REGISTRATION NO. 333-
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
Proposed Proposed
Title of Each Maximum Maximum Amount of
Class of Amount Offering Aggregate Registration
Securities to to be Price Offering Fee
be Registered Registered Per Security Price
51/2% Senior $150,000,000 100% $150,000,000 $51,725(1)
Convertible/
Exchangeable Notes
Due 2000
51/2% Series C 150,000(2) -- -- --
Convertible
Preferred Stock,
par value $.01 per
share
Common Stock, par 8,040,984(3) $19.81(4) $103,225,869(4) $35,600(4)
value $.01 per
share
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(A) OF THE SECURITIES ACT 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.
(1) Calculated pursuant to Rule 457(i) under the Securities Act of
1933, as amended (the "Securities Act").
(2) Based on an exchange price of $1,000 principal amount of Notes
(as hereinafter defined) per share, but deemed to include any
additional shares of the Registrant's 51/2% Series C Convertible
Preferred Stock, par value $.01 per share (the "Series C
Preferred Stock") that may be issuable upon exchange of the
Notes as a result of the antidilution provisions thereof.
Pursuant to Rule 457(i) under the Securities Act, no
additional registration fee is required for such shares.
(3) Includes 2,830,188 shares of the Registrant's common stock,
par value $.01 per share (the "Common Stock"), issuable upon
conversion of the Notes and the Series C Preferred Stock,
based on a conversion price of $53.00 per share, but is deemed
to include any additional shares of Common Stock that may be
issuable upon conversion of the Registrant's 51/2% Senior
Convertible/Exchangeable Notes Due 2000 (the "Notes") or the
Series C Preferred Stock as a result of the antidilution
provisions of either the Notes or the Series C Preferred
Stock. Pursuant to Rule 457(i) under the Securities Act, no
additional registration fee is required for these shares.
(4) Estimated solely for the purpose of calculating the registration
fee pursuant to paragraph (c) of rule 457 under the Securities
Act of 1933, as amended, based on the average of the high and low
prices per share of the Registrant's Common Stock reported on the
Nasdaq National Market on April 1, 1996.
Subject to Completion, Dated April 9, 1996
SOFTKEY LOGO
$150,000,000 51/2% Senior Convertible/Exchangeable Notes Due 2000
150,000 Shares 51/2% Series C Convertible Preferred Stock
8,040,984 Shares Common Stock
The securities of SoftKey International Inc., a Delaware
corporation ("SoftKey" or the "Company"), that may be offered hereby
for sale from time to time for the account of Tribune Company, a
Delaware corporation and the holder such securities ("Tribune" or
the "Selling Holder"), include (i) $150,000,000 principal amount of
51/2% Senior Convertible/Exchangeable Notes Due 2000 of the Company
(the "Notes"), (ii) the shares of the Company's 51/2% Series C
Convertible Preferred Stock, par value $.01 per share, issuable upon
exchange thereof (the "Series C Preferred Stock"), (iii) the shares
of the Company's common stock, par value $.01 per share (the "Common
Stock"), issuable upon conversion of either the Notes or the Series
C Preferred Stock (such shares, together with the Notes and the
Series C Preferred Stock, the "Securities") and (iv) the shares of
Common Stock (the "Comptons Shares") issued pursuant to the Merger
Agreement (as defined herein). The Selling Holder may from time to
time sell the Securities or the Comptons Shares offered hereby in
the manner set forth under "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 (i) exchange any Notes or portions thereof
into Series C Preferred Stock at an exchange price of $1,000
principal amount of Notes per share, subject to certain adjustments,
and (ii) convert any Notes, Series C Preferred Stock or portions
thereof into Common Stock at a conversion price of $53 per share of
Common Stock, subject to certain adjustments. See "Description of
the Notes -- Conversion of Notes" and "-- Exchange of Notes."
The Company is required to redeem all then outstanding shares
of Series Preferred Stock on November 1, 2000. Dividends on the
Series C Preferred Stock are payable semi-annually on May 1 and
November 1 of each year. Holders of the Series C Preferred Stock
are entitled through November 1, 2000, subject to prior redemption,
to convert any shares of Series C Preferred Stock into Common Stock
at a conversion price of $53 per share of Common Stock, subject to
certain adjustments. See "Description of Capital Stock -- Preferred
Stock -- Dividend Rights" and "-- Conversion Rights."
The Notes and the Series C Preferred Stock are redeemable at
the option of the Company under certain circumstances and are
subject to repurchase at the option of the holders thereof under
certain circumstances, in each case as set forth herein. See
"Description of Notes -- Optional Redemption by the Company" and "--
Change of Control" and "Description of Capital Stock -- Series C
Preferred Stock -- Redemption" and "-- Change of Control."
The Common Stock is quoted on the Nasdaq National Market under
the symbol "SKEY." On April 8, 1996, the last reported sale price
of the Common Stock on the Nasdaq National Market was $221/4 per
share.
The Securities and the Comptons Shares were originally issued
by the Company on December 22, 1995 and December 28, 1995,
respectively, in transactions 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 Securities or the Comptons Shares offered hereby.
SEE "RISK FACTORS" ON PAGE 6 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
SECURITIES AND COMPTONS SHARES 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 AD-
EQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1996.
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 and the Comptons Shares 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, the Securities and the Comptons
Shares 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
There is incorporated herein by reference and made a part
hereof, each of which is on file with the Commission, (i) the
Annual Report on Form 10-K of the Company for the fiscal year ended
January 6, 1996 and (ii) 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 amendments or
reports filed for the purpose of updating such description filed by
the Company.
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 and the Comptons
Shares hereby 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 and the Comptons
Shares offered hereby involve a high degree of risk. See "Risk
Factors."
THE COMPANY
General. SoftKey is a developer and publisher of 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, to a lesser
extent, entertainment, in North America. The Company 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. The Company also publishes lower priced boxed
products under the "Key" brand and a line of jewel-case only
products under the "Platinum" brand. 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 (including the Reader Rabbit Series),
"Treasure" family, "Super Solvers" family, "Writing Tools" family,
"College Prep" family and "Foreign Languages" family. The Company
publishes school editions of a number of these products.
SoftKey's objective is to be the leading worldwide producer of
value-priced, high-quality consumer software. Accordingly,
SoftKey's strategy is to develop, license and acquire a broad range
of high quality software products with significant unit-volume
potential and to continuously introduce these new products through
a wide variety of established and emerging distribution channels
worldwide, including retail channels, direct mail, original
equipment manufacturers ("OEMs") and school channels. 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 customer 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.
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,
among others, The Learning Company, a publisher of educational
software, Compton's NewMedia, Inc. and Compton's Learning Company,
publishers of educational software and encyclopedia products (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 a number of conditions and approvals including the
approval of the stockholders of MECC and the Company. There can be
no assurance that this transaction will be consummated.
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,
the Company 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 and to further
expand its existing distribution channels.
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 (i) $150,000,000 of 51/2% Senior
hereby . . . . . . Convertible/Exchangeable Notes due November
1, 2000 issued under an indenture (the
"Indenture") between SoftKey and State Street
Bank and Trust Company, as trustee (the
"Trustee"), together with the Series C
Preferred Stock issuable upon exchange of the
Notes and the Common Stock issuable upon
conversion of either the Notes or the Series
C Preferred Stock and (ii) 5,210,796 shares
of Common Stock issued pursuant to the
Agreement and Plan of Merger dated November
30, 1995 by and among the Company, Cubsco I
Inc., a California corporation, Cubsco II
Inc., a Delaware corporation, Tribune,
Compton's NewMedia, Inc., a California
corporation, and Compton's Learning Company,
a Delaware corporation (the "Merger
Agreement")
Interest and
Dividend Payment May 1 and November 1 of each year, commencing
Dates . . . . . . . May 1, 1996
Maturity of the November 1, 2000
Notes . . . . . .
Exchange Price of The Notes are exchangeable into Series C
the Notes . . . . . Preferred Stock at $1,000 per share, subject
to adjustment as set forth herein
Conversion Price . The Notes and the Series C Preferred Stock
are convertible into Common Stock at $53 per
share, subject to adjustment as set forth
herein
Redemption . . . . The Notes and the Series C Preferred Stock
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 or
dividends, as the case may be. On November
1, 2000, the Company is required to redeem
all shares of Series C Preferred Stock then
outstanding
Change of Control . In the event of a Change of Control (as
defined herein), holders of the Notes or the
Series C Preferred Stock have the right to
require the Company to repurchase the Notes
or the Series C Preferred Stock, as the case
may be, in whole or in part at a redemption
price of 101% of the principal amount or
liquidation preference thereof plus accrued
interest or dividends, as the case may be, as
set forth herein
Ranking of the The Notes are general unsecured obligations
Notes . . . . . . . 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 See
"Description of Notes"
Use of Proceeds . . The Company will not receive any of the
proceeds from the sale of any of the
Securities or the Comptons Shares offered
hereby See "Use of Proceeds"
Trading . . . . . . The Company intends to apply to have the
shares of Common Stock offered hereby listed
on the Nasdaq National Market (the "NNM").
The Common Stock is quoted on the NNM under
the symbol "SKEY." On April 8, 1996 the last
reported sale price of the Common Stock on
the NNM was $221/4 per share
RISK FACTORS
Prospective purchasers of the Securities and the Comptons
Shares 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. The Company's marketplace has recently
experienced a higher emphasis on on-line and Internet related
services and content tailored for this new delivery vehicle. To
the extent that demand increases for on-line products and content,
the demand for the Company's existing products and future
performance may change.
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, Mattel, Sony, The Walt Disney
Company, Viacom, IBM/Eduquest, Fisher-Price, Jostens, Electronic
Arts, Sierra On-Line, Inc., Davidson & Associates, Mindscape, GT
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.
Consolidation in the consumer software industry creates new, larger
competitors. For example, CC International Inc. recently announced
proposed mergers with Sierra On-Line, Inc. and Davidson &
Associates. This increased consolidation of the consumer software
market may impact future growth potential and performance.
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 "competitive upgrade"
price discounting among the major firms is eroding the traditional
pricing structures that had previously existed in the software
industry. Microsoft launched the Windows '95 operating system in
1995. As a result, the Company has embarked on a program to
transition many of its titles to Windows '95 format. In 1995,
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. If the
occurrence of these exclusive arrangements increases and the
Company is not 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 without limitation 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. Should on-line distribution channels
increase, the Company will be required to modify its existing
technology bases in order for its products to be compatible and
remain competitive. 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 and others.
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 or dividends under the Notes or the Series C
Preferred Stock, as the case may be. 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, or dividends on the Series C
Preferred Stock.
To the extent that the Notes are not exchanged for Series C
Preferred Stock or converted into Common Stock prior to their
maturity or that the Series C Preferred Stock is not converted into
Common Stock prior to its redemption 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 or its obligations to redeem and pay dividends on
the Series C Preferred Stock, 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; INTEGRATION OF ACQUIRED BUSINESSES; 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.
Additionally, as a result of such acquisitions, the Company
faces challenges relating to integration of operations such as
coordinating geographically separate organizations, integrating
personnel with disparate business backgrounds and combining
different corporate cultures. The process of combining
organizations may cause an interruption of, or a loss of momentum
in, the activities of the Company's business, which could have an
adverse effect on the revenues and operating results of the
Company, at least in the near term.
The ability of software companies with significant internal
development and marketing 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 require a substantially
larger internal development and marketing staff than its operations
had 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
SoftKey operates in a highly competitive and technology driven
environment. The consumer software industry is undergoing
substantial change and is subject to a high level of uncertainty.
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.
In the past, the Company 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.
COMPETITION FOR SHELF SPACE AND PROMOTIONAL SUPPORT
Retailers of the Company's products typically have a limited
amount of shelf space and promotional resources, and there is
intense competition among high-quality educational software
products for adequate levels of shelf space and promotional support
from retailers. To the extent that the number of consumer software
products and computer platforms increases, this competition for
shelf space may intensify. Due to increased competition for
limited shelf space, retailers and distributors are increasingly in
a better position to negotiate favorable terms of sale, including
price discounts and product return policies, as well as cooperative
market development funds. Retailers often require software
publishers to pay fees in exchange for preferred shelf space. The
amounts paid to retailers by software publishers for preferred
shelf space are customarily determined by an arms-length
negotiation on a case by case basis, and there is no general
formula or industry standard for determining such fees. Amounts
typically paid by the Company for shelf space, cooperative
advertising, promotional costs and market developments funds
represent approximately 4-5% of gross sales. There can be no
assurance that such retailers will continue to purchase the
Company's products, provide the Company's products with adequate
levels and quality of shelf space or continue to participate with
the Company in cooperative advertising, promotional or market
development arrangements.
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 15% of its revenues in the
year ended January 6, 1996 from sales occurring outside North
America. The Company's international revenues increased by 96% in
1995 as compared to 1994. This increase was driven by both the
acquisition of tewi, a German company, on July 21, 1995 and
increased penetration of personal computers in Europe, which in
turn caused an increase in demand for and sales of consumer
software products. 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 "shrink-wrap" 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.
PROTECTION OF PROPRIETARY RIGHTS; RISK OF INFRINGEMENT CLAIMS
The Company relies on a combination of trade secret,
copyright, trademark and other proprietary rights laws and license
agreements to protect its rights to its software products and
related documentation. The Company does not have any patents.
United States copyright law, international conventions and
international treaties, however, may not provide meaningful
protection against unauthorized duplication of the Company's
software. The Company generally licenses its externally developed
products rather than transferring title and has relied on
contractual arrangements with recipients and users of its products
to establish certain proprietary rights and to maintain
confidentiality of those products protected by trade secret law.
Consistent with standard industry practice, the Company's products
generally are licensed pursuant to "shrink-wrap" licenses that are
not signed by the licensee. The enforceability of such licenses
has not been conclusively determined. The Company's products do
not contain any mechanisms to prevent or inhibit unauthorized
copying.
The Company has registered numerous trademarks in the United
States and Canada, and a small number in other countries, for
titles or components of its products and has trademark
registrations pending in the United States and other countries for
various new products.
Policing unauthorized use of a broadly disseminated product
such as PC software is very difficult. Software piracy can be
expected to be a persistent problem for the "shrink-wrap" software
industry. These problems are particularly acute in certain
international markets such as South America, the Middle East, the
Pacific Rim and the Far East.
The Company periodically receives communications alleging or
suggesting that its products may incorporate material covered by
the copyrights, trademarks or other proprietary rights of third
parties. With the increased use of music and animation in CD-ROM
products and the increased number of software products on the
market generally, the Company is likely to experience an increase
in the number of infringement claims asserted against it in the
future. With respect to licensed products, the Company is
generally indemnified against liability on these matters. The
Company's policy is to investigate the factual basis of such
communications and to resolve such matters promptly by enforcing
its rights, negotiating licenses (if necessary) or taking other
appropriate actions.
In certain circumstances, litigation may be necessary to
enforce the Company's proprietary rights, to protect copyrights,
trademarks and trade secrets and other intellectual property rights
owned by the Company or its licensors, to defend the Company
against claimed infringements of the rights of others and to
determine the scope and validity of the proprietary rights of the
Company and others. Any such litigation, whether with or without
merit, could be costly and a diversion of management's attention,
which could have an adverse effect on the Company's business,
operating results or financial condition. Adverse determinations
in litigation relating to any of the Company's products could
result in the loss of the Company's proprietary rights, subject the
Company to liabilities, require the Company to seek licenses from
third parties or prevent the Company from selling that product.
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 $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 and $65,960,000 for the
year ended January 6, 1996 (after amortization of $18,229,000 of
goodwill). The Company had net income of $21,145,000 for the year
ended December 31, 1994. There can be no assurance that the
Company will 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 and the Series C Preferred Stock issuable upon
exchange thereof 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 the Company's debt, including the Notes, and to pay
dividends on any Series C Preferred Stock issued upon exchange
thereof, are dependent upon the earnings of the Company's
subsidiaries and the distribution of those earnings to, or upon
loans or other payments of funds by those subsidiaries to, the
Company. The Company's subsidiaries are separate and distinct
legal entities and have no obligation, contingent or otherwise, to
pay any amounts due under the Notes or as dividends on Series C
Preferred Stock issued upon exchange thereof 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 Securities and the Comptons
Shares 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. 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 of the
Company's subsidiaries can create, incur, assume or guarantee.
CHANGE OF CONTROL
The Indenture and the Certificate of Designations of the
Series C Preferred Stock (the "Certificate of Designations")
provide that holders of the Notes and the Series C Preferred Stock
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 or
liquidation preference thereof plus accrued interest or dividends,
as the case may be. There can be no assurance that the Company
will have the financial resources necessary to purchase the Notes
and the Series C Preferred Stock upon a Change of Control. See
"Description of Notes -- Change of Control" and "Description of
Capital Stock -- Series C Preferred Stock -- Change of Control."
LACK OF PUBLIC MARKET FOR THE NOTES AND SERIES C PREFERRED STOCK;
VOLATILITY
There is no existing trading market for the Notes or the
Series C Preferred Stock, and there can be no assurance regarding
the future development of a market for the Notes or the Series C
Preferred Stock or the ability of holders thereof or the price at
which such holders may be able to sell such securities. If such
markets were to develop, the Notes or the Series C Preferred Stock
could trade at prices that may be higher or lower than the price at
which they are sold hereunder depending on many factors, including
prevailing interest rates, the Company's operating results and the
market for similar securities. There can be no assurance as to the
liquidity of any trading market for the Notes or the Series C
Preferred Stock or that an active public market therefor will
develop. The Company does not intend to apply for listing or
quotation of the Notes or the Series C Preferred Stock on any
securities exchange or automated quotation service.
The Common Stock is quoted on the NNM. The market price of
the Common Stock, like that for the shares of many other high
technology companies, has been and may continue to be volatile.
Recently, the stock market in general and the shares of personal
computer software companies in particular have experienced
significant price fluctuations. These broad market fluctuations,
as well as general economic and political conditions and factors
such as quarterly fluctuations in results of operations, the
announcement of technological innovations, the introduction of new
products by the Company or its competitors, general conditions in
the computer hardware and software industries and general economic
and political conditions may have a significant impact on the
market price of the Notes, Series C Preferred Stock and Common
Stock.
RATIOS OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
For the purpose of computing the ratio of earnings to fixed
charges, earnings consist of the sum of (i) earnings before income
taxes and (ii) fixed charges. Fixed charges consist of interest on
all indebtedness and amortization of debt-related expenses. At
December 31, 1995, the Company had paid no dividends on any Preferred
Stock. At December 31, 1995, fixed charges exceeded earnings by
$60,165, which includes the effect of amortization and merger-
related costs. Excluding the effect of amortization and merger-
related costs, the ratio of earnings to fixed charges at December
31, 1995 would have been 8.39X. Fixed charges prior to 1995 were
deemed immaterial by the Company.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the
Securities or the Comptons Shares by the Selling Holder.
THE SELLING HOLDER
The Notes were initially issued and sold pursuant to a
Securities Purchase Agreement dated as of November 30, 1995 between
the Company and the Selling Holder. The Comptons Shares were
initially issued and sold pursuant to the Merger Agreement. The
Selling Holder acquired the Notes and the Compton Shares in
transactions exempt from registration under the Securities Act.
The Company has agreed to indemnify and hold the Selling Holder
harmless against certain liabilities under the Securities Act that
would arise in connection with sales of the Securities and the
Comptons Shares by the Selling Holder.
The table below sets forth certain information with respect to
the Selling Holder, the Securities and the Comptons Shares as of
April 1, 1996. Unless the context otherwise requires, the term
Selling Holder includes the beneficial owner (possessing sole
voting and investment power) of the Securities and the Comptons
Shares listed below. Other than as a result of the ownership of
the Securities and the Comptons Shares indicated below and as
otherwise indicated herein, the Selling Holder has not had any
material relationship with the Company or any of its affiliates
within the past three years.
Aggregate Number
of Shares of
Common Stock That
May
Be Sold,
Including the
Aggregate Number Comptons Shares
of and Shares Issued
Shares of Series Upon Conversion
C of Notes and
Aggregate Preferred Stock Series C
Principal That Preferred
Amount of Notes May Be Sold Upon Stock**
Selling That May Be Exchange of
Holder Sold Notes*
Tribune
Company $150,000,000 150,000 8,040,984
________________
* Assumes an exchange price of $1,000 per share and a cash
payment in lieu of any fractional share interest.
** Assumes a conversion price of $53.00 per share and a cash
payment in lieu of any fractional share interest for shares of
Common Stock issuable upon conversion of the Notes or the
Series C Preferred Stock.
The preceding table has been prepared based upon information
furnished to the Company by the Trustee and by or on behalf of the
Selling Holder.
In view of the fact that the Selling Holder may offer for sale
all or a portion of the Securities or the Comptons Shares held by
it from time to time, no estimate can be given as to the amount of
Notes or the number of shares of Series C Preferred Stock or Common
Stock that will be held by the Selling Holder after completion of
the offering made hereby.
Information concerning the Selling Holder 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 exchange price and conversion price, and the number
of shares of Series C Preferred Stock issuable upon exchange of the
Notes or the number of shares of Common Stock issuable upon
conversion of the Notes or the Series C Preferred Stock, are
subject to adjustment under certain circumstances. Accordingly,
the aggregate principal amount of Notes, the number of shares of
Series C Preferred Stock issuable upon exchange thereof or Common
Stock issuable upon conversion of either the Notes or the Series C
Preferred Stock offered hereby may increase or decrease. As of the
date of this Prospectus, the aggregate principal amount of Notes
outstanding is $150,000,000. As of the date hereof, none of the
Notes has been exchanged for Series C Preferred Stock or has been
converted into Common Stock.
In connection with the execution and delivery of the Indenture
and the Merger Agreement, the Company and Tribune entered into (i)
the Standstill Agreement dated as of December 22, 1995 pursuant to
which, among other agreements, Tribune agreed under certain
circumstances to restrict its ownership in and voting of securities
of the Company and the Company agreed (x) to take all necessary
actions to increase the size of its Board of Directors (the "Board
of Directors") by one and to fill the vacancy created thereby with
an individual designated by Tribune and (y) if the Board of
Directors shall at any time consist of 10 or more members, to take
all necessary actions to increase further the size of the Board of
Directors by one and to fill the additional vacancy created thereby
with a second individual designated by Tribune and (ii) the Tax
Sharing Agreement dated as of December 28, 1995 pursuant to which
the Company and Tribune agreed to an allocation of certain tax
liabilities and related matters.
DESCRIPTION OF THE NOTES
The Notes are issued under the Indenture. A copy of the
Indenture has been filed with the Commission and is incorporated by
reference 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 Note which is a part thereof) are referenced herein, such
provisions or defined terms are incorporated herein by reference.
As used in this "Description of the 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," are exchangeable for Series C Preferred Stock (as
described below under the subheading "Exchange of Notes"), and are
convertible into Common Stock (as described below under the
subheading "Conversion of Notes"). The Notes are limited to
$150,000,000 aggregate principal amount, have been 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
holders thereof upon a Change of Control.
Except as described below with respect to the form of
certificate of designation included as an exhibit to the Indenture,
the Indenture does not contain any restrictions on the payment of
dividends, the repurchase of securities of the Company or the
incurrence of debt by the Company or any of its subsidiaries.
The Notes bear interest from December 22, 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 exchange, conversion or registration
of transfer and exchange, without service charge, at the office of
the Trustee in New York, New York.
EXCHANGE OF NOTES
The holders of Notes are entitled at any time prior to the
close of business on November 1, 2000, subject to prior redemption,
to exchange any Notes or portions thereof (in denominations of
$1,000 or multiples thereof) into Series C Preferred Stock, at the
exchange 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, exchange 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 consideration. 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 exchanged 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 exchange of any Notes for interest
accrued thereon or for dividends on any Series C Preferred Stock
issued. Unless called for redemption, if Notes are exchanged 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 exchanged. Upon exchange,
dividends on the Series C Preferred Stock issuable upon such
exchange will commence to accrue as of the most recent date as of
which interest has been paid on the Notes, unless no interest has
been paid on the Notes, in which case dividends shall accrue from
December 22, 1995. The Company is not required to issue fractional
shares of Series C Preferred Stock upon exchange of Notes and, in
lieu thereof, will pay a cash adjustment based upon the greater of
the liquidation preference of the Series C Preferred Stock or the
current market value (on the last business day prior to the date of
the exchange) of the number of shares of Common Stock into which
one share of Preferred Stock may then be converted.
The exchange price is subject to adjustment (in such manner as
the Board of Directors shall determine is fair and equitable, which
determination shall be conclusive and shall be set forth in a
resolution of the Board of Directors) upon an amendment to the
provisions of the Series C Preferred Stock as set forth in the
Certificate of Designation relating to the Series C Preferred Stock
to reduce the liquidation preference of, or the amount of dividends
or other distributions payable with respect to, the Series C
Preferred Stock, or to change the conversion price at which the
Series C Preferred Stock is convertible into Common Stock pursuant
to such Certificate of Designation.
The exchange price will not be adjusted for the issuance of
Series C Preferred Stock or any securities convertible into or
exchangeable for Series C Preferred Stock or carrying the right to
purchase any of the foregoing. No adjustment in the exchange price
will be required unless such adjustment would require a change of
at least 1% in the exchange 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
Series C Preferred Stock (other than changes in par value or to or
from no par value resulting from a subdivision or a combination) or
(ii) a consolidation, merger or combination 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 Series C
Preferred Stock shall be entitled to receive stock, other
securities, other property or assets (including cash) with respect
to or in exchange for such Series C Preferred Stock, the holders of
the Notes then outstanding will be entitled thereafter to exchange
such Notes into the kind and amount of shares of stock, other
securities or other property or assets (including cash) which they
would have owned or been entitled to receive upon such
reclassification, change, consolidation, merger, combination, sale
or conveyance had such Notes been exchanged for Series C Preferred
Stock immediately prior to such reclassification, change,
consolidation, merger, combination, 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 Series C
Preferred Stock (or other transaction) which results in any
adjustment of the exchange 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 Series C Preferred Stock.
The Company from time to time may, to the extent permitted by
law, reduce the exchange 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 to the holders of record of the
Notes, 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. A distribution of a stock
dividend or of rights to acquire stock to the holders of Series C
Preferred Stock that is not accompanied by a full adjustment of the
exchange price of the Notes to take such distribution into account
may result in a taxable dividend to the holders of Series C
Preferred Stock. The Company may, at its option, make such
reductions in the exchange 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.
CONVERSION OF NOTES
The holders of Notes are entitled at any time prior to the
close of business on November 1, 2000 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. 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. Unless called for redemption, if Notes 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
and combinations 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
and any cash plus the fair market value of consideration payable in
respect of any tender offer, in any such case 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 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 to or from no par
value or resulting from a subdivision or a combination) or (ii) a
consolidation, merger or combination 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 (including cash) which they would have owned or been
entitled to receive upon such reclassification, change,
consolidation, merger, combination, sale or conveyance had such
Notes been converted into Common Stock immediately prior to such
reclassification, change, consolidation, merger, combination, sale
or conveyance, assuming that a holder of Common Stock would not
have exercised any rights of election as to the stock, other
securities or other property or assets receivable in connection
therewith.
If one of the events that results in an adjustment of the
conversion price is treated for United States income tax purposes
as a taxable dividend to holders of Common Stock (or other
shareholders of the Company), the holders of Notes may be deemed to
have received a distribution subject to United States income tax as
a dividend.
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 to the holders of record of the
Notes, 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. A distribution of a stock
dividend or of rights to acquire stock to the holders of Common
Stock that is not accompanied by a full adjustment of the
conversion price of the Notes to take such distribution into
account may result in a taxable dividend to the holders of Common
Stock. 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 after such selection, 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 thereon to the date of such repurchase, 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 on a United States
national securities exchange or approved for quotation on the NNM
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). "Acquisition Price" means the
volume-weighted average price per share paid by the person or group
in acquiring the Voting Stock.
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. 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 of the Company evidenced by the Notes is
senior and unsecured. 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 conducted primarily
through subsidiaries, the cash flow and the consequent ability to
service the Company's debt, including the Notes, and to redeem and
pay dividends on any Series C Preferred Stock issuable upon
exchange thereof are dependent upon the earnings of the Company's
subsidiaries and the distribution of those earnings to, or upon
loans or other payments of funds by those subsidiaries to, the
Company. The Company's subsidiaries are separate and distinct
legal entities and have no obligation, contingent or otherwise, to
pay any amounts due under the Notes or any Series C Preferred Stock
issuable upon exchange thereof 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.
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 the 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, among other things, as to (i) rights of
registration of transfer and exchange; (ii) substitution of
apparently mutilated, defaced, destroyed, lost or stolen Notes;
(iii) rights of holders of the Notes to receive payments of
principal of 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 and all other
amounts payable under the Indenture, all outstanding Notes (except
lost, stolen or destroyed Notes which have been replaced or paid)
have been delivered to the Trustee for cancellation and the Company
has delivered to the Trustee an Officers' Certificate stating that
all conditions relating to such defeasance have been satisfied or
(B)(w) 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, (x) the Company will have irrevocably deposited
with the Trustee, as trust funds, cash, in an amount sufficient to
pay principal of and interest on the outstanding Notes, to maturity
or redemption, as the case may be, (y) 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 (z) 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, among
other things, 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 and 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 the
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 in 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 the subheadings "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
accountants 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 in 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 above
under the subheadings "Change of Control."
MODIFICATIONS OF THE INDENTURE
The Indenture contains provisions permitting the Company and
the Trustee, in certain cases 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 for 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
exchange the Notes for Series C Preferred Stock subject to the
terms set forth in the Indenture or 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 interest rate 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 have provided, are providing and
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, 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 (including the
Series C 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 (including the Series C 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 (including the Series C 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 Series C Preferred Stock, all of which are reserved
for issuance upon exchange of the Notes.
The Company has no current plans to issue any Preferred Stock
other than the Series C Preferred 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.
SERIES C PREFERRED STOCK
The powers, preferences, rights, qualifications, limitations
and restrictions of the Series C Preferred Stock are set forth in
the Certificate of Designations. A copy of the Certificate of
Designation has been filed with the Commission as an exhibit to the
Indenture and is incorporated by reference as an exhibit to the
Registration Statement. The following summaries of certain
provisions of the Certificate of Designation do not purport to be
complete and are subject to, and are qualified in their entirety by
reference to, all the provisions of the Certificate of Designation,
including the definitions therein of certain terms which are not
otherwise defined in this Prospectus. Wherever particular
provisions or defined terms of the Certificate of Designation are
referred to, such provisions or defined terms are incorporated
herein by reference. As used in this "Description of Capital
Stock--Series C Preferred Stock", the "Company" refers to SoftKey
International Inc. and does not, unless the context otherwise
indicates, include its subsidiaries.
General. The Series C Preferred Stock, with respect to the
payment of dividends and the distribution of assets on liquidation,
dissolution or winding up, ranks prior to the Common Stock and on a
parity with any other series of preferred stock hereafter issued by
the Company. The maximum authorized number of shares of Series C
Preferred Stock is 150,000. The Series C Preferred Stock is
convertible at the option of the holders into Common Stock as
described below under the subheading "Conversion Rights." The
liquidation preference of the Series C Preferred Stock is $1,000
per share, plus an amount equal to all accrued and unpaid dividends
thereon.
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 $1,000 per share liquidation preference of the
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. 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 (i) declare or pay
dividends, or make any other distributions, on any shares of
capital stock of the Company ranking junior ("Junior Stock") to the
Series C Preferred Stock, except dividends or distributions payable
in Junior Stock, or (ii) declare or pay dividends, or make any
other distributions, on any shares of Company stock ranking on a
parity with ("Parity Stock") the Series C Preferred Stock, except
(A) dividends or distributions payable in Junior Stock and (B)
dividends or distributions paid ratably on the Series C Preferred
Stock and all Parity Stock in proportion to the total amounts to
which holders of all the Series C Preferred Stock and Parity Stock
are entitled; provided, however, that in the case of clause (B) the
holders of at least 66-2/3% of the outstanding shares of Series C
Preferred Stock, voting separately as a single class, or of at
least 66-2/3% of the outstanding shares of Series C Preferred Stock
and of Parity Stock (if the approval of the holders thereof is
required for such a pro rata dividend or distribution under the
applicable certificate of designation) voting together as a single
class, shall have approved the payment of such dividend or
distribution; and provided, further, that the provisions of this
sentence will not apply upon the affirmative vote of the holders of
66 2/3% of the outstanding shares of Series C Preferred Stock.
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.
Conversion Rights. The holders of shares of Series C
Preferred Stock are entitled at any time prior to the close of
business on November 1, 2000 to convert any shares of Series C
Preferred Stock 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 of $53 per share of Common Stock,
which conversion price is subject to adjustment as provided below;
provided that in the case of Series C Preferred Stock 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.
The Company is not required to issue fractional shares of Common
Stock upon conversion of Series C Preferred Stock 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 Certificate of Designation) 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 and combinations 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 and any cash plus the fair market value
of consideration payable in respect of any tender offer, in any
such case 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 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 to or from no par
value resulting from a subdivision or a combination) or (ii) a
consolidation, merger or combination 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, each share of Series C Preferred Stock then
outstanding shall be convertible into the kind and amount of shares
of stock, other securities or other property or assets (including
cash) receivable upon such reclassification, change, consolidation,
merger, combination, sale or conveyance by a holder of a number of
shares of Common Stock issuable upon conversion of such share of
Series C Preferred Stock immediately prior to such
reclassification, change, consolidation, merger, combination, sale
or conveyance assuming that a holder of Common Stock would not have
exercised any rights of election as to the stock, other securities
or other property or assets receivable in connection therewith.
If one of the events that results in an adjustment of the
conversion price is treated for United States income tax purposes
as a taxable dividend to holders of Common Stock (or other
shareholders of the Company), the holders of Series C Preferred
Stock may be deemed to have received a distribution subject to
United States income tax as a dividend.
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 to the holders of record of the
Series C Preferred Stock, 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. A
distribution of a stock dividend or of rights to acquire stock to
the holders of Common Stock that is not accompanied by a full
adjustment of the conversion price of the Series C preferred Stock
to take such distribution into account may result in a taxable
dividend to the holders of Common Stock. 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.
Change in Control. Upon the occurrence of a Change of
Control, each holder of the Series C Preferred Stock shall have the
right to require that the Company repurchase such holder's Series C
Preferred Stock in whole or in part at a purchase price in cash in
an amount equal to 101% of the Liquidation Preference thereof,
together with accrued and unpaid dividends thereon to the date of
such repurchase, pursuant to a Change of Control Offer made in
accordance with the procedures described below and the other
provisions in the Certificate of Designation.
Within 30 days following any Change of Control, the Company
shall send by first-class mail, postage prepaid, to each holder of
Series C Preferred Stock, at such holder's address appearing on the
books of the Company, 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 Series C Preferred Stock 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 Series C Preferred Stock 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. 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 Series C Preferred Stock of their right to require the Company
to purchase the Series C Preferred Stock 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 Series
C Preferred Stock 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.
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), together in each case with accrued and unpaid dividends
thereon, whether or not declared, to the date of redemption, 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.
Voting Rights. In addition to any voting rights provided by
law, 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 to (i)
authorize, increase the authorized number of shares of or issue any
shares of any class of capital stock ranking prior to the Series C
Preferred Stock, (ii) increase the authorized number of shares of,
or issue any shares of, Series C Preferred Stock, except in
connection with the exchange of the Notes, (iii) authorize, adopt
or approve an amendment to the Restated Certificate of
Incorporation of the Company, as amended, that would decrease the
aggregate number of authorized shares of Series C Preferred Stock,
change the par value of the shares of Series C Preferred Stock, or
adversely alter the rights of holders of the Series C Preferred
Stock, (iv) authorize or issue shares of any class or series of
stock with any preference or priority as to dividends or assets
superior to any such preference or priority of the Series C
Preferred Stock, or (v) reclassify any shares of Junior Stock into
shares having any preference or priority as to dividends or
liquidation superior to or on a parity with the Series C Preferred
Stock.
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 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.
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
Products Inc., an Ontario corporation and a subsidiary of the
Company ("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 and the Series C
Preferred Stock.
PLAN OF DISTRIBUTION
The Securities and the Comptons Shares covered hereby may be
offered and sold from time to time by the Selling Holder. The
Selling Holder will act independently of the Company in making
decisions with respect to the timing, manner and size of each sale.
Sales of the Securities and the Comptons Shares are, in general,
expected to be made at the market price prevailing at the time of
each such sale; however, prices in negotiated transactions may
differ considerably. Such sales may be made directly by the
Selling Holder or in the over-the-counter market or otherwise, at
fixed prices, 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 public 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) crosses
and block trades in which a broker-dealer so engaged will attempt
to sell the Securities and the Comptons 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 Holder has made no arrangement with any broker for the
offering or sale of the Securities or the Comptons Shares.
Underwriters, brokers, dealers or agents may participate in such
transactions as agents and may, in such capacity, receive brokerage
commissions from the Selling Holder or purchasers of such
securities. Such underwriters, brokers, dealers or agents may also
purchase the Securities or the Comptons Shares and resell such
securities for their own account. The Selling Holder and such
underwriters, brokers, dealers or agents may be considered
"underwriters" as that term is defined by the Securities Act,
although the Selling Holder disclaims 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 Securities and the Comptons Shares will be
offered or sold in such jurisdictions only through registered or
licensed brokers or dealers. In addition, in certain
jurisdictions, the Securities and the Comptons Shares may not be
offered or sold unless they have been registered or qualified for
sale in such jurisdictions or unless an exemption from such
registration or qualification is available and is complied with.
Under applicable rules and regulations under the Exchange Act,
any person engaged in a distribution of the Securities and the
Comptons Shares may be limited in its ability to engage in market
activities with respect to such Securities. In addition and
without limiting the foregoing, the Selling Holder will be subject
to applicable provisions of the Exchange Act and the rules and
regulations thereunder, which provisions may limit the timing of
purchases and sales of any of the Securities or the Comptons Shares
by the Selling Holder. All of the foregoing may affect the
marketability of the Securities or the Compton Shares.
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 (as amended or supplemented as necessary) may be
resumed as soon as practicable.
The Company has agreed to pay all of the expenses incident to
the registration, offering and sale to the public of the Securities
or the Comptons Shares other than commissions and discounts of
agents, dealers or underwriters. Such expenses (excluding such
commissions and discounts) are estimated to be approximately
$225,000. The Company has also agreed to indemnify the Selling
Holder against certain liabilities, including certain liabilities
under the Securities Act.
LEGAL MATTERS
The validity of the Securities and the Comptons Shares 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 114,375 shares of Common Stock, which are
or become exercisable in periodic installments through February
1999.
EXPERTS
The consolidated financial statements and related schedule of
the Company as of and for the years ended January 6, 1996 and
December 31, 1994, included in the Company's Annual Report on Form
10-K for the year ended January 6, 1996, have been audited by
Coopers & Lybrand L.L.P., independent public accountants, as set
forth in their report therein dated February 20, 1996 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 statements of operations, stockholders'
equity (deficit) and cash flows and the related financial statement
schedule of the Company for the six month transition period from
July 4, 1993 to January 1, 1994 and for the year ended June 30,
1993, included in the Company's Annual Report on Form 10-K for the
year ended January 6, 1996, have been audited by Arthur Andersen
LLP, independent public accountants, as indicated 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 statements of operations, stockholders'
equity (deficit) and cash flows and the related financial statement
schedule of WordStar and Spinnaker for the year ended June 30,
1993, its opinion is based on the reports of other independent
accountants, namely KPMG Peat Marwick LLP and Price Waterhouse LLP,
respectively. The consolidated statements of operations,
stockholders' equity (deficit) and cash flows and the related
financial statement schedule of the Company have been included
therein in reliance 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 for the year ended
June 30, 1993 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 combined financial statements of Compton's as of December
25, 1994 and the fiscal year then ended included in the Current
Report on Form 8-K/A of SoftKey dated January 25, 1996,
incorporated by reference in this Joint Proxy Statement-Prospectus,
have been incorporated herein in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of
said firm as experts in accounting and auditing.
The Selling Holder . . . . 13
Description of the Notes . 14
Description of Capital Stock 21
No dealer, salesman or Plan of Distribution . . 26
any other person has been
authorized to give any Legal Matters . . . . . . . 27
information or to make any Experts . . . . . . . . . . 27
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 the 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
delivery of this Prospectus
nor any sale made hereunder
shall, under any
circumstances, create any
implication that the
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.
____________
TABLE OF CONTENTS
Page
Available Information . . . 2
Documents Incorporated by
Reference . . . . . . . . . 2
Prospectus Summary . . . . 3
Risk Factors . . . . . . . 6
Ratio of Earnings to Fixed
Charges . . . . . . . . . . 13
Use of Proceeds . . . . . . 13
SOFTKEY LOGO
$150,000,000
51/2% SENIOR CONVERTIBLE/
EXCHANGEABLE NOTES DUE 2000
150,000 SHARES
51/2% SERIES C CONVERTIBLE
PREFERRED STOCK
8,040,984 SHARES
COMMON STOCK
____________________
PROSPECTUS
____________________
, 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 and discounts, will be borne by the Company and not the
Selling Holders), are estimated as follows:
Securities and Exchange Commission Registration Fee . . . $ 87,325
NASD Filing Fee . . . . . . . . . . . . . . . . . . . . . 17,500
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . 30,000
Accounting Fees and Expenses . . . . . . . . . . . . . . 50,000
Trustee and Registrar Fees and Expenses . . . . . . . . . 12,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 28,175
Total . . . . . . . . . . . . . . . . . . . . . . . . $225,000
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. In addition
certain of SoftKey's directors may be entitled to indemnification
and advancement of expenses under the charter documents of Tribune
Company and may be covered by directors' and officers' liability
insurance maintained by Tribune.
16. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
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)
2.2 Agreement and Plan of Merger dated November 30,
1995 by and among the Company, Cubsco I Inc.,
Cubsco II Inc., Tribune Company, Compton's
NewMedia, Inc., and Compton's Learning
Company(2)
2.3 SoftKey/TLC Agreement and Plan of Merger dated
December 6, 1995 among the Company, Kidsco Inc.
and The Learning Company(2)
2.4 Agreement and Plan of Merger by and among the
Company, SchoolCo Inc. and Minnesota Educational
Computing Corporation (MECC) dated as of October
30, 1995(3)
4.1 Securities Resale Registration Rights Agreement
by and among the Company and Tribune Company
4.2 Indenture between the Company and State Street
Bank and Trust Company, as Trustee, for 51/2%
Senior Convertible/Exchangeable Notes Due 2000
(including the Form of the Notes)
5.1 Opinion of Neal S. Winneg, Esq.
12.1 Statements re. computation of ratios
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Arthur Andersen LLP
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of Price Waterhouse 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 exhibits filed with the Company's
Current Report on Form 8-K dated December 11, 1995.
(3) Incorporated by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 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.
Insofar as indemnification for liabilities arising 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 for 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 the 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 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.
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 April 9,
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 on April 9, 1996
by the following persons in the capacities 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
/s/ Michael J. Perik Chairman of the
Board and
Chief Executive
Michael J. Perik Officer
(principal executive
officer)
/s/ R. Scott Murray Chief Financial
Officer
R. Scott Murray (principal financial
and accounting
officer)
/s/ Kevin O'Leary President and
Director
Kevin O'Leary
/s/ Michael Bell Director
Michael Bell
/s/ James C. Dowdle Director
James C. Dowdle
/s/ Robert Gagnon Director
Robert Gagnon
/s/ Robert Rubinoff Director
Robert Rubinoff
/s/ Scott M. Director
Sperling
Scott M. Sperling
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
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)
2.2 Agreement and Plan of Merger dated November 30,
1995 by and among the Company, Cubsco I Inc.,
Cubsco II Inc., Tribune Company, Compton's
NewMedia, Inc., and Compton's Learning
Company(2)
2.3 SoftKey/TLC Agreement and Plan of Merger dated
December 6, 1995 among the Company, Kidsco Inc.
and The Learning Company(2)
2.4 Agreement and Plan of Merger by and among the
Company, SchoolCo Inc. and Minnesota Educational
Computing Corporation (MECC) dated as of October
30, 1995(3)
4.1 Securities Resale Registration Rights Agreement
by and among the Company and Tribune Company
4.2 Indenture between the Company and State Street
Bank and Trust Company, as Trustee, for 51/2%
Senior Convertible/Exchangeable Notes Due 2000
(including the Form of the Notes)
5.1 Opinion of Neal S. Winneg, Esq.
12.1 Statements re. computation of ratios
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Arthur Andersen LLP
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of Price Waterhouse 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 exhibits filed with the Company's
Current Report on Form 8-K dated December 11, 1995.
