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, please 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
_______________________________________________________________________________
Amount Proposed Proposed
Title of Securities to be Maximum Maximum Amount of
to be Registered Registered Offering Aggregate Registration
Price Offering Fee (2)
Per Share(1) Price (1)
Common Stock, par 726,885 shares $27.88 $20,265,553.80 $6,988.12
value $.01
per share
_______________________________________________________________________________
(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(c) of 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
May 3, 1996.
(2) Calculated pursuant to Rule 457(c) of the Securities Act of 1933,
as amended.
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.
SUBJECT TO COMPLETION, DATED MAY 7, 1996
[SOFTKEY LOGO]
726,885 SHARES
COMMON STOCK
This Prospectus relates to the registration of 726,885 shares
(the "Shares") of Common Stock, par value $.01 per share (the
"Common Stock"), of SoftKey International Inc. ("SoftKey" or the
"Company"). Of the 726,885 Shares offered hereby, 500,000 Shares
(the "Bear Stearns Shares") are being offered by the Company or
Bear, Stearns & Co. Inc. ("Bear Stearns") (as described herein) and
the remaining 226,885 Shares (the "Nordman Shares") may be offered
by Jean-Pierre Nordman (the "Selling Stockholder"). The Bear
Stearns Shares are being offered and sold pursuant to the terms of
the Adjustment Agreement (as defined herein) between the Company
and Bear Stearns. See "Plan of Distribution--Bear Stearns." The
Nordman Shares may be offered and sold from time to time in trans-
actions quoted on the Nasdaq National Market (the "NNM"), in
negotiated transactions, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices related to
prevailing market prices or at negotiated prices. See "Plan of
Distribution--Nordman." Bear Stearns and the Selling Stockholder,
and any agents or broker-dealers that participate with either of
them in the distribution of the Shares, may be deemed to be "under-
writers" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), and any commissions received by
them and any profit on their resale of the Shares may be deemed to
be underwriting commissions or discounts under the Securities Act.
See "The Selling Stockholder" and "Plan of Distribution."
Under certain circumstances, the Company may receive a portion
of the proceeds from the sale of the Bear Stearns Shares offered
hereby. The Company will not receive any of the proceeds from the
sale of the Nordman Shares.
The Common Stock is traded on the NNM under the symbol "SKEY."
On May 6, 1996, the last reported sale price of the Common Stock
on the NNM was $2811/16 per share.
SEE "RISK FACTORS" ON PAGE 4 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
COMMON STOCK OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
May [ ], 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 informa-
tion 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 State-
ment on Form S-3 (together with any amendments or supplements
thereto, the "Registration Statement") under the Securities Act
with respect to the 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 and
the 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 refer-
ence.
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, (ii) the Current Report on Form 8-K/A of the Company dated
January 25, 1996, (iii) pages 72 through 77 (inclusive) of the
Joint Proxy Statement-Prospectus of the Company dated April 11,
1996 and (iv) 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 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 refer-
ence 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 re-
quests 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 appear-
ing elsewhere in this Prospectus and in the documents, consolidated
financial statements and related notes thereto and other informa-
tion incorporated by reference herein. See "Risk Factors."
THE COMPANY
General. SoftKey is a developer and publisher of high-quality
consumer software for personal computers ("PCs"), primarily pro-
duced 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 equip-
ment 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, acquir-
ing complementary products, technologies and businesses and enhanc-
ing brand awareness and customer loyalty.
The Company was created through a combination of three corpora-
tions. 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 associ-
ated 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, Massachu-
setts 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.
RISK FACTORS
Prospective purchasers of the Shares offered hereby should
carefully consider the following risk factors, in addition to other
information contained or incorporated by reference in this Prospec-
tus.
INTENSE COMPETITIVE ENVIRONMENT
The PC consumer software industry is intensely competitive and is
characterized by rapid changes in technology and customer require-
ments. 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 comput-
er 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 distribu-
tion advantage, the Company could be adversely affected. Consoli-
dation in the consumer software industry creates new, larger
competitors. For example, CUC International Inc. recently an-
nounced 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 pic-
tures, 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 offer-
ing 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 increas-
ing 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 combi-
nations 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 combina-
tion 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 recent-
ly been increasing. The future availability of desirable prospects
for these transactions in the computer software industry is uncer-
tain. 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.
