<PAGE> 1
As filed with the Securities and Exchange Commission on November 10, 1998
Registration Statement No. 333-62171
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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THE LEARNING COMPANY, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 94-2562108
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
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
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
THE LEARNING COMPANY, 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 PUBLIC: AS SOON AS
PRACTICABLE 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. / / 333-_______.
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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. / / 333-__________.
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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THE COMPANY HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE COMPANY 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),
SHALL DETERMINE.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
SUBJECT TO COMPLETION, DATED NOVEMBER 10, 1998
PROSPECTUS
THE LEARNING COMPANY, INC.
1,641,138 SHARES OF COMMON STOCK
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This prospectus covers the offer and sale (the "Offering") of 1,641,138
shares (the "Shares") of common stock, $.01 par value per share (the "Common
Stock"), of The Learning Company, Inc. (the "Company"). The Shares may be
offered and sold from time to time for the account of North Coast Entertainment,
Inc., a Michigan corporation, a stockholder of the Company ("North Coast" or the
"Selling Stockholder"). See "The Selling Stockholder." The Shares were issued to
the Selling Stockholder in connection with the acquisition by the Company of
Sofsource, Inc., a Michigan corporation ("Sofsource"), as of July 4, 1998. See
"The Acquisition."
The Company will generally not receive any of the proceeds from the sale
of the Shares covered by this Prospectus, except that net proceeds received by
the Selling Stockholder in excess of the Adjusted Purchase Price (as defined
herein under "Use of Proceeds"), if any, shall be paid to the Company. The
Company will bear all expenses incurred in effecting the registration of the
Shares held by the Selling Stockholder covered by this Prospectus, including all
registration and filing fees, exchange listing fees, fees and expenses of
counsel for the Company and fees and expenses of accountants for the Company,
but excluding any brokerage fees, selling commissions or underwriting discounts
incurred by the Selling Stockholder in connection with the sale of the Shares
and fees and expenses of any counsel for the Selling Stockholder.
The Shares covered by this Prospectus may be sold from time to time by the
Selling Stockholder, or by its pledgees, donees, transferees or other successors
in interest in the over-the-counter market, through the writing of options on
the Shares, in ordinary brokerage transactions, in negotiated transactions,
pursuant to an underwritten offering or pursuant to one or more block trades to
or through underwriters or dealers designated from time to time at market prices
prevailing at the time of sale or at negotiated prices. To the extent required,
certain terms of the sale of the Shares with respect to which this Prospectus is
being delivered, including, where applicable, the names of the underwriters,
dealers and agents, the public offering price, and any applicable commissions,
discounts or other terms constituting compensation to such underwriters, dealers
or agents, will be set forth in a Prospectus Supplement. See "Plan of
Distribution."
The Selling Stockholder and intermediaries through whom the Shares are
sold may be deemed "underwriters" within the meaning of the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Shares offered
hereby, and any profits realized or commissions received may be deemed
underwriting compensation. See "Plan of Distribution."
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The Company's Common Stock is traded on the New York Stock Exchange (the
"NYSE") under the symbol "TLC." On November 5, 1998, the closing sale price of
the Common Stock on the NYSE was $26.25 per share.
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THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE
OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 9.
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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.
---------------------
The date of this Prospectus is November ___, 1998
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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 may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549 and at the Commission's regional offices
located at Seven World Trade Center, Suite 1300, New York, New York 10048, and
at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such materials also may be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. In addition, reports, proxy and information statements and
other information concerning the Company can be inspected and copied at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005. The Company is required to file electronic versions of these documents
through the Commission's Electronic Data Gathering, Analysis and Retrieval
(EDGAR) system. The Commission maintains a World Wide Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with all amendments, supplements, exhibits and schedules thereto,
the "Registration Statement") under the Securities Act, with respect to the
Shares offered hereby. This Prospectus does not contain all of the information
set forth in the Registration Statement, as certain items are omitted in
accordance with the rules and regulations of the Commission. For further
information pertaining to the Company and the Shares, reference is made to such
Registration Statement. Statements contained in this Prospectus regarding the
contents of any agreement or other document are not necessarily complete, and in
each instance reference is made to the copy of such agreement or document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference. The Registration Statement may be inspected
without charge at the office of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies of all or any part thereof may be obtained
from the Commission at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(i) The Company's Annual Report on Form 10-K for the fiscal
year ended January 3, 1998, filed with the Commission on
March 13, 1998;
(ii) The Company's Amendment No. 1 to Annual Report on Form
10-K for the fiscal year ended January 3, 1998, filed
with the Commission on May 29, 1998;
(iii) The Company's Amendment No. 2 to Annual Report on Form
10-K for the fiscal year ended January 3, 1998, filed
with the Commission on June 19, 1998;
(iv) The Company's Current Report on Form 8-K, dated March
12, 1998, and filed with the Commission on March 17,
1998;
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(v) The Company's Definitive Proxy Statement for the Annual
Meeting of Stockholders held on May 21, 1998, filed with
the Commission on April 2, 1998;
(vi) The Company's Current Report on Form 8-K, dated March
27, 1998, and filed with the Commission on April 13,
1998;
(vii) The Company's Amendment No. 1 to Current Report on Form
8-K/A, dated March 27, 1998, and filed with the
Commission on April 29, 1998;
(viii) The Company's Amendment No. 2 to Current Report on Form
8-K/A, dated March 27, 1998, and filed with the
Commission on May 8, 1998;
(ix) The Company's Amendment No. 3 to Current Report on Form
8-K/A, dated March 27, 1998, and filed with the
Commission on May 20, 1998;
(x) The Company's Amendment No. 4 to Current Report on Form
8-K/A, dated March 27, 1998, and filed with the
Commission on May 29, 1998;
(xi) The Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended April 4, 1998, filed with the
Commission on May 13, 1998;
(xii) The Company's Current Report on Form 8-K, dated June 21,
1998, filed with the Commission on June 24, 1998;
(xiii) The Company's Joint Proxy Statement/Prospectus, dated
July 31, 1998, and filed with the Commission on July 31,
1998;
(xiv) The Company's Current Report on Form 8-K, dated July 24,
1998, and filed with the Commission on August 4, 1998;
(xv) The Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 4, 1998, filed with the
Commission on August 18, 1998;
(xvi) The Company's Current Report on Form 8-K, dated August
31, 1998, and filed with the Commission on September 10,
1998;
(xvii) The Company's Amendment No. 1 to Current Report on Form
8-K/A, dated August 31, 1998, and filed with the
Commission on November 4, 1998;
(xviii) The Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended October 3, 1998, filed with the
Commission on November 9, 1998; and
(xix) The Company's Registration Statement on Form 8-A, filed
with the Commission on October 29, 1996.
