricted Global Note in accordance with
the certification requirements hereof. During the
Restricted Period, interests in the Regulation S Global Note
may be exchanged for interests in the Restricted Global Note
or for definitive Notes only in accordance with the
certification requirements described in Section 2.5 below."
SECTION 1.3. Each of the last paragraph of Section 2.2
of the Indenture, the first paragraph of Section 2.3 of the
Indenture and the first paragraph of Section 2.4 of the Indenture
is hereby amended by deleting the phrase "Exhibits A and B"
therein in its entirety and substituting the phrase "Exhibits A,
B and C".
SECTION 1.4. Section 2.5(b) of the Indenture is hereby
amended by deleting the first paragraph in its entirety and
substituting the following:
"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 the Restricted Global Note registered in the
name of the Depositary or the nominee of the Depositary.
The transfer and exchange of beneficial interests in any
global Note, which does not involve the issuance of a
definitive Note or the transfer of interests to another
global Note, shall be effected through the Depositary (but
not the Trustee or the Custodian) in accordance with this
Indenture (including the 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 global Note
that does not involve the issuance of a definitive Note or
the transfer of interests to another global Note."
SECTION 1.5. (a) The first paragraph of Section
2.5(c) of the Indenture is hereby amended by (i) deleting the
phrase "together with a certification from the transferor that
the transferee is a QIB" in its entirety and substituting the
phrase "together with a certificate in the form of Exhibit E
hereto from the transferor that the transferor reasonably
believes the transferee is a QIB and is obtaining such beneficial
interest in a transaction meeting the requirements of Rule 144A
and any applicable securities laws of any state of the United
States or any other jurisdiction" and (ii) deleting the phrase
"the Note in global form" in its entirety wherever it appears
therein and substituting the phrase "the Restricted Global Note".
(b) Section 2.5(c) of the Indenture is hereby amended
by adding the following paragraphs after the first paragraph
thereof:
"So long as the Notes are eligible for book-entry
settlement, or unless otherwise required by law, upon any
transfer of a definitive Note in accordance with Regulation
S, if requested by the transferor, and upon receipt of the
definitive Note or Notes being so transferred, together with
a certificate in the form of Exhibit E hereto from the
transferor that the transfer was made in accordance with
Rule 903 or 904 of Regulation S or Rule 144 under the
Securities Act (or other evidence satisfactory to the
Trustee), the Trustee shall make or direct the Custodian to
make, an endorsement on the Regulation S Global Note to
reflect an increase in the aggregate principal amount of the
Notes represented by the Regulation S Global Note, 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 Regulation S Global Note
to be increased accordingly.
If a holder of a beneficial interest in the
Restricted Global Note wishes at any time to exchange its
interest in the Restricted Global Note for an interest in
the Regulation S Global Note, or to transfer its interest in
the Restricted Global Note to a person who wishes to take
delivery thereof in the form of an interest in the
Regulation S Global Note, such holder may, subject to the
rules and procedures of the Depositary and to the
requirements set forth in the following sentence, exchange
or cause the exchange or transfer or cause the transfer of
such interest for an equivalent beneficial interest in the
Regulation S Global Note. Upon receipt by the Trustee, as
transfer agent of (1) instructions given in accordance with
the Depositary's procedures from or on behalf of a holder of
a beneficial interest in the Restricted Global Note,
directing the Trustee (via DWAC), as transfer agent, to
credit or cause to be credited a beneficial interest in the
Regulation S Global Note in an amount equal to the
beneficial interest in the Restricted Global Note to be
exchanged or transferred, (2) a written order given in
accordance with the Depositary's procedures containing
information regarding the Euroclear or Cedel account to be
credited with such increase and the name of such account,
and (3) a certificate in the form of Exhibit D given by the
holder of such beneficial interest stating that the exchange
or transfer of such interest has been made pursuant to and
in accordance with Rule 903 or Rule 904 of Regulation S or
Rule 144 under the Securities Act (or other evidence
satisfactory to the Trustee), the Trustee, as transfer
agent, shall promptly deliver appropriate instructions to
the Depositary (via DWAC), its nominee, or the custodian for
the Depositary, as the case may be, to reduce or reflect on
its records a reduction of the Restricted Global Note by the
aggregate principal amount of the beneficial interest in
such Restricted Global Note to be so exchanged or
transferred from the relevant participant, and the Trustee,
as transfer agent, shall promptly deliver appropriate
instructions (via DWAC) to the Depositary, its nominee, or
the custodian for the Depositary, as the case may be,
concurrently with such reduction, to increase or reflect on
its records an increase of the principal amount of such
Regulation S Global Note by the aggregate principal amount
of the beneficial interest in such Restricted Global Note to
be so exchanged or transferred, and to credit or cause to be
credited to the account of the person specified in such
instructions (who shall be Morgan Guaranty Trust Company of
New York, Brussels office, as operator of Euroclear or Cedel
or another agent member of Euroclear or Cedel, or both, as
the case may be, acting for and on behalf of them) a
beneficial interest in such Regulation S Global Note equal
to the reduction in the principal amount of such Restricted
Global Note.
If a holder of a beneficial interest in the
Regulation S Global Note wishes at any time to exchange its
interest in the Regulation S Global Note for an interest in
the Restricted Global Note, or to transfer its interest in
the Regulation S Global Note to a person who wishes to take
delivery thereof in the form of an interest in the
Restricted Global Note, such holder may, subject to the
rules and procedures of Euroclear or Cedel and the
Depositary, as the case may be, and to the requirements set
forth in the following sentence, exchange or cause the
exchange or transfer or cause the transfer of such interest
for an equivalent beneficial interest in such Restricted
Global Note. Upon receipt by the Trustee, as transfer agent
of (l) instructions given in accordance with the procedures
of Euroclear or Cedel and the Depositary, as the case may
be, from or on behalf of a beneficial owner of an interest
in the Regulation S Global Note directing the Trustee, as
transfer agent, to credit or cause to be credited a
beneficial interest in the Restricted Global Note in an
amount equal to the beneficial interest in the Regulation S
Global Note to be exchanged or transferred, (2) a written
order given in accordance with the procedures of Euroclear
or Cedel and the Depositary, as the case may be, containing
information regarding the account with the Depositary to be
credited with such increase and the name of such account,
and (3) prior to the expiration of the Restricted Period, a
certificate in the form of Exhibit E given by the holder of
such beneficial interest and stating that the person
transferring such interest in such Regulation S Global Note
reasonably believes that the person acquiring such interest
in the Restricted Global Note is a QIB and is obtaining such
beneficial interest in a transaction meeting the
requirements of Rule 144A and any applicable securities laws
of any state of the United States or any other jurisdiction
(or other evidence satisfactory to the Trustee), the
Trustee, as transfer agent, shall promptly deliver (via
DWAC) appropriate instructions to the Depositary, its
nominee, or the custodian for the Depositary, as the case
may be, to reduce or reflect on its records a reduction of
the Regulation S Global Note by the aggregate principal
amount of the beneficial interest in such Regulation S
Global Note to be exchanged or transferred, and the Trustee,
as transfer agent, shall promptly deliver (via DWAC)
appropriate instructions to the Depositary, its nominee, or
the custodian for the Depositary, as the case may be,
concurrently with such reduction, to increase or reflect on
its records an increase of the principal amount of the
Restricted Global Note by the aggregate principal amount of
the beneficial interest in the Regulation S Global Note to
be so exchanged or transferred, and to credit or cause to be
credited to the account of the person specified in such
instructions a beneficial interest in the Restricted Global
Note equal to the reduction in the principal amount of the
Regulation S Global Note. After the expiration of the
Restricted Period, the certification requirement set forth
in clause (3) of the second sentence of this Section
2.5(b)(iii) will no longer apply to such exchanges and
transfers.
If a holder of a definitive Note wishes at any
time to exchange its Note for a beneficial interest in any
global Note (or vice versa), or to transfer its definitive
Note to a person who wishes to take delivery thereof in the
form of a beneficial interest in a global Note (or vice
versa), such Notes and beneficial interests may be exchanged
or transferred for one another only in accordance with such
procedures as are substantially consistent with the
provisions of the two preceding paragraphs (including the
certification requirements intended to ensure that such
exchanges or transfers comply with Rule 144, Rule 144A or
Regulation S, as the case may be) and as may be from time to
time adopted by the Company and the Trustee.
Any beneficial interest in one of the global Notes
that is transferred to a person who takes delivery in the
form of an interest in the other global Note will, upon
transfer, cease to be an interest in such global Note and
become an interest in the other global Note and,
accordingly, will thereafter be subject to all transfer
restrictions and other procedures applicable to beneficial
interests in such other global Note for as long as it
remains such an interest."
(c) The second paragraph of Section 2.5(c) of the
Indenture is hereby amended by adding the phrase "or with
Regulation S" after the phrase "or required to comply with any
applicable law or any regulation thereunder".
SECTION 1.6. (a) The second paragraph of Section
2.5(d) of the Indenture is hereby amended by adding after the
first reference to "Note" therein the parenthetical phrase
"(other than any Note represented by the Regulation S Global
Note)".
(b) Section 2.5(d) of the Indenture is hereby amended
by adding after the last paragraph therein the following:
"The Company and the Trustee may for all purposes,
including the making of payments due on the Notes, deal
with the Depositary as the authorized representative of
the Noteholders for the purposes of exercising the
rights of Noteholders hereunder. The rights of the
owner of any beneficial interest in a global Note shall
be limited to those established by law and agreements
between such owners and depository participants or
Euroclear and Cedel; provided, that no such agreement
shall give any rights to any person against the Company
or the Trustee without the written consent of the
parties so affected. Multiple requests and directions
from and votes of, the Depositary as holder of notes in
book entry form with respect to any particular matter
shall not be deemed inconsistent to the extent they do
not represent an amount of notes in excess of those
held in the name of the Depositary or its nominee."
(c) The fourth, fifth, sixth and eighth paragraphs of
Section 2.5(d) of the Indenture are hereby amended by changing
every reference therein to a global "Note" in singular form to a
reference to global "Notes" in plural form and every reference
therein to "a Note in global form" to "global Notes".
SECTION 1.7. (a) The first paragraph of Section
2.5(e) of the Indenture is hereby amended by adding after the
first reference to "Note" therein the parenthetical phrase
"(other than any Note represented by the Regulation S Global
Note)".
SECTION 1.8. Exhibit B of the Indenture is hereby
amended by deleting Exhibit B in its entirety and substituting
the following:
EXHIBIT B - FORM OF RESTRICTED 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 RESTRICTED GLOBAL NOTE MAY
NOT BE TRANSFERRED EXCEPT AS A WHOLE 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. 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
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 Restricted Global 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 Restricted Global Note, from the May 1 or November
1, as the case may be, next preceding the date of this Restricted
Global 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
Restricted Global 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 Restricted Global 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 Restricted Global 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 Restricted Global 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 this Restricted
Global Note represented hereby may from time to time be reduced
or increased to reflect exchanges of a part of this Restricted
Global Note for interests in the Regulation S Global Note or
definitive Notes or exchanges of interests in the Regulation S
Global Note or definitive Notes for a part of this Restricted
Global Note or conversions or redemptions of a part of this
Restricted Global Note or cancellations of a part of this
Restricted Global Note or transfers of interests in the
Regulation S Global Note or definitive Notes in return for a part
of this Restricted Global Note or transfers of a part of this
Restricted Global Note effected by delivery of interests in the
Regulation S Global Note or 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
Restricted Global Note to the contrary, (i) exchanges of a part
of this Restricted Global Note for interests in the Regulation S
Global Note or definitive Notes, (ii) exchanges of interests in
the Regulation S Global Note or definitive Notes for a part of
this Restricted Global Note, (iii) conversions or redemptions of
a part of this Restricted Global Note, (iv) cancellations of a
part of this Restricted Global Note, (v) transfers of interests
in the Regulation S Global Note or definitive Notes in return for
a part of this Restricted Global Note and (vi) transfers of a
part of this Restricted Global Note effected by delivery of
interests in the Regulation S Global Note or definitive Notes may
be effected without the surrendering of this Restricted Global
Note, 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 Restricted
Global Note resulting therefrom or as a consequence thereof.