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 coordinat-
ing geographically separate organizations, integrating personnel
with disparate business backgrounds and combining different corpo-
rate 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 substan-
tial change and is subject to a high level of uncertainty. Soft-
ware 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 flexi-
ble 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 prod-
ucts 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 pub-
lishers 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 negotia-
tion 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 approxi-
mately 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 signifi-
cantly 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 mar-
gins.
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 penetra-
tion 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, complica-
tions 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, copy-
right, 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 interna-
tional 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 prod-
ucts 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 conclu-
sively 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 registra-
tions 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 general-
ly 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 excep-
tions (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 modifica-
tion 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 opera-
tions resulting from acquisitions of companies, products or tech-
nologies, 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 signifi-
cant 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.
VOLATILITY OF STOCK PRICE
The Common Stock is quoted on the NNM. The market price of the
Common Stock, like that for the shares of many other high technolo-
gy 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 techno-
logical innovations, the introduction of new products by the
Company or its competitors and general conditions in the computer
hardware and software industries may have a significant impact on
the market price of the Common Stock. There can be no assurance as
to the effect of the consummation or failure to consummate the
recent and proposed acquisitions by the Company on the market price
of the Common Stock.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the
Nordman Shares by Mr. Nordman. The Company will not receive any
proceeds from the sale of the Bear Stearns Shares by Bear Stearns,
except as a result of payments which may be received pursuant to
the terms of the Fee Adjustment Agreement dated as of May [ ],1996
by and between the Company and Bear Stearns (the "Adjustment
Agreement"), the material terms of which are described herein. See
"Plan of Distribution--Bear Stearns." Should the Company receive
any proceeds from this offering pursuant to the Adjustment Agree-
ment, the Company will use such proceeds for general corporate
purposes.
THE SELLING STOCKHOLDER
Set forth below is certain information regarding the Selling
Stockholder and the Nordman Shares. At March 20, 1996, there were
31,848,980 shares of Common Stock issued and outstanding.
Jean-Pierre Nordman beneficially owns, by sole voting and invest-
ment power (except to the extent authority may be shared by a
spouse under applicable law), an aggregate of 122,322 shares of
Common Stock, all of which were acquired by Mr. Nordman pursuant to
a Stock Purchase Agreement dated as of November 15, 1995 between
Mr. Nordman and the Company (the "Nordman Agreement") and are
offered hereby. The remaining 104,563 Nordman Shares offered
hereby may be acquired by Mr. Nordman between the date hereof and
April 15, 1999 pursuant to certain provisions of the Nordman
Agreement. The Nordman Shares represent less than 1% of the Common
Stock outstanding as of March 20, 1996. Mr. Nordman has been
employed by the Company as the President of Personal Soft S.A., a
French societe anonyme and a wholly owned subsidiary of the Compa-
ny, from November 15, 1995 to the present. Other than as set forth
herein and as a result of the ownership of the Nordman Shares, Mr.
Nordman has not had any material relationship with the Company or
any of its affiliates within the past three years.
PLAN OF DISTRIBUTION
GENERAL
The Company has been advised by each of Bear Stearns and the
Selling Stockholder that, as of the date hereof, it has not made
any arrangement with any broker for the offering or sale of the
Shares. Underwriters, brokers, dealers or agents may participate
in such transactions as agents and may, in such capacity, receive
brokerage commissions from Bear Stearns or the Selling Stockholder
or from purchasers of such securities. Such underwriters, brokers,
dealers or agents may also purchase and resell Shares for their own
account. Bear Stearns and the Selling Stockholder and such under-
writers, brokers, dealers or agents may be considered "underwrit-
ers" as that term is defined by the Securities Act, although the
Selling Stockholder 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 Shares will be offered or sold in such jurisdic-
tions only through registered or licensed brokers or dealers. In
addition, in certain jurisdictions, the 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.
