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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 30, 1998
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TRIBUNE COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 1-8572 36-1880355
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
435 North Michigan Avenue, Chicago, Illinois 60611
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 222-9100
Not Applicable
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
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On July 31, 1998, Tribune Company ("Tribune") announced the offering of
three-year notes in the form of Debt Exchangeable for Common Stock(SM)
(DECS(SM)) exchangeable at maturity on August 15, 2001 into The Learning
Company ("TLC") common shares or, at Tribune's option, into an equivalent
amount of cash.
Tribune has offered 4.6 million DECS at an issue price of $27.9375 per DECS,
for gross proceeds of $128.5 million. The coupon on the DECS is 6 1/4 percent,
and the notes are not callable prior to maturity. With the DECS structure,
Tribune retains all of the first 20.4 percent market value appreciation in The
Learning Company common stock from $27.9375 and 16.9 percent of all further
appreciation above $33.625, but does not share in any decline in value of TLC
common stock below $27.9375.
Tribune acquired its 5.2 million shares of TLC common stock in connection with
its sale of its Compton's New Media subsidiary to The Learning Company in
December 1995.
Salomon Smith Barney was the sole manager on the offering. The DECS will be
listed on the NYSE under the symbol "TRD". Tribune has granted Salomon Smith
Barney an over-allotment option to purchase up to .6 million (the remaining
shares held by Tribune) additional DECS at the issue price.
Item 7. Financial Statements and Exhibits.
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Tribune Company is filing herewith the following exhibits:
(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
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<S> <C>
1 Underwriting Agreement, dated July 30, 1998, among Tribune Company, The
Learning Company and Smith Barney Inc.
4.1 Form of First Supplemental Indenture between Tribune Company and Bank
of Montreal Trust Company, as Trustee.
4.2 Form of Global Note
99.1 Form of Securities Loan Agreement between Tribune Company and Smith
Barney Inc.
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
TRIBUNE COMPANY
(Registrant)
Date: August 4, 1998 By: /s/ Donald C. Grenesko
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Name: Donald C. Grenesko
Title: Senior Vice President/
Finance and Administration
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EXHIBIT INDEX
Exhibit Number Description of Exhibit
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1 Underwriting Agreement, dated July 30, 1998,
among Tribune Company, The Learning Company and Smith
Barney Inc.
4.1 Form of First Supplemental Indenture between
Tribune Company and Bank of Montreal Trust Company, as
Trustee.
4.2 Form of Global Note
99.1 Form of Securities Loan Agreement between Tribune
Company and Smith Barney Inc.
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EXHIBIT 1
Tribune Company
4,600,000 DECS(SM) (Debt Exchangeable for Common Stock(SM)*1
6 1/4% Exchangeable Notes Due August 15, 2001
(Subject to Exchange into Shares of Common Stock,
par value $.01 per share, of The Learning Company, Inc.)
Underwriting Agreement
New York, New York
July 30, 1998
Salomon Smith Barney
Smith Barney Inc.
As Representative of the several Underwriters,
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
Tribune Company, a Delaware corporation (the "Company"), proposes to sell
to the several underwriters named in Schedule I hereto (the "Underwriters"), for
whom you (the "Representatives") are acting as representatives, an aggregate of
4,600,000 DECS (Debt Exchangeable for Common Stock) consisting of its 6 1/4%
Exchangeable Notes Due August 15, 2001 (the "Underwritten DECS"), to be issued
under an indenture dated as of January 1, 1997 between the Company and Bank of
Montreal Trust Company, as trustee (the "Trustee"), as supplemented to the date
hereof (as so supplemented, the "Indenture"). The Company also proposes to grant
to the Underwriters an option to purchase up to 610,796 additional DECS to cover
over-allotments (the "Option DECS"; the Option DECS, together with the
Underwritten DECS, being hereinafter called the "DECS"). At maturity (including
as a result of acceleration or otherwise), the DECS will be mandatorily
exchanged by the Company into shares of common stock, par value $.01 per share
(the "Learning Common
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* Plus an option to purchase from Tribune Company, up to 610,796 additional
DECS to cover over-allotments/
"DECS" and "Debt Exchangeable For Common Stock" are service marks of
Salomon Brothers Inc.
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Stock"), of The Learning Company, a Delaware corporation ("TLC") (or, at the
Company's option, the cash equivalent and/or such other consideration as
permitted or required by the terms of the DECS) at the exchange rate specified
in the Company Prospectus (as defined herein). To the extent there are no
additional Underwriters listed on Schedule I other than you, the term
Representatives as used herein shall mean you, as Underwriters, and the terms
Representatives and Underwriters shall mean either the singular or plural as the
context requires. Any reference herein to the Company Registration Statement, a
Company Preliminary Prospectus, the Company Prospectus, the TLC Registration
Statement, the TLC Preliminary Prospectus or the TLC Prospectus shall be deemed
to refer to and include the documents incorporated by reference therein pursuant
to Item 12 of Form S-3 which were filed under the Exchange Act on or before the
Effective Date of the Company Registration Statement or the TLC Registration
Statement or the issue date of such Company Preliminary Prospectus, Company
Prospectus, TLC Preliminary Prospectus or TLC Prospectus, as the case may be;
and any reference herein to the terms "amend", "amendment" or "supplement" with
respect to the Company Registration Statement, any Company Preliminary
Prospectus, the Company Prospectus, the TLC Registration Statement, the TLC
Preliminary Prospectus or the TLC Prospectus shall be deemed to refer to and
include the filing of any document under the Exchange Act after the Effective
Date of the Company Registration Statement or the TLC Registration Statement, as
the case may be, or the issue date of any Company Preliminary Prospectus or the
Company Prospectus or any TLC Preliminary Prospectus or the TLC Prospectus, as
the case may be, deemed to be incorporated therein by reference.
In connection with the foregoing, TLC has filed with the Commission a
post-effective amendment to registration statement with respect to 5,210,796
shares and a prospectus supplement thereto relating to 4,600,000 of such shares
(the "Underwritten Shares") of Learning Common Stock, in respect of the
Underwritten DECS plus an additional 610,796 shares (the "Option Shares" and,
together with the Underwritten Shares, the "Shares") of Learning Common Stock in
respect of the Option DECS, for delivery by the Company pursuant to the DECS,
which registration statement is referred to in Section 2 of this Agreement.
Certain terms used herein are defined in Section 18 hereof.
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each Underwriter and TLC as set
forth below in this Section 1.
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(a) The Company meets the requirements for use of Form S-3 under the
Act and has prepared and filed with the Commission a registration statement
(file number 333-18921) on Form S-3, including a related preliminary
prospectus, for the registration under the Act of the offering and sale of
the Company's debt securities. The Company may have filed one or more
amendments thereto, including a related preliminary prospectus, each of
which has previously been furnished to you. The Company will next file with
the Commission one of the following: either (1) prior to the Effective Date
of such registration statement, a further amendment to such registration
statement, (including the form of final prospectus), (2) after the
Effective Date of such registration statement, a final prospectus in
accordance with Rules 430A and 424(b), or (3) a final prospectus in
accordance with Rules 415 and 424(b). In the case of clause (2), the
Company has included in such registration statement, as amended at the
Effective Date, all information (other than Rule 430A Information) required
by the Act and the rules thereunder to be included in such registration
statement and the Company Prospectus. As filed, such amendment and form of
final prospectus, or such final prospectus, shall contain all Rule 430A
Information, together with all other such required information, and, except
to the extent the Representatives shall agree in writing to a modification,
shall be in all substantive respects in the form furnished to you prior to
the Execution Time or, to the extent not completed at the Execution Time,
shall contain only such specific additional information and other changes
(beyond that contained in the latest Company Preliminary Prospectus) as the
Company has advised you, prior to the Execution Time, will be included or
made therein. If the Company Registration Statement contains the
undertaking specified by Regulation S-K Item 512(a), the Company
Registration Statement, at the Execution Time, meets the requirements set
forth in Rule 415(a)(1)(x).
(b) (i) On the Effective Date, (ii) when the Company Prospectus is
first filed (if required) in accordance with Rule 424(b), (iii) when,
prior to the Closing Date (as defined herein), any amendment to the Company
Registration Statement becomes effective (including the filing of any
document incorporated by reference in the Company Registration Statement),
(iv) when any supplement to the Company Prospectus is filed with the
Commission and (v) on the Closing Date and on any date on which Option DECS
are purchased, if such date is not the Closing Date (a "settlement date"):
(x) the Company Registration Statement, as amended as of any such time, the
Company Prospectus, as amended or supplemented as of any such time,
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and the Indenture will comply in all material respects with the applicable
requirements of the Act, the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), and the Exchange Act and the respective rules
thereunder, (y) the Company Registration Statement, as amended as of any
such time, will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading and (z) the Company
Prospectus, as amended or supplemented as of any such time, will not
contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided,
however, that the Company makes no representations or warranties as to (x)
that part of the Company Registration Statement which shall constitute the
Statement of Eligibility (Form T-1) under the Trust Indenture Act of the
Trustee or (y) any information contained in or omitted from the Company
Registration Statement or the Company Prospectus or any amendment thereof
or supplement thereto in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of any Underwriter
through the Representatives specifically for use in connection with the
preparation of the Company Registration Statement and the Company
Prospectus.
(c) As of the date hereof and at the Closing Date:
(i) each of the Company and Chicago Tribune Company, Sentinel
Communications Company, Sun-Sentinel Company and Tribune
Broadcasting Company (individually, a "Designated Subsidiary" and
collectively, the "Designated Subsidiaries") has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of the jurisdiction in which it is
chartered or organized, with full corporate power and authority to
own its properties and conduct its business as described in the
Company Prospectus, and is duly qualified or licensed to do
business as a foreign corporation and is in good standing under the
laws of each jurisdiction where the character of the properties
owned or leased or the nature of the activities conducted by such
corporations, respectively, makes such qualifications or
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licensing necessary, and where the failure to be so qualified or
licensed might materially adversely affect the financial condition,
assets, operations or prospects of the Company and its subsidiaries
considered as one enterprise;
(ii) all the outstanding shares of capital stock of each
Designated Subsidiary have been duly and validly authorized and
issued and are fully paid and nonassessable, and, except as
otherwise set forth in the Company Prospectus, all outstanding
shares of capital stock of the Designated Subsidiaries are owned by
the Company either directly or through wholly owned subsidiaries
free and clear of any perfected security interest and any other
security interests, claims, liens or encumbrances;
(iii) the Indenture has been duly authorized, and prior to the
Closing will be executed and delivered and will constitute a legal,
valid and binding instrument enforceable against the Company in
accordance with its terms (subject, as to enforcement of remedies,
to applicable bankruptcy, reorganization, insolvency, moratorium or
other laws affecting creditors' rights generally from time to time
in effect and to general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or
at law)); the Indenture has been duly qualified under the Trust
Indenture Act; and the DECS have been duly authorized and, when
executed and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the purchasers thereof,
will constitute legal, valid and binding obligations of the
Company, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws of
general applicability relating to or affecting the enforcement of
creditors' rights or by the effect of general principles of equity
(regardless of whether enforceability is considered in a proceeding
in equity or at law)
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and will be entitled to the benefits of the Indenture;
(iv) the financial statements of the Company and its
consolidated subsidiaries included or incorporated by reference in
the Company Prospectus present fairly the financial position of the
Company and such consolidated subsidiaries as at the dates
indicated and the results of their operations for the periods
specified; except as stated therein, said financial statements have
been prepared in conformity with generally accepted accounting
principles applied on a consistent basis;
(v) to the best knowledge of the Company, there is no pending
or threatened action, suit or proceeding before any court or
governmental agency, authority or body or any arbitrator involving
the Company or any of the Designated Subsidiaries of a character
required to be disclosed in the Company Registration Statement
which is not adequately disclosed in the Company Prospectus, and
there is no franchise, contract or other document of a character
required to be described in the Company Registration Statement or
the Company Prospectus, or to be filed as an exhibit, which is not
described or filed as required;
(vi) this Agreement has been duly authorized, executed and
delivered by the Company;
(vii) no consent, approval, authorization or order of any
court or governmental agency or body, domestic or foreign, is
required for the consummation of the transactions contemplated
herein except such as have been obtained under the Act and such as
may be obtained under the blue sky laws of any jurisdiction in
connection with the sale of the DECS as contemplated by this
Agreement and such other approvals as have been obtained; and
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(viii) none of the execution of the Indenture, the issuance
and sale of the DECS, the consummation of any other of the
transactions herein contemplated or the fulfillment of the terms
hereof will conflict with, result in a breach of or constitute a
default under the charter or by-laws of the Company or the terms of
any material indenture or other material agreement or instrument to
which the Company or any of the Designated Subsidiaries is a party
or bound, or any material order, decree, rule or regulation known
to the Company to be applicable to the Company or any of its
Designated Subsidiaries of any court, regulatory body,
administrative agency, governmental body or arbitrator, domestic or
foreign, having jurisdiction over the Company or any of its
Designated Subsidiaries.
(d) The Company confirms as of the date hereof, and at the Closing
Date, that the Company is in compliance with all provisions of Section 1 of
Laws of Florida, Chapter 92-198, An Act Relating to Disclosure of Doing
Business with Cuba, and the Company further agrees that if it commences
engaging in business with the government of Cuba or with any person or
affiliate located in Cuba after the date the Company Registration Statement
becomes or has become effective with the Commission or with the Florida
Department of Banking and Finance (the "Department"), whichever date is
later, or if the information reported in the Company Prospectus, if any,
concerning the Company's business with Cuba or with any person or affiliate
located in Cuba changes in any material way, the Company will provide the
Department notice of such business or change, as appropriate, in a form
acceptable to the Department.
Any certificate signed by any officer of the Company and delivered to
the Representatives or counsel for the Underwriters at the closing of the
offering of the DECS shall be deemed a representation and warranty by the
Company, as to matters covered thereby, to each Underwriter.
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2. Representations and Warranties of TLC. TLC represents and warrants
to, and agrees with, each Underwriter and the Company as set forth below in this
Section 2.
(a) TLC Company meets the requirements for use of Form S-3 under the
Act and has prepared and filed with the Commission a registration statement
(file number 333-02385) on Form S-3, including a related preliminary
prospectus, for the registration under the Act of the offering and sale of
the Shares. TLC may have filed one or more amendments thereto, including a
related preliminary prospectus, each of which has previously been furnished
to you. TLC will next file with the Commission one of the following: either
(1) prior to the Effective Date of such registration statement, a further
amendment to such registration statement, (including the form of final
prospectus), (2) after the Effective Date of such registration statement, a
final prospectus in accordance with Rules 430A and 424(b), or (3) a final
prospectus in accordance with Rules 415 and 424(b). In the case of clause
(2), TLC has included in such registration statement, as amended at the TLC
Effective Date, all information (other than Rule 430A Information) required
by the Act and the rules thereunder to be included in such registration
statement and the TLC Prospectus. As filed, such amendment and form of final
prospectus, or such final prospectus, shall contain all Rule 430A
Information, together with all other such required information, and, except
to the extent the Representatives shall agree in writing to a modification,
shall be in all substantive respects in the form furnished to you prior to
the Execution Time or, to the extent not completed at the Execution Time,
shall contain only such specific additional information and other changes
(beyond that contained in the latest TLC Preliminary Prospectus) as the TLC
has advised you, prior to the Execution Time, will be included or made
therein. If the TLC Registration Statement contains the undertaking
specified by Regulation S-K Item 512(a), the TLC Registration Statement, at
the Execution Time, meets the requirements set forth in Rule 415(a)(1)(x).