Reference is made to the further provisions of this
Restricted Global Note set forth on the reverse hereof,
including, without limitation, provisions giving the holder of
this Restricted Global Note the right to convert this Restricted
Global 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 Restricted Global 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 Restricted Global 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
Restricted Global Note to be duly executed under its corporate
seal.
SOFTKEY INTERNATIONAL INC.
By:
Name:
Title:
Dated:_________________________
Attest:
______________________________
Secretary
[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 RESTRICTED GLOBAL NOTE]
SoftKey International Inc.
5 1/2% Senior Convertible Note Due 2000
This Restricted Global 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
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 Restricted Global 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 Restricted Global 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 Restricted Global Note or such other Notes.
No reference herein to the Indenture and no provision
of this Restricted Global 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 Restricted Global 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.
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.
If redeemed during the 12-month period beginning:
Date Percentage
November 2, 1998 102.2%
November 1, 1999 101.1%
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 Restricted Global 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 Restricted Global 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 Restricted Global 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 Restricted Global 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 Restricted Global 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 Restricted Global 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 Restricted Global 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 Restricted Global Note (whether or not this Restricted
Global 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 Restricted Global Note.
No recourse for the payment of the principal of or any
premium or interest on this Restricted Global 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 Restricted Global Note and defined
in the Indenture are used herein as therein defined.
ABBREVIATIONS
The following abbreviations, when used in the
inscription of the face of this Restricted Global 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 -
__________________ Custodian
(Cust)
TEN ENT - as tenants by the __________________ under
entireties (Minor)
JT TEN - as joint tenants with
right of survivorship Uniform Gifts to
and not as tenants in Minors Act _____________________
common (State)
Additional abbreviations may also be used
though not in the above list.
[FORM OF CONVERSION NOTICE]
CONVERSION NOTICE
To: SoftKey International Inc.
The undersigned registered owner of this Restricted Global Note
hereby irrevocably exercises the option to convert this
Restricted Global 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 Restricted Global
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 Restricted
Global 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 Restricted
Global 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
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) $____________
________________________________
[FORM OF OPTION TO ELECT REPAYMENT
UPON A CHANGE OF CONTROL]
To: SoftKey International Inc.
The undersigned registered owner of this Restricted
Global 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 Restricted Global 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 Restricted Global 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):
$________________________
[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
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.
SCHEDULE A
SCHEDULE OF EXCHANGES
The initial principal amount of this Restricted Global Note is
U.S. $_____________. The following additions to principal, redemptions,
exchanges of a part of this Restricted Global Note for an interest in the
Regulation S Global Note or definitive Note and conversions into Common
Shares have been made:
Principal
Amount
Redeemed,
Principal Exchanged for
Amount Added Interest in
on the
Exchange of Regulation S Remaining
Date of Interest in Global Note Principal
Addition to the or Definitive Amount
Principal, Regulation S Notes or Outstanding Notation
Redemption, Global Note Converted Following Made by or
Exchange or or Definitive into Common such on behalf of
Conversion Notes Shares Transaction the Trustee
SECTION 1.9. The Exhibits to the Indenture are amended
by adding the following "EXHIBIT C", "EXHIBIT D" and "EXHIBIT E"
in the appropriate alphabetical order at the end of "EXHIBIT B":
EXHIBIT C - FORM OF REGULATION S GLOBAL NOTE
[FORM OF FACE OF NOTE]
No. C-1 $_________________
CUSIP U83395AA8
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 REGULATION S GLOBAL NOTE MAY
NOT BE TRANSFERRED EXCEPT AS A WHOLE 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. UNLESS THIS
REGULATION S GLOBAL NOTE 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.
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 Regulation S Global 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 Regulation S Global Note, from the May 1 or
November 1, as the case may be, next preceding the date of this
Regulation S Global 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 Regulation S Global 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 Regulation S Global 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 Regulation S
Global 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
Regulation S Global 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 this Regulation S
Global Note represented hereby may from time to time be reduced
or increased to reflect exchanges of a part of this Regulation S
Global Note for interests in the Restricted Global Note or
definitive Notes or exchanges of interests in the Restricted
Global Note or definitive Notes for a part of this Regulation S
Global Note or conversions or redemptions of a part of this
Regulation S Global Note or cancellations of a part of this
Regulation S Global Note or transfers of interests in the
Restricted Global Note or definitive Notes in return for a part
of this Regulation S Global Note or transfers of a part of this
Regulation S Global Note effected by delivery of interests in the
Restricted Global Note or 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
Regulation S Global Note to the contrary, (i) exchanges of a part
of this Regulation S Global Note for interests in the Restricted
Global Note or definitive Notes, (ii) exchanges of interests in
the Restricted Global Note or definitive Notes for a part of this
Regulation S Global Note, (iii) conversions or redemptions of a
part of this Regulation S Global Note, (iv) cancellations of a
part of this Regulation S Global Note, (v) transfers of interests
in the Restricted Global Note or definitive Notes in return for a
part of this Regulation S Global Note and (vi) transfers of a
part of this Regulation S Global Note effected by delivery of
interests in the Restricted Global Note or definitive Notes may
be effected without the surrendering of this Regulation S Global
Note, 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 Regulation
S Global Note resulting therefrom or as a consequence thereof.
Reference is made to the further provisions of this
Regulation S Global Note set forth on the reverse hereof,
including, without limitation, provisions giving the holder of
this Regulation S Global Note the right to convert this
Regulation S Global 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 Regulation S Global 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 Regulation S Global 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
Regulation S Global Note to be duly executed under its corporate
seal.
SOFTKEY INTERNATIONAL INC.
By:
Name:
Title:
Dated:__________________
Attest:
________________________
Secretary
[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 REGULATION S GLOBAL NOTE]
SoftKey International Inc.
5 1/2% Senior Convertible Note Due 2000
This Regulation S Global 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
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 Regulation S Global 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 Regulation S
Global 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 Regulation S Global Note or such other
Notes.
No reference herein to the Indenture and no provision
of this Regulation S Global 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 Regulation S Global 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.
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.
If redeemed during the 12-month period beginning:
Date Percentage
November 2, 1998 102.2%
November 1, 1999 101.1%
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 Regulation S Global 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 Regulation S Global 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 Regulation S Global 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 Regulation S Global 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 Regulation S Global 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 Regulation S Global 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 Regulation S Global 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 Regulation S Global Note (whether or not this Regulation
S Global 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 Regulation S Global Note.
No recourse for the payment of the principal of or any
premium or interest on this Regulation S Global 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 Regulation S Global Note and defined
in the Indenture are used herein as therein defined.
ABBREVIATIONS
The following abbreviations, when used in the
inscription of the face of this Regulation S Global 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 - ______________
Custodian (Cust)
TEN ENT - as tenants by the __________________ under
entireties (Minor)
JT TEN - as joint tenants with
right of survivorship Uniform Gifts to
and not as tenants in Minors Act ________________________
common (State)
Additional abbreviations may also be used
though not in the above list.
[FORM OF CONVERSION NOTICE)
CONVERSION NOTICE
To: SoftKey International Inc.
The undersigned registered owner of this Regulation S Global
Note hereby irrevocably exercises the option to convert this Regulation
S Global 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
Regulation S Global 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 Regulation S Global 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 Regulation S Global 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
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) $____________
________________________________
[FORM OF OPTION TO ELECT REPAYMENT
UPON A CHANGE OF CONTROL]
To: SoftKey International Inc.
The undersigned registered owner of this Regulation S
Global 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 Regulation S Global 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 Regulation S Global 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): $________________________
(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
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.
SCHEDULE A
SCHEDULE OF EXCHANGES
The initial principal amount of this Regulation S
Global Note is U.S.$ _____________. The following additions to
principal, redemptions, exchanges of a part of this Regulation S
Global Note for an interest in the Restricted Global Note,
definitive Note and conversions into Common Shares have been
made:
Principal
Amount
Redeemed,
Principal Exchanged for
Amount Added Interest in
on the
Exchange of Restricted Remaining
Date of Interest in Global Note Principal
Addition to the or Definitive Amount
Principal, Restricted Notes or Outstanding Notation
Redemption, Global Note Converted Following Made by or
Exchange or or Definitive into Common such on behalf of
Conversion Note Shares Transaction the Trustee
EXHIBIT D
FORM OF TRANSFER CERTIFICATE
FOR TRANSFER FROM RESTRICTED GLOBAL
NOTE TO REGULATION S GLOBAL NOTE
(Transfers pursuant to SECTION 2.5(c)
of the Indenture)
State Street Bank and Trust Company,
as Trustee
Two International Place
Boston, Massachusetts 02110
Attention: Corporate Trust Department
Re: SoftKey International Inc.
51/2% Senior Convertible
Notes Due 2000 (the "Notes")
Reference is hereby made to the Indenture dated as of October 16,
1995 (as supplemented from time to time, the "Indenture") between SoftKey
International Inc. and State Street Bank and Trust Company, as Trustee.
Capitalized terms used but not defined herein shall have the meanings given
them in the Indenture.
This letter relates to U.S.$_________ (being U.S.$1,000 and any
integral multiple of U.S.$1,000 in excess thereof) principal amount of
Notes beneficially held through interests in the Restricted Global Note
(CUSIP No. 83402NAA7) with DTC in the name of ________(the "Transferor")
account no. . The Transferor hereby requests that on [INSERT DATE]
such beneficial interest in the Restricted Global Note be transferred or
exchanged for an interest in the Regulation S Global Note (CUSIP (CINS) No.
U83395AA8) in the same principal denomination and transfer to (account no.
________). If this is a partial transfer, a minimum amount of U.S.$1,000
and any integral multiple of U.S.$1,000 in excess thereof of the Restricted
Global Note will remain outstanding.
In connection with such request and in respect of such Notes, the
Transferor does hereby certify that such transfer has been effected in
accordance with the transfer restrictions set forth in the Indenture and
the Notes and pursuant to and in accordance with Rule 903 or 904 of
Regulation S under the Securities Act of 1933, as amended (the "Securities
Act"), and accordingly, the Transferor further certifies that:
(A) (1) the offer of the Notes was not made to a person in the
United States;
(2) either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting
on our behalf reasonably believed that the transferee was outside the
United States or (b) the transaction was executed in, on or through
the facilities of a designated offshore securities market and neither
the Transferor nor any person acting on our behalf knows that the
transaction was prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act.