Pursuant to applicable rules and regulations under the Exchange
Act, any person engaged in a distribution of the Shares may be
limited in its ability to engage in market activities with respect
to such Shares. In addition and without limiting the foregoing,
Bear Stearns and the Selling Stockholder will be subject to appli-
cable provisions of the Exchange Act and the rules and regulations
thereunder which may limit the timing of purchases and sales of the
Shares. All of the foregoing may affect the marketability of the
Shares.
The Company has agreed to pay substantially all of the expenses
incident to the registration, offering and sale of the Shares to
the public other than commissions and discounts of agents, dealers
or underwriters. Such expenses (excluding such commissions and
discounts) are estimated to be approximately $90,000.
BEAR STEARNS
In the course of its normal business and trading operations, Bear
Stearns periodically buys and sells shares of Common Stock for its
own account and the accounts of others. Accordingly, Bear Stearns
may have beneficial ownership of varying amounts of Common Stock
from time to time. Bear Stearns acquired the Bear Stearns Shares
pursuant to the Adjustment Agreement, all of the Bear Stearns
Shares are offered hereby. The Bear Stearns Shares offered hereby
represent approximately 1.6% of the Common Stock outstanding as of
March 20, 1996.
The Bear Stearns Shares offered hereby will be issued to and
offered and sold by Bear Stearns pursuant to the terms and provi-
sions of the Adjustment Agreement and otherwise as described below.
The Adjustment Agreement relates to the settlement of up to
$10,116,394.17 in fees, costs and expenses (the "Aggregate Fee
Amount") payable by the Company to Bear Stearns for investment
banking advice and financial advisory services rendered by Bear
Stearns to the Company in connection with certain recent and
currently pending acquisitions and the reimbursement of certain
fees, costs and expenses in connection therewith. Pursuant to the
terms of the Adjustment Agreement, if the Sale Proceeds (as defined
in the Adjustment Agreement) to Bear Stearns relating to the offer
and sale of the Bear Stearns Shares are less than the Aggregate Fee
Amount, the Company has agreed to pay Bear Stearns an amount in
cash equal to the difference between the Aggregate Fee Amount and
the Sale Proceeds. In addition, pursuant to the terms of the
Adjustment Agreement, if the Sale Proceeds exceed the Aggregate Fee
Amount, Bear Stearns has agreed to pay the Company an amount in
cash equal to the portion of the Sale Proceeds which exceeds the
Aggregate Fee Amount.
Under the Adjustment Agreement, Bear Stearns has agreed to use
all reasonable efforts to sell all of the Bear Stearns Shares by
the halt of trading on the twentieth NNM trading day after the date
of this Prospectus. If all Bear Stearns Shares are not sold by the
halt of trading on the twentieth NNM trading day after the date of
this Prospectus, such remaining Bear Stearns Shares will be sold by
Bear Stearns for its own account pursuant to the terms of the
Adjustment Agreement. Such sales may be made by Bear Stearns,
subject to the timing, volume and price limitations of the Adjust-
ment Agreement described below, in transactions on the NNM, in
negotiated transactions, pursuant to an underwritten offering or
pursuant to one or more of the following methods (among others):
(a) purchases by a broker-dealer as principal and resale by such
broker or dealer for its account pursuant to this Prospectus; (b)
ordinary brokerage transactions and transactions in which a broker
solicits purchasers; and (c) block trades in which a broker-dealer
so engaged will attempt to sell the Bear Stearns Shares as agent
but may take a position and resell a portion of the block as
principal to facilitate the transaction. In connection with any
such sales, Bear Stearns may be deemed to have received compensa-
tion from the Company in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of the
Bear Stearns Shares for whom it may act as agent.
Pursuant to the terms of the Adjustment Agreement, Bear Stearns
shall sell no more than 75,000 Shares in any single NNM trading day
without the prior consent of the Company and must sell all of the
Bear Stearns Shares at a price equal to or in excess of the pre-
vailing per share market price of the Common Stock at the time of
sale, as determined by reference to then current quotations on the
NNM, unless the Company gives prior consent to a sale of the Bear
Stearns Shares at a lower price.
The Adjustment Agreement provides that the Company will indemnify
Bear Stearns against certain liabilities, including civil liabili-
ties under the Securities Act, or will contribute to certain
payments Bear Stearns may be required to make in respect thereof.