All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
hereof and prior to the termination of the offering of the Shares registered
hereby shall be deemed to be incorporated by reference into this Prospectus and
to be a part hereof from the date of filing such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded 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
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reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the foregoing documents incorporated by reference into this
Prospectus (without exhibits to such documents other than exhibits specifically
incorporated by reference into such documents). All such requests shall be
directed to: The Learning Company, Inc., One Athenaeum Street, Cambridge,
Massachusetts 02142, Attention: Secretary; Telephone: (617) 494-1200.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL.
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
Certain statements in this Prospectus and in the documents incorporated
herein constitute "forward-looking statements" within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act. For this purpose, any
statements contained herein or incorporated herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "plans," "expects" and similar expressions
are intended to identify forward-looking statements. There are a number of
important factors that could cause the results of the Company to differ
materially from those indicated by such forward-looking statements.
These factors include those set forth in "Risk Factors" herein.
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THE COMPANY
The Learning Company, Inc. (the "Company") develops and publishes a broad
range of high quality branded consumer software for personal computers ("PCs")
that educate across every age category, from young children to adults. The
Company's primary emphasis is in education and reference software, but it also
offers a selection of lifestyle, productivity and, to a lesser extent,
entertainment products, both in North America and internationally.
The Company's educational products are principally sold under a number of
well known brands, including The Learning Company, MECC and Creative Wonders
brands. The Company develops and markets educational products for children ages
18 months to seven years in the popular "Reader Rabbit" family, which includes
both single-subject and multi-subject titles such as Reader Rabbit's Reading 1,
Reader Rabbit's Math 1, Reader Rabbit's Toddler, Reader Rabbit's PreSchool,
Reader Rabbit's Kindergarten and Reader Rabbit's 1st Grade. The Company also
publishes educational products for this age group based on the popular Sesame
Street and Madeline characters, among others. For children seven years and
older, the Company develops and markets engaging educational products such as
the long-running "Trail" series, which includes The Oregon Trail 3rd Edition, as
well as products based on the popular The Baby-Sitters Club books. During 1997,
the Company launched its The American Girls Premiere title, which is marketed
towards girls in this age group.
The Company develops and markets several different lines of software
designed to teach children and adults such foreign languages as French, German,
Spanish and Japanese. These lines include, among others, the Learn to Speak and
Berlitz lines of products.
The Company's reference products include the "Compton's Home Library" line
which includes, among others, Compton's Interactive Encyclopedia and Compton's
3D World Atlas Deluxe. In addition, the Company offers a line of medical
reference products that includes BodyWorks, Home Medical Advisor and Mosby's
Medical Encyclopedia. The Company's productivity line is marketed under the
SoftKey and the Creative Office brands. The Company also publishes a
lower-priced "Value" line of products in box version under the Key and Classics
brands and a jewel-case only version under the SoftKey brand.
During 1997, the Company began offering an Internet filtering product with
the introduction of the popular Cyber Patrol, which allows parents and teachers
to choose what content on the Internet is appropriate for children. Adults can
choose to block material organized into many different categories such as
violence, nudity, explicit sexual material and hate speech. In addition to
marketing the product to homes and schools, the Company is also marketing to
corporations a version of Cyber Patrol that can block sites with content such as
sports, leisure and shopping to improve productivity in the office. As a result
of the Company's recent acquisition of Mindscape in 1998, the Company also sells
the popular Mavis Beacon Teaches Typing, Chessmaster 5500, Print Master Platinum
and The Complete National Geographic.
The Company distributes its products through retail channels, including
direct sales to computer electronics stores, office superstores, mass
merchandisers, discount warehouse stores and software specialty stores which
control over 23,000 North American storefronts. The Company also sells its
products directly to consumers through the mail, telemarketing and the Internet,
and directly to schools. The Company's international sales are conducted from
subsidiaries in Germany, France, Holland, Ireland, the United Kingdom, Australia
and Japan. The Company also derives revenue from licensing its products to
original equipment manufacturers ("OEMs") which bundle the Company's products
for sale with computer systems or components and through on-line offerings.