OR
(B) Such transfer is being made in accordance with Rule 144A
under the Securities Act.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company. Terms used in this
certificate and not otherwise defined in the Indenture have the meaning set
forth in Regulation S under the Securities Act.
Dated: ___________,________________
[Name of Transferor]
By: _________________________
Name:
Title:
Telephone No.:
Signatures must be guaran-
teed by an "eligible guar-
antor institution" meeting
the requirements of the
transfer agent, which
requirements include mem-
bership or participation
in STAMP or such other
"signature guarantee pro-
gram" as may be determined
by the transfer agent in
addition to, or in substi-
tution for, STAMP, all in
accordance with the Secu-
rities Exchange Act of
1934, as amended.
______________________________
Signature Guarantee
Please print name and address (including zip code number)
cc: SoftKey International Inc.
EXHIBIT E
FORM OF TRANSFER CERTIFICATE
FOR TRANSFER FROM REGULATION S GLOBAL
NOTE TO RESTRICTED GLOBAL NOTE
PRIOR TO EXPIRATION OF RESTRICTED PERIOD
(Transfers pursuant to SECTION 2.5(c)
of the Indenture)
State Street Bank and Trust Company
as Trustee
Two International Place
Boston, Massachusetts 02110
Attention: Corporate Trust Department
Re: SoftKey International Inc.
51/2% Senior Convertible
Notes Due 2000 (the "Notes")
Reference is hereby made to the Indenture dated as of October 16,
1995 (as supplemented from time to time, the "Indenture") between SoftKey
International Inc. and State Street Bank and Trust Company, as Trustee.
Capitalized terms used but not defined herein shall have the meanings given
them in the Indenture.
This letter relates to U.S.$__________ (being U.S.$1,000 and any
integral multiple of U.S.$1,000 in excess thereof) principal amount of
Notes beneficially held through interests in the Regulation S Global Note
(CUSIP (CINS) No. U83395AA8) with [Euroclear] [CEDEL] (Common Code No.
________) through the Depositary in the name of _______________ (the
"Transferor") [Euroclear] [CEDEL] account no. . The Transferor
hereby requests that on [INSERT DATE] such beneficial interest in the
Regulation S Global Note be transferred or exchanged for an interest in the
Restricted Global Note (CUSIP No. 83402NAA7) in the same principal
denomination and transferred to ______________ (the Depositary account no.
________). If this is a partial transfer, a minimum of U.S.$1,000 and any
integral multiple of U.S.$1,000 in excess thereof of the Regulation S
Global Note will remain outstanding.
In connection with such request, and in respect of such Notes,
the Transferor does hereby certify that such Notes are being transferred in
accordance with Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act"), to a transferee that the Transferor reasonably believes
is purchasing the Notes for its own account or an account with respect to
which the transferee exercises sole investment discretion and the
transferee and any such account is a "qualified institutional buyer" within
the meaning of Rule 144A, in each case in a transaction meeting the
requirements of Rule 144A and in accordance with any applicable securities
laws of any state of the United States or any other jurisdiction.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company.
Dated: ___________,___________
[Name of Transferor]
By: ________________________
Name:
Title:
Telephone No.:
Signatures must be guaran-
teed by an "eligible guar-
antor institution" meeting
the requirements of the
transfer agent, which
requirements include mem-
bership or participation
in STAMP or such other
"signature guarantee pro-
gram" as may be determined
by the transfer agent in
addition to, or in substi-
tution for, STAMP, all in
accordance with the Secu-
rities Exchange Act of
1934, as amended.
______________________________
Signature Guarantee
Please print name and address (including zip code number)
cc: SoftKey International Inc.
ARTICLE II.
MISCELLANEOUS
SECTION 2.1. Except to the extent specifically
provided therein, no provision of this First Supplemental
Indenture or any future supplemental indenture is intended to
modify, and the parties do hereby adopt and confirm, the
provisions of Section 318(c) of the Trust Indenture Act of 1939,
as amended, which amend and supersede provisions of the
Indenture, as amended by this First Supplemental Indenture.
SECTION 2.2. Nothing in this First Supplemental
Indenture is intended to or shall provide any rights to any
parties other than those expressly contemplated by this First
Supplemental Indenture.
SECTION 2.3. Capitalized terms not otherwise defined
herein shall have the meanings set forth in the Indenture.
SECTION 2.4. This First Supplemental Indenture 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 2.5. This instrument may be executed in any
number of counterparts, each of which so executed shall be deemed
to be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 2.6. Except as expressly modified hereby, all
the provisions of the Indenture are and shall continue to be in
full force and effect. Each reference in the Indenture to "this
Indenture", "hereunder", "hereof" and words of like import
referring to the Indenture and each reference in any other
transaction document relating to the Indenture shall mean the
Indenture as amended hereby.
IN WITNESS WHEREOF, the parties hereto have caused this
First Supplemental Indenture to be duly executed, and their
respective corporate seals to be hereunto affixed and attested
all as of the day and year first above written.
SOFTKEY INTERNATIONAL INC.
By__________________________
Name:
Title:
Attest:
________________________
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By__________________________
Name:
Title:
Attest:
________________________
STATE OF MASSACHUSETTS )
: ss.:
COUNTY OF SUFFOLK )
On this ____ day of November, 1995, before me, the
undersigned officer, personally appeared _________________, who
acknowledged himself to be the ________________ of STATE STREET
BANK AND TRUST COMPANY, a Massachusetts corporation, and that he
as such officer, being authorized to do so, executed the
foregoing instrument for the purposes therein contained by
signing the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official
seal.
____________________________
Notary Public
[SEAL]
STATE OF MASSACHUSETTS )
: ss.:
COUNTY OF MIDDLESEX )
On this ____ day of November, 1995, before me, the
undersigned officer, personally appeared ______________, who
acknowledged himself to be the _________________ of SOFTKEY
INTERNATIONAL INC., a Delaware corporation, and that he as such
officer, being authorized to do so, executed the foregoing
instrument for the purposes therein contained by signing the name
of the corporation by himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official
seal.
____________________________
Notary Public
[SEAL]
This Note Resale Registration Rights Agreement (this
"Agreement") is made and entered into as of October 23, 1995 by
and among SOFTKEY INTERNATIONAL INC., a Delaware corporation (the
"Company"), and BEAR, STEARNS & CO. INC. and MONTGOMERY
SECURITIES (collectively, the "Purchasers"), which Purchasers
have agreed to purchase from the Company up to $402,500,000
principal amount of 51/2% Senior Convertible Notes due 2000 (the
"Notes") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase
Agreement dated October 17, 1995 (the "Purchase Agreement") by
and among the Company and the Purchasers. In order to induce the
Purchasers to purchase the Notes, the Company has agreed to
provide the registration rights set forth in this Agreement. The
execution and delivery of this Agreement is provided for in the
Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized
terms shall have the following meanings:
Act: Securities Act of 1933, as amended.
Agreement: As defined in the preamble hereto.
Broker-Dealer: Any broker or dealer registered under
the Exchange Act (as hereinafter defined).
Closing Date: The date of this Agreement.
Commission: Securities and Exchange Commission.
Common Stock: Common Stock of the Company issuable
upon conversion of the Notes.
Company: As defined in the preamble hereto.
Consummate: An Exchange Offer (as hereinafter defined)
shall be deemed "Consummated" for purposes of this Agreement upon
(i) the filing and effectiveness under the Act of the Exchange
Offer Registration Statement relating to the New Notes (as
hereinafter defined) to be issued in the Exchange Offer, (ii) the
maintenance of such Exchange Offer Registration Statement
continuously effective and the keeping of the Exchange Offer open
for a period of not less than the minimum period required under
applicable federal and state securities laws to consummate the
Exchange Offer, provided, however, that in no event shall such
period be less than 20 business days, and (iii) the delivery by
the Company to the registrar under the Indenture (as hereinafter
defined) of New Notes in the same aggregate principal amount as
the aggregate principal amount of Notes that were tendered by
Holders (as hereinafter defined) thereof pursuant to the Exchange
Offer.
Effectiveness Target Date: As defined in Section 3
hereof.
Exchange Act: Securities Exchange Act of 1934, as
amended.
Exchange Offer: The registration by the Company under
the Act of the New Notes pursuant to the Exchange Offer
Registration Statement through which the Company offers the
Holders of all outstanding Transfer Restricted Securities (as
hereinafter defined) the opportunity to exchange all such
outstanding Transfer Restricted Securities held by such Holders
for New Notes in an aggregate principal amount equal to the
aggregate principal amount of the Transfer Restricted Securities
tendered in such exchange offer by such Holders.
Exchange Offer Registration Statement: As defined in
Section 3(c).
Exempt Resales: The transactions in which the
Purchasers propose to sell the Notes (i) to certain "qualified
institutional buyers," as such term is defined in Rule 144A under
the Act ("QIBs"), (ii) to certain institutional "accredited
investors," as such term is defined in Rule 501(a)(1), (2), (3)
or (7) of Regulation D under the Act ("Accredited Institutions")
and (iii) outside the United States, to certain persons in
offshore transactions in reliance on Regulation S under the Act.
Holder: As defined in Section 2(b) hereof.
Indemnified Holder: As defined in Section 6(a) hereof.
Indenture: The Indenture dated as of October 16, 1995
by and among the Company and State Street Bank and Trust Company,
as trustee (the "Trustee"), pursuant to which the Notes are to be
issued, as such Indenture is amended, modified or supplemented
from time to time in accordance with the terms thereof.
Interest Payment Date: As defined in the Indenture and
the Notes.
NASD: National Association of Securities Dealers, Inc.
New Notes: As defined in Section 3(c) hereof.
Person: An individual, partnership, corporation,
trust, unincorporated organization or a government, agency or
political subdivision thereof.
Prospectus: The prospectus included in any
Registration Statement, as amended or supplemented including
without limitation by any post-effective amendments thereto, and
all material incorporated by reference into such prospectus.
Purchase Agreement: As defined in the preamble hereto.
Purchasers: As defined in the preamble hereto.
Registration Statement: The Shelf Registration
Statement or the Exchange Offer Registration Statement of the
Company which is filed pursuant to the provisions of Section 3 of
this Agreement, including the Prospectus included therein, all
amendments and supplements thereto (including any post-effective
amendments) and all exhibits and material incorporated by
reference therein.
Shelf Filing Deadline: As defined to Section 3 hereof.
Shelf Registration Statement: As defined in Section 3
hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C.
Section 77aaa-77bbbb), as amended and in effect on the date of
the Indenture.
Transfer Restricted Securities: Each Note, and any
Common Stock issued upon conversion of any Note, until the
earliest to occur of (a) the date on which such Note or Common
Stock, as the case may be, has been effectively registered under
the Act and disposed of in accordance with an effective Shelf
Registration Statement, (b) the date on which such Note is
exchanged for a New Note in the Exchange Offer and entitled to be
resold to the public by the Holder thereof without complying with
the prospectus delivery requirements of the Act, (c) the date on
which such Note or Common Stock, as the case may be, is
distributed to the public pursuant to Rule 144 under the Act or
by a Broker-Dealer pursuant to the "Plan of Distribution"
contemplated by the Exchange Offer Registration Statement
(including delivery of the Prospectus contained therein), and (d)
the date on which such Note is converted into Common Stock in
accordance with the terms and provisions of the Note and the
Indenture.