In addition to advising the Company in connection with certain
recent and currently pending acquisitions, Bear Stearns also served
as the placement agent for a private offering of convertible notes
of the Company in October 1995. Other than as set forth herein and
as a result of the ownership of the Bear Stearns Shares, Bear
Stearns has not had any material relationship with the Company or
any of its affiliates within the past three years.
NORDMAN
The Nordman Shares offered hereby may be offered and sold by Mr.
Nordman from time to time in transactions on the NNM, in negotiated
transactions, at fixed prices which may be changed, at market
prices prevailing at the time of sale, at prices related to the
prevailing market prices or at negotiated prices. Such sales may
be made pursuant to an underwritten offering or pursuant to one or
more of the following methods (among others): (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 purchas-
ers; and (c) block trades in which a broker-dealer so engaged will
attempt to sell the Nordman Shares as agent but may take a position
and resell a portion of the block as principal to facilitate the
transaction.
Mr. Nordman will act independently of the Company in making
decisions with respect to the timing, manner and size of each sale.
Sales of the Nordman 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.
LEGAL MATTERS
The validity of the 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 install-
ments 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 (defi-
cit) 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, indepen-
dent 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 consol-
idated 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 (defi-
cit) and cash flows and the related financial statement schedule of
the Company have been included therein in reliance upon the author-
ity 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 contin-
ue as a going concern as described in Note 12 of the consolidated
financial statements of Spinnaker (not included herein).
The financial statements and related financial statement sched-
ules of MECC as of March 31, 1995 and for each of the three years
in the period ended March 31, 1995, included in this Registration
Statement, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report and have been so included in
reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
The combined financial statements of Compton's NewMedia, Inc. and
Compton's Learning Company as of December 25, 1994 and for the
fiscal year then ended included in the Current Report on Form 8-K/A
of the Company dated January 25, 1996, incorporated by reference in
this Registration Statement, have been incorporated herein in
reliance on the report of Price Waterhouse LLP, independent accoun-
tants, given on the authority of said firm as experts in accounting
and auditing.
MINNESOTA EDUCATIONAL COMPUTING CORPORATION (MECC)
INDEX TO FINANCIAL STATEMENTS
[To be filed by amendment.]
No dealer, salesman or any
other person has been autho-
rized to give any information
or to make any representation
not contained in this Prospec-
tus, and, if given or made,
such information or represen-
tation must not be relied upon
as having been authorized by
the Company, Bear Stearns or
the Selling Stockholder. This
Prospectus does not constitute 726,885 SHARES
an offer to sell or a solici-
tation of an offer to buy any
of the securities offered
hereby in any jurisdiction to
any person to whom it is un-
lawful to make such offer in
such jurisdiction. Neither
the delivery of this Prospec-
tus nor any sale made hereun-
der shall, under any circum- [SOFTKEY LOGO]
stances, create any implica-
tion that the information
herein is correct as of any
time subsequent to the date
hereof or that there has been COMMON STOCK
no change in the affairs of
the Company since such date.
____________
____________________
PROSPECTUS
____________________
TABLE OF CONTENTS
Page
Available Information . . . 2
Documents Incorporated by MAY [ ], 1996
Reference . . . . . . . . . 2
Prospectus Summary . . . . 3
Risk Factors . . . . . . . 4
Use of Proceeds . . . . . . 10
The Selling Stockholder . . 10
Plan of Distribution . . . 10
Legal Matters . . . . . . . 12
Experts . . . . . . . . . . 12
Index to Financial Statements F-1
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the offering (all of which,
other than selling commissions or discounts, will be borne by the
Company and not the Selling Stockholder), are estimated as follows:
Securities and Exchange Commission Registration Fee . . . . $6,988.12
NASDAQ Additional Listing of Shares Fee . . 14,538.00
Legal Fees and Expenses . . . . . . . . . . 25,000.00
Accounting Fees and Expenses . . . . . . . 25,000.00
State Securities Laws Registration Fees and Expenses 15,000.00
Miscellaneous . . . . . . . . . . . . . . . 3,473.88
Total . . . . . . . . . . . . . . . . . $90,000.00
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102 of the Delaware General Corporation Law, as amend-
ed, allows a corporation to eliminate the personal liability of
directors of a corporation to the corporation or its stockholders
for monetary damages 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 amend-
ed, 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 Incorpora-
tion, 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 stock-
holders 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, admin-
istrative, 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, execu-
tors, and administrators; provided, however, that the Corporation
shall indemnify any such person seeking indemnification in connec-
tion 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 indemnifica-
tion 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 ad-
vanced 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 Direc-
tors, provide indemnification to employees and agents of the
Corporation with the same scope and effect as the foregoing indem-
nification of directors and officers.