(b) On the TLC Effective Date, the TLC Registration Statement did or
will, and when the TLC Prospectus is first filed (if required) in accordance
with Rule 424(b) and on the Closing Date and on any date on which Option
DECS are purchased, if such date is not the Closing Date (a "settlement
date"), the TLC
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Prospectus (and any supplements thereto) will, comply in all material
respects with the applicable requirements of the Act and the Exchange Act
and the respective rules thereunder; on the TLC Effective Date and at the
Execution Time, the TLC Registration Statement did not or will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading; and, on the TLC Effective Date, the TLC Prospectus,
if not filed pursuant to Rule 424(b), will not, and on the date of any
filing pursuant to Rule 424(b) and on the Closing Date and any settlement
date, the TLC Prospectus (together with any supplement thereto) will not,
include any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that TLC makes no representations or warranties as to the information
contained in or omitted from the TLC Registration Statement, or the TLC
Prospectus (or any supplement thereto) in reliance upon and in conformity
with information furnished herein or in writing to TLC (x) by or on behalf
of any Underwriter through the Representatives or (y) by the Company, in
either case, specifically for inclusion in the TLC Registration Statement or
the TLC Prospectus (or any supplement thereto).
(c) Each of TLC and its domestic "significant subsidiaries" within the
meaning of Regulation S-X as shown on Exhibit A (the "TLC Subsidiaries") has
been duly incorporated and is validly existing as a corporation in good
standing under the laws of the jurisdiction in which it is chartered or
organized with full corporate power and authority to own or lease, as the
case may be, and to operate its properties and conduct its business as
described in the TLC Prospectus, and is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each
jurisdiction which requires such qualification, and where the failure to be
so qualified or licensed might materially adversely affect the financial
condition, assets, operations or prospects of TLC and its subsidiaries
considered as one enterprise;
(d) all the outstanding shares of capital stock of each TLC Subsidiary
have been duly and validly authorized and issued and are fully paid and
nonassessable, and, except as otherwise set forth in the TLC Prospectus, all
outstanding shares of capital stock of the TLC Subsidiaries are owned by the
Company either directly or through wholly owned subsidiaries free and clear
of any perfected security interest or any
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other security interests, claims, liens or encumbrances other than security
interests held by certain banks;
(e) TLC's authorized equity capitalization is as set forth in the TLC
Prospectus; the capital stock of TLC conforms in all material respects to
the description thereof contained in the TLC Prospectus; the outstanding
shares of capital stock of TLC have been duly and validly authorized and
issued and are fully paid and nonassessable; the Shares are duly listed, and
admitted and authorized for trading on the NYSE; and the holders of
outstanding shares of capital stock of TLC are not entitled to preemptive or
other rights to subscribe for the Shares.
(f) There is no franchise, contract or other document of a character
required to be described in the TLC Registration Statement or TLC
Prospectus, or to be filed as an exhibit thereto, which is not described or
filed as required.
(g) This Agreement has been duly authorized, executed and delivered by
TLC.
(h) TLC is not and, after giving effect to the offering and sale of the
DECS and the Shares, will not be an "investment company" as defined in the
Investment Company Act of 1940, as amended.
(i) No consent, approval, authorization, filing with or order of any
court or governmental agency or body is required in connection with the
transactions contemplated herein in respect of TLC and the TLC Subsidiaries,
except such as have been obtained under the Act and such as may be required
under the blue sky laws of any jurisdiction in connection with the purchase
and distribution of the DECS by the Underwriters in the manner contemplated
herein and in the Company Prospectus.
(j) Neither the execution, delivery and performance of this Agreement
by TLC and the consummation of the transactions herein contemplated nor the
fulfillment of the terms hereof will conflict with, result in a breach or
violation or imposition of any lien, charge or encumbrance upon any property
or assets of TLC or any of its subsidiaries pursuant to, (i) the charter or
by-laws of TLC or any of its subsidiaries, (ii) the terms of any indenture,
contract, lease, mortgage, deed of trust, note
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agreement, loan agreement or other agreement, obligation, condition,
covenant or instrument to which TLC or any of its subsidiaries is a party or
bound or to which its or their property is subject, or (iii) any statute,
law, rule, regulation, judgment, order or decree applicable to TLC or any of
its subsidiaries of any court, regulatory body, administrative agency,
governmental body, arbitrator or other authority having jurisdiction over
TLC or any of its subsidiaries or any of its or their properties.
(k) The consolidated historical financial statements and schedules of
the TLC and its consolidated subsidiaries included in the TLC Prospectus and
the TLC Registration Statement present fairly in all material respects the
financial condition, results of operations and cash flows of TLC as of the
dates and for the periods indicated, comply as to form with the applicable
accounting requirements of the Act and have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as otherwise noted therein). The
selected consolidated financial data set forth under the caption "Selected
Consolidated Financial Data" in the TLC Prospectus and TLC Registration
Statement fairly present, on the basis stated in the TLC Prospectus and the
TLC Registration Statement, the information included therein.
(l) To the best knowledge of TLC, no action, suit or proceeding by or
before any court or governmental agency, authority or body or any arbitrator
involving TLC or any of its subsidiaries or its or their property is pending
or threatened that (i) could reasonably be expected to have a material
adverse effect on the performance of this Agreement or the consummation of
any of the transactions contemplated hereby or (ii) could reasonably be
expected to have a material adverse effect on the condition (financial or
otherwise), prospects, earnings, business or properties of TLC and its
subsidiaries, taken as a whole, whether or not arising from transactions in
the ordinary course of business, except as set forth in or contemplated in
the TLC Prospectus (exclusive of any supplement thereto).
(m) PricewaterhouseCoopers LLP, who have certified certain financial
statements of TLC and its consolidated subsidiaries and delivered their
report with respect to the audited consolidated financial statements and
schedules included in the TLC Prospectus, are independent public accountants
with respect to TLC within the meaning of the Act and the applicable
published rules and regulations thereunder.
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(n) TLC has not taken, directly or indirectly, any action designed to
or which has constituted or which might reasonably be expected to cause or
result, under the Exchange Act or otherwise, in stabilization or
manipulation of the price of any security of TLC to facilitate the sale or
resale of the DECS.
(o) TLC and its subsidiaries own, possess, license or have other rights
to use, on reasonable terms, all material patents, patent applications,
trade and service marks, trade and service mark registrations, trade names,
copyrights, licenses, inventions, trade secrets, technology, know-how and
other intellectual property (collectively, the "Intellectual Property")
necessary for the conduct of TLC's business as now conducted or as proposed
in the TLC Prospectus to be conducted. Except as set forth in the Prospectus
under the caption "Business--Proprietary Rights and Licenses," (a) there is
no material infringement by third parties of any such Intellectual Property;
(b) there is no pending or threatened material action, suit, proceeding or
claim by others challenging TLC's rights in or to any such Intellectual
Property, and TLC is unaware of any facts which would form a reasonable
basis for any such claim; (c) there is no pending or threatened material
action, suit, proceeding or claim by others challenging the validity or
scope of any such Intellectual Property, and TLC is unaware of any facts
which would form a reasonable basis for any such claim; (d) there is no
pending or threatened material action, suit, proceeding or claim by others
that TLC infringes or otherwise violates any patent, trademark, copyright,
trade secret or other proprietary rights of others, and TLC is unaware of
any other fact which would form a reasonable basis for any such claim, in
each case that might adversely affect the financial condition, assets,
operations or prospects of TLC and its subsidiairies considered as one
enterprise.
(p) The statements contained in the TLC Prospectus under the captions
"Risk Factors -- Protection of Proprietary Rights; Risk of Infringement
Claims" and "Business -- Proprietary Rights and Licenses," insofar as such
statements summarize legal matters, agreements, documents, or proceedings
discussed therein, are in all material respects accurate and fair summaries
of such legal matters, agreements, documents or proceedings.
Any certificate signed by any officer of TLC and delivered to the
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Representatives or counsel for the Underwriters in connection with the offering
of the DECS shall be deemed a representation and warranty by TLC, as to matters
covered thereby, to each Underwriter.
3. Purchase and Sale. (a) Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Company
agrees to sell to each Underwriter, and each Underwriter agrees, severally and
not jointly, to purchase from the Company, at a purchase price of $27.099375 per
DECS, plus accrued interest, if any, on the DECS, the number of DECS set forth
opposite such Underwriter's name in Schedule I hereto.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company hereby grants
an option to the several Underwriters to purchase, severally and not
jointly, up to 610,796 Option DECS at the same purchase price per DECS as
the Underwriters shall pay for the Underwritten DECS, plus accrued interest,
if any. Said option may be exercised only to cover over-allotments in the
sale of the Underwritten DECS by the Underwriters. Said option may be
exercised in whole or in part at any time (but not more than once) on or
before the 30th day after the date of the Company Prospectus upon written or
telegraphic notice by the Representatives to the Company setting forth the
number of Option DECS as to which the several Underwriters are exercising
the option and the settlement date. Delivery of certificates for the Option
DECS by the Company, and payment therefor to the Company, shall be made as
provided in Section 4 hereof. The number of Option DECS to be purchased by
each Underwriter shall be the same percentage of the total number of Option
DECS to be purchased by the several Underwriters as such Underwriter is
purchasing of the Underwritten DECS, subject to such adjustments as you in
your absolute discretion shall make to eliminate any fractional shares.
4. Delivery and Payment. Delivery of and payment for the Underwritten
DECS and the Option DECS (if the option provided for in Section 3(b) hereof
shall have been exercised on or before the third Business Day prior to the
Closing Date) shall be made at 10:00 AM, New York City time, on August 5, 1998,
or at such time on such later date not more than three Business Days after the
foregoing date as the Representatives shall designate, which date and time may
be postponed by agreement
<PAGE> 14
14
between the Representatives and the Company or as provided in Section 11 hereof
(such date and time of delivery and payment for the DECS being herein called the
"Closing Date"). Delivery of the DECS shall be made to the Representatives for
the respective accounts of the several Underwriters against payment by the
several Underwriters through the Representatives of the purchase price thereof
to or upon the order of the Company by wire transfer payable in same-day funds
to an account specified by the Company. Delivery of the Underwritten DECS and
the Option DECS shall be made through the facilities of The Depository Trust
Company unless the Representatives shall otherwise instruct.
The Company agrees to have the DECS available for inspection, checking
and packaging by the Representatives in New York, New York, not later than 1:00
p.m. on the business day prior to the Closing Date.
If the option provided for in Section 3(b) hereof is exercised after
the third Business Day prior to the Closing Date, the Company will deliver the
Option DECS to the Representatives on the date specified by the Representatives
(which shall be within three Business Days after exercise of said option) for
the respective accounts of the several Underwriters, against payment by the
several Underwriters through the Representatives of the purchase price thereof
to or upon the order of the Company by wire transfer payable in same-day funds
to an account specified by the Company. If settlement for the Option DECS occurs
after the Closing Date, the Company will deliver to the Representatives on the
settlement date for the Option DECS, and the obligation of the Underwriters to
purchase the Option DECS shall be conditioned upon receipt of, supplemental
opinions, certificates and letters confirming as of such date the opinions,
certificates and letters delivered on the Closing Date pursuant to Section 8
hereof.
5. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the DECS for sale to the public as set forth in
the Company Prospectus.
6. Agreements of the Company. The Company agrees with the several
Underwriters and TLC that:
<PAGE> 15
15
(a) The Company will use its reasonable best efforts to cause the
Company Registration Statement, if not effective at the Execution Time, and
any amendment thereof, to become effective. Prior to the termination of the
offering of the DECS, the Company will not file any amendment of the Company
Registration Statement or supplement to the Company Prospectus or any Rule
462(b) Company Registration Statement unless the Company has furnished you a
copy for your review prior to filing and, prior to the termination of the
offering of the DECS, will not file any such proposed amendment or
supplement to which you reasonably object. Subject to the foregoing
sentence, if the Company Registration Statement has become or becomes
effective pursuant to Rule 430A, or filing of the Company Prospectus is
otherwise required under Rule 424(b), the Company will cause the Company
Prospectus, properly completed, and any supplement thereto to be filed with
the Commission pursuant to the applicable paragraph of Rule 424(b) within
the time period prescribed and will provide evidence satisfactory to the
Representatives of such timely filing. The Company will promptly advise the
Representatives (1) when the Company Registration Statement, if not
effective at the Execution Time, shall have become effective, (2) when the
Company Prospectus, and any supplement thereto, shall have been filed (if
required) with the Commission pursuant to Rule 424(b) or when any Rule
462(b) Company Registration Statement shall have been filed with the
Commission, (3) when, prior to termination of the offering of the
Securities, any amendment to the Company Registration Statement shall have
been filed or become effective, (4) of any request by the Commission or its
staff for any amendment of the Company Registration Statement, or any Rule
462(b) Company Registration Statement, or for any supplement to the Company
Prospectus or for any additional information, (5) of the issuance by the
Commission of any stop order suspending the effectiveness of the Company
Registration Statement or the institution or threatening of any proceeding
for that purpose and (6) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the DECS for sale in
any jurisdiction or the institution or threatening of any proceeding for
such purpose. The Company will use its best efforts to prevent the issuance
of any such stop order or the suspension of any such qualification and, if
issued, to obtain as soon as possible the withdrawal thereof.
(b) If, at any time when a prospectus relating to the DECS is required
to be delivered under the Act, any event occurs as a result of which the
Company
<PAGE> 16
16
Prospectus as then supplemented would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which they were
made not misleading, or if it shall be necessary to amend the Company
Registration Statement or supplement the Company Prospectus to comply with
the Act or the Exchange Act or the respective rules thereunder, the Company
promptly will (1) notify the Representatives of such event, (2) prepare and
file with the Commission, subject to the second sentence of paragraph (a) of
this Section 6, an amendment or supplement which will correct such statement
or omission or effect such compliance and (3) supply any supplemented
Company Prospectus to you in such quantities as you may reasonably request.
(c) As soon as practicable, the Company will make generally available
to its security holders and to the Representatives an earnings statement or
statements (which need not be audited) of the Company and its subsidiaries
which will satisfy the provisions of Section 11(a) of the Act and Rule 158
under the Act.
(d) The Company will furnish to the Representatives and counsel for the
Underwriters, without charge, a copy of the Company Registration Statement
(without exhibits thereto) and, so long as delivery of a prospectus by an
Underwriter or dealer may be required by the Act, as many copies of each
Company Preliminary Prospectus and the Company Prospectus and any supplement
thereto as the Representatives may reasonably request. The Company will pay
the expenses of printing or other production of the Company Registration
Statement, each Company Preliminary Prospectus and the Company Prospectus.
(e) The Company will arrange, if necessary, for the qualification of
the DECS for sale under the laws of such jurisdictions as the
Representatives may designate, will maintain such qualifications in effect
so long as required for the distribution of the DECS and will pay any fee of
the National Association of Securities Dealers, Inc., in connection with any
review of the offering; provided that in no event shall the Company be
obligated to qualify to do business in any jurisdiction where it is not now
so qualified or to take any action that would subject it to service of
process in suits, other than those arising out of the offering or sale of
the DECS, in any jurisdiction where it is not now so subject.
<PAGE> 17
17
(f) The Company will not, without the prior written consent of Salomon
Smith Barney, for a period of 60 days following the Execution Time, (i)
offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase or otherwise transfer or dispose of, directly or
indirectly, (or enter into any transaction which is designed to, or might
reasonably be expected to, result in the disposition (whether by actual
disposition or effective economic disposition due to cash settlement or
otherwise) by the Company or any affiliate of the Company) or announce the
offering (or plans to make an offering) of, any shares of Learning Common
Stock or any securities convertible into or exercisable or exchangeable for
shares of Learning Common Stock or (ii) enter into any swap or other
agreement that transfers to another, in whole or in part, any of the
economic consequences of the ownership of shares of Learning Common Stock,
whether any such transaction described in clause (i) or (ii) above is to be
settled by delivery of shares of Learning Common Stock or such other
securities, in cash or otherwise.