Underwritten Registration or Underwritten Offering: A
registration in which securities of the Company are sold to an
underwriter for reoffering to the public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities
entitled to the benefits of this Agreement are the Transfer
Restricted Securities.
(b) Holders of Transfer Restricted Securities. A
Person is deemed to be a holder of Transfer Restricted Securities
(each, a "Holder") whenever such Person owns Transfer Restricted
Securities of record.
SECTION 3. REGISTRATION
(a) Shelf Registration. The Company hereby agrees to:
(i) use its best efforts to file or cause to be filed
a continuous registration statement pursuant to Rule 415
under the Act (together with the Prospectus included
therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and materials
incorporated by reference therein, the "Shelf Registration
Statement") on or prior to the 90th day after the Closing
Date (the "Shelf Filing Deadline"), which Shelf Registration
Statement shall provide for resales of all Transfer
Restricted Securities, provided that the Holders thereof
shall have provided the information required pursuant to
Section 3(b) hereof; and
(ii) use all reasonable efforts to cause the Shelf
Registration Statement to be declared effective by the
Commission as promptly as practicable after the Closing Date
(the "Effectiveness Target Date").
Subject to any notice by the Company in accordance with Section
4(b) hereof of the existence of any fact or event of the kind
described in Section 4(b)(iii)(D) hereof, the Company shall use
all reasonable efforts to keep the Shelf Registration Statement
continuously effective, supplemented and amended as required by
the provisions of Sections 4(a) and (b) hereof to the extent
necessary to ensure that it is available for resales of Transfer
Restricted Securities by the Holders of Transfer Restricted
Securities entitled to the benefit of this Section 3(a) and to
ensure that the Shelf Registration Statement conforms to the
requirements of this Agreement, the Act and the policies, rules
and regulations of the Commission as announced from time to time
thereunder for a period of at least three years following the
Closing Date.
(b) Certificated Securities; Provision by Holders of
Certain Information in Connection with the Shelf Registration
Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf
Registration Statement pursuant to this Agreement unless (i) such
Holder holds such Transfer Restricted Securities in the form of
definitive Notes (as provided in the Indenture) which are
evidenced by physical certificates and (ii) until such Holder
furnishes to the Company in writing, within 20 business days
after receipt of a request therefor, such information as the
Company may reasonably request for use in connection with the
Shelf Registration Statement or any Prospectus or preliminary
Prospectus included therein. In connection with all such
requests for information from Holders of Transfer Restricted
Securities, the Company shall notify such Holders of the
requirements set forth in the preceding sentence. Each Holder as
to which any Shelf Registration Statement is being effected
agrees to furnish promptly to the Company all information
required to be disclosed in order to make the information
previously furnished to the Company by such Holder not materially
misleading.
(c) Registered Exchange Offer. If, based upon a
written opinion of counsel (other than in-house counsel) to the
Company addressed and delivered to the Holders, the Company
determines that it is permissible under applicable law and
Commission policy to Consummate an Exchange Offer, the Company
may Consummate an Exchange Offer in lieu of filing and
maintaining the Shelf Registration Statement described herein.
If the Company elects to Consummate an Exchange Offer in
accordance with the provisions hereof, the Company shall (i)
cause to be filed with the Commission no later than the Shelf
Filing Deadline, a Registration Statement (the "Exchange Offer
Registration Statement") under the Act relating to (A) a new
issue of notes identical in all material respects to the Notes
except as to transfer restrictions (the "New Notes") and (B) the
shares of Common Stock issuable upon conversion of such New
Notes), (ii) use all reasonable efforts to cause such
Registration Statement to become effective no later than the
Effectiveness Target Date, (iii) in connection with the
foregoing, file (A) all pre-effective amendments to such
Registration Statement as may be necessary in order to cause such
Registration Statement to become effective, (B) if applicable, a
post-effective amendment to such Registration Statement pursuant
to Rule 430A under the Act and (C) cause all necessary filings in
connection with the registration and qualification of the New
Notes to be made under the Blue Sky laws of such jurisdictions as
are necessary to permit Consummation of the Exchange Offer and
(iv) upon the effectiveness of the Registration Statement,
commence the Exchange Offer. The Company shall cause the
Exchange Offer to comply with all applicable federal and state
securities laws. No securities other than the New Notes (and the
shares of Common Stock issuable upon conversion of such New
Notes) shall be included in the Exchange Offer Registration
Statement. The Company shall use all reasonable efforts to cause
the Exchange Offer to be Consummated on the earliest practicable
date after the Exchange Offer Registration Statement has become
effective, but in no event later than 30 business days after such
effectiveness. The Exchange Offer shall be on the appropriate
form permitting registration of the New Notes to be offered in
exchange for the Notes and to permit resales of New Notes and
shares of Common Stock received by Broker-Dealers in the Exchange
Offer by delivering the Prospectus contained in the Exchange
Offer Registration Statement. The "Plan of Distribution" section
in the Prospectus contained in the Exchange Offer Registration
Statement shall not name any such Broker-Dealer or disclose the
amount of Notes held by any such Broker-Dealer except to the
extent required by Commission policy. The Company shall use its
best efforts to keep the Exchange Offer Registration Statement
continuously effective, supplemented and amended to the extent
necessary to ensure that it is available for resales of New Notes
acquired by Broker-Dealers for their own accounts as a result of
market-making activities or other trading activities, and to
ensure that it conforms with the requirements of this Agreement,
the Act and the policies, rules and regulations of the Commission
as announced from time to time, for a period of one year from the
date on which the Exchange Offer Registration Statement is
declared effective. The Company shall provide sufficient copies
of the latest version of such Prospectus to Broker-Dealers
promptly upon request at any time during such one-year period in
order to facilitate such resales. Notwithstanding anything
herein to the contrary, despite the Consummation of an Exchange
Offer, the Company shall be required to file the Shelf
Registration Statement in accordance with Section 3(a) hereof if
any Holder of Transfer Restricted Securities shall notify the
Company within 20 business days of the Consummation of the
Exchange Offer (x) that such Holder is prohibited by applicable
law or Commission policy from participating in the Exchange
Offer, (y) that such Holder may not resell the New Notes acquired
by it in the Exchange Offer to the public without delivering a
prospectus and that the Prospectus contained in the Exchange
Offer Registration Statement is not appropriate or available for
such resales by such Holder or (z) that such Holder is a Broker-
Dealer and holds Notes acquired directly from the Company or one
of its affiliates.
SECTION 4. REGISTRATION PROCEDURES
(a) In connection with any Shelf Registration
Statement, the Company shall comply with all the provisions of
Section 4(b) below and shall use all reasonable efforts to effect
such registration to permit the resale of the Transfer Restricted
Securities being sold in accordance with the intended method or
methods of distribution thereof.
(b) In connection with any Registration Statement and
any Prospectus required by this Agreement, the Company shall:
(i) subject to any notice by the Company in
accordance with this Section 4(b) of the existence of
any fact or event of the kind described in Section
4(b)(iii)(D) hereof, use all reasonable efforts to keep
such Registration Statement continuously effective and
provide all requisite financial statements for the
period specified in Section 3 of this Agreement; upon
the occurrence of any event that would cause such
Registration Statement or the Prospectus contained
therein (A) to contain a material misstatement or
omission or (B) not to be effective and usable for
resales of Transfer Restricted Securities during the
period required by this Agreement, the Company shall
file promptly an appropriate amendment to such
Registration Statement correcting any such misstatement
or omission, and, in the case of either clause (A) or
(B), except as set forth in Section 4(b)(xv) below, use
all reasonable efforts to cause such amendment to be
declared effective and such Registration Statement and
the related Prospectus to become usable for their
intended purpose(s) as soon as practicable thereafter;
(ii) prepare and file with the Commission such
amendments and post-effective amendments to such
Registration Statement as may be necessary to keep such
Registration Statement effective for the applicable
period set forth in Section 3 hereof, or such shorter
period as will terminate when all Transfer Restricted
Securities covered by such Registration Statement have
been sold; cause the Prospectus to be supplemented by
any required Prospectus supplement, and as so
supplemented, cause the Prospectus to be filed pursuant
to Rule 424 under the Act and to comply fully with the
applicable provisions of Rules 424 and 430A under the
Act in a timely manner; and comply with the provisions
of the Act with respect to the disposition of all
securities covered by such Registration Statement
during the applicable period in accordance with the
intended method or methods of distribution by the
sellers thereof set forth in such Registration
Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and
selling Holders promptly and, if requested by such
Persons, to confirm such advice in writing, (A) when
the Prospectus or any Prospectus supplement or post-
effective amendment to any Registration Statement has
been filed, and, with respect to any Registration
Statement or any post-effective amendment thereto, when
the same has become effective, (B) of any request by
the Commission for amendments to the Registration
Statement or amendments or supplements to the
Prospectus or for additional information relating
thereto, (C) of the issuance by the Commission of any
stop order suspending the effectiveness of the
Registration Statement under the Act or of the
suspension by any state securities commission of the
qualification of the Transfer Restricted Securities for
offering or sale in any jurisdiction or of the
initiation of any proceeding for any of the preceding
purposes, (D) of the existence of any fact or the
happening of any event (including without limitation
pending negotiations relating to, or the consummation
of, a transaction or the occurrence of any event which
would require additional disclosure of material, non-
public information by the Company in the Registration
Statement as to which the Company has a bona fide
business purpose for preserving confidentiality or
which renders the Company unable to comply with
Commission requirements) that makes untrue any
statement of a material fact made in the Registration
Statement, the Prospectus, any amendment or supplement
thereto or any document incorporated by reference
therein, or that requires the making of any additions
to or changes in the Registration Statement or the
Prospectus in order to make the statements therein not
misleading. If at any time the Commission shall issue
any stop order suspending the effectiveness of the
Registration Statement, or any state securities
commission or other regulatory authority shall issue an
order suspending the qualification or exemption from
qualification of the Transfer Restricted Securities
under state securities or Blue Sky laws, the Company
shall use its best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time;
(iv) furnish to each of the selling Holders,
upon request, and to each of the underwriter(s), if
any, before filing with the Commission, copies of any
Registration Statement or any Prospectus included
therein and any amendments or supplements thereto
(including all documents incorporated by reference
prior to the effectiveness of such Registration
Statement), which documents, other than documents
incorporated by reference, will be subject to the
review of such Holders and underwriter(s), if any, for
a period of at least five business days, and the
Company shall not file any such Registration Statement
or Prospectus or any amendment or supplement to any
such Registration Statement or Prospectus to which a
selling Holder of Transfer Restricted Securities
covered by such Registration Statement or the
underwriter(s), if any, shall reasonably object within
five business days after the receipt thereof; a selling
Holder or underwriter, if any, shall be deemed to have
reasonably objected to such filing only if such
Registration Statement, amendment, Prospectus or
supplement, as applicable, as proposed to be filed,
contains a material misstatement or omission;
(v) if practicable, promptly prior to the
filing of any document that is to be incorporated by
reference into a Registration Statement or Prospectus
subsequent to the effectiveness thereof, and in any
event no later than the date such document is filed
with the Commission, provide copies of such document to
the selling Holders, if requested, and to the