8.2.2 NON-EXCLUSIVITY OF RIGHTS. The right to indemnifica-
tion 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 disinter-
ested 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 insur-
ance 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 advance-
ment of expenses under the charter documents of Tribune Company and
may be covered by directors' and officers' liability insurance
maintained by Tribune Company.
16. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
2.1 Amended and Restated Combination Agreement by
and among WordStar International Incorporated,
SoftKey Software Products Inc., Spinnaker Soft-
ware 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) ("MECC") dated as
of October 30, 1995(3)
5.1 Opinion of Neal S. Winneg, Esq.
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 Deloitte & Touche LLP
23.5 Consent of Price Waterhouse LLP
23.6 Consent of Price Waterhouse LLP
23.7 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)
99.1* Fee Adjustment Agreement dated May [ ], 1996 by
and between the Company and Bear, Stearns & Co.
Inc
_____________
* To be filed by amendment.
(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 registra-
tion statement to include any material information with respect to
the plan of distribution not previously disclosed in the registra-
tion 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-effec-
tive 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 provi-
sions 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 ex-
pressed in the 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 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 May 7,
1996.
SOFTKEY INTERNATIONAL INC.
By:/s/ Michael J. Perik
_____________________________
Michael J. Perik
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated. Each person
whose signature appears below hereby authorizes Neal S. Winneg and
R. Scott Murray and each of them, with full power of substitution,
to execute in the name and on behalf of such person any amendment
(including any post-effective amendment) to this Registration
Statement 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 appropri-
ate, 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 docu-
ments in connection therewith.
Signature Title Date
/s/ Michael J. Perik Chairman of the May 7, 1996
_____________________ Board and
Michael J. Perik Chief Executive Of-
ficer
(principal executive
officer)
/s/ R. Scott Murray Chief Financial Of- May 7, 1996
_____________________ ficer (principal
R. Scott Murray financial and
accounting offi-
cer)
/s/ Kevin O'Leary President and Director May 7, 1996
______________________
Kevin O'Leary
/s/ Michael Bell Director May 7, 1996
______________________
Michael Bell
/s/ James C. Dowdle Director May 7, 1996
______________________
James C. Dowdle
/s/ Robert Gagnon Director May 7, 1996
_____________________
Robert Gagnon
/s/ Robert Rubinoff Director May 7, 1996
______________________
Robert Rubinoff
/s/ Scott M. Sperling Director May 7, 1996
- ----------------------
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 Soft-
ware 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 Compa-
ny(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)
5.1 Opinion of Neal S. Winneg, Esq.
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 Deloitte & Touche LLP
23.5 Consent of Price Waterhouse LLP
23.6 Consent of Price Waterhouse LLP
23.7 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)
99.1* Fee Adjustment Agreement dated May [ ], 1996 by
and between the Company and Bear, Stearns & Co.
Inc.
_____________
* To be filed by amendment.
(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 5.1
SOFTKEY INTERNATIONAL INC.
One Athenaeum Street
Cambridge, Massachusetts 02142
May 7, 1996
SoftKey International Inc.
One Athenaeum Street
Cambridge, Massachusetts 02142
Re: 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 Registration Statement on Form S-3 being filed
by the Company with the Securities and Exchange Commis-
sion (the "Commission") on the date hereof (the "Regis-
tration Statement"). The Registration Statement relates
to the registration by the Company under the Securities
Act of 1933, as amended (the "Act"), of up to 500,000
shares (the "Company Shares") of common stock of the
Company, par value $.01 per share (the "Common Stock"),
to be sold by the Company or Bear, Stearns & Co. Inc.