(3) Incorporated by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1995.
Exhibit 4.1
SECURITIES RESALE REGISTRATION RIGHTS AGREEMENT
DATED AS OF DECEMBER 22, 1995
BY AND AMONG
TRIBUNE COMPANY
AND
SOFTKEY INTERNATIONAL INC.
SECURITIES RESALE REGISTRATION RIGHTS AGREEMENT
This SECURITIES RESALE REGISTRATION RIGHTS
AGREEMENT (this "Agreement") is made and entered into as
of December 22, 1995 by and among SOFTKEY INTERNATIONAL
INC., a Delaware corporation (the "Company"), and TRIBUNE
COMPANY, a Delaware corporation (the "Purchaser"), which
Purchaser (i) has agreed to purchase from the Company
$150,000,000 principal amount of 51/2% Senior Convertible/
Exchangeable Notes due 2000 (the "Notes") pursuant to the
Purchase Agreement (as defined below) and (ii) will
acquire shares of Common Stock (as defined below)
pursuant to the Merger Agreement (as defined below).
This Agreement is made pursuant to (i) the
Securities Purchase Agreement dated as of November 30,
1995 (the "Purchase Agreement") by and among the Company
and the Purchaser and (ii) the Agreement and Plan of
Merger dated as of November 30, 1995 providing for two
separate reverse subsidiary mergers of wholly owned
subsidiaries of the Company with and into wholly owned
subsidiaries of the Purchaser (the "Merger Agreement").
In order to induce the Purchaser 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).
Certificate of Designation: The Certificate of
Designation for the Preferred Shares.
Closing Date: The earliest to occur of (a) the
closing of the transactions contemplated by the Merger
Agreement and (b) the purchase and sale of the Notes to
the Purchaser.
Commission: Securities and Exchange Commission.
Common Stock: Common Stock of the Company, par
value $.01 per share.
Company: As defined in the preamble hereto.
Effectiveness Target Date: As defined in
Section 3 hereof.
Exchange Act: Securities Exchange Act of 1934,
as amended.
Exempt Resales: Any transaction exempt from
the registration requirements of the Act in which the
Purchaser sells the Notes, including without limitation
sales (i) to "qualified institutional buyers," as such
term is defined in Rule 144A under the Act ("QIBs"), (ii)
to 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 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 as 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.
Person: An individual, partnership,
corporation, trust, unincorporated organization or a
government, agency or political subdivision thereof.
Preferred Shares: The Company's 51/2% Series C
Convertible Preferred Stock into which the Notes are
exchangeable at the option of the Holders thereof.
Prospectus: The prospectus included in the
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.
Purchaser: As defined in the preamble hereto.
Registrable Securities: As defined in Section
3(a)(i) hereto.
Registration Statement: The continuous
registration statement of the Company which is filed
pursuant to Rule 415 under the Act, 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 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,
each Preferred Share and each share of Common Stock (i)
issuable upon conversion of the Notes or Preferred Shares
and (ii) issuable to Purchaser under the Merger Agreement
held by the Purchaser or, except in the case of shares of
Common Stock issuable to Purchaser under the Merger
Agreement, its transferee until the date on which such
Note, Preferred Share or share of Common Stock, as the
case may be, has been registered under the Act and
disposed of in accordance with an effective Registration
Statement.
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 and, more
particularly, the Registrable 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 the Registration Statement on or prior to
the 90th day after the Closing Date (the "Shelf
Filing Deadline"), which Registration Statement
shall provide for resales of all Transfer Restricted
Securities except (A) Transfer Restricted Securities
held by transferees of any Holder who or which
becomes a Holder after the Registration Statement is
declared effective and (B) Transfer Restricted
Securities held by the transferee of any Holder who
or which holds less than $5,000,000 in principal
amount of the Notes or the equivalent (on an "as
exchanged" or "as converted" basis) in Preferred
Shares or shares of Common Stock (such Transfer
Restricted Securities being hereinafter referred to
as the "Registrable 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
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
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 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
Registration Statement. No Holder of Registrable
Securities may include any of its Transfer Restricted
Securities in the Registration Statement pursuant to this
Agreement unless (i) such Holder holds such Transfer
Restricted Securities in the form of 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
Registration Statement or any Prospectus or preliminary
Prospectus included therein. In connection with all such
requests for information from Holders of Registrable
Securities, the Company shall notify such Holders of the
requirements set forth in the preceding sentence. Each
Holder as to which the 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.
SECTION 4. REGISTRATION PROCEDURES
(a) In connection with the 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 Registrable Securities being sold in
accordance with the intended method or methods of
distribution thereof.
(b) In connection with the Registration
Statement and any Prospectus required by this Agreement,
the Company shall:
(i) subject to Section 4(b)(xv) hereof, use
all reasonable efforts to keep the 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 the
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 Registrable Securities during the period
required by this Agreement, the Company shall file
promptly an appropriate amendment to the
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 the
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 the
Registration Statement as may be necessary to keep
the Registration Statement effective for the
applicable period set forth in Section 3 hereof, or
such shorter period as will terminate when all
Registrable Securities covered by the 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 the
Registration Statement during the applicable period
in accordance with the intended method or methods of
distribution by the sellers thereof set forth in the
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 the Registration Statement
has been filed, and, with respect to the
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 Registrable 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 other event
which would require additional disclosure of
material, nonpublic 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 Registrable 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
the Registration Statement or any Prospectus
included therein and any amendments or supplements
thereto (including all documents incorporated by
reference prior to the effectiveness of the
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 the Registration
Statement or Prospectus or any amendment or
supplement to the Registration Statement or
Prospectus to which a selling Holder of Registrable
Securities covered by the Registration Statement or
the underwriter(s), if any, shall reasonably object
within five business days after the receipt thereof;
a selling Holder or underwriter(s), if any, shall be
deemed to have reasonably objected to such filing
only if the 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 the 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 the 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,
underwriters, attorney or accountant in connection
with the Registration Statement subsequent to the
filing thereof and prior to its effectiveness;
(vii) if requested by any selling Holders or
the underwriters, if any, promptly incorporate in
the Registration Statement or any Prospectus,
pursuant to a supplement or post-effective amendment
if necessary, such information as such selling
Holders and underwriters, if any, may reasonably
request to have included therein, including, without
limitation, information relating to the "Plan of
Distribution" of the Registrable Securities,
information with respect to the principal amount or
number of shares of Registrable Securities being
sold to such underwriter(s), the purchase price
being paid therefor and any other terms of the
offering of the Registrable Securities 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 Notes or Preferred Shares
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, in the case of the Notes,
or a majority of the Preferred Shares, in the case
of the Preferred Shares, or the underwriter(s) for
any Underwritten Offering of such Notes or Preferred
Shares, 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 each 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 each
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 covered by any 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 Section 4(b)(xv) hereof, take all such
other customary actions in connection therewith in
order to expedite or facilitate the disposition of
the Registrable Securities pursuant to the
Registration Statement contemplated by this
Agreement, all to such extent as may be requested by
the Purchaser or by any Holder of Registrable
Securities or underwriter in connection with any
sale or resale pursuant to the 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 the Purchaser, each
selling Holder and each underwriter, if any
(including any Broker-Dealer who may be deemed
to be an underwriter), officers' certificates,
legal opinions and comfort letters, 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 Registration
Statement;
(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.
(xii) prior to any public offering of
Registrable Securities, cooperate with the selling
Holders, the underwriter(s), if any, and their
respective counsel in connection with the
registration and qualification of the Registrable
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 Registrable
Securities covered by the 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 Registrable 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
Registrable 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 Registrable
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 transaction) which based upon the
advice of outside counsel reasonably acceptable to
the Purchaser, 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 (provided that such period
may not exceed 120 days in any calendar year), 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 Transfer Restricted Securities
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 the Registration
Statement to become effective and be approved by
such governmental agencies or authorities as may be
necessary to enable the Holders selling Registrable
Securities to consummate the disposition of such
Transfer Restricted Securities;
(xviii) otherwise use its reasonable 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 Registration Statement, 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 Registrable Securities covered
by the Registration Statement to be listed on any
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, the Holders of a majority of shares
of the Preferred Shares, 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
Registrable 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 Registrable
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 the 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
the 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.
Each Holder, by acquisition of a Transfer Restricted
Security, agrees that, to the extent that (A) such Holder
is deemed to be an "affiliate" of the Company for
purposes of the Securities Act or Accounting Series 130
and 135 of the Commission and (B) (i) the Company has
entered into a business combination transaction intended
to be accounted for as a pooling of interests and (ii)
such accounting treatment requires affiliates of the
Company to not dispose of or otherwise reduce such
affiliate's risk with respect to any Common Stock of the
Company during the period beginning 30 days prior to the
effective date of the transaction and until after such
time as results covering at least 30 days of combined
operations of the combined entity have been published,
such Holder shall deliver to the Company an "affiliate
letter" in reasonable and customary form and reasonably
satisfactory to 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 the Registration Statement
becomes effective, including without limitation: (i) all
registration and filing fees and expenses (including, 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 Preferred Shares
and printing of Prospectuses), messenger and delivery
services and telephone charges; (iv) all fees and
disbursements of counsel for the Company and, as provided
for in Section 5(b) below, the Holders of Registrable
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 the Registration Statement
required by this Agreement, the Company agrees to
reimburse the Purchaser and the Holders of Transfer
Restricted Securities being registered pursuant to the
Registration Statement for the reasonable fees and
disbursements of not more than one counsel, who shall be
Sidley & Austin or such other counsel as may be chosen by
the Holders of a majority in principal amount or a
majority of the shares of the Registrable Securities for
whose benefit the 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 the Registration Statement or any 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 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 the Registration
Statement or any Prospectus. In case any action or
proceeding shall be brought against any of the 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 of 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 the
Losses as well as any 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 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 Registrable Securities covered by the
Registration Statement who desire to do so may sell such
Registrable 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 or a majority
of the shares of the Registrable 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 or a majority of the
shares 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 deliver;
(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, Massachusetts 02142
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
One Beacon Street, 31st Floor
Boston, Massachusetts 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 is
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, to the extent provided for herein, 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) and the Merger 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 or therein 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:
TRIBUNE COMPANY
By:_______________________
Name:
Title:
Exhibit 4.2
INDENTURE dated as of December 22, 1995 between SOFTKEY
INTERNATIONAL INC., a Delaware corporation (hereinafter sometimes
called the "Company", as more fully set forth in Section 1.1), and
STATE STREET BANK AND TRUST COMPANY, a Massachusetts banking
corporation (hereinafter sometimes called the "Trustee", as more
fully set forth in Section 1.1).
W I T N E S S E T H
WHEREAS, for its lawful corporate purposes, the Company
has duly authorized the issuance of its 5 1/2% Senior
Convertible/Exchangeable Notes Due 2000 (hereinafter sometimes
called the "Notes"), in an aggregate principal amount not to
exceed $150,000,000 and, to provide the terms and conditions upon
which the Notes are to be authenticated, issued and delivered, the
Company has duly authorized the execution and delivery of this
Indenture; and
WHEREAS, the Notes, the certificate of authentication to
be borne by the Notes, a form of assignment, a form of option to
require repurchase by the Company upon a Change of Control (as
hereinafter defined), a form of conversion notice, a form of
exchange notice, a form of certificate of designation of 5 1/2%
Series C Convertible Preferred Stock for which the Notes are
exchangeable, and a form of certificate of transfer to be borne by
the Notes are to be substantially in the forms hereinafter
provided for; and
WHEREAS, all acts and things necessary to make the
Notes, when executed by the Company and authenticated and
delivered by the Trustee or a duly authorized authenticating
agent, as in this Indenture provided, the valid, binding and legal
obligations of the Company, and to constitute these presents a
valid agreement according to its terms, have been done and
performed, and the execution of this Indenture and the issuance
hereunder of the Notes have in all respects been duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon
which the Notes are, and are to be, authenticated, issued and
delivered, and in consideration of the premises and of the
purchase and acceptance of the Notes by the holders thereof, the
Company covenants and agrees with the Trustee for the equal and
proportionate benefit of the respective holders from time to time
of the Notes (except as otherwise provided below), as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. The terms defined in this
Section 1.1 (except as herein otherwise expressly provided or
unless the context otherwise requires) for all purposes of this
Indenture and of any indenture supplemental hereto shall have the
respective meanings specified in this Section 1.1. All other
terms used in this Indenture which are defined in the Trust
Indenture Act (as hereinafter defined) or which are by reference
defined in the Securities Act (as herein defined), except as
herein otherwise expressly provided or unless the context
otherwise requires, shall have the meanings assigned to such terms
in said Trust Indenture Act and in said Securities Act as in force
at the date of the execution of this Indenture. The words
"herein," "hereof," "hereunder" and words of similar import refer
to this Indenture as a whole and not to any particular Article,
Section or other Subdivision. The terms defined in this Article
include the plural as well as the singular.
Accredited Investor: The term "Accredited Investor"
shall have the meaning given it in Rule 501(a) under the
Securities Act.
Acquisition Price: The term "Acquisition Price" means
the volume weighted average of the per share prices paid by a
specified person or group in acquiring Voting Stock.
Affiliate: The term "Affiliate" of any specified person
shall mean an "affiliate" as defined in Rule 144(a) as promulgated
under the Securities Act.
Board of Directors: The term "Board of Directors" shall
mean the Board of Directors of the Company or a committee of such
Board duly authorized to act for it hereunder.
Board Resolution: The term "Board Resolution" means a
copy of a resolution certified by the Secretary or an Assistant
Secretary of the Company to have been duly adopted by the Board of
Directors, or a duly authorized committee thereof (to the extent
permitted by applicable law), and to be in full force and effect
on the date of such certification, and delivered to the Trustee.
Business Day: The term "Business Day" shall mean a day,
other than a Saturday, a Sunday or other day on which the banking
institutions in the State of New York, the State of California or
the Commonwealth of Massachusetts are authorized or obligated by
law or executive order to close or a day which is declared a
national or New York, California or Massachusetts state holiday.
Change of Control: The term "Change of Control" means
an event or series of events pursuant to which (i) any "person" or
"group" (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act) acquires beneficial ownership (as determined in
accordance with Rule 13d-3 under the Exchange Act), directly or
indirectly, of more than 50% of the total voting Stock of the
Company at an Acquisition Price less than the conversion price
then in effect with respect to the Notes and (ii) holders of
Common Stock receive consideration which is not all or
substantially all common stock that is (or upon consummation of or
immediately following such event or events will be) listed on a
United States national securities exchange or approved for
quotation on the Nasdaq National Market or any similar United
States system of automated dissemination of quotations of
securities prices; provided, however, that any such person or
group shall not be deemed to be the beneficial owner of, or to
beneficially own, any Voting Stock tendered into a tender offer
until such tendered voting Stock is accepted for purchase under
the tender offer.
Commission: The term "Commission" shall mean the
Securities and Exchange Commission.
Common Stock: The term "Common Stock" shall mean any
stock of any class of the Company which has no preference in
respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of
the Company and which is not subject to redemption by the Company.
Subject to the provisions of Section 15.6, however, shares
issuable on conversion of Notes shall include only shares of the
class designated as common stock of the Company at the date of
this Indenture or shares of any class or classes resulting from
any reclassification or reclassifications thereof and which have
no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company and which are not subject to redemption
by the Company; provided that if at any time there shall be more
than one such resulting class, the shares of each such class then
so issuable shall be substantially in the proportion which the
total number of shares of such class resulting from all such
reclassifications bears to the total number of shares of all such
classes resulting from all such reclassifications.
Company: The term "Company" shall mean SoftKey
International Inc., a Delaware corporation, and subject to the
provisions of Article XII, shall include its successors and
assigns.
Conversion Price: The term "Conversion Price" shall
have the meaning specified in Section 15.4.
Corporate Trust Office of the Trustee: The term
"Corporate Trust office of the Trustee," or other similar term,
shall mean the office of the Trustee at which at any particular
time its corporate trust business shall be principally
administered, which office is, at the date as of which this
Indenture is dated, located at 225 Franklin Street, Boston,
Massachusetts 02110 (Attention: Corporate Trust Department).
Custodian: The term "Custodian" means State Street Bank
and Trust Company, as custodian with respect to the Notes in
global form, or any successor entity thereto.
Default: The term "default" shall mean any event that
is, or after notice or passage of time, or both, would be, an
Event of Default.
Depositary: The term "Depositary" means, with respect
to the Notes issuable or issued in whole or in part in global
form, the person specified in Section 2.5(d) as the Depositary
with respect to the Notes, until a successor shall have been
appointed and become such pursuant to the applicable provisions of
this Indenture, and thereafter, "Depositary" shall mean or include
such successor.
Exchange Act: The term "Exchange Act" means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
Exchange Price: The term "Exchange Price" shall have
the meaning specified in Section 17.4.
Event of Default: The term "Event of Default" shall
mean any event specified in Section 7.1(a), (b), (c), (d) or (e).
Indenture: The term "Indenture" shall mean this
instrument as originally executed or, if amended or supplemented
as herein provided, as so amended or supplemented.
Note or Notes: The terms "Note" or "Notes" shall mean
any Note or Notes, as the case may be, authenticated and delivered
under this Indenture.
Noteholder; holder: The terms "Noteholder" or "holder"
as applied to any Note, or other similar terms (but excluding the
term "beneficial holder"), shall mean any person in whose name at
the time a particular Note is registered on the Note registrar's
books.
Note register: The term "Note register" shall have the
meaning specified in Section 2.5.
Note registrar: The term "Note registrar" shall have
the meaning specified in Section 2.5.
Officers' Certificate: The term "Officers'
Certificate," when used with respect to the Company, shall mean a
certificate signed by the President, the Chief Executive officer,
the Chief Financial officer or any Vice President or the Secretary
or any Assistant Secretary of the Company, which is delivered to
the Trustee. Each such certificate shall include the statements
provided for in Section 16.5 if and to the extent required by the
provisions of such Section.
Opinion of Counsel: The term "Opinion of Counsel" shall
mean an opinion in writing signed by legal counsel, who may be an
employee of or counsel to the Company or other counsel acceptable
to the Trustee, which is delivered to the Trustee. Each such
opinion shall include the statements provided for in Section 16.5
if and to the extent required by the provisions of such Section.
Outstanding: The term "outstanding," when used with
reference to Notes, shall, subject to the provisions of Section
9.4, mean, as of any particular time, all Notes authenticated and
delivered by the Trustee under this Indenture, except
(a) Notes theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(b) Notes, or portions thereof, for which monies in the
necessary amount shall have been deposited in trust with the
Trustee for payment or redemption; provided that if such Notes are
to be redeemed prior to the maturity thereof, notice of such
redemption shall have been given as in Article III provided, or
provision satisfactory to the Trustee shall have been made for
giving such notice;
(c) Notes in lieu of or in substitution for which other
Notes shall have been authenticated and delivered pursuant to the
terms of Section 2.6 unless proof satisfactory to the Trustee is
presented that any such Notes are held by bona fide holders in due
course; and
(d) Notes converted into Common Stock pursuant to
Article XV or exchanged for Preferred Stock pursuant to
Article XVII and Notes not deemed outstanding pursuant to Section
3.2.
Person: The term "person" shall mean a corporation, an
association, a partnership, an individual, a joint venture, a
joint stock company, a trust, an unincorporated organization or a
government or an agency or a political subdivision thereof.
PORTAL Market: The term "PORTAL Market" shall mean the
Private Offerings, Resales and Trading through Automated Linkages
market operated by the National Association of Securities Dealers,
Inc. or any successor thereto.
Predecessor Note: The term "Predecessor Note" of any
particular Note shall mean every previous Note evidencing all or a
portion of the same debt as that evidenced by such particular
Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 2.6 in lieu of a lost,
destroyed or stolen Note shall be deemed to evidence the same debt
as the lost, destroyed or stolen Note.
Preferred Stock: The term "Preferred Stock" shall mean
the 5 1/2% Series C Convertible Preferred Stock whose terms are
initially set forth in the form of the Certificate of Designation
attached hereto as Exhibit C, for which the Notes are exchangeable
in accordance with Article XVII.
QIB: The term "QIB" shall mean a "qualified
institutional buyer" as defined in Rule 144A (as hereinafter
defined).
Responsible Officer: The term "Responsible Officer,"
when used with respect to the Trustee, shall mean an officer of
the Trustee assigned and duly authorized by the Trustee to
administer its corporate trust matters.
Restricted Securities: The term "Restricted Securities"
has the meaning specified in Section 2.5(d).
Rule 144A: The term "Rule 144A" shall mean Rule 144A as
promulgated under the Securities Act.
Securities Act: The term "Securities Act" means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
Subsidiary: The term "subsidiary" of any specified
person shall mean (i) a corporation a majority of whose capital
stock with voting power under ordinary circumstances, to elect
directors is at the time directly or indirectly owned by such
person or (ii) any other person (other than a corporation) in
which such person or such person and a subsidiary or subsidiaries
of such person or a subsidiary or subsidiaries of such person
directly or indirectly, at the date of determination thereof, has
at least majority ownership.
Successor Company: The term "Successor Company" shall
have the meaning specified in Section 12.1.
Trust Indenture Act: The term "Trust Indenture Act"
shall mean the Trust Indenture Act of 1939, as amended, as it was
in force at the date of execution of this Indenture, except as
provided in Sections 11.3, 15.6 and 17.6; provided, however, that
in the event said Trust Indenture Act of 1939 is amended after the
date hereof, the term "Trust Indenture Act" shall mean, to the
extent required by such amendment, said Trust Indenture Act of
1939 as so amended.
Trustee: The term "Trustee" shall mean State Street
Bank and Trust Company, its successors and any corporation
resulting from or surviving any consolidation or merger to which
it or its successors may be a party and any successor trustee at
the time serving as successor trustee hereunder.
U.S. Government Obligations: The term "U.S. Government
Obligations" means securities that are (i) direct obligations of
the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person
controlled or supervised by, and acting as an agency or
instrumentality of, the United States of America the timely
payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in
either case, are not callable or redeemable at the option of the
issuer hereof, and shall also include a Depositary receipt issued
by a bank (as defined in Section 3(a)(2) of the Securities Act of
1933, as amended) as custodian with respect to any such U.S.
Government Obligation or a specific payment of principal or
interest on any such U.S. Government Obligation held by such
custodian for the account of the holder of such Depositary
receipt; provided that (except as required by law) such custodian
is not authorized to make any deduction from the amount payable to
the holder of such Depositary receipt from any amount received by
such custodian in respect of the U.S. Government Obligation or the
specific payment of principal of or interest on the U.S.
Government Obligation evidenced by such Depositary receipt.
Voting Stock: The term "Voting Stock" means stock of
the class or classes pursuant to which the holders thereof have
the general voting power under ordinary circumstances to elect at
least a majority of the board of directors, managers or trustees
of a corporation (irrespective of whether or not at the time stock
of any other class or classes shall have or might have voting
power by reason of the happening of any contingency).
The definitions of certain other terms are as specified
in Section 3.5 and Articles XV and XVII.
ARTICLE II
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES
Section 2.1 Designation, Amount and Issue of Notes.
The Notes shall be designated as "5 1/2% Senior Convertible/
Exchangeable Notes Due 2000." Notes not to exceed the aggregate
principal amount of $150,000,000 upon the execution of this
Indenture, or from time to time thereafter, may be executed by the
Company and delivered to the Trustee for authentication, and the
Trustee shall thereupon authenticate and deliver said Notes upon
the written order of the Company, signed by its (a) Chief
Executive Officer or President, and (b) Chief Financial Officer or
Secretary or any Assistant Secretary, without any further action
by the Company hereunder.
Section 2.2 Form of Notes. The Notes in definitive
form and the Trustee's certificate of authentication to be borne
by such Notes shall be substantially in the form set forth in
Exhibit A, which is incorporated in and made a part of this
Indenture. The Notes may be issued in global form, substantially
in the form of Exhibit B, which is incorporated in and made a part
of this Indenture.
Any of the Notes may have such letters, numbers or other
marks of identification and such notations, legends and
endorsements as the officers executing the same may approve
(execution thereof to be conclusive evidence of such approval) and
as are not inconsistent with the provisions of this Indenture, or
as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of
any stock exchange on which the Notes may be listed, or to conform
to usage. Any Note in global form shall represent such of the
outstanding Notes as shall be specified therein and shall provide
that it shall represent the aggregate amount of outstanding Notes
from time to time endorsed thereon and that the aggregate amount
of outstanding Notes represented thereby may from time to time be
increased or reduced to reflect transfers or exchanges permitted
hereby. Any endorsement of a Note in global form to reflect the
amount of any increase or decrease in the amount of outstanding
Notes represented thereby shall be made by the Trustee or the
Custodian, at the direction of the Trustee, in such manner and
upon instructions given by the holder of such Notes in accordance
with the Indenture. Payment of principal of and interest and
premium, if any, on any Note in global form shall be made to the
holder of such Note.
The terms and provisions contained in the forms of Notes
attached as Exhibits A and B hereto shall constitute, and are
hereby expressly made, a part of this Indenture and to the extent
applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Section 2.3 Date and Denomination of Notes; Payments of
Interest. The Notes shall be issuable in registered form without
coupons in denominations of $1,000 principal amount and integral
multiples thereof. Every Note shall be dated the date of its
authentication, shall bear interest from the applicable date and
shall be payable semiannually on each May 1 and November 1,
commencing May 1, 1996, as specified on the faces of the forms of
Notes, attached as Exhibits A and B hereto.
The person in whose name any Note (or its Predecessor
Note) is registered at the close of business on any record date
with respect to any interest payment date (including any Note that
is converted after the record date and on or before the interest
payment date) shall be entitled to receive the interest payable on
such interest payment date notwithstanding the cancellation of
such Note upon any transfer, exchange or conversion subsequent to
the record date and prior to such interest payment date. Interest
may, at the option of the Company, be paid by check mailed to the
address of such person on the registry kept for such purposes;
provided that, with respect to any holder of Notes with an
aggregate principal amount equal to or in excess of $5,000,000, at
the request of such holder in writing to the Trustee on or before
the record date preceding any interest payment date, interest on
such holder's Notes shall be paid by wire transfer in immediately
available funds. The term "record date" with respect to any
interest payment date shall mean the April 15 or October 15
immediately preceding said May 1 or November 1.
Interest on the Notes shall be computed on the basis of
a year of twelve 30-day months.
Any interest on any Note which is payable, but is not
punctually paid or duly provided for, on any said May 1 or
November 1 (herein called "Defaulted Interest") shall forthwith
cease to be payable to the Noteholder on the relevant record date
by virtue of his having been such Noteholder; and such Defaulted
Interest shall be paid by the Company, at its election in each
case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any
Defaulted Interest to the Persons in whose names the Notes (or
their respective Predecessor Notes) are registered at the close of
business on a special record date for the payment of such
Defaulted Interest, which shall be fixed in the following manner.
The Company shall notify the Trustee in writing of the amount of
Defaulted Interest to be paid on each Note and the date of the
payment (which shall be not less than 25 days after the receipt by
the Trustee of such notice, unless the Trustee shall consent to an
earlier date), and at the same time, the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount
to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to
the date of the proposed payment, such money when deposited to be
held in trust for the benefit of the Persons entitled to such
Defaulted Interest as in this clause provided. Thereupon, the
Trustee shall fix a special record date for the payment of such
Defaulted Interest which shall be not more than 15 days and not
less than 10 days prior to the date of the payment and not less
than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company
of such special record date and, in the name and at the expense of
the Company, shall cause notice of the payment of such Defaulted
Interest and the special record date therefor to be mailed, first-
class postage prepaid, to each Noteholder at his address as it
appears in the Note register, not less than 10 days prior to such
special record date. Notice of the proposed payment of such
Defaulted Interest and the special record date therefor having
been so mailed, such Defaulted Interest shall be paid to the
Persons in whose names the Notes (or their respective Predecessor
Notes) were registered at the close of business on such special
record date and shall no longer be payable pursuant to the
following clause (2).
(2) The Company may make payment of any Defaulted
Interest in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Notes may be
listed, and upon such notice as may be required by such exchange,
if, after notice given by the Company to the Trustee of the
proposed payment pursuant to this clause, such manner of payment
shall be deemed practicable by the Trustee.
Section 2.4 Execution of Notes. The Notes shall be
signed in the name and on behalf of the Company by the facsimile
signature of its Chief Executive Officer, President or its Chief
Financial Officer and attested by the facsimile signature of its
Secretary or any of its Assistant Secretaries (which may be
printed, engraved or otherwise reproduced thereon, by facsimile or
otherwise). Only such Notes as shall bear thereon a certificate
of authentication substantially in the form set forth on the forms
of Notes attached as Exhibits A and B hereto, manually executed by
the Trustee (or an authenticating agent appointed by the Trustee
as provided by Section 16.11), shall be entitled to the benefits
of this Indenture or be valid or obligatory for any purpose. Such
certificate by the Trustee (or such an authenticating agent) upon
any Note executed by the Company shall be conclusive evidence that
the Note so authenticated has been duly authenticated and
delivered hereunder and that the holder is entitled to the
benefits of this Indenture.
In case any officer of the Company who shall have signed
any of the Notes shall cease to be such officer before the Notes
so signed shall have been authenticated and delivered by the
Trustee, or disposed of by the Company, such Notes nevertheless
may be authenticated and delivered or disposed of as though the
person who signed such Notes had not ceased to be such officer of
the Company; and any Note may be signed on behalf of the Company
by such persons as, at the actual date of the execution of such
Note, shall be the proper officers of the Company, although at the
date of the execution of this Indenture any such person was not
such an officer.
Section 2.5 Exchange and Registration of Transfer of
Notes; Restrictions on Transfer; Depositary.
(a) The Company shall cause to be kept at the Corporate
Trust Office of the Trustee a register (the register maintained in
such office and in any other office or agency of the Company
designated pursuant to Section 5.2 being herein sometimes
collectively referred to as the "Note register") in which, subject
to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of Notes and of transfers of
Notes. Such register shall be in written form or in any form
capable of being converted into written form within a reasonable
period of time. The Trustee is hereby appointed "Note registrar"
for the purpose of registering Notes and transfers of Notes as
herein provided. The Company may appoint one or more co-
registrars.
Upon surrender for registration of transfer of any Note
to the Note registrar or any co-registrar and satisfaction of the
requirements for such transfer set forth in this Section 2.5, the
Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees,
one or more new Notes of any authorized denominations and of a
like aggregate principal amount and bearing such restrictive
legends as may be required by Section 2.5(d).
Notes may be exchanged for other Notes of any authorized
denominations and of a like aggregate principal amount, upon
surrender of the Notes to be exchanged at any such office or
agency. Whenever any Notes are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and
deliver, the Notes which the Noteholder making the exchange is
entitled to receive.
All Notes presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company, the
Trustee, the Note registrar or any co-registrar) be duly endorsed,
or be accompanied by a written instrument of transfer in form
satisfactory to the Company, and the Note shall be duly executed
by the Noteholder thereof or his attorney duly authorized in
writing.
No service charge shall be charged to the Noteholder for
any exchange or registration of transfer of Notes, but the Company
may require payment of a sum sufficient to cover any tax,
assessments or other governmental charges that may be imposed in
connection therewith.
None of the Company, the Trustee, the Note registrar or
any co-registrar shall be required to exchange or register a
transfer of (a) any Notes for a period of 15 days next preceding
any selection of Notes to be redeemed or (b) any Notes called for
redemption or, if a portion of any Note is selected or called for
redemption, such portion thereof selected or called for redemption
or (c) any Notes surrendered for conversion or exchange in
accordance with Articles XV or XVII or, if a portion of any Note
is surrendered for conversion or such exchange, such portion
thereof surrendered for conversion or exchange or (d) any Notes
surrendered for redemption pursuant to Section 3.5 or, if a
portion of any Note is surrendered for redemption pursuant to
Section 3.5, such portion thereof surrendered for redemption
pursuant to Section 3.5.
All Notes issued upon any transfer or exchange of Notes
shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture as
the Notes surrendered upon such registration of transfer or
exchange.
(b) So long as the Notes are eligible for book-entry
settlement with the Depositary, or unless otherwise required by
law, all Notes to be traded on the PORTAL Market shall be
represented by a Note in global form registered in the name of the
Depositary or the nominee of the Depositary. The transfer and
exchange of beneficial interests in such Note in global form,
which does not involve the issuance of a definitive Note, shall be
effected through the Depositary (but not the Trustee or the
Custodian) in accordance with this Indenture (including the
restrictions on transfer set forth herein) and the procedures of
the Depositary therefor. Neither the Trustee nor the Custodian
(in such respective capacities) will have any responsibility for
the transfer and exchange of beneficial interests in such Note in
global form that does not involve the issuance of a definitive
Note.
At any time at the request of the beneficial holder of
an interest in a Note in global form, such beneficial holder shall
be entitled to obtain a definitive Note upon written request to
the Trustee and the Custodian in accordance with the standing
instructions and procedures existing between the Depositary and
the Custodian for the issuance thereof. Upon receipt of any such
request, the Trustee or the Custodian, at the direction of the
Trustee, will cause, in accordance with the standing instructions
and procedures existing between the Depositary and the Custodian,
the aggregate principal amount of the Note in global form to be
reduced and, following such reduction, the Company will execute
and the Trustee will authenticate and deliver to such beneficial
holder (or its nominee) a Note or Notes in the appropriate
aggregate principal amount in the name of such beneficial holder
(or its nominee) and bearing such restrictive legends as may be
required by this Indenture.
Any transfer of a beneficial interest in a Note in
global form which cannot be effected through book-entry settlement
must be effected by the delivery to the transferee (or its
nominee) of a definitive Note or Notes registered in the name of
the transferee (or its nominee) on the books maintained by the
Trustee. With respect to any such transfer, the Trustee or the
Custodian, at the direction of the Trustee, will cause, in
accordance with the standing instructions and procedures existing
between the Depositary and the Custodian, the aggregate principal
amount of the Note in global form to be reduced and, following
such reduction, the Company will execute and the Trustee will
authenticate and deliver to the transferee (or such transferee's
nominee, as the case may be), a Note or Notes in the appropriate
aggregate principal amount in the name of such transferee (or its
nominee) and bearing such restrictive legends as may be required
by this Indenture. In connection with any such transfer, the
Trustee or the Custodian, at the direction of the Trustee, may
request such representations and agreements relating to the
restrictions on transfer of such Note or Notes from such
transferee (or such transferee's nominee) as may be required under
this Indenture or as the Company may direct the Trustee to
request.
(c) So long as the Notes are eligible for book-entry
settlement, or unless otherwise required by law, upon any transfer
of a definitive Note to a QIB in accordance with Rule 144A, unless
otherwise requested by the transferor, and upon receipt of the
definitive Note or Notes being so transferred, together with a
certification from the transferor that the transferee is a QIB (or
other evidence satisfactory to the Trustee), the Trustee shall
direct the Custodian to adjust its records with respect to the
Note in global form to reflect an increase in the aggregate
principal amount of the Notes represented by the Note in global
form, the Trustee shall cancel such definitive Note or Notes and
cause, or direct the Custodian to cause, in accordance with the
standing instructions and procedures existing between the
Depositary and the Custodian, the aggregate principal amount of
Notes represented by the Note in global form to be increased
accordingly.
Any Note in global form may be endorsed with or have
incorporated in the text thereof such legends or recitals or
changes not inconsistent with the provisions of this Indenture as
may be required by the Custodian, the Depositary or by the
National Association of Securities Dealers, Inc. in order for the
Notes to be tradeable on the PORTAL Market or as may be required
for the Notes to be tradeable on any other market developed for
trading of securities pursuant to Rule 144A or required to comply
with any applicable law or any regulation thereunder or with the
rules and regulations of any securities exchange upon which the
Notes may be listed or traded or to conform with any usage with
respect thereto, or to indicate any special limitations or
restrictions to which any particular Notes are subject.
(d) Every Note that bears or is required under this
Section 2.5(d) to bear the legend set forth in this Section 2.5(d)
(together with Preferred Stock issued upon exchange for all or a
portion of such Note or any Common Stock issued upon conversion of
the Notes and required to bear the legend set forth in Section
2.5(e), collectively, the "Restricted Securities") shall be
subject to the restrictions on transfer set forth in this Section
2.5(d), unless such restrictions on transfer shall have been
waived by the written consent of the Company or removed in
accordance with the provisions of Section 2.5(f), and the holder
of each such Restricted Security, by such holder's acceptance
thereof, agrees to be bound by such restrictions on transfer. As
used in this Section 2.5(d), the term "transfer" encompasses any
sale, pledge, transfer or other disposition of any Restricted
Security.
Until three years after the later of the original
issuance date of any Note and the last date on which the Company
or an Affiliate of the Company was the owner of such Note, any
certificate evidencing such Note (and all securities issued in
exchange therefor or substitution thereof, other than Preferred
Stock, if any, issued in exchange therefor or Common Stock, if
any, issued upon conversion thereof, which shall bear the legend
set forth in Section 2.5(e), if applicable) shall bear a legend in
substantially the following form, unless otherwise agreed by the
Company (with notice thereof to the Trustee):
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, AND MAY
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS
SET FORTH IN THE 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
PREFERRED STOCK ISSUED UPON EXCHANGE OF SUCH NOTE OR THE
COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH NOTE
EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B)
TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE SECURITIES ACT, (C) TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO STATE STREET BANK AND TRUST
COMPANY, AS TRUSTEE, A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY
(THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH
TRUSTEE), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE
WITH RULE 904 UNDER THE SECURITIES ACT OR (E) PURSUANT
TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE SECURITIES ACT (IF AVAILABLE); AND (3) AGREES
THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE NOTE
EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THE NOTE EVIDENCED HEREBY BEFORE THE
RESTRICTION TERMINATION DATE, THE HOLDER MUST CHECK THE
APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING
TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO STATE STREET BANK AND TRUST COMPANY, AS
TRUSTEE. IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE
(C), (D) OR (E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO STATE STREET BANK AND TRUST
COMPANY, AS TRUSTEE, SUCH CERTIFICATIONS, LEGAL OPINIONS
OR OTHER INFORMATION AS THE COMPANY MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE
RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT.
Any Note (or security issued in exchange or substitution
therefor) as to which such restrictions on transfer shall have
expired in accordance with their terms may, upon satisfaction of
the requirements of Section 2.5(f) and surrender of such Note for
exchange to the Note registrar in accordance with the provisions
of this Section 2.5, be exchanged for a new Note or Notes, of like
tenor and aggregate principal amount, which shall not bear the
restrictive legend required by this Section 2.5(d).
Notwithstanding any other provisions of this Indenture
(other than the provisions set forth in this Section 2.5(d)), a
Note in global form may not be transferred as a whole except by
the Depositary to a nominee of the Depositary or by a nominee of
the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor
Depositary or a nominee of such successor Depositary.
The Depositary shall be a clearing agency registered
under the Exchange Act. The Company initially appoints The
Depository Trust Company to act as Depositary with respect to the
Notes in global form. Initially, the global Note shall be issued
to the Depositary, registered in the name of Cede & Co., as the
nominee of the Depositary, and deposited with the Trustee as
Custodian for Cede & Co.
If at any time the Depositary for the Note in global
form notifies the Company that it is unwilling or unable to
continue as Depositary for such Note, the Company may appoint a
successor Depositary with respect to such Note. If a successor
Depositary for the Note is not appointed by the Company within 90
days after the Company receives such notice, the Company will
execute, and the Trustee, upon receipt of an Officers' Certificate
for the authentication and delivery of Notes, will authenticate
and deliver, Notes in definitive form, in an aggregate principal
amount equal to the principal amount of the Note in global form,
in exchange for such Note in global form.
Definitive Notes issued in exchange for all or a part of
a Note in global form pursuant to this Section 2.5(d) shall be
registered in such names and in such authorized denominations as
the Depositary, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Trustee.
Upon execution and authentication, the Trustee shall deliver such
definitive Notes to the persons in whose names such definitive
Notes are so registered.
At such time as all interests in a Note in global form
have been redeemed, converted, repurchased or canceled, such Note
in global form shall be, upon receipt thereof, canceled by the
Trustee in accordance with standing procedures and instructions
existing between the Depositary and the Custodian. At any time
prior to such cancellation, if any interest in a global Note is
exchanged for definitive Notes, redeemed, converted, canceled or
transferred to a transferee who receives definitive Notes therefor
or any definitive Note is exchanged or transferred for part of a
Note in global form, the principal amount of such Note in global
form shall, in accordance with the standing procedures and
instructions existing between the Depositary and the Custodian, be
reduced or increased, as the case may be, and an adjustment shall
be made on the records of the Trustee with respect to such Note in
global form by the Trustee or the Custodian, at the direction of
the Trustee, to reflect such reduction or increase.
(e) Until three years after the later of the original
issuance date of any Note and the last date on which the Company
or an Affiliate of the Company was the owner of such Note, any
stock certificate representing Preferred Stock issued upon
exchange of such Note or Common Stock issued upon conversion of
such Note shall bear a legend in substantially the following form,
including the bracketed material as appropriate, unless otherwise
agreed by the Company (with written notice thereof to the Trustee
and any transfer agent for the Common Stock):
THE [COMMON][PREFERRED] STOCK EVIDENCED HEREBY HAS NOT
BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD WITHIN
THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT
OF U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. THE HOLDER HEREOF AGREES THAT PRIOR TO THE
DATE THAT IS THREE YEARS AFTER THE LATER OF THE ORIGINAL
ISSUANCE OF THE NOTE UPON THE [CONVERSION OF WHICH THE
COMMON STOCK] [EXCHANGE FOR WHICH THE PREFERRED STOCK]
EVIDENCED HEREBY WAS ISSUED AND THE LAST DATE ON WHICH
SOFTKEY INTERNATIONAL INC. (THE "COMPANY") OR ANY
"AFFILIATE" (AS DEFINED IN RULE 144 OF THE SECURITIES
ACT) OF THE COMPANY WAS THE OWNER OF THE NOTE UPON THE
[CONVERSION OF] [EXCHANGE FOR] WHICH THE [COMMON
STOCK][PREFERRED STOCK] EVIDENCED HEREBY WAS ISSUED (THE
"RESTRICTION TERMINATION DATE"), (1) IT WILL NOT RESELL
OR OTHERWISE TRANSFER THE [COMMON STOCK] [PREFERRED
STOCK] EVIDENCED HEREBY 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" (AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT) THAT PRIOR TO SUCH TRANSFER, FURNISHES
TO THE FIRST NATIONAL BANK OF BOSTON, AS TRANSFER AGENT,
A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF
THE [COMMON STOCK] [PREFERRED STOCK] EVIDENCED HEREBY
(THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH
TRANSFER AGENT), (D) OUTSIDE THE UNITED STATES IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY
RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT; (2) PRIOR
TO ANY SUCH TRANSFER PURSUANT TO CLAUSE (C), (D) OR (E)
ABOVE, IT WILL FURNISH TO THE FIRST NATIONAL BANK OF
BOSTON, AS TRANSFER AGENT, SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS THE COMPANY MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS
BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT; AND (3) IT WILL
DELIVER TO EACH PERSON TO WHOM THE [COMMON
STOCK][PREFERRED STOCK] EVIDENCED HEREBY IS TRANSFERRED
A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
THIS LEGEND WILL BE REMOVED UPON THE RESTRICTION
TERMINATION DATE. AS USED HEREIN, THE TERMS "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO
THEM BY REGULATION S UNDER THE SECURITIES ACT.
Any such Preferred Stock or Common Stock as to which
such restrictions on transfer shall have expired in accordance
with their terms may, upon satisfaction of the requirements of
Section 2.5(f) and surrender of the certificates representing such
shares of Preferred Stock or Common Stock for exchange in
accordance with the procedures of the transfer agent for the
Common Stock or the Preferred Stock, as the case may be, be
exchanged for a new certificate or certificates for a like
aggregate number of shares of Preferred Stock or Common Stock, as
the case may be, which shall not bear the restrictive legend
required by this Section 2.5(e).