(g) The Company will not take, directly or indirectly, any action
designed to or which has constituted or which might reasonably be expected
to cause or result, under the Exchange Act or otherwise, in stabilization or
manipulation of the price of any security of the Company or the Learning
Common Stock to facilitate the sale or resale of the DECS, in each case in
violation of applicable law.
(h) Until the Business Day following the Closing Date, the Company will
not, without the consent of Salomon Smith Barney, offer, sell or contract to
sell, or announce the offering of, any debt securities or warrants to
purchase debt securities covered by the Company Registration Statement or
any other registration statement filed under the Act.
7. Agreements of TLC. TLC agrees with the several Underwriters and the
Company that:
(a) TLC will use its reasonable best efforts to cause the TLC
Registration Statement, if not effective at the Execution Time, and any
amendment thereof, to become effective. Prior to the termination of the
offering of the DECS, TLC will not file any amendment of the TLC
Registration Statement or supplement to the TLC
<PAGE> 18
18
Prospectus or any Rule 462(b) TLC Registration Statement unless TLC has
furnished you a copy for your review prior to filing and will not file any
such proposed amendment or supplement to which you reasonably object.
Subject to the foregoing sentence, if the TLC Registration Statement has
become or becomes effective pursuant to Rule 430A, or filing of the TLC
Prospectus is otherwise required under Rule 424(b), TLC will cause the TLC
Prospectus, properly completed, and any supplement thereto to be filed with
the Commission pursuant to the applicable paragraph of Rule 424(b) within
the time period prescribed and will provide evidence satisfactory to the
Representatives of such timely filing. TLC will promptly advise the
Representatives (1) when the TLC Registration Statement, if not effective at
the Execution Time, shall have become effective, (2) when the TLC
Prospectus, and any supplement thereto, shall have been filed (if required)
with the Commission pursuant to Rule 424(b) or when any Rule 462(b) TLC
Registration Statement shall have been filed with the Commission, (3) when,
prior to termination of the offering of the DECS, any amendment to the TLC
Registration Statement shall have been filed or become effective, (4) of any
request by the Commission or its staff for any amendment of the TLC
Registration Statement, or any Rule 462(b) TLC Registration Statement, or
for any supplement to the TLC Prospectus or for any additional information,
(5) of the issuance by the Commission of any stop order suspending the
effectiveness of the TLC Registration Statement or the institution or
threatening of any proceeding for that purpose and (6) of the receipt by TLC
of any notification with respect to the suspension of the qualification of
the Shares for sale in any jurisdiction or the institution or threatening of
any proceeding for such purpose. TLC will use its best efforts to prevent
the issuance of any such stop order or the suspension of any such
qualification and, if issued, to obtain as soon as possible the withdrawal
thereof.
(b) If, at any time when a prospectus relating to the DECS is required
to be delivered under the Act, any event occurs as a result of which the TLC
Prospectus as then supplemented would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which they were
made not misleading, or if it shall be necessary to amend the TLC
Registration Statement or supplement the TLC Prospectus to comply with the
Act or the Exchange Act or the respective rules thereunder, TLC promptly
will (1) notify the Representatives of such event, (2) prepare and file with
the Commission, subject to the second sentence of paragraph (a) of this
Section 7, an
<PAGE> 19
19
amendment or supplement which will correct such statement or omission or
effect such compliance and (3) supply any supplemented TLC Prospectus to you
in such quantities as you may reasonably request.
(c) As soon as practicable, TLC Company will make generally available
to its security holders and to the Representatives an earnings statement or
statements (which need not be audited) of TLC and its subsidiaries which
will satisfy the provisions of Section 11(a) of the Act and Rule 158 under
the Act.
(d) TLC will furnish to the Representatives and counsel for the
Underwriters, without charge, a copy of the TLC Registration Statement
(without exhibits thereto) and, so long as delivery of a prospectus by an
Underwriter or dealer may be required by the Act, as many copies of each TLC
Preliminary Prospectus and the TLC Prospectus and any supplement thereto as
the Representatives may reasonably request. TLC will pay the expenses of
printing or other production of the TLC Registration Statement, the TLC
Preliminary Prospectus and the TLC Prospectus.
(e) TLC will cooperate with the Company for purposes of the
qualification of the DECS and the Shares for sale under the laws of such
jurisdictions as the Representatives may designate and will maintain such
qualifications in effect so long as required for the distribution of the
DECS and the Shares; provided that in no event shall TLC be obligated to
qualify to do business in any jurisdiction where it is not now so qualified
or to take any action that would subject it to service of process in suits,
other than those arising out of the offering or sale of the DECS, in any
jurisdiction where it is not now so subject.
(f) TLC will not, without the prior written consent of Salomon Smith
Barney, for a period of 60 days following the Execution Time, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant
to purchase or otherwise transfer or dispose of, directly or indirectly, (or
enter into any transaction which is designed to, or might reasonably be
expected to, result in the disposition (whether by actual disposition or
effective economic disposition due to cash settlement or otherwise) by TLC
or any affiliate of TLC) or announce the offering (or plans to make an
offering)
<PAGE> 20
20
of, any shares of Learning Common Stock or any securities convertible into
or exercisable or exchangeable for shares of Learning Common Stock; (ii)
enter into any swap or other agreement that transfers to another, in whole
or in part, any of the economic consequences of the ownership of shares of
Learning Common Stock; or (iii) waive any rights TLC has against any entity
which is an affiliate of TLC which prevents such entity from effecting a
disposition or transfer (whether by actual disposition or effective economic
disposition due to cash settlement or otherwise) of the ownership of
Learning Common Stock, or waive any such rights against any entity in
respect of any underwritten offering, whether any such transaction described
in clause (i), (ii) or (iii) above is to be settled by delivery of shares of
Learning Common Stock or such other securities, in cash or otherwise;
provided, however, that (1) TLC may issue shares of Learning Common Stock
directly to shareholders of companies acquired by TLC as consideration for
the acquisition, and in connection therewith announce such issuance or
contemplated issuance; (2) TLC may sell warrants to purchase equity
securities in offerings made pursuant to Canadian law solely to non-U.S.
residents so long as such warrants (or such other securities into which such
warrants are exchangeable or convertible) are not available to be resold in
the United States or to U.S. residents (and TLC takes no action to permit
such resale) until a date that is at least 60 days from the Execution Time;
(3) TLC may exchange the 5 1/2% Senior Convertible Notes due 2000 of TLC
which are outstanding as of the Execution Time by issuing shares of Learning
Common Stock provided such shares are subject to the foregoing restrictions
for the remainder of the 60 day period; (4) TLC may issue shares of Learning
Common Stock pursuant to any stock option plan, equity incentive plan, stock
purchase plan or dividend reinvestment plan of TLC in effect at the
Execution Time or pursuant to any warrant or other equity security
convertible into or exercisable or exchangeable for Learning Common Stock
outstanding at the Execution Time; and (5) in connection with an acquisition
by TLC or any affiliate of TLC, TLC may announce that to finance such
acquisition, TLC is reviewing a number of alternatives, including a debt or
equity offering by TLC.
(g) TLC will take such action as may be reasonably necessary to comply
with the rules and regulations of the NYSE in respect of the offering and
listing of the Shares in connection with the DECS.
<PAGE> 21
21
8. Conditions to the Obligations of the Underwriters. The obligations
of the Underwriters to purchase the Underwritten DECS and the Option DECS,
as the case may be, shall be subject to the accuracy of the representations
and warranties on the part of the Company and TLC contained herein as of the
Execution Time, the Closing Date and any settlement date pursuant to Section
4 hereof, to the accuracy of the statements of the Company and TLC made in
any certificates pursuant to the provisions hereof, to the performance by
the Company and TLC in all material respects of their respective obligations
hereunder and to the following additional conditions:
(a) If either of the Company Registration Statement or the TLC
Registration Statement has not become effective prior to the Execution Time,
unless the Representatives agree in writing to a later time, the Company
Registration Statement or the TLC Registration Statement, as the case may
be, will become effective not later than (i) 6:00PM New York City time on
the date of determination of the public offering price, if such
determination occurred at or prior to 3:00PM New York City time on such date
or (ii) 9:30 AM on the Business Day following the day on which the public
offering price was determined, if such determination occurred after 3:00PM
New York City time on such date; if filing of the Company Prospectus or the
TLC Prospectus, or any supplements thereto, is required pursuant to Rule
424(b), the Company Prospectus or the TLC Prospectus, and any such
supplements, will be filed in the manner and within the time period required
by Rule 424(b); and no stop order suspending the effectiveness of the
Company Registration Statement or the TLC Registration Statement shall have
been issued and no proceedings for that purpose shall have been instituted
or threatened.
(b) The Company shall have furnished to the Representatives the opinion
of Sidley & Austin, counsel for the Company, dated the Closing Date and
addressed to the Representatives, to the effect that:
(i) each of the Company and the Designated Subsidiaries has
been duly incorporated and is validly existing as a corporation in
good standing under the laws of the jurisdiction in which it is
chartered or organized, with full corporate power and authority to
own or lease, as the case may be, and to operate its properties and
conduct its business as described in the Company
<PAGE> 22
22
Prospectus, and is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each
jurisdiction which requires such qualification, except where the
failure to be so qualified or in good standing would not have a
material adverse affect on the Company and its consolidated
subsidiaries considered as one enterprise;
(ii) all the outstanding shares of capital stock of each
Designated Subsidiary have been duly and validly authorized and
issued and are fully paid and nonassessable, and, to the knowledge
of such counsel, except as otherwise set forth in the Company
Prospectus, all outstanding shares of capital stock of the
Subsidiaries are owned by the Company either directly or through
wholly owned subsidiaries free and clear of any perfected security
interest, claim, lien or encumbrance;
(iii) the DECS and the Indenture conform in all material
respects to the description thereof contained in the Company
Prospectus, and the holders of outstanding shares of capital stock
of the Company do not have pre-emptive rights to subscribe for the
DECS;
(iv) the Indenture has been duly authorized, executed and
delivered by the Company, and constitutes a legal, valid and
binding instrument enforceable against the Company in accordance
with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws of
general applicability relating to or affecting the enforcement of
creditors' rights or by the effect of general principles of equity
(regardless of whether enforceability is considered in a proceeding
in equity or at law); the Indenture has been duly qualified under
the Trust Indenture Act; and the DECS have been duly authorized
and, when executed and authenticated in accordance with the
provisions of the Indenture and the procedures adopted by the Board
of Directors of the Company and the Special Committee thereof and
delivered to and paid for by the Underwriters pursuant to this
Agreement, will constitute legal, valid and binding obligations of
the Company, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws of
general applicability relating to or affecting the enforcement of
creditors'
<PAGE> 23
23
rights or by the effect of general principles of equity (regardless
of whether enforceability is considered in a proceeding in equity
or at law) and will be entitled to the benefits of the Indenture;
(v) to the knowledge of such counsel, there is no pending or
threatened action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving
the Company or any of its Designated Subsidiaries or its or their
property of a character required to be disclosed in the Company
Registration Statement which is not disclosed in the Company
Prospectus as so required, and to the knowledge of such counsel,
there is no franchise, contract or other document of a character
required to be described in the Company Registration Statement or
Company Prospectus, or to be filed as an exhibit thereto, which is
not described or filed as required; and the statement included or
incorporated in the Company Prospectus with respect to any such
action, suit, proceeding, franchise, contract or other document
fairly summarize the matters therein described;
(vi) the Company Registration Statement has become effective
under the Act; any required filing of the Company Prospectus, and
any supplements thereto, pursuant to Rule 424(b) has been made in
the manner and within the time period required by Rule 424(b); to
the knowledge of such counsel, no stop order suspending the
effectiveness of the Company Registration Statement has been issued
and no proceedings for that purpose have been instituted or
threatened; and the Company Registration Statement and the Company
Prospectus as of their respective effective or issue dates (other
than (i) the Form T-1 or (ii) the financial statements, financial
data and supporting schedules and other financial information
included or incorporated by reference therein, as to which such
counsel need express no opinion) complied as to form in all
material respects with the applicable requirements of the Act and
the Exchange Act and the respective rules thereunder; and nothing
has come to the attention of such counsel that causes such counsel
to believe that on the Effective Date or at the Execution Time the
Company Registration Statement contains or contained any untrue
statement of a material fact or omitted or omits to state any
material fact required to be stated therein or necessary to make
the statements therein not misleading or
<PAGE> 24
24
that the Company Prospectus as of its date and on the Closing Date
includes any untrue statement of a material fact or omitted or
omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading (in each case, other than (i) the Form T-1 or
(ii) the financial statements, financial data and supporting
schedules and other financial information included or incorporated
by reference therein, as to which such counsel need express no
belief);
(vii) this Agreement has been duly authorized, executed and
delivered by the Company;
(viii) the Company is not and, after giving effect to the
offering and sale of the DECS and the application of the proceeds
thereof as described in the Company Prospectus, will not be an
"investment company" as defined in the Investment Company Act of
1940, as amended;
(ix) no consent, approval, authorization, filing with or order
of any court or governmental agency or body is required to be made
or obtained by the Company in connection with the transactions
contemplated herein, except such as have been obtained under the
Act and such as may be required under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of
the DECS by the Underwriters in the manner contemplated in this
Agreement and in the Company Prospectus and such other approvals
(specified in such opinion) as have been obtained; and
(x) none of the execution of the Indenture, the issuance and
sale of the DECS, the consummation of any other of the transactions
herein contemplated nor the fulfillment of the terms hereof result
in a breach or constitute a default under (i) the charter or
by-laws of the Company, (ii) the terms of any indenture or other
material agreement or obligation known to such counsel to which the
Company or any of its Designated Subsidiaries is a party or bound,
or (iii) any statute, law, rule, regulation, judgment, order or
decree known to such counsel to be applicable to the Company or any
of its Designated Subsidiaries of any court, regulatory body,
administrative agency, governmental body, arbitrator or other
authority having jurisdiction over the
<PAGE> 25
25
Company or any of its Designated Subsidiaries or any of its or
their properties.
In rendering such opinion, such counsel may limit its opinion to
matters involving the application of the laws the States of Illinois and
New York, the General Corporation Law of the State of Delaware and the
Federal laws of the United States and as to matters of fact, to the
extent they deem proper, on certificates of responsible officers of the
Company and public officials. References to the Company Prospectus in
this paragraph (b) include any supplements thereto at the Closing Date.
The opinion of such counsel shall be rendered to the Underwriters at the
request of the Company and shall so state therein.