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The Company has a history of acquiring companies in order to broaden its
product lines and sales channels. As of July 4, 1998, the Company completed the
acquisition of Sofsource, a publisher of educational and test software for high
school and college students. In May 1998, the Company completed the acquisition
of PF.Magic, Inc. ("PF Magic"), a publisher of virtual life software for
children. In March 1998, the Company and certain of its affiliates completed the
acquisition of Mindscape, Inc. and certain related companies (collectively,
"Mindscape"), a publisher of educational, productivity and entertainment
software. During 1997, the Company completed a number of small complementary
acquisitions in the educational software segment. During the third quarter of
1997, the Company acquired Learning Services, Inc. ("Learning Services") (a
national school software catalog for teachers), Skills Bank Corporation ("Skills
Bank") (a developer of older age and remedial educational software for schools)
and Microsystems Software, Inc. ("Microsystems") (an Internet filtering
publisher and creator of Cyber Patrol). During the fourth quarter of 1997, the
Company and certain of its affiliates acquired control of Creative Wonders,
L.L.C. ("Creative Wonders") (a developer of branded children's educational
software) and acquired TEC Direct (the publisher of an educational consumer
software catalog).
In May 1996, the Company consummated the acquisition of MECC, an
educational software publisher. That acquisition, together with the acquisitions
in December 1995 of The Learning Company ("The Former Learning Company") and
Compton's NewMedia, Inc. ("Compton's"), marked the completion of the Company's
strategic initiative to expand its educational software franchise.
ACQUISITION OF BRODERBUND
On August 31, 1998, the Company acquired all of the issued and outstanding
shares of the common stock of Broderbund Software, Inc. ("Broderbund"). Under
the terms of the Agreement and Plan of Merger, dated as of June 21, 1998, among
the Company, TLC Merger Corp. and Broderbund (the "Agreement"), the Company
issued 0.80 shares of Common Stock in exchange for each outstanding share of
Broderbund common stock. Based on the number of shares of Broderbund common
stock issued and outstanding on July 22, 1998 (excluding stock options, warrants
or other rights to acquire Broderbund common stock), the Company issued
16,848,753 shares of Common stock in the transaction.
Broderbund develops, publishes and markets a broad line of interactive
personal productivity, entertainment and educational software for use in the
home, school and small business markets. Broderbund's product strategy is to
identify and develop families of products that will achieve sustained consumer
appeal and brand name recognition primarily across three major consumer software
categories: personal productivity, entertainment and education. Broderbund's
products include The Print Shop family of personal productivity products, the
Carmen Sandiego family of educational products, the Family Tree Maker line of
genealogy products, the entertainment products Myst and Riven.
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The Company was incorporated in California in October 1978 and
reincorporated in Delaware in October 1986. In February 1994, the Company, which
was then known as WordStar International Incorporated, completed a three-way
business combination with SoftKey Software Products Inc. and Spinnaker Software
Corporation in which the Company changed its name to SoftKey International Inc.
In October 1996, the Company changed its name from SoftKey International Inc. to
The Learning Company, Inc. to reflect its expanded emphasis on educational
software. The Company's executive offices are located at One Athenaeum Street,
Cambridge, Massachusetts 02142. Its telephone number is (617) 494-1200, and its
internet web site is located at http:/www.learningco.com. "The Learning Company,
Inc." and all of the Company's logos and product names are trademarks of the
Company.
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RISK FACTORS
The Shares offered hereby involve a high degree of risk. The following
risk factors should be considered carefully in addition to the other information
included or incorporated by reference in this Prospectus before purchasing the
Shares offered hereby.
INTENSE COMPETITIVE ENVIRONMENT
The consumer software industry is intensely and increasingly competitive
and is characterized by rapid changes in technology and customer requirements.
The Company competes for retail shelf space and general consumer awareness with
a number of companies that market consumer software. The Company encounters
competition from both established companies, including the largest companies in
the industry, and new companies that may develop comparable or superior
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 online and Internet
related services and content tailored for this new delivery vehicle. To the
extent that demand increases for online products and content, the demand for the
Company's existing products may change. There can be no assurance that the
Company will be able to successfully maintain market share and otherwise compete
successfully in the future.
Competitive pressures in the software industry have resulted, and the
Company believes may continue to result, in pressure to reduce the prices of its
products or risk loss of market share. In response to such competitive pressures
during early 1997 the Company reduced the retail selling price of certain of its
educational products. There can be no assurance that the Company's product
selling prices will not continue to decline in the future or that the Company
will not respond to such declines with additional price reductions. Such price
reductions may reduce the Company's revenues and operating margins in the
future. During 1997, the Company and many of its competitors began using rebate
coupons in order to induce consumers to purchase their products. In addition,
the Company uses various forms of prints and television advertising to enhance
brand and product awareness. The use of these methods of channel marketing and
advertising is becoming more prevalent among the larger consumer software
publishers. To the extent that the Company fails to match competitor's future
channel marketing and advertising programs, it could risk loss of market share
and corresponding revenues and operating profits.
Large companies with substantial bases of intellectual property content in
the motion picture and media industries, sophisticated product marketing and
technical abilities and/or financial resources that may not need to realize an
immediate profit or return on investment have increasingly entered or announced
their intention to enter the consumer software market. These competitors include
Microsoft Corporation, The Walt Disney Company, Mattel, Inc., Hasbro, Inc., IBM
and Cendant Corporation (formerly CUC International Inc.). For example,
technology companies have begun to acquire greater access to content, and
content-oriented companies have begun to acquire greater technological
capabilities. To the extent that competitors achieve a performance, price or
distribution advantage, the Company could be adversely affected. Furthermore,
increased consolidation of the consumer software market may impact future growth
potential and performance.
INTENSE COMPETITION FOR DISTRIBUTION CHANNELS
In the retail distribution channel resellers typically have available a
limited amount of shelf space and promotional resources. There is intense
competition for high quality and adequate levels of shelf space and promotional
support from retailers. To the extent that the number of consumer computer
platforms and products increases, this competition for shelf space may also
increase. The
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Company also competes for shelf space against non-educational and reference
category publishers such as games. To the extent that these vendors acquire
greater shelf space, the Company's position may be reduced. Mass merchants such
as Wal-Mart and Kmart, are increasingly becoming a larger portion of the
Company's sales. As these retailers achieve greater market share from the
traditional software retailers, the Company may experience higher marketing
costs and increased competition for shelf space, which could impact future sales
and operating margins. 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. There can be no assurance
that the Company will compete effectively in these channels in the future.