underwriter(s), if any, make representatives of the
Company available for discussion of such document and
other customary due diligence matters, and include such
information in such document prior to the filing
thereof as such selling Holders or underwriter(s), if
any, reasonably may request;
(vi) make available at reasonable times for
inspection by the selling Holders, any underwriter(s)
participating in any disposition pursuant to such
Registration Statement and any attorney or accountant
retained by such selling Holders or any of the
underwriter(s), all financial and other records,
pertinent corporate documents and properties of the
Company and cause the officers, directors and employees
of the Company to supply all information reasonably
requested by any such Holder, underwriter(s), attorney
or accountant in connection with such Registration
Statement subsequent to the filing thereof and prior to
its effectiveness;
(vii) if requested by any selling Holders or the
underwriter(s), if any, promptly incorporate in any
Registration Statement or Prospectus, pursuant to a
supplement or post-effective amendment if necessary,
such information as such selling Holders and
underwriter(s), if any, may reasonably request to have
included therein, including, without limitation,
information relating to the "Plan of Distribution" of
the Transfer Restricted Securities or New Notes,
information with respect to the principal amount of
Transfer Restricted Securities or New Notes being sold
to such underwriter(s), the purchase price being paid
therefor and any other terms of the offering of the
Transfer Restricted Securities or New Notes to be sold
in such offering; and make all required filings of any
such Prospectus supplement or post-effective amendment
as soon as practicable after the Company is notified of
the matters to be incorporated in such Prospectus
supplement or post-effective amendment;
(viii) cause the Transfer Restricted Securities
covered by the Registration Statement to be rated with
the appropriate rating agencies, if so requested by the
Holders of a majority in aggregate principal amount of
Notes or New Notes covered thereby or the
underwriter(s), if any;
(ix) [Intentionally omitted]
(x) deliver to each selling Holder and each of
the underwriter(s), if any, without charge, as many
copies of the Prospectus (including each preliminary
prospectus intended for public distribution) and any
amendment or supplement thereto as such Persons
reasonably may request; the Company hereby consents to
the use of the Prospectus and any amendment or
supplement thereto by each of the selling Holders and
each of the underwriter(s), if any, in connection with
the offering and the sale of the Transfer Restricted
Securities or New Notes covered by the Prospectus or
any amendment or supplement thereto;
(xi) enter into such customary agreements
(including an underwriting agreement), and make such
customary representations and warranties, and, subject
to any notice by the Company in accordance with this
Section 4(b) of the existence of any fact or event of
the kinds described in Section 4(b)(iii)(D) hereof,
take all such other customary actions in connection
therewith in order to expedite or facilitate the
disposition of the Transfer Restricted Securities or
New Notes pursuant to any Registration Statement
contemplated by this Agreement, all to such extent as
may be requested by any Purchaser or by any Holder of
Transfer Restricted Securities or underwriter in
connection with any sale or resale pursuant to any
Registration Statement contemplated by this Agreement;
and whether or not an underwriting agreement is entered
into and whether or not the registration is an
Underwritten Registration, the Company shall:
(A) furnish to each Purchaser, each selling
Holder and each underwriter, if any (including any
Broker-Dealer who may be deemed to be an
underwriter), in such substance and scope as they
may request and as are customarily made by issuers
to underwriters in primary underwritten offerings,
upon the date of the effectiveness of the Shelf
Registration Statement, and, to the extent
applicable, upon the Consummation of the Exchange
Offer:
(1) a certificate, dated the date of
effectiveness of the Shelf Registration
Statement (or, to the extent applicable,
dated the date of Consummation of the
Exchange Offer) signed by (y) the president
or chief executive officer of the Company and
(z) the chief financial officer or the
principal financial or accounting officer or
the Company, confirming, as of the date
thereof, the matters set forth in Section
6(e)(i) and (iii) of the Purchase Agreement
and such other matters as such parties may
reasonably request;
(2) opinions, dated the date of
effectiveness of the Shelf Registration
Statement (or, to the extent applicable,
dated the date of Consummation of the
Exchange Offer) of outside and in-house
counsel, respectively, for the Company,
covering the matters set forth in Sections
6(a) and (b) of the Purchase Agreement and
such other matters as such parties may
reasonably request; and
(3) a customary comfort letter, dated
as of the date of effectiveness of the Shelf
Registration Statement (and, to the extent
applicable, as of the date of Consummation of
the Exchange Offer) from the independent
certified public accountants of the Company,
in the customary form and covering matters of
the type customarily covered in comfort
letters by underwriters in connection with
primary underwritten offerings, and
addressing the matters set forth in the
comfort letters delivered pursuant to Section
6(f) of the Purchase Agreement, without
exception;
(B) set forth in full or incorporate by
reference in the underwriting agreement, if any,
indemnification provisions and procedures
substantially in the form of those set forth in
Section 6 hereof with respect to all parties
required to be indemnified pursuant to said
Section 6; and
(C) deliver such other documents and
certificates as may be reasonably requested by
such parties to evidence compliance with clause
(A) above and with any customary conditions
contained in the underwriting agreement or other
agreement entered into by the Company pursuant to
this clause (xi), if any.
If at any time the representations and warranties
of the Company indirectly referenced in clause (A)(1)
above cease to be true and correct, the Company shall
so advise the Purchasers and the underwriter(s), if
any, and each selling Holder promptly and, if requested
by such Persons, shall confirm such advice in writing;
(xii) prior to any public offering of Transfer
Restricted Securities, cooperate with the selling
Holders, the underwriter(s), if any, and their
respective counsel in connection with the registration
and qualification of the Transfer Restricted Securities
under the securities or Blue Sky laws of such
jurisdictions as the selling Holders or underwriter(s)
may request; and do any and all other acts or things
necessary or advisable to enable the disposition in
such jurisdictions of the Transfer Restricted
Securities covered by the Shelf Registration Statement;
provided, however, that the Company shall not be
required to register or qualify as a foreign
corporation where it is not now so qualified or to take
any action that would subject it to service of process
in suits or to taxation, other than as to matters and
transactions relating to the Registration Statement, in
any jurisdiction where it is not now so subject;
(xiii) cooperate with the selling Holders and the
underwriter(s), if any, to facilitate the timely
preparation and delivery of certificates representing
Transfer Restricted Securities to be sold and not
bearing any restrictive legends; and enable such
Transfer Restricted Securities to be in such
denominations and registered in such names as the
Holders or the underwriter(s), if any, may request at
least two business days prior to any sale of Transfer
Restricted Securities made by such underwriter(s);
(xiv) use all reasonable efforts to cause the
Transfer Restricted Securities covered by the
Registration Statement to be registered with or
approved by such other governmental agencies or
authorities as may be necessary to enable the seller or
sellers thereof or the underwriter(s), if any, to
consummate the disposition of such Transfer Restricted
Securities, subject to the proviso contained in clause
(xii) above;
(xv) as soon as reasonably practicable after the
occurrence of any fact or event of the kind described
in clause (b)(iii)(D) above, prepare a supplement or
post-effective amendment to the Registration Statement
or related Prospectus or any document incorporated
therein by reference or file any other required
document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the
Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact
necessary, in light of the circumstances in which it
was made, to make the statements therein not
misleading, provided, however, that notwithstanding
anything to the contrary herein, the Company shall not
be required to prepare and file such a supplement or
post-effective amendment or document if the fact no
longer exists; and provided further, however, that, in
the event of a material business transaction (including
without limitation pending negotiations relating to
such a transaction) which, based upon the advice of
outside counsel reasonably acceptable to the
Purchasers, would require disclosure by the Company in
the Registration Statement of material, nonpublic
information which the Company has a bona fide business
purpose for not disclosing, then for so long as such
circumstances and such business purpose continue to
exist, the Company shall not be required to prepare and
file a supplement or post-effective amendment
hereunder;
(xvi) provide a CUSIP number for all Transfer
Restricted Securities not later than the effective date
of the Registration Statement and provide the Trustee
under the Indenture with printed certificates for the
Notes or New Notes, as the case may be, which are in a
form eligible for deposit with the Depositary Trust
Company;
(xvii) cooperate in any filings required to be
made with the NASD and in the performance of any due
diligence investigation by any underwriter (including
any "qualified independent underwriter") that is
required to be retained in accordance with the rules
and regulations of the NASD, and use all reasonable
efforts to cause such Registration Statement to become
effective and be approved by such governmental agencies
or authorities as may be necessary to enable the
Holders selling Transfer Restricted Securities to
consummate the disposition of such Transfer Restricted
Securities;
(xviii) otherwise use its best efforts to comply
with all applicable rules and regulations of the
Commission, and make generally available to its
security holders, as soon as practicable, a
consolidated earnings statement meeting the
requirements of Rule 158 (which need not be audited)
for the twelve-month period (A) commencing at the end
of any fiscal quarter in which Transfer Restricted
Securities are sold to underwriters in a firm
commitment or best efforts Underwritten Offering or (B)
if not sold to underwriters in such an offering,
beginning with the first month of the Company's first
fiscal quarter, as applicable, commencing after the
effective date of the Registration Statement;
(xix) cause the Indenture to be qualified under
the TIA not later than the effective date of the first
Registration Statement required to be filed by this
Agreement, and, in connection therewith: cooperate
with the Trustee and the Holders of Notes to effect
such changes to the Indenture as may be required for
such Indenture to be so qualified in accordance with
the terms of the TIA; and execute and use all
reasonable efforts to cause the Trustee to execute, all
documents that may be required to effect such changes
and all other forms and documents required to be filed
with the Commission to enable such Indenture to be so
qualified in a timely manner;
(xx) cause all Transfer Restricted Securities
covered by the Registration Statement to be listed on
each securities exchange on which similar securities
issued by the Company are then listed if requested by
the Holders of a majority in aggregate principal amount
of Notes or the managing underwriter(s), if any; and
(xxi) provide promptly to each Holder upon
request any document filed with the Commission pursuant
to the requirements of Section 13 and Section 15 of the
Exchange Act.
Each Holder agrees by acquisition of a Transfer
Restricted Security that, upon receipt of any notice from the
Company of the existence of any fact or event of the kind
described in Section 4(b)(iii)(D) hereof, such Holder will
forthwith discontinue disposition of Transfer Restricted
Securities pursuant to the applicable Registration Statement
until such Holder's receipt of the copies of a supplemented or
amended Prospectus as contemplated by Section 4(b)(xv) hereof, or
until it is advised in writing (the "Advice") by the Company that
the use of the Prospectus may be resumed, and has received copies
of any additional or supplemental filings that are incorporated
by reference in the Prospectus. If so directed by the Company,
each Holder will deliver to the Company (at the expense of the
Company) all copies, other than permanent file copies then in
such Holder's possession, of the Prospectus covering such
Transfer Restricted Securities that was current at the time of
receipt of such notice. In the event the Company shall give any
such notice, the time period regarding the effectiveness of such
Registration Statement set forth in Section 3 hereof shall be
extended by the number of days during the period from and
including the date of the giving of such notice pursuant to
Section 4(b)(iii)(D) hereof to and including the date when each
selling Holder covered by such Registration Statement shall have
received the copies of the supplemented or amended prospectus
contemplated by Section 4(b)(xv) hereof or shall have received
the Advice.