(c) TLC shall have furnished to the Representatives the opinion of
Hale and Dorr LLP, counsel for TLC, dated the Closing Date, to the
effect that:
(i) TLC has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the jurisdiction
in which it is chartered or organized, with full corporate power
and authority to own or lease, as the case may be, and to operate
its properties and conduct its business as described in the TLC
Prospectus;
(ii) the TLC Registration Statement has become effective under
the Act; any required filing of the TLC Prospectus, and any
supplements thereto, pursuant to Rule 424(b) has been made in the
manner and within the time period required by Rule 424(b); to the
knowledge of such counsel, no stop order suspending the
effectiveness of the TLC Registration Statement has been issued, no
proceedings for that purpose have been instituted or threatened and
the TLC Registration Statement and the TLC Prospectus as of their
respective effective or issuance dates (other than the financial
statements, financial data, proforma data, supporting schedules and
other financial information contained or
<PAGE> 26
26
incorporated by reference therein, as to which such counsel need
express no opinion) complied as to form in all material respects
with the applicable requirements of the Act and the Exchange Act
and the respective rules thereunder;
(iii) the capital stock of TLC conforms in all material
respects to the description thereof contained in the TLC
Prospectus;
(iv) this Agreement has been duly authorized, executed and
delivered by TLC;
(v) TLC is not and, after giving effect to the offering and
sale of the DECS and the Shares, will not be an "investment
company" as defined in the Investment Company Act of 1940, as
amended;
(vi) no consent, approval, authorization, filing with or order
of any court or governmental agency or body is required in
connection with the transactions contemplated herein, except such
as have been obtained under the Act and such as may be required
under the blue sky laws of any jurisdiction in connection with the
purchase and distribution of the DECS by the Underwriters in the
manner contemplated in this Agreement and in the Company Prospectus
and such other approvals (specified in such opinion) as have been
obtained;
(vii) the consummation of any of the transactions herein
contemplated by TLC and the fulfillment of the terms hereof by TLC
will not result in a breach of or constitute a default under (i)
the charter or by-laws of TLC or the TLC Subsidiaries, (ii) the
terms of any indenture, contract, lease, mortgage, deed of trust,
note agreement, loan agreement or other agreement, obligation,
condition, covenant or instrument
<PAGE> 27
27
to which TLC or the TLC Subsidiaries is a party or bound or to
which its or their property is subject and that is filed as an
exhibit to TLC's Annual Report on Form 10-K for the year ended
January 28, 1998, or (iii) any statute, law, rule, regulation,
judgment, order or decree applicable to TLC or the TLC Subsidiaries
of any court, regulatory body, administrative agency, governmental
body, arbitrator or other authority having jurisdiction over TLC or
the TLC Subsidiaries or any of its or their properties; and
(viii) The opinion will also state that nothing has come to
the attention of such counsel that causes it to believe that on the
Effective Date or at the Execution Time the TLC Registration
Statement contains or contained any untrue statement of a material
fact or omitted or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading or that the TLC Prospectus as of its date and on the
Closing Date includes any untrue statement of a material fact or
omitted or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading (in each case, other than the
financial statements, financial data, proforma data, supporting
schedules and other financial information contained or incorporated
by reference therein, as to which such counsel need express no
belief); provided, however, that such counsel need express no
opinion with respect to information contained in documents filed by
Broderbund Software Inc. with the Commission which is incorporated
by reference into to TLC Prospectus.
In rendering such opinion, such counsel may rely limit its opinion to
matters involving the application of the laws of the Commonwealth of
Massachusetts, the State of New York, the Federal laws of the United States
and the General Corporation Law of the State of Delaware and (B) as to
matters of fact, to the extent they deem proper, on certificates of
responsible
<PAGE> 28
28
officers of TLC and public officials. References to the Company Prospectus
in this paragraph (c) include any supplements thereto at the Closing Date.
The opinion of such counsel shall be rendered to the Underwriters at the
request of TLC and shall so state therein.
(d) TLC shall have furnished to the Representatives the opinion of Neal
S. Winneg, general counsel for TLC, dated the Closing Date, to the effect
that:
(i) each of TLC and the TLC Subsidiaries has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of the jurisdiction in which it is
chartered or organized, with full corporate power and authority to
own or lease, as the case may be, and to operate its properties and
conduct its business as described in the TLC Prospectus;
(ii) all the outstanding shares of capital stock of each TLC
Subsidiary have been duly and validly authorized and issued and are
fully paid and nonassessable, and, except for non-voting
exchangeable shares of Softkey Software Products, Inc. described in
the TLC Prospectus, and as otherwise set forth in the TLC
Prospectus, to the knowledge of such counsel, all outstanding
shares of capital stock of the TLC Subsidiaries are owned by TLC
either directly or through wholly owned subsidiaries free and clear
of any perfected security interest and, to the knowledge of such
counsel after due inquiry, any other security interest, claim, lien
or encumbrance, other than security interests held by certain
banks;
(iii) TLC's authorized equity capitalization
<PAGE> 29
29
is as set forth in the TLC Prospectus; the outstanding shares of
capital stock of TLC have been duly and validly authorized and
issued and are fully paid and nonassessable; the Shares are duly
listed, and admitted and authorized for trading on the NYSE; and to
the knowledge of such counsel, the holders of outstanding shares of
capital stock of the Company are not entitled to preemptive or
other rights to subscribe for the Shares;
(iv) to the knowledge of such counsel, there is no pending or
threatened action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving
TLC or any subsidiaries of TLC or its or their property of a
character required to be disclosed in the TLC Registration
Statement which is not adequately disclosed in the TLC Prospectus,
and to the knowledge of such counsel; after due inquiry, there is
no franchise, contract or other document of a character required to
be described in the TLC Registration Statement or TLC Prospectus,
or to be filed as an exhibit thereto, which is not described or
filed as required; and the statement included or incorporated in
the TLC Prospectus with respect to any such action, suit,
proceeding, franchise, contract or other document fairly summarize
the matters therein described;
(v) to such counsel's knowledge, there are no persons other
than the Company with registration or other similar rights to have
any securities of TLC registered pursuant to the TLC Registration
Statement.
<PAGE> 30
30
(vi) The opinion will also state that nothing has come to the
attention of such counsel that causes it to believe that on the
Effective Date or at the Execution Time the TLC Registration
Statement contains or contained any untrue statement of a material
fact or omitted or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading or that the TLC Prospectus (including information
contained in documents filed by Broderbund Software Inc. with the
Commission which is incorporated by reference into the TLC
Prospectus) as of its date and on the Closing Date includes any
untrue statement of a material fact or omitted or omits to state a
material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading (in each case, other than the financial statements,
financial data, proforma data, supporting schedules and other
financial information contained or incorporated by reference
therein, as to which such counsel need express no belief).
In rendering such opinion, such counsel may rely limit its opinion to
matters involving the application of the laws of the Commonwealth of
Massachusetts, the Federal laws of the United States and the General
Corporation Law of the State of Delaware and (B) as to matters of fact, to
the extent they deem proper, on certificates of responsible officers of TLC
and public officials. References to the Company Prospectus in this paragraph
(d) include any supplements thereto at the Closing Date. The opinion of such
counsel shall be rendered to the Underwriters at the request of TLC and
shall so state therein.
(e) The Representatives shall have received from Mayer, Brown & Platt,
counsel for the Underwriters, such opinion or opinions, dated the Closing
Date and addressed to the Representatives, with respect to the issuance and
sale of the
<PAGE> 31
31
Securities, the Company Registration Statement, the Company Prospectus
(together with any supplement thereto) and other related matters as the
Representatives may reasonably require, and the Company shall have furnished
to such counsel such documents as they request for the purpose of enabling
them to pass upon such matters. The opinion or opinions of such counsel
shall be rendered to the Underwriters at the request of the Company and
shall so state therein.
(f) The Company shall have furnished to the Representatives a
certificate of the Company, signed by the Chairman of the Board or the
President or any Vice President and the principal financial or accounting
officer of the Company, dated the Closing Date, to the effect that the
signers of such certificate have carefully examined the Company Registration
Statement, the Company Prospectus, any supplements to the Company Prospectus
and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects on and as
of the Closing Date with the same effect as if made on the Closing
Date and the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or
satisfied at or prior to the Closing Date;
(ii) no stop order suspending the effectiveness of the
Company Registration Statement has been issued and no proceedings
for that purpose have been instituted or, to the Company's
knowledge, threatened; and
(iii) since the date of the most recent financial statements
included in the Company Prospectus as of its issue date, there has
been no material adverse change, or any development involving a
prospective material adverse change, in the condition (financial or
otherwise), earnings, business or properties of the Company and its
subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set
forth in or contemplated in the Company Prospectus.
(g) the DECS are authorized for listing, subject to official notice of
issuance, on the New York Stock Exchange;
<PAGE> 32
32
(h) TLC shall have furnished to the Representatives a certificate of
TLC, signed by the Chairman of the Board or the President and the principal
financial or accounting officer of TLC, dated the Closing Date, to the
effect that the signers of such certificate have carefully examined the TLC
Registration Statement, the TLC Prospectus, any supplements to the TLC
Prospectus and this Agreement and that:
(i) the representations and warranties of TLC in this
Agreement are true and correct in all material respects on and as
of the Closing Date with the same effect as if made on the Closing
Date and TLC has complied with all the agreements and satisfied all
the conditions on its part to be performed or satisfied at or prior
to the Closing Date;
(ii) no stop order suspending the effectiveness of the TLC
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to TLC's knowledge, threatened;
and
(iii) since the date of the most recent financial statements
included in the TLC Prospectus (exclusive of any supplement
thereto), there has been no material adverse change, or any
development involving a prospective material adverse change, in the
condition (financial or otherwise), earnings, business or
properties of TLC and its subsidiaries, taken as a whole, whether
or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the TLC
Prospectus (exclusive of any supplement thereto).
(i) At the Execution Time and at the Closing Date,
PricewaterhouseCoopers LLP shall have furnished to the Representatives
letters, dated respectively as of the Execution Time and as of the Closing
Date, in form and substance satisfactory to the Representatives, confirming
that they are independent accountants within the meaning of the Act and the
Exchange Act and the respective applicable published rules and regulations
thereunder and that they have performed a review of the unaudited interim
financial information of the Company for the three-month period ended March
28, 1998, and as at March 28, 1998 in accordance with Statement on
Accounting Standards No. 71, and stating in effect that:
<PAGE> 33
33
(i) in their opinion the audited financial statements and
financial statement schedules and pro forma financial statements
included or incorporated in the Company Registration Statement and
the Company Prospectus and reported on by them comply as to form in
all material respects with the applicable accounting requirements
of the Act and the Exchange Act and the related published rules and
regulations;
(ii) on the basis of a reading of the latest unaudited
financial statements made available by the Company and its
subsidiaries; their limited review, in accordance with standards
established under Statement on Auditing Standards No. 71, of the
unaudited interim financial information for the three-month period
ended March 29, 1998, and as at March 29, 1998, as indicated in
their Form 10-Q for the quarter ended March 29, 1998, incorporated
in the Company Registration Statement and the Company Prospectus;
carrying out certain specified procedures (but not an examination
in accordance with generally accepted auditing standards) which
would not necessarily reveal matters of significance with respect
to the comments set forth in such letter; a reading of the minutes
of the meetings of the stockholders and Board of Directors of the
Company and the Subsidiaries; and inquiries of certain officials of
the Company who have responsibility for financial and accounting
matters of the Company and its subsidiaries as to transactions and
events subsequent to December 28, 1997, nothing came to their
attention which caused them to believe that:
(1) any unaudited financial statements included or
incorporated in the Company Registration Statement and the
Company Prospectus do not comply as to form in all material
respects with applicable accounting requirements of the Act
and with the published rules and regulations of the
Commission with respect to financial statements included or
incorporated in quarterly reports on Form 10-Q under the
Exchange Act; and said unaudited financial statements are
not in conformity with generally accepted accounting
principles applied on a basis substantially consistent with
that of the audited financial statements included or
incorporated in the Company Registration Statement and the
Company Prospectus;
<PAGE> 34
34
(2) with respect to the period subsequent to March 29,
1998, there were any changes, at a specified date not more
than five days prior to the date of the letter, in the
stock (the sum of common stock and paid-in capital, net of
treasury stock) or long-term debt of the Company and its
consolidated subsidiaries or any decreases in consolidated
total assets, net current assets (working capital) or
stockholders' investment as compared with the amounts shown
on the March 29, 1998 consolidated balance sheet included
or incorporated in the Company Registration Statement and
the Company Prospectus, or for the period from March 29,
1998 to such specified date there were any decreases, as
compared with the corresponding period in the preceding
year in consolidated operating revenues, operating profit,
income before income taxes or in the total or per-share
amounts of net income, except in all instances for changes
or decreases set forth in such letter, in which case the
letter shall be accompanied by an explanation by the
Company as to the significance thereof unless said
explanation is not deemed necessary by the Representatives;
(3) the information included in the Company
Registration Statement and Company Prospectus in response
to Regulation S-K, Item 301 (Selected Financial Data), Item
302 (Supplementary Financial Information), Item 402
(Executive Compensation) and Item 503(d) (Ratio of Earnings
to Fixed Charges) is not in conformity with the applicable
disclosure requirements of Regulation S-K; and
(4) with regard to the Company and its consolidated
subsidiaries, the amounts included in any unaudited
"capsule" information included or incorporated by reference
in the Company Registration Statement or the Company
Prospectus do not agree with the corresponding amounts in
the audited or unaudited consolidated financial statement
from which such amounts were derived or were not determined
on a basis substantially consistent with that of the
corresponding amounts in the audited financial statement
included or incorporated by reference in the Company
Registration Statement and
<PAGE> 35
35
the Company Prospectus;
(iii) they have performed certain other specified procedures
as a result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company and its subsidiaries) set
forth or incorporated by reference in the Company Registration
Statement and the Company Prospectus, including the information
included or incorporated in Items 1, 6 and 7 of the Company's
Annual Report on Form 10-K, incorporated in the Company
Registration Statement and the Company Prospectus, and the
information included in the "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included or
incorporated in any of the Company's Quarterly Reports on Form
10-Q, incorporated in the Company Registration Statement and the
Company Prospectus, agrees with the accounting records of the
Company and its subsidiaries, excluding any questions of legal
interpretation; and
(iv) if unaudited pro forma financial statements are included
or incorporated by reference in the Company Registration Statement
and the Company Prospectus, on the basis of a reading of the
unaudited pro forma financial statements included or incorporated
in the Company Registration Statement and the Company Prospectus
(the "pro forma financial statements"); carrying out certain
specified procedures; inquiries of certain officials of the Company
and the acquired company who have responsibility for financial and
accounting matters; and proving the arithmetic accuracy of the
application of the pro forma adjustments to the historical amounts
in the pro forma financial statements, nothing came to their
attention which caused them to believe that the pro forma financial
statements do not comply as to form in all material respects with
the applicable accounting requirements of Rule 11-02 of Regulation
S-X or that the pro forma adjustments have not been properly
applied to the historical amounts in the compilation of such
statements.
<PAGE> 36
36
References to the Company Prospectus in this paragraph (i) include
any supplement thereto at the date of the letter.