The retail channels of distribution available for products are subject to
rapid changes as retailers and distributors enter and exit the consumer software
market 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 online services or the
Internet, which will necessitate certain changes in the Company's business and
operations, including addressing operational challenges such as improving
download time for pictures, images and programs, ensuring proper regulation of
content quality and developing sophisticated security for transmitting payments.
Should on-line distribution channels increase, the Company will be required to
modify its existing technology platforms 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 range of
product 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 continuously engages in discussions
with certain businesses in pursuit of possible transactions. Certain of these
businesses may be substantial in size as compared to the Company. 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
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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.
RISKS RELATING TO THE INTEGRATION OF BRODERBUND WITH THE COMPANY
On August 31, 1998, the Company completed its acquisition of Broderbund.
The Company and Broderbund each have similar operations involving the
development and sale of consumer software. Integrating the operations (including
among other things, product development, sales and marketing activities,
information and software systems, customer and direct response services,
products manufacturing and fulfillment, employee hiring and training, and
expansion strategy) and management of the two companies will be a time-consuming
process, and there can be no assurance that this integration will result in the
achievement of any of the anticipated synergies and other benefits that may be
realized from the merger with Broderbund. Moreover, the integration of these
organizations will require the dedication of management resources, which may
temporarily distract attention from the day-to-day business of the Company. The
inability of management to successfully integrate the operations of the two
companies could have a material adverse effect on the business and operating
results of the Company.
LEVERAGE
As of October 3, the Company had outstanding long-term debt of
approximately $190,900,000 comprised of 5 1/2% Senior Convertible Notes due 2000
(the "Notes"). The Notes are convertible into Common Stock at a price of $53 per
share. If the holders of the Notes do not convert the Notes held by them into
Common Stock, there can be no assurance that the Company's operating cash flow
will be sufficient to meet its debt service requirements, or that the Company
will be able to repay the Notes at maturity or in accordance with their
respective terms or to refinance the Notes on favorable terms or at all.
MANAGEMENT OF GROWTH; INTEGRATION OF ACQUIRED BUSINESSES; KEY EMPLOYEES
The Company is currently experiencing a period of 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, over the past two years, the Company
has acquired The Former Learning Company, Compton's, Compton's Learning Company,
MECC, Learning Services, Skills Bank, Microsystems, TEC Direct, Mindscape, PF.
Magic and Sofsource, among other companies. Should certain key employees not be
retained, future operating results may be adversely affected.
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<PAGE> 14
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
The Company 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.
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.
Certain of the Company's products, such as The American Girls Premiere,
The Princeton Review, National Geographic and the Sesame Street line of
products, among others, include branded content licensed from third parties.
This content is licensed pursuant to agreements with terms of finite duration
and which may contain restrictions on the Company's ability to develop future
products without the consent of the applicable licensor. If the Company is not
able to develop future products under these agreements or enter into alternative
arrangements with the same or additional licensors, the Company's operating
results could be adversely affected.
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<PAGE> 15
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 arms-length negotiations on a case by case basis,
and there is no general formula or industry standard for determining such fees.
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. In
addition, the Company has implemented new promotional programs, including coupon
rebates and other various programs through print and television media. These
programs may increase the Company's cost of marketing and reduce future
operating margins.
SIGNIFICANT PRICE REDUCTIONS IN PERSONAL COMPUTER SOFTWARE
Recently, several major publishers of PC software, including the Company,
have significantly reduced the prices of their products with the goal of gaining
greater market share. 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 19% of its revenues in the year ended
January 3, 1998 from sales occurring outside North America. 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 United States 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
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<PAGE> 16
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 smaller 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
In 1997, the production, assembly and distribution of the Company's North
American line of products was performed by two units of Bertelsmann AG
(collectively, "BMG") (with the exception of school channel products and certain
OEM products). The Company believes that BMG's existing production capacity is
sufficient to handle anticipated increases in volume and titles into the
foreseeable future. Although the Company believes that suitable alternative
suppliers exist, there can be no assurance that any termination or modification
of the agreement with BMG would not result in a short-term business interruption
for the Company.
YEAR 2000 COMPLIANCE
Many existing computer systems use only the last two digits to identify a
year. Consequently, as the year 2000 approaches, many systems do not yet
recognize the difference in a year that begins with "20" instead of "19." Unless
corrected, this, as well as other date-related processing issues, may result in
systems failures or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities. The Year 2000
issue also may affect the Company's products.
The Company has appointed a Year 2000 project team to develop and
implement a comprehensive four-phase Year 2000 readiness plan for its worldwide
operations relating to the following three areas: (1) the Company's internal
systems (including information technology such as financial and order entry
systems and non-information technology systems such as facilities); (2) third
party customers, vendors and others with whom the Company does business and (3)
the Company's products. The project team includes members of senior management
and prepares progress reports to the board of directors on a regular basis.
Phase One (inventory) consists of identifying all the Company's systems,
relationships and products that may be impacted by Year 2000. Phase Two
(assessment) involves determining the Company's current state of Year 2000
readiness for those areas identified in the inventory phase and prioritizing the
areas that need to be fixed. Phase Three (remediation) will consist of
developing a plan for those areas identified as needing correction in the
assessment phase. Phase Four (implementation) will consist of executing the
action plan and completing the steps identified to attain Year 2000 readiness.