(c) In connection with the Exchange Offer, the Company
shall comply with all of the provisions of Section 4(b) (other
than those which are not applicable) and shall use its best
efforts to effect such exchange to permit the sale of Transfer
Restricted Securities being sold in accordance with the intended
method or methods of distribution thereof. In addition, prior to
effectiveness of the Exchange Offer Registration Statement, the
Company shall provide a supplemental letter to the Commission (i)
stating that they are registering the Exchange Offer in reliance
on the position of the Commission enunciated in Exxon Capital
Holdings Corporation (available May 13, 1988), Morgan Stanley and
Co., Inc. (available June 5, 1991) and, if applicable, any no-
action letter obtained by the Company and (ii) including a
representation that the Company has not entered into any
arrangement or understanding with any Person to distribute the
New Notes to be received in the Exchange Offer and that, to the
best of the Company's information and belief, each Holder
participating in the Exchange Offer is acquiring the New Notes in
its ordinary course of business and has no arrangement or
understanding with any Person to participate in the distribution
of the New Notes received in the Exchange Offer. As a condition
to its participation in the Exchange Offer pursuant to the terms
of this Agreement, each Holder of Transfer Restricted Securities
shall furnish, upon the request of the Company, prior to the
Consummation thereof, a written representation to the Company
(which may be contained in the letter of transmittal contemplated
by the Exchange Offer Registration Statement) to the effect that
(A) it is not an affiliate of the Company, (B) it is not engaged
in and does not intend to engage in and has no arrangement or
understanding with any person to participate in, a distribution
of the New Notes to be issued in the Exchange Offer and (C) it is
acquiring the New Notes in its ordinary course of business. In
addition, all such Holders of Transfer Restricted Securities
shall otherwise cooperate in the Company's preparations for the
Exchange Offer. Each Holder hereby acknowledges and agrees that
any Broker-Dealer and any such Holder using the Exchange Offer to
participate in a distribution of the securities to be acquired in
the Exchange Offer (1) could not under Commission policy as in
effect on the date of this Agreement rely on the position of the
Commission enunciated in Morgan Stanley and Co., Inc. (available
June 5, 1991) and Exxon Capital Holdings Corporation (available
May 13, 1988), as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and similar no-action
letters and (2) must comply with the registration and prospectus
delivery requirements of the Act in connection with a secondary
resale transaction and that such a secondary resale transaction
should be covered by an effective registration statement
containing the selling security holder information required by
Item 507 or 508, as applicable, of Regulation S-K if the resales
are of New Notes obtained by such Holder in exchange for Notes
acquired by such Holder directly from the Company.
SECTION 5. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance
of or compliance with this Agreement will be borne by the Company
regardless of whether a Registration Statement becomes effective,
including without limitation: (i) all registration and filing
fees and expenses (including filings made by any Purchaser or
Holder with the NASD (and, if applicable, the fees and expenses
of any "qualified independent underwriter" and its counsel that
may be required by the rules and regulations of the NASD)); (ii)
all fees and expenses associated with compliance with federal
securities and state Blue Sky or securities laws; (iii) all
expenses of printing (including printing of any certificates
evidencing the Notes and printing of Prospectuses), messenger and
delivery services and telephone; (iv) all fees and disbursements
of counsel for the Company and, as provided for in Section 5(b)
below, the Holders of Transfer Restricted Securities; (v) all
application and filing fees in connection with listing any
securities on a national securities exchange or automated
quotation system pursuant to the requirements hereof; and (vi)
all fees and disbursements of independent certified public
accountants of the Company (including the expenses of any special
audit and comfort letters required by or incident to such
performance).
The Company will, in any event, bear its own internal
expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or
accounting duties), the expenses of any annual audit and the fees
and expenses of any Person, including special experts, retained
by the Company.
(b) In connection with any Registration Statement
required by this Agreement, the Company agrees to reimburse the
Purchasers and the Holders of Transfer Restricted Securities
being registered pursuant to the Shelf Registration Statement
(or, to the extent applicable, being tendered in the Exchange
Offer and/or resold pursuant to the "Plan of Distribution"
contained in the Exchange Offer Registration Statement) for the
reasonable fees and disbursements of not more than one counsel,
who shall be Simpson Thacher & Bartlett or such other counsel as
may be chosen by the Holders of a majority in principal amount of
the Transfer Restricted Securities for whose benefit such
Registration Statement is being prepared.
SECTION 6. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless
(i) each Holder and (ii) each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) any Holder (any of the persons referred to in this
clause (ii) being hereinafter referred to as a "controlling
person") and (iii) the respective officers, directors, partners,
employees, representatives and agents of any Holder or any
controlling person (any person referred to in clause (i), (ii) or
(iii) may hereinafter be referred to as an "Indemnified Holder"),
to the fullest extent lawful, from and against any and all
losses, claims, damages, liabilities, judgments, costs and
expenses ("Losses") (including, without limitation and as
incurred, reimbursement of all costs of investigating, preparing,
pursuing or defending any claim or action, or any investigation
or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and expenses of counsel
to any Indemnified Holder) directly or indirectly caused by,
related to, based upon, arising out of or in connection with any
untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement or Prospectus (or any
amendment or supplement thereto) or any omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading,
except insofar as such Losses are caused by an untrue statement
or omission or alleged untrue statement or omission that is made
in reliance upon and in conformity with information relating to
any of the Holders furnished in writing to the Company by any of
the Holders for use therein. The Company shall notify the
Holders promptly of the institution, threat or assertion of any
claim, proceeding (including any governmental investigation) or
litigation in connection with the matters addressed by this
Agreement which involves the Company or any Indemnified Holder.
(b) In case any action or proceeding (including,
without limitation, any governmental or regulatory investigation
or proceeding) shall be brought or asserted against any of the
Indemnified Holders with respect to which indemnity may be sought
against the Company, such Indemnified Holder (or the Indemnified
Holder controlled by such controlling person) shall promptly
notify the Company in writing (provided that the failure to give
such notice shall not relieve the Company of its obligations
pursuant to this Agreement). Any Indemnified Holder shall have
the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Holder,
provided, however, that the fees and expenses of such counsel
shall be at the expense of the Company if (i) the Company has
failed to assume the defense and employ counsel reasonably
satisfactory to the Holders or (ii) the named parties to any such
action (including any impleaded parties) include such indemnified
Holder and the Company and such Indemnified Holder shall have
reasonably concluded that there may be one or more legal defenses
available to it that are different from or in addition to those
available to the Company; provided, further that the Company
shall not in such event be responsible hereunder for the fees and
expenses of more than one firm of separate counsel, which firm
shall be designated by the Holders, in connection with any action
in the same jurisdiction, in addition to any local counsel. The
Company shall not be liable for any settlement of any such action
or proceeding effected with its prior written consent, which
consent shall not be unreasonably withheld or delayed, and the
Company agrees to indemnify and hold harmless any Indemnified
Holder from and against any Loss by reason of any settlement of
any action effected with its written consent. The Company shall
not, without the prior written consent of each Indemnified
Holder, settle or compromise or consent to the entry of a
judgment in or otherwise seek to terminate any pending or
threatened action, claim, litigation or proceeding in respect of
which indemnification or contribution may be sought hereunder
(whether or not any Indemnified Holder is a party thereto),
unless such settlement, compromise, consent or termination
includes an unconditional release of each Indemnified Holder from
all liability arising out of such action, claim, litigation or
proceeding.
(c) Each Holder of Transfer Restricted Securities
agrees, severally and not jointly, to indemnify and hold harmless
the Company, its directors, its officers, and any person
controlling (within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act) the Company, and the respective
officers, directors, partners, employees, representatives and
agents of each such person, to the same extent as the foregoing
indemnity from the Company to each of the Indemnified Holders,
but only with respect to claims and actions based on information
relating to such Holder furnished in writing by such Holder for
use in any Registration Statement or Prospectus. In case any
action or proceeding shall be brought against any of Company or
its directors or officers or any such controlling person in
respect of which indemnity may be sought against a Holder of
Transfer Restricted Securities, such Holder shall have the rights
and duties given the Company, and each of the Company or its
directors or officers of such controlling person shall have the
rights and duties given to each Holder by the proceeding
paragraph. In no event shall the liability or any selling Holder
hereunder be greater in amount than the dollar amount of the
proceeds received by such Holder upon the sale of the securities
registered pursuant to provisions hereof giving rise to such
indemnification obligation.
(d) If the indemnification provided for in this
Section 6 is unavailable to a party entitled to indemnification
in respect of any Losses referred to herein, then each
indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such
indemnified party as a result of such Losses (i) in such
proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Holders on the
other hand from their sale of Transfer Restricted Securities or
(ii) if such allocation is not permitted by applicable law, the
relative fault of the Company on the one hand and of the
Indemnified Holder on the other in connection with the statements
or omissions which resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of the
Company on the one hand and of the Indemnified Holder on the
other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the
Indemnified Holder and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
statement or omission. The indemnity and contribution
obligations of each indemnifying party set forth herein shall be
in addition to any liability or obligation such indemnifying
party may otherwise have to any indemnified party.
The Company and each Holder of Transfer Restricted
Securities agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro
rata allocation (even if the Holders were treated as one entity
for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to in
the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the Losses referred to in
the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this Section 6, none of
the Holders (and their related Indemnified Holders) shall be
required to contribute, in the aggregate, any amount in excess of
the amount by which the total proceeds received by such Holder
with respect to the Notes exceeds the amount of any damages which
such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Holders' obligations to
contribute pursuant to this Section 6(d) are several in
proportion to the respective principal amount of Notes held by
each of the Holders hereunder and not joint.
SECTION 7. RULE 144A
The Company hereby agrees with each Holder, for so long
as any Transfer Restricted Securities remain outstanding, to make
available to any Holder or beneficial owner of Transfer
Restricted Securities in connection with any sale thereof and any
prospective purchase of such Transfer Restricted Securities from
such Holder or beneficial owner, any information required to be
supplied to a Holder by Rule 144A(d)(4) under the Act in order to
permit offers and sales of such Transfer Restricted Securities
pursuant to Rule 144A.
SECTION 8. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten
Registration hereunder unless such Holder (a) agrees to sell such
Holder's Transfer Restricted Securities on the basis provided in
any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements and (b) completes and
executes all reasonable questionnaires, powers of attorney,
indemnities, underwriting agreements, lock-up letters and other
documents required under the terms of such underwriting
arrangements.
SECTION 9. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered
by the Shelf Registration Statement who desire to do so may sell
such Transfer Restricted Securities in an Underwritten Offering.
In any such Underwritten Offering, the investment banker or
investment bankers and manager or managers that will administer
the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities
included in such offering; provided, that such investment bankers
and managers must be reasonably satisfactory to the Company.
SECTION 10. MISCELLANEOUS
(a) Remedies. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred
by reason of a breach by it of the provisions of this Agreement
and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not,
on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the
rights granted to the Holders in this Agreement or otherwise
conflicts with the provisions hereof. The rights granted to the
Holders hereunder are not inconsistent with the rights granted to
the holders of the Company's securities under any agreement in
effect on the date hereof.
(c) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and
waivers or consents to or departures from the provisions hereof
may not be given, unless the Company has obtained the written
consent of Holders of a majority of the outstanding principal
amount of Transfer Restricted Securities.
(d) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by
hand-delivery, first-class mail (registered or certified, return-
receipt requested), telex, telecopier or courier guaranteeing
overnight delivery;
(i) if to a Holder, at the address set forth on
the records of the Registrar under the Indenture, with
a copy to the Registrar under the Indenture; and
(ii) if to the Company:
SoftKey International Inc.