(j) At the Execution Time and at the Closing Date,
PricewaterhouseCoopers LLP shall have furnished to the Representatives
letters, dated respectively as of the Execution Time and as of the Closing
Date, in form and substance satisfactory to the Representatives, confirming
that they are independent accountants within the meaning of the Act and the
Exchange Act and the respective applicable published rules and regulations
thereunder and that they have performed a review of the unaudited interim
financial information of TLC for the three-month period ended April 4, 1998,
and as at April 4, 1998 in accordance with Statement on Accounting Standards
No. 71, and stating in effect that:
(i) in their opinion the audited financial statements and
financial statement schedules and pro forma financial statements
included or incorporated in the TLC Registration Statement and the
TLC Prospectus and reported on by them comply as to form in all
material respects with the applicable accounting requirements of
the Act and the Exchange Act and the related published rules and
regulations;
(ii) on the basis of a reading of the latest unaudited
financial statements made available by TLC and its subsidiaries;
their limited review, in accordance with standards established
under Statement on Auditing Standards No. 71, of the unaudited
interim financial information for the three-month period ended
April 4, 1998, and as at April 4, 1998, as indicated in their
report dated May 12, 1998, incorporated in the TLC Registration
Statement and the TLC Prospectus; carrying out certain specified
procedures (but not an examination in accordance with generally
accepted auditing standards) which would not necessarily reveal
matters of significance with respect to the comments set forth in
such letter; a reading of the minutes of the meetings of the
stockholders, directors and committees of TLC and the TLC
Subsidiaries; and inquiries of certain officials of TLC who have
responsibility for financial and accounting matters of TLC and its
subsidiaries as to transactions and events subsequent to January 3,
1998, nothing came to their attention which caused them to believe
that:
<PAGE> 37
37
(1) any unaudited financial statements included or
incorporated in the TLC Registration Statement and the TLC
Prospectus do not comply as to form in all material respects
with applicable accounting requirements of the Act and with
the published rules and regulations of the Commission with
respect to financial statements included or incorporated in
quarterly reports on Form 10-Q under the Exchange Act; and
said unaudited financial statements are not in conformity
with generally accepted accounting principles applied on a
basis substantially consistent with that of the audited
financial statements included or incorporated in the TLC
Registration Statement and the TLC Prospectus;
(2) with respect to the period subsequent to April 4,
1998, there were any changes, at a specified date not more
than five days prior to the date of the letter, in
consolidated net sales or increase in total or per-share
amounts of loss before extraordinary items of net loss as
compared with the amounts shown on the April 4, 1998
consolidated balance sheet included or incorporated in the
TLC Registration Statement and the TLC Prospectus, except in
all instances for changes or decreases set forth in such
letter, in which case the letter shall be accompanied by an
explanation by TLC as to the significance thereof unless
said explanation is not deemed necessary by the
Representatives;
(3) the information included in the TLC Registration
Statement and TLC Prospectus in response to Regulation S-K,
Item 301 (Selected Financial Data), Item 302 (Supplementary
Financial Information), Item 402 (Executive Compensation)
and Item 503(d) (Ratio of Earnings to Fixed Charges) is not
in conformity with the applicable disclosure requirements of
Regulation S-K; and
(4) with regard to the TLC and its consolidated
subsidiaries, the amounts included in any unaudited
"capsule" information included or incorporated by reference
in the TLC Registration Statement or the TLC Prospectus do
not agree with the corresponding amounts in the audited or
<PAGE> 38
38
unaudited consolidated financial statement from which such amounts
were derived or were not determined on a basis substantially
consistent with that of the corresponding amounts in the audited
financial statement included or incorporated by reference in the
TLC Registration Statement and the TLC Prospectus;
(iii) they have performed certain other specified procedures
as a result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of TLC and its subsidiaries) set forth
in the TLC Registration Statement and the TLC Prospectus, including
the information the information included or incorporated in TLC's
Annual Report on Form 10-K, incorporated in the TLC Registration
Statement and the TLC Prospectus, and the information included in
the "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included or incorporated in the
Company's Quarterly Reports on Form 10-Q, incorporated in the TLC
Registration Statement and the TLC Prospectus, agrees with the
accounting records of TLC and its subsidiaries, excluding any
questions of legal interpretation; and
(iv) on the basis of a reading of the unaudited pro forma
financial statements included or incorporated in the TLC
Registration Statement and the TLC Prospectus (the "TLC pro forma
financial statements"); carrying out certain specified procedures;
inquiries of certain officials of TLC who have responsibility for
financial and accounting matters; and proving the arithmetic
accuracy of the application of the pro forma adjustments to the
historical amounts in the TLC pro forma financial statements,
nothing came to their attention which caused them to believe that
the TLC pro forma financial statements do not comply as to form in
all material respects with the applicable accounting requirements
of Rule 11-02 of Regulation S-X or that the pro forma adjustments
have not been properly applied to the historical amounts in the
compilation of such statements.
References to the TLC Prospectus in this paragraph (j)
include any supplement thereto at the date of the letter.
<PAGE> 39
39
(k) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in each of the Company Prospectus and the TLC
Prospectus (exclusive of any supplement thereto), there shall not have been
(i) any change or decrease specified in the letter or letters referred to in
paragraphs (h) or (i) of this Section 8 or (ii) any change, or any
development involving a prospective change, in or affecting the condition
(financial or otherwise), earnings, business or properties of the Company or
TLC and their respective subsidiaries, taken as a whole, whether or not
arising from transactions in the ordinary course of business, except as set
forth in or contemplated in the Company Prospectus or the TLC Prospectus
(exclusive of any supplement thereto) the effect of which, in any case
referred to in clause (i) or (ii) above, is, in the judgment of the
Representatives, so material and adverse as to make it impractical or
inadvisable to proceed with the offering or delivery of the DECS as
contemplated by the Company Prospectus or the TLC Prospectus (in either
case, exclusive of any amendment thereof).
(l) At the Execution Time and at the Closing Date, Ernst & Young LLP
and KPMG Peat Marwick LLP shall have furnished to the Representatives
letters, dated respectively as of the Execution Time and as of the Closing
Date, in form and substance satisfactory to the Representatives, containing
statements and information of the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to the financial statements
and certain financial information pertaining to Broderbund Software, Inc.
contained in or incorporated by reference into the TLC Registration
Statement.
(m) At the Execution Time, PricewaterhouseCoopers LLP shall have
furnished to the Representatives letters, dated respectively as of the
Execution Time and as of the Closing Date, in form and substance
satisfactory to the Representatives, containing statements and information
of the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
information pertaining to Mindscape Group contained in or incorporated by
reference into the TLC Registration Statement.
(n) Subsequent to the Execution Time, there shall not have been any
decrease in the rating of any of the Company's debt securities by any
"nationally
<PAGE> 40
40
recognized statistical rating organization" (as defined for purposes of Rule
436(g) under the Act) or any notice given of any intended or potential
decrease in any such rating or of a possible change in any such rating that
does not indicate the direction of the possible change.
(o) Prior to the Closing Date, the Company and TLC shall have furnished
to the Representatives such further information, certificates and documents
as the Representatives may reasonably request.
If any of the conditions specified in this Section 8 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Representatives and counsel for the Underwriters, this
Agreement and all obligations of the Underwriters hereunder may be canceled at,
or at any time prior to, the Closing Date by the Representatives. Notice of such
cancellation shall be given to the Company in writing or by telephone or
facsimile confirmed in writing.
The documents required to be delivered by this Section 8 shall be
delivered at the office of Mayer, Brown & Platt, counsel for the Underwriters,
at 190 South LaSalle Street, Chicago, Illinois 60603 on the Closing Date.
9. Reimbursement of Underwriters' Expenses. If the sale of the DECS
provided for herein is not consummated because any condition to the obligations
of the Underwriters set forth in Section 8 hereof is not satisfied or because of
any refusal, inability or failure on the part of the Company or TLC to perform
any agreement herein or comply with any provision hereof other than by reason of
a default by any of the Underwriters, subject to the immediately following
sentence, the Company will reimburse the Underwriters severally through Salomon
Smith Barney on demand for all out-of-pocket expenses (including reasonable fees
and disbursements of counsel) that shall have been reasonably incurred by them
in connection with the proposed purchase and sale of the DECS. If the Company is
required to make any payment to the Underwriters under this Section 9 because of
TLC's refusal, inability or failure to satisfy any condition to the obligations
of the Underwriters set forth in Section 8, TLC shall, rather than the Company,
reimburse
<PAGE> 41
41
the Underwriters on demand for the foregoing expenses.
10. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each Underwriter, the directors, officers, employees
and agents of each Underwriter and each person who controls any Underwriter
within the meaning of either the Act or the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Act, the Exchange Act or other Federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the registration statement for the registration of
the DECS as originally filed or in any amendment thereof, or in any Company
Preliminary Prospectus or the Company Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and agrees to reimburse
each such indemnified party, as incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of any Underwriter through the Representatives
specifically for use in connection with the preparation thereof, or arises out
of or is based upon the Statement of Eligibility (Form T-1) under the Trust
Indenture Act of the Trustee, and such indemnity with respect to any Company
Preliminary Prospectus shall not inure to the benefit of any Underwriter (or any
director, officer, employee or agent of, or any person controlling such
Underwriter) from whom the person asserting any such loss, claim, damage or
liability purchased the DECS which are the subject thereof if such person did
not receive a copy of the Company Prospectus (or the Company Prospectus as
amended or supplemented) excluding documents incorporated therein by reference
at or prior to the confirmation of the sale of such DECS to such person in any
case where such delivery is required by the Act and the untrue statement or
alleged untrue statement or omission or alleged omission of a material fact
contained in any Company
<PAGE> 42
42
Preliminary Prospectus was corrected in the Company Prospectus (or the Company
Prospectus as amended or supplemented) and; provided, further, that the Company
will not be liable under the indemnity agreement in this paragraph (a) to the
extent that any such loss, claim, damage or liability arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made in the Company Registration Statement as originally filed
or in any amendment thereof, or in any Company Preliminary Prospectus or the
Company Prospectus, or in any amendment thereof or supplement thereto in
reliance upon and in conformity with written information furnished to the
Company by TLC specifically for inclusion therein. This indemnity agreement will
be in addition to any liability which the Company may otherwise have.
(b) TLC agrees to indemnify and hold harmless each Underwriter, the
directors, officers, employees and agents of each Underwriter and each person
who controls any Underwriter within the meaning of either the Act or the
Exchange Act against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Act, the
Exchange Act or other Federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in (i) the TLC
Registration Statement for the registration of the Shares as originally filed or
in any amendment thereof, or in any TLC Preliminary Prospectus or the TLC
Prospectus, or in any amendment thereof or supplement thereto, or (ii) the
Company Registration Statement as originally filed to register the DECS or in
any amendment thereof, or in any Company Preliminary Prospectus or the Company
Prospectus, or in any amendment thereto or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state in the documents
referred to in clause (i) or (ii) above a material fact required to be stated
therein or necessary to make the statements therein not misleading, but in the
case of the documents referred to in clause (ii) only to the extent that the
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished in
writing to the Company by TLC specifically for inclusion therein including the
information contained in the Preliminary TLC Prospectus or TLC Prospectus (other
than information contained in or omitted from any such Preliminary TLC
Prospectus or TLC Prospectus in reliance on and in
<PAGE> 43
43
conformity with information furnished to TLC by the Company specifically for
inclusion therein) and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that TLC will not be liable under
the indemnity agreement in this paragraph (b) to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made in the documents referred to in clause (i) above in reliance upon and
in conformity with written information furnished to TLC by or on behalf of
any Underwriter through the Representatives specifically for use in
connection with the preparation thereof, and such indemnity with respect to
any TLC Preliminary Prospectus shall not inure to the benefit of any
Underwriter (or any director, officer, employee or agent or, or any person
controlling such Underwriter) from whom the person asserting any such loss,
claim, damage or liability purchased the DECS if such person did not receive
a copy of the TLC Prospectus (or the TLC Prospectus as amended or
supplemented) excluding documents incorporated therein by reference at or
prior to the confirmation of the sale of such DECS to such person in any
case where such delivery is required by the Act and the untrue statement or
alleged untrue statement or omission or alleged omission of a material fact
contained in any TLC Preliminary Prospectus was corrected in the TLC
Prospectus (or the TLC Prospectus as amended or supplemented); and provided,
further, that TLC shall not be liable under the indemnity agreement in this
paragraph (b) to the extent that any such loss, claim, damage or liability
arises out of or is based on any such untrue statement or alleged untrue
statement or omission or alleged omission made in the documents referred to
in clause (i) above in reliance upon and in conformity with written
information furnished to TLC by the Company specifically for inclusion
therein. This indemnity agreement will be in addition to any liability which
TLC may otherwise have.
(c) The Company agrees to indemnify and hold harmless TLC, the
directors, officers, employees and agents of TLC and each person who
controls TLC within the meaning of either the Act or the Exchange Act
against any and all losses, claims, damages or liabilities, joint or
several, to which they or any of them may become subject under the Act, the
Exchange Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims,
<PAGE> 44
44
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a material
fact contained in the Company Preliminary Prospectus or the Company
Prospectus, or in any amendment thereof or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the
Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
furnished to the Company by or on behalf of TLC specifically for use in
connection with the preparation thereof. TLC agrees that it has provided to
the Company for use in the Company Preliminary Prospectus and the Company
Prospectus information under the following captions therein: "THE LEARNING
COMPANY, INC.," "RELATIONSHIP BETWEEN TRIBUNE AND THE LEARNING COMPANY" and
"PRICE RANGE OF LEARNING COMMON STOCK."
(d) Each Underwriter agrees to indemnify and hold harmless the Company,
each of its directors, officers, employees and agents, and each person who
controls the Company within the meaning of either the Act or the Exchange
Act, to the same extent as the foregoing indemnity in paragraph (a) from the
Company to each Underwriter, but only with reference to written information
relating to such Underwriter furnished to the Company by or on behalf of
such Underwriter through the Representatives specifically for inclusion in
the documents referred to in such indemnity. This indemnity agreement will
be in addition to any liability which any Underwriter may otherwise have.
(e) Each Underwriter agrees to indemnify and hold harmless TLC, each of
its directors, officers, employees and agents and each person who controls
TLC within the meaning of either the Act or the Exchange Act, to the same
extent as the foregoing indemnity in paragraph (b) from TLC to each
Underwriter, but only with reference to written information relating to such
Underwriter furnished to TLC
<PAGE> 45
45
by or on behalf of such Underwriter through the Representatives specifically
for inclusion in the documents referred to in such indemnity. This indemnity
agreement will be in addition to any liability which any Underwriter may
otherwise have.
(f) Promptly after receipt by an indemnified party under this Section
10 of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under this Section 10, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party otherwise than under this Section 10 except to the extent the
indemnifying party has been materially prejudiced by the failure to be so
notified. In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and to the
extent that it may elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such indemnified
party, to assume the defense thereof, with counsel reasonably satisfactory
to such indemnified party; provided, however, that if the defendants in any
such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be
legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party,
the indemnified party or parties shall have the right to select separate
counsel to assert such legal defenses and to otherwise participate in the
defense of such action on behalf of such indemnified party or parties. Upon
receipt of notice from the indemnifying party to such indemnified party of
its election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to
such indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof unless (i) the indemnified party shall have employed
separate counsel in connection with the assertion of legal defenses in
accordance with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be liable for the
expenses of more than one separate counsel (other than local counsel used
principally to facilitate local litigation), approved by the Representatives
in the case of paragraphs (a) or (b) of this Section 10, representing the
indemnified parties under such paragraphs (a) or (b) who are parties to such
action), (ii) the
<PAGE> 46
46
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action or (iii) the indemnifying
party has authorized the employment of counsel for the indemnified party at
the expense of the indemnifying party; and except that, if clause (i) or
(iii) is applicable, such liability shall be only in respect of the counsel
referred to in such clause (i) or (iii). The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment
(after all rights to appeal have been exhausted) for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified
party for reasonable fees and expenses of counsel required to be paid by
this Section 10(f), the indemnifying party agrees that it shall be liable
for any settlement of any proceeding effected without its written consent if
(i) such settlement is entered into more than 90 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such
aforesaid request prior to the date of such settlement. No indemnifying
party shall, without the prior written consent of the indemnified party
(which consent shall not be unreasonably withheld), effect any settlement of
any pending or threatened proceeding in respect of which any indemnified
party is a party unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject
matter of such proceeding.