The Company is currently in the inventory phase of the plan for both its
internal systems and its third party relationships, although, for certain known
critical internal systems, the Company has completed the assessment and
remediation phases. For the Company's products, it is either in the inventory or
assessment phase of the plan. The Company has not yet determined a date by which
it expects to complete implementation for all of the targeted areas, but it
intends to complete such implementation well in advance of January 1, 2000.
The Company for some time has been taking, and will continue to take,
actions intended to resolve Year 2000 issues through planned replacement or
upgrades of its internal computer equipment and software systems. For this
purpose, the term "computer equipment and software" includes systems that are
commonly considered IT systems, including accounting, data processing and
telephone/PBX systems, as well as systems that are not commonly considered IT
systems such as security systems, fax machines or other miscellaneous systems.
Both IT and non-IT systems may contain embedded technology, which complicates
the Company's Year 2000 inventory, assessment, remediation and implementation
efforts.
The Company currently believes that the cost of its Year 2000
inventory, assessment, remediation and implementation efforts with respect to
internal systems, as well as the costs to be incurred with respect to Year
2000 issues of third parties, should not exceed $1,000,000, which expenditures
will be funded from operating cash flows. Because the Company is still in the
inventory phase of its readiness plan with respect to many of its internal
systems and with respect to third parties, it is difficult to estimate with
certainty the ultimate amount of such costs. As discussed below, the Company
believes that a substantial portion of its remediation and implementation
efforts with respect to internal systems will be conducted in connection with
the integration of the businesses acquired by the Company in 1998 with the
Company's operations. As of August 31, 1998 the Company estimates that it has
incurred costs of approximately $350,000 related to its Year 2000 inventory,
assessment, remediation and implementation efforts with respect to internal
systems. All of the $350,000 relates to analysis, repair or replacement of
existing software, upgrades of existing software, evaluation of information
received from significant vendors, service providers or customers, or
consulting advisory agents. Other non-Year 2000 IT efforts have not been
materially delayed or impacted by Year 2000 initiatives.
While the Company is dedicating substantial resources toward attaining
Year 2000 readiness, there is no assurance that the Company will be successful
in its efforts to address all Year 2000 systems issues. If all Year 2000 issues
are not properly identified, or assessment, remediation or implementation are
not effected timely with respect to Year 2000 issues that are identified, there
can be no assurance that the Year 2000 issue will not materially adversely
impact the Company's results of operations or adversely affect the Company's
relationships with customers, vendors or others. For example, failure to
achieve Year 2000 readiness for the Company's internal systems could delay its
ability to manufacture and ship products, disrupt customer service and
technical support facilities, or interrupt customer access to online products
and services. The Company also relies heavily on third parties such as
manufacturing suppliers, service providers and a large retail distribution
channel. If these or other third parties experience Year 2000 failures or
malfunctions, there could be a material adverse impact on the Company's
ability to conduct ongoing operations. For example, the ability to manufacture
and ship products into the retail channel, to receive retail sales information
necessary to maintain proper inventory levels, or to complete online
transactions dependent upon third party service providers could be affected.
If the Company's products are not Year 2000 ready, the Company could
suffer increased costs, lost sales or other negative consequences resulting
from customer dissatisfaction, including litigation. The Company is aware of
the potential for claims against it and other companies for damages arising
from products that are or were not Year 2000 ready. In addition, because of the
large number of products sold by the Company currently and in the past, the
Company could face lawsuits relating to the Year 2000 readiness of products
that it no longer sells and that it no longer supports.
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<PAGE> 17
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, customer 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 $35,167,000 for the year ended January 6, 1996 (after amortization,
merger and other costs of $103,267,000), $376,460,000 for the year ended January
4, 1997 (after amortization, merger and other costs of $503,520,000) and
$494,910,000 for the year ended January 3, 1998 (after amortization, merger and
other costs of $543,926,000) and $199,997,000 for the nine months ended October
3, 1998 (after amortization, merger and other costs of $282,852,000). 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.
VOLATILITY OF STOCK PRICE
The Common Stock is quoted on the NYSE. 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
and general conditions in the computer hardware and software industries may have
a significant impact on the market price of the Common Stock.
The Company has recently issued an aggregate of 20,377,655 shares of
Common Stock in connection with its acquisition of Broderbund, Mindscape, PF.
Magic and Sofsource. The sale in the
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<PAGE> 18
public market of all or part of these shares, or any shares that might be issued
in connection with future acquisitions, could have a material adverse effect
upon the market price of the Common Stock.
USE OF PROCEEDS
The Company will generally not receive any of the proceeds from the sale
of the Shares covered by this Prospectus, except that net proceeds received by
the Selling Stockholder in excess of the Adjusted Purchase Price (as defined
below), if any, shall be paid to the Company. The Adjusted Purchase Price means
$45 million less the Working Capital Deficiency (as defined herein under "The
Acquisition"), if any, plus an amount equal to 7% thereon per annum from August
3, 1998 to the date on which all of the Shares are sold pursuant to a registered
offering or repurchased by the Company. The Company will bear all expenses
incurred in effecting the registration of the Shares held by the Selling
Stockholder covered by this Prospectus, including all registration and filing
fees, exchange listing fees, fees and expenses of counsel for the Company and
fees and expenses of accountants for the Company, but excluding any brokerage
fees, selling commissions or underwriting discounts incurred by the Selling
Stockholder in connection with the sale of the Shares and fees and expenses of
any counsel for the Selling Stockholder.
THE ACQUISITION
Pursuant to a Stock Purchase Agreement, dated June 2, 1998, as amended on
July 4, 1998 (the "Stock Purchase Agreement"), by and among the Company,
Sofsource, North Coast and Handleman Company, the Company acquired all of the
outstanding stock of Sofsource. As a result of the acquisition, North Coast
became a stockholder of the Company. As payment for the purchase price, the
Company issued 1,641,138 shares of its Common Stock to the Selling Stockholder
on July 4, 1998 (the "Closing Date").