(f) Upon any sale or transfer of any Restricted
Security (including any interest in a Note in global form) (i)
that is effected pursuant to an effective registration statement
under the Securities Act, (ii) that is effected pursuant to Rule
144 as promulgated under the Securities Act or (iii) in connection
with which the Trustee (or transfer agent for the Common Stock, in
the case of shares of Common Stock of the Company or any transfer
agent for the Preferred Stock in the case of shares of Preferred
Stock) receives certificates and other information (including an
Opinion of Counsel, if requested) reasonably acceptable to the
Company and the Trustee (or such transfer agent, as the case may
be) to the effect that such security will no longer be subject to
the resale restrictions under federal and state securities laws,
then (A) in the case of a Restricted Security in definitive form,
the Note registrar or co-registrar (or transfer agent, in the case
of Common stock of the Company or any transfer agent for the
Preferred Stock in the case of shares of Preferred Stock) shall
permit the holder thereof to exchange such Restricted Security for
a security that does not bear the legends set forth in Section
2.5(d) or 2.5(e), as applicable, and shall rescind any such
restrictions on transfer and (B) in the case of Restricted
Securities represented by a Note in global form, such Note shall
no longer be subject to the restrictions contained in the legend
set forth in Section 2.5(d) (but still subject to the other
provisions hereof). In addition, any Note (or security issued in
exchange or substitution therefor) or shares of Preferred Stock
issued upon exchange of any Note or shares of Common Stock issued
upon conversion of any Note, in any case, as to which the
restrictions on transfer described in the legends set forth in
Section 2.5(d) and 2.5(e), respectively, have expired by their
terms, may, upon surrender thereof (in accordance with the terms
of this Indenture in the case of Notes) together with such
certifications and other information (including an Opinion of
Counsel having substantial experience in practice under the
Securities Act and otherwise reasonably acceptable to the Company,
addressed to the Company and the Trustee and in a form acceptable
to the Company, to the effect that the transfer of such Restricted
Security has been made in compliance with Rule 144 or such
successor provision) acceptable to the Company and the Trustee (or
any transfer agent, as the case may be) as either of them may
reasonably require, be exchanged for a new Note or Notes of like
tenor and aggregate principal amount (in the case of Notes), or a
new certificate or certificates for a like aggregate number of
shares of Preferred Stock (in the case of Preferred Stock) or
Common Stock (in the case of Common Stock), or a new certificate
or other instrument of like tenor and amount (in the case of
securities issued in exchange or substitution for Notes), which
shall not bear the restrictive legends set forth in Sections
2.5(d) and 2.5(e).
(g) The form of representation letter referred to in
the restrictive legends in Sections 2.5(d) and 2.5(e) hereof is
attached hereto as Exhibit D.
Section 2.6 Mutilated, Destroyed, Lost or Stolen Notes.
In case any Note shall become mutilated or be destroyed, lost or
stolen, the Company in its discretion may execute, and upon its
request, the Trustee or an authenticating agent appointed by the
Trustee shall authenticate and deliver, a new Note, bearing a
number not contemporaneously outstanding, in exchange and
substitution for the mutilated Note, or in lieu of and in
substitution for the Note so destroyed, lost or stolen. The
Company may charge such applicant for the expenses of the Company
in replacing a Note. In every case the applicant for a
substituted Note shall furnish to the Company, to the Trustee and,
if applicable, to such authenticating agent such security or
indemnity as may be required by them to save each of them harmless
from any loss, liability, cost or expense caused by or connected
with such substitution, and in every case of destruction, loss or
theft, the applicant shall also furnish to the Company, to the
Trustee and, if applicable, to such authenticating agent evidence
to their satisfaction of the destruction, loss or theft of such
Note and of the ownership thereof.
The Trustee or such authenticating agent may
authenticate any such substituted Note and deliver the same upon
the receipt of such security or indemnity as the Trustee, the
Company and, if applicable, such authenticating agent may require.
Upon the issuance of any substituted Note, the Company may require
the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and
any other expenses connected therewith. In case any Note which
has matured or is about to mature or has been called for
redemption or is about to be converted into Common Stock shall
become mutilated or be destroyed, lost or stolen, the Company may,
instead of issuing a substitute Note, pay or authorize the payment
of or convert or authorize the conversion of the same (without
surrender thereof, except in the case of a mutilated Note), as the
case may be, if the applicant for such payment or conversion shall
furnish to the Company, to the Trustee and, if applicable, to such
authenticating agent such security or indemnity as may be required
by them to save each of them harmless from any loss, liability,
cost or expense caused by or connected with such substitution, and
in case of destruction, loss or theft, evidence satisfactory to
the Company, the Trustee and, if applicable, any paying agent or
conversion agent of the destruction, loss or theft of such Note
and of the ownership thereof.
Every substitute Note issued pursuant to the provisions
of this Section 2.6 in lieu of any Note which is destroyed, lost
or stolen shall constitute an additional contractual obligation of
the Company, whether or not the destroyed, lost or stolen Note
shall be enforceable by anyone, and shall be entitled to all the
benefits (but shall be subject to all the limitations set forth
in) this Indenture equally and proportionately with any and all
other Notes duly issued hereunder. To the extent permitted by
law, all Notes shall be held and owned upon the express condition
that the foregoing provisions are exclusive with respect to the
replacement or payment or conversion of mutilated, destroyed, lost
or stolen Notes and shall preclude any and all other rights or
remedies notwithstanding any law or statute existing or hereafter
enacted to the contrary with respect to the replacement or payment
or conversion of negotiable instruments or other securities
without their surrender.
Section 2.7 Temporary Notes. Pending the preparation
of definitive Notes, the Company may execute and the Trustee or an
authenticating agent appointed by the Trustee shall, upon written
request of the Company, authenticate and deliver temporary Notes
(printed or lithographed). Temporary Notes shall be issuable in
any authorized denomination and shall be substantially in the form
of the definitive Notes but with such omissions, insertions and
variations as may be appropriate for temporary Notes, all as may
be determined by the Company. Every such temporary Note shall be
executed by the Company and authenticated by the Trustee or such
authenticating agent upon the same conditions and in substantially
the same manner, and with the same effect, as the definitive
Notes. Without unreasonable delay the Company will execute and
deliver to the Trustee or such authenticating agent definitive
Notes (other than in the case of Notes in global form) and
thereupon any or all temporary Notes (other than any such Note in
global form) may be surrendered in exchange therefor, at each
office or agency maintained by the Company pursuant to Section 5.2
and the Trustee or such authenticating agent shall authenticate
and deliver in exchange for such temporary Notes an equal
aggregate principal amount of definitive Notes. Such exchange
shall be made by the Company at its own expense and without any
charge therefor. Until so exchanged, the temporary Notes shall in
all respects be entitled to the same benefits and subject to the
same limitations under this Indenture as definitive Notes
authenticated and delivered hereunder.
Section 2.8 Cancellation of Notes Paid, Etc. All Notes
surrendered for the purpose of payment, redemption, conversion,
exchange or registration of transfer shall, if surrendered to the
Company or any paying agent or any Note registrar or any
conversion agent, be surrendered to the Trustee and promptly
canceled by it or, if surrendered to the Trustee, shall be
promptly canceled by it and no Notes shall be issued in lieu
thereof except as expressly permitted by any of the provisions of
this Indenture. Upon written instructions of the Company, the
Trustee shall destroy canceled Notes, in accordance with the usual
destruction procedures of the Trustee. If the Company shall
acquire any of the Notes, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such
Notes unless and until the same are delivered to the Trustee for
cancellation.
Section 2.9 Ranking. The Notes will represent general,
unsecured obligations of the Company senior or pari passu in right
of payment to all other unsecured obligations of the Company and
will rank pari passu in order of preference with the Company's 5
1/2% Senior Convertible Notes due 2000 issued October 23, 1995.
ARTICLE III
REDEMPTION OF NOTES
Section 3.1 Redemption Prices. The Company may, at its
option, redeem all or from time to time any part of the Notes on
any date prior to maturity, upon notice as set forth in Section
3.2, and at the optional redemption prices set forth in the forms
of Note attached as Exhibits A and B hereto, together with accrued
interest to the date fixed for redemption, provided, however, that
no such redemption shall be effected before November 2, 1998.
Section 3.2 Notice of Redemption, Selection of Notes.
In case the Company shall desire to exercise the right to redeem
all or, as the case may be, any part of the Notes pursuant to
Section 3.1, it shall fix a date for redemption and, in the case
of any redemption pursuant to Section 3.1, it or, at its request
accompanied by the proposed form of notice of redemption (which
must be received by the Trustee at least ten Business Days prior
to the date the Trustee is requested to give notice as described
below, unless a shorter period is agreed to by the Trustee), the
Trustee in the name of and at the expense of the Company, shall
mail or cause to be mailed a notice of such redemption at least 30
and not more than 60 days prior to the date fixed for redemption
to the holders of Notes so to be redeemed in whole or in part at
their last addresses as the same appear on the Note register,
provided that if the Company shall give such notice, it shall also
give such notice, and notice of the Notes to be redeemed, to the
Trustee. Such mailing shall be by first class mail. The notice,
if mailed in the manner herein provided, shall be conclusively
presumed to have been duly given, whether or not the holder
receives such notice. In any case, failure to give such notice by
mail or any defect in the notice to the holder of any Note
designated for redemption as a whole or in part shall not affect
the validity of the proceedings for the redemption of any other
Note.
Each such notice of redemption shall specify the
aggregate principal amount of Notes to be redeemed, the date fixed
for redemption, the redemption price at which Notes are to be
redeemed, the place or places of payment, that payment will be
made upon presentation and surrender of such Notes, that interest
accrued to the date fixed for redemption will be paid as specified
in said notice and that on and after said date, interest thereon
or on the portion thereof to be redeemed will cease to accrue.
Such notice shall also state the current Exchange Price and
Conversion Price and the date on which the right to exchange and
to convert such Notes or portions thereof into Preferred Stock or
Common Stock, as the case may be, will expire. If fewer than all
the Notes are to be redeemed, the notice of redemption shall
identify the Notes to be redeemed. In case any Note is to be
redeemed in part only, the notice of redemption shall state the
portion of the principal amount thereof to be redeemed and shall
state that on and after the date fixed for redemption, upon
surrender of such Note, a new Note or Notes in principal amount
equal to the unredeemed portion thereof will be issued.
On or prior to the Business Day prior to the redemption
date specified in the notice of redemption given as provided in
this Section, the Company will deposit with the Trustee or with
one or more paying agents (or, if the Company is acting as its own
paying agent, set aside, segregate and hold in trust as provided
in Section 5.4) an amount of money sufficient to redeem on the
redemption date all the Notes so called for redemption (other than
those theretofore surrendered for exchange for Preferred Stock or
conversion into Common Stock) at the appropriate redemption price,
together with accrued interest to the date fixed for redemption.
If any Note called for redemption is exchanged or converted
pursuant hereto, any money deposited with the Trustee or any
paying agent or so segregated and held in trust for the redemption
of such Note shall be paid to the Company upon its request or, if
then held by the Company, shall be discharged from such trust. If
fewer than all the Notes are to be redeemed, the Company will give
the Trustee written notice in the form of an Officers' Certificate
(accompanied by the proposed form of notice of redemption) not
fewer than 45 days (or such shorter period of time as may be
acceptable to the Trustee) prior to the redemption date as to the
aggregate principal amount of Notes to be redeemed.
If fewer than all the Notes are to be redeemed, the
Trustee shall select the Notes or portions thereof to be redeemed
(in principal amounts of $1,000 or integral multiples thereof), by
lot or, in its sole discretion, on a pro rata basis. If any Note
selected for partial redemption is exchanged or converted in part
after such selection, the converted or exchanged portion of such
Note shall be deemed (so far as may be) to be the portion to be
selected for redemption. The Notes (or portions thereof) so
selected shall be deemed duly selected for redemption for all
purposes hereof, notwithstanding that any such Note is exchanged
or converted as a whole or in part before the mailing of the
notice of redemption.
Upon any redemption of less than all Notes, the Company
and the Trustee may treat as outstanding any Notes surrendered for
exchange or conversion during the period of 15 days next preceding
the mailing of a notice of redemption and need not treat as
outstanding any Note authenticated and delivered during such
period in exchange for the unexchanged or unconverted portion of
any Note exchanged or converted in part during such period.
Section 3.3 Payment of Notes Called for Redemption. If
notice of redemption has been given as above provided, the Notes
or portion of Notes with respect to which such notice has been
given shall, unless exchanged for Preferred Stock or converted
into Common Stock pursuant to the terms hereof, become due and
payable on the date and at the place or places stated in such
notice at the applicable redemption price, together with interest
thereon accrued to the date fixed for redemption, and on and after
said date (unless the Company shall default in the payment of such
Notes at the redemption price, together with interest thereon
accrued to said date), interest on the Notes or portion of Notes
so called for redemption shall cease to accrue, and such Notes
shall cease after the close of business on the Business Day next
preceding the date fixed for redemption to be exchangeable for
Preferred Stock or convertible into Common Stock and, except as
provided in Sections 8.5 and 13.4, to be entitled to any benefit
or security under this Indenture, and the holders thereof shall
have no right in respect of such Notes except the right to receive
the redemption price thereof and unpaid interest thereon to the
date fixed for redemption. On presentation and surrender of such
Notes at a place of payment in said notice specified, the said
Notes or the specified portions thereof shall be paid and redeemed
by the Company at the applicable redemption price, together with
interest accrued thereon to the date fixed for redemption;
provided that any semi-annual payment of interest becoming due on
the date fixed for redemption shall be payable to the holders of
such Notes registered as such on the relevant record date subject
to the terms and provisions of Section 2.3 hereof.
Upon presentation of any Note redeemed in part only, the
Company shall execute and the Trustee shall authenticate and
deliver to the holder thereof, at the expense of the Company, a
new Note or Notes, of authorized denominations, in principal
amount equal to the unredeemed portion of the Notes so presented.
Notwithstanding the foregoing, the Trustee shall not
redeem any Notes or mail any notice of optional redemption during
the continuance of a default in payment of interest or premium on
the Notes or of any Event of Default of which, in the case of any
Event of Default other than under Section 7.1(a) or (b), a
Responsible Officer of the Trustee has knowledge. If any Note
called for redemption shall not be so paid upon surrender thereof
for redemption, the principal and premium, if any, shall, until
paid or duly provided for, bear interest from the date fixed for
redemption at the rate borne by the Note and such Note shall
remain exchangeable for Preferred Stock and convertible into
Common Stock until the principal and premium, if any, shall have
been paid or duly provided for.
Section 3.4 Conversion/Exchange Arrangement on Call for
Redemption. In connection with any redemption of Notes, the
Company may arrange for the purchase and conversion or exchange of
any Notes by an agreement with one or more investment bankers or
other purchasers to purchase such Notes by paying to the Trustee
in trust for the Noteholders, on or before the date fixed for
redemption, an amount not less than the applicable redemption
price, together with interest accrued to the date fixed for
redemption, of such Notes. Notwithstanding anything to the
contrary contained in this Article III, the obligation of the
Company to pay the redemption price of such Notes, together with
interest accrued to the date fixed for redemption, shall be deemed
to be satisfied and discharged to the extent such amount is so
paid by such purchasers. If such an agreement is entered into, a
copy of which will be filed with the Trustee at least two Business
Days prior to the date fixed for redemption, any Notes not duly
surrendered for conversion or exchange by the holders thereof may,
at the option of the Company, be deemed, to the fullest extent
permitted by law, acquired by such purchasers from such holders
and (notwithstanding anything to the contrary contained in
Articles XV or XVII) surrendered by such purchasers for conversion
or exchange, all as of immediately prior to the close of business
on the date fixed for redemption (and the right to exchange or
convert any such Notes shall be deemed to have been extended
through such time), subject to payment of the above amount as
aforesaid. At the direction of the Company, the Trustee shall
hold and dispose of any such amount paid to it in the same manner
as it would monies deposited with it by the Company for the
redemption of Notes. Without the Trustee's prior written consent,
no arrangement between the Company and such purchasers for the
purchase and conversion or exchange of any Notes shall increase or
otherwise affect any of the powers, duties, responsibilities or
obligations of the Trustee as set forth in this Indenture, and the
Company agrees to indemnify the Trustee from, and hold it harmless
against, any loss, liability or expense arising out of or in
connection with any such arrangement for the purchase and
conversion or exchange of any Notes between the Company and such
purchasers including the costs and expenses incurred by the
Trustee in the defense of any claim or liability arising out of or
in connection with the exercise or performance of any of its
powers, duties, responsibilities or obligations under this
Indenture.
Section 3.5 Purchase of Notes Upon a Change of Control.
(a) If a Change of Control shall occur at any time,
then each holder of Notes shall have the right to require that the
Company purchase such holder's Notes in whole or in part in
integral multiples of $1,000 at a purchase price (the "Change of
Control Purchase Price") in cash in an amount equal to 101% of the
principal amount of such Notes, plus accrued and unpaid interest
thereon, if any, to the repurchase date (the "Change of Control
Purchase Date") pursuant to the offer described below (the "Change
of Control Offer") and in accordance with the other procedures set
forth in this Indenture.
(b) Within 30 days following any Change of Control, the
Company shall notify the Trustee thereof and give written notice
of such Change of Control to each holder of Notes, by first-class
mail, postage prepaid, at his address appearing in the Note
register, stating, among other things: that a Change of Control
has occurred; the Change of Control Purchase Price and the Change
of Control Purchase Date (which shall be a Business Day no earlier
than 30 days nor later than 60 days from the date such notice is
mailed, or such later date as is necessary to comply with
requirements under the Exchange Act); that any Note not tendered
will continue to accrue interest and to have all of the benefits
of this Indenture; that, unless the Company defaults in the
payment of the Change of Control Purchase Price, any Notes
accepted for payment pursuant to the Change of Control Offer shall
cease to accrue interest after the Change of Control Purchase
Date; and certain other procedures that a holder of Notes must
follow to accept a Change of Control Offer or to withdraw such
acceptance.
(c) The Company will comply with the applicable tender
offer rules, including Rule 13e-4 under the Exchange Act, and any
other applicable securities laws or regulations in connection with
a Change of Control Offer.
(d) The Company will not, and will not permit any
subsidiary to, create or permit to exist or become effective any
restriction that would materially impair the ability of the
Company to make a Change of Control Offer to purchase the Notes
or, if such Change of Control Offer is made, to pay for the Notes
tendered for purchase.
ARTICLE IV
[RESERVED]
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
Section 5.1 Payment of Principal, Premium and Interest.
The Company covenants and agrees that it will duly and punctually
pay or cause to be paid the principal of and premium, if any, and
interest on each of the Notes at the places, at the respective
times and in the manner provided herein and in the Notes. Each
installment of interest on the Notes due on any May 1 or November
1 may be paid by mailing checks for the interest payable to or
upon the written order of the holders of Notes entitled thereto as
they shall appear on the Note register; provided that, with
respect to any holder of Notes with an aggregate principal amount
equal to or in excess of $5,000,000, at the request of such holder
in writing to the Trustee, interest on such holder's Notes shall
be paid by wire transfer in immediately available funds. An
installment of principal or interest shall be considered paid on
the date due if the Trustee or Paying Agent (other than the
Company, a Subsidiary of the Company or any Affiliate of any of
them) holds on that date money designated for and sufficient to
pay the installment of principal or interest and is not prohibited
from paying such money to the holders of the Notes pursuant to the
terms of this Indenture.
Section 5.2 Maintenance of Office or Agency. The
Company will maintain in the Borough of Manhattan, The City of New
York, an office or agency where the Notes may be surrendered for
registration of transfer or exchange or for presentation for
payment or for exchange or conversion or redemption and where
notices and demands to or upon the Company in respect of the Notes
and this Indenture may be served. The Company will give prompt
written notice to the Trustee of the location, and any change in
the location, of such office or agency not designated by the
Trustee. If at any time the Company shall fail to maintain any
such office or agency or shall fail to furnish the Trustee with
the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust office of the
Trustee.
The Company may also from time to time designate one or
more other offices or agencies where the Notes may be presented or
surrendered for any or all such purposes and may from time to time
rescind such designations; provided that no such designation or
rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, for such purposes. The Company
will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any
such other office or agency.
The Company hereby initially designates the Trustee as
paying agent, Note registrar and conversion and exchange agent and
each of the Corporate Trust Office of the Trustee and the office
of State Street Bank and Trust Company, N.A. in the Borough of
Manhattan, The City of New York, as one such office or agency of
the Company for the purposes set forth in the first paragraph of
this Section 5.2.
So long as the Trustee is the Note registrar, the
Trustee agrees to mail, or cause to be mailed, the notices set
forth in Section 8.10(a) and the third paragraph of Section 8.11.
Section 5.3 Appointments to Fill Vacancies in Trustee's
office. The Company, whenever necessary to avoid or fill a
vacancy in the office of Trustee, will appoint, in the manner
provided in Section 8.10, a Trustee, so that there shall at all
times be a Trustee hereunder.
Section 5.4 Provisions as to Paying Agent.
(a) If the Company shall appoint a paying agent other
than the Trustee, or if the Trustee shall appoint such a paying
agent, it will cause such paying agent to execute and deliver to
the Trustee an instrument in which such agent shall agree with the
Trustee, subject to the provisions of this Section 5.4:
(1) that it will hold all sums held by it as such
agent for the payment of the principal of, premium, if
any, or interest on the Notes (whether such sums have
been paid to it by the Company or by any other obligor
on the Notes) in trust for the benefit of the holders of
the Notes;
(2) that it will give the Trustee notice of any
failure by the Company (or by any other obligor on the
Notes) to make any payment of the principal of, premium,
if any, or interest on the Notes when the same shall be
due and payable; and
(3) that at any time during the continuance of an
Event of Default, upon request of the Trustee, it will
forthwith pay to the Trustee all sums so held in trust.
The Company shall, before each due date of the principal
of, premium, if any, or interest on the Notes, deposit with the
paying agent a sum sufficient to pay such principal, premium, if
any, or interest, and (unless such paying agent is the Trustee)
the Company will promptly notify the Trustee of any failure to
take such action.
(b) If the Company shall act as its own paying agent,
it will, on or before each due date of the principal of, premium,
if any, or interest on the Notes, set aside, segregate and hold in
trust for the benefit of the holders of the Notes a sum sufficient
to pay such principal, premium, if any, or interest so becoming
due and will notify the Trustee of any failure to take such action
and of any failure by the Company (or any other obligor under the
Notes) to make any payment of the principal of, premium, if any,
or interest on the Notes when the same shall become due and
payable.
(c) Anything in this Section 5.4 to the contrary
notwithstanding, the Company may, at any time, for the purpose of
obtaining a satisfaction and discharge of this Indenture, or for
any other reason, pay or cause to be paid to the Trustee all sums
held in trust by the Company or any paying agent hereunder as
required by this Section 5.4, such sums to be held by the Trustee
upon the trusts herein contained and upon such payment by the
company or any paying agent to the Trustee, the Company or such
paying agent shall be released from all further liability with
respect to such sums.
(d) Anything in this section 5.4 to the contrary
notwithstanding, the agreement to hold sums in trust as provided
in this Section 5.4 is subject to Sections 13.3 and 13.4.
Section 5.5 Corporate Existence. Subject to Article
XII, the Company will do or cause to be done all things necessary
to preserve and keep in full force and effect its corporate
existence.
Section 5.6 Rule 144A Information Requirement. During
the three-year period following the original issuance date of any
Note and during the three-year period following the last date on
which the Company or an Affiliate of the Company was the owner of
any Note (or shares of Common Stock issued upon conversion of any
Note or Preferred Stock issued upon exchange of Notes), if the
Company is subject neither to Section 13 nor Section 15(d) of the
Exchange Act, the Company shall at the written request of any
holder or beneficial holder of such Note (or shares of Preferred
Stock issued upon exchange of Notes or Common Stock issued upon
conversion of Notes) provide to such holder or beneficial holder
of such Note (or shares of Common Stock issued upon conversion of
Notes or Preferred Stock issued upon exchange of Notes) and any
prospective transferee designated by such holder or beneficial
holder of such Note (or shares of Preferred Stock issued upon
exchange of Notes or Common Stock issued upon conversion of Notes)
such information, if any, required by Rule 144A(d)(4) under the
Securities Act (so long as such information is required to permit
such transfer under Rule 144A).
Section 5.7 Stay, Extension and Usury Laws. The
Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead or in any manner
whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law or other law which would prohibit or
forgive the Company from paying all or any portion of the
principal of or interest on the Notes as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which
may affect the covenants or the performance of this Indenture; and
the Company (to the extent it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law, and covenants
that it will not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Trustee,
but will suffer and permit the execution of every such power as
though no such law has been enacted.
Section 5.8 Amendments to Series C Preferred Stock.
Without the consent (evidenced as provided in Article IX) of the
holders of not less than a majority in aggregate principal amount
of the Notes at the time outstanding, the Company will not take
any action with respect to its capital stock or adopt any change
to the Certificate of Designation of the Series C Preferred Stock
which in either such case would require the affirmative vote of
the holders of at least 66-2/3% of the outstanding shares of
Series C Preferred Stock under Section 3.2 of the Certificate of
Designation (whether or not any such Series C Preferred Stock is
at the time outstanding).
Section 5.9 Statement as to Compliance If this
Indenture is qualified under the Trust Indenture Act, then the
Company will deliver to the Trustee, within 120 days after the end
of each fiscal year, a brief certificate from its principal
executive officer, principal financial officer or principal
accounting officer as to his or her knowledge of the Company's
compliance with all conditions and covenants under this Indenture
and in the event of any noncompliance, specifying such
noncompliance and the nature and status thereof. For purposes of
this Section 5.9, such compliance shall be determined without
regard to any period of grace or requirement of notice under this
Indenture.
ARTICLE VI
NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY
Section 6.1 Noteholders' Lists. The Company covenants
and agrees that it will furnish or cause to be furnished to the
Trustee, semi-annually, not more than 15 days after April 15 and
October 15 in each year beginning with April 15, 1996, and at such
other times as the Trustee may request in writing, within 30 days
after receipt by the Company of any such request (or such lesser
time as the Trustee may reasonably request in order to enable it
to timely provide any notice to be provided by it hereunder), a
list in such form as the Trustee may reasonably require of the
names and addresses of the holders of Notes as of a date not more
than 15 days (or such other date as the Trustee may reasonably
request in order to so provide any such notices) prior to the time
such information is furnished, except that no such list need be
furnished so long as the Trustee is acting as Note registrar or
co-registrar.
Section 6.2 Reports by Company. The Company will
deliver to the Trustee (a) as soon as available and in any event
within 90 days after the end of each fiscal year of the Company
(i) a consolidated balance sheet of the Company and its
subsidiaries as of the end of such fiscal year and the related
consolidated statements of operations, stockholders, equity and
cash flows for such fiscal year, all reported on by an independent
public accountant of nationally recognized standing and (ii) a
report containing a management's discussion and analysis of the
financial condition and results of operations and a description of
the business and properties of the Company and (b) as soon as
available and in any event within 45 days after the end of each of
the first three quarters of each fiscal year of the Company (i) an
unaudited consolidated financial report for such quarter and (ii)
a report containing a management's discussion and analysis of the
financial condition and results of operations of the Company;
provided that the foregoing shall not be required for any fiscal
year or quarter, as the case may be, with respect to which the
Company files or expects to file with the Trustee an annual report
or quarterly report, as the case may be, pursuant to the next
paragraph of this Section 6.2.
The Company shall file with the Trustee, within 15 days
after it files such annual and quarterly reports with the
Commission such annual and quarterly reports as are required to be
filed by the Company with the Commission pursuant to Section 13 or
15(d) of the Exchange Act. Except during the continuance of an
Event of Default, the Trustee shall have no duty or obligation to
examine any reports or other financial statements filed with it
under this Indenture and shall not be required to monitor the
financial condition of the Company.
ARTICLE VII
DEFAULTS AND REMEDIES
Section 7.1 Events of Default. In case one or more of
the following Events of Default (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary
or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of
any administrative or governmental body) shall have occurred and
be continuing:
(a) default in the payment of any installment of
interest upon any of the Notes as and when the same shall become
due and payable, and continuance of such default for a period of
30 days; or
(b) default in the payment of the principal of and
premium, if any, on any of the Notes as and when the same shall
become due and payable either at maturity or in connection with
any redemption, by declaration or otherwise; or
(c) a failure on the part of the Company duly to
observe or perform any other covenants or agreements on the part
of the Company in the Notes or in this Indenture (other than a
default in the performance or breach of a covenant or agreement
which is specifically dealt with) elsewhere in this Section 7.1,
which continues for a period of 90 days after the date on which
written notice of such failure, requiring the Company to remedy
the same, shall have been given to the Company by the Trustee, or
to the Company and a Responsible Officer of the Trustee, by the
holders of at least 25 percent in aggregate principal amount of
the Notes at the time outstanding determined in accordance with
Section 9.4; or
(d) the Company shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect, or
seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part
of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it or shall
make a general assignment for the benefit of creditors or shall
fail generally to pay its debts as they become due; or
(e) an involuntary case or other proceeding shall be
commenced against the Company seeking liquidation, reorganization
or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or
other proceeding shall remain undismissed and unstayed for a
period of 90 consecutive days;
then, and in each and every such case (other than an Event of
Default specified in Section 7.1(d) or (e)), unless the principal
of all of the Notes shall have already become due and payable,
either the Trustee or the holders of not less than 25% in
aggregate principal amount of the Notes then outstanding hereunder
determined in accordance with Section 9.4, by notice in writing to
the Company (and to the Trustee if given by Noteholders), may
declare the principal of, premium, if any, on all the Notes and
the interest accrued thereon to be due and payable immediately,
and upon any such declaration the same shall become and shall be
immediately due and payable, anything in this Indenture or in the
Notes contained to the contrary notwithstanding. If an Event of
Default specified in Section 7.1(d) or (e) occurs and is
continuing, the principal of all the Notes and the interest
accrued thereon shall be immediately due and payable. This
provision, however, is subject to the conditions that if, at any
time after the principal of the Notes shall have been so declared
due and payable, and before any judgment or decree for the payment
of the monies due shall have been obtained or entered as
hereinafter provided, the Company shall pay or shall deposit with
the Trustee a sum sufficient to pay all matured installments of
interest upon all Notes and the principal of and premium, if any,
on any and all Notes which shall have become due otherwise than by
acceleration (with interest on overdue installments of interest
(to the extent that payment of such interest is enforceable under
applicable law) and on such principal and premium, if any, at the
rate borne by the Notes, to the date of such payment or deposit)
and amounts due to the Trustee pursuant to Section 8.6, and if any
and all defaults under this Indenture, other than the nonpayment
of principal of, premium, if any, and accrued interest on Notes
which shall have become due by acceleration, shall have been cured
or waived pursuant to Section 7.7, then and in every such case the
holders of a majority in aggregate principal amount of the Notes
then outstanding, by written notice to the Company and to the
Trustee, may waive all defaults or Events of Default and rescind
and annul such declaration and its consequences; but no such
waiver or rescission and annulment shall extend to or shall affect
any subsequent default or Event of Default, or shall impair any
right consequent thereto. The Company shall notify a Responsible
Officer of the Trustee, promptly upon becoming aware thereof, of
any Event of Default.
In case the Trustee shall have proceeded to enforce any
right under this Indenture and such proceedings shall have been
discontinued or abandoned because of such waiver or rescission and
annulment or for any other reason or shall have been determined
adversely to the Trustee, then and in every such case the Company,
the holders of Notes and the Trustee shall be restored
respectively to their several positions and rights hereunder, and
all rights, remedies and powers of the Company, the holders of
Notes and the Trustee shall continue as though no such proceeding
had been taken.
Section 7.2 Payments of Notes on Default; Suit
Therefor. The Company covenants that (a) in case default shall be
made in the payment of any installment of interest upon any of the
Notes as and when the same shall become due and payable, and such
default shall have continued for a period of 30 days, or (b) in
case default shall be made in the payment of the principal of or
premium, if any, on any of the Notes as and when the same shall
have become due and payable, whether at maturity of the Notes or
in connection with any redemption, by declaration or otherwise,
then, upon demand of the Trustee, the Company will pay to the
Trustee, for the benefit of the holders of the Notes, the whole
amount that then shall have become due and payable on all such
Notes for principal, premium, if any, or interest, or both, as the
case may be, with interest upon the overdue principal, premium, if
any, and (to the extent that payment of such interest is
enforceable under applicable law) upon the overdue installments of
interest at the rate borne by the Notes; and, in addition thereto,
such further amount as shall be sufficient to cover the costs and
expenses of collection, including reasonable compensation to the
Trustee, its agents, attorneys and counsel, and any expenses or
liabilities incurred by the Trustee hereunder other than through
its negligence or bad faith. Until such demand by the Trustee,
the Company may pay the principal of and premium, if any, and
interest on the Notes to the registered holders, whether or not
the Notes are overdue; provided, however, that the Company shall
provide notice (in the form of an Officer's Certificate) to the
Trustee of any such payment.
In case the Company shall fail forthwith to pay such
amounts upon such demand, the Trustee, in its own name and as
trustee of an express trust, shall be entitled and empowered to
institute any actions or proceedings at law or in equity for the
collection of the sums so due and unpaid and may prosecute any
such action or proceeding to judgment or final decree, and may
enforce any such judgment or final decree against the Company or
any other obligor on the Notes and collect in the manner provided
by law out of the property of the Company or any other obligor on
the Notes wherever situated the monies adjudged or decreed to be
payable.
In the case there shall be pending proceedings for the
bankruptcy or for the reorganization of the Company or any other
obligor on the Notes under Title 11 of the United States Code or
any other applicable law, or in case a receiver, assignee or
trustee in bankruptcy or reorganization, liquidator, sequestrator
or similar official shall have been appointed for or taken
possession of the Company or such other obligor, the property of
the Company or such other obligor, or in the case of any other
judicial proceedings relative to the Company or such other obligor
upon the Notes, or to the creditors or property of the Company or
such other obligor, the Trustee, irrespective of whether the
principal of the Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand pursuant to the
provisions of this Section 7.2, shall be entitled and empowered,
by intervention in such proceedings or otherwise, to file and
prove a claim or claims for the whole amount of principal,
premium, if any, and interest owing and unpaid in respect of the
Notes and, in case of any judicial proceedings, to file such
proofs of claim and other papers or documents and to take such
other actions (including participating in a committee of
creditors) as may be necessary or advisable in order to have the
claims of the Trustee and of the Noteholders allowed in such
judicial proceedings relative to the Company or any other obligor
on the Notes, its or their creditors, or its or their property and
to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same after
the deduction of any amounts due the Trustee under Section 8.6;
and any receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, custodian or similar official is
hereby authorized by each of the Noteholders to make such payments
to the Trustee and, in the event that the Trustee shall consent to
the making of such payments directly to the Noteholders, to pay to
the Trustee any amount due it for reasonable compensation,
expenses, advances and disbursements, including counsel fees
incurred by it up to the date of such distribution. To the extent
that such payment of reasonable compensation, expenses, advances
and disbursements out of the estate in any such proceedings shall
be denied for any reason, payment of the same shall be secured by
a lien on, and shall be paid out of, any and all distributions,
dividends, monies, securities and other property which the holders
of the Notes may be entitled to receive in such proceedings,
whether in liquidation or under any plan of reorganization or
arrangement or otherwise.
Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or adopt on behalf of any
Noteholder any plan of reorganization or arrangement affecting the
Notes or the rights of any Noteholder, or to authorize the Trustee
to vote in respect of the claim of any Noteholder in any such
proceeding.
All rights of action and of asserting claims under this
Indenture, or under any of the Notes, may be enforced by the
Trustee without the possession of any of the Notes or the
production thereof on any trial or other proceeding relative
thereto, and any such suit or proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust,
and any recovery of judgment shall, after provision for the
payment of the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the holders of the Notes.
In any proceedings brought by the Trustee (and in any
proceedings involving the interpretation of any provision of this
Indenture to which the Trustee shall be a party), the Trustee
shall be held to represent all the holders of the Notes, and it
shall not be necessary to make any holders of the Notes parties to
any such proceedings.
Section 7.3 Application of Monies Collected by Trustee.
Any monies collected by the Trustee pursuant to this Article VII
shall be applied in the order following, at the date or dates
fixed by the Trustee for the distribution of such monies, upon
presentation of the several Notes and stamping thereon the
payment, if only partially paid, and upon surrender thereof, if
fully paid:
First: To the payment of all amounts due the Trustee
under Section 8.6;
Second: Subject to the provisions of Article V, in
case the principal of the outstanding Notes shall not have
become due and be unpaid, to the payment of interest on the
Notes in default in the order of the maturity of the
installments of such interest, with interest (to the extent
that such interest has been collected by the Trustee) upon
the overdue installments of interest at the rate borne by the
Notes, such payments to be made ratably to the persons
entitled thereto; and
Third: Subject to the Provisions of Article V, in
case the principal of the outstanding Notes shall have become
due, by declaration or otherwise, and be unpaid, to the
payment of the whole amount then owing and unpaid upon the
Notes for principal, premium, if any, and interest, with
interest on the overdue principal and premium, if any, and
(to the extent that such interest has been collected by the
Trustee) upon overdue installments of interest at the rate
borne by the Notes; and in case such monies shall be
insufficient to pay in full the whole amounts so due and
unpaid upon the Notes, then to the payment of such principal,
premium, if any, and interest without preference or priority
of principal and premium, if any, over interest, or of
interest over principal and premium, if any, or of any
installment of interest over any other installment of
interest, or of any Note over any other Note, ratably to the
aggregate of such principal and premium, if any, and accrued
and unpaid interest.
Section 7.4 Proceedings by Noteholder. No holder of
any Note shall have any right by virtue of or by availing of any
provision of this Indenture to institute any suit, action or
proceeding in equity or at law upon or under or with respect to
this Indenture, or for the appointment of a receiver, trustee,
liquidator, custodian or other similar official, or for any other
remedy hereunder, unless such holder previously shall have given
to the Trustee written notice of an Event of Default and of the
continuance thereof, as hereinbefore provided, and unless also the
holders of not less than 25 percent in aggregate principal amount
of the Notes then outstanding shall have made written request upon
the Trustee to institute such action, suit or proceeding in its
own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the
costs, expenses and liabilities to be incurred therein or thereby,
and the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity, shall have neglected or refused to
institute any such action, suit or proceeding, and no direction
inconsistent with such written request shall have been given to
the Trustee pursuant to Section 7.7; it being understood and
intended, and being expressly covenanted by the taker and holder
of every Note with every other taker and holder and the Trustee,
that no one or more holders of Notes shall have any right in any
manner whatever by virtue of or by availing of any provision of
this Indenture to affect, disturb or prejudice the rights of any
other holder of Notes, to obtain or seek to obtain priority over
or preference to any other such holder or to enforce any right
under this Indenture, except in the manner herein provided and for
the equal, ratable and common benefit of all holders of Notes
(except as otherwise provided herein). For the protection and
enforcement of this Section 7.4, each and every Noteholder and the
Trustee shall be entitled to such relief as can be given either at
law or in equity.
Notwithstanding any other provision of this Indenture
and any provision of any Note, the right of any holder of any Note
to receive payment of the principal of, premium, if any, and
interest on such Note, on or after the respective due dates
expressed in such Note, or to institute suit for the enforcement
of any such payment on or after such respective dates against the
Company shall not be impaired or affected without the consent of
such holder.
Anything in this Indenture or the Notes to the contrary
notwithstanding, the holder of any Note, without the consent of
either the Trustee or the holder of any other Note, in his own
behalf and for his own benefit, may enforce, and may institute and
maintain any proceeding suitable to enforce, his rights of
conversion as provided herein.
Section 7.5 Proceedings by Trustee. In case of an
Event of Default, the Trustee may in its discretion proceed to
protect and enforce the rights vested in it by this Indenture by
such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either
by suit in equity or by action at law or by proceeding in
bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Indenture or in aid of
the exercise of any power granted in this Indenture or to enforce
any other legal or equitable right vested in the Trustee by this
Indenture or by law.
Section 7.6 Remedies Cumulative and Continuing. Except
as provided in Section 2.6, all powers and remedies given by this
Article VII to the Trustee or to the Noteholders shall, to the
extent permitted by law, be deemed cumulative and not exclusive of
such powers and remedies or of any other powers and remedies
available to the Trustee or the holders of the Notes, by judicial
proceedings or otherwise, to enforce the performance or observance
of the covenants and agreements contained in this Indenture, and
no delay or omission of the Trustee or of any holder of any of the
Notes to exercise any right or power accruing upon any default or
Event of Default occurring and continuing as aforesaid shall
impair any such right or power or shall be construed to be a
waiver of any such default or any acquiescence therein; and,
subject to the provisions of Section 7.4, every power and remedy
given by this Article VII or by law to the Trustee or to the
Noteholders may be exercised from time to time, and as often as
shall be deemed expedient, by the Trustee or by the Noteholders.
Section 7.7 Direction of Proceedings and Waiver of
Defaults by Majority of Noteholders. The holders of a majority in
aggregate principal amount of the Notes at the time outstanding
(determined in accordance with Section 9.4) shall have the right
to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee; provided, however, that (a) such
direction shall not be in conflict with any rule of law or with
this Indenture, (b) the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such
direction and (c) such holder or holders agree to indemnify the
Trustee, in a manner reasonably satisfactory to the Trustee,
against any loss, liability or expense incurred in connection
therewith. The holders of a majority in aggregate principal
amount of the Notes at the time outstanding (determined in
accordance with Section 9.4) may on behalf of the holders of all
of the Notes waive any past default or Event of Default hereunder
and its consequences except (i) a default in the payment of
interest or premium, if any, on, or the principal of, the Notes,
(ii) a failure by the Company to exchange any Notes for Preferred
Stock or to convert any Notes into Common Stock or (iii) a default
in respect of a covenant or provisions hereof which under Article
XI cannot be modified or amended without the consent of the
holders of all Notes then outstanding. Upon any such waiver, the
Company, the Trustee and the holders of the Notes shall be
restored to their former positions and rights hereunder; but no
such waiver shall extend to any subsequent or other default or
Event of Default or impair any right consequent thereon. Whenever
any default or Event of Default hereunder shall have been waived
as permitted by this Section 7.7, said default or Event of Default
shall for all purposes of the Notes and this Indenture be deemed
to have been cured and to be not continuing; but no such waiver
shall extend to any subsequent or other default or Event of
Default or impair any right consequent thereon.
Section 7.8 Notice of Defaults. The Trustee shall,
within 90 days after the occurrence of an Event of Default, mail
to all Noteholders, as the names and addresses of such holders
appear upon the registry books of the Company, notice of all
Events of Default known to a Responsible Officer, unless such
Events of Default shall have been cured or waived before the
giving of such notice; and provided that, except in the case of
Events of Default in the payment of the principal of, premium, if
any, or interest on any of the Notes, the Trustee shall be
protected in withholding such notice if and so long as a trust
committee of directors and/or Responsible Officers of the Trustee
in good faith determine that the withholding of such notice is in
the interests of the Noteholders.
Section 7.9 Undertaking to Pay Costs. All parties to
this Indenture agree, and each holder of any Note by his
acceptance thereof shall be deemed to have agreed, that any court
may, in its discretion, require, in any suit for the enforcement
of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken or omitted by it as
Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit and that such court may
in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having
due regard to the merits and good faith of the claims or defenses
made by such party litigant; provided that the provisions of this
Section 7.9 shall not apply to any suit instituted by the Trustee,
to any suit instituted by any Noteholder or group of Noteholders
holding in the aggregate more than ten percent in principal amount
of the Notes at the time outstanding determined in accordance with
Section 9.4 or to any suit instituted by any Noteholder for the
enforcement of the payment of the principal of, premium, if any,
or interest on any Note on or after the due date expressed in such
Note or to any suit for the enforcement of the right to convert
any Note in accordance with the provisions of Article XV or of the
right to exchange any Note in accordance with the provisions of
Article XVII.
ARTICLE VIII
CONCERNING THE TRUSTEE
Section 8.1 Duties and Responsibilities of Trustee. (a)
if an Event of Default has occurred and is continuing, the Trustee
shall exercise the rights and powers vested in it by this
Indenture and use the same degree of care and skill in its
exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of
Default:
(1) the Trustee need perform only those duties
that are specifically set forth in this Indenture and no
others; and
(2) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this
Indenture; provided that the Trustee shall examine such
certificates and opinions to determine whether or not
they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for
its own negligent action, its own negligent failure to act or its
own willful misconduct, except that:
(1) this paragraph (c) does not limit the effect
of paragraph (b) of this section 8.1;
(2) the Trustee shall not be liable for any error
of judgment made in good faith by an officer of the
Trustee unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect
to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to
Section 7.7.