(g) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in paragraphs (a),
(b), (c), (d) or (e) of this Section 10 is unavailable to or insufficient to
hold harmless an indemnified party for any reason, each indemnifying party
agrees to contributed to the aggregate losses, claims, damages and
(including legal or other expenses reasonably incurred in connection with
investigating or defending same) to which an indemnified party may be
subject in such proportion so that the Underwriters are responsible for that
portion represented by the percentage that the underwriting discount bears
to the sum of such discount and the purchase price of the DECS specified in
Schedule I hereto and the Company and TLC are responsible for the balance
according to the
<PAGE> 47
47
relative benefits received by the Company and TLC, in the aggregate, from
the offering of the DECS; provided, however, that (y) in no case shall any
Underwriter be responsible for any amount in excess of the underwriting
discount applicable to the DECS purchased by such Underwriter hereunder and
(z) no person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 10, each person who controls an Underwriter within the meaning
of the Act shall have the same rights to contribution as such Underwriter,
and each person who controls the Company or TLC within the meaning of the
Act or the Exchange Act, each officer of the Company or TLC who shall have
signed the Company Registration Statement or the TLC Registration Statement
and each director of the Company or TLC shall have the same rights to
contributions as the Company or TLC, as the case may be, subject in each
case to clause (y) of this paragraph (g). Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit
or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this
paragraph (g), notify such party or parties from whom contribution may be
sought, but the omission to so notify such party or parties shall not
relieve the party or parties from whom contribution may be sought from any
other obligation it or they may have hereunder or otherwise than under this
paragraph (g).
(h) The Company and TLC agree that the provisions of Section 6
(relating to indemnification and contribution) of the Securities Resale
Registration Rights Agreement dated as of December 22, 1995 by and among the
Company and TLC (formerly SoftKey International Inc.) (the "Registration
Rights Agreement") shall be applicable to the offering of the DECS. Each
reference in Section 6 of the Registration Rights Agreement to "Registration
Statement" shall be deemed to include the TLC Registration Statement, and
each reference to "Prospectus" in such Section 6 shall be deemed to include
(i) the TLC Preliminary Prospectus, (ii) the TLC Prospectus and (iii) the
statement contained in the Company Preliminary Prospectus and Company
Prospectus under the captions "SUMMARY -- The Learning Company, Inc.," "THE
LEARNING COMPANY, INC." and "PRICE RANGE OF LEARNING COMMON STOCK."
11. Termination. This Agreement shall be subject to termination in
<PAGE> 48
48
the absolute discretion of the Representatives, by notice given to the
Company and TLC prior to delivery of and payment for the DECS, if at any
time prior to such time (i) trading in the Company's or TLC's common stock
shall have been suspended by the Commission or the NYSE or trading in
securities generally on the NYSE shall have been suspended or limited or
minimum prices shall have been established on such Exchange, (ii) a banking
moratorium shall have been declared either by Federal or New York State
authorities or (iii) there shall have occurred any outbreak or escalation of
hostilities, declaration by the United States of a national emergency or war
or other calamity or crisis the effect of which on financial markets is such
as to make it in the case of (i), (ii) or (iii), in the judgment of the
Representatives, impractical or inadvisable to proceed with the offering or
delivery of the DECS as contemplated by the Company Prospectus (exclusive of
any supplement thereto).
12. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of
the Company and TLC or their respective officers and of the Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any
Underwriter, the Company or TLC or any of the officers, directors or
controlling persons referred to in Section 10 hereof, and will survive
delivery of and payment for the DECS. The provisions of Sections 9 and 10
hereof shall survive the termination or cancellation of this Agreement.
13. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Representatives, will be
mailed, delivered or telefaxed to the Salomon Smith Barney General Counsel
(fax no.: (212) 816-7912 and confirmed to the General Counsel, Salomon Smith
Barney Inc., at 388 Greenwich Street, New York, New York, 10013, Attention:
General Counsel; if sent to the Company, will be mailed, delivered or
telefaxed to Crane H. Kenney, General Counsel of the Company (fax no.: (312)
222-4206) and confirmed to it at 435 North Michigan Avenue, Chicago,
Illinois, 60611, attention of the Legal Department or, if sent to TLC, will
be mailed, delivered or telefaxed to Neal S. Winneg, General Counsel of TLC
(fax no.: (617) 494-5660) and confirmed to it at One Athenaeum Street,
Cambridge, Massachusetts 02142, attention of the Legal Department.
14. Successors. This Agreement will inure to the benefit of and be
<PAGE> 49
49
binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 10
hereof, and no other person will have any right or obligation hereunder.
15. Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York applicable to contracts
made and to be performed within the State of New York.
16. Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.
17. Headings. The section headings used herein are for convenience only
and shall not affect the construction hereof.
18. Definitions. The terms which follow, when used in this Agreement,
shall have the meanings indicated.
"Act" shall mean the Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
legal holiday or a day on which banking institutions or trust companies are
authorized or obligated by law to close in New York City.
"Commission" shall mean the Securities and Exchange Commission.
"Effective Date" shall mean each date and time that the Company
Registration Statement, any post-effective amendment or amendments thereto and
any Rule 462(b) Company Registration Statement became or become effective under
the Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.
<PAGE> 50
50
"Execution Time" shall mean the date and time that this Agreement is
executed and delivered by the parties hereto.
"Company Preliminary Prospectus" shall mean any preliminary prospectus
referred to in paragraph 1(a) above.
"Company Prospectus" shall mean the prospectus relating to the DECS that
is first filed pursuant to Rule 424(b) after the Execution Time or.
"Company Registration Statement" shall mean the registration statement
referred to in paragraph 1(a) above, including exhibits and financial
statements, as amended at the Execution Time (or, if not effective at the
Execution Time, in the form in which it shall become effective) and, in the
event any post-effective amendment thereto or any Rule 462(b) Company
Registration Statement becomes effective prior to the Closing Date, shall also
mean such registration statement as so amended or such Rule 462(b) Company
Registration Statement, as the case may be. Such term shall include any Rule
430A Information deemed to be included therein at the Effective Date as provided
by Rule 430A.
"Rule 424", "Rule 430A" and "Rule 462" refer to such rules under the Act.
"Rule 430A Information" shall mean information with respect to the DECS
and the Shares and the offering thereof permitted to be omitted from the Company
Registration Statement and the TLC Registration Statement when each becomes
effective pursuant to Rule 430A.
"Rule 462(b) Company Registration Statement" shall mean a registration
statement and any amendments thereto filed pursuant to Rule 462(b) relating to
the offering covered by the initial Company Registration Statement.
"Rule 462(b) TLC Registration Statement" shall mean a registration
statement and any amendments thereto filed pursuant to Rule 462(b) relating to
the offering covered by the initial TLC Registration Statement.
"Salomon Smith Barney" shall mean Smith Barney Inc. or Salomon Brothers
Inc, to the extent that either such party is a signatory to this Agreement.
<PAGE> 51
51
"TLC Effective Date" shall mean each date and time that the TLC
Registration Statement, any post-effective amendment or amendments thereto and
any Rule 462(b) TLC Registration Statement became or become effective.
"TLC Preliminary Prospectus" shall mean any preliminary prospectus
referred to in paragraph 2(a) above and any preliminary prospectus included in
the TLC Registration Statement at the Effective Date that omits Rule 430A
Information.
"TLC Prospectus" shall mean the prospectus relating to the Shares that is
first filed pursuant to Rule 424(b) after the Execution Time or, if no filing
pursuant to Rule 424(b) is required, shall mean the form of final prospectus
relating to the Shares included in the TLC Registration Statement at the
Effective Date.
"TLC Registration Statement" shall mean the registration statement
referred to in paragraph 2(a) above, including exhibits and financial
statements, as amended at the Execution Time (or, if not effective at the
Execution Time, in the form in which it shall become effective) and, in the
event any post-effective amendment thereto or any Rule 462(b) TLC Registration
Statement becomes effective prior to the Closing Date, shall also mean such
registration statement as so amended or such Rule 462(b) TLC Registration
Statement, as the case may be. Such term shall include any Rule 430A Information
deemed to be included therein at the Effective Date as provided by Rule 430A.
<PAGE> 52
52
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Company and the several Underwriters.
Very truly yours,
Tribune Company
By: /s/ David J. Granat
--------------------------------
Name: David J. Granat
Title: Vice President and
Treasurer
The Learning Company, Inc.
By: /s/ Scott Murray
--------------------------------
Name: Scott Murray
Title: Executive Vice President
and Chief Financial Officer
The foregoing Agreement is hereby
confirmed and accepted as of the date
first above written.
Smith Barney Inc.
By: /s/ Michael S. Canmann
---------------------------
Name: Michael S. Canmann
Title: Vice President
For itself and the other several
Underwriters named in
Schedule I to the foregoing Agreement.
<PAGE> 53
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF UNDERWRITTEN
UNDERWRITERS SECURITIES TO BE PURCHASED
---------------------------------------
<S> <C>
Smith Barney Inc. ............................................4,600,000
----------
Total ........................................................4,600,000
==========
</TABLE>
<PAGE> 54
Exhibit A
TLC Multimedia Inc.
Learning Company Properties Inc.
The Learning Company Funding, Inc.
Mindscape, Inc.
<PAGE> 1
EXHIBIT 4.1
================================================================================
TRIBUNE COMPANY,
Issuer
and
BANK OF MONTREAL TRUST COMPANY,
Trustee
----------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of August 5, 1998
Supplemental to Indenture dated as of January 1, 1997
================================================================================
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE dated as of August 5, 1998 (this "Supplemental
Indenture"), made and entered into by and between Tribune Company, a
corporation duly organized and existing under the laws of the State of Delaware
(herein called the "Company"), having its principal office at 435 North
Michigan Avenue, Chicago, Illinois 60611, and Bank of Montreal Trust Company, a
trust company duly organized and existing under the laws of the State of New
York, as Trustee (herein called the "Trustee") under the Indenture of the
Company dated as of January 1, 1997 (the "Indenture").
WHEREAS, the parties hereto previously entered into the Indenture to
provide for the issuance and sale by the Company from time to time of its
unsecured debentures, notes or other evidences of indebtedness (herein called
the "Securities"); and
WHEREAS, Sections 9.01(5) and (6) of the Indenture provide that the
Company, when authorized by a Board Resolution, and the Trustee, at any time
and from time to time, may enter into an indenture supplemental to the
Indenture, in form satisfactory to the Trustee, without the consent of any
Holder (a) to add to, change or eliminate any of the provisions of the
Indenture, in respect of one or more series of Securities, provided that any
such addition, change or elimination shall become effective only when there is
no such Security Outstanding and (b) to establish the form or terms of
Securities of any series as permitted by Section 2.01 and 3.01 of the
Indenture; and
WHEREAS, the Company has duly authorized the creation of a series of its
Securities denominated its "6 1/4% Exchangeable Notes Due August August 15,
2001" representing up to 5,210,796 of its "Debt Exchangeable for Common
Stock(SM)" (such Securities being referred to herein as the "DECS(SM)"), the
principal amount of which is mandatorily exchangeable at Maturity into shares
of Common Stock, par value $.01 per share (the "Learning Common Stock") of The
Learning Company, Inc. ("The Learning Company"), or, at the option of the
Company (under the circumstances described herein), cash, in either case at the
Exchange Rate (as defined herein) and/or such other consideration as permitted
or required by the terms of the DECS; and
WHEREAS, the entry into this Supplemental Indenture by the parties hereto
is in all respects authorized by the provisions of the Indenture; and
WHEREAS, the Company has duly authorized the execution and delivery of
this Supplemental Indenture, and all things necessary have been done to make
the DECS, when executed by the Company and authenticated and delivered
hereunder and duly issued by the Company, the valid obligations of the Company,
and to make this Supplemental Indenture a valid agreement of the Company, in
accordance with their and its terms:
2
<PAGE> 3
NOW THEREFORE:
It is mutually covenanted and agreed, for the equal and proportionate
benefit of all Holders of the DECS, as follows:
ARTICLE I
SECTION 1.01. Definitions.
For all purposes of the Indenture and this Supplemental Indenture as they
relate to the DECS, except as otherwise expressly provided or unless the
context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to them
in this Article;
(2) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to the Indenture and this Supplemental Indenture as a
whole and not to any particular Article, Section or other subdivision; and
(3) capitalized terms used but not defined herein are used as they are
defined in the Indenture.
"Adjustment Event" has the meaning set forth in Section 2.04(b).
"Business Day" mean any day that is not a Saturday, a Sunday or a day on
which the NYSE or banking institutions or trust companies in The City of New
York are authorized or obligated by law or executive order to close.
"Closing Price" of any security on any date of determination mean (i) the
closing sale price (or, if no closing price is reported, the last reported sale
price) of such security (regular way) on the NYSE on such date, (ii) if such
security is not listed for trading on the NYSE on any such date, as reported in
the composite transactions for the principal United States securities exchange
on which such security is so listed, (iii) if such security is not so listed on
a United States national or regional securities exchange, as reported by the
Nasdaq Stock Market, (iv) if such security is not so reported, the last quoted
bid price for such security in the over-the-counter market as reported by the
National Quotation Bureau or similar organization, or (v) if such security is
not so quoted, the average of the mid-point of the last bid and ask prices for
such security from each of at least three nationally recognized independent
investment banking firms selected by the Company for such purpose.
"DECS" has the meaning set forth in the recitals to this Supplemental
Indenture.
"Dilution Event" has the meaning set forth in Section 2.05(a)(ii).
3
<PAGE> 4
"Exchange Rate" means a rate equal to (a) if the Maturity Price is greater
than or equal to $33.625 (the "Threshold Appreciation Price"), 0.8309 shares of
Learning Common Stock per DECS, (b) if the Maturity Price is less than the
Threshold Appreciation Price but is greater than the Initial Price, a fraction
equal to (i) the Initial Price divided by (ii) the Maturity Price of one share
of Learning Common Stock per DECS and (c) if the Maturity Price is less than or
equal to the Initial Price, one share of Learning Common Stock per DECS;
provided, however, that the Exchange Rate is subject to adjustment from time to
time pursuant to Section 2.04(a).
"Initial Price" means $27.9375.
"Learning Common Stock" has the meaning set forth in the recitals to this
Supplemental Indenture.
"Market Price" means, as of any date of determination, the average Closing
Price per share of Learning Common Stock for the 20 Trading Days immediately
prior to the date of determination; provided, however, that if there are not 20
Trading Days for the Learning Common Stock occurring later than the 60th
calendar day immediately prior to, but not including, such date, the Market
Price shall be determined as the market value per share of Learning Common Stock
as of such date as determined by a nationally recognized investment banking firm
retained for such purpose by the Company.
"Maturity" mean the date on which the principal of a DECS becomes due and
payable as provided herein, whether at Stated Maturity or by declaration of
acceleration or otherwise.
"Maturity Price" means the average Closing Price per share of Learning
Common Stock on the 20 Trading Days immediately prior to (but not including)
the date of Maturity; provided, however, that if there are not 20 Trading Days
for the Learning Common Stock occurring later than the 60th calendar day
immediately prior to, but not including, the date of Maturity, Maturity Price
means the market value per share of Learning Common Stock as of Maturity as
determined by a nationally recognized investment banking firm retained for such
purpose by the Company.
"NYSE" means the New York Stock Exchange, Inc.
"Ordinary Cash Dividend" has the meaning set forth in subparagraph (b)(5)
of Section 2.04.
"Reported Securities" has the meaning set forth in subparagraph (b)(3) of
Section 2.04.
"Share Components" means the ratios of shares of Learning Common Stock per
DECS specified in clauses (a), (b) and (c) of the definition of "Exchange Rate"
set forth in this Article.
4
<PAGE> 5
"Threshold Appreciation Price" has the meaning specified in the definition
of "Exchange Rate" set forth in this Article.