Pursuant to the terms of the Stock Purchase Agreement, Sofsource is
required to have at least $7 million of net working capital as of the Closing
Date. If the Company determines that there is a deficiency in such net working
capital (the "Working Capital Deficiency"), the Company is entitled to collect
such deficiency from an escrow account established by the parties into which
164,114 Shares issued to North Coast were placed on the Closing Date. Subject to
agreement of the parties, these Shares may be released after September 2, 1998.
As of the date hereof, these Shares have not been released.
THE SELLING STOCKHOLDER
The following table sets forth, to the knowledge of the Company, certain
information, as of August 13, 1998, with respect to the Selling Stockholder for
whom the Company is registering the Shares for resale to the public. The Company
will generally not receive any of the proceeds from the sale of the Shares,
except that net proceeds received by the Selling Stockholder in excess of the
Adjusted Purchase Price (as defined above under "Use of Proceeds"), if any,
shall be paid to the Company. See "Use of Proceeds." The shares of Common Stock
covered by this Prospectus were issued to the Selling Stockholder in connection
with the acquisition of Sofsource. See "The Acquisition."
To the Company's knowledge, the Selling Stockholder does not hold any
position or office with, has not been employed by, and has not otherwise had a
material relationship with the Company or any of its subsidiaries within the
past three years.
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<PAGE> 19
<TABLE>
<CAPTION>
Number of
Number of Shares of Percentage of
Shares of Common Shares of
Common Stock Number of Stock Common Stock
Beneficially Shares of Beneficially Beneficially
Owned Prior to Common Stock Owned after Owned after
Name of Selling Stockholder Offering(1)(3) Offered Hereby Offering(1)(2) Offering (1)(2)
- --------------------------- -------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
North Coast Entertainment, Inc. 1,641,138 1,641,138 0 0
</TABLE>
- ----------------------
(1) The number of Shares beneficially owned is determined under rules
promulgated by the Commission, and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such
rules, beneficial ownership includes any Shares as to which the individual
has sole or shared voting power or investment power and also any Shares
which the individual has the right to acquire within 60 days after August
13, 1998 through the exercise of any stock option or other right. The
inclusion herein of such Shares, however, does not constitute an admission
that the Selling Stockholder is direct or indirect beneficial owners of
such Shares. The Selling Stockholder has sole voting power and investment
power with respect to all Shares listed as owned by it.
(2) It is unknown if, when or in what amounts the Selling Stockholder may
offer Shares for sale and there can be no assurance that the Selling
Stockholder will sell any or all of the Shares offered hereby. Because the
Selling Stockholder may offer all or some of the Shares pursuant to this
Offering, and because there are currently no agreements, arrangements or
understandings with respect to the sale of any of the Shares that will be
held by the Selling Stockholders after completion of the Offering, no
estimate can be given as to the amount of the Shares that will be held by
the Selling Stockholders after completion of the Offering. However, for
purposes of this table, the Company has assumed that, after completion of
the Offering, no Shares will be held by the Selling Stockholders.
(3) Includes 164,114 shares of Common Stock placed in escrow pursuant to the
terms of the Stock Purchase Agreement. See "The Acquisition."
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<PAGE> 20
PLAN OF DISTRIBUTION
The Shares covered by this Prospectus may be offered and sold from time to
time by the Selling Stockholder or by its pledgees, donees, transferees or other
successors in interest in the over-the-counter market, through the writing of
options on the Shares, in ordinary brokerage transactions, in negotiated
transactions, pursuant to an underwritten offering or pursuant to one or more
block trades to or through underwriters or dealers designated from time to time.
For purposes of this "Plan of Distribution" section only, the term "Selling
Stockholder" shall be deemed to include such pledgees, donees, transferees or
other successors in interest. The Selling Stockholder has agreed that, prior to
December 31, 1998, except as specifically agreed to by the Selling Stockholder
and the Company, it shall not sell or otherwise transfer any Shares, effect any
short sale of the Company's Common Stock or otherwise hedge its position in the
Shares through any put or call options or similar arrangements. The Selling
Stockholder has agreed, however, that, prior to December 31, 1998, the Selling
Stockholder shall, at the election of the Company, include all or such portion
of the Shares for sale pursuant to a block trade or an underwritten public
offering under the Securities Act through a broker-dealer or underwriter
selected by the Company. After December 31, 1998, the Selling Stockholder will
act independently of the Company in making decisions with respect to the timing,
manner and size of each sale. The Selling Stockholder may sell the Shares being
offered hereby on the New York Stock Exchange, or otherwise, at prices and under
terms then prevailing or at prices related to the then current market price or
at negotiated prices. Subject to the restrictions described above, the Shares
may be sold by one or more of the following means of distribution: (a) a block
trade in which the broker-dealer so engaged will attempt to sell Shares as
agent, but may position and resell a portion of the block as principal to
facilitate the transaction; (b) purchases by a broker-dealer as principal and
resale by such broker-dealer for its own account pursuant to this Prospectus;
(c) an over-the-counter distribution in accordance with the rules of the New
York Stock Exchange; (d) ordinary brokerage transactions and transactions in
which the broker solicits purchasers; (e) an underwritten public offering; and
(f) in privately negotiated transactions. To the extent required, this
Prospectus may be amended and supplemented from time to time to describe a
specific plan of distribution. After December 31, 1998, in connection with
distributions of the Shares or otherwise, the Selling Stockholder may enter into
hedging transactions with broker-dealers or other financial institutions. In
connection with such transactions, broker-dealers or other financial
institutions may engage in short sales of the Company's Common Stock in the
course of hedging the positions they assume with a Selling Stockholder, and the
Selling Stockholder may also sell the Company's Common Stock short and redeliver
the Shares to close out such short positions. After December 31, 1998, the
Selling Stockholder may also enter into option or other transactions with
broker-dealers or other financial institutions which require the delivery to
such broker-dealer or other financial institution of Shares offered hereby,
which Shares such broker-dealer or other financial institution may resell
pursuant to this Prospectus (as supplemented or amended to reflect such
transaction). The Selling Stockholder may also pledge Shares to a broker-dealer
or other financial institution, and, upon a default, such broker-dealer or other
financial institution, may effect sales of the pledged Shares pursuant to this
Prospectus (as supplemented or amended to reflect such transaction). In
addition, any Shares that qualify for sale pursuant to Rule 144 may be sold
under Rule 144 rather than pursuant to this Prospectus.