(d) Every provision of this Indenture that in any way
relates to the Trustee is subject to paragraphs (a), (b), (c) and
(e) of this Section 8.1.
(e) The Trustee may refuse to perform any duty or
exercise any right or power or extend or risk its own funds or
otherwise incur any financial liability unless it receives
indemnity satisfactory to it against any loss, liability or
expense.
Section 8.2 Reliance on Documents, Opinions, Etc.
Except as otherwise provided in Section 8.1:
(a) The Trustee may rely and shall be protected in
acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture,
coupon or other paper or document believed by it in good faith to
be genuine and to have been signed or presented by the proper
party or parties;
(b) Any request, direction, order or demand of the
Company mentioned herein shall be sufficiently evidenced by an
Officers' Certificate (unless other evidence in respect thereof be
herein specifically prescribed); and any resolution of the Board
of Directors may be evidenced to the Trustee by a copy thereof
certified by the Secretary or an Assistant Secretary of the
Company;
(c) The Trustee may consult with counsel and any advice
or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or omitted by it
hereunder in good faith and in accordance with such advice or
Opinion of Counsel;
(d) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys, and the Trustee shall not be
responsible for any misconduct or negligence on the part of any
agent or attorney appointed by it with due care hereunder; no
Depositary, Custodian or paying agent who is not the Trustee shall
be deemed an agent of the Trustee, and the Trustee (in its
capacity as Trustee) shall not be responsible for any act or
omission by any such Depositary, Custodian or paying agent;
(e) The Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by the Indenture
at the request or direction of any of the holders pursuant to this
Indenture unless such holders have offered the Trustee reasonable
security or indemnity against the costs, expenses and liabilities
which would be incurred by it in compliance with such request or
direction.
(f) Subject to the provisions of Section 8.1(c), the
Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within
its rights or powers;
(g) In connection with any request to transfer or
exchange any Note, the Trustee may request a direction (in the
form of an Officers' Certificate) from the Company and an Opinion
of Counsel with respect to compliance with any restrictions on
transfer or exchange imposed by this Indenture, the Securities
Act, other applicable law or the rules and regulations of any
exchange on which the Notes or the capital stock may be traded,
and the Trustee may rely and shall be protected in acting upon
such direction and in accordance with such Officers' Certificate
and Opinion of Counsel;
(h) The Trustee may rely and shall be fully protected
in acting upon the determination and notice by the Company of the
Conversion Price, including any adjustment to the Conversion Price
pursuant to Section 15.5(j) or the Exchange Price pursuant to
Section 17.5; and
(i) The Trustee shall not be deemed to have knowledge
of any Event of Default or other fact or event upon the occurrence
of which it may be required to take action hereunder unless one of
its Responsible Officers has actual knowledge thereof.
Section 8.3 No Responsibility for Recitals, Etc. The
recitals contained herein and in the Notes (except in the
Trustee's certificate of authentication) shall be taken as the
statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same. The Trustee makes
no representations as to the validity or sufficiency of this
Indenture or of the Notes. The Trustee shall not be accountable
for the use or application by the Company of any Notes or the
proceeds of any Notes authenticated and delivered by the Trustee
in conformity with the provisions of this Indenture.
Section 8.4 Trustee, Paying Agents, Exchange Agents,
Conversion Agents or Registrar May own Notes. The Trustee, any
paying agent, any exchange agent, any conversion agent or any Note
registrar, in its individual or any other capacity, may become the
owner or pledgee of Notes with the same rights it would have if it
were not Trustee, paying agent, exchange agent, conversion agent
or Note registrar.
Section 8.5 Monies to Be Held in Trust. Subject to the
provisions of Section 13.4, all monies received by the Trustee
shall, until used or applied as herein provided, be held in trust
for the purposes for which they were received. Money held by the
Trustee in trust hereunder need not be segregated from other funds
except to the extent required by law. The Trustee shall be under
no liability for interest on any money received by it hereunder
except as may be agreed in writing from time to time by the
Company and the Trustee.
Section 8.6 Compensation and Expenses of Trustee. The
Company covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to, reasonable
compensation for all services rendered by it hereunder in any
capacity (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust), and
the Company will pay or reimburse the Trustee upon its request for
all reasonable expenses, disbursements and advances incurred or
made by the Trustee in accordance with any of the provisions of
this Indenture (including the reasonable compensation and the
expenses and disbursements of its counsel and of all persons not
regularly in its employ) except any such expense, disbursement or
advance as may arise from its negligence or bad faith. The
Company also covenants to indemnify the Trustee in any capacity
under this Indenture and its agents and any authenticating agent
for, and to hold them harmless against, any loss, liability or
expense incurred without negligence or bad faith on the part of
the Trustee or such agent or authenticating agent, as the case may
be, and arising out of or in connection with the acceptance or
administration of this trust or in any other capacity hereunder,
including the costs and expenses of defending themselves against
any claim of liability in the premises. The obligations of the
Company under this Section 8.6 to compensate or indemnify the
Trustee and to pay or reimburse the Trustee for expenses,
disbursements and advances shall be secured by a lien prior to
that of the Notes upon all property and funds held or collected by
the Trustee as such, except funds held in trust for the benefit of
the holders of particular Notes. The obligation of the Company
under this Section shall survive the satisfaction and discharge of
this Indenture.
Section 8.7 Officers' Certificate as Evidence. Except
as otherwise provided in Section 8.1, whenever in the
administration of the provisions of this Indenture the Trustee
shall deem it necessary or desirable that a matter be proved or
established prior to taking or omitting any action hereunder, such
matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or bad
faith on the part of the Trustee, be deemed to be conclusively
proved and established by an Officers' Certificate delivered to
the Trustee, and such Officers' Certificate, in the absence of
negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken or omitted by it under
the provisions of this Indenture upon the faith thereof.
Section 8.8 Conflicting Interests of Trustee. In the
event that the Trust Indenture Act is applicable hereto, the
Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act and there exists an Event of
Default hereunder (exclusive of any period of grace or requirement
of notice), the Trustee shall either eliminate such interest or
resign, to the extent and in the manner provided by, and subject
to the provisions of, the Trust Indenture Act and this Indenture.
Section 8.9 Eligibility of Trustee. There shall at all
times be a Trustee hereunder which shall be a person that is
eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $50,000,000. If
such person publishes reports of condition at least annually,
pursuant to law or to the requirements of any supervising or
examining authority, then for the purposes of this Section, the
combined capital and surplus of such person shall be deemed to be
its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of
this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article VIII.
Section 8.10 Resignation or Removal of Trustee. (a) The
Trustee may at any time resign by giving written notice of such
resignation to the Company; and the Company shall mail, or cause
to be mailed, notice thereof to the holders of Notes at their
addresses as they shall appear on the registry books of the
Company. Upon receiving such notice of resignation, the Company
shall promptly appoint a successor trustee by written instrument,
in duplicate, executed by order of the Board of Directors, one
copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor trustee. If a successor
trustee shall not have been so appointed and shall not have
accepted appointment 60 days after the mailing of such notice of
resignation to the Noteholders, the resigning Trustee may petition
any court of competent jurisdiction for the appointment of a
successor trustee, or any Noteholder who has been a bona fide
holder of a Note or Notes for at least six months may, subject to
the provisions of Section 7.9, on behalf of himself and all others
similarly situated, petition any such court for the appointment of
a successor trustee. Such court may thereupon, after such notice,
if any, as it may deem proper and prescribe, appoint a successor
trustee.
(b) In case at any time any of the following shall
occur:
(1) the Trustee shall fail to comply with Section
8.8 after written request therefor by the Company or by any
Noteholder who has been a bona fide holder of a Note or Notes
for at least six months; or
(2) the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.9 and shall fail
to resign after written request therefor by the Company or by
any such Noteholder; or
(3) the Trustee shall become incapable of acting,
or shall be adjudged a bankrupt or insolvent, or a receiver
of the Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, the Company may remove the Trustee and
appoint a successor trustee by written instrument, in duplicate,
executed by order of the Board of Directors, one copy of which
instrument shall be delivered to the Trustee so removed and one
copy to the successor trustee or, subject to the provisions of
Section 7.9, any Noteholder who has been a bona fide holder of a
Note or Notes for at least six months may, on behalf of himself
and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of
a successor trustee. Such court may thereupon, after such notice,
if any, as it may deem proper and prescribe, remove the Trustee
and appoint a successor trustee.
(c) The holders of a majority in aggregate principal
amount of the Notes at the time outstanding may at any time remove
the Trustee and nominate a successor trustee which shall be deemed
appointed as successor trustee unless within ten days after notice
to the Company of such nomination the Company objects thereto, in
which case the Trustee so removed or any Noteholder, upon the
terms and conditions and otherwise as in Section 8.10(a) provided,
may petition any court of competent jurisdiction for an
appointment of a successor trustee.
(d) Any resignation or removal of the Trustee and
appointment of a successor trustee pursuant to any of the
provisions of this Section 8.10 shall become effective upon
acceptance of appointment by the successor trustee as provided in
Section 8.11.
Section 8.11 Acceptance by Successor Trustee. Any
successor trustee appointed as provided in Section 8.10 shall
execute, acknowledge and deliver to the Company and to its
predecessor trustee an instrument accepting such appointment
hereunder, and thereupon, the resignation or removal of the
predecessor trustee shall become effective and such successor
trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with like effect as if originally named as
trustee herein; but, nevertheless, on the written request of the
Company or of the successor trustee, the Trustee ceasing to act
shall, upon payment of any amounts then due it pursuant to the
provisions of Section 8.6, execute and deliver an instrument
transferring to such successor trustee all the rights and powers
of the Trustee so ceasing to act. Upon request of any such
successor trustee, the Company shall execute any and all
instruments in writing for more fully and certainly vesting in and
confirming to such successor trustee all such rights and powers.
Any Trustee ceasing to act shall, nevertheless, retain a lien upon
all property and funds held or collected by such trustee as such,
except for funds held in trust for the benefit of holders of
particular Notes, to secure any amounts then due it pursuant to
the provisions of Section 8.6.
No successor trustee shall accept appointment as
provided in this Section 8.11 unless at the time of such
acceptance such successor trustee shall be qualified under the
provisions of Section 8.8 and eligible under the provisions of
Section 8.9.
Upon acceptance of appointment by a successor trustee as
provided in this Section 8.11, the Company shall mail or cause to
be mailed notice of the succession of such Trustee hereunder to
the holders of Notes at their addresses as they shall appear on
the registry books of the Company. If the Company fails to mail
such notice within ten days after acceptance of appointment by the
successor trustee, the successor trustee shall cause such notice
to be mailed at the expense of the Company.
Section 8.12 Successor, by Merger, Etc. Any
corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee
shall be a party, or any corporation succeeding to all or
substantially all of the corporate trust business of the Trustee,
shall be the successor to the Trustee hereunder, provided such
corporation shall be qualified under the provisions of Section 8.8
and eligible under the provisions of Section 8.9 without the
execution or filing of any paper or any further act on the part of
any of the parties hereto.
Section 8.13 Limitation on Rights of Trustee as
Creditor. If and when the Trustee shall be or become a creditor
of the Company (or any other obligor upon the Notes) and the Trust
Indenture Act is applicable hereto, the Trustee shall be subject
to the provisions of the Trust Indenture Act regarding the
collection of the claims against the Company (or any such other
obligor).
ARTICLE IX
CONCERNING THE NOTEHOLDERS
Section 9.1 Action by Noteholders. Whenever in this
Indenture it is provided that the holders of a specified
percentage in aggregate principal amount of the Notes may take any
action (including the making of any demand or request, the giving
of any notice, consent or waiver or the taking of any other
action), the fact that at the time of taking any such action, the
holders of such specified percentage have joined therein may be
evidenced (a) by any instrument or any number of instruments of
similar tenor executed by Noteholders in person or by agent or
proxy appointed in writing (b) by the record of the holders of
Notes voting in favor thereof at any meeting of Noteholders duly
called and held in accordance with the provisions of Article X or
(c) by a combination of such instrument or instruments and any
such record of such a meeting of Noteholders. Whenever the
Company or the Trustee solicits the taking of any action by the
holders of the Notes, the Company or the Trustee may fix in
advance of such solicitation, a date as the record date for
determining holders entitled to take such action. The record date
shall be not more than 15 days prior to the date of commencement
of solicitation of such action.
Section 9.2 Proof of Execution by Noteholders. Subject
to the provisions of Sections 8.1, 8.2 and 11.5, proof of the
execution of any instrument by a Noteholder or his agent or proxy
shall be sufficient if made in accordance with such reasonable
rules and regulations as may be prescribed by the Trustee or in
such manner as shall be satisfactory to the Trustee. The holding
of Notes shall be proved by the Note register or by a certificate
of the Note registrar.
The record of any Noteholders' meeting shall be proved
in the manner provided in Section 9.1.
Section 9.3 Who Are Deemed Absolute Owners. The
Company, the Trustee, any paying agent, any conversion or exchange
agent and any Note registrar may deem the person in whose name
such Note shall be registered upon the books of the Company to be,
and may treat him as, the absolute owner of such Note (whether or
not such Note shall be overdue and notwithstanding any notation of
ownership or other writing thereon) for the purpose of receiving
payment of or on account of the principal of, premium, if any, and
interest on such Note, for conversion or exchange of such Note and
for all other purposes; and neither the Company nor the Trustee
nor any paying agent nor any conversion or exchange agent nor any
Note registrar shall be affected by any notice to the contrary.
All such payments so made to any holder for the time being, or
upon his order, shall be valid and, to the extent of the sum or
sums so paid, effectual to satisfy and discharge the liability for
monies payable upon any such Note.
The Depositary shall be deemed to be the owner of any
Note in global form for all purposes, including receipt of notices
to Noteholders and payment of principal of, premium, if any, and
interest on the Notes. None of the Company, the Trustee (in its
capacity as Trustee), any paying agent or the Note registrar (or
co-registrar) will have any responsibility for any aspect of the
records relating to or payments made on account of beneficial
interests of a Note in global form or for maintaining, supervising
or reviewing any records relating to such beneficial ownership
interests; provided, however, that the foregoing shall not apply
to the Trustee or any other person acting in its capacity as
Custodian.
Section 9.4 Company-Owned Notes Disregarded. In
determining whether the holders of the requisite aggregate
principal amount of Notes have concurred in any direction,
consent, waiver or other action under this Indenture, Notes which
are owned by the Company or any other obligor on the Notes or by
any person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company or any
other obligor on the Notes shall be disregarded and deemed not to
be outstanding for the purpose of any such determination; provided
that for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, consent, waiver or
other action, only Notes which a Responsible Officer knows are so
owned shall be so disregarded. Notes so owned which have been
pledged in good faith may be regarded as outstanding for the
purposes of this Section 9.4 if the pledgee shall establish to the
satisfaction of the Trustee the pledger's right to vote such Notes
and that the pledgee is not the Company, any other obligor on the
Notes or a person directly or indirectly controlling or controlled
by or under direct or indirect common control with the Company or
any such other obligor. In the case of a dispute as to such
right, any decision by the Trustee taken upon the advice of
counsel shall be full protection to the Trustee. Upon request of
the Trustee, the Company shall furnish to the Trustee promptly an
Officers' Certificate listing and identifying all Notes, if any,
known by the Company to be owned or held by or for the account of
any of the above described persons; and subject to Section 8.1,
the Trustee shall be entitled to accept such Officers' Certificate
as conclusive evidence of the facts therein set forth and of the
fact that all Notes not listed therein are outstanding for the
purpose of any such determination.
Section 9.5 Revocation of Consents, Future Holders
Bound. At any time prior to (but not after) the evidencing to the
Trustee, as provided in Section 9.1, of the taking of any action
by the holders of the percentage in aggregate principal amount of
the Notes specified in this Indenture in connection with such
action, any holder of a Note which is shown by the evidence to be
included in the Notes the holders of which have consented to such
action may, by filing written notice with the Trustee at its
Corporate Trust Office and upon proof of holding as provided in
Section 9.2, revoke such action so far as concerns such Note.
Except as aforesaid, any such action taken by the holder of any
Note shall be conclusive and binding upon such holder and upon all
future holders and owners of such Note and of any Notes issued in
exchange or substitution therefor, irrespective of whether any
notation in regard thereto is made upon such Note or any Note
issued in exchange or substitution therefor.
ARTICLE X
NOTEHOLDERS MEETINGS
Section 10.1 Purposes for Which Meetings May be Called.
A meeting of Noteholders may be called at any time and from time
to time pursuant to the provisions of this Article X for any of
the following purposes:
(i) to give any notice to the Company or to the
Trustee, or to give any directions to the Trustee, or to consent
to the waiving of any default hereunder and its consequences, or
to take any other action authorized to be taken by Noteholders
pursuant to any of the provisions of Article VII;
(ii) to remove the Trustee and appoint a successor
trustee pursuant to the provisions of Article VIII;
(iii) consent to the execution of an indenture or
indentures supplemental hereto pursuant to the provisions of
Section 11.2; or
(iv) to take any other action authorized to be taken by
or on behalf of the holders of any specified aggregate principal
amount of the Notes under any other provisions of this Indenture
or under applicable law.
Section 10.2 Manner of Calling Meetings; Record Date.
The Trustee may at any time call a meeting of Noteholders to take
any action specified in Section 10.1, to be held at such time and
at such place in the City of Boston, Commonwealth of
Massachusetts, as the Trustee shall determine. Notice of every
meeting of the Noteholders, setting forth the time and the place
of such meeting and in general terms the action proposed to be
taken at such meeting, shall be mailed not less than 30 nor more
than 60 days prior to the date fixed for the meeting to such
Noteholders at their addresses as such addresses appear in the
Note Register. For the purpose of determining Noteholders
entitled to notice of any meeting of Noteholders, the Trustee
shall fix in advance a date as the record date for such
determination, such date to be a business day not more than ten
days prior to the date of the mailing of such notice as
hereinabove provided. Only persons in whose name any Note shall
be registered in the Note Register at the close of business on a
record date fixed by the Trustee as aforesaid, or by the Company
or the Noteholders as in Section 10.3 provided, shall be entitled
to notice of the meeting of Noteholders with respect to which such
record date was so fixed.
Section 10.3 Call of Meeting by Company or Noteholders.
In case at any time the Company, pursuant to a resolution of its
Board of Directors or the holders of at least ten percent in
aggregate principal amount of the Notes then outstanding, shall
have requested the Trustee to call a meeting of Noteholders to
take any action authorized in Section 10.1 by written request
setting forth in reasonable detail the action proposed to be taken
at the meeting, and the Trustee shall not have mailed notice of
such meeting within 20 days after receipt of such request, then
the Company or the holders of Notes in the amount above specified,
as the case may be, may fix the record date with respect to, and
determine the time and the place in said City of Boston for, such
meeting and may call such meeting to take any action authorized in
Section 10.1, by mailing notice thereof as provided in Section
10.2. The record date fixed as provided in the preceding sentence
shall be set forth in a written notice to the Trustee and shall be
a business day not less than 15 nor more than 20 days after the
date on which such notice is sent to the Trustee.
Section 10.4 Who may Attend and Vote at Meetings. Only
persons entitled to receive notice of a meeting of Noteholders and
their respective proxies duly appointed by an instrument in
writing shall be entitled to vote at such meeting. The only
persons who shall be entitled to be present or to speak at any
meeting of Noteholders shall be the persons entitled to vote at
such meeting and their counsel and any representatives of the
Trustee and its counsel and any representatives of the Company and
its counsel. When a determination of Noteholders entitled to vote
at any meeting of Noteholders has been made as provided in this
Section, such determination shall apply to any adjournments
thereof.
Section 10.5 Manner of Voting at Meetings and Record to
be Kept. The vote upon any resolution submitted to any meeting of
Noteholders shall be by written ballots on each of which shall be
subscribed the signature of the Noteholder or proxy casting such
ballot and the identifying number or numbers of the Notes held or
represented in respect of which such ballot is cast. The
permanent chairman of the meeting shall appoint two inspectors of
votes who shall count all votes cast at the meeting for or against
any resolution and who shall make and file with the secretary of
the meeting their verified written reports in duplicate of all
votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Noteholders shall be prepared by
the secretary of the meeting and there shall be attached to said
record the original reports of the inspectors of votes on any vote
by ballot taken thereat and affidavits by one or more persons
having knowledge of the facts setting forth a copy of the notice
of the meeting and showing that said notice was mailed as provided
in Section 10.2. The record shall show the identifying numbers of
the Notes voting in favor of or against any resolution. Each
counterpart of such record shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting
and one of the counterparts shall be delivered to the Company and
the other to the Trustee to be preserved by the Trustee.
Any counterpart record so signed and verified shall be
conclusive evidence of the matters therein stated and shall be the
record referred to in clause (b) of Section 9.1.
Section 10.6 Exercise of Rights of Trustee and
Noteholders not to be Hindered or delayed. Nothing in this
Article X contained shall be deemed or construed to authorize or
permit, by reason of any call of a meeting of Noteholders or any
rights expressly or impliedly conferred hereunder to make such
call, any hindrance or delay in the exercise of any right or
rights conferred upon or reserved to the Trustee or to the
Noteholders under any of the provisions of this Indenture or of
the Notes.
ARTICLE XI
SUPPLEMENTAL INDENTURES
Section 11.1 Supplemental Indentures Without Consent of
Noteholders. The Company, when authorized by a Board Resolution,
and the Trustee may from time to time and at any time enter into
an indenture or indentures supplemental hereto for one or more of
the following purposes:
(a) to make provision with respect to the conversion
rights of the holders of Notes pursuant to the requirements of
Section 15.6;
(b) subject to Article IV, to convey, transfer, assign,
mortgage or pledge to the Trustee as security for the Notes, any
property or assets;
(c) to evidence the succession of another person to the
Company, or successive successions, and the assumption by the
Successor Company of the covenants, agreements and obligations of
the Company pursuant to Article XII;
(d) to add to the covenants of the Company such further
covenants, restrictions or conditions as the Board of Directors
and the Trustee shall consider to be for the benefit of the
holders of Notes and to make the occurrence, or the occurrence and
continuance, of a default in any such additional covenants,
restrictions or conditions a default or an Event of Default
permitting the enforcement of all or any of the several remedies
provided in this Indenture as herein set forth; provided, however,
that in respect of any such additional covenant, restriction or
condition, such supplemental indenture may provide for a
particular period of grace after default (which period may be
shorter or longer than that allowed in the case of other defaults)
or may provide for an immediate enforcement upon such default or
may limit the remedies available to the Trustee upon such default;
(e) to provide for the issuance under this Indenture of
Notes in coupon form (including Notes registrable as to principal
only) and to provide for exchangeability of such Notes with the
Notes issued hereunder in fully registered form and to make all
appropriate changes for such purpose;
(f) to cure any ambiguity or to correct or supplement
any provision contained herein or in any supplemental indenture
which may be defective or inconsistent with any other provision
contained herein or in any supplemental indenture, or to make such
other provisions in regard to matters or questions arising under
this Indenture which shall not materially adversely affect the
interests of the holders of the Notes;
(g) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee with respect to the
Notes;
(h) to modify, eliminate or add to the provisions of
this Indenture to such extent as shall be necessary to effect the
qualifications of this Indenture under the Trust Indenture Act (if
applicable), or under any similar federal statute hereafter
enacted (if applicable); or
(i) to modify, eliminate or add to the provisions of
this Indenture to allow for the issuance of one or more Notes in
global form, in addition to the global Note provided for herein,
representing beneficial interests in Notes issued outside the
United States in reliance on Regulation S under the Securities
Act, with such transfer restrictions and legends as are consistent
with such Regulation, and to add provisions relating to the
exchange and transfer of beneficial interests in any Note or Notes
represented by any such global Note or Notes, any definitive Note
and any global Note referred to in Section 2.5(b) hereof.
The Trustee is hereby authorized to join with the
Company in the execution of any such supplemental indenture, to
make any further appropriate agreements and stipulations which may
be therein contained and to accept the conveyance, transfer and
assignment of any property thereunder, but the Trustee shall not
be obligated to, but may in its discretion, enter into any
supplemental indenture which affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions
of this Section 11.1 may be executed by the Company and the
Trustee without the consent of the holders of any of the Notes at
the time outstanding, notwithstanding any of the provisions of
Section 11.2.
Section 11.2 Supplemental Indentures with Consent of
Noteholders. With the consent (evidenced as provided in Article
IX) of the holders of not less than a majority in aggregate
principal amount of the Notes at the time outstanding, the
Company, when authorized by a Board Resolution, and the Trustee
may from time to time and at any time enter into an indenture or
indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or any supplemental indenture or of
modifying in any manner the rights of the holders of the Notes;
provided, however, that no such supplemental indenture shall (i)
extend the fixed maturity of any Note, or reduce the rate or
extend the time of payment of interest thereon, or reduce the
principal amount thereof or premium, if any, thereon or reduce any
amount payable on redemption thereof, alter the obligation of the
Company to redeem the Notes at the option of the holder upon the
occurrence of a Change of Control or impair or affect the right of
any Noteholder to institute suit for the payment thereof or make
the principal thereof or interest or premium, if any, thereon
payable in any coin or currency other than that provided in the
Notes or impair the right to exchange the Notes for Preferred
Stock or the right to convert the Notes into Common Stock subject
to the terms set forth herein, including Sections 15.6 and 17.6,
without the consent of the holder of each Note so affected or (ii)
reduce the aforesaid percentage of Notes, the holders of which are
required to consent to any such supplemental indenture, without
the consent of the holders of all Notes then outstanding.
Upon the request of the Company, accompanied by a copy
of a Board Resolution certified by its Secretary or Assistant
Secretary authorizing the execution of any such supplemental
indenture and the Officer's Certificate and Opinion of Counsel
required by Section 11.5, and upon the filing with the Trustee of
evidence of the consent of Noteholders as aforesaid, the Trustee
shall join with the Company in the execution of such supplemental
indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such supplemental indenture.
It shall not be necessary for the consent of the
Noteholders under this Section 11.2 to approve the particular form
of any proposed supplemental indenture, but it shall be sufficient
if such consent shall approve the substance thereof.
Section 11.3 Effect of Supplemental Indentures. Any
supplemental indenture executed pursuant to the provisions of this
Article XI shall comply with the Trust Indenture Act, as then in
effect, if such supplemental indenture is then required to so
comply. Upon the execution of any supplemental indenture pursuant
to the provisions of this Article XI, this Indenture shall be and
be deemed to be modified and amended in accordance therewith and
the respective rights, limitation of rights, obligations, duties
and immunities under this Indenture of the Trustee, the Company
and the holders of Notes shall thereafter be determined, exercised
and enforced hereunder subject in all respects to such
modifications and amendments and all the terms and conditions of
any such supplemental indenture shall be and be deemed to be part
of the terms and conditions of this Indenture for any and all
purposes.
Section 11.4 Notation on Notes. Notes authenticated
and delivered after the execution of any supplemental indenture
pursuant to the provisions of this Article XI may bear a notation
in form approved by the Trustee as to any matter provided for in
such supplemental indenture. If the Company or the Trustee shall
so determine, new Notes so modified as to conform, in the opinion
of the Trustee and the Board of Directors, to any modification of
this Indenture contained in any such supplemental indenture may,
at the Company's expense, be prepared and executed by the Company,
authenticated by the Trustee (or an authenticating agent duly
appointed by the Trustee pursuant to Section 16.12) and delivered
in exchange for the Notes then outstanding, upon surrender of such
Notes then outstanding.
Section 11.5 Evidence of Compliance of Supplemental
Indenture to be Furnished Trustee. The Trustee shall be furnished
with and, subject to the provisions of Sections 8.1 and 8.2, may
rely upon an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed
pursuant hereto complies with the requirements of this Article XI.
ARTICLE XII
CONSOLIDATION, MERGER, SALE, CONVEYANCE,
TRANSFER AND LEASE
Section 12.1 Company May Consolidate, Etc. on Certain
Terms. The Company shall not consolidate with or merge with or
into, or convey, transfer or lease all or substantially all of its
assets to any Person unless: (i) either the Company is the
resulting, surviving or transferee person (the "Successor
Company") or the Successor Company is a person organized and
existing under the laws of the United States or any State thereof
or the District of Columbia, and the Successor Company (if not the
Company) expressly assumes by a supplemental indenture, executed
and delivered to the Trustee, in form satisfactory to the Trustee,
all the obligations of the Company under this Indenture and the
Notes, including the rights pursuant to Article XV hereof; (ii)
immediately after giving effect to such transaction, no Event of
Default has happened and is continuing; and (iii) the Company
delivers to the Trustee an Officer's Certificate and an Opinion of
Counsel, each stating that such consolidation, merger or transfer
and such supplemental indenture (if any) comply with this
Indenture.
Section 12.2 Successor Company to Be Substituted. In
case of any such consolidation, merger, sale, conveyance, transfer
or lease and upon the assumption by the Successor Company, by
supplemental indenture, executed and delivered to the Trustee and
satisfactory in form to the Trustee, of the due and punctual
payment of the principal of, premium, if any, and interest on all
of the Notes and the due and punctual performance of all of the
covenants and conditions of this Indenture to be performed by the
Company, such Successor Company shall succeed to and be
substituted for the Company, with the same effect as if it had
been named herein as the party of the first part. Such Successor
Company thereupon may cause to be signed, and may issue either in
its own name or in the name of SoftKey International Inc. any or
all of the Notes issuable hereunder which theretofore shall not
have been signed by the Company and delivered to the Trustee; and,
upon the order of such Successor Company instead of the Company
and subject to all the terms, conditions and limitations in this
Indenture prescribed, the Trustee shall authenticate and shall
deliver, or cause to be authenticated and delivered, any Notes
which previously shall have been signed and delivered by the
officers of the Company to the Trustee for authentication, and any
Notes which such Successor Company thereafter shall cause to be
signed and delivered to the Trustee for that purpose. All the
Notes so issued shall in all respects have the same legal rank and
benefit under this Indenture as the Notes theretofore or
thereafter issued in accordance with the terms of this Indenture
as though all of such Notes had been issued at the date of the
execution hereof. In the event of any such consolidation, merger,
sale, conveyance, transfer or lease, the person named as the
"Company" in the first paragraph of this Indenture or any
successor which shall thereafter have become such in the manner
prescribed in this Article XII may be dissolved, wound up and
liquidated at any time thereafter and such person shall be
released from its liabilities as obligor and maker of the Notes
and from its obligations under this Indenture.
In case of any such consolidation, merger, sale,
conveyance, transfer or lease, such changes in phraseology and
form (but not in substance) may be made in the Notes thereafter to
be issued as may be appropriate.
Section 12.3 Opinion of Counsel to Be Given Trustee.
The Trustee subject to Sections 8.1 and 8.2, shall receive an
Officers' Certificate and an Opinion of Counsel as conclusive
evidence that any such consolidation, merger, sale, conveyance,
transfer or lease and any such assumption complies with the
provisions of this Article XII.
ARTICLE XIII
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS
Section 13.1 Legal Defeasance and Covenant Defeasance
of the Notes.
(a) The Company may, at its option by Board Resolution,
at any time, with respect to the Notes, elect to have either
paragraph (b) or paragraph (c) below be applied to the outstanding
Notes upon compliance with the conditions set forth in paragraph
(d).
(b) Upon the Company's exercise under paragraph (a) of
the option applicable to this paragraph (b), the Company shall be
deemed to have been released and discharged from its obligations
with respect to the outstanding Notes on the date the conditions
set forth below are satisfied (hereinafter, "legal defeasance").
For this purpose, such legal defeasance means that the Company
shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Notes, which shall
thereafter be deemed to be "outstanding" only for the purposes of
the Sections of and matters under this Indenture referred to in
(i) and (ii) below and to have satisfied all its other obligations
under such Notes and this Indenture insofar as such Notes are
concerned, except for the following which shall survive until
otherwise terminated or discharged hereunder: (i) the rights of
holders of outstanding Notes to receive solely from the trust fund
described in paragraph (d) below and as more fully set forth in
such paragraph, payments in respect of the principal of, premium,
if any, and interest on such Notes when such payments are due,
(ii) obligations listed in Section 13.3 and (iii) the obligations
of the Company pursuant to Section 5.6.
(c) Upon the Company's exercise under paragraph (a) of
the option applicable to this paragraph (c), the Company shall be
released and discharged from its obligations under any covenant
contained in Article XII and in Sections 3.5, 5.3, 5.4, 5.5 and
5.7 with respect to the outstanding Notes on and after the date
the conditions set forth in paragraph (d) are satisfied
(hereinafter, "covenant defeasance"), and the Notes shall
thereafter be deemed to be not "outstanding" for the purpose of
any direction, waiver, consent or declaration or act of Holders
(and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all
other purposes hereunder. For this purpose, such covenant
defeasance means that, with respect to the outstanding Notes, the
Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of
any reference in any such covenant to any other provision herein
or in any other document, and such omission to comply shall not
constitute a Default or an Event of default under Section 7.1(c),
but, except as specified above, the remainder of this Indenture
and such Notes shall be unaffected thereby.
(d) The following shall be the conditions to application of
either paragraph (b) or paragraph (c) above to the outstanding
Notes:
(i) The Company shall have irrevocably deposited
in trust with the Trustee, pursuant to an irrevocable trust
and security agreement in form and substance satisfactory to
the Trustee, cash or U.S. Government Obligations maturing as
to principal and interest at such times, or a combination
thereof, in such amounts as are sufficient, without
consideration of the reinvestment of such interest and after
payment of all federal, state and local taxes or other
charges or assessments in respect thereof payable by the
Trustee, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written
certification thereof (in form and substance reasonably
satisfactory to the Trustee) delivered to the Trustee, to pay
the principal of, premium, if any, and interest on the
outstanding Notes on the dates on which any such payments are
due and payable in accordance with the terms of this
Indenture and of the Notes;
(ii) (A) No Event of Default shall have occurred or be
continuing on the date of such deposit, and (B) no Default or
Event of Default under Section 7.1(d) or 7.1(e) shall occur
on or before the 123rd day after the date of such deposit;
(iii) Such deposit will not result in a Default under
this Indenture or a breach or violation of, or constitute a
default under, any other instrument or agreement to which the
Company is a party or by which it or its property is bound;
(iv) In the case of a legal defeasance under paragraph
(b) above, the Company has delivered to the Trustee an
Opinion of Counsel stating that (A) the Company has received
from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the date of this Indenture,
there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon
such opinion shall confirm that, the holders of the Notes
will not recognize income, gain or loss for federal income
tax purposes as a result of such deposit, defeasance and
discharge and will be subject to federal income tax on the
same amounts and in the same manner and at the same times as
would have been the case if such deposit, defeasance and
discharge had not occurred; and, in the case of a covenant
defeasance under paragraph (c) above, the Company shall
deliver to the Trustee an Officers' Certificate and an
Opinion of Counsel, in form and substance reasonably
satisfactory to the Trustee, to the effect that holders of
the Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such deposit and
defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as
would have been the case if such deposit and defeasance had
not occurred;
(v) The holders shall have a perfected security
interest under applicable law in the cash or U.S. Government
Obligations deposited pursuant to Section 13(d)(i) above;
(vi) The Company shall have delivered to the Trustee an
Opinion of Counsel, in form and substance reasonably
satisfactory to the Trustee, to the effect that, after the
passage of 123 days following the deposit, the trust funds
will not be subject to any applicable bankruptcy, insolvency,
reorganization or similar law affecting creditors' rights
generally;
(vii) Such defeasance shall not cause the Trustee to
have a conflicting interest with respect to any securities of
the Company; and
(viii) The Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent specified herein relating to
the defeasance contemplated by this Section 13.1 have been
complied with;
provided, however, that no deposit under clause (d)(i) above shall
be effective to terminate the obligations of the Company under the
Notes or this Indenture prior to 123 days following any such
deposit.
Section 13.2 Termination of Obligations upon
Cancellation of the Notes. In addition to the Company's rights
under Section 13.1, the Company may terminate all of its
obligations under this Indenture (subject to Section 13.3 and any
obligations of the Company under Section 5.6 with respect to any
Common Stock issued upon conversion of the Notes or any Preferred
Stock issued upon exchange of the Notes) when:
(a) (i) all Notes theretofore authenticated and
delivered (other than Notes which have been destroyed, lost
or stolen and which have been replaced or paid as provided in
Section 2.6) have been delivered to the Trustee for
cancellation;
(ii) the Company has paid or caused to be paid all other
sums payable hereunder and under the Notes by the Company;
and
(iii) the Company has delivered to the Trustee an
Officers' Certificate, stating that all conditions precedent
specified herein relating to the satisfaction and discharge
of this Indenture have been complied with; or
(b) (i) the Notes not previously delivered to the
Trustee for cancellation will have become due and payable or
are by their terms to become due and payable within one year
or are to be called for redemption under arrangements
satisfactory to the Trustee upon delivery of notice; (ii) the
Company will have irrevocably deposited with the Trustee, as
trust funds, cash, in an amount sufficient to pay principal
of and interest on the outstanding Notes, to maturity or
redemption, as the case may be; (iii) such deposit will not
result in a breach or violation of, or constitute a default
under, any agreement or instrument pursuant to which the
Company is a party or by which it or its property is bound;
and (iv) and the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating
that all conditions related to such defeasance have been
complied with.
Section 13.3 Survival of Certain Obligations.
Notwithstanding the satisfaction and discharge of this Indenture
and of the Notes referred to in Section 13.1 or 13.2, the
respective obligations of the Company and the Trustee under
Sections 2.3, 2.4, 2.5, 2.6, 2.8, 2.9, 5.2, 6.1, 7.4, 7.9, 8.6,
8.10, 13.5, 13.6 and 13.7 shall survive until the Notes are no
longer outstanding, and thereafter, the obligations of the Company
and the Trustee under Sections 7.9, 8.6, 13.5, 13.6 and 13.7 shall
survive. Nothing contained in this Article XIII shall abrogate
any of the rights, obligations or duties of the Trustee under this
Indenture.
Section 13.4 Acknowledgment of Discharge by Trustee.
Subject to Section 13.7, after (i) the conditions of Section 13.1
or 13.2 have been satisfied, (ii) the Company has paid or caused
to be paid all other sums payable hereunder by the Company and
(iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent referred to in clause (i) above relating to
the satisfaction and discharge of this Indenture have been
complied with, the Trustee upon written request shall acknowledge
in writing the discharge of the Company's obligations under this
Indenture except for those surviving obligations specified in
Section 13.3.
Section 13.5 Application of Trust Assets. The Trustee
shall hold any cash or U.S. Government Obligations deposited with
it in the irrevocable trust established pursuant to Section 13.1
or 13.2, as the case may be. The Trustee shall apply the
deposited cash or the U.S. Government Obligations, together with
earnings thereon in accordance with this Indenture and the terms
of the irrevocable trust agreement established pursuant to Section
13.1 or 13.2, as the case may be, to the payment of principal of,
premium, if any, and interest on the Notes. The cash or U.S.
Government Obligations so held in trust and deposited with the
Trustee in compliance with Section 13.1 or 13.2, as the case may
be, shall not be part of the trust estate under this Indenture,
but shall constitute a separate trust fund for the benefit of all
holders entitled thereto. Except as specifically provided herein,
the Trustee shall not be requested to invest any amounts held by
it for the benefit of the holders or pay interest on uninvested
amounts to any holder.
Section 13.6 Repayment to the Company; Unclaimed Money.
Upon termination of the trust established pursuant to Section 13.1
or 13.2, as the case may be, the Trustee shall promptly pay to the
Company upon request any excess cash or U.S. Government
Obligations held by them. Additionally, if amounts for the
payment of principal, premium, if any, or interest remains
unclaimed for six years, the Trustee will pay such amounts back to
the Company forthwith. Thereafter, all liability of the Trustee
with respect to such amounts shall cease.
Subject to applicable laws governing escheat of such
property, the Trustee shall pay to the Company upon request, and,
if applicable, in accordance with the irrevocable trust
established pursuant to Section 13.1 or 13.2, any cash or U.S.
Government Obligations held by them for the payment of principal
of, premium, if any, or interest on the Notes that remain
unclaimed for six years after the date on which such payment shall
have become due. After payment to the Company, Holders entitled
to such payment must look to the Company for such payment as
general creditors unless an applicable abandoned property law
designates another person.
Section 13.7 Reinstatement. If the Trustee is unable
to apply any cash or U.S. Government Obligations in accordance
with Section 13.1 or 13.2 by reason of any legal proceeding or by
reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and
the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 13.1 or 13.2 until such time as the
Trustee is permitted to apply all such cash or U.S. Government
Obligations in accordance with Section 13.1 or 13.2, as the case
may be; provided that if the Company makes any payment of
principal of, premium, if any, or interest on any Notes following
the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Notes to receive
such payment from the amounts held by the Trustee.
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
Section 14.1 Indenture and Notes Solely Corporate
Obligations. No recourse for the payment of the principal of, or
premium, if any, or interest on any Note, or for any claim based
thereon or otherwise in respect thereof, and no recourse under or
upon any obligation, covenant or agreement of the Company in this
Indenture or in any supplemental indenture or in any Note, or
because of the creation of any indebtedness represented thereby,
shall be had against any incorporator, stockholder, officer or
director, as such, past, present or future, of the Company or of
any successor entity, either directly or through the Company or
any successor entity, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise; it being expressly understood that all such
liability is hereby expressly waived and released as a condition
of, and as a consideration for, the execution of this Indenture
and the issue of the Notes.
ARTICLE XV
CONVERSION OF NOTES
Section 15.1 Right to Convert. Subject to and upon
compliance with the provisions of this Indenture, the holder of
any Note shall have the right, at his option, at any time prior to
the close of business on November 1, 2000 (except that, with
respect to any Note or portion of a Note which shall be called for
redemption or delivered for repurchase, such right shall
terminate, except as provided in the fourth paragraph of Section
15.2, at the close of business on the last Trading Day prior to
the date fixed for redemption of such Note or portion of a Note
unless the Company shall default in payment due upon redemption
thereof) to convert the principal amount of any such Note, or any
portion of such principal amount which is $1,000 or an integral
multiple thereof, into that number of fully paid and nonassessable
shares of Common Stock (as such shares shall then be constituted)
obtained by dividing the principal amount of the Note or portion
thereof surrendered for conversion by the Conversion Price in
effect at such time, by surrender of the Note so to be converted
in whole or in part in the manner provided in Section 15.2. A
holder of Notes is not entitled to any rights of a holder of
Common Stock until such holder has converted his Notes to Common
Stock, and only to the extent such Notes are deemed to have been
converted to Common Stock under this Article XV.
Section 15.2 Exercise of Conversion Privilege; Issuance
of Common Stock on Conversion; No Adjustment for Interest or
Dividends. In order to exercise the conversion privilege with
respect to any Note in definitive form, the holder of any such
Note to be converted in whole or in part shall surrender such
Note, duly endorsed, at an office or agency maintained by the
Company pursuant to Section 5.2, accompanied by the funds, if any,
required by the penultimate paragraph of this Section 15.2, and
shall give written notice of conversion in the form provided on
the Notes (or such other notice which is acceptable to the
Company) to the office or agency that the holder elects to convert
such Note or the portion thereof specified in said notice. Such
notice shall also state the name or names (with address) in which
the certificate or certificates for shares of Common Stock which
shall be issuable on such conversion shall be issued and shall be
accompanied by transfer taxes, if required pursuant to Section
15.7. Each such Note surrendered for conversion shall, unless the
shares issuable on conversion are to be issued in the same name as
the registration of such Note, be duly endorsed by, or be
accompanied by instruments of transfer in form satisfactory to the
Company duly executed by, the holder or his duly authorized
attorney.
In order to exercise the conversion privilege with
respect to any interest in a Note in global form, the beneficial
holder must complete the appropriate instruction form for
conversion pursuant to the Depositary's book-entry conversion
program and follow the other procedures set forth in such program.
As promptly as practicable after satisfaction of the
requirements for conversion set forth above, subject to compliance
with any restrictions on transfer if shares issuable on conversion
are to be issued in a name other than that of the Noteholder (as
if such transfer were a transfer of the Note or Notes (or portion
thereof) so converted), the Company shall issue and shall deliver
to such holder at the office or agency maintained by the Company
for such purpose pursuant to Section 5.2, a certificate or
certificates for the number of full shares issuable upon the
conversion of such Note or portion thereof in accordance with the
provisions of this Article XV and a check or cash in respect of
any fractional interest in respect of a share of Common Stock
arising upon such conversion, as provided in Section 15.3. In case
any Note of a denomination greater than $1,000 shall be
surrendered for partial conversion, and subject to Section 2.3,
the Company shall execute and the Trustee shall authenticate and
deliver to the holder of the Note so surrendered, without charge
to him, a new Note or Notes in authorized denominations in an
aggregate principal amount equal to the unconverted portion of the
surrendered Note.