"Trading Day" means a Business Day on which the security, the Closing
Price of which is being determined, (a) is not suspended from trading on any
national or regional securities exchange or association or over-the-counter
market at the close of business and (b) has traded at least once on the
national or regional securities exchange or association or over-the-counter
market that is the primary market for the trading of such security.
"Transaction Value" means (a) for any cash received in any Adjustment
Event, the amount of cash received per share of Learning Common Stock, (b) for
any Reported Securities received in any Adjustment Event, an amount equal to
(x) the average Closing Price per security of such Reported Securities for the
20 Trading Days immediately prior to Maturity multiplied by (y) the number of
such Reported Securities (as adjusted pursuant to subparagraph (b)(4) of
Section 2.04) received per share of Learning Common Stock and (c) for any
property received in any Adjustment Event other than cash or such Reported
Securities, an amount equal to the fair market value of the property received
per share of Learning Common Stock on the date such property is received, as
determined by a nationally recognized investment banking firm retained for this
purpose by the Company; provided, however, that in the case of clause (b), (x)
with respect to securities that are Reported Securities by virtue of only
clause (iv) of the definition of Reported Security, Transaction Value with to
any such Reported Security means the average of the mid-point of the last bid
and ask prices for such Reported Security as of Maturity from each of at least
three nationally recognized investment banking firms retained for such purpose
by the Company multiplied by the number of such Reported Securities (as
adjusted pursuant to subparagraph (b)(4) of Section 2.04) received per share of
Learning Common Stock and (y) with respect to all other Reported Securities, if
there are not 20 Trading Days for any particular Reported Security occurring
later than the 60th calendar day immediately prior to, but not including, the
date of Maturity, Transaction Value with respect to such Reported Security
means the market value per security of such Reported Security as of Maturity as
determined by a nationally recognized investment banking firm retained for such
purpose by the Company multiplied by the number of such Reported Securities (as
adjusted pursuant to subparagraph (b)(4) of Section 2.04) received per share of
Learning Common Stock. For purposes of calculating the Transaction Value, any
cash, Reported Securities or other property receivable in any Adjustment Event
shall be deemed to have been received immediately prior to the close of
business on the record date for such Adjustment Event or, if there is no record
date for such Adjustment Event, immediately prior to the close of business on
the effective date of such Adjustment Event.
Section 1.02. Effect of Headings.
The Article and Section headings herein are for convenience only and shall
not affect the construction hereof.
5
<PAGE> 6
Section 1.03. Successors and Assigns.
All covenants and agreements in this Supplemental Indenture by the Company
shall bind its successors and assigns, whether so expressed or not.
Section 1.04. Separability.
In case any provision in this Supplemental Indenture or the DECS shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 1.05. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Supplemental
Indenture by any of the provisions of the Trust Indenture Act of 1939, as
amended, such required provisions shall control.
Section 1.06. Benefits of Supplemental Indenture.
Nothing in this Supplemental Indenture, expressed or implied, shall give
to any person, other than the parties hereto and their successors hereunder,
and the Holders of the DECS any benefit or any legal or equitable right, remedy
or claim under this Supplemental Indenture.
SECTION 1.07. Application of Supplemental Indenture.
This Supplemental Indenture shall take effect on the date hereof, and
shall apply only to the DECS. This Supplemental Indenture shall have no effect
on any other Securities, whether originally issued prior to the date hereof or
thereafter. If any provision of this Supplemental Indenture is inconsistent
with any provision of the Indenture, then, to the extent permitted by the
Indenture, the provision in this Supplemental Indenture shall control.
SECTION 1.08. Governing Law.
THIS SUPPLEMENTAL INDENTURE AND THE DECS SHALL BE DEEMED TO BE A CONTRACT
MADE UNDER THE LAWS OF THE STATE OF ILLINOIS AND THIS SUPPLEMENTAL INDENTURE
AND EACH SUCH DECS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF ILLINOIS.
ARTICLE II
The DECS
6
<PAGE> 7
Section 2.01. Title and Terms.
There is hereby created under the Indenture a series of Securities known
and designated as the "6 1/4% Exchangeable Notes Due August 15, 2001" of the
Company. The aggregate principal amount of DECS that may be authenticated and
delivered under this Indenture is limited to $200 million, except for DECS
authenticated and delivered upon reregistration of, transfer of, or in exchange
for, or in lieu of, other DECS pursuant to Section 3.04, 3.05, 3.06 and 11.06
of the Indenture.
The DECS shall bear interest at the rate of 6 1/4% of the principal amount
per annum, from the date of original issuance or the most recent Interest
Payment Date to which interest has been paid or duly provided for, until the
principal amount thereof is exchanged at maturity pursuant to the terms of the
DECS. Interest on the DECS shall be payable quarterly in arrears on February
15, May 15, August 15 and November 15 of each year, commencing November 15,
1998 (each, an Interest Payment Date"), to the persons in whose names the DECS
(or any predecessor securities) are registered at the close of business on
February 1, May 1, August 1 and November 1 immediately preceding such Interest
Payment Date, provided that interest payable at Maturity shall be payable to
the person to which the Learning Common Stock is deliverable.
The DECS shall be initially issued in the form of a Global Security and
the depositary for the DECS shall be the Depositary Trust Company, New York,
New York.
The DECS shall not be redeemable prior to their Maturity and shall not be
subject to any sinking fund. The DECS are not subject to payment prior to the
date of Maturity at the option of the Holder.
The DECS shall be mandatorily exchangeable as provided in Section 2.02.
The DECS shall be issuable in denominations of $27.9375 and any integral
multiple thereof.
The DECS shall not be issued as Original Issue Discount Securities.
The form of DECS attached hereto as Exhibit A is hereby adopted, pursuant
to Section 9.01(6) of the Indenture, as a form of Securities of a series that
consists of DECS. Certain terms of the DECS are set forth in the form of the
DECS.
The Company shall not be obligated to pay any additional amount on the
DECS in respect of taxes, except as otherwise provided in Section 2.06.
Section 2.02. Exchange at Maturity.
7
<PAGE> 8
Subject to Section 2.04(b), at maturity the principal amount of each DECS
shall be mandatorily exchanged by the Company into a number of shares of
Learning Common Stock at the Exchange Rate; provided, however, that, pursuant
to Section 2.03, no fraction of a share of Learning Common Stock shall be
issued. The Holders of the DECS shall be responsible for the payment of any
and all brokerage costs upon the subsequent sale of such shares. The Company
may, at its option, in lieu of delivering Learning Common Stock, deliver cash
in an amount (calculated to the nearest 1/100th of a dollar per DECS or, if
there is not a nearest 1/100th of a dollar, then to the next higher 1/100th of
a dollar) equal to the product of the number of shares of Learning common Stock
otherwise deliverable in respect of such DECS on the date of Maturity,
multiplied by the Maturity Price; provided, however, that if such option is
exercised, the Company shall deliver cash with respect to all, but not less
than all, of the Learning Common Stock that would otherwise be deliverable. In
determining the amount of cash deliverable in exchange for the DECS in lieu of
Learning Common Stock pursuant to the prior sentence hereof, if more than one
DECS shall be surrendered for exchange at one time by the same Holder, the
amount of cash which shall be delivered upon exchange shall be computed on the
basis of the aggregate number of DECS so surrendered at Maturity.
Section 2.03. No Fractional Shares.
If more than one DECS shall be surrendered for exchange pursuant to
Section 2.02 at one time by the same Holder, the number of full shares of
Learning Common Stock or Reported Securities which shall be delivered upon such
exchange, in whole or in part, as the case may be, shall be computed on the
basis of the aggregate number of DECS surrendered at Maturity. No fractional
shares or script representing fractional shares of Learning Common Stock or
Reported Securities shall be issued or delivered upon any exchange pursuant to
Section 2.02 of any DECS. In lieu of any fractional share of Learning Common
Stock or securities which, but for the immediately preceding sentence, would
otherwise be deliverable upon such exchange, the Company, through any
applicable Paying Agent, shall make a cash payment in respect of such
fractional interest in an amount equal to the value of such fractional share of
Learning Common Stock or security at the Maturity Price. The Company shall,
upon such exchange of any DECS, provide cash to any applicable Paying Agent in
an amount equal to the cash payable with respect to any fractional shares of
Learning Common Stock deliverable upon such exchange, and the Company shall
retain such fractional shares of Learning Common Stock.
SECTION 2.04. Adjustment of Exchange Rate.
(a) Adjustment for Distributions, Reclassifications, etc. The Exchange
Rate shall be subject to adjustment from time to time as follows:
(i) If The Learning Company shall:
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(A) pay a stock dividend or make a distribution, in each case,
with respect to the Learning Common Stock in shares of such stock;
(B) subdivide or split the outstanding shares of Learning
Common Stock;
(C) combine its outstanding shares of Learning Common Stock
into a smaller number of shares; or
(D) issue by reclassification (other than a reclassification
pursuant to clause (ii), (iii), (iv) or (v) of the definition of
Adjustment Event in paragraph (b) of this Section) of its shares of
Learning Common Stock any shares of common stock of The Learning
Company; or
then, in any such event, the Exchange Rate shall be adjusted by adjusting
each of the Share Components of the Exchange Rate in effect immediately
prior to such event so that a holder of any DECS shall be entitled to
receive, upon exchange pursuant to Section 2.02 of the principal amount of
such DECS at Maturity, the number of shares of Learning Common Stock (or,
in the case of a reclassification referred to in clause (D) of this
sentence, the number of shares of other common stock of The Learning
Company issued pursuant thereto) which such holder of such DECS would have
owned or been entitled to receive immediately following such event had
such DECS been exchanged immediately prior to such event or any record
date with respect thereto. Each such adjustment shall become effective at
the opening of business on the Business Day next following the record date
for determination of holders of Learning Common Stock entitled to receive
such dividend or distribution in the case of a dividend or distribution
and shall become effective immediately after the effective date in the
case of a subdivision, split, combinations or reclassification. Each such
adjustment shall be made successively.
(ii) If The Learning Company shall, after the date hereof, issue
rights or warrants to all holders of Learning Common Stock entitling them
to subscribe for or purchase shares of Learning Common stock (other than
rights to purchase Learning Common Stock pursuant to a plan for the
reinvestment of dividends) at a price per share less than the Market Price
of the Learning Common Stock on the Business Day next following the record
date for the determination of holders of shares of Learning Common Stock
entitled to receive such rights or warrants, then in each case, the
Exchange Rate shall be adjusted by multiplying each of the Share
Components of the Exchange Rate in effect on the record date for the
determination of holders of Learning Common Stock entitled to receive such
right rights or warrants, by a fraction, of which the numerator shall be
(A) the number of shares of Learning Common Stock outstanding on such
record date plus (B) the number of additional shares of Learning Common
Stock offered for subscription or purchase pursuant to such rights or
warrants, and of which the
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<PAGE> 10
denominator shall be (x) the number of shares of Learning Common Stock
outstanding on such record date plus (y) the number of additional shares
of Learning Common Stock which the aggregate offering price of the total
number of shares of Learning Common Stock so offered for subscription or
purchase pursuant to such rights or warrants would purchase at the Market
Price of the Learning Common Stock on the Business Day next following such
record date, which number of additional shares shall be determined by
multiplying such total number of shares by the exercise price of such
rights or warrants and dividing the product so obtained by such Market
Price of Learning Common Stock. Such adjustment shall become effective at
the opening of business on the Business Day next following the record date
for the determination of holders of Learning Common Stock entitled to
receive such rights or warrants. To the extent that such rights or
warrants expire prior to the Maturity of the DECS and shares of Learning
Common Stock are not delivered pursuant to such rights or warrants prior
to such expiration, the Exchange Rate shall be readjusted to the Exchange
Rate which would then be in effect had such adjustments for the issuance
of such rights or warrants been made upon the basis of delivery of only
the number of shares of Learning Common Stock actually delivered pursuant
to such rights or warrants. Each such adjustment shall be made
successively.
(iii) Any shares of Learning Common Stock issuable in payment of a
dividend shall be deemed to have been issued immediately prior to the
close of business on the record date for such dividend for purposes of
calculating the number of outstanding shares of Learning Common Stock
under paragraph (a)(ii) of this Section.
(iv) All adjustments to the Exchange Rate will be calculated to the
nearest 1/10,000th of a share of Learning Common Stock (or if there is not
a nearest 1/10,000th of a share of Learning Common Stock to the next lower
1/10,000th of a share of Learning Common Stock). No adjustment in the
Exchange Rate shall be required unless such adjustment would require an
increase or decrease of at least one percent therein; provided, however,
that any adjustments which by reason of the foregoing are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. If an adjustment is made to the Exchange Rate pursuant to
paragraphs (a)(i) or (a)(ii) of this Section, an adjustment shall also be
made to the Maturity Price as such term is used throughout the definition
of Exchange Rate set forth in Section 1.01. The required adjustment to
the Maturity Price shall be made at Maturity by multiplying the original
Maturity Price by the cumulative number or fraction determined under
paragraphs (a)(i) and/or (a)(ii) of this Section by which the original
Exchange Rate was multiplied to adjust such rate. In the case of a
reclassification of any shares of Learning Common Stock into any common
stock of The Learning Company other than Learning Common Stock, such
common stock shall be deemed to be shares of Learning Common Stock solely
to determine the Maturity Price and to apply the Exchange Rate at
Maturity.
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Each such adjustment to the Exchange Rate and the Maturity Price shall be
made successively.
(b) Other Adjustment Events. In the event of (i) any dividend or
distribution by The Learning Company to all holders of Learning Common Stock of
evidences of its indebtedness or other assets (excluding any dividends or
distributions referred to in clause (A) of paragraph (a)(i) of this Section,
any common shares issued pursuant to a reclassification referred to in clause
(D) of paragraph (a)(i) of this Section and any Ordinary Cash Dividends) or any
issuance by The Learning Company to all holders of Learning Common Stock of
rights or warrants (other than rights or warrants referred to in paragraph
(a)(ii) of this Section), (ii) any consolidation or merger of The Learning
Company with or into another entity (other than a merger or consolidation in
which The Learning Company is the continuing corporation and in which the
Learning Common Stock outstanding immediately prior to the merger or
consolidation are not exchanged for cash, securities or other property of The
Learning Company or another corporation), (iii) any sale, transfer, lease or
conveyance to another corporation of the property of The Learning Company as an
entirety or substantially as an entirety, (iv) any statutory exchange of
securities of The Learning Company with another corporation (other than in
connection with a merger or acquisition) or (v) any liquidation, dissolution or
winding up of The Learning Company (any such event, an "Adjustment Event"), the
property receivable by Holders of DECS at Maturity shall be subject to
adjustment from time to time as follows:
(1) Each holder of a DECS will receive at Maturity, in lieu of or (in
the case of an Adjustment Event described in clause (i) of this paragraph
(b)) in addition to, the shares of Learning Common Stock that it would
otherwise receive as required by Section 2.02, cash in an amount equal to
(A) if the Maturity Price is greater than or equal to the Threshold
Appreciation Price, 0.8309 multiplied by the Transaction Value, (B) if the
Maturity Price is less than the Threshold Appreciation Price but is
greater than the Initial Price, the product of (x) the Initial Price
divided by the Maturity Price multiplied by (y) the Transaction Value and
(C) if the Maturity Price is less than or equal to the Initial Price, the
Transaction Value.