In effecting sales, brokers, dealers or agents engaged by the Selling
Stockholder may arrange for other brokers or dealers to participate. Brokers,
dealers or agents may receive commissions, discounts or concessions from the
Selling Stockholder in amounts to be negotiated prior to the sale. Such brokers
or dealers and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales, and any such commissions, discounts or concessions may be deemed to be
underwriting discounts or commissions under the Securities Act. The Company will
pay all expenses incident to the offering and sale of the Shares to the public
other than any commissions and discounts of underwriters, dealers or agents and
any transfer taxes.
In order to comply with the securities laws of certain states, if
applicable, the Shares must be sold
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<PAGE> 21
in such jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states the Shares may not be sold unless they have been
registered or qualified for sale in the applicable state or an exemption from
the registration or qualification requirement is available and is complied with.
The anti-manipulation rules of Regulation M under the Exchange Act may
apply to sales of Shares in the market and to the activities of the Selling
Stockholder and its affiliates. In addition, the Company will make copies of
this Prospectus available to the Selling Stockholder and has informed it of the
need for delivery of copies of this Prospectus to purchasers at or prior to the
time of any sale of the Shares offered hereby. The Selling Stockholder may
indemnify any broker-dealer that participates in transactions involving the sale
of the Shares against certain liabilities, including liabilities arising under
the Securities Act.
At the time a particular offer of Shares is made, if required, a
Prospectus Supplement will be distributed that will set forth the number of
Shares being offered and the terms of the offering, including the name of any
underwriter, dealer or agent, the purchase price paid by any underwriter, any
discount, commission and other item constituting compensation, any discount,
commission or concession allowed or reallowed or paid to any dealer, and the
proposed selling price to the public.
The sale of Shares by the Selling Stockholder is subject to compliance by
the Selling Stockholder with certain contractual restrictions with the Company.
There can be no assurance that the Selling Stockholder will sell all or any of
the Shares.
The Company has agreed with the Selling Stockholder to keep the
Registration Statement of which this Prospectus constitutes a part effective
until the earlier of (i) such time as all of the Shares have been disposed of
pursuant to and in accordance with such Registration Statement; or (ii) July 4,
1999, subject to extension in certain circumstances. The Company intends to
de-register any of the Shares not sold by the Selling Stockholder at the end of
such period.
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 173,500 shares of Common Stock, which are to
become exercisable in periodic installments through August 2001.
EXPERTS
The supplemental consolidated balance sheets of the Company as of
January 3, 1998 and January 4, 1997 and the related supplemental consolidated
statements of operations, stockholders' equity and cash flows for each of the
three fiscal years in the period ending January 3, 1998, incorporated by
reference in this Prospectus, have been incorporated herein in reliance on the
report dated October 10, 1998, of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in accounting and
auditing.
The consolidated balance sheets of the Company as of January 3, 1998 and
January 4, 1997 and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of the three fiscal years
in the period ending January 3, 1998, incorporated by reference in this
Prospectus, have been incorporated herein in reliance on the report dated
February 9, 1998 (except as to Note 12 which is as of March 6, 1998), of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in accounting and auditing.
The combined balance sheet of Mindscape as of December 31, 1997, and the
related combined statements of operations, shareholder's equity and cash flows
for the year then ended, incorporated by reference in this Prospectus, have been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
-19-
<PAGE> 22
The consolidated financial statements of Broderbund at August 31, 1997 and
1996, and for each of the three years in the period ended August 31, 1997,
incorporated by reference in this Prospectus, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report appearing in
Broderbund's Annual Report (Form 10-K) for the year ended August 31, 1997, and
are incorporated by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
-20-
<PAGE> 23
================================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING
STOCKHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION OF AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information ................................................... 3
Incorporation of Certain Documents
By Reference .......................................................... 3
Special Note Regarding Forward-Looking
Information ........................................................... 5
The Company ............................................................. 6
Risk Factors ............................................................ 9
Use of Proceeds ......................................................... 16
The Acquisition ......................................................... 16
The Selling Stockholder ................................................. 16
Plan of Distribution .................................................... 18
Legal Matters ........................................................... 19
Experts ................................................................. 19
</TABLE>
================================================================================
THE LEARNING COMPANY, INC.
1,641,138 SHARES
COMMON STOCK
--------------
PROSPECTUS
--------------
November __, 1998
================================================================================
<PAGE> 24
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses to be incurred in
connection with the sale and distribution of the securities being registered
hereby, all of which will be borne by the Company (except expenses incurred by
the Selling Stockholders for brokerage, fees, selling commissions or
underwriting discounts and fees and expenses of any counsel for the Selling
Stockholder or accounting, tax or legal services or any other expenses incurred
by the Selling Stockholders in taking possession of or disposing of the Shares).