Each conversion shall be deemed to have been effected as
to any such Note (or portion thereof) on the date on which the
requirements set forth above in this Section 15.2 have been
satisfied as to such Note (or portion thereof), and the person in
whose name any certificate or certificates for shares of Common
Stock shall be issuable upon such conversion shall be deemed to
have become on said date the holder of record of the shares
represented thereby; provided, however, that any such surrender on
any date when the stock transfer books of the Company shall be
closed shall constitute the person in whose name the certificates
are to be issued as the record holder thereof for all purposes on
the next succeeding day on which such stock transfer books are
open, but such conversion shall be at the Conversion Price in
effect on the date upon which such Note shall have been
surrendered.
Any Note or portion thereof surrendered for conversion
during the period from the close of business on the record date
for any interest payment date through the close of business on the
Trading Day next preceding such interest payment date shall
(unless such Note or portion thereof being converted shall have
been called for redemption on a date in such period) be
accompanied by payment, in funds acceptable to the Company, of an
amount equal to the interest otherwise payable on such interest
payment date on the principal amount being converted; provided,
however, that no such payment need be made if there shall exist at
the time of conversion a default in the payment of interest on the
Notes. An amount equal to such payment shall be paid by the
Company on such interest payment date to the holder of such Note
at the close of business on such record date; provided, however,
that if the Company shall default in the payment of interest on
such interest payment date, such amount shall be paid to the
person who made such required payment. Except as provided above
in this Section 15.2, no adjustment shall be made for interest
accrued on any Note converted or for dividends on any shares
issued upon the conversion of such Note as provided in this
Article.
Upon the conversion of an interest in a Note in global
form, the Trustee, or the Custodian at the direction of the
Trustee, shall make an adjustment on its records with respect to
such Note in global form as to the reduction in the principal
amount represented thereby.
Section 15.3 Cash Payments in Lieu of Fractional
Shares. No fractional shares of Common Stock or scrip
representing fractional shares shall be issued upon conversion of
Notes. If more than one Note shall be surrendered for conversion
at one time by the same holder, the number of full shares which
shall be issuable upon conversion shall be computed on the basis
of the aggregate principal amount of the Notes (or specified
portions thereof to the extent permitted hereby) so surrendered.
If any fractional share of stock would be issuable upon the
conversion of any Note or Notes, the Company shall make an
adjustment therefor in cash at the current market value thereof.
The current market value of a share of Common Stock shall be the
Closing Price on the first Trading Day immediately preceding the
day on which the Notes (or specified portions thereof) are deemed
to have been converted and such Closing Price shall be determined
as provided in Section 15.5(g).
Section 15.4 Conversion Price. The conversion price
shall be as specified in the forms of Notes (herein called the
"Conversion Price") attached as Exhibits A and B hereto, subject
to adjustment as provided in this Article XV.
Section 15.5 Adjustment of Conversion Price. The
Conversion Price shall be adjusted from time to time by the
Company as follows:
(a) In case the Company shall hereafter pay a dividend
or make a distribution to all holders of the outstanding Common
Stock in shares of Common Stock, the Conversion Price in effect at
the opening of business on the date following the date fixed for
the determination of stockholders entitled to receive such
dividend or other distribution shall be reduced by multiplying
such Conversion Price by a fraction the numerator of which shall
be the number of shares of Common Stock outstanding at the close
of business on the Record Date (as defined in Section 15.5(g))
fixed for such determination and the denominator of which shall be
the sum of such number of shares and the total number of shares
constituting such dividend or other distribution, such reduction
to become effective immediately after the opening of business on
the day following the Record Date. The Company will not pay any
dividend or make any distribution on shares of Common Stock held
in the treasury of the Company.
(b) In case the Company shall issue rights or warrants
to all holders of its outstanding shares of Common Stock entitling
them (for a period expiring within 45 days after the date fixed
for determination of stockholders entitled to receive such rights
or warrants) to subscribe for or purchase shares of Common Stock
at a price per share less than the Current Market Price (as
defined in Section 15.5(g)) on the Record Date fixed for
determination of stockholders entitled to receive such rights or
warrants, the Conversion Price shall be adjusted so that the same
shall equal the price determined by multiplying the Conversion
Price in effect at the opening of business on the date after the
Record Date by a fraction the numerator of which shall be the
number of shares of Common Stock outstanding at the close of
business on the Record Date plus the number of shares which the
aggregate offering price of the total number of shares so offered
would purchase at such Current Market Price, and the denominator
of which shall be the number of shares of Common Stock outstanding
on the close of business on the Record Date plus the total number
of additional shares of Common Stock so offered for subscription
or purchase. Such adjustment shall become effective immediately
after the opening of business on the day following the Record Date
fixed for determination of stockholders entitled to receive such
rights or warrants. To the extent that shares of Common Stock are
not delivered after the expiration or termination of such rights
or warrants, the Conversion Price shall be readjusted to the
Conversion Price which would then be in effect had the adjustments
made upon the issuance of such rights or warrants been made on the
basis of delivery of only the number of shares of Common Stock
actually delivered. In the event that such rights or warrants are
not so issued, the Conversion Price shall again be adjusted to be
the Conversion Price which would then be in effect if such date
fixed for the determination of stockholders entitled to receive
such rights or warrants had not been fixed. In determining
whether any rights or warrants entitle the holders to subscribe
for or purchase shares of Common Stock at less than such Current
Market Price, and in determining the aggregate offering price of
such shares of Common Stock, there shall be taken into account any
consideration received for such rights or warrants, the value of
such consideration, if other than cash, to be determined by the
Board of Directors.
(c) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
Conversion Price in effect at the opening of business on the day
following the day upon which such subdivision becomes effective
shall be proportionately reduced, and conversely, in case
outstanding shares of Common Stock shall be combined into a
smaller number of shares of Common Stock, the Conversion Price in
effect at the opening of business on the day following the day
upon which such combination becomes effective shall be
proportionately increased, such reduction or increase, as the case
may be, to become effective immediately after the opening of
business on the day following the day upon which such subdivision
or combination becomes effective.
(d) In case the Company shall, by dividend or
otherwise, distribute to all holders of its Common Stock shares of
any class of capital stock of the Company (other than any
dividends or distributions to which Section 15.5(a) applies) or
evidences of its indebtedness or assets (including securities, but
excluding any rights or warrants referred to in Section 15.5(b),
and excluding any dividend or distribution (x) in connection with
the liquidation, dissolution or winding-up of the Company, whether
voluntary or involuntary, (y) exclusively in cash or (z) referred
to in Section 15.5(a) (any of the foregoing hereinafter in this
Section 15.5(d) called the "Securities"), then, in each such case,
the Conversion Price shall be reduced so that the same shall be
equal to the price determined by multiplying the Conversion Price
in effect immediately prior to the close of business on the Record
Date (as defined in Section 15.5(g)) with respect to such
distribution by a fraction of which the numerator shall be the
Current Market Price (determined as provided in Section 15.5(g))
on such date less the fair market value (as determined by the
Board of Directors, whose determination shall be conclusive and
described in a Board Resolution) on such date of the portion of
the Securities so distributed applicable to one share of Common
Stock and the denominator shall be such Current Market Price, such
reduction to become effective immediately prior to the opening of
business on the day following the Record Date; provided, however,
that in the event the then fair market value (as so determined) of
the portion of the Securities so distributed applicable to one
share of Common Stock is equal to or greater than the Current
Market Price on the Record Date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each
Noteholder shall have the right to receive upon conversion the
amount of Securities such holder would have received had such
holder converted each Note on such date. In the event that such
dividend or distribution is not so paid or made, the Conversion
Price shall again be adjusted to be the Conversion Price which
would then be in effect if such dividend or distribution had not
been declared. If the Board of Directors determines the fair
market value of any distribution for purposes of this Section
15.5(d) by reference to the actual or when issued trading market
for any securities comprising all or part of such distribution, it
must in doing so consider the prices in such market over the same
period used in computing the Current Market Price pursuant to
Section 15.5(g) to the extent possible.
Notwithstanding the foregoing provisions of this Section
15.5(d), no adjustment shall be made hereunder for any
distribution of Securities if the Company makes proper provision
so that each Noteholder who converts such Note (or any portion
thereof) after the date fixed for determination of stockholders
entitled to receive such distribution shall be entitled to receive
upon such conversion, in addition to the shares of Common Stock
issuable upon such conversion, the amount and kind of Securities
that such holder would have been entitled to receive if such
holder had, immediately prior to such determination date,
converted such Note into Common Stock; provided that, with respect
to any Securities that are convertible, exchangeable or
exercisable, the foregoing provision shall only apply to the
extent (and so long as) the Securities receivable upon conversion
of such Note would be convertible, exchangeable or exercisable, as
applicable, without any loss of rights or privileges for a period
of at least 60 days following conversion of such Note.
Rights or warrants distributed by the Company to all
holders of Common Stock entitling the holders thereof to subscribe
for or purchase shares of the Company's capital stock (either
initially or under certain circumstances), which rights or
warrants, until the occurrence of a specified event or events
("Trigger Event"): (i) are deemed to be transferred with such
shares of Common Stock, (ii) are not exercisable and (iii) are
also issued in respect of future issuances of Common Stock, shall
not be deemed distributed for purposes of this Section 15.5(d)
(and no adjustment to the Conversion Price under Section 15.5(d)
will be required) until the occurrence of the earliest Trigger
Event. In addition, in the event of any distribution of rights or
warrants, or any Trigger Event with respect thereto, that shall
have resulted in an adjustment to the Conversion Price under this
Section 15.5(d), (1) in the case of any such rights or warrants
which shall all have been redeemed or repurchased without exercise
by any holders thereof, the Conversion Price shall be readjusted
upon such final redemption or repurchase to give effect to such
distribution or Trigger Event, as the case may be, as though it
were a cash distribution, equal to the per share redemption or
repurchase price received by a holder of Common Stock with respect
to such rights or warrants (assuming such holder had retained such
rights or warrants), made to all holders of Common Stock as of the
date of such redemption or repurchase, and (2) in the case of such
rights or warrants all of which shall have expired or been
terminated without exercise by any holder thereof, the Conversion
Price shall be readjusted as if such issuance had not occurred.
For purposes of this Section 15.5(d) and Sections
15.5(a) and (b), any dividend or distribution to which this
Section 15.5(d) is applicable that also includes shares of Common
Stock, or rights or warrants to subscribe for or purchase shares
of Common Stock (or both), shall be deemed instead to be (1) a
dividend or distribution of the evidences of indebtedness, assets
or shares of capital stock other than such shares of Common Stock
or rights or warrants (and any Conversion Price reduction required
by this Section 15.5(d) with respect to such dividend or
distribution shall then be made) immediately followed by (2) a
dividend or distribution of such shares of Common Stock or such
rights or warrants (and any further Conversion Price reduction
required by Sections 15.5(a) and (b) with respect to such dividend
or distribution shall then be made, except (A) the Record Date of
such dividend or distribution shall be substituted as "the date
fixed for the determination of stockholders entitled to receive
such dividend or other distribution" and "the date fixed for such
determination" within the meaning of Sections 15.5(a) and (b) and
(B) any shares of Common Stock included in such dividend or
distribution shall not be deemed "outstanding at the close of
business on the date fixed for such determination" within the
meaning of Section 15.5(a).
(e) In case the Company shall, by dividend or
otherwise, distribute to all holders of its Common Stock cash
(excluding any cash that is distributed upon a merger or
consolidation to which Section 15.6 applies or as part of a
distribution referred to in Section 15.5(d)) in an aggregate
amount that, combined together with (1) the aggregate amount of
any other such distributions to all holders of its Common Stock
made exclusively in cash within the twelve (12) months preceding
the date of payment of such distribution, and in respect of which
no adjustment pursuant to this Section 15.5(e) has been made, and
(2) the aggregate of any cash plus the fair market value (as
determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution) of consideration
payable in respect of any tender offer, by the Company or any of
its subsidiaries for all or any portion of the Common Stock
concluded within the twelve (12) months preceding the date of
payment of such distribution, and in respect of which no
adjustment pursuant to Section 15.5(f) has been made, exceeds
20.0% of the product of the Current Market Price (determined as
provided in Section 15.5(g)) on the Record Date with respect to
such distribution times the number of shares of Common Stock
outstanding on such date, then, and in each such case, immediately
after the close of business on such date, unless the Company
elects to reserve such cash for distribution to the holders of the
Notes upon the conversion of the Notes so that any such holder
converting Notes will receive upon such conversion, in addition to
the shares of Common Stock to which such holder is entitled, the
amount of cash which such holder would have received if such
holder had, immediately prior to the Record Date for such
distribution of cash, converted its Notes into Common Stock, the
Conversion Price shall be reduced so that the same shall equal the
price determined by multiplying the Conversion Price in effect
immediately prior to the close of business on such date by a
fraction (i) the numerator of which shall be equal to the Current
Market Price on the Record Date less an amount equal to the
quotient of (x) the excess of such combined amount over such 20.0%
and (y) the number of shares of Common Stock outstanding on the
Record Date and (ii) the denominator of which shall be equal to
the Current Market Price on such date; provided, however, that in
the event the portion of the cash so distributed applicable to one
share of Common Stock is equal to or greater than the Current
Market Price of the Common Stock on the Record Date, in lieu of
the foregoing adjustment, adequate provision shall be made so that
each Noteholder shall have the right to receive upon conversion
the amount of cash such holder would have received had such holder
converted each Note on the Record Date. In the event that such
dividend or distribution is not so paid or made, the Conversion
Price shall again be adjusted to be the Conversion Price which
would then be in effect if such dividend or distribution had not
been declared.
(f) In case a tender offer made by the Company or any
of its subsidiaries for all or any portion of the Common Stock
shall expire and such tender offer (as amended upon the expiration
thereof) shall require the payment to stockholders (based on the
acceptance (up to any maximum specified in the terms of the tender
offer) of Purchased Shares (as defined below)) of an aggregate
consideration having a fair market value (as determined by the
Board of Directors, whose determination shall be conclusive and
described in a Board Resolution) that combined together with (1)
the aggregate of the cash plus the fair market value (as
determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution), as of the
expiration of such tender offer, of consideration payable in
respect of any other tender offer, by the Company or any of its
subsidiaries for all or any portion of the Common Stock expiring
within the twelve (12) months preceding the expiration of such
tender offer, and in respect of which no adjustment pursuant to
this paragraph (f) has been made, and (2) the aggregate amount of
any distributions to all holders of the Company's Common Stock
made exclusively in cash within twelve (12) months preceding the
expiration of such tender offer, and in respect of which no
adjustment pursuant to paragraph (e) of this Section has been
made, exceeds 20.0% of the product of the Current Market Price
(determined as provided in paragraph (g) of this Section) as of
the last time (the "Expiration Time") tenders could have been made
pursuant to such tender offer (as it may be amended) times the
number of shares of Common Stock outstanding (including any
tendered shares) on the Expiration Time, then, and in each such
case, immediately prior to the opening of business on the day
after the date of the Expiration Time, the Conversion Price shall
be adjusted so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to
close of business on the date of the Expiration Time by a fraction
of which the numerator shall be the number of shares of Common
Stock outstanding (including any tendered shares) on the
Expiration Time multiplied by the Current Market Price of the
Common Stock on the Trading Day next succeeding the Expiration
Time and the denominator shall be the sum of (x) the fair market
value (determined as aforesaid) of the aggregate consideration
payable to stockholders based on the acceptance (up to any maximum
specified in the terms of the tender offer) of all shares validly
tendered and not withdrawn as of the Expiration Time (the shares
deemed so accepted, up to any such maximum, being referred to as
the "Purchased Shares") and (y) the product of the number of
shares of Common Stock outstanding (less any Purchased Shares) on
the Expiration Time and the Current Market Price of the Common
Stock on the Trading Day next succeeding the Expiration Time, such
reduction to become effective immediately prior to the opening of
business on the day following the Expiration Time. In the event
that the Company is obligated to purchase shares pursuant to any
such tender offer, but the Company is permanently prevented by
applicable law from effecting any such purchases or all such
purchases are rescinded, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect
if such tender offer had not been made.
(g) For purposes of this Indenture, the following terms
shall have the meaning indicated:
(1) "Closing Price" with respect to any securities on
any day shall mean the closing sale price regular way on such
day or, in case no such sale takes place on such day, the
average of the reported closing bid and asked prices, regular
way, in each case on the New York Stock Exchange, or, if such
security is not listed or admitted to trading on such
Exchange, on the principal national security exchange or
quotation system on which such security is quoted or listed
or admitted to trading, or, if not quoted or listed or
admitted to trading on any national securities exchange or
quotation system, the average of the closing bid and asked
prices of such security on the over-the-counter market on the
day in question as reported by the National Quotation Bureau
Incorporated, or a similar generally accepted reporting
service, or if not so available, in such manner as furnished
by any New York Stock Exchange member firm selected from time
to time by the Board of Directors for that purpose, or a
price determined in good faith by the Board of Directors
whose determination shall be conclusive and described in a
Board Resolution.
(2) "Current Market Price" shall mean the average of
the daily Closing Prices per share of Common Stock for the
ten consecutive Trading Days immediately prior to the date in
question; provided, however, that (1) if the "ex" date (as
hereinafter defined) for any event (other than the issuance
or distribution or Change of Control requiring such
computation) that requires an adjustment to the Conversion
Price pursuant to Section 15.5(a), (b), (c), (d), (e) or (f)
occurs during such ten consecutive Trading Days, the Closing
Price for each Trading Day prior to the "ex" date for such
other event shall be adjusted by multiplying such Closing
Price by the same fraction by which the Conversion Price is
so required to be adjusted as a result of such other event,
(2) if the "ex" date for any event (other than the issuance,
distribution or Change of Control requiring such computation)
that requires an adjustment to the Conversion Price pursuant
to Section 15.5(a), (b), (c), (d), (e) or (f) occurs on or
after the "ex" date for the issuance or distribution
requiring such computation and prior to the day in question,
the Closing Price for each Trading Day on and after the "ex"
date for such other event shall be adjusted by multiplying
such Closing Price by the reciprocal of the fraction by which
the Conversion Price is so required to be adjusted as a
result of such other event and (3) if the "ex" date for the
issuance, distribution or Change of Control requiring such
computation is prior to the day in question, after taking
into account any adjustment required pursuant to clause (1)
or (2) of this proviso, the Closing Price for each Trading
Day on or after such "ex" date shall be adjusted by adding
thereto the amount of any cash and the fair market value (as
determined by the Board of Directors in a manner consistent
with any determination of such value for purposes of Section
15.5(d) or (f), whose determination shall be conclusive and
described in a Board Resolution) of the evidences of
indebtedness, shares of capital stock or assets being
distributed applicable to one share of Common Stock as of the
close of business on the day before such "ex" date. For
purposes of any computation under Section 15.5(f), the
Current Market Price of the Common Stock on any date shall be
deemed to be the average of the daily Closing Prices per
share of Common Stock for such day and the next two
succeeding Trading Days; provided, however, that if the "ex"
date for any event (other than the tender or exchange offer
requiring such computation) that requires an adjustment to
the conversion Price pursuant to Section 15.5(a), (b), (c),
(d), (e) or (f) occurs on or after the Expiration Time for
the tender or exchange offer requiring such computation and
prior to the day in question, the Closing Price for each
Trading Day on and after the "ex" date for such other event
shall be adjusted by multiplying such Closing Price by the
reciprocal of the fraction by which the Conversion Price is
so required to be adjusted as a result of such other event.
For purposes of this paragraph, the term "ex" date, (1) when
used with respect to any issuance or distribution, means the
first date on which the Common Stock trades regular way on
the relevant exchange or in the relevant market from which
the Closing Price was obtained without the right to receive
such issuance or distribution, (2) when used with respect to
any subdivision or combination of shares of Common Stock,
means the first date on which the common Stock trades regular
way on such exchange or in such market after the time at
which such subdivision or combination becomes effective and
(3) when used with respect to any tender or exchange offer
means the first date on which the Common Stock trades regular
way on such exchange or in such market after the expiration
of such offer. Notwithstanding the foregoing, whenever
successive adjustments to the Conversion Price are called for
pursuant to this Section 15.5, such adjustments shall be made
to the Current Market Price as may be necessary or
appropriate to effectuate the intent of this Section 15.5 and
to avoid unjust or inequitable results as determined in good
faith by the Board of Directors.
(3) "fair market value" shall mean the amount which a
willing buyer would pay a willing seller in an arm's-length
transaction.
(4) "Record Date" shall mean, with respect to any
dividend, distribution or other transaction or event in which
the holders of Common Stock have the right to receive any
cash, securities or other property or in which the Common
Stock (or other applicable security) is exchanged for or
converted into any combination of cash, securities or other
property, the date fixed for determination of stockholders
entitled to receive such cash, securities or other property
(whether such date is fixed by the Board of Directors or by
statute, contract or otherwise).
(5) "Trading Day" shall mean (x) if the applicable
security is listed or admitted for trading on the New York
Stock Exchange or another national security exchange, a day
on which the New York Stock Exchange or that other national
security exchange is open for business or (y) if the
applicable security is quoted on the Nasdaq National Market,
a day on which trades may be made thereon or (z) if the
applicable security is not so listed, admitted for trading or
quoted, any day other than a Saturday or Sunday or a day on
which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
(h) The Company may make such reductions in the
Conversion Price, in addition to those required by Sections
15.5(a), (b), (c), (d), (e) and (f), as the Board of Directors
considers to be advisable to avoid or diminish any income tax to
holders of Common Stock or rights to purchase Common Stock
resulting from any dividend or distribution of stock (or rights to
acquire stock) or from any event treated as such for income tax
purposes. To the extent permitted by applicable law, the Company
from time to time may reduce the Conversion Price by any amount
for any period of time if the period is at least 20 days, the
reduction is irrevocable during the period and the Board of
Directors shall have made a determination that such reduction
would be in the best interests of the Company, which determination
shall be conclusive and described in a Board Resolution. Whenever
the Conversion Price is reduced pursuant to the preceding
sentence, the Company shall mail to all holders of record of the
Notes a notice of the reduction at least 15 days prior to the date
the reduced Conversion Price takes effect, and such notice shall
state the reduced Conversion Price and the period it will be in
effect.
(i) No adjustment in the Conversion Price shall be
required unless such adjustment would require an increase or
decrease of at least 1% in such price; provided, however, that any
adjustments which by reason of this Section 15.5(i) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this
Article XV shall be made by the Company and shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the
case may be.
No adjustment need be made for rights to purchase Common
Stock pursuant to a Company plan for reinvestment of dividends or
interest.
No adjustment need be made for a change in the par
value, or to or from no par value, of the Common Stock.
To the extent the Notes become convertible into cash,
assets, property or securities (other than Common Stock of the
Company), no adjustment need be made thereafter as to the cash,
assets, property or such securities (except as such securities may
otherwise by their terms provide), and interest shall not accrue
on such cash.
(j) Whenever the Conversion Price is adjusted as herein
provided, the Company shall promptly file with the Trustee and any
conversion agent other than the Trustee an Officers' Certificate
setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such
adjustment. Promptly after delivery of such certificate, the
Company shall prepare a notice of such adjustment of the
Conversion Price setting forth the adjusted Conversion Price and
the date on which each adjustment becomes effective and shall mail
such notice of such adjustment of the Conversion Price to the
holder of each Note at his last address appearing on the Note
register provided for in Section 2.5 of this Indenture, within 20
days after execution thereof. Failure to deliver such notice
shall not effect the legality or validity of any such supplemental
indenture.
(k) In any case in which this Section 15.5 provides
that an adjustment shall become effective immediately after a
Record Date for an event, the Company may defer until the
occurrence of such event (i) issuing to the holder of any Note
converted after such Record Date and before the occurrence of such
event the additional shares of Common Stock issuable upon such
conversion by reason of the adjustment required by such event over
and above the Common Stock issuable upon such conversion before
giving effect to such adjustment and (ii) paying to such holder
any amount in cash in lieu of any fraction pursuant to Section
15.3.
Section 15.6 Effect of Reclassification, Consolidation,
Merger or Sale. If any of the following events occur, namely (i)
any reclassification or change of outstanding shares of Common
Stock (other than a change in par value, or to or from no par
value, as a result of a subdivision or combination), (ii) any
consolidation, merger or combination of the Company with another
corporation as a result of which holders of Common Stock shall be
entitled to receive stock, securities or other property or assets
(including cash) with respect to or in exchange for such Common
Stock or (iii) any sale or conveyance of the properties and assets
of the Company as, or substantially as, an entirety to any other
corporation as a result of which holders of Common Stock shall be
entitled to receive stock, securities or other property or assets
(including cash) with respect to or in exchange for such Common
Stock, then the Company or the successor or purchasing
corporation, as the case may be, shall execute with the Trustee a
supplemental indenture (which shall comply with the Trust
Indenture Act as in force at the date of execution of such
supplemental indenture if such supplemental indenture is then
required to so comply) providing that such Note shall be
convertible into the kind and amount of shares of stock and other
securities or property or assets (including cash) receivable upon
such reclassification, change, consolidation, merger, combination,
sale or conveyance by a holder of a number of shares of Common
Stock issuable upon conversion of such Notes (assuming, for such
purposes, a sufficient number of authorized shares of Common Stock
available to convert all such Notes) immediately prior to such
reclassification, change, consolidation, merger, combination, sale
or conveyance, assuming such holder of Common Stock did not
exercise his rights of election, if any, as to the kind or amount
of securities, cash or other property receivable upon such
reclassification, change, consolidation, merger, combination, sale
or conveyance (provided that, if the kind or amount of securities,
cash or other property receivable upon such reclassification,
change, consolidation, merger, combination, sale or conveyance is
not the same for each share of Common Stock in respect of which
such rights of election shall not have been exercised ("non-
electing share"), then for the purposes of this Section 15.6 the
kind and amount of securities, cash or other property receivable
upon such reclassification, change, consolidation, merger,
combination, sale or conveyance for each non-electing share shall
be deemed to be the kind and amount so receivable per share by a
plurality of the non-electing shares). Such supplemental
indenture shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for
in this Article XV.
The Company shall cause notice of the execution of such
supplemental indenture to be mailed to each holder of Notes, at
his address appearing on the Note register provided for in Section
2.5 of this Indenture, within 20 days after execution thereof.
Failure to deliver such notice shall not affect the legality or
validity of such supplemental indenture.
The above provisions of this Section shall similarly
apply to successive reclassifications, changes, consolidations,
mergers, combinations, sales and conveyances.
If this Section 15.6 applies to any event or occurrence,
Section 15.5 shall not apply.
Section 15.7 Transfer or Similar Taxes on Shares
Issued. The issue of stock certificates on conversions of Notes
shall be made without charge to the converting Noteholder for any
transfer or similar tax in respect of the issue thereof. The
Company shall not, however, be required to pay any such tax which
may be payable in respect of any transfer involved in the issue
and delivery of stock in any name other than that of the holder of
any Note converted, and the Company shall not be required to issue
or deliver any such stock certificate unless and until the person
or persons requesting the issue thereof shall have paid to the
Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
Section 15.8 Reservation of Shares; Shares to Be Fully
Paid; Listing of Common Stock. The Company shall provide, free
from preemptive rights, out of its authorized but unissued shares
or shares held in treasury, sufficient shares to provide for the
conversion of the Notes from time to time as such Notes are
presented for conversion.
Before taking any action which would cause an adjustment
reducing the Conversion Price below the then par value, if any, of
the shares of Common Stock issuable upon conversion of the Notes,
the Company will take all corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may
validly and legally issue shares of such Common Stock at such
adjusted Conversion Price.
The Company covenants that all shares of Common Stock
which may be issued upon conversion of Notes will, upon issue, be
fully paid and nonassessable by the Company and free from all
transfer or similar taxes as described in Section 15.7, liens and
charges with respect to the issue thereof.
The Company further covenants that, if at any time the
Common Stock shall be listed on the New York Stock Exchange or any
other national securities exchange, the Company will, if permitted
by the rules of such exchange, list and keep listed, so long as
the Common Stock shall be so listed on such exchange, all Common
Stock issuable upon conversion of the Notes.
Section 15.9 Responsibility of Trustee. The Trustee
and any other conversion agent shall not at any time be under any
duty or responsibility to any holder of Notes to determine whether
any facts exist which may require any adjustment of the Conversion
Price, or with respect to the nature or extent or calculation of
any such adjustment when made, or with respect to the method
employed, or herein or in any supplemental indenture provided to
be employed, in making the same. The Trustee and any other
conversion agent shall not be accountable with respect to the
validity or value (or the kind or amount) of any shares of Common
Stock, or of any securities or property, which may at any time be
issued or delivered upon the conversion of any Note; and the
Trustee and any other conversion agent make no representations
with respect thereto. Subject to the provisions of Section 8.1,
neither the Trustee nor any conversion agent shall be responsible
for any failure of the Company to issue, transfer or deliver any
shares of Common Stock or stock certificates or other securities
or property or cash upon the surrender of any debenture for the
purpose of conversion or to comply with any of the duties,
responsibilities or covenants of the Company contained in this
Article XV. Without limiting the generality of the foregoing,
neither the Trustee nor any conversion agent shall be under any
responsibility to determine the correctness of any provisions
contained in any supplemental indenture entered into pursuant to
Section 15.6 relating either to the kind or amount of shares of
stock or securities or property (including cash) receivable by
Noteholders upon the conversion of their Notes after any event
referred to in such Section 15.6 or to any adjustment to be made
with respect thereto, but, subject to the provisions of Section
8.1, may accept as conclusive evidence of the correctness of any
such provisions, and shall be protected in relying upon, the
Officers' Certificate (which the Company shall be obligated to
file with the Trustee prior to the execution of any such
supplemental indenture) with respect thereto.
Section 15.10 Notice to Holders Prior to Certain
Actions. In case:
(a) the Company makes any distribution or dividend that
would require an adjustment in the Conversion Price pursuant
to Section 15.5; or
(b) the Company takes any action that would require a
supplemental indenture pursuant to Section 15.6; or
(c) of the voluntary or involuntary dissolution,
liquidation or winding-up of the Company, the Company shall
cause to be filed with the Trustee and to be mailed to each
holder of Notes at his address appearing on the Note register
provided for in Section 2.5 of this Indenture, as promptly as
possible but in any event at least 15 days prior to the
applicable date hereinafter specified, a notice stating (x)
the date on which a record date is to be taken for the
purpose of such dividend, distribution, rights or warrants,
or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such
dividend, distribution, rights or warrants are to be
determined or (y) the date on which such reclassification,
change, consolidation, merger, sale, conveyance, transfer,
dissolution, liquidation or winding-up is expected to become
effective or occur and the date as of which it is expected
that holders of record of Common Stock shall be entitled to
exchange their Common Stock for securities or other property
deliverable upon such reclassification, change consolidation,
merger, sale, conveyance, transfer, dissolution, liquidation
or winding-up. Failure to give such notice, or any defect
therein, shall not affect the legality or validity of such
dividend, distribution, reclassification, change,
consolidation, merger, sale, conveyance, transfer,
dissolution, liquidation or winding-up. Neither the failure
to give such notice nor any defect therein shall affect the
legality or validity of the proceedings referenced in clauses
(a) through (c) of this Section 15.10.
ARTICLE XVI
MISCELLANEOUS PROVISIONS
Section 16.1 Provisions Binding on Company's
Successors. All the covenants, stipulations, promises and
agreements in this Indenture made by the Company shall bind its
successors and assigns whether so expressed or not.
Section 16.2 Official Acts by Successor Company. Any
act or proceeding by any provision of this Indenture authorized or
required to be done or performed by any board (including the Board
of Directors), committee or officer of the Company shall and may
be done and performed with like force and effect by the like
board, committee or officer of any corporation that shall at the
time be the lawful sole successor of the Company.
Section 16.3 Addresses for Notices, Etc. Any notice or
demand which by any provision of this Indenture is required or
permitted to be given or served by the Trustee or by the holders
of Notes on the Company shall be deemed to have been sufficiently
given or made, for all purposes if given or served by being
deposited postage prepaid by registered or certified mail in a
post office letter box addressed (until another address is filed
by the Company with the Trustee) to SoftKey International Inc.,
One Athenaeum Street, Cambridge, MA 02142, Attention: Chief
Financial Officer. Any notice, direction, request or demand
hereunder to or upon the Trustee shall be deemed to have been
sufficiently given or made, for all purposes, if given or served
by being deposited postage prepaid by registered or certified mail
in a post office letter box addressed to the Corporate Trust
Office of the Trustee, which office is, at the date as of which
this Indenture is dated, located at 225 Franklin Street, Boston,
MA 02110.
The Trustee, by notice to the Company, may designate
additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Noteholder shall
be mailed to him by first class mail, postage prepaid, at his
address as it appears on the Note register and shall be
sufficiently given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a
Noteholder or any defect in it shall not affect its sufficiency
with respect to other Noteholders. If a notice or communication
is mailed in the manner provided above, it is duly given, whether
or not the addressee receives it.
Section 16.4 Governing Law. This Indenture and each
Note shall be deemed to be a contract made under the substantive
laws of New York and for all purposes shall be construed in
accordance with the substantive laws of New York.
Section 16.5 Evidence of Compliance with Conditions
Precedent; Certificates to Trustee. Upon any application or
demand by the Company to the Trustee to take any action under any
of the provisions of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, and an Opinion of Counsel
stating that, in the Opinion of such counsel, all such conditions
precedent have been complied with.
Each certificate or opinion provided for in this
Indenture and delivered to the Trustee with respect to compliance
with a condition or covenant provided for in this Indenture shall
include: (1) a statement that the person making such certificate
or opinion has read such covenant or condition; (2) a brief
statement as to the nature and scope of the examination or
investigation upon which the statement or opinion contained in
such certificate or opinion is based; (3) a statement that, in the
opinion of such person, he has made such examination or
investigation as is necessary to enable him to express an informed
opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not, in the
opinion of such person, such condition or covenant has been
complied with.
Section 16.6 Legal Holidays. In any case where the
date of maturity of interest on or principal of the Notes or the
date fixed for redemption of any Note will not be a Business Day,
then payment of such interest on or principal of the Notes need
not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the date
of maturity or the date fixed for redemption, and no interest
shall accrue for the period from and after such date.
Section 16.7 No Security Interest Created. Nothing in
this Indenture or in the Notes, expressed or implied, shall be
construed to constitute a security interest under the Uniform
Commercial Code or similar legislation, as now or hereafter
enacted and in effect, in any jurisdiction where property of the
Company or its subsidiaries is located.
Section 16.8 Trust Indenture Act. This Indenture is
hereby made subject to, and shall be governed by, the provisions
of the Trust Indenture Act required to be part of and to govern
indentures qualified under the Trust Indenture Act; provided,
however, that, notwithstanding the foregoing, this Indenture and
the Notes issued hereunder shall not be subject to the provisions
of subsections (a)(1), (a)(2) and (a)(3) of Section 314 of the
Trust Indenture Act as now in effect or as hereafter amended or
modified.
Section 16.9 Benefits of Indenture. Nothing in this
Indenture or in the Notes, expressed or implied, shall give to any
person, other than the parties hereto, any paying agent, any
authenticating agent, any Note registrar and their successors
hereunder and the holders of Notes, any benefit or any legal or
equitable right, remedy or claim under this Indenture.
Section 16.10 Table of Contents, Headings Etc. The
table of contents and the titles and headings of the articles and
sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall
in no way modify or restrict any of the terms or provisions
hereof.
Section 16.11 Authenticating Agent. The Trustee may
appoint an authenticating agent which shall be authorized to act
on its behalf and subject to its direction in the authentication
and delivery of Notes in connection with the original issuance
thereof and transfers and exchanges of Notes hereunder, including
under Sections 2.4, 2.5, 2.6, 2.7 and 3.3, as fully to all intents
and purposes as though the authenticating agent had been expressly
authorized by this Indenture and those Sections to authenticate
and deliver Notes. For all purposes of this Indenture, the
authentication and delivery of Notes by the authenticating agent
shall be deemed to be authentication and delivery of such Notes
"by the Trustee" and a certificate of authentication executed on
behalf of the Trustee by an authenticating agent shall be deemed
to satisfy any requirement hereunder or in the Notes for the
Trustee's certificate of authentication. Such authenticating
agent shall at all times be a person eligible to serve as Trustee
hereunder pursuant to Section 8.9.
Any corporation into which any authenticating agent may
be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, consolidation or
conversion to which any authenticating agent shall be a party, or
any corporation succeeding to the corporate trust business of any
authenticating agent, shall be the successor of the authenticating
agent hereunder, if such Successor Company is otherwise eligible
under this Section, without the execution or filing of any paper
or any further act on the part of the parties hereto or the
authenticating agent or such Successor Company.
Any authenticating agent may at any time resign by
giving written notice of resignation to the Trustee and to the
Company. The Trustee may at any time terminate the agency of any
authenticating agent by giving written notice of termination to
such authenticating agent and to the Company. Upon receiving such
a notice of resignation or upon such a termination, or in case at
any time any authenticating agent shall cease to be eligible under
this Section, the Trustee shall promptly appoint a successor
authenticating agent (which may be the Trustee), shall give
written notice of such appointment to the Company and shall mail
notice of such appointment to all holders of Notes as the names
and addresses of such holders appear on the Note register.
The Trustee agrees to pay to the authenticating agent
from time to time reasonable compensation for its services, and
the Trustee shall be entitled to be reimbursed for such payments,
subject to Section 8.6.
The provisions of Sections 8.2, 8.3, 8.4, 9.3 and this
Section 16.11 shall be applicable to any authenticating agent.
Section 16.12 Execution in Counterparts. This
Indenture may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together
constitute but one and the same instrument.
Section 16.13 Pooling of Interests. The Company
desires to preserve its ability to account for acquisition and
other business combination transactions using the pooling of
interests method where appropriate, and the provisions of this
Indenture shall be interpreted accordingly.
ARTICLE XVII
EXCHANGE OF NOTES
Section 17.1 Right to Exchange. Subject to and upon
compliance with the provisions of this Indenture, the holder of
any Note shall have the right, at his option, at any time prior to
the close of business on November 1, 2000 (except that, with
respect to any Note or portion of a Note which shall be called for
redemption or delivered for repurchase, such right shall
terminate, except as provided in the fourth paragraph of Section
17.2, at the close of business on the last Trading Day prior to
the date fixed for redemption of such Note or portion of a Note
unless the Company shall default in payment due upon redemption
thereof) to exchange the principal amount of any such Note, or any
portion of such principal amount which is $1,000 or an integral
multiple thereof, into that number of fully paid and nonassessable
shares of Preferred Stock (as such shares shall then be
constituted) obtained by dividing the principal amount of the Note
or portion thereof surrendered for exchange by the Exchange Price
in effect at such time, by surrender of the Note so to be
converted in whole or in part in the manner provided in Section
17.2. A holder of Notes is not entitled to any rights of a holder
of Preferred Stock until such holder has converted his Notes to
Preferred Stock, and only to the extent such Notes are deemed to
have been exchanged for Preferred Stock under this Article XVII.
Section 17.2 Exercise of Exchange Privilege; Issuance
of Preferred Stock on Exchange; Adjustment for Interest or
Dividends. In order to exercise the exchange privilege with
respect to any Note in definitive form, the holder of any such
Note to be converted in whole or in part shall surrender such
Note, duly endorsed, at an office or agency maintained by the
Company pursuant to Section 5.2, accompanied by the funds, if any,
required by the penultimate paragraph of this Section 17.2, and
shall give written notice of exchange in the form provided on the
Notes (or such other notice which is acceptable to the Company) to
the office or agency that the holder elects to exchange such Note
or the portion thereof specified in said notice. Such notice
shall also state the name or names (with address) in which the
certificate or certificates for shares of Preferred Stock which
shall be issuable on such conversion shall be issued and shall be
accompanied by transfer taxes, if required pursuant to Section
17.7. Each such Note surrendered for exchange shall, unless the
shares issuable on exchange are to be issued in the same name as
the registration of such Note, be duly endorsed by, or be
accompanied by instruments of transfer in form satisfactory to the
Company duly executed by, the holder or his duly authorized
attorney.
In order to exercise the exchange privilege with respect
to any interest in a Note in global form, the beneficial holder
must complete the appropriate instruction form for exchange
pursuant to the Depositary's book-entry exchange program and
follow the other procedures set forth in such program.
As promptly as practicable after satisfaction of the
requirements for exchange set forth above, subject to compliance
with any restrictions on transfer if shares issuable on exchange
are to be issued in a name other than that of the Noteholder (as
if such transfer were a transfer of the Note or Notes (or portion
thereof) so exchanged), the Company shall issue and shall deliver
to such holder at the office or agency maintained by the Company
for such purpose pursuant to Section 5.2, a certificate or
certificates for the number of full shares issuable upon the
exchange of such Note or portion thereof in accordance with the
provisions of this Article XVII. In case any Note of a
denomination greater than $1,000 shall be surrendered for partial
exchange, and subject to Section 2.3, the Company shall execute
and the Trustee shall authenticate and deliver to the holder of
the Note so surrendered, without charge to him, a new Note or
Notes in authorized denominations in an aggregate principal amount
equal to the exchanged portion of the surrendered Note.
Each exchange shall be deemed to have been effected as
to any such Note (or portion thereof) on the date on which the
requirements set forth above in this Section 17.2 have been
satisfied as to such Note (or portion thereof), and the person in
whose name any certificate or certificates for shares of Preferred
Stock shall be issuable upon such exchange shall be deemed to have
become on said date the holder of record of the shares represented
thereby; provided, however, that any such surrender on any date
when the stock transfer books of the Company shall be closed shall
constitute the person in whose name the certificates are to be
issued as the record holder thereof for all purposes on the next
succeeding day on which such stock transfer books are open, but
such exchange shall be at the Exchange Price in effect on the date
upon which such Note shall have been surrendered.
Any Note or portion thereof surrendered for exchange
during the period from the close of business on the record date
for any interest payment date through the close of business on the
Trading Day next preceding such interest payment date shall
(unless such Note or portion thereof being converted shall have
been called for redemption on a date in such period) be
accompanied by payment, in funds acceptable to the Company, of an
amount equal to the interest otherwise payable on such interest
payment date on the principal amount being converted; provided,
however, that no such payment need be made if there shall exist at
the time of exchange a default in the payment of interest on the
Notes. An amount equal to such payment shall be paid by the
Company on such interest payment date to the holder of such Note
at the close of business on such record date; provided, however,
that if the Company shall default in the payment of interest on
such interest payment date, such amount shall be paid to the
person who made such required payment. In the case of any
exchange, dividends on the Preferred Stock issuable upon such
exchange will commence to accrue as of the most recent date as of
which interest has been paid, or duly provided for, on the Notes
unless no interest has been paid or duly provided for on the
Notes, in which case from December 22, 1995. Except as provided
above in this Section 17.2, no adjustment shall be made for
interest accrued on any Note converted or for dividends on any
shares issued upon the exchange of such Note as provided in this
Article.
Upon the exchange of an interest in a Note in global
form, the Trustee, or the Custodian at the direction of the
Trustee, shall make an adjustment on its records with respect to
such Note in global form as to the reduction in the principal
amount represented thereby.
Section 17.3 Cash Payments in Lieu of Fractional
Shares. No fractional shares of Preferred Stock or scrip
representing fractional shares shall be issued upon exchange of
Notes. If more than one Note shall be surrendered for exchange at
one time by the same holder, the number of full shares which shall
be issuable upon exchange shall be computed on the basis of the
aggregate principal amount of the Notes (or specified portions
thereof to the extent permitted hereby) so surrendered. If any
fractional share of stock would be issuable upon the exchange of
any Note or Notes, the Company shall make an adjustment therefor
in cash at the current market value thereof. The Current Market
Value of a share of Preferred Stock shall be the greater of (i)
the Liquidation Preference thereof or (ii) the current market
value of that number of shares of Common Stock (including any
fraction of a share) into which one share of Preferred Stock may
then be converted. The current market value of a share of Common
Stock shall be the Closing Price on the first Trading Day
immediately preceding the day on which the Notes (or specified
portions thereof) are deemed to have been converted and such
Closing Price shall be determined as provided in Section 15.5(g).