One Athenaeum Street
Cambridge, MA 02142
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate Meagher & Flom
One Beacon Street
Boston, MA 02108
Attention: Louis A. Goodman
All such notices and communications shall be deemed to
have been duly given: at the time delivered by hand, if
personally delivered; five business days after being deposited in
the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to a courier guaranteeing
overnight delivery.
Copies of all such notices, demands or other
communications shall be concurrently delivered by the Person
giving the same to the Trustee at the address specified in the
Indenture.
(e) Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the successors and
assigns of each of the parties, including without limitation and
without the need for an express assignment, subsequent Holders of
Transfer Restricted Securities; provided, however, that this
Agreement shall not inure to the benefit of or be binding upon a
successor or assign of a Holder unless and to the extent such
successor or assign acquired Transfer Restricted Securities from
such Holder.
(f) Counterparts. This Agreement may be executed in
any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute
one and the same agreement.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF.
(i) Severability. In the event that any one or more
of the provisions contained herein, or the application thereof in
any circumstance, is held invalid, illegal or unenforceable, the
validity, legality and enforceability of any such provision in
every other respect and the remaining provisions contained herein
shall not be affected or impaired thereby.
(j) Entire Agreement. This Agreement, together with
the other Transaction Documents (as defined in the Purchase
Agreement), is intended by the parties as a final expression of
their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein. There
are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein with respect to the
registration rights granted by the Company with respect to the
Transfer Restricted Securities. This Agreement supersedes all
prior agreements and understandings between the parties with
respect to such subject matter.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
SOFTKEY INTERNATIONAL INC.
By:___________________________
Name:
Title:
BEAR, STEARNS & CO. INC.
By:_______________________
Name:
Title:
MONTGOMERY SECURITIES
By:_______________________
Name:
Title:
NOTE RESALE REGISTRATION RIGHTS AGREEMENT
Dated as of October 23, 1995
by and among
SOFTKEY INTERNATIONAL INC.
and
BEAR, STEARNS & CO. INC.
MONTGOMERY SECURITIES
November 22, 1995
Bear, Stearns & Co. Inc.
Montgomery Securities
c/o Bear, Stearns & Co. Inc.
245 Park Avenue, 2nd Floor
New York, New York 10167
Ladies and Gentlemen:
This letter is written in connection with the offering
of $350,000,000 5 1/2% Senior Convertible Notes Due 2000 by
SoftKey International Inc. (the "Company") and the Note Resale
Registration Rights Agreement (the "Note Resale Registration
Rights Agreement"), dated October 23, 1995, among the Company,
Bear, Stearns & Co. Inc. and Montgomery Securities (collectively,
the "Initial Purchasers"). Capitalized terms used herein and not
otherwise defined shall have the meanings given to them in the
the Note Resale Registration Rights Agreement.
1. The Company and the Initial Purchasers hereby
agree to amend the definition of "Transfer Restricted Securities"
contained in Section 1 of the Note Resale Registration Rights
Agreement by deleting such definition in its entirety and
substituting the following:
"Transfer Restricted Securities: Each Note (other than
any Note represented by the Regulation S Global Note or any
definitive Note not bearing the legend required by Section 2.5(d)
of the Indenture), and any Common Stock issued upon conversion of
any such Note, until the earliest to occur of (a) the date on
which such Note or Common Stock, as the case may be, has been
effectively registered under the Act and disposed of in
accordance with an effective Shelf Registration Statement, (b)
the date on which such Note is exchanged for a New Note in the
Exchange Offer and entitled to be resold to the public by the
Holder thereof without complying with the prospectus delivery
requirements of the Act, (c) the date on which such New Note or
Common Stock, as the case may be, is distributed to the public
pursuant to Rule 144 under the Act or by a Broker-Dealer pursuant
to the "Plan of Distribution" contemplated by the Exchange Offer
Registration Statement (including delivery of the Prospectus
contained therein), and (d) the date on which such Note is
converted into Common Stock in accordance with the terms and
provisions of the Note and the Indenture."
2. Except as expressly modified hereby, all the
provisions of the Note Resale Registration Rights Agreement are
and shall continue to be in full force and effect. Each
reference in the Note Resale Registration Rights Agreement to
"this Agreement", "hereunder", "hereof" and words of like import
referring to the Note Resale Registration Rights Agreement and
each reference in any other transaction documents relating
thereto shall mean the Note Resale Registration Rights Agreement
as amended hereby.
If the above correctly reflects your understanding and
agreement with respect to the foregoing matters, please so
confirm by signing the enclosed copy of this letter agreement.
SOFTKEY INTERNATIONAL INC.
By:
Name:
Title:
Accepted:
BEAR, STEARNS & CO. INC.
By:
Name:
Title:
MONTGOMERY SECURITIES
By:
Name:
Title:
January 10, 1996
SoftKey International Inc.
One Athenaeum Street
Cambridge, MA 02146
Re: SoftKey International Inc.
Registration Statement on Form S-3
Ladies and Gentlemen:
I am Vice President and General Counsel of
SoftKey International Inc., a Delaware corporation (the
"Company"), and am issuing this opinion in connection
with the filing today of a Registration Statement on Form
S-3 (the "Registration Statement") with the Securities
and Exchange Commission (the "Commission") relating to
the registration by the Company of (a) $350,000,000
aggregate principal amount of its 51/2% Senior Convertible
Notes due 2000 (the "Notes") and (b) 6,603,773 (or such
other number as may be issuable upon conversion of the
Notes as a result of the antidilution provisions thereof)
shares of common stock, par value $.01 per share, of the
Company (the "Common Stock" and, together with the Notes,
the "Securities") issuable upon conversion of the Notes,
in each case to be sold by certain holders of the
Securities (the "Selling Holders"). The Notes were
originally issued under an Indenture dated as of October
16, 1995 (the "Indenture") by and between the Company and
State Street Bank and Trust Company, as trustee (the
"Trustee").
This opinion is being furnished in accordance
with the requirements of Item 601(b)(5) of Regulation S-K
under the Securities Act of 1933, as amended (the "Act").
Capitalized terms used and not otherwise defined herein
shall have the respective meanings set forth in the
Registration Statement.
In connection with this opinion and as General
Counsel of the Company, I have examined originals or
copies, certified or otherwise identified to my
satisfaction, of: (i) the Registration Statement; (ii)
the Indenture; (iii) the First Supplemental Indenture
dated as of November 17, 1995 by and between the Company
and the Trustee; (iv) the Restated Certificate of
Incorporation of the Company, as amended, as currently in
effect; (v) the Bylaws of the Company, as amended, as
currently in effect; and (vi) certain resolutions of the
Board of Directors of the Company and the Pricing
Committee appointed by the Board of Directors of the
Company relating to, among other things, the issuance and
sale of the Notes by the Company, the filing of the
Registration Statement and certain related matters. I
have also examined originals or copies, certified or
otherwise identified to my satisfaction, of such records
of the Company and such agreements, certificates of
public officials, certificates of other officers or
representatives of the Company and others and such other
documents, certificates and records as I have deemed
necessary or appropriate as a basis for the opinions set
forth herein.
In my examination, I have assumed the legal
capacity of all natural persons, the genuineness of all
signatures, the authenticity of all documents submitted
to me as originals, the conformity to original documents
of all documents submitted to me as certified or
photostatic copies and the authenticity of the originals
of such latter documents.
I am admitted to the Bar in the Commonwealth of
Massachusetts and do not purport to be an expert on, or
express any opinion concerning, any law other than the
substantive law of the Commonwealth of Massachusetts.
Based upon and subject to the limitations,
qualifications, exceptions and assumptions set forth
herein, I am of the opinion that:
1. The Notes have been duly
authorized by requisite corporate action on the part of
the Company and constitute valid and binding obligations
of the Company, enforceable against the Company in
accordance with their terms and are entitled to the
benefits (and are subject to all of the limitations)
provided for by the Indenture, except that (a)
enforcement may be subject to or limited by (i)
bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to
creditors' rights and remedies generally and (ii) general
principles of equity (regardless of whether such
enforcement may be sought in a proceeding in equity or at
law) and (b) the provisions contained in Section 16.1 of
the Indenture may be deemed unenforceable.
2. The shares of Common Stock
initially issuable upon conversion of the Notes have been
duly authorized by the Company and, when issued and
delivered upon such conversion in accordance with the
terms and provisions of the Notes and the Indenture, will
be validly issued, fully paid and nonassessable.
I hereby consent to the filing of this opinion
with the Commission as an exhibit to the Registration
Statement. I also consent to the reference to my name
under the caption "Legal Matters" in the Registration
Statement. In giving this consent, I do not thereby
admit that I am included in the category of persons whose
consent is required under Section 7 of the Act or the
rules and regulations of the Commission.
Very truly yours,
/s/ Neal S. Winneg
Neal S. Winneg
Vice President
and General Counsel
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statement of SoftKey International Inc. on Form S-3 of our report
dated March 3, 1995, on our audit of the consolidated financial
statements and financial statement schedule of SoftKey
International Inc. as of December 31, 1994 and for the year then
ended, which report is included in the 1994 Annual Report on Form
10-K. We also consent to the reference to our firm under the
caption "Experts".
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 8, 1996
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of our
report dated January 16, 1995 included in SoftKey International
Inc.'s Form 10-K for the year ended December 31, 1994 and to all
references to our Firm included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
January 8, 1996
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated September 13, 1993,
relating to the consolidated balance sheet of WordStar
International Incorporated and subsidiaries as of June 30, 1993,
and their related consolidated statements of operations,
stockholders' equity, and cash flows for each of the years in the
two-year period ended June 30, 1993, and the related schedule,
incorporated by reference in this registration statement on Form S-
3 and to the reference to our firm under the heading "Experts" in
the prospectus.
/s/ KPMG PEAT MARWICK LLP
San Francisco, California
January 8, 1996
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of SoftKey International Inc. on Form S-3 of the report
of Deloitte & Touche dated September 30, 1992 (except for Note 12,
for which the date is October 12, 1992) (which report expresses an
unqualified opinion and includes an explanatory paragraph referring
to an uncertainty in connection with an arbitration proceeding)
relating to the financial statements of Spinnaker Software
Corporation (not presented separately herein) and to the reference
to Deloitte & Touche LLP under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
January 8, 1996
EXHIBIT 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectus constituting part of this Registration Statement on Form
S-3 of our report dated September 28, 1993, except as to Note 12
which is as of December 3, 1993, relating to the consolidated
financial statements of Spinnaker Software Corporation, appearing
on page 27 of SoftKey International Inc.'s Annual Report on Form
10-K for the year ended December 31, 1994. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Boston, Massachusetts
January 8, 1996
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2)
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip code)
John R. Towers, Esq. Senior Vice President and Corporate Secretary
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
SOFTKEY INTERNATIONAL INC.
(Exact name of obligor as specified in its charter)
Delaware 94-2562108
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Athenaeum Street
Cambridge, Massachusetts 02142
(Address of principal executive offices) (Zip code)
5 1/2% Senior Convertible Notes due 2000
(Title of indenture securities)
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington, D.C.,
Federal Deposit Insurance Corporation, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent,
State Street Boston Corporation.