("Bear Stearns") and 226,885 shares of Common Stock (the
"Selling Stockholder Shares") to be sold by a certain
selling stockholder of the Company (the "Selling Stock-
holder").
This opinion is being furnished in accordance
with the requirements of Item 601(b)(5) of Regulation
S-K. 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 and am familiar
with originals or copies, certified or otherwise identi-
fied to my satisfaction, of: (i) the Registration State-
ment (together with the form of preliminary prospectus
included therein); (ii) the Restated Certificate of
Incorporation of the Company, as amended, as currently in
effect; (iii) the Bylaws of the Company, as amended, as
currently in effect; (iv) certain resolutions adopted by
the Board of Directors of the Company relating to the
preparation and filing of the Registration Statement, the
registration of the Shares, the issuance of the Shares by
the Company, the sale of the Selling Stockholder Shares
to the Selling Stockholder and certain related matters;
(v) the form of proposed Fee Adjustment Agreement between
the Company and Bear Stearns to be filed as an exhibit to
the Registration Statement; (vi) a form of specimen
certificate for the Common Stock; (vii) certain agree-
ments, certificates of public officials, certificates of
other officers or representatives of the Company or
others; and (viii) 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, conformed
or photostatic copies and the authenticity of the origi-
nals of such copies. As to any facts material to the
opinions expressed herein which I have not independently
established or verified, I have relied upon statements
and representations of other officers and representatives
of the Company and others.
I am admitted to the Bar of 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. Assuming the conformity of the certifi-
cate(s) representing the Company Shares to the form of
the specimen certificate for the Common Stock examined by
me and the due execution and delivery of such certifi-
cate(s), the Company Shares have been duly authorized for
issuance and when the Company Shares have been paid for
and one or more certificates therefor have been issued
and delivered as contemplated by the Registration State-
ment, the Company Shares will be validly issued, fully
paid and nonassessable.
2. Assuming the conformity of the certifi-
cates representing the Selling Stockholder Shares not yet
issued by the Company to the form of the specimen certif-
icate for the Common Stock examined by me and the due
execution and delivery of such certificates, the Selling
Stockholder Shares have been duly authorized for issuance
and have been or as to Selling Stockholder Shares not yet
issued by the Company, when one or more certificates
therefor have been issued and delivered in accordance
with the terms and provisions of the Nordman Agreement,
will be validly issued, fully paid and nonassessable.
I hereby consent to the filing of this opinion
with the Commission as an exhibit to the Registration
Statement. I also consent to the reference to my name
under the caption "Legal Matters" in the prospectus filed
as part of the Registration Statement. In giving such
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 promulgated thereunder.
This opinion is furnished by me, as General
Counsel of the Company, in connection with the filing of
the Registration Statement and, except as provided in the
immediately preceding paragraph, is not to be used,
circulated or quoted for any other purpose or otherwise
referred to or relied upon by any other person without
the prior express written permission of the Company.
Very truly yours,
/s/ Neal S. Winneg
Neal S. Winneg
General Counsel
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this
registration statement of SoftKey International Inc. on
Form S-3 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.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
May 6, 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
ARTHUR ANDERSEN LLP
Boston, Massachusetts
May 6, 1996
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
SoftKey International Inc.
(formerly WordStar International Incorporated):
We consent to the incorporation by reference in this
registration statement on Form S-3 of SoftKey
International Inc. (the "Form S-3") 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 annual
report on Form 10-K of SoftKey International Inc. for the
year ended January 6, 1996, and to the reference to our
firm under the heading "Experts" in the prospectus
forming a part of the Form S-3.
/S/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
San Francisco, California
May 6, 1996
Exhibit 23.5
Consent of Independent Accountants
We hereby consent to the incorporation by reference in
the Prospectus constituting part of this Registration
Statement on Form S-3 of our report dated September 28,
1993, except as to Note 12 which is as of December 3,
1993, relating to the consolidated financial statements
of Spinnaker Software Corporation, appearing on page 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
PRICE WATERHOUSE LLP
Boston, Massachusetts
May 6, 1996
Exhibit 23.6
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 reference to us under the heading
"Experts" in such Prospectus.
/S/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Chicago, Illinois
May 6, 1996