Section 17.4 Exchange Price. The exchange price shall
be $1000.00 (herein called the "Exchange Price").
Section 17.5 Adjustment of Exchange Price. The
Exchange Price shall be adjusted from time to time by the Company
as follows:
(a) In the event that the provisions of the Series C
Preferred Stock as set forth in the Certificate of Designation
attached as Exhibit C hereto shall at any time be amended in
accordance with the provisions of the Certificate of Designation
and this Indenture, to reduce the Liquidation Preference of, or
the amount of dividends or other distributions payable with
respect to, the Series C Preferred Stock, or to change the
Conversion Price at which such Series C Preferred Stock is
convertible into Common Stock pursuant to the provisions of the
Certificate of Designation (or the manner in which such Conversion
Price is adjusted as set forth in Section 8 thereof), the Exchange
Price shall be adjusted in such manner as the Board of Directors
of the Company shall determine is fair and equitable, which
determination shall be conclusive and shall be set forth in a
Board Resolution.
(b) The Company may make such reductions in the
Exchange Price, in addition to those required by Section 17.5(a),
as the Board of Directors considers to be advisable to avoid or
diminish any income tax to holders of Preferred Stock or rights to
purchase Preferred Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any
event treated as such for income tax purposes. To the extent
permitted by applicable law, the Company from time to time may
reduce the Exchange Price by any amount for any period of time if
the period is at least 20 days, the reduction is irrevocable
during the period and the Board of Directors shall have made a
determination that such reduction would be in the best interests
of the Company, which determination shall be conclusive and
described in a Board Resolution. Whenever the Exchange Price is
reduced pursuant to the preceding sentence, the Company shall mail
to all holders of record of the Notes a notice of the reduction at
least 15 days prior to the date the reduced Exchange Price takes
effect, and such notice shall state the reduced conversion Price
and the period it will be in effect.
(c) No adjustment in the Exchange Price shall be
required unless such adjustment would require an increase or
decrease of at least 1% in such price; provided, however, that any
adjustments which by reason of this Section 17.5(c) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this
Article XVII shall be made by the Company and shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the
case may be.
No adjustment need be made for a change in the par
value, or to or from no par value, of the Preferred Stock.
To the extent the Notes become convertible into cash,
assets, property or securities (other than Preferred Stock or
Common Stock of the Company), no adjustment need be made
thereafter as to the cash, assets, property or such securities
(except as such securities may otherwise by their terms provide),
and interest shall not accrue on such cash.
(d) Whenever the Exchange Price is adjusted as herein
provided, the Company shall promptly file with the Trustee and any
exchange agent other than the Trustee an Officers' Certificate
setting forth the Exchange Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.
Promptly after delivery of such certificate, the Company shall
prepare a notice of such adjustment of the Exchange Price setting
forth the adjusted Exchange Price and the date on which each
adjustment becomes effective and shall mail such notice of such
adjustment of the Exchange Price to the holder of each Note at his
last address appearing on the Note register provided for in
Section 2.5 of this Indenture, within 20 days after execution
thereof. Failure to deliver such notice shall not effect the
legality or validity of any such supplemental indenture.
(e) In any case in which this Section 17.5 provides
that an adjustment shall become effective immediately after a
Record Date for an event, the Company may defer until the
occurrence of such event (i) issuing to the holder of any Note
converted after such Record Date and before the occurrence of such
event the additional shares of Preferred Stock issuable upon such
conversion by reason of the adjustment required by such event over
and above the Preferred Stock issuable upon such conversion before
giving effect to such adjustment and (ii) paying to such holder
any amount in cash in lieu of any fraction pursuant to Section
17.3.
Section 17.6 Effect of Reclassification, Consolidation,
Merger or Sale. If any of the following events occur, namely (i)
any reclassification or change of outstanding shares of Preferred
Stock (other than a change in par value, or to or from no par
value, as a result of a subdivision or combination), (ii) any
consolidation, merger or combination of the Company with another
corporation as a result of which holders of Preferred Stock shall
be entitled to receive stock, securities or other property or
assets (including cash) with respect to or in exchange for such
Preferred Stock or (iii) any sale or conveyance of the properties
and assets of the Company as, or substantially as, an entirety to
any other corporation as a result of which holders of Preferred
Stock shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in exchange
for such Preferred Stock, then the Company or the successor or
purchasing corporation, as the case may be, shall execute with the
Trustee a supplemental indenture (which shall comply with the
Trust Indenture Act as in force at the date of execution of such
supplemental indenture if such supplemental indenture is then
required to so comply) providing that such Note shall be
exchangeable into the kind and amount of shares of stock and other
securities or property or assets (including cash) receivable upon
such reclassification, change, consolidation, merger, combination,
sale or conveyance by a holder of a number of shares of Preferred
Stock issuable upon exchange of such Notes (assuming, for such
purposes, a sufficient number of authorized shares of Preferred
Stock available to exchange all such Notes) immediately prior to
such reclassification, change, consolidation, merger, combination,
sale or conveyance, assuming such holder of Preferred Stock did
not exercise his rights of election, if any, as to the kind or
amount of securities, cash or other property receivable upon such
reclassification, change, consolidation, merger, combination, sale
or conveyance (provided that, if the kind or amount of securities,
cash or other property receivable upon such reclassification,
change, consolidation, merger, combination, sale or conveyance is
not the same for each share of Preferred Stock in respect of which
such rights of election shall not have been exercised ("non-
electing share"), then for the purposes of this Section 17.6 the
kind and amount of securities, cash or other property receivable
upon such reclassification, change, consolidation, merger,
combination, sale or conveyance for each non-electing share shall
be deemed to be the kind and amount so receivable per share by a
plurality of the non-electing shares). Such supplemental
indenture shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for
in this Article XVII.
The Company shall cause notice of the execution of such
supplemental indenture to be mailed to each holder of Notes, at
his address appearing on the Note register provided for in Section
2.5 of this Indenture, within 20 days after execution thereof.
Failure to deliver such notice shall not affect the legality or
validity of such supplemental indenture.
The above provisions of this Section shall similarly
apply to successive reclassifications, changes, consolidations,
mergers, combinations, sales and conveyances.
Section 17.7 Transfer or Similar Taxes on Shares
Issued. The issue of stock certificates on exchanges of Notes
shall be made without charge to the exchanging Noteholder for any
transfer or similar tax in respect of the issue thereof. The
Company shall not, however, be required to pay any such tax which
may be payable in respect of any transfer involved in the issue
and delivery of stock in any name other than that of the holder of
any Note converted, and the Company shall not be required to issue
or deliver any such stock certificate unless and until the person
or persons requesting the issue thereof shall have paid to the
Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
Section 17.8 Reservation of Stock; Shares to Be Fully
Paid; Listing of Preferred Stock. The Company shall provide, free
from preemptive rights, out of its authorized but unissued shares
or shares held in treasury, sufficient shares to provide for the
exchange of the Notes from time to time as such Notes are
presented for exchange.
Before taking any action which would cause an adjustment
reducing the Exchange Price below the then par value, if any, of
the shares of Preferred Stock issuable upon exchange of the Notes,
the Company will take all corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may
validly and legally issue shares of such Preferred Stock at such
adjusted Exchange Price.
The Company covenants that all shares of Preferred Stock
which may be issued upon exchange of Notes will, upon issue, be
fully paid and nonassessable by the Company and free from all
transfer or similar taxes as described in Section 17.7, liens and
charges with respect to the issue thereof.
The Company further covenants that, if at any time the
Preferred Stock shall be listed on the New York Stock Exchange or
any other national securities exchange, the Company will, if
permitted by the rules of such exchange, list and keep listed, so
long as the Preferred Stock shall be so listed on such exchange,
all Preferred Stock issuable upon exchange of the Notes.
Section 17.9 Responsibility of Trustee. The Trustee
and any other exchange agent shall not at any time be under any
duty or responsibility to any holder of Notes to determine whether
any facts exist which may require any adjustment of the Exchange
Price, or with respect to the nature or extent or calculation of
any such adjustment when made, or with respect to the method
employed, or herein or in any supplemental indenture provided to
be employed, in making the same. The Trustee and any other
conversion agent shall not be accountable with respect to the
validity or value (or the kind or amount) of any shares of
Preferred Stock, or of any securities or property, which may at
any time be issued or delivered upon the exchange of any Note; and
the Trustee and any other exchange agent make no representations
with respect thereto. Subject to the provisions of Section 8.1,
neither the Trustee nor any exchange agent shall be responsible
for any failure of the Company to issue, transfer or deliver any
shares of Preferred Stock or stock certificates or other
securities or property or cash upon the surrender of any debenture
for the purpose of exchange or to comply with any of the duties,
responsibilities or covenants of the Company contained in this
Article XVII, without limiting the generality of the foregoing,
neither the Trustee nor any exchange agent shall be under any
responsibility to determine the correctness of any provisions
contained in any supplemental indenture entered into pursuant to
Section 17.6 relating either to the kind or amount of shares of
stock or securities or property (including cash) receivable by
Noteholders upon the exchange of their Notes after any event
referred to in such Section 17.6 or to any adjustment to be made
with respect thereto, but, subject to the provisions of Section
8.1, may accept as conclusive evidence of the correctness of any
such provisions, and shall be protected in relying upon, the
Officers' Certificate (which the Company shall be obligated to
file with the Trustee prior to the execution of any such
supplemental indenture) with respect thereto.
Section 17.10 Notice to Holders Prior to Certain
Actions. In case:
(a) the Company takes any action that would require a
supplemental indenture pursuant to Section 17.6; or
(b) of the voluntary or involuntary dissolution,
liquidation or winding-up of the Company, the Company shall cause
to be filed with the Trustee and to be mailed to each holder of
Notes at his address appearing on the Note register provided for
in Section 2.5 of this Indenture, as promptly as possible but in
any event at least 15 days prior to the applicable date
hereinafter specified, a notice stating (x) the date on which a
record date is to be taken for the purpose of such dividend,
distribution, rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Preferred Stock of
record to be entitled to such dividend, distribution, rights or
warrants are to be determined or (y) the date on which such
reclassification, change, consolidation, merger, sale, conveyance,
transfer, dissolution, liquidation or winding-up is expected to
become effective or occur and the date as of which it is expected
that holders of record of Preferred Stock shall be entitled to
exchange their Preferred Stock for securities or other property
deliverable upon such reclassification, change consolidation,
merger, sale, conveyance, transfer, dissolution, liquidation or
winding-up. Failure to give such notice, or any defect therein,
shall not affect the legality or validity of such dividend,
distribution, reclassification, change, consolidation, merger,
sale, conveyance, transfer, dissolution, liquidation or winding-
up. Neither the failure to give such notice nor any defect
therein shall affect the legality or validity of the proceedings
referenced in clauses (a) through (b) of this Section 17.10.
State Street Bank and Trust Company hereby accepts the
trusts in this Indenture declared and provided, upon the terms and
conditions hereinabove set forth.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly signed, and their respective corporate seals
to be hereunto affixed and attested, all as of the date first
written above.
SOFTKEY INTERNATIONAL INC.
By:
Name:
Title:
Attest:
________________________
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By: ___________________
Name: _________________
Title:
Attest:
_______________________
EXHIBIT A - FORM OF DEFINITIVE NOTE
[FORM OF FACE OF NOTE]
No. B-1 $_______________
CUSIP
SOFTKEY INTERNATIONAL INC.
5 1/2% Senior Convertible/Exchangeable Note Due 2000
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED
OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A) (1), (2), (3) OR (7) UNDER THE SECURITIES ACT)
("INSTITUTIONAL ACCREDITED INVESTOR",) OR (C) IT IS NOT A
U.S. PERSON AND IS ACQUIRING THE NOTE EVIDENCED HEREBY IN AN
OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT PRIOR TO
THE DATE THAT IS THREE YEARS AFTER THE LATER OF THE ORIGINAL
ISSUANCE OF THE NOTE EVIDENCED HEREBY AND THE LAST DATE ON
WHICH SOFTKEY INTERNATIONAL INC. (THE "COMPANY") OR ANY
"AFFILIATE" (AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT)
OF THE COMPANY WAS THE OWNER OF THE NOTE (THE "RESTRICTION
TERMINATION DATE") RESELL OR OTHERWISE TRANSFER THE NOTE
EVIDENCED HEREBY OR THE PREFERRED STOCK ISSUABLE UPON
EXCHANGE OF SUCH NOTE 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", "U.S. PERSON" HAVE
THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT.
SOFTKEY INTERNATIONAL INC., a corporation duly organized
and validly existing under the laws of the State of Delaware
(herein) called the "Company"), which term includes any Successor
Company under the Indenture referred to on the reverse hereof, for
value received hereby promises to pay to
__________________________ or registered assigns, the principal
sum of _________ Dollars on November 1, 2000, at the office or
agency of the Company maintained for that purpose in the Borough
of Manhattan, The City of New York, or, at the option of the
holder of this Note, at the Corporate Trust Office of the Trustee,
in such coin or currency of the United States of America as at the
time of payment shall be legal tender for the payment of public
and private debts, and to pay interest, semi-annually on May 1 and
November 1 of each year, commencing May 1, 1996, on said principal
sum at said office or agency, in like coin or currency, at the
rate per annum specified in the title of this Note, from the May 1
or November 1, as the case may be, next preceding the date of this
Note to which interest has been paid or duly provided for, unless
the date hereof is a date to which interest has been paid or duly
provided for, in which case from the date of this Note, or unless
no interest has been paid or duly provided for on the Notes, in
which case from _____________, 1995, until payment of said
principal sum has been made or duly provided for. Notwithstanding
the foregoing, if the date hereof is after any April 15 or October
15, as the case may be, and before the following May 1 or November
1 other than October 15, 1995, this Note shall bear interest from
such May 1 or November 1, respectively; provided, however, that if
the Company shall default in the payment of interest due on such
May 1 or November 1, then this Note shall bear interest from the
next preceding May 1 or November 1 to which interest has been paid
or duly provided for or, if no interest has been paid or duly
provided for on such Note, from ____________, 1995. The interest
so payable on any May 1 or November 1 will be paid to the person
in whose name this Note (or one or more Predecessor Notes) is
registered at the close of business on the record date, which
shall be the April 15 or October 15 (whether or not a Business
Day) next preceding such May 1 or November 1, respectively;
provided that any such interest not punctually paid or duly
provided for shall be payable as provided in the Indenture.
Interest may, at the option of the Company, be paid by check
mailed to the registered address of such person.
Reference is made to the further provisions of this Note
set forth an the reverse hereof, including, without limitation,
provisions giving the holder of this Note the right to convert
this Note into Common Stock and to exchange this Note for
Preferred 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 set forth at this place.
This Note shall be deemed to be a contract made under
the laws of the State of New York, and for all purposes shall be
construed in accordance with and governed by the laws of said
State.
This Note shall not be valid or become obligatory for
any purpose until the certificate of authentication hereon shall
have been manually signed by the Trustee or a duly authorized
authenticating agent under the Indenture.
IN WITNESS WHEREOF, the Company has caused this Note to
be duly executed under its corporate seal.
SOFTKEY INTERNATIONAL INC.
By:
Name:
Title:
Dated:
Attest:
_____________________
Secretary
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within-named
Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By:
Authorized officer
As Authenticating Agent
(if different from
Trustee)
By:
Authorized Officer
[FORM OF REVERSE OF NOTE]
SOFTKEY INTERNATIONAL INC.
5 1/2% Senior Convertible/Exchangeable Note Due 2000
This Note is one of a duly authorized issue of Notes in
the Company, designated as its 5 1/2% Senior Convertible/Ex-
changeable Notes due 2000 (herein called the "Notes"), limited to
the aggregate principal amount of $150,000,000 all issued or to be
issued under and pursuant to an indenture dated as of
_____________ (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 exchange the Notes for Preferred Stock or to convert
the Notes into Common Stock subject to the terms set forth in the
Indenture, including Sections 15.6 and 17.6 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 to exchange
any Notes for Preferred Stock of the Company or a default in
respect of a covenant or provision of the Indenture which under
Article XI thereof cannot be modified or amended without the
consent of the holders of all Notes then outstanding. Any such
consent or waiver by the holder of this Note (unless revoked as
provided in the Indenture) shall be conclusive and binding upon
such holder and upon all future holders and owners of this Note
and any Notes which may be issued in exchange or substitution
hereof, irrespective of whether or not any notation thereof is
made upon this Note or such other Notes.
No reference herein to the Indenture and no provision of
this Note or of the Indenture shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the
principal of and any premium and interest on this Note at the
place, at the respective times, at the rate and in the coin or
currency herein prescribed.
Interest on the Notes shall be computed on the basis of
a year of twelve 30-day months.
The Notes are issuable in registered form without
coupons in denominations of $1,000 principal amount and integral
multiples thereof. At the office or agency of the Company
referred to on the face hereof, and in the manner and subject to
the limitations provided in the Indenture, without payment of any
service charge but with payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection
with any registration or exchange of Notes, Notes may be exchanged
for a like aggregate principal amount of Notes of other authorized
denominations.
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, on 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 exchange the principal amount 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 the Company's Preferred Stock obtained by
dividing the principal amount of this Note, or portion thereof to
be exchanged by the exchange price of $1000.00, or such exchange
price as adjusted from time to time as provided in the Indenture,
or to convert the principal hereof or any portion of such
principal which is $1,000 or an integral multiple thereof, into
that number of fully paid and non-assessable shares of Company's
Common Stock, as said shares shall be constituted at the date of
conversion, obtained by dividing the principal amount of this Note
or portion thereof to be converted by the conversion price of
$53.00 or such conversion price as adjusted from time to time as
provided in the Indenture, in either case, upon surrender of this
Note, together with any conversion or exchange notice, as the case
may be, 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 or exchange are to be
issued in the same name as this Note, duly endorsed by, or
accompanied by instruments of transfer in form satisfactory to the
Company duly executed by, the holder or by his duly authorized
attorney. In the case of any exchange, dividends on the Preferred
Stock issuable upon such exchange will commence to accrue as of
the most recent date as of which interest has been paid, or duly
provided for, on the Notes unless no interest has been paid or
duly provided for on the Notes, in which case from ____________,
1995 and no further adjustment will be made with regard to
interest due on the Note, or portions thereof, so exchanged. No
adjustment in respect of interest or dividends will be made upon
any conversion; provided, however, that if this Note shall be
surrendered for conversion or exchange during the period from the
close of business on any record date for the payment of interest
through the close of business on the Business Day next preceding
the following interest payment date, this Note (unless it or the
portion being converted or exchanged 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 or exchanged. No fractional shares will be issued
upon any conversion or exchange, 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 or exchange.
Any Notes called for redemption, unless surrendered for
exchange or 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 in 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 or
exchange them for Preferred Stock of the Company and to make
payment for such Notes as aforesaid to the Trustee in trust for
such holders.
Upon due presentment for registration of transfer of
this Note at the office or agency of the Company in the Borough of
Manhattan, The City of New York, or at the option of the holder of
this Note, at the Corporate Trust office of the Trustee, a new
Note or Notes of authorized denominations for an equal aggregate
principal amount will be issued to the transferee in exchange
thereof, subject to the limitations provided in the Indenture,
without charge except for any tax or other governmental charge
imposed in connection therewith.
The Company, the Trustee, any authenticating agent, any
paying agent, exchange or any conversion agent and any Note
registrar may deem and treat the registered holder hereof as the
absolute owner of this Note (whether or not this Note shall be
overdue and notwithstanding any notation of ownership or other
writing hereon made by anyone other than the Company or any Note
registrar), for the purpose of receiving payment hereof, or on
account hereof, for the exchange or 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
exchange or conversion agent nor any Note registrar shall be
affected by any notice to the contrary. All payments made to or
upon the order of such registered holder shall, to the extent of
the sum or sums paid, satisfy and discharge liability for monies
payable on this Note.
No recourse for the payment of the principal of or any
premium or interest on this Note, or for any claim based hereon or
otherwise in respect hereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in the Indenture
or any indenture supplemental thereto or in any Note, or because
of the creation of any indebtedness represented thereby, shall be
had against any incorporator, stockholder, officer or director, as
such, past, present or future, of the Company or of any Successor
Company, either directly or through the Company or any Successor
Company, whether by virtue of any constitution, statute or rule of
law or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by the acceptance hereof and
as part of the consideration for the issue hereof, expressly
waived and released.
Terms used in this Note and defined in the Indenture are
used herein as therein defined.
ABBREVIATIONS
The following abbreviations, when used in the inscription of the
face of this Note, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT
TEN ENT - as tenants by the ____________________ Custodian
entireties (Cust)
JT TEN - as joint tenants with ____________________ under
right of survivorship (minor)
and not as tenants in
common
Uniform Gifts to
minors Act ___________________
(State)
Additional abbreviations may also be used
though not in the above list.
[FORM OF CONVERSION NOTICE]
CONVERSION NOTICE
TO: SoftKey International Inc.
The undersigned registered owner of this Note hereby
irrevocably exercises the option to convert this Note, or the
portion hereof (which is $1,000 principal amount or an integral
multiple thereof) below designated, into shares of Common Stock,
par value $.01 per share, of the Company in accordance with the
terms of the Indenture referred to in this Note, and directs that
the shares issuable and deliverable upon such conversion, and any
Notes representing any unconverted principal amount hereof, be
issued and delivered to the registered holder hereof unless a
different name has been indicated below. If shares or any portion
of this Note not converted are to be issued in the name of a
person other than the undersigned, the undersigned will check the
appropriate box below and pay all transfer taxes payable with
respect thereto. Any amount required to be paid to the
undersigned on account of interest accompanies this Note.
Dated: _______________________
__________________________________
__________________________________
Signature(s)
Signature(s) must be guaranteed by an eligible Guarantor
Institution (banks, stock brokers, savings and loan associations
and credit unions) with membership in an approved signature
guarantee medallion program pursuant to Securities and Exchange
Commission Rule 17Ad-15 if shares of Common Stock are to be
issued, or Notes to be delivered, other than to and in the name of
the registered holder.
_____________________________________
Signature Guarantee
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
__________________________
Social Security or other
Taxpayer Identification
Number
Principal amount to be
converted (if less than
all) $___________________
[FORM OF EXCHANGE NOTICE]
EXCHANGE NOTICE
TO: SoftKey International Inc.
The undersigned registered owner of this Note hereby
irrevocably exercises the option to exchange this Note, or the
portion hereof (which is $1,000 principal amount or an integral
multiple thereof) below designated, into shares of Preferred
Stock, par value $.01 per share, of the Company in accordance with
the terms of the Indenture referred to in this Note, and directs
that the shares issuable and deliverable upon such exchange, and
any Notes representing any unexchanged principal amount hereof, be
issued and delivered to the registered holder hereof unless a
different name has been indicated below. If shares or any portion
of this Note not exchanged are to be issued in the name of a
person other than the undersigned, the undersigned will check the
appropriate box below and pay all transfer taxes payable with
respect thereto. Any amount required to be paid to the
undersigned on account of interest accompanies this Note.
Dated: ___________
____________________
____________________
Signature(s)
Signature(s) must be guaranteed by an eligible Guarantor
institution (banks, stock brokers, savings and loan associations
and credit unions) with membership in an approved signature
guarantee medallion program pursuant to Securities and Exchange
Commission Rule 17Ad-15 if shares of Preferred 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
__________________________
Social Security or other
Taxpayer Identification
Number
Principal amount to be
exchanged (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 Note hereby
irrevocably acknowledges receipt of a notice from SoftKey
International Inc. (the "Company") as to the occurrence of a
Change of Control with respect to the Company and requests and
instructs the Company to repay the entire principal amount of this
Note, or the portion thereof (which is $1,000 principal amount or
an integral multiple thereof) below designated, in accordance with
the terms of the Indenture referred to in this Note, together with
accrued interest to such date, to the registered holder hereof.
Dated:________________ ____________________
____________________
Signature(s)
____________________
Social Security or Other
Taxpayer Identification
Number
Principal amount to be
repaid (if less than all):
$___________________
(FORM OF ASSIGNMENT)
For value received _________________________ hereby
sell(s), assign(s) and transfer(s) unto ___________________
(Please insert social security or other identifying number of
assignee) the within Note, and hereby irrevocably constitutes and
appoints ____________________ attorney to transfer the said Note
on the books of the Company, with full power of substitution in
the premises.
In connection with any transfer of the within Note (or
any issuance of shares of Common Stock, par value $.0l per share,
or shares of Preferred Stock, par value $.01 per share, of SoftKey
International Inc. upon conversion or exchange 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 or Preferred 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 or Preferred 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 or Preferred 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 or the exchange
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.
EXHIBIT B - FORM OF GLOBAL NOTE
[FORM OF FACE OF NOTE]
No. A-1 $____________________
CUSIP_______________
SOFTKEY INTERNATIONAL INC.
5 1/2% Senior Convertible/Exchangeable Note Due 2000
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE 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 DEPOSITARY 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
OR EXCHANGE 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
Note, at the Corporate Trust office of the Trustee, in such coin
or currency of the United States of America as at the time of
payment shall be legal tender for the payment of public and
private debts, and to pay interest, semi-annually on May 1 and
November 1 of each year, commencing May 1, 1996, on said principal
sum at said office or agency, in like coin or currency, at the
rate per annum specified in the title of this Note, from the May 1
or November 1, as the case may be, next preceding the date of this
Note to which interest has been paid or duly provided for, unless
the date hereof is a date to which interest has been paid or duly
provided for, in which case from the date of this Note, or unless
no interest has been paid or duly provided for on the Notes, in
which case from ___________, 1995, until payment of said principal
sum has been made or duly provided for. Notwithstanding the
foregoing, if the date hereof is after any April 15 or October 15,
as the case may be, and before the following May 1 or November 1
other than October 15, 1995, this Note shall bear interest from
such May 1 or November 1, respectively; provided, however, that if
the Company shall default in the payment of interest due on such
May 1 or November 1, then this Note shall bear interest from the
next preceding May 1 or November 1 to which interest has been paid
or duly provided for or, if no interest has been paid or duly
provided for on such Note, from __________, 1995. The interest so
payable on any May 1 or November 1 will be paid to the person in
whose name this Note (or one or more Predecessor Notes) is
registered at the close of business on the record date, which
shall be the April 15 or October 15 (whether or not a Business
Day) next preceding such May 1 or November 1, respectively;
provided that any such interest not punctually paid or duly
provided for shall be payable as provided in the Indenture.
Interest may, at the option of the Company, be paid by check
mailed to the registered address of such person.
The aggregate principal amount of the Note in global form
represented hereby may from time to time be reduced or increased
to reflect exchanges of a part of this Note in global form for
definitive Notes or exchanges of definitive Notes for a part of
this Note in global form or exchanges or conversions or
redemptions of a part of this Note in global form or cancellations
of a part of this Note in global form or transfers of definitive
Notes in return for a part of this Note in global form or
transfers of a part of this Note in global form effected by
delivery of definitive Notes, in each case, and in any such case,
by means of notations on the Schedule of Exchanges, Conversions,
Redemptions, Cancellations and Transfers on the last page hereof.
Notwithstanding any provision of this Note to the contrary, (i)
exchanges of a part of this Note in global form for definitive
Notes, (ii) exchanges of definitive Notes for a part of this Note
in global form, (iii) conversions, exchanges or redemptions of a
part of this Note in global form, (iv) cancellations of a part of
this Note in global form, (v) transfers of definitive Notes in
return for a part of this Note in global form and (vi) transfers
of a part of this Note in global form effected by delivery of
definitive Notes may be effected without the surrendering of this
Note in global form, provided that appropriate notations on the
Schedule of Exchanges, Conversions, Redemptions, Cancellations and
Transfers or on the records of the Trustee in accordance with the
standing instructions of DTC are made by the Trustee, or the
Custodian at the direction of the Trustee, to reflect the
appropriate reduction or increase, as the case may be, in the
aggregate principal amount of this Note in global form resulting
therefrom or as a consequence thereof.
Reference is made to the further provisions of this Note set
forth on the reverse hereof, including, without limitation,
provisions giving the holder of this Note the right to convert
this Note into Common Stock and exchange this Note for Preferred
Stock of the Company on the terms and subject to the limitations
referred to on the reverse hereof and as more fully specified in
the Indenture. Such further provisions shall for all purposes
have the same effect as though fully set forth at this place.
This Note shall be deemed to be a contract made under the
laws of the State of New York, and for all purposes shall be
construed in accordance with and governed by the laws of said
State.
This Note shall not be valid or become obligatory for any
purpose until the certificate of authentication hereon shall have
been manually signed by the Trustee or a duly authorized
authenticating agent under the Indenture.
IN WITNESS WHEREOF, the Company has caused this Note to be
duly executed under its corporate seal.
SOFTKEY INTERNATIONAL INC.
By:________________________________
Name:
Title:
Dated: _______________________
Attest:
______________________________
Secretary
[FORM OF CERTIFICATE AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This is one of the Notes Described in the within-named
Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By: _____________________________
Authorized Officer
As Authenticating Agent
(if different from Trustee)
By: _____________________________
Authorized Officer
[FORM OF REVERSE OF NOTE]
SoftKey International Inc.
5 1/2% Senior Convertible/Exchangeable Note Due 2000
This Note is one of a duly authorized issue of Notes of the
Company, designated as its 5 1/2% Senior Convertible/Exchangeable
Notes due 2000 (herein called the "Notes"), limited to the
aggregate principal amount of $150,000,000 all issued or to be
issued under and pursuant to an Indenture dated as of __________,
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 to 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 exchange the Notes for Preferred Stock or to convert
the Notes into Common Stock subject to the terms set forth in the
Indenture, including Sections 15.6 and 17.6 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
exchange the Notes for Preferred Stock or to convert any Notes
into Common Stock of the Company or a default in respect of a
covenant or provision of the Indenture which under Article XI
thereof cannot be modified or amended without the consent of the
holders of all Notes then outstanding. Any such consent or waiver
by the holder of this Note (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such holder and
upon all future holders and owners of this Note and any Notes
which may be issued in exchange or substitution hereof,
irrespective of whether or not any notation thereof is made upon
this Note or such other Notes.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the
principal of and any premium and interest on this Note at the
place, at the respective times, at the rate and in the coin or
currency herein prescribed.
Interest on the Notes shall be computed on the basis of a
year of twelve 30-day months.
The Notes are issuable in registered form without coupons in
denominations of $1,000 principal amount and integral multiples
thereof. At the office or agency of the Company referred to on
the face hereof, and in the manner and subject to the limitations
provided in the Indenture, without payment of any service charge
but with payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any
registration or exchange of Notes, Notes may be exchanged for a
like aggregate principal amount of Notes of other authorized
denominations.
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), exchange the principal amount 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 the Company's Preferred Stock obtained by dividing the
principal amount of this Note, or portion thereof to be exchanged,
by the exchange price of $1000.00 or such exchange price as
adjusted from time to time as provided in the Indenture, or to
convert the principal hereof or any portion of such principal
which is $1,000 or an integral multiple thereof, into that number
of fully paid and non-assessable shares of Company's Common Stock,
as said shares shall be constituted at the date of conversion,
obtained by dividing the principal amount of this Note or portion
thereof to be converted by the conversion price of $53.00 or such
conversion price as adjusted from time to time as provided in the
Indenture, in either case, upon surrender of this Note, together
with an exchange notice or a conversion notice, as the case may
be, 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 or exchange are to be issued in the
same name as this Note, duly endorsed by, or accompanied by
instruments of transfer in form satisfactory to the Company duly
executed by the holder or by his duly authorized attorney. In the
case of any exchange, dividends on the Preferred Stock issuable
upon such exchange will commence to accrue as of the most recent
date as of which interest has been paid, or duly provided for, on
the Notes unless no interest has been paid or duly provided for on
the Notes, in which case from ____________, 1995 and no further
adjustment will be made with regard to interest due on the Note,
or portions thereof, so exchanged. No adjustment in respect of
interest or dividends will be made upon any conversion; provided,
however, that if this Note shall be surrendered for conversion or
exchange during the period from the close of business on any
record date for the payment of interest through the close of
business on the Business Day next preceding the following interest
payment date, this Note (unless it or the portion being converted
or exchanged 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 or exchanged.
No fractional shares will be issued upon any conversion or
exchange, 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 or exchange.
Any Notes called for redemption, unless surrendered for
conversion or exchange 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 or
exchange them for Preferred Stock of the Company and to make
payment for such Notes as aforesaid to the Trustee in trust for
such holders.
Upon due presentment for registration of transfer of this
Note at the office or agency of the Company in the Borough of
Manhattan, The City of New York, or at the option of the holder of
this Note, at the Corporate Trust office of the Trustee, a new
Note or Notes of authorized denominations for an equal aggregate
principal amount will be issued to the transferee in exchange
thereof, subject to the limitations provided in the Indenture,
without charge except for any tax or other governmental charge
imposed in connection therewith.
The Company, the Trustee, any authenticating agent, any
paying agent, any exchange or conversion agent and any Note
registrar may deem and treat the registered holder hereof as the
absolute owner of this Note (whether or not this Note shall be
overdue and notwithstanding any notation of ownership or other
writing hereon made by anyone other than the Company or any Note
registrar), for the purpose of receiving payment hereof, or on
account hereof, for the exchange or 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
exchange or conversion agent nor any Note registrar shall be
affected by any notice to the contrary. All payments made to or
upon the order of such registered holder shall, to the extent of
the sum or sums paid, satisfy and discharge liability for monies
payable on this Note.
No recourse for the payment of the principal of or any
premium or interest on this Note, or for any claim based hereon or
otherwise in respect hereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in the Indenture
or any indenture supplemental thereto or in any Note, or because
of the creation of any indebtedness represented thereby, shall be
had against any incorporator, stockholder, officer or director, as
such, past, present or future, of the Company or of any Successor
Company, either directly or through the Company or any Successor
Company, whether by virtue of any constitution, statute or rule of
law or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by the acceptance hereof and
as part of the consideration for the issue hereof, expressly
waived and released.
Terms used in this Note and defined in the Indenture are used
herein as therein defined.
[FORM OF CONVERSION NOTICE]
CONVERSION NOTICE
TO: SoftKey International Inc.
The undersigned registered owner of this Note hereby
irrevocably exercises the option to convert this Note, or the
portion hereof (which is $1,000 principal amount or an integral
multiple thereof) below designated, into shares of Common Stock,
par value $.01 per share, of the Company in accordance with the
terms of the Indenture referred to in this Note, and directs that
the shares issuable and deliverable upon such conversion, and any
Notes representing any unconverted principal amount hereof, be
issued and delivered to the registered holder hereof unless a
different name has been indicated below. If shares or any portion
of this Note not converted are to be issued in the name of a
person other than the undersigned, the undersigned will check the
appropriate box below and pay all transfer taxes payable with
respect thereto. Any amount required to be paid to the
undersigned on account of interest accompanies this Note.
Dated: _______________________
__________________________________
__________________________________
Signature(s)
Signature(s) must be guaranteed by an eligible Guarantor
Institution (banks, stock brokers, savings and loan associations
and credit unions) with membership in an approved signature
guarantee medallion program pursuant to Securities and Exchange
Commission Rule 17Ad-15 if shares of Common Stock are to be
issued, or Notes to be delivered, other than to and in the name of
the registered holder.
_____________________________________
Signature Guarantee
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
__________________________
Social Security or other
Taxpayer Identification
Number
Principal amount to be
converted (if less than
all) $___________________
[FORM OF EXCHANGE NOTICE)
EXCHANGE NOTICE
To: SoftKey International Inc.
The undersigned registered owner of this Note hereby
irrevocably exercises the option to exchange this Note, or the
portion hereof (which is $1,000 principal amount or an integral
multiple thereof) below designated, into shares of Preferred
Stock, par value $.01 per share, of the Company in accordance with
the terms of the Indenture referred to in this Note, and directs
that the shares issuable and deliverable upon such exchange, and
any Notes representing any unconverted principal amount hereof, be
issued and delivered to the registered holder hereof unless a
different name has been indicated below. If shares or any portion
of this Note not exchanged are to be issued in the name of a
person other than the undersigned, the undersigned will check the
appropriate box below and pay all transfer taxes payable with
respect thereto. Any amount required to be paid to the
undersigned on account of interest accompanies this Note.
Dated:
_________________________________
Signature(s)
Signature(s) must be guaranteed by an eligible Guarantor
institution (banks, stock brokers, savings and loan associations
and credit unions) with membership in an approved signature
guarantee medallion program pursuant to Securities and Exchange
Commission Rule 17Ad-15 if shares of Common Stock are to be
issued, or Notes to be delivered, other than to and in the name of
the registered holder.
________________________________
Signature Guarantee
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
__________________________
Social Security or other
Taxpayer Identification
Number
Principal amount to be
exchanged (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 Note hereby
irrevocably acknowledges receipt of a notice from SoftKey
International Inc. (the "Company") as to the occurrence of a
Change of Control with respect to the Company and requests and
instructs the Company to repay the entire principal amount of this
Note, or the portion thereof (which is $1,000 principal amount or
an integral multiple thereof) below designated, in accordance with
the terms of the Indenture referred to in this Note, together with
accrued interest to such date, to the registered holder hereof.
Dated:________________________
___________________________________
___________________________________
Signature(s)
___________________________________
Social Security or Other Taxpayer
Identification Number
___________________________________
Principal amount to be repaid (if
less than all): $__________________
(FORM OF ASSIGNMENT)
For value received ____________________ hereby sell(s),
assign(s) and transfer(s) unto _____________ (Please insert social
security or other identifying number of assignee) the within Note,
and hereby irrevocably constitutes and appoints _____________
attorney to transfer the said Note on the books of the Company,
with full power of substitution in the premises.
In connection with any transfer of the within Note (or
any issuance of shares of Common Stock, par value $.01 per share,
or shares of Preferred Stock, par value $.01 per share, of SoftKey
International Inc. upon conversion or exchange 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 or Preferred 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 or Preferred 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 14Ad-15.
_____________________________
Signature Guarantee
NOTICE: The signature on the conversion notice or the exchange
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.
EXHIBIT B - FORM OF GLOBAL NOTE
[FORM OF FACE OF NOTE]
No. A-1 $__________________
CUSIP______________
SOFTKEY INTERNATIONAL INC.
5 1/2% Senior Convertible/Exchangeable Note Due 2000
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE 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 DEPOSITARY 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
OR EXCHANGE 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
Note, at the Corporate Trust of f ice of the Trustee, in such coin
or currency of the United States of America as at the time of
payment shall be legal tender for the payment of public and
private debts, and to pay interest, semi-annually on May 1 and
November 1 of each year, commencing May 1, 1996, on said principal
sum at said office or agency, in like coin or currency, at the
rate per annum specified in the title of this Note, from the May 1
or November 1, as the case may be, next preceding the date of this
Note to which interest has been paid or duly provided for, unless
the date hereof is a date to which interest has been paid or duly
provided for, in which case from the date of this Note, or unless
no interest has been paid or duly provided for on the Notes, in
which case from, _________ 1995, until payment of said principal
sum has been made or duly provided for. Notwithstanding the
foregoing, if the date hereof is after any April 15 or October 15,
as the case may be, and before the following May 1 or November 1
other than October 15, 1995, this Note shall bear interest from
such May 1 or November 1, respectively; provided, however, that if
the Company shall default in the payment of interest due on such
May 1 or November 1, then this Note shall bear interest from the
next preceding May 1 or November 1 to which interest has been paid
or duly provided for or, if no interest has been paid or duly
provided for on such Note, from, __________ 1995. The interest so
payable on any May 1 or November 1 will be paid to the person in
whose name this Note (or one or more Predecessor Notes) is
registered at the close of business on the record date, which
shall be the April 15 or October 15 (whether or not a Business
Day) next preceding such May 1 or November 1, respectively;
provided that any such interest not punctually paid or duly
provided for shall be payable as provided in the Indenture.
Interest may, at the option of the Company, be paid by check
mailed to the registered address of such person.
The aggregate principal amount of the Note in global form
represented hereby may from time to time be reduced or increased
to reflect exchanges of a part of this Note in global form for
definitive Notes or exchanges of definitive Notes for a part of
this Note in global form or exchanges or conversions or
redemptions of a part of this Note in global form or cancellations
of a part of this Note in global form or transfers of definitive
Notes in return for a part of this Note in global form or
transfers of a part of this Note in global form effected by
delivery of definitive Notes, in each case, and in any such case,
by means of notations on the Schedule of Exchanges, Conversions,
Redemptions, Cancellations and Transfers on the last page hereof.
Notwithstanding any provision of this Note to the contrary, (i)
exchanges of a part of this Note in global form for definitive
Notes, (ii) exchanges of definitive Notes for a part of this Note
in global form, (iii) conversions, exchanges or redemptions of a
part of this Note in global form, (iv) cancellations of a part of
this Note in global form, (v) transfers of definitive Notes in
return for a part of this Note in global form and (vi) transfers of
a part of this Note in global form effected by delivery of
definitive Notes may be effected without the surrendering of this
Note in global form, provided that appropriate notations on the
Schedule of Exchanges, Conversions, Redemptions, Cancellations and
Transfers or on the records of the Trustee in accordance with the
standing instructions of DTC are made by the Trustee, or the
Custodian at the direction of the Trustee, to reflect the
appropriate reduction or increase, as the case may be, in the
aggregate principal amount of this Note in global form resulting
therefrom or as a consequence thereof.
Reference is made to the further provisions of this Note set
forth on the reverse hereof, including, without limitation,
provisions giving the holder of this Note the right to convert
this Note into Common Stock and exchange this Note for Preferred
Stock of the Company on the terms and subject to the limitations
referred to on the reverse hereof and as more fully specified in
the Indenture. Such further provisions shall for all purposes
have the same effect as though fully set forth at this place.
This Note shall be deemed to be a contract made under the
laws of the State of New York, and for all purposes shall be
construed in accordance with and governed by the laws of said
State.
This Note shall not be valid or become obligatory for any
purpose until the certificate of authentication hereon shall have
been manually signed by the Trustee or a duly authorized
authenticating agent under the Indenture.
IN WITNESS WHEREOF, the Company has caused this Note to be
duly executed under its corporate seal.
SOFTKEY INTERNATIONAL INC.
By:_______________________
Name:
Title:
Dated:_________________________
Attest:
_______________________________
Secretary
EXHIBIT C
[FORM OF
CERTIFICATE OF DESIGNATION]
SoftKey International Inc.
CERTIFICATE OF DESIGNATION
OF 5-1/2% SERIES C CONVERTIBLE
PREFERRED STOCK SETTING FORTH THE POWERS,
PREFERENCES, RIGHTS, QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS OF
SUCH SERIES OF PREFERRED STOCK
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware, SoftKey International Inc. (the
"Company"), a corporation organized and existing under the
General Corporation Law of the State of Delaware, in accordance
with the provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board
of Directors of the Company (the "Board of Directors") by Article
4.2.2 of the Restated Certificate of Incorporation of the
Company, as amended, and in accordance with the provisions of
Section 151 of the General Corporation Law of the State of
Delaware, the Board of Directors on November 30, 1995, adopted
the following resolution authorizing and creating a series of
Preferred Stock designated as 5-1/2% Series C Convertible
Preferred Stock:
RESOLVED that, pursuant to the authority vested in the
Board of Directors in accordance with the provisions of the
Restated Certificate of Incorporation, as amended, a series of
the class of authorized Preferred Stock, par value $.01 per
share, of the Company is hereby authorized and created and that
the designation and number of shares thereof and the voting
powers, preferences and relative, participating, optional and
other special rights of the shares of such series, and the
qualifications, limitations and restrictions thereof are as
follows:
Section 1. Designation and Number.
Section 1.1 Designation. The shares of such series
shall be designated as "5-1/2% Series C Convertible Preferred
Stock" (the "Series C Preferred Stock"). The maximum number of
shares of Series C Preferred Stock hereby authorized shall be
150,000 shares.
Section 1.2 Priority. The Series C Preferred Stock
shall, with respect to the payment of dividends and the
distribution of assets on liquidation, dissolution or winding up,
(i) rank prior to the Common Stock, par value $0.01 per share, of
the Company (the "Common Stock") and (ii) rank on a parity with
any other series of Preferred Stock hereinafter issued by the
Company.
Section 2. Dividends and Distributions.