(See Note on page 6.)
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF VOTING SECURITIES OF
THE TRUSTEE:
As of:
Col. A Col. B
Title of Class Amount outstanding
Not applicable.
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY OTHER
SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER
SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, FURNISH THE FOLLOWING INFORMATION:
(A) TITLE OF THE SECURITIES OUTSTANDING UNDER EACH SUCH OTHER INDENTURE.
Not applicable.
(B) A BRIEF STATEMENT OF THE FACTS RELIED UPON AS A BASIS FOR THE CLAIM
THAT NO CONFLICTING INTEREST WITHIN THE MEANING OF SECTION 310(B)(1) OF THE
ACT ARISES AS A RESULT OF THE TRUSTEESHIP UNDER ANY SUCH OTHER INDENTURE,
INCLUDING A STATEMENT AS TO HOW THE INDENTURE SECURITIES WILL RANK AS
COMPARED WITH THE SECURITIES ISSUED UNDER SUCH OTHER INDENTURE.
Not applicable.
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE
OBLIGOR OR UNDERWRITERS.
IF THE TRUSTEE OR ANY OF THE DIRECTORS OR EXECUTIVE OFFICERS OF THE
TRUSTEE IS A DIRECTOR, OFFICER, PARTNER, EMPLOYEE, APPOINTEE OR
REPRESENTATIVE OF THE OBLIGOR OR OF ANY UNDERWRITER FOR THE OBLIGOR,
IDENTIFY EACH SUCH PERSON HAVING ANY SUCH CONNECTION AND STATE THE NATURE
OF EACH SUCH CONNECTION.
Not applicable.
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS
OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE
TRUSTEE OWNED BENEFICIALLY BY THE OBLIGOR AND EACH DIRECTOR, PARTNER AND
EXECUTIVE OFFICER OF THE OBLIGOR:
As of:
Col. A Col. B Col. C Col. D
Name of Title of Amount owned Percentage of
owner class beneficially voting securities
represented by
amount given in
Col. C
Not applicable.
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE
TRUSTEE OWNED BENEFICIALLY BY EACH UNDERWRITER FOR THE OBLIGOR AND EACH
DIRECTOR, PARTNER AND EXECUTIVE OFFICER OF EACH SUCH UNDERWRITER:
As of:
Col. A Col. B Col. C Col. D
Name of Title of Amount owned Percentage of
owner class beneficially voting securities
represented by
amount given in
Col. C
Not applicable.
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO SECURITIES OF THE OBLIGOR OWNED
BENEFICIALLY OR HELD AS COLLATERAL SECURITY FOR OBLIGATIONS IN DEFAULT BY
THE TRUSTEE:
As of:
Col. A Col. B Col. C Col. D
Title of Whether Amount owned Percent of
class the securities beneficially class repre-
are voting or or held as sented by
non-voting collateral security amount given
securities for obligations in Col. C
in default
Not applicable.
ITEM 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT ANY SECURITIES OF AN UNDERWRITER FOR THE OBLIGOR,
FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OF SUCH
UNDERWRITER ANY OF WHICH ARE SO OWNED OR HELD BY THE TRUSTEE:
As of:
Col. A Col. B Col. C Col. D
Title of Amount Amount owned Percent of
issuer outstanding beneficially class represented
and title or held as by amount
of class collateral security given in Col. C
for obligations in
default by trustee
Not applicable.
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF
CERTAIN AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT VOTING SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE
OF THE TRUSTEE (1) OWNS 10 PERCENT OR MORE OF THE VOTING SECURITIES OF THE
OBLIGOR OR (2) IS AN AFFILIATE, OTHER THAN A SUBSIDIARY, OF THE OBLIGOR,
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF SUCH
PERSON:
As of:
Col. A Col. B Col. C Col. D
Title of Amount Amount owned Percent of
issuer outstanding beneficially class represented
and title or held as by amount
of class collateral security given in Col. C
for obligations in
default by trustee
Not applicable.
ITEM 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON
OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT ANY SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF
THE TRUSTEE, OWNS 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE
OBLIGOR, FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES
OF SUCH PERSON ANY OF WHICH ARE SO OWNED OR HELD BY THE TRUSTEE:
As of:
Col. A Col. B Col. C Col. D
Title of Amount Amount owned Percent of
issuer outstanding beneficially class represented
and title or held as by amount
of class collateral security given in Col. C
for obligations in
default by trustee
Not applicable.
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
EXCEPT AS NOTED IN THE INSTRUCTIONS, IF THE OBLIGOR IS INDEBTED TO THE
TRUSTEE, FURNISH THE FOLLOWING INFORMATION:
As of:
Col. A Col. B Col. C
Nature of Amount Date due
indebtedness outstanding
Not applicable.
ITEM 13. DEFAULTS BY THE OBLIGOR.
(A) STATE WHETHER THERE IS OR HAS BEEN A DEFAULT WITH RESPECT TO THE
SECURITIES UNDER THIS INDENTURE. EXPLAIN THE NATURE OF ANY SUCH DEFAULT.
Not applicable.
(B) IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY
OTHER SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER
SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, OR IS A TRUSTEE FOR MORE THAN
ONE OUTSTANDING SERIES OF SECURITIES UNDER THE INDENTURE, STATE WHETHER
THERE HAS BEEN A DEFAULT UNDER ANY SUCH INDENTURE OR SERIES, IDENTIFY THE
INDENTURE OR SERIES AFFECTED, AND EXPLAIN THE NATURE OF ANY SUCH DEFAULT.
To the best of the knowledge of the Trustee, there has not been a
default under any such indenture or series.
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.
IF AN UNDERWRITER IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
Not applicable.
ITEM 15. FOREIGN TRUSTEE.
IDENTIFY THE ORDER OR RULE PURSUANT TO WHICH THE FOREIGN TRUSTEE IS
AUTHORIZED TO ACT AS SOLE TRUSTEE UNDER INDENTURES QUALIFIED OR TO BE
QUALIFIED UNDER THE ACT.
Not applicable.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission as
Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with Registration Statement
of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by
reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of Massachusetts
that no certificate of authority for the trustee to commence business
was necessary or issued is on file with the Securities and Exchange
Commission as Exhibit 2 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST
POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS
SPECIFIED IN PARAGRAPH (1) OR (2) ABOVE.
A copy of the authorization of the trustee to exercise corporate
trust powers is on file with the Securities and Exchange Commission
as Exhibit 3 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with Registration Statement
of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by
reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the By-Laws of the trustee, as now in effect, is on file
with the Securities and Exchange Commission as Exhibit 4 to the
Statement of Eligibility and Qualification of Trustee (Form T-1)
filed with Registration Statement of Eastern Edison Company (File No.
33-37823) and is incorporated herein by reference thereto.
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4, IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF THE UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act is
annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority is annexed hereto as Exhibit 7 and made a part hereof.
8. A COPY OF ANY ORDER PURSUANT TO WHICH THE FOREIGN TRUSTEE IS
AUTHORIZED TO ACT AS SOLE TRUSTEE UNDER INDENTURES QUALIFIED OR TO BE
QUALIFIED UNDER THE ACT.
Not applicable.
9. FOREIGN TRUSTEES ARE REQUIRED TO FURNISH A CONSENT TO SERVICE OF
PROCESS.
Not applicable.
NOTE
The answers to this statement insofar as such answers relate to persons
who are affiliates of the obligors are based upon information furnished to
the trustee by the obligors. While the trustee has no reason to doubt the
accuracy of any such information, it cannot accept any responsibility
therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, State Street Bank and Trust Company, a corporation organized and
existing under the laws of The Commonwealth of Massachusetts, has duly
caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and
The Commonwealth of Massachusetts, on the 5th day of January, 1996.
STATE STREET BANK AND TRUST COMPANY
By /s/ Henry W. Seemore
Henry W. Seemore
Assistant Vice President
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939 in connection with the proposed registration by SoftKey Inter-
national Inc. of its 5 1/2% Senior Convertible Notes due 2000, we hereby
consent that reports of examination by Federal, State, Territorial or
District authorities may be furnished by such authorities to the Securities
and Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By /s/ Henry W. Seemore
Henry W. Seemore
Assistant Vice President
Dated: January 5, 1996
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company of
Boston, Massachusetts and foreign and domestic subsidiaries, a state
banking institution organized and operating under the banking laws of this
commonwealth and a member of the Federal Reserve System, at the close of
business December 31, 1994, published in accordance with a call made by the
Federal Reserve Bank of this District pursuant to the provisions of the
Federal Reserve Act and in accordance with a call made by the Commissioner
of Banks under General Laws, Chapter 172, Section 22(a).
THOUSANDS OF
DOLLARS
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin . . 942,661
Interest-bearing balances . . . . . . . . . 4,843,628
Securities . . . . . . . . . . . . . . . . . . . . . . . . 8,410,339
Federal funds sold and securities purchased under agreements
to resell in domestic offices of the bank and of its Edge
subsidiary . . . . . . . . . . . . . . . . . . . . . . . 2,240,374
Loans and lease financing receivables:
Loans and leases, net of unearned income . . . 3,257,795
Allowance for loan and lease losses . . . . . . 58,184
Loans and leases, net of unearned income and
allowance . . . . . . . . . . . . . . . . . . . . . 3,199,611
Assets held in trading accounts . . . . . . . . . . 825,549
Premises and fixed assets . . . . . . . . . . . . . . . . . 375,086
Other real estate owned . . . . . . . . . . . . . . . . . . 4,359
Investments in unconsolidated subsidiaries . . . . . 25,051
Customers' liability to this bank on acceptances outstanding 55,358
Intangible Assets . . . . . . . . . . . . . . . . . . . . . 34,862
Other Assets . . . . . . . . . . . . . . . . . . . . . . . 653,750
Total Assets . . . . . . . . . . . . . . . . . . . . . . . 21,610,628
LIABILITIES
Deposits:
In domestic offices . . . . . . . . . . . . 5,946,262
Noninterest-bearing . . . 4,175,167
Interest-bearing . . . . 1,771,095
In foreign offices and Edge subsidiary . . . 8,147,182
Noninterest-bearing . . . . . 44,817
Interest-bearing . . . . 8,102,365
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the
bank and of its Edge subsidiary . . . . . . . . 4,912,704
Demand notes issued to the U.S. Treasury and Trading
Liabilities . . . . . . . . . . . . . . . . . . . . 423,324
Other borrowed money . . . . . . . . . . . . . . . . . . . 386,049
Bank's liability on acceptances executed and outstanding . 55,621
Other liabilities . . . . . . . . . . . . . . . . . . . . . 530,536
Total liabilities: . . . . . . . . . . . . . . . . . . . . 20,401,678
EQUITY CAPITAL
Common Stock . . . . . . . . . . . . . . . . . . . . . . . 28,043
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . 177,736
Undivided profits . . . . . . . . . . . . . . . . . . . . . 1,003,171
Total equity capital . . . . . . . . . . . . . . . . . . . 1,208,950
Total liabilities and equity capital . . . . . . 21,610,628
I, Rex S. Schuette, Senior Vice President and Comptroller of the above
named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of
Governors of the Federal Reserve System and is true to the best of my
knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of
our knowledge and belief has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System
and is true and correct.
David A. Spina
Marshall N. Carter
Charles F. Kaye