All amounts shown are estimates except the Securities and Exchange Commission
registration fee.
<TABLE>
<S> <C>
Filing Fee - Securities and Exchange Commission $10,924
Legal fees and expenses of the Company ........ $25,000
Accounting fees and expenses .................. $10,000
Printing expenses ............................. $ 2,500
Miscellaneous expenses ........................ $ 6,576
Total Expenses .......................... $55,000
=======
</TABLE>
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 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 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:
II-1
<PAGE> 25
"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
II-2
<PAGE> 26
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."
The Company has purchased directors' and officers' liability insurance
which would indemnify the directors and officers of the Company 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.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
5* Opinion of Neal S. Winneg, Esq.
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of PricewaterhouseCoopers LLP
23.3 Consent of Ernst & Young LLP
23.4* Consent of Neal S. Winneg, Esq., included in Exhibit 5
24.5* Power of Attorney
</TABLE>
- ------------------------------
* Previously filed
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:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in the volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
derivation from the low or high and of the estimated maximum offering
range may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price
II-3
<PAGE> 27
represent no more than 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective Registration Statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement.
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Company pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") that are
incorporated by reference in this Registration Statement.
(2) That, for the purposes of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be deemed
to be the initial bona fide offering thereof.
(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 Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or 15(d) of the Exchange Act of 1934, as
amended (the "Exchange Act") (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) 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 the time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the indemnification provisions described herein, 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.
II-4
<PAGE> 28
SIGNATURES
Pursuant to the requirements of the Securities Act, 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 Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Cambridge, Commonwealth of Massachusetts, on
this 6th day of November, 1998.
THE LEARNING COMPANY, INC.
By: /s/ Neal S. Winneg
------------------------------------
Neal S. Winneg
Senior Vice President and
General Counsel
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Michael J. Perik* Chairman of the Board and Chief Executive November 6, 1998
- ----------------------------------- Officer (Principal Executive Officer)
Michael J. Perik
/s/ R. Scott Murray* Executive Vice President and Chief Financial November 6, 1998
- ----------------------------------- Officer (Principal Financial and Accounting
R. Scott Murray Officer)
/s/ Kevin O'Leary* President and Director November 6, 1998
- ------------------------------------
Kevin O'Leary
/s/ Lamar Alexander* Director November 6, 1998
- ------------------------------------
Lamar Alexander
/s/ Michael A. Bell* Director November 6, 1998
- ------------------------------------
Michael A. Bell
</TABLE>
II-5
<PAGE> 29
<TABLE>
<S> <C> <C>
/s/ Robert Gagnon* Director November 6, 1998
- ------------------------------------
Robert Gagnon
/s/ Carolynn N. Reid-Wallace* Director November 6, 1998
- ------------------------------------
Carolynn N. Reid-Wallace
/s/ Robert A. Rubinoff* Director November 6, 1998
- ------------------------------------
Robert A. Rubinoff
/s/ Scott M. Sperling* Director November 6, 1998
- ------------------------------------
Scott M. Sperling
/s/ Anthony J. DiNovi* Director November 6, 1998
- ------------------------------------
Anthony J. DiNovi
/s/ Mark E. Nunnelly* Director November 6, 1998
- ------------------------------------
Mark E. Nunnelly
/s/ Paul J. Zepf* Director November 6, 1998
- ------------------------------------
Paul J. Zepf
* By: /s/ Neal S. Winneg
-------------------------------
Neal S. Winneg
Attorney-in-Fact
</TABLE>
II-6
<PAGE> 30
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
5* Opinion of Neal S. Winneg, Esq.
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of PricewaterhouseCoopers LLP
23.3 Consent of Ernst & Young LLP
23.4* Consent of Neal S. Winneg, Esq., included in Exhibit 5
24.5* Power of Attorney
- ---------------------
* Previously filed
</TABLE>
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement on Form S-3 (File No. 333-62171) of our report dated
October 10, 1998 which report is included in Amendment No. 1 to Current Report
on Form 8-K/A, on our audits of the supplemental consolidated financial
statements and financial statement schedule of valuation and qualifying accounts
of The Learning Company, Inc. as of January 3, 1998 and January 4, 1997 and for
each of the three fiscal years in the period ended January 3, 1998. We also
consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement on Form S-3 (File No. 333-62171) of our report dated
February 9, 1998 (except as to Note 12 which is as of March 6, 1998), on our
audits of the consolidated financial statements and financial statement schedule
of valuation and qualifying accounts of The Learning Company, Inc. as of January
3, 1998 and January 4, 1997 and for each of the three fiscal years in the period
ended January 3, 1998, which report is included in the Company's Annual Report
on Form 10-K/A for the fiscal year ended January 3, 1998. We also consent to the
reference to our firm under the caption "Experts."
/s/ PricewaterhouseCoopers LLP
------------------------------
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
November 6, 1998
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Amendment No. 1 to the Registration Statement on Form
S-3 of The Learning Company, Inc. (the "Company") of our report dated March 2,
1998, relating to the combined financial statements of Mindscape Group which
appear in the Company's Current Report on Form 8-K/A, dated March 27, 1998. We
also consent to the reference to us under the caption "Experts" in such
Prospectus.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
San Jose, California
November 6, 1998
<PAGE> 1
Exhibit 23.3
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Amendment #1 to Registration Statement (Form S-3) and related Prospectus of The
Learning Company, Inc. for the registration of 1,641,138 shares of its common
stock and to the incorporation by reference therein of our report dated October
3, 1997, with respect to the consolidated financial statements and schedule of
Broderbund Software Inc. included in its Annual Report (Form 10-K) for the year
ended August 31, 1997, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Palo Alto, California
November 6, 1998