Section 2.1 Dividends. The holders of shares of
Series C Preferred Stock, in preference to the holders of shares
of Common Stock and of any shares of other capital stock of the
Company ranking junior to the Series C Preferred Stock as to
payment of dividends, shall be entitled to receive, when, as and
if declared by the Board of Directors, out of the assets of the
Company legally available therefor, dividends in the amount per
share equal to 5-1/2% per annum of the Liquidation Preference (as
defined herein) of such share payable or accrued semi-annually on
May 1 and November 1 in each year commencing May 1, 1996 (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, as the case may be. Such dividends
shall begin to accrue on outstanding shares of Series C Preferred
Stock from the date of issuance of such shares of Series C
Preferred Stock; provided, in the case of any Series C Preferred
Stock issued upon exchange for the Company's $150 million
principal amount of 5-1/2% Senior Convertible/Exchangeable Notes
due 2000 (the "Notes"), such dividend shall begin to accrue and
accumulate from the date on which interest was last paid or duly
provided for on such Notes, or if no interest has been paid or
duly provided for prior to the date of such exchange, from
December 22, 1995. Dividends payable for any partial dividend
period shall be computed on the basis of a 360-day year of twelve
30-day months. Dividends on the Series C Preferred Stock shall
accrue on a daily basis whether or not funds shall be legally
available for the payment thereof. Accrued but unpaid dividends
on the Series C Preferred Stock shall cumulate as of the Dividend
Payment Date on which they first become payable, and any and all
such accrued dividends shall be paid as provided in this Section
2, Section 5 and Section 7.
Section 2.2 No Additional Dividends. The holders of
shares of Series C Preferred Stock shall not be entitled to
receive any dividends or other distributions except as provided
herein.
Section 3. Voting Rights. In addition to any voting
rights provided by law, the holders of shares of Series C
Preferred Stock shall have the following voting rights:
Section 3.1 With Common Stock. So long as the Series
C Preferred Stock is outstanding, each share of Series C
Preferred Stock shall entitle the holder thereof to vote on all
matters voted on by holders of Common Stock voting together as a
single class with other shares entitled to vote at all meetings
of the stockholders of the Company. 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.
Section 3.2 As a Class. The affirmative vote of the
holders of at least 66-2/3% of the outstanding shares of Series C
Preferred Stock, in person or by proxy, at a special or annual
meeting of stockholders called for the purpose, shall be
necessary to (i) authorize, increase the authorized number of
shares of, or issue (including on conversion or exchange of any
convertible or exchangeable securities or by reclassification),
any shares of any class or classes of the Company's capital stock
ranking prior to (either as to dividends or upon voluntary or
involuntary liquidation, dissolution or winding up) the Series C
Preferred Stock; (ii) increase the authorized number of shares
of, or issue (including on conversion or exchange of any
convertible or exchangeable securities or by reclassification)
any shares of, Series C Preferred Stock, except in connection
with the exchange of the Notes; (iii) authorize, adopt or approve
an amendment to the Restated Certificate of Incorporation of the
Company which would decrease the aggregate number of authorized
shares of Series C Preferred Stock, increase or decrease the par
value of the shares of Series C Preferred Stock, or alter or
change the powers, preferences or special rights of the shares of
Series C Preferred Stock so as to affect such shares of Series C
Preferred Stock adversely; (iv) authorize or issue shares of any
class or series of stock not authorized herein having any
preference or priority as to dividends or assets superior to any
such preference or priority of the Series C Preferred Stock; or
(v) reclassify any shares of Common Stock or any other shares of
capital stock of the Company other than the Series C Preferred
Stock (such shares other than (A) shares of capital stock of the
Company ranking senior (either as to dividends or upon
liquidation, dissolution or winding up of the Company) to the
Series C Preferred Stock and (B) Parity Stock (as hereinafter
defined) are hereinafter referred to as "Junior Stock") into
shares having any preference or priority as to dividends or
liquidation superior to or on a parity with any such preference
or priority of the Series C Preferred Stock; provided that Parity
Stock may be reclassified into a different series of Parity Stock
without the approval of the holders of Series C Preferred Stock.
Section 3.3 Right to Elect Directors as a Class. 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 shall, without
further action, be increased by two and the holders of shares of
Series C Preferred Stock shall have, in addition to the other
voting rights set forth herein, the exclusive right, voting
separately as a single class or as a class with the holders of
shares of Parity Stock (as hereinafter defined), if such holders
are then entitled to elect additional directors pursuant to any
provision of the Certificate of Designation for such stock that
is similar to this Section 3.3 ("Defaulted Parity Stock"), to
elect the directors of the Company to fill such newly created
directorships, the remaining directors to be elected by the other
classes of stock entitled to vote therefor (including the Series
C Preferred Stock in accordance with Section 3.1), at each
meeting of stockholders held for the purpose of electing
directors. Such additional directors shall continue as directors
and such additional voting right shall continue until such time
as all dividends accumulated on the Series C Preferred Stock have
been paid in full or all necessary funds have been set aside for
payment, as the case may be, at which time such additional
directors shall cease to be directors and such additional voting
right of the holders of Series C Preferred Stock shall terminate
subject to revesting in the event of each and every subsequent
event of the character indicated above. In no event shall the
holders of Series C Preferred Stock and/or the holders of Parity
Stock voting separately or together as a class be entitled to
elect a total of more than two directors to the Board of
Directors of the Company pursuant to this Section 3.3 and/or any
similar provision of the Certificate of Designation for any
Parity Stock.
Section 3.4.1 Exercise. The foregoing rights of
holders of shares of Series C Preferred Stock to take any actions
as provided in this Section 3 may be exercised at any annual
meeting of stockholders or at a special meeting of stockholders
held for such purpose as hereinafter provided or at any
adjournment thereof, or by the written consent, delivered to the
Secretary of the Company, of the holders of the minimum number of
shares required to take such action.
So long as such right to vote continues (and unless
such right has been exercised by written consent of the minimum
number of shares required to take such action), the Chairman of
the Board of the Company may call, and, upon the written request
of holders of record of 20% of the outstanding shares of Series C
Preferred Stock, if the holders of Series C Preferred Stock are
to vote separately as a single class, or the holders of record of
20% of the outstanding shares of Series C Preferred Stock and
Defaulted Parity Stock, if the holders of shares of Series C
Preferred Stock are to vote as a class with the holders of shares
of any Defaulted Parity Stock, addressed to the Secretary of the
Company at the principal office of the Company, shall call a
special meeting of the holders of shares entitled to vote as
provided herein. Such meeting shall be held within 30 days after
delivery of such request to the Secretary, at the place and upon
the notice provided by law and in the By-laws of the Company for
the holding of meetings of stockholders.
Section 3.4.2 Quorum. At each meeting of stockholders
at which 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 any Defaulted Parity Stock, to
elect directors of the Company as provided in this Section 3 or
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, if the holders of shares of Series C
Preferred Stock are to vote separately as a single class, or the
holders of record of one-third of the total number of shares of
Series C Preferred Stock and Defaulted Parity Stock, if the
holders of shares of Series C Preferred Stock are to vote as a
class with the holders of shares of any Parity Stock, then
outstanding and entitled to vote on the matter shall be necessary
and sufficient to constitute a quorum. At any such meeting or at
any adjournment thereof:
(i) the absence of a quorum of the holders of
shares of Series C Preferred Stock, if the holders of
Series C Preferred Stock are to vote separately as a
single class, or the holders of shares of Series C
Preferred Stock and Defaulted Parity Stock, if the
holders of shares of Series C Preferred Stock are to
vote as a class with the holders of shares of any
Parity Stock, shall not prevent the election of
directors other than those to be elected by the holders
of shares of Series C Preferred Stock or the holders of
shares of Series C Preferred Stock and Defaulted Parity
Stock, as the case may be, and the absence of a quorum
of the holders of shares of any other class or series
of capital stock shall not prevent the election of
directors to be elected by the holders of shares of
Series C Preferred Stock or the holders of shares of
Series C Preferred Stock and Defaulted Parity Stock, as
the case may be, or the taking of any action as
provided in this Section 3; and
(ii) in the absence of a quorum of the holders of
shares of Series C Preferred Stock, if the holders of
Series C Preferred Stock are to vote separately as a
single class, or the holders of shares of Series C
Preferred Stock and Defaulted Parity Stock, if the
holders of Series C Preferred Stock are to vote as a
class with the holders of shares of any Defaulted
Parity Stock, a majority of the holders of such shares
present in person or by proxy shall have the power to
adjourn the meeting as to the actions to be taken by
the holders of shares of Series C Preferred Stock or
the holders of shares of Series C Preferred Stock and
Defaulted Parity Stock, as the case may be, from time
to time and place to place without notice other than
announcement at the meeting until a quorum shall be
present.
Section 3.4.3 Votes. For the taking of any action as
provided in Sections 3.2 and 3.3 by the holders of shares of
Series C Preferred Stock or the holders of shares of Series C
Preferred Stock and Defaulted Parity Stock, as the case may be,
each such holder shall have one vote for each share of such stock
standing in his name on the transfer books of the Company as of
any record date fixed for such purpose or, if no such date be
fixed, at the close of business on the Business Day (as defined
in Section 11) next preceding the day on which notice is given,
or if notice is waived, at the close of business on the Business
Day next preceding the day on which the meeting is held.
Section 3.4.4 Directors. Each director elected by the
holders of shares of Series C Preferred Stock or the holders of
shares of Series C Preferred Stock and Defaulted Parity Stock, as
the case may be, as provided in Section 3.3 shall, unless his
term shall expire earlier, hold office until the annual meeting
of stockholders next succeeding his election or until his
successor, if any, is elected and qualified.
In case any vacancy shall occur among the directors
elected by the holders of shares of Series C Preferred Stock or
the holders of shares of Series C Preferred Stock and Defaulted
Parity Stock, as the case may be, as provided in Section 3.3,
such vacancy may be filled for the unexpired portion of the term
by vote of the remaining director theretofore elected by such
holders (if there is a remaining director), or such director's
successor in office. If any such vacancy is not so filled within
20 days after the creation thereof or if both directors so
elected by the holders of Series C Preferred Stock or the holders
of Series C Preferred Stock and Defaulted Parity Stock, as the
case may be, shall cease to serve as directors before their terms
shall expire, the holders of the Series C Preferred Stock or the
holders of Series C Preferred Stock and Defaulted Parity Stock,
as the case may be, then outstanding and entitled to vote for
such directors may, by written consent as herein provided, or at
a special meeting of such holders called as provided herein,
elect successors to hold office for the unexpired terms of the
directors whose places shall be vacant.
Any director elected by the holders of shares of Series
C Preferred Stock voting separately as a single class or the
holders of shares of Series C Preferred Stock voting as a class
with the holders of shares of Defaulted Parity Stock may be
removed from office with or without cause by the vote or written
consent of the holders of at least a majority of the outstanding
shares of Series C Preferred Stock or a majority of the
outstanding shares of Series C Preferred Stock and Defaulted
Parity Stock, as the case may be. A special meeting of the
holders of shares of Series C Preferred Stock or the holders of
shares of Series C Preferred Stock and Defaulted Parity Stock, as
the case may be, may be called in accordance with the procedures
set forth in Section 3.4.1.
Section 3.4.5 Parity Stock. "Parity Stock" shall mean
any capital stock of the Company ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up of
the Company) with the Series C Preferred Stock.
Section 4. Certain Restrictions.
Section 4.1 Restrictions on Dividends. Whenever
dividends payable on shares of Series C Preferred Stock as
provided in Section 2 are not paid in full, thereafter and until
all unpaid dividends payable, whether or not declared, on the
outstanding shares of Series C Preferred Stock shall have been
paid in full or declared and set apart for payment, until all
necessary funds have been set apart for payment, the Company
shall not: (A) declare or pay dividends, or make any other
distributions, on any shares of Junior Stock (as defined in
Section 3.2), other than dividends or distributions payable in
Junior Stock; or (B) declare or pay dividends, or make any other
distributions, on any shares of Parity Stock, except (1)
dividends or distributions payable in Junior Stock and (2)
dividends or distributions paid ratably on the Series C Preferred
Stock and all Parity Stock on which dividends are payable or in
arrears, in proportion to the total amounts to which the holders
of all shares of the Series C Preferred Stock and such Parity
Stock are then entitled; provided, however, that in the case of
clause (2) the holders of at least 66-2/3% of the outstanding
shares of Series C Preferred Stock, voting separately as a single
class, or the holders of at least 66-2/3% of the outstanding
shares of Series C Preferred Stock and of any Parity Stock the
approval of holders of which is required for such a pro rata
dividend or distribution pursuant to any similar provision of the
Certificate of Designation for such stock, voting together as a
class, shall have approved the payment of such dividend or
distribution; and provided, further, that the restrictions of
this Section 4.1 shall not apply upon the affirmative vote of the
holders of 66-2/3% of the outstanding shares of Series C
Preferred Stock.
Section 4.2 Restrictions on Redemption or Purchase.
Whenever dividends payable on shares of Series C Preferred Stock
as provided in Section 2 are not paid in full, thereafter and
until all unpaid dividends payable, whether or not declared, on
the outstanding shares of Series C Preferred Stock shall have
been paid in full or declared and set apart for payment, the
Company shall not: (A) redeem, purchase or otherwise acquire for
consideration any shares of Junior Stock or Parity Stock;
provided that (1) the Company may at any time redeem, purchase or
otherwise acquire shares of Junior Stock or Parity Stock in
exchange for any shares of Junior Stock, (2) the Company may
accept shares of any Parity Stock for conversion and (3) the
Company may at any time redeem, purchase or otherwise acquire
shares of any Parity Stock pursuant to any mandatory redemption,
put, sinking fund or other similar obligation, pro rata with the
Series C Preferred Stock in proportion to the total amount then
required to be applied by it to repurchase or otherwise acquire
shares of Series C Preferred Stock and shares of such Parity
Stock; provided, however, that in the case of clause (3) the
holders of at least 66-2/3% of the outstanding shares of Series C
Preferred Stock, voting separately as a single class, or the
holders of at least 66-2/3% of the outstanding shares of Series C
Preferred Stock and of any Parity Stock the approval of holders
of which is required for such a pro rata repurchase or other
acquisition pursuant to any similar provision of the Certificate
of Designation for such stock, voting together as a class, shall
have approved such repurchase or other acquisition; or (B) redeem
or purchase or otherwise acquire for consideration any shares of
Series C Preferred Stock; provided that the Company (1) may
accept shares of Series C Preferred Stock surrendered for
conversion into shares of capital stock of the Company pursuant
to Section 8, or (2) may redeem shares of Series C Preferred
Stock pro rata pursuant to Section 5.2; and provided, further,
that the restrictions of this Section 4.2 shall not apply upon
the affirmative vote of the holders of 66-2/3% of the outstanding
shares of Series C Preferred Stock.
Section 4.3 Purchase by Subsidiary. The Company shall
not permit any subsidiary of the Company to purchase or otherwise
acquire for consideration any shares of capital stock of the
Company unless the Company could, pursuant to Section 4.2,
purchase such shares at such time and in such manner.
Section 5. Redemption.
Section 5.1 Redemption Prices. The Company may, at
its option, redeem all or from time to time any part of the
Series C Preferred Stock on any date, upon notice as set forth in
Section 5.2, and at the redemption prices set forth below,
provided, however, that no such redemption shall be effected
before November 2, 1998; provided, further, that, notwithstanding
the foregoing, 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
$1,000.00), together in each case with accrued and unpaid
dividends thereon, whether or not declared, to the date of
redemption, payable in cash, 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.
Section 5.2 Notice of Redemption, Selection of Series
C Preferred Stock. In case the Company shall desire to exercise
the right to redeem all or, as the case may be, any part of the
Series C Preferred Stock pursuant to Section 5.1, it shall fix a
date for redemption and, in the case of any redemption pursuant
to Section 5.1, it shall mail or cause to be mailed a notice of
such redemption at least 30 and not more than 60 days prior to
the date fixed for redemption to the holders of Series C
Preferred Stock so to be redeemed as a whole or in part at their
last addresses as the same appear on the books of the Company.
Such mailing shall be by first class mail. The notice, if mailed
in the manner herein provided, shall be conclusively presumed to
have been duly given, whether or not the holder receives such
notice. In any case, failure to give such notice by mail or any
defect in the notice to the holder of any Series C Preferred
Stock designated for redemption as a whole or in part shall not
affect the validity of the proceedings for the redemption of any
other shares of Series C Preferred Stock.
Each such notice of redemption shall specify the
aggregate number of shares of Series C Preferred Stock to be
redeemed, the date fixed for redemption, the redemption price at
which Series C Preferred Stock is to be redeemed, the place or
places of payment, that payment will be made upon presentation
and surrender of certificates representing such Series C
Preferred Stock, that dividends accrued to the date fixed for
redemption will be paid as specified in said notice and that on
and after said date, dividends thereon or on the portion thereof
to be redeemed will cease to accrue. Such notice shall also
state the current Conversion Price (as defined below) and the
date on which the right to convert such Series C Preferred Stock
into Common Stock will expire. If fewer than all the Series C
Preferred Stock is to be redeemed, the notice of redemption shall
identify the Series C Preferred Stock to be redeemed.
On or prior to the Business Day prior to the redemption
date specified in the notice of redemption given as provided in
this Section, the Company will deposit with one or more paying
agents (or, if the Company is acting as its own paying agent, set
aside, segregate and hold in trust) an amount of money sufficient
to redeem on the redemption date all the Series C Preferred Stock
so called for redemption (other than those shares theretofore
surrendered for conversion into Common Stock) at the appropriate
redemption price, together with accrued dividends to the date
fixed for redemption. If any shares of Series C Preferred Stock
called for redemption are converted pursuant hereto, any money
deposited with any paying agent or so segregated and held in
trust for the redemption of such shares of Series C Preferred
Stock shall be paid to the Company upon its request or, if then
held by the Company, shall be discharged from such trust.
If fewer than all the shares of Series C Preferred
Stock are to be redeemed, the Company shall select the shares of
Series C Preferred Stock to be redeemed by lot or, in its sole
discretion, on a pro rata basis.
Section 5.3 Payment of Series C Preferred Stock Called
for Redemption. If notice of redemption has been given as above
provided, the Series C Preferred Stock with respect to which such
notice has been given shall, unless converted into Common Stock
pursuant to the terms hereof, become due and payable on the date
and at the place or places stated in such notice at the
applicable redemption price, together with dividends thereon
accrued to the date fixed for redemption, and on and after said
date (unless the Company shall default in the payment of such
redemption price, together with dividends thereon accrued to said
date), dividends on the Series C Preferred Stock so called for
redemption shall cease to accrue, and such Series C Preferred
Stock shall cease after the close of business on the Business Day
next preceding the date fixed for redemption to be convertible
into Common Stock and the holders thereof shall have no right in
respect of such shares of Series C Preferred Stock except the
right to receive the redemption price thereof and dividends
thereon to the date fixed for redemption. On presentation and
surrender of Series C Preferred Stock at a place of payment in
said notice specified, the said Series C Preferred Stock shall be
paid and redeemed by the Company at the applicable redemption
price, together with dividends accrued thereon to the date fixed
for redemption.
Section 5.4 Conversion Arrangement on Call for
Redemption. In connection with any redemption of Series C
Preferred Stock, the Company may arrange for the purchase and
conversion of any Series C Preferred Stock by an agreement with
one or more investment bankers or other purchasers to purchase
such Series C Preferred Stock by paying to the Company or a
paying agent designated by the Company in trust for the holders
of Series C Preferred Stock, on or before the date fixed for
redemption, an amount not less than the applicable redemption
price, together with dividends accrued to the date fixed for
redemption, of such Series C Preferred Stock. Notwithstanding
anything to the contrary contained in this Section 5, the
obligation of the Company to pay the redemption price of such
Series C Preferred Stock, together with dividends accrued to the
date fixed for redemption, shall be deemed to be satisfied and
discharged to the extent such amount is so paid by such
purchasers. If such an agreement is entered into, any Series C
Preferred Stock not duly surrendered for conversion by the
holders thereof may, at the option of the Company, be deemed, to
the fullest extent permitted by law, acquired by such purchasers
from such holders and (notwithstanding anything to the contrary
contained in Section 8) surrendered by such purchasers for
conversion, all as of immediately prior to the close of business
on the date fixed for redemption (and the right to convert any
such Series C Preferred Stock shall be deemed to have been
extended through such time), subject to payment of the above
amount as aforesaid. At the direction of the Company, any
payment agent appointed by the Company shall hold and dispose of
any such amount paid to it in the same manner as it would monies
deposited with it by the Company for the redemption of Series C
Preferred Stock.
Section 5.5. Purchase of Series C Preferred Stock Upon
a Change of Control.
Section 5.5.1 If a Change of Control (as defined in
Section 11) shall occur at any time, then each holder of Series C
Preferred Stock shall have the right to require that the Company
purchase, to the extent that the Company shall have funds legally
available therefor, such holder's shares of Series C Preferred
Stock in whole or in part at a purchase price (the "Change of
Control Purchase Price") in cash in an amount equal to 101% of
the Liquidation Preference of such Series C Preferred Stock, plus
accrued and unpaid dividends thereon, if any, to the repurchase
date (the "Change of Control Purchase Date") pursuant to the
offer described below (the "Change of Control Offer") and in
accordance with the other procedures set forth herein.
Section 5.5.2 Within 30 days following any Change of
Control, the Company shall give written notice of such Change of
Control to each holder of Series C Preferred Stock, by first-
class mail, postage prepaid, at his address appearing on the
books of the Company, stating, among other things: that a Change
of Control has occurred; the Change of Control Purchase Price and
the Change of Control Purchase Date (which shall be a Business
Day no earlier than 30 days nor later than 60 days from the date
such notice is mailed, or such later date as is necessary to
comply with requirements under the Exchange Act); that any shares
of Series C Preferred Stock not tendered will continue to accrue
dividends; that, unless the Company defaults in the payment of
the Change of Control Purchase Price, any shares of Series C
Preferred Stock accepted for payment pursuant to the Change of
Control Offer shall cease to accrue dividends after the Change of
Control Purchase Date; and certain other procedures that a holder
of Series C Preferred Stock must follow to accept a Change of
Control Offer or to withdraw such acceptance.
Section 5.5.3 The Company will comply with the
applicable tender offer rules, including Rule 13e-4 under the
Exchange Act, and any other applicable securities laws or
regulations in connection with a Change of Control Offer.
Section 5.5.4 The Company will not, and will not
permit any subsidiary to, create or permit to exist or become
effective any restriction that would materially impair the
ability of the Company to make a Change of Control Offer to
purchase the Series C Preferred Stock or, if such Change of
Control Offer is made, to pay for the Series C Preferred Stock
tendered for purchase.
Section 6. Reacquired Shares. Any shares of Series C
Preferred Stock converted, redeemed, purchased or otherwise
acquired by the Company in any manner whatsoever shall be retired
and canceled promptly after the acquisition thereof. All such
shares of Series C Preferred Stock shall upon their cancellation,
and upon the filing of an appropriate certificate with the
Secretary of State of the State of Delaware, become authorized
but unissued shares of Preferred Stock, par value $.01 per share,
of the Company, undesignated as to series, and may be reissued as
part of another series of Preferred Stock, par value $.01 per
share, of the Company subject to the conditions or restrictions
on issuance set forth herein.
Section 7. Liquidation, Dissolution or Winding Up.
Section 7.1 Bankruptcy or Insolvency. If the Company
shall commence a voluntary case under the Federal bankruptcy laws
or any other applicable Federal or State bankruptcy, insolvency
or similar law, or consent to the entry of an order for relief in
an involuntary case under any such law or to the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator
(or other similar official) of the Company or of any substantial
part of its property, or make an assignment for the benefit of
its creditors, or admit in writing its inability to pay its debts
generally as they become due, or if a decree or order for relief
in respect of the Company shall be entered by a court having
jurisdiction in the premises in an involuntary case under the
Federal bankruptcy laws or any other applicable Federal or State
bankruptcy, insolvency or similar law, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Company or any substantial part of its
property, or ordering the winding up or liquidation of its
affairs, and any such decree or order shall be unstayed and in
effect for a period of 90 consecutive days and on account of any
such event the Company shall liquidate, dissolve or wind up, or
if the Company shall otherwise liquidate, dissolve or wind up, no
distribution shall be made (i) to the holders of shares of Junior
Stock unless, prior thereto, the holders of shares of Series C
Preferred Stock, subject to Section 8, shall have received the
Liquidation Preference with respect to each share, or (ii) to the
holders of shares of Parity Stock, except distributions made
ratably on the Series C Preferred Stock and all Parity Stock in
proportion to the total amounts to which the holders of all
shares of the Series C Preferred Stock and Parity Stock are
entitled upon such liquidation, dissolution or winding up.
"Liquidation Preference" shall mean $1,000.00 per share of Series
C Preferred Stock, plus an amount equal to all accrued and unpaid
dividends thereon. After payment of the full amount to which the
holders of Series C Preferred Stock are entitled as provided in
this Section 7.1, such holders shall have no further right or
claim to any of the remaining assets of the Company.
Section 7.2 Consolidation or Merger. Neither the
consolidation, merger or other business combination of the
Company with or into any other person or persons nor the sale,
lease, exchange or other transfer of all or substantially all the
assets of the Company shall be deemed to be a liquidation,
dissolution or winding up of the Company for purposes of this
Section 7.
Section 7.3 Proportionate Amount. The Liquidation
Preference with respect to each fractional share of Series C
Preferred Stock outstanding shall be equal to a ratably
proportionate amount of the Liquidation Preference with respect
to each outstanding share of Series C Preferred Stock.
SECTION 8.
CONVERSION OF SERIES C PREFERRED STOCK
Section 8.1 Right to Convert. Subject to and upon
compliance with the provisions of this Certificate of
Designation, the holder of any share of Series C Preferred Stock
shall have the right, at his option, at any time (except that,
with respect to any shares of Series C Preferred Stock which
shall be called for redemption or delivered for repurchase, such
right shall terminate, except as provided in the third paragraph
of Section 8.2, at the close of business on the last Trading Day
prior to the date fixed for redemption of such shares of Series C
Preferred Stock unless the Company shall default in payment due
upon redemption thereof) to convert any such share into that
number of fully paid and nonassessable shares of Common Stock (as
such shares shall then be constituted) obtained by dividing
$1,000.00 for each such share so converted by the Conversion
Price in effect at such time, by surrender of the shares so to be
converted in the manner provided in Section 8.2. 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, and only to the extent such
Series C Preferred Stock is deemed to have been converted to
Common Stock under this Section 8.
Section 8.2 Exercise of Conversion Privilege; Issuance
of Common Stock on Conversion; No Adjustment for Dividends. In
order to exercise the conversion privilege with respect to any
Series C Preferred Stock, the holder of any such share of Series
C Preferred Stock to be converted in whole or in part shall
surrender such share of Series C Preferred Stock, duly endorsed,
at the principal office of the Company or with the Transfer Agent
for the Common Stock, and shall give written notice of conversion
in the form provided on the share of Series C Preferred Stock (or
such other notice which is acceptable to the Company) to the
office or agency that the holder elects to convert such shares
specified in said notice. Such notice shall also state the name
or names (with address) in which the certificate or certificates
for shares of Common Stock which shall be issuable on such
conversion shall be issued and shall be accompanied by transfer
taxes, if required pursuant to Section 8.7. Each such share
surrendered for conversion shall, unless the shares issuable on
conversion are to be issued in the same name as the registration
of such share of Series C Preferred Stock, be duly endorsed by,
or be accompanied by instruments of transfer in form satisfactory
to the Company duly executed by, the holder or his duly
authorized attorney.
As promptly as practicable after satisfaction of the
requirements for conversion set forth above, subject to
compliance with any restrictions on transfer if shares issuable
on conversion are to be issued in a name other than that of the
shareholder (as if such transfer were a transfer of the shares so
converted), the Company shall issue and shall deliver to such
holder at the address designated in the notice of conversion, a
certificate or certificates for the number of full shares
issuable upon the conversion of such shares in accordance with
the provisions of this Section 8 and a check or cash in respect
of any fractional interest in respect of a share of Common Stock
arising upon such conversion, as provided in Section 8. In case
any certificate shall be surrendered for partial conversion, the
Company shall issue and deliver to the holder of the certificate
so surrendered, without charge to him, a new certificate or
certificates in an aggregate share amount equal to the
unconverted portion of the surrendered certificate.
Each conversion shall be deemed to have been effected as
to any such certificate on the date on which the requirements set
forth above in this Section 8.2 have been satisfied as to such
certificate, and the person in whose name any certificate or
certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become on said date the
holder of record of the shares represented thereby; provided,
however, that any such surrender on any date when the stock
transfer books of the Company shall be closed shall constitute
the person in whose name the certificates are to be issued as the
record holder thereof for all purposes on the next succeeding day
on which such stock transfer books are open, but such conversion
shall be at the Conversion Price in effect on the date upon which
such Series C Preferred Stock shall have been surrendered.
Section 8.3 Cash Payments in Lieu of Fractional Shares.
No fractional shares of Common Stock or scrip representing
fractional shares shall be issued upon conversion of Series C
Preferred Stock. If more than one certificate for shares of
Preferred Stock shall be surrendered for conversion at one time
by the same holder, the number of full shares which shall be
issuable upon conversion shall be computed on the basis of the
aggregate shares of Series C Preferred Stock (or specified
portions thereof to the extent permitted hereby) so surrendered.
If any fractional share of stock would be issuable upon the
conversion of any Series C Preferred Stock, the Company shall
make an adjustment therefor in cash at the current market value
thereof. The current market value of a share of Common Stock
shall be the Closing Price on the first Trading Day immediately
preceding the day on which the Series C Preferred Stock is deemed
to have been converted and such Closing Price shall be determined
as provided in Section 8.5.7.
Section 8.4 Conversion Price. The conversion price
shall be $53.00 (herein called the "Conversion Price") subject to
adjustment as provided in this Section 8.
Section 8.5 Adjustment of Conversion Price. The
Conversion Price shall be adjusted from time to time by the
Company as follows:
Section 8.5.1 In case the Company shall hereafter pay a
dividend or make a distribution to all holders of the outstanding
Common Stock in shares of Common Stock, the Conversion Price in
effect at the opening of business on the date following the date
fixed for the determination of stockholders entitled to receive
such dividend or other distribution shall be reduced by
multiplying such Conversion Price by a fraction the numerator of
which shall be the number of shares of Common Stock outstanding
at the close of business on the Record Date (as defined in
Section 8.5.7) fixed for such determination and the denominator
of which shall be the sum of such number of shares and the total
number of shares constituting such dividend or other
distribution, such reduction to become effective immediately
after the opening of business on the day following the Record
Date. The Company will not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of
the Company.
Section 8.5.2 In case the Company shall issue rights or
warrants to all holders of its outstanding shares of Common Stock
entitling them (for a period expiring within 45 days after the
date fixed for determination of stockholders entitled to receive
such rights or warrants) to subscribe for or purchase shares of
Common Stock at a price per share less than the Current Market
Price (as defined in Section 8.5.7) on the Record Date fixed for
determination of stockholders entitled to receive such rights or
warrants, the Conversion Price shall be adjusted so that the same
shall equal the price determined by multiplying the Conversion
Price in effect at the opening of business on the date after the
Record Date by a fraction the numerator of which shall be the
number of shares of Common Stock outstanding at the close of
business on the Record Date plus the number of shares which the
aggregate offering price of the total number of shares so offered
would purchase at such Current Market Price, and the denominator
of which shall be the number of shares of Common Stock
outstanding on the close of business on the Record Date plus the
total number of additional shares of Common Stock so offered for
subscription or purchase. Such adjustment shall become effective
immediately after the opening of business on the day following
the Record Date fixed for determination of stockholders entitled
to receive such rights or warrants. To the extent that shares of
Common Stock are not delivered after the expiration or
termination of such rights or warrants, the Conversion Price
shall be readjusted to the Conversion Price which would then be
in effect had the adjustments made upon the issuance of such
rights or warrants been made on the basis of delivery of only the
number of shares of Common Stock actually delivered. In the
event that such rights or warrants are not so issued, the
Conversion Price shall again be adjusted to be the Conversion
Price which would then be in effect if such date fixed for the
determination of stockholders entitled to receive such rights or
warrants had not been fixed. In determining whether any rights
or warrants entitle the holders to subscribe for or purchase
shares of Common Stock at less than such Current Market Price,
and in determining the aggregate offering price of such shares of
Common Stock, there shall be taken into account any consideration
received for such rights or warrants, the value of such
consideration, if other than cash, to be determined by the Board
of Directors.
Section 8.5.3 In case outstanding shares of Common
Stock shall be subdivided into a greater number of shares of
Common Stock, the Conversion Price in effect at the opening of
business on the day following the day upon which such subdivision
becomes effective shall be proportionately reduced, and
conversely, in case outstanding shares of Common Stock shall be
combined into a smaller number of shares of Common Stock, the
Conversion Price in effect at the opening of business on the day
following the day upon which such combination becomes effective
shall be proportionately increased, such reduction or increase,
as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such
subdivision or combination becomes effective.
Section 8.5.4 In case the Company shall, by dividend or
otherwise, distribute to all holders of its Common Stock shares
of any class of capital stock of the Company (other than any
dividends or distributions to which Section 8.5.1 applies) or
evidences of its indebtedness or assets (including securities,
but excluding any rights or warrants referred to in Section
8.5.2, and excluding any dividend or distribution (x) in
connection with the liquidation, dissolution or winding-up of the
Company, whether voluntary or involuntary, (y) exclusively in
cash or (z) referred to in Section 8.5.1 (any of the foregoing
hereinafter in this Section 8.5.4 called the "Securities")),
then, in each such case, the Conversion Price shall be reduced so
that the same shall be equal to the price determined by
multiplying the Conversion Price in effect immediately prior to
the close of business on the Record Date (as defined in Section
8.5.7) with respect to such distribution by a fraction of which
the numerator shall be the Current Market Price (determined as
provided in Section 8.5.7) on such date less the fair market
value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a resolution
of such board) on such date of the portion of the Securities so
distributed applicable to one share of Common Stock and the
denominator shall be such Current Market Price, such reduction to
become effective immediately prior to the opening of business on
the day following the Record Date; provided, however, that in the
event the then fair market value (as so determined) of the
portion of the Securities so distributed applicable to one share
of Common Stock is equal to or greater than the Current Market
Price on the Record Date, in lieu of the foregoing adjustment,
adequate provision shall be made so that each holder of Series C
Preferred Stock shall have the right to receive upon conversion
the amount of Securities such holder would have received had such
holder converted each Series C Preferred Stock on such date. In
the event that such dividend or distribution is not so paid or
made, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such dividend
or distribution had not been declared. If the Board of Directors
determines the fair market value of any distribution for purposes
of this Section 8.5.4 by reference to the actual or when issued
trading market for any securities comprising all or part of such
distribution, it must in doing so consider the prices in such
market over the same period used in computing the Current Market
Price pursuant to Section 8.5.7 to the extent possible.
Notwithstanding the foregoing provisions of this Section
8.5.4, no adjustment shall be made hereunder for any distribution
of Securities if the Company makes proper provision so that each
holder of Series C Preferred Stock who converts such Series C
Preferred Stock after the date fixed for determination of
stockholders entitled to receive such distribution shall be
entitled to receive upon such conversion, in addition to the
shares of Common Stock issuable upon such conversion, the amount
and kind of Securities that such holder would have been entitled
to receive if such holder had, immediately prior to such
determination date, converted such Series C Preferred Stock into
Common Stock; provided that, with respect to any Securities that
are convertible, exchangeable or exercisable, the foregoing
provision shall only apply to the extent (and so long as) the
Securities receivable upon conversion of such Series C Preferred
Stock would be convertible, exchangeable or exercisable, as
applicable, without any loss of rights or privileges for a period
of at least 60 days following conversion of such Series C
Preferred Stock.
Rights or warrants distributed by the Company to all
holders of Common Stock entitling the holders thereof to
subscribe for or purchase shares of the Company's capital stock
(either initially or under certain circumstances), which rights
or warrants, until the occurrence of a specified event or events
("Trigger Event"): (i) are deemed to be transferred with such
shares of Common Stock, (ii) are not exercisable and (iii) are
also issued in respect of future issuances of Common Stock, shall
not be deemed distributed for purposes of this Section 8.5.4 (and
no adjustment to the Conversion Price under Section 8.5.4 will be
required) until the occurrence of the earliest Trigger Event. In
addition, in the event of any distribution of rights or warrants,
or any Trigger Event with respect thereto, that shall have
resulted in an adjustment to the Conversion Price under this
Section 8.5.4, (1) in the case of any such rights or warrants
which shall all have been redeemed or repurchased without
exercise by any holders thereof, the Conversion Price shall be
readjusted upon such final redemption or repurchase to give
effect to such distribution or Trigger Event, as the case may be,
as though it were a cash distribution, equal to the per share
redemption or repurchase price received by a holder of Common
Stock with respect to such rights or warrants (assuming such
holder had retained such rights or warrants), made to all holders
of Common Stock as of the date of such redemption or repurchase,
and (2) in the case of such rights or warrants all of which shall
have expired or been terminated without exercise by any holder
thereof, the Conversion Price shall be readjusted as if such
issuance had not occurred.
For purposes of this Section 8.5.4 and Sections 8.5.1
and 8.5.2, any dividend or distribution to which this Section
8.5.4 is applicable that also includes shares of Common Stock, or
rights or warrants to subscribe for or purchase shares of Common
Stock (or both), shall be deemed instead to be (1) a dividend or
distribution of the evidences of indebtedness, assets or shares
of capital stock other than such shares of Common Stock or rights
or warrants (and any Conversion Price reduction required by this
Section 8.5.4 with respect to such dividend or distribution shall
then be made) immediately followed by (2) a dividend or
distribution of such shares of Common Stock or such rights or
warrants (and any further Conversion Price reduction required by
Sections 8.5.1 and 8.5.2 with respect to such dividend or
distribution shall then be made, except (A) the Record Date of
such dividend or distribution shall be substituted as "the date
fixed for the determination of stockholders entitled to receive
such dividend or other distribution" and "the date fixed for such
determination" within the meaning of Sections 8.5.1 and 8.5.2 and
(B) any shares of Common Stock included in such dividend or
distribution shall not be deemed "outstanding at the close of
business on the date fixed for such determination" within the
meaning of Section 8.5.1).
Section 8.5.5 In case the Company shall, by dividend
or otherwise, distribute to all holders of its Common Stock cash
(excluding any cash that is distributed upon a merger or
consolidation to which Section 8.6 applies or as part of a
distribution referred to in Section 8.5.4) in an aggregate amount
that, combined together with (1) the aggregate amount of any
other such distributions to all holders of its Common Stock made
exclusively in cash within the twelve (12) months preceding the
date of payment of such distribution, and in respect of which no
adjustment pursuant to this Section 8.5.5 has been made, and (2)
the aggregate of any cash plus the fair market value (as
determined by the Board of Directors, whose determination shall
be conclusive and described in a resolution of such board) of
consideration payable in respect of any tender offer, by the
Company or any of its subsidiaries for all or any portion of the
Common Stock concluded within the twelve (12) months preceding
the date of payment of such distribution, and in respect of which
no adjustment pursuant to Section 8.5.6 has been made, exceeds
20.0% of the product of the Current Market Price (determined as
provided in Section 8.5.7) on the Record Date with respect to
such distribution times the number of shares of Common Stock
outstanding on such date, then, and in each such case,
immediately after the close of business on such date, unless the
Company elects to reserve such cash for distribution to the
holders of the Series C Preferred Stock upon the conversion of
the Series C Preferred Stock so that any such holder converting
Series C Preferred Stock will receive upon such conversion, in
addition to the shares of Common Stock to which such holder is
entitled, the amount of cash which such holder would have
received if such holder had, immediately prior to the Record Date
for such distribution of cash, converted its Series C Preferred
Stock into Common Stock, the Conversion Price shall be reduced so
that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the close of
business on such date by a fraction (i) the numerator of which
shall be equal to the Current Market Price on the Record Date
less an amount equal to the quotient of (x) the excess of such
combined amount over such 20.0% and (y) the number of shares of
Common Stock outstanding on the Record Date and (ii) the
denominator of which shall be equal to the Current Market Price
on such date; provided, however, that in the event the portion of
the cash so distributed applicable to one share of Common Stock
is equal to or greater than the Current Market Price of the
Common Stock on the Record Date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each Series
C Preferred Stock shareholder shall have the right to receive
upon conversion the amount of cash such holder would have
received had such holder converted each share of Series C
Preferred Stock on the Record Date. In the event that such
dividend or distribution is not so paid or made, the Conversion
Price shall again be adjusted to be the Conversion Price which
would then be in effect if such dividend or distribution had not
been declared.
Section 8.5.6 In case a tender offer made by the
Company or any of its subsidiaries for all or any portion of the
Common Stock shall expire and such tender offer (as amended upon
the expiration thereof) shall require the payment to stockholders
(based on the acceptance (up to any maximum specified in the
terms of the tender offer) of Purchased Shares (as defined
below)) of an aggregate consideration having a fair market value
(as determined by the Board of Directors, whose determination
shall be conclusive and described in a resolution of such board)
that combined together with (1) the aggregate of the cash plus
the fair market value (as determined by the Board of Directors,
whose determination shall be conclusive and described in a
resolution of such board), as of the expiration of such tender
offer, of consideration payable in respect of any other tender
offer, by the Company or any of its subsidiaries for all or any
portion of the Common Stock expiring within the twelve (12)
months preceding the expiration of such tender offer, and in
respect of which no adjustment pursuant to this Section 8.5.6 has
been made, and (2) the aggregate amount of any distributions to
all holders of the Company's Common Stock made exclusively in
cash within twelve (12) months preceding the expiration of such
tender offer, and in respect of which no adjustment pursuant to
Section 8.5.5 has been made, exceeds 20.0% of the product of the
Current Market Price (determined as provided in Section 8.5.7) as
of the last time (the "Expiration Time") tenders could have been
made pursuant to such tender offer (as it may be amended) times
the number of shares of Common Stock outstanding (including any
tendered shares) on the Expiration Time, then, and in each such
case, immediately prior to the opening of business on the day
after the date of the Expiration Time, the Conversion Price shall
be adjusted so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to
close of business on the date of the Expiration Time by a
fraction of which the numerator shall be the number of shares of
Common Stock outstanding (including any tendered shares) on the
Expiration Time multiplied by the Current Market Price of the
Common Stock on the Trading Day next succeeding the Expiration
Time and the denominator shall be the sum of (x) the fair market
value (determined as aforesaid) of the aggregate consideration
payable to stockholders based on the acceptance (up to any
maximum specified in the terms of the tender offer) of all shares
validly tendered and not withdrawn as of the Expiration Time (the
shares deemed so accepted, up to any such maximum, being referred
to as the "Purchased shares") and (y) the product of the number
of shares of Common Stock outstanding (less any Purchased Shares)
on the Expiration Time and the Current Market Price of the Common
Stock on the Trading Day next succeeding the Expiration Time,
such reduction to become effective immediately prior to the
opening of business on the day following the Expiration Time. In
the event that the Company is obligated to purchase shares
pursuant to any such tender offer, but the Company is permanently
prevented by applicable law from effecting any such purchases or
all such purchases are rescinded, the Conversion Price shall
again be adjusted to be the Conversion Price which would then be
in effect if such tender offer had not been made.
Section 8.5.7 For purposes of this section 8.5, the
following terms shall have the meaning indicated:
(1) "Closing Price" with respect to any securities on
any day shall mean the closing sale price regular way on such day
or, in case no such sale takes place on such day, the average of
the reported closing bid and asked prices, regular way, in each
case on the New York Stock Exchange, or, if such security is not
listed or admitted to trading on such Exchange, on the principal
national security exchange or quotation system on which such
security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national
securities exchange or quotation system, the average of the
closing bid and asked prices of such security on the over-the-
counter market on the day in question as reported by the National
Quotation Bureau Incorporated, or a similar generally accepted
reporting service, or if not so available, in such manner as
furnished by any New York Stock Exchange member firm selected
from time to time by the Board of Directors for that purpose, or
a price determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolution
of such board.
(2) "Current Market Price" shall mean the average of
the daily Closing Prices per share of Common Stock for the ten
consecutive Trading Days immediately prior to the date in
question; provided, however, that (1) if the "ex" date (as
hereinafter defined) for any event (other than the issuance or
distribution or Change of Control requiring such computation)
that requires an adjustment to the Conversion Price pursuant to
Section 8.5.1, 8.5.2, 8.5.3, 8.5.4, 8.5.5 or 8.5.6 occurs during
such ten consecutive Trading Days, the Closing Price for each
Trading Day prior to the "ex" date for such other event shall be
adjusted by multiplying such Closing Price by the same fraction
by which the Conversion Price is so required to be adjusted as a
result of such other event, (2) if the "ex" date for any event
(other than the issuance, distribution or Change of Control
requiring such computation) that requires an adjustment to the
Conversion Price pursuant to Section 8.5.1, 8.5.2, 8.5.3, 8.5.4,
8.5.5 or 8.5.6 occurs on or after the "ex" date for the issuance
or distribution requiring such computation and prior to the day
in question, the Closing Price for each Trading Day on and after
the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the reciprocal of the fraction
by which the Conversion Price is so required to be adjusted as a
result of such other event and (3) if the "ex" date for the
issuance, distribution or Change of Control requiring such
computation is prior to the day in question, after taking into
account any adjustment required pursuant to clause (1) or (2) of
this proviso, the Closing Price for each Trading Day on or after
such "ex" date shall be adjusted by adding thereto the amount of
any cash and the fair market value (as determined by the Board of
Directors in a manner consistent with any determination of such
value for purposes of Section 8.5.4 or 8.5.6, whose determination
shall be conclusive and described in a resolution of such board)
of the evidences of indebtedness, shares of capital stock or
assets being distributed applicable to one share of Common Stock
as of the close of business on the day before such "ex" date.
For purposes of any computation under Section 8.5.6, the Current
Market Price of the Common Stock on any date shall be deemed to
be the average of the daily Closing Prices per share of Common
Stock for such day and the next two succeeding Trading Days;
provided, however, that if the "ex" date for any event (other
than the tender or exchange offer requiring such computation)
that requires an adjustment to the Conversion Price pursuant to
Section 8.5.1, 8.5.2, 8.5.3, 8.5.4, 8.5.5 or 8.5.6 occurs on or
after the Expiration Time for the tender or exchange offer
requiring such computation and prior to the day in question, the
Closing Price for each Trading Day on and after the "ex" date for
such other event shall be adjusted by multiplying such Closing
Price by the reciprocal of the fraction by which the Conversion
Price is so required to be adjusted as a result of such other
event. For purposes of this paragraph, the term "ex" date, (1)
when used with respect to any issuance or distribution, means the
first date on which the Common Stock trades regular way in the
relevant exchange or in the relevant market from which the
Closing Price was obtained without the right to receive such
issuance or distribution, (2) when used with respect to any
subdivision or combination of shares of Common Stock, means the
first date on which the Common Stock trades regular way on such
exchange or in such market after the time at which such
subdivision or combination becomes effective and (3) when used
with respect to any tender or exchange offer means the first date
on which the Common Stock trades regular way on such exchange or
in such market after the expiration of such offer.
Notwithstanding the foregoing, whenever successive adjustments to
the Conversion Price are called for pursuant to this Section 8.5,
such adjustments shall be made to the Current Market Price as may
be necessary or appropriate to effectuate the intent of this
Section 8.5 and to avoid unjust or inequitable results as
determined in good faith by the Board of Directors.
(3) "fair market value" shall mean the amount which a
willing buyer would pay a willing seller in an arm's-length
transaction.
(4) "Record Date" shall mean, with respect to any
dividend, distribution or other transaction or event in which the
holders of Common Stock have the right to receive any cash,
securities or other property or in which the Common Stock (or
other applicable security) is exchanged for or converted into any
combination of cash, securities or other property, the date fixed
for determination of stockholders entitled to receive such cash,
securities or other property (whether such date is fixed by the
Board of Directors or by statute, contract or otherwise).
(5) "Trading Day" shall mean (x) if the applicable
security is listed or admitted for trading on the New York Stock
Exchange or another national security exchange, a day on which
the New York Stock Exchange or that other national security
exchange is open for business or (y) if the applicable security
is quoted on the Nasdaq National Market, a day on which trades
may be made thereon or (z) if the applicable security is not so
listed, admitted for trading or quoted, any day other than a
Saturday or Sunday or a day on which banking institutions in the
State of New York are authorized or obligated by law or executive
order to close.
Section 8.5.8 The Company may make such reductions in
the Conversion Price, in addition to those required by Sections
8.5.1, 8.5.2, 8.5.3, 8.5.4, 8.5.5 and 8.5.6 as the Board of
Directors considers to be advisable to avoid or diminish any
income tax to holders of Common Stock or rights to purchase
Common Stock resulting from any dividend or distribution of stock
(or rights to acquire stock) or from any event treated as such
for income tax purposes. To the extent permitted by applicable
law, the Company from time to time may reduce the Conversion
Price by any amount for any period of time if the period is at
least 20 days, the reduction is irrevocable during the period and
the Board of Directors shall have made a determination that such
reduction would be in the best interests of the Company, which
determination shall be conclusive and described in a resolution
of such board. Whenever the Conversion Price is reduced pursuant
to the preceding sentence, the Company shall mail to all holders
of record of the Series C Preferred Stock a notice of the
reduction at least 15 days prior to the date the reduced
Conversion Price takes effect, and such notice shall state the
reduced Conversion Price and the period it will be in effect.
Section 8.5.9 No adjustment in the Conversion Price
shall be required unless such adjustment would require an
increase or decrease of at least 1% in such price; provided,
however, that any adjustments which by reason of this Section
8.5.9 are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All
calculations under this Section 8 shall be made by the Company
and shall be made to the nearest cent or to the nearest one one-
hundredth of a share, as the case may be.
No adjustment need be made for rights to purchase Common
Stock pursuant to a Company plan for reinvestment of dividends or
interest.
No adjustment need be made for a change in the par value,
or to or from no par value, of the Common Stock.
To the extent the Series C Preferred Stock becomes
convertible into cash, assets, property or securities (other than
Common Stock of the Company), no adjustment need be made
thereafter as to the cash, assets, property or such securities
(except as such securities may otherwise by their terms provide),
and interest shall not accrue on such cash.
Section 8.5.10 In any case in which this Section 8.5
provides that an adjustment shall become effective immediately
after a Record Date for an event, the Company may defer until the
occurrence of such event (i) issuing to the holder of any Series
C Preferred Stock converted after such Record Date and before the
occurrence of such event the additional shares of Common Stock
issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock issuable
upon such conversion before giving effect to such adjustment and
(ii) paying to such holder any amount in cash in lieu of any
fraction pursuant to Section 8.3.
Section 8.6 Effect of Reclassification, Consolidation,
Merger or Sale. If any of the following events occur, namely (i)
any reclassification or change of outstanding shares of Common
Stock (other than a change in par value, or to or from no par
value, as a result of a subdivision or combination), (ii) any
consolidation, merger, or combination of the Company with another
corporation as a result of which holders of Common Stock shall be
entitled to receive stock, securities or other property or assets
(including cash) with respect to or in exchange for such Common
Stock or (iii) any sale or conveyance of the properties and
assets of the Company as, or substantially as, an entirety to any
other corporation as a result of which holders of Common Stock
shall be entitled to receive stock, securities or other property
or assets (including cash) with respect to or in exchange for
such Common Stock, (each of the foregoing being referred to as a
"Transaction"), each share of Series C Preferred Stock then
outstanding shall thereafter be convertible into the kind and
amount of shares of stock and other securities or property or
assets (including cash) receivable upon such reclassification,
change, consolidation, merger, combination, sale or conveyance by
a holder of a number of shares of Common Stock issuable upon
conversion of such share of Series C Preferred Stock (assuming,
for such purposes, a sufficient number of authorized shares of
Common Stock available to convert all such Series C Preferred
Stock) immediately prior to such reclassification, change,
consolidation, merger, combination, sale or conveyance, assuming
each holder of Common Stock did not exercise his rights of
election, if any, as to the kind or amount of securities, cash or
other property receivable upon such reclassification, change,
consolidation, merger, combination, sale or conveyance (provided
that, if the kind or amount of securities, cash or other property
receivable upon such reclassification, change, consolidation,
merger, combination, sale or conveyance is not the same for each
share of Common Stock in respect of which such rights of election
shall not have been exercised ("non-electing share"), then for
the purposes of this Section 8.6 the kind and amount of
securities, cash or other property receivable upon such
reclassification, change, consolidation, merger, combination,
sale or conveyance for each non-electing share shall be deemed to
be the kind and amount so receivable per share by a plurality of
the non-electing shares).
Notwithstanding anything contained herein to the
contrary, the Company will not effect any Transaction unless,
prior to the consummation thereof, (i) the Surviving Person
thereof shall assume, by written instrument mailed to each holder
of shares of Series C Preferred Stock if such shares are held by
50 or fewer holders or groups of affiliated holders or to each
Transfer Agent for the shares of Series C Preferred Stock if such
shares are held by a greater number of holders, the obligation to
deliver to such holder such stock, securities or other property
or assets (including cash) with respect to or in exchange for
Common Stock to which, in accordance with the foregoing
provisions, such holder is entitled and (ii) proper provision is
made to ensure that the holders of shares of Series C Preferred
Stock will be entitled to receive the benefits afforded by
Section 8.6. Such written instrument should provide for
adjustments which shall be as nearly as equivalent as may be
practicable to the adjustments provided for in this Section 8.6.
The above provisions of this Section shall similarly
apply to successive reclassifications, changes, consolidations,
mergers, combinations, sales and conveyances.
If this Section 8.6 applies to any event or occurrence,
Section 8.5 shall not apply.
Section 8.7 Transfer or Similar Taxes on Shares Issued.
The issue of stock certificates on conversions of Series C
Preferred Stock shall be made without charge to the converting
holder of Series C Preferred Stock for any transfer or similar
tax in respect of the issue thereof. The Company shall not,
however, be required to pay any such tax which may be payable in
respect of any transfer involved in the issue and delivery of
stock in any name other than that of the holder of any Series C
Preferred Stock converted, and the Company shall not be required
to issue or deliver any such stock certificate unless and until
the person or persons requesting the issue thereof shall have
paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has
been paid.
Section 8.8 Reservation of Shares; Shares to Be Fully
Paid; Listing of Common Stock. The Company shall provide, free
from preemptive rights, out of its authorized but unissued shares
or shares held in treasury, sufficient shares to provide for the
conversion of the Series C Preferred Stock from time to time as
such Series C Preferred Stock is presented for conversion.
Before taking any action which would cause an adjustment
reducing the Conversion Price below the then par value, if any,
of the shares of Common Stock issuable upon conversion of the
Series C Preferred Stock, the Company will take all corporate
action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue shares of
such Common Stock at such adjusted Conversion Price.
The Company covenants that all shares of Common Stock
which may be issued upon conversion of Series C Preferred Stock
will, upon issue, be fully paid and nonassessable by the Company
and free from all transfer or similar taxes as described in
Section 8.7, liens and charges with respect to the issue thereof.
The Company further covenants that, if at any time the
Common Stock shall be listed on the New York Stock Exchange or
any other national securities exchange, the Company will, if
permitted by the rules of such exchange, list and keep listed, so
long as the Common Stock shall be so listed on such exchange, all
Common Stock issuable upon conversion of the Series C Preferred
Stock.
Section 8.9 Notice to Stockholders Prior to Certain
Actions. In case:
(a) the Company makes any distribution or dividend that
would require an adjustment in the Conversion Price pursuant to
Section 8.5; or
(b) the Company takes any action that would result in a
Transaction as defined in Section 8.6; or
(c) of the voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
the Company shall cause to be mailed to each holder of Series C
Preferred Stock at his address appearing on the books of the
Company, as promptly as possible but in any event at least 15
days prior to the applicable date hereinafter specified, a notice
stating (x) the date on which a record date is to be taken for
the purpose of such dividend, distribution, rights or warrants,
or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such
dividend, distribution, rights or warrants are to be determined
or (y) the date on which such reclassification, change,
consolidation, merger, sale, conveyance, transfer, dissolution,
liquidation or winding-up is expected to become effective or
occur and the date as of which it is expected that holders of
record of Common Stock shall be entitled to exchange their Common
Stock for securities or other property deliverable upon such
reclassification, change consolidation, merger, sale, conveyance,
transfer, dissolution, liquidation or winding-up. Failure to
give such notice, or any defect therein, shall not affect the
legality or validity of such dividend, distribution,
reclassification, change, consolidation, merger, sale,
conveyance, transfer, dissolution, liquidation or winding-up.
Neither the failure to give such notice nor any defect therein
shall affect the legality or validity of the proceedings
referenced in clauses (a) through (c) of this Section 8.9.
Section 9. Reports as to Adjustments. Upon any
adjustment of the Conversion Price then in effect and any
increase or decrease in the number of shares of Common Stock
issuable upon the operation of the conversion set forth in
Section 8, then, and in each such case, the Company shall
promptly deliver to the Transfer Agent for the Series C Preferred
Stock and the Transfer Agent for the Common Stock, a certificate
signed by the President or a Vice President and by the Treasurer
or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Company setting forth in reasonable detail the
event requiring the adjustment and the method by which such
adjustment was calculated and specifying the Conversion Price
then in effect following such adjustment and the increased or
decreased number of shares issuable upon the conversion set forth
in Section 8. The Company shall also promptly after the making
of such adjustment give written notice to the registered holders
of the Series C Preferred Stock at the address of each holder as
shown on the books of the Company maintained by the Transfer
Agent thereof, which notice shall state the Conversion Price then
in effect, as adjusted, and the increased or decreased number of
shares issuable upon the exercise of the right of conversion
granted by Section 8, and shall set forth in reasonable detail
the method of calculation of each with a brief statement of the
facts requiring such adjustment. Where appropriate, such notice
to holders of the Series C Preferred Stock may be given in
advance and included as part of the notice required under the
provisions of Section 8.9.
Section 10. Certain Covenants. Any registered holder
of Series C Preferred Stock may proceed to protect and enforce
its rights and the rights of such holders by any available remedy
by proceeding at law or in equity to protect and enforce any such
rights, whether for the specific enforcement of any provision in
this Certificate of Designation or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
Section 11. Definitions. For the purposes of this
Certificate of Designation of Series C Preferred Stock, the
following terms shall have the meanings indicated:
"Acquisition Prices" shall mean the volume weighted
average of the per share prices paid by a specified person or
group in acquiring Voting Stock.
"Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Exchange Act.
"Business Day" shall mean a day, other than a Saturday,
a Sunday or other day on which the banking institutions in the
State of New York, the State of California or the Commonwealth of
Massachusetts are authorized or obligated by law or executive
order to close or a day which is declared a national or New York,
California or Massachusetts state holiday.
"Change in Control" shall mean an event or series of
events pursuant to which (i) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Exchange Act)
acquires beneficial ownership (as determined in accordance with
Rule 13d-3 under the Exchange Act), directly or indirectly, of
more than 50% of the total Voting Stock of the Company at an
Acquisition Price less than the Conversion Price then in effect
with respect to the Series C Preferred Stock and (ii) holders of
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 on
a United States national securities exchange or approved for
quotation on the Nasdaq National Market or any similar United
States system of automated dissemination of quotations of
securities prices; provided, however, that any such person or
group shall not be deemed to be the beneficial owner of, or to
beneficially own, any Voting Stock tendered into a tender offer
until such tendered Voting Stock is accepted for purchase under
the tender offer.
Commission: The term "Commission" shall mean the
Securities and Exchange Commission.
Company: The term "Company" shall mean SoftKey
International Inc., a Delaware corporation.
Conversion Price: The term "Conversion Price" shall
have the meaning specified in Section 8.4.
Exchange Act: The term "Exchange Act" means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
Junior Stock: The term "Junior Stock" shall have the
meaning set forth in Section 3.2.
Parity Stock: The term "Parity Stock" shall have the
meaning set forth in Section 3.4.5.
person: The terms "person" shall mean a corporation,
an association, a partnership, an individual, a joint venture, a
joint stock company, a trust, an unincorporated organization or a
government or an agency or a political subdivision thereof.
subsidiary: The term "subsidiary" of any specified
person shall mean (i) a corporation a majority of whose capital
stock with voting power under ordinary circumstances, to elect
directors is at the time directly or indirectly owned by such
person or (ii) any other person (other than a corporation) in
which such person or a subsidiary or subsidiaries of such person
directly or indirectly, at the date of determination thereof, has
at least majority ownership.
Surviving Person shall mean the continuing or surviving
person of a merger, consolidation or other corporate combination,
the person receiving a transfer of all or substantially all of
the properties and assets of the Company, or the person
consolidating with or merging into the Company in a merger,
consolidation or other combination in which the Company is the
continuing or surviving person, but in connection with which
Series C Preferred Stock or Common Stock of the Company is
exchanged, converted or reinstated into the securities of any
other person or cash or any other property.
Voting Stock: The term "Voting Stock" means stock of
the class or classes pursuant to which the holders thereof have
the general voting power under ordinary circumstances to elect at
least a majority of the board of directors, managers or trustees
of a corporation (irrespective of whether or not at the time
stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency).
IN WITNESS WHEREOF, SoftKey International Inc. has
caused this Certificate to be signed by Neal S. Winneg, its Vice
President and Secretary, on this 22nd day of December, 1995.
SOFTKEY INTERNATIONAL INC.
By /S/ Neal S. Winneg
Name: Neal S. Winneg
Title: Vice President and Secretary
EXHIBIT D
FORM OF LETTER TO BE DELIVERED BY ACCREDITED INVESTORS
SoftKey International Inc.
One Athenaeum Street
Cambridge, Massachusetts 02142
Ladies and Gentlemen:
The undersigned is delivering this letter in connection
with the transfer to it of [51/2% Senior Convertible/Exchangeable
Notes Due 2000 (the "Notes")] [51/2% Series C Convertible Preferred
Stock (the "Preferred Stock")] [common stock, par value $.01 per
share ("Common Stock")] of SoftKey International Inc. (the
"Company").
The undersigned hereby confirms that:
(i) the undersigned is an "accredited investor" within the
meaning of Rule 501(a)(1), (2) or (3) under the Securities Act of
1933, as amended (the "Securities Act"), or an entity in which
all of the equity owners are accredited investors within the
meaning of Rule 501(a)(1), (2) or (3) under the Securities Act
(an "Institutional Accredited Investor");
(ii)(A) any purchase of [Notes] [Preferred Stock] [Common
Stock] by the undersigned will be for the undersigned's own
account or for the account of one or more other Institutional
Accredited Investors or as fiduciary for the account of one or
more trusts, each of which is an "accredited investor" within the
meaning of Rule 501(a)(7) under the Securities Act and for each
of which we exercise sole investment discretion or (B) we are a
"bank," within the meaning of Section 3(a)(2) of the Securities
Act, or a "savings and loan association" or other institution
described in Section 3(a)(5)(A) of the Securities Act that is
acquiring [Notes] [Preferred Stock][Common Stock] as fiduciary
for the account of one or more institutions for which we exercise
sole investment discretion;
(iii) in the event that the undersigned purchases any
[Notes] [Preferred Stock] [Common Stock], we will acquire [Notes]
[Preferred Stock] [Common Stock] having a minimum [principal
amount] [liquidation value] [market value] of not less than
$250,000 for the undersigned's own account or for any separate
account for which the undersigned is acting;
(iv) the undersigned has such knowledge and experience in
financial and business matters that the undersigned is capable of
evaluating the merits and risks of purchasing [Notes] [Preferred
Stock] [Common Stock];
(v) the undersigned is not acquiring [Notes] [Preferred
Stock] [Common Stock] with a view to distribution thereof or with
any present intention of offering or selling [Notes] [Preferred
Stock] [Common Stock] [the Preferred Stock issuable in exchange
therefor] [or the Common Stock issuable upon conversion thereof],
except as permitted below; provided that the disposition of the
undersigned's property and property of any accounts for which the
undersigned is acting as fiduciary shall remain at all times
within the undersigned's control; and
(vi) the undersigned acknowledges that the undersigned has
had access to such financial and other information as the
undersigned deems necessary in connection with the undersigned's
decision to purchase [Notes] [Preferred Stock] [Common Stock].
The undersigned understands that the [Notes] [Preferred
Stock] [Common Stock] are being transferred in a transaction not
involving any public offering within the United States within the
meaning of the Securities Act and that the [Notes] [Preferred
Stock] and the shares of [Preferred Stock and] Common Stock
issuable upon conversion [or exchange] thereof (collectively, the
"Securities") [Common Stock (the "Securities")] have not been
registered under the Securities Act or any applicable state
securities laws, and the undersigned agrees, on the undersigned's
own behalf and on behalf of each account for which the
undersigned acquires any Securities, that if in the future the
undersigned decides to resell or otherwise transfer such
Securities, such Securities may be resold or otherwise
transferred only (a) to the Company or any subsidiary thereof,
(b) to a person who is a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act) in a transaction
meeting the requirements of Rule 144A, (c) to an Institutional
Accredited Investor that, prior to such transfer, furnishes to
the trustee (or transfer agent, as the case may be) for such
Securities a signed letter containing certain representations and
agreements relating to the restrictions on transfer of such
Securities (the form of which letter can be obtained from such
trustee, or transfer agent, as the case may be), (d) outside the
United States in a transaction meeting the requirements of
Regulation S under the Securities Act, (e) pursuant to the
exemption from registration provided by Rule 144 under the
Securities Act (if applicable) or (f) pursuant to a registration
statement which has been declared effective under the Securities
Act. The undersigned agrees that any such transfer of Securities
referred to in this paragraph shall be in accordance with
applicable securities laws of any State of the United States or
any other applicable jurisdiction and in accordance with the
legends set forth on the Securities. The undersigned further
agrees to provide any person purchasing any of the Securities
from the undersigned a notice advising such purchaser that
resales of such Securities are restricted as stated herein. The
undersigned understands that the registrar and transfer agent for
the Securities will not be required to accept for registration or
transfer any Securities, except upon presentation of evidence
satisfactory to the Company that the foregoing restrictions on
transfer have been complied with. The undersigned further
understands that any Securities will be in the form of definitive
physical certificates and that such certificates will bear a
legend (unless the sale of the Securities has been registered
under the Securities Act) reflecting the substance of this
paragraph.
The undersigned acknowledges that the Company, others
and you will rely upon the undersigned's confirmations,
acknowledgements and agreements set forth herein, and the
undersigned agrees to notify you promptly in writing if any of
the undersigned's representations or warranties herein ceases to
be accurate and complete.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
(Name of Purchaser)
By:
Name:
Title:
Address:
SOFTKEY INTERNATIONAL INC.
AND
STATE STREET BANK AND TRUST COMPANY
TRUSTEE
INDENTURE
DATED AS OF DECEMBER 22, 1995
5 1/2% SENIOR CONVERTIBLE/EXCHANGEABLE NOTES DUE 2000
TABLE OF CONTENTS
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . 2
Section 1.1 Definitions . . . . . . . . . . . . . . . . 2
ARTICLE II ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES . . . . . . . . . . . . . . . . . . . . 8
Section 2.1 Designation, Amount and Issue of Notes . . 8
Section 2.2 Form of Notes . . . . . . . . . . . . . . . 8
Section 2.3 Date and Denomination of Notes; Payments
of Interest . . . . . . . . . . . . . . . . . . . . 9
Section 2.4 Execution of Notes . . . . . . . . . . . . 10
Section 2.5 Exchange and Registration of Transfer of
Notes; Restrictions on Transfer; Depositary . . . . 11
Section 2.6 Mutilated, Destroyed, Lost or Stolen
Notes . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.7 Temporary Notes . . . . . . . . . . . . . . 20
Section 2.8 Cancellation of Notes Paid, Etc . . . . . . 21
Section 2.9 Ranking . . . . . . . . . . . . . . . . . . 21
ARTICLE III REDEMPTION OF NOTES . . . . . . . . . . . . . . 21
Section 3.1 Redemption Prices . . . . . . . . . . . . . 21
Section 3.2 Notice of Redemption, Selection of Notes . 21
Section 3.3 Payment of Notes Called for Redemption . . 23
Section 3.4 Conversion/Exchange Arrangement on Call
for Redemption . . . . . . . . . . . . . . . . . . 24
Section 3.5 Purchase of Notes Upon a Change of
Control . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE IV [RESERVED] . . . . . . . . . . . . . . . . . . . 26
ARTICLE V PARTICULAR COVENANTS OF THE COMPANY . . . . . . . 26
Section 5.1 Payment of Principal, Premium and
Interest . . . . . . . . . . . . . . . . . . . . . 26
Section 5.2 Maintenance of Office or Agency . . . . . . 26
Section 5.3 Appointments to Fill Vacancies in
Trustee's office . . . . . . . . . . . . . . . . . 27
Section 5.4 Provisions as to Paying Agent . . . . . . . 27
Section 5.5 Corporate Existence . . . . . . . . . . . . 28
Section 5.6 Rule 144A Information Requirement . . . . . 28
Section 5.7 Stay, Extension and Usury Laws . . . . . . 29
Section 5.8 Amendments to Series C Preferred Stock . . 29
Section 5.9 Statement as to Compliance . . . . . . . . 29
ARTICLE VI NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY . . 30
Section 6.1 Noteholders' Lists . . . . . . . . . . . . 30
Section 6.2 Reports by Company . . . . . . . . . . . . 30
ARTICLE VII DEFAULTS AND REMEDIES . . . . . . . . . . . . . 31
Section 7.1 Events of Default . . . . . . . . . . . . . 31
Section 7.2 Payments of Notes on Default; Suit
Therefor . . . . . . . . . . . . . . . . . . . . . 33
Section 7.3 Application of Monies Collected by
Trustee . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.4 Proceedings by Noteholder . . . . . . . . . 36
Section 7.5 Proceedings by Trustee . . . . . . . . . . 37
Section 7.6 Remedies Cumulative and Continuing . . . . 37
Section 7.7 Direction of Proceedings and Waiver of
Defaults by Majority of Noteholders . . . . . . . . 37
Section 7.8 Notice of Defaults . . . . . . . . . . . . 38
Section 7.9 Undertaking to Pay Costs . . . . . . . . . 38
ARTICLE VIII CONCERNING THE TRUSTEE . . . . . . . . . . . . 39
Section 8.1 Duties and Responsibilities of Trustee . . 39
Section 8.2 Reliance on Documents, Opinions, Etc . . . 40
Section 8.3 No Responsibility for Recitals, Etc . . . . 41
Section 8.4 Trustee, Paying Agents, Exchange Agents,
Conversion Agents or Registrar May own Notes . . . 41
Section 8.5 Monies to Be Held in Trust . . . . . . . . 41
Section 8.6 Compensation and Expenses of Trustee . . . 42
Section 8.7 Officers' Certificate as Evidence . . . . . 42
Section 8.8 Conflicting Interests of Trustee . . . . . 42
Section 8.9 Eligibility of Trustee . . . . . . . . . . 43
Section 8.10 Resignation or Removal of Trustee . . . . 43
Section 8.11 Acceptance by Successor Trustee . . . . . 44
Section 8.12 Successor, by Merger, Etc . . . . . . . . 45
Section 8.13 Limitation on Rights of Trustee as
Creditor . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE IX CONCERNING THE NOTEHOLDERS . . . . . . . . . . . 46
Section 9.1 Action by Noteholders . . . . . . . . . . . 46
Section 9.2 Proof of Execution by Noteholders . . . . . 46
Section 9.3 Who Are Deemed Absolute Owners . . . . . . 46
Section 9.4 Company-Owned Notes Disregarded . . . . . . 47
Section 9.5 Revocation of Consents, Future Holders
Bound . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE X NOTEHOLDERS MEETINGS . . . . . . . . . . . . . . . 48
Section 10.1 Purposes for Which Meetings May be
Called . . . . . . . . . . . . . . . . . . . . . . 48
Section 10.2 Manner of Calling Meetings; Record Date . 48
Section 10.3 Call of Meeting by Company or
Noteholders . . . . . . . . . . . . . . . . . . . . 49
Section 10.4 Who may Attend and Vote at Meetings . . . 49
Section 10.5 Manner of Voting at Meetings and Record
to be Kept . . . . . . . . . . . . . . . . . . . . 49
Section 10.6 Exercise of Rights of Trustee and
Noteholders not to be Hindered or delayed . . . . . 50
ARTICLE XI SUPPLEMENTAL INDENTURES . . . . . . . . . . . . . 50
Section 11.1 Supplemental Indentures Without Consent
of Noteholders . . . . . . . . . . . . . . . . . . 50
Section 11.2 Supplemental Indentures with Consent of
Noteholders . . . . . . . . . . . . . . . . . . . . 52
Section 11.3 Effect of Supplemental Indentures . . . . 53
Section 11.4 Notation on Notes . . . . . . . . . . . . 53
Section 11.5 Evidence of Compliance of Supplemental
Indenture to be Furnished Trustee . . . . . . . . . 53
ARTICLE XII CONSOLIDATION, MERGER, SALE, CONVEYANCE,
TRANSFER AND LEASE . . . . . . . . . . . . . . . . . . . . . 53
Section 12.1 Company May Consolidate, Etc. on
Certain Terms . . . . . . . . . . . . . . . . . . . 53
Section 12.2 Successor Company to Be Substituted . . . 54
Section 12.3 Opinion of Counsel to Be Given Trustee . . 55
ARTICLE XIII SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS . . . . . . . . . . . . . . . . . . . . . . 55
Section 13.1 Legal Defeasance and Covenant Defeasance
of the Notes . . . . . . . . . . . . . . . . . . . 55
Section 13.2 Termination of Obligations upon
Cancellation of the Notes . . . . . . . . . . . . . 58
Section 13.3 Survival of Certain Obligations . . . . . 58
Section 13.4 Acknowledgment of Discharge by Trustee . . 59
Section 13.5 Application of Trust Assets . . . . . . . 59
Section 13.6 Repayment to the Company; Unclaimed
Money . . . . . . . . . . . . . . . . . . . . . . . 59
Section 13.7 Reinstatement . . . . . . . . . . . . . . 60
ARTICLE XIV IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS . . . . . . . . . . . . . . . . . . . 60
Section 14.1 Indenture and Notes Solely Corporate
Obligations . . . . . . . . . . . . . . . . . . . . 60
ARTICLE XV CONVERSION OF NOTES . . . . . . . . . . . . . . . 60
Section 15.1 Right to Convert . . . . . . . . . . . . . 60
Section 15.2 Exercise of Conversion Privilege;
Issuance of Common Stock on Conversion; No
Adjustment for Interest or Dividends . . . . . . . 61
Section 15.3 Cash Payments in Lieu of Fractional
Shares . . . . . . . . . . . . . . . . . . . . . . 63
Section 15.4 Conversion Price . . . . . . . . . . . . . 63
Section 15.5 Adjustment of Conversion Price . . . . . . 63
Section 15.6 Effect of Reclassification,
Consolidation, Merger or Sale . . . . . . . . . . . 73
Section 15.7 Transfer or Similar Taxes on Shares
Issued . . . . . . . . . . . . . . . . . . . . . . 74
Section 15.8 Reservation of Shares; Shares to Be Fully
Paid; Listing of Common Stock . . . . . . . . . . . 74
Section 15.9 Responsibility of Trustee . . . . . . . . 75
Section 15.10 Notice to Holders Prior to Certain
Actions . . . . . . . . . . . . . . . . . . . . . . 75
ARTICLE XVI MISCELLANEOUS PROVISIONS . . . . . . . . . . . . 76
Section 16.1 Provisions Binding on Company's
Successors . . . . . . . . . . . . . . . . . . . . 76
Section 16.2 Official Acts by Successor Company . . . . 76
Section 16.3 Addresses for Notices, Etc . . . . . . . . 76
Section 16.4 Governing Law . . . . . . . . . . . . . . 77
Section 16.5 Evidence of Compliance with Conditions
Precedent; Certificates to Trustee . . . . . . . . 77
Section 16.6 Legal Holidays . . . . . . . . . . . . . . 78
Section 16.7 No Security Interest Created . . . . . . . 78
Section 16.8 Trust Indenture Act . . . . . . . . . . . 78
Section 16.9 Benefits of Indenture . . . . . . . . . . 78
Section 16.10 Table of Contents, Headings Etc . . . . . 78
Section 16.11 Authenticating Agent . . . . . . . . . . 78
Section 16.12 Execution in Counterparts . . . . . . . . 79
Section 16.13 Pooling of Interests . . . . . . . . . . 79
ARTICLE XVII EXCHANGE OF NOTES . . . . . . . . . . . . . . . 80
Section 17.1 Right to Exchange . . . . . . . . . . . . 80
Section 17.2 Exercise of Exchange Privilege; Issuance
of Preferred Stock on Exchange; Adjustment for
Interest or Dividends . . . . . . . . . . . . . . . 80
Section 17.3 Cash Payments in Lieu of Fractional
Shares . . . . . . . . . . . . . . . . . . . . . . 82
Section 17.4 Exchange Price . . . . . . . . . . . . . . 82
Section 17.5 Adjustment of Exchange Price . . . . . . . 82
Section 17.6 Effect of Reclassification,
Consolidation, Merger or Sale . . . . . . . . . . . 84
Section 17.7 Transfer or Similar Taxes on Shares
Issued . . . . . . . . . . . . . . . . . . . . . . 85
Section 17.8 Reservation of Stock; Shares to Be Fully
Paid; Listing of Preferred Stock . . . . . . . . . 85
Section 17.9 Responsibility of Trustee . . . . . . . . 86
Section 17.10 Notice to Holders Prior to Certain
Actions . . . . . . . . . . . . . . . . . . . . . . 87
EXHIBIT A - FORM OF DEFINITIVE NOTE . . . . . . . . . . 89
CERTIFICATE OF AUTHENTICATION . . . . . . . . . . . . . 92
ABBREVIATIONS . . . . . . . . . . . . . . . . . . . . . 97
FORM OF CONVERSION NOTICE . . . . . . . . . . . . . . . 98
FORM OF EXCHANGE NOTICE . . . . . . . . . . . . . . . . 10
FORM OF OPTION TO ELECT REPAYMENT UPON A CHANGE OF
CONTROL . . . . . . . . . . . . . . . . . . . . . . 102
FORM OF ASSIGNMENT . . . . . . . . . . . . . . . . . . . 103
EXHIBIT B - FORM OF GLOBAL NOTE . . . . . . . . . . . . 105
FORM OF CERTIFICATE AUTHENTICATION . . . . . . . . . . . 109
FORM OF REVERSE OF NOTE . . . . . . . . . . . . . . . . 110
CONVERSION NOTICE . . . . . . . . . . . . . . . . . . . 115
FORM OF EXCHANGE NOTICE . . . . . . . . . . . . . . . . 117
FORM OF OPTION TO ELECT REPAYMENT UPON A
CHANGE OF CONTROL . . . . . . . . . . . . . . . . . 119
EXHIBIT C - FORM OF CERTIFICATE OF DESIGNATION . . . . . 120
EXHIBIT D - FORM OF LETTER TO BE DELIVERED BY ACCREDITED
INVESTORS . . . . . . . . . . . . . . . . . . . . . 121
Exhibit 5.1
SOFTKEY INTERNATIONAL INC.
One Athenaeum Street
Cambridge, Massachusetts 02142
April 8, 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) $150,000,000
aggregate principal amount of 51/2% Senior
Convertible/Exchangeable Notes due 2000 of the Company
(the "Notes"), (b) 150,000 shares of 51/2% Series C
Convertible Preferred Stock, par value $.01 per share, of
the Company (the "Series C Preferred Stock") issuable
upon exchange thereof, (c) 2,830,188 (or such other
number as may be issuable upon conversion of the Notes or
the Series C Preferred Stock as a result of the
antidilution provisions thereof) shares of common stock,
par value $.01 per share, of the Company (the "Common
Stock") issuable upon conversion of the Notes or the
Series C Preferred Stock (such shares together with the
Notes and the Series C Preferred Stock, the "Securities")
and (d) 5,052,697 shares of Common Stock issued pursuant
to the Agreement and Plan of Merger (the "Merger
Agreement") dated November 30, 1995 by and among the
Company, Cubsco I Inc., a California corporation, Cubsco
II Inc., a Delaware corporation, Tribune Company, a
Delaware corporation ("Tribune"), Compton's NewMedia,
Inc., a California corporation, and Compton's Learning
Company, a Delaware corporation (the "Comptons Shares"),
in each case to be sold by the holder of the Securities
(the "Selling Holder"). The Notes were originally issued
under an Indenture dated as of December 22, 1995 (the
"Indenture") by and between the Company and State Street
Bank and Trust Company, as trustee (the "Trustee")
pursuant to a Securities Purchase Agreement dated as of
November 30, 1995 between the Company and Tribune (the
"Securities Purchase Agreement").
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 Securities Purchase Agreement;
(iv) the Merger Agreement; (v) the Restated Certificate
of Incorporation of the Company, as amended, as currently
in effect; (vi) the Bylaws of the Company, as amended, as
currently in effect; and (vii) 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 and the Comptons Shares 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, 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 in the Indenture, except to the extent 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 16.13 of
the Indenture may be deemed unenforceable.
2. The Series C Preferred Stock
initially issuable upon exchange of the Notes and the
shares of Common Stock initially issuable upon conversion
of the Notes or the Series C Preferred Stock have been
duly authorized by the Company and, when issued and
delivered upon such conversion in accordance with the
applicable terms and provisions of the Notes, the
Indenture or the Series C Preferred Stock, as the case
may be, will be validly issued, fully paid and
nonassessable.
3. The Comptons Shares have been
duly authorized and validly issued by the Company and are
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 thereunder.
Very truly yours,
/s/ Neal S. Winneg
Neal S. Winneg
Vice President
and General Counsel
Exhibit 12.1
Statement re Computation of Ratios
1995
EARNINGS
Net Loss $(65,960)
Taxes 5,795
Interest expense and
amortization of debt-
related expenses 5,816
$(54,349)
FIXED
CHARGES
Interest expense 5,795
Amortization of debt-
related expenses 437
5,816
Earnings deficiency $(60,165)
For the purpose of computing the ratio of earnings to
fixed charges, earnings consist of the sum of (i)
earnings before income taxes and (ii) fixed charges.
Fixed charges consist of interest on all indebtedness and
amortization of debt-related expenses. At December 31,
1995, the Company had paid no dividends on any Preferred
Stock. At December 31, 1995, fixed charges exceeded
earnings by $60,165, which includes the effect of
amortization and merger-related costs. Excluding the
effect of amortization and merger-related costs, the
ratio of earnings to fixed charges at December 31, 1995
would have been 8.39X. Fixed charges prior to 1995 were
deemed immaterial by the Company.
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 to register $150,000,000 of 5 1/2% Senior
Convertible Exchangeable Notes due 2000, 150,000 shares
of 5 1/2% Series C Convertible Preferred Stock and
7,882,885 shares of Common Stock of our report dated
February 20, 1996, on our audits of the consolidated
balance sheets of SoftKey International Inc. as of
December 31, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity, and cash
flows for the years ended December 31, 1995 and 1994, and
the related financial statement schedule. We also
consent to the reference to our firm under the caption
"Experts."
/s/ COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
April 4, 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 on Form S-3 of our report dated January 16,
1995 included in SoftKey International Inc.'s Form 10-K
for the year ended January 6, 1996 and to all references
to our Firm included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 4, 1996
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
SoftKey International Inc.
(formerly WordStar International Incorporated):
We consent to incorporation by reference in the
registration statement on Form S-3 of SoftKey
International Inc. of our report dated September 13,
1993, relating to the consolidated statements of
operations, stockholders' equity, and cash flows of
WordStar International Incorporated and subsidiaries for
the year ended June 30, 1993, and the related schedule,
which report appears in the December 31, 1995 annual
report on Form 10-K of SoftKey International Inc., and to
the reference to our firm under the heading of "Experts"
in the prospectus.
/s/ KPMG PEAT MARWICK LLP
San Francisco, California
April 4, 1996
Exhibit 23.4
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 32
of SoftKey International Inc.'s Annual Report on Form 10-
K for the year ended January 6, 1996. We also consent to
the references to us under the heading "Experts" in such
Prospectus.
/s/ PRICE WATERHOUSE LLP
Boston, Massachusetts
April 4, 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 SoftKey International Inc.
("SoftKey") of our report dated January 5, 1996, relating
to the combined financial statements of Compton's New
Media Group as of December 25, 1994 and for the fiscal
year then ended, which appears in the Current Report on
Form 8-K/A of SoftKey dated January 25, 1996. We also
consent to the references to us under the heading
"Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
April 5, 1996
Exhibit 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________
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 (I.R.S. Employer
incorporation or Identification No.)
organization if not a U.S.
national bank)
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 (I.R.S. Employer
of Identification No.)
incorporation or
organization)
ONE ATHENAEUM STREET
CAMBRIDGE, MASSACHUSETTS 02142
(Address of principal executive offices) (Zip Code)
____________________
5-1/2% SENIOR CONVERTIBLE/EXCHANGEABLE 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 SUPERVISORY
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.
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.
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS 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
the 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 the
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 the 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 the 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 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.
NOTES
In answering any item of this Statement of Eligibility
and Qualification which relates to matters peculiarly within
the knowledge of the obligor or any underwriter for the
obligor, the trustee has relied upon information furnished
to it by the obligor and the underwriters, and the trustee
disclaims responsibility for the accuracy or completeness of
such information.
The answer furnished to Item 2. of this statement will
be amended, if necessary, to reflect any facts which differ
from those stated and which would have been required to be
stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act
of 1939, as amended, 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 and qualification 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 8TH DAY OF APRIL, 1996.
STATE STREET BANK AND TRUST COMPANY
By: /S/ HENRY W. SEEMORE
____________________________
HENRY W. SEEMORE
ASSISTANT VICE PRESIDENT
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the
Trust Indenture Act of 1939, as amended, in connection with
the proposed issuance by SOFTKEY INTERNATIONAL INC.. of its
5-1/2% SENIOR CONVERTIBLE/EXCHANGEABLE 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: APRIL 8 , 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, 1995, 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
ASSETS Dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency
and coin ..................................... 1,331,827
Interest-bearing balances....................... 5,971,326
Securities.......................................... 6,325,054
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary ............ 5,436,994
Loans and lease financing receivables:
Loans and leases, net of unearned
income ......................... 4,308,339
Allowance for loan and lease losses.... 63,491
Loans and leases, net of unearned income
and allowances ............................... 4,244,848
Assets held in trading accounts...................... 1,042,846
Premises and fixed assets............................ 374,362
Other real estate owned.............................. 3,223
Investments in unconsolidated subsidiaries........... 31,624
Customers' liability to this bank on acceptances
outstanding..................................... 57,472
Intangible assets...................................... 68,384
Other assets......................................... 670,058
Total assets........................................ 25,558,018
===========
LIABILITIES
Deposits:
In domestic offices............................. 6,880,231
Noninterest-bearing.............. 4,728,115
Interest-bearing............... 2,152,116
In foreign offices and Edge subsidiary.......... 9,607,427
Noninterest-bearing ............ 28,265
Interest-bearing............... 9,579,162
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary............. 5,913,969
Demand notes issued to the U.S. Treasury and
Trading Liabilities ............................ 530,406
Other borrowed money .............................. 493,191
Bank's liability on acceptances executed and
outstanding.................................... 57,387
Other liabilities................................... 620,287
Total liabilities................................... 24,102,898
EQUITY CAPITAL
Common stock........................................ 29,176
Surplus............................................ 228,448
Undivided profits.................................. 1,197,496
Total equity capital.............................. 1,455,120
Total liabilities and equity capital.............. 25,558,018
============
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
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF
THE OBLIGOR IS IN DEFAULT.
Not applicable.
6. THE CONSENTS OF 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.
NOTES
In answering any item of this Statement of Eligibility
and Qualification which relates to matters peculiarly within
the knowledge of the obligor or any underwriter of the
obligor, the trustee has relied upon the information
furnished to it by the obligor and the underwriters, and the
trustee disclaims responsibility for the accuracy or
completeness of such information.
The answer to Item 2. of this statement will be
amended, if necessary, to reflect any facts which differ
from those stated and which would have been required to be
stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act
of 1939, as amended, 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 and qualification 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 8TH DAY OF APRIL , 1996.
STATE STREET BANK AND TRUST COMPANY
By: /S/ HENRY W. SEEMORE
_______________________________
HENRY W. SEEMORE
ASSISTANT VICE PRESIDENT
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the
Trust Indenture Act of 1939, as amended, in connection with
the proposed issuance by SOFTKEY INTERNATIONAL INC.. of its
5-1/2% SENIOR CONVERTIBLE EXCHANGEABLE 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: APRIL 8 , 1996