(2) Following an Adjustment Event, the Maturity Price, as such term
is used in subparagraph (b)(1) above and throughout the definition of
Exchange Rate, shall be deemed to equal (A) if shares of Learning Common
Stock are outstanding at Maturity, subject to Section 2.04(b)(2)(B), the
Maturity Price of the shares of Learning Common Stock, as adjusted
pursuant to the provisions of paragraph (a)(iv) of this Section, plus the
Transaction Value or (B) if shares of Learning Common Stock are not
outstanding at maturity (or if the Learning Common Stock, as a result of
an Adjustment Event, is not (i) listed on a United States national
securities exchange, (ii) reported on a United States national securities
system subject to last sale reporting or (iii) traded in the
over-the-counter market and reported on the National Quotation Bureau or
similar organization,
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and for which bid and ask prices are not available from at least three
nationally recognized investment banking firms), the Transaction Value.
(3) Notwithstanding the foregoing, with respect to any securities
received in an Adjustment Event that (A) are (i) listed on a United States
national securities exchange, (ii) reported on a United States national
securities system subject to last sale reporting, (iii) traded in the
over-the-counter market and reported on the National Quotation Bureau or
similar organization or (iv) for which bid and ask prices are available
from at least three nationally recognized investment banking firms and (B)
are either (x) perpetual equity securities or (y) non-perpetual equity or
debt securities with a stated maturity after the Stated Maturity
("Reported Securities"), the Company may, at its option, in lieu of
delivering the amount of cash deliverable in respect of Reported
Securities received in an Adjustment Event, as determined in accordance
with subparagraph (b)(1), deliver a number of such Reported Securities
with a value equal to such cash amount, as determined in accordance with
clause (b) of the definition of Transaction Value set forth in Section
1.01; provided, however, that (i) if such option is exercised, the Company
shall deliver Reported Securities in respect of all, but not less than
all, cash amounts that would otherwise be deliverable in respect of
Reported Securities received in an Adjustment Event, (ii) the Company may
not exercise such option if the Company has elected to deliver cash in
lieu of Learning Common Stock, if any, deliverable upon Maturity or if
such Reported Securities have not yet been delivered to the holders
entitled thereto following such Adjustment Event or any record date with
respect thereto, and (iii) subject to clause (ii) of this proviso, the
Company must exercise such option if the Company does not elect to deliver
cash in lieu of Learning Common Stock, if any, deliverable upon Maturity.
If the Company elects to deliver Reported Securities, each holder of a
DECS will be responsible for the payment of any and all brokerage and
other transaction costs upon the sale of such Reported Securities. If,
following any Adjustment Event, any Reported Security ceases to qualify as
a Reported Security, then (x) the Company may no longer elect to deliver
such Reported Security in lieu of an equivalent amount of cash and (y)
notwithstanding clause (b) of the definition of Transaction Value, the
Transaction Value of such Reported Security shall mean the fair market
value of such Reported Security on the date such security ceases to
qualify as a Reported Security, as determined by a nationally recognized
investment banking firm retained for this purpose by the Company.
(4) The amount of cash and/or the kind and number of securities into
which the DECS shall be exchangeable after an Adjustment Event shall be
subject to adjustment following such Adjustment Event in the same manner
and upon the occurrence of the same type of events as described in
paragraphs (a) and (b) of this Section with respect to Learning Common
Stock and The Learning Company.
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(5) For purposes of the foregoing, the term "Ordinary Cash Dividend"
means, with respect to any consecutive 365-day period, any dividend with
respect to Learning Common Stock paid in cash to the extent that the
amount of such dividend, together with the aggregate amount of all other
dividends on Learning Common Stock paid in cash during such 365-day
period, does not exceed on a per-share basis 10% of the average of the
Closing Prices of Learning Common Stock over such 365-day period. For
purposes of this subparagraph (b)(5), any cash dividend shall be deemed to
be paid as of the record date for such cash dividend.
Section 2.05. Notice of Adjustment and Certain Other Events.
(a) Whenever the Exchange Rate is adjusted as herein provided or an
Adjustment Event occurs, the Company shall:
(i) forthwith compute the adjusted Exchange Rate (or Transaction
Value) in accordance with Section 2.04 and prepare a certificate signed by
an officer of the Company setting forth the adjusted Exchange Rate (or
Transaction Value), the method of calculation thereof in reasonable detail
and the facts requiring such adjustment and upon which such adjustment is
based, which certificate shall be conclusive, final and binding evidence
of the correctness of the adjustment, and file such certificate forthwith
with the Trustee; and
(ii) within ten Business Days following the occurrence of an event
that permits or requires an adjustment to the Exchange Rate pursuant to
Section 2.04(a) (each, a "Dilution Event") or an Adjustment Event that
permits or requires a change in the consideration to be received by
Holders pursuant to Section 2.04(b) (or, in any case, if the Company is
not aware of such occurrence, as soon as practicable after becoming so
aware), provide written notice to the Trustee and to the Holders of the
outstanding DECS of the occurrence of such Dilution Event or Adjustment
Event including a statement in reasonable detail setting forth the method
by which any adjustment to the Exchange Rate or change in the
consideration to be received by Holders of DECS following the Adjustment
Event was determined and setting forth the revised Exchange Rate or
consideration, as the case may be provided, however, that in respect of
any adjustment of the Maturity Price, such notice need only disclose the
factor by which the Maturity Price is to be multiplied pursuant to Section
2.04(a)(iv) in order to determine which clause of the definition of the
Exchange Rate will apply at Maturity, it being understood that, until
Maturity, the Exchange Rate itself cannot be determined.
(b) In case at any time while any of the DECS are outstanding the Company
receives notice from The Learning Company that:
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(i) The Learning Company will declare a dividend (or any other
distribution) on or in respect of the Learning Common Stock to which
Section 2.04(a)(i) or (ii) shall apply (other than any cash dividends and
distributions, if any, paid from time to time by The Learning Company that
constitute Ordinary Cash Dividends);
(ii) The Learning Company will authorize the issuance to all holders
of Learning Common Stock of rights or warrants to subscribe for or
purchase shares of Learning Common Stock or of any other subscription
rights or warrants;
(iii) there will occur any conversion or reclassification of Learning
Common Stock (other than a subdivision or combination of outstanding
shares of such Learning Common Stock) or any consolidation, merger or
reorganization to which The Learning Company is a party and for which
approval of any stockholders of The Learning Company is required, or the
sale or transfer of all or substantially all of the assets of The Learning
Company; or
(iv) there will occur the voluntary or involuntary dissolution,
liquidation or winding up of The Learning Company;
then, if the notice provides to the Company the information described in clause
(x) and (y) below in a reasonable amount of time in advance of the delivery and
filing requirements set forth in this subparagraph (b), the Company shall cause
to be delivered to the Trustee and any applicable Paying Agent and filed at the
office or agency maintained for the purpose of exchange of DECS at Maturity in
the Borough of Manhattan, in The City of New York by the Trustee (or any
applicable Paying Agent), and shall cause to be mailed to the Holders of DECS
at their last addresses as they shall appear upon the registration books of the
Security Registrar, at least ten days before the date hereinafter specified (or
the earlier of the dates hereinafter specified, in the event that more than one
is specified), a notice stating (x) the date on which a record is to be taken
for the purpose of such dividend, distribution or grant of rights or warrants
or, if a record is not to be taken, the date as of which holders of Learning
Common Stock of record to be entitled to such dividend, distribution or grant
of rights are to be determined, or (y) the date, if known by the Company, on
which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective.
Following any Adjustment Event, the provisions of this paragraph (b) shall
apply with respect to any Reported Securities in the same manner as with
respect to The Learning Company and the Learning Common Stock.
(c) On or prior to the fourth Business Day preceding the Stated Maturity
of the DECS the Company shall notify the Trustee and will publish a notice in a
daily newspaper of national circulation stating whether the Company will
deliver, in accordance with Section 2.02, shares of Learning Common Stock or
cash (and/or, in accordance with Section 2.04(b), cash or Reported Securities)
upon the mandatory exchange of the principal amount of the DECS. The Trustee
shall notify DTC of the form of consideration to be delivered by the Company.
After the close of
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business on the Business Day immediately preceding the Stated Maturity of the
DECS, the Company shall notify the Trustee in writing of the number of shares
of Learning Common Stock and/or Reported Securities, or the amount of cash to
be paid per DECS.
SECTION 2.06. Taxes.
(a) The Company will pay any and all documentary, stamp, transfer or
similar taxes that may be payable in respect of the transfer and delivery of
Learning Common Stock (or Reported Securities) pursuant hereto; provided,
however, that the Company shall not be required to pay any such tax which may
be payable in respect of any transfer involved in the delivery of Learning
Common Stock (or Reported Securities) in a name other than that in which the
DECS so exchanged were registered, and no such transfer or delivery shall be
made unless and until the person requesting such transfer has paid to the
Company the amount of any such tax, or has established, to the satisfaction of
the Company, that such tax has been paid.
(b) The parties hereto hereby agree, and each Holder of a DECS by its
purchase of a DECS hereby agrees:
(i) to treat, for U.S. federal income tax purposes, each DECS as a
forward purchase contract to purchase Learning Common Stock at Maturity
(including as a result of acceleration or otherwise) ( the "forward
purchase contract characterization"), under the terms of which contract
(a) at the time of issuance of the DECS the Holder deposits irrevocably
with the Company a fixed amount of cash equal to the purchase price of the
DECS to assure the fulfillment of the Holder's purchase obligation
described in clause (c) below, which deposit will unconditionally and
irrevocably be applied at Maturity to satisfy such obligation, (b) until
Maturity the Company will be obligated to pay interest on such deposit at
a rate equal to the stated rate of interest on the DECS as compensation to
the Holder for the Company's use of such cash deposit during the term of
the DECS, and (c) at Maturity such cash deposit unconditionally and
irrevocably will be applied by the Company in full satisfaction of the
Holder's obligation under the forward purchase contract, and the Company
will deliver to the Holder the number of shares of Learning Common Stock
that the Holder is entitled to receive at the time pursuant to the terms
of the DECS (subject to the Company's right to deliver cash in lieu of the
shares of Learning Common Stock);
(ii) to treat, consistent with the above characterization, (x)
amounts paid to the Company in respect of the original issue of a DECS as
allocable in their entirety to the amount of the cash deposit attributable
to such DECS, and (y) amounts denominated as interest that are payable
with respect to the DECS as interest payable on the amount of such
deposit, includible annually in the income of the Holder as interest
income in accordance with its method of accounting; and
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(iii) to file all U.S. federal, state and local income and franchise
tax returns consistent with the forward purchase contract characterization
(unless required otherwise by an applicable taxing authority).
SECTION 2.07. Delivery of Securities upon Maturity.
All Learning Common Stock and Reported Securities deliverable to Holders
upon the Maturity of the DECS shall be delivered to such Holders, whenever
practicable, in such manner (such as book-entry transfer) so as to assure
same-day transfer of such securities to Holders and otherwise in the manner
customary at such time for delivery of such securities and securities of the
same type.
ARTICLE III
Covenants
SECTION 3.01. Shares Free and Clear; No Rights in the Stock.
With respect to the DECS only and for the benefit of only the Holders
thereof, the Company covenants and warrants that upon exchange of a DECS at
Maturity pursuant to the Indenture and this Supplemental Indenture, the Holder
of a DECS shall receive valid title to the Learning Common Stock (and, in the
event an Adjustment Event has occurred, the Reported Securities, if Reported
Securities are delivered) for which such DECS is at such time exchangeable
pursuant to this Indenture, free and clear of any and all liens, claims,
charges and encumbrances whatsoever, except to the extent such liens, claims,
charges and encumbrances are caused by the Holders. Except as provided in
Section 2.06(a), the Company shall pay all taxes and charges with respect to
the delivery of Learning Common Stock (and Reported Securities) delivered in
exchange for DECS hereunder. Until such time, if any, as the Company shall
deliver shares of Learning Common Stock to Holders of the DECS at Maturity, the
Holders shall not be entitled to any rights with respect to the Learning Common
Stock (including, without limitation, voting rights and the rights to receive
any dividends or other distributions in respect thereof.
Section 3.02 Discharge of Indenture.
With respect to the DECS only and for the benefit of only the Holders
thereof, the Company surrenders all rights and powers conferred on it by
subclause (b)(ii) or (iii) of clause (1) of Section 4.01 of the Indenture.
With respect to the DECS only and for the benefit of only the Holders thereof,
the Company shall have the right to discharge the Indenture pursuant to and in
accordance with the remaining provisions of Section 4.01 of the Indenture if,
instead of depositing with the Trustee funds, the Company deposits Learning
Common Stock, Reported Securities and/or cash sufficient to pay and discharge
the entire indebtedness on the DECS for principal and interest to the date of
Stated Maturity.
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ARTICLE IV
Miscellaneous
SECTION 4.01. Confirmation of Indenture.
The Indenture, as supplemented and amended by this Supplemental Indenture
and all other indentures supplemental thereto, is in all respects ratified and
confirmed, and the Indenture, this Supplemental Indenture and all indentures
supplemental thereto shall be read, taken and construed as one and the same
instrument.
SECTION 4.02. Concerning the Trustee.
The Trustee assumes no duties, responsibilities or liabilities by reason
of this Supplemental Indenture other than as set forth in the Indenture.
SECTION 4.03. Payment of Principal.
Each reference in the Indenture to the payment by the Company of the
principal of any Security (or words of like import) shall be deemed, for
purposes of the DECS only, to mean the delivery of the Learning Common Stock
(or, at the Company's option, the cash equivalent thereof) at the time, rate
and manner set forth herein.
_______________
This Supplemental Indenture may be executed in any number of counterparts,
each of which shall be an original; but such counterparts shall together
constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
TRIBUNE COMPANY
By:________________________
Name:
Title:
Attest: ________________________
Name:
Title:
BANK OF MONTREAL TRUST
COMPANY, as Trustee
By: ________________________
Name:
Title:
Attest: ________________________
Name:
Title:
18
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STATE OF ILLINOIS )
) SS.:
COUNTY OF COOK )
On the ____ day of ___________, 1998, before me personally came
___________________, to me known, who, being by me duly sworn, did depose and
say that she/he is the ____________ of TRIBUNE COMPANY, one of the corporations
described in and which executed the foregoing instrument; that she/he knows the
seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by authority of the Board of Directors
of said corporation, and that she/he signed her/his name thereto by like
authority.
___________________________
Notary Public
SEAL
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On the ___ day of __________, 1998, before me personally came
____________, to me known, who, being by me duly sworn, did depose and say that
she/he is the _________ of BANK OF MONTREAL TRUST COMPANY, one of the
corporations described in and which executed the foregoing instrument; that
she/he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation, and that she/he signed her/his name
thereto by like authority.
_______________________
Notary Public
SEAL
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Exhibit A
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITARY OR A
NOMINEE OF THE DEPOSITARY. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN
PART FOR THE INDIVIDUAL DEBT SECURITIES REPRESENTED HEREBY, THIS GLOBAL
SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY
OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE
TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO., OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND
ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL SINCE THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
NO.____________ CUSIP NO. 896047206
[Form of Face of DECS]
TRIBUNE COMPANY
________________DECS (SM)
(Debt Exchangeable for Common Stock (SM)
6 1/4% Exchangeable Note Due August 15, 2001
(Subject to Exchange at Maturity into Shares of Common Stock,
Par Value $.01 Per Share, of The Learning Company, Inc.)
Tribune Company, a Delaware corporation (hereinafter called the "Company",
which term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to exchange with CEDE & CO.
or registered assigns, on August
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<PAGE> 21
15, 2001 a number of shares of Common Stock, par value $.01 per share (the
"Learning Common Stock"), of the Learning Company, Inc. (The "Learning Company")
(or, at the Company's option, the cash equivalent thereof and/or such other
consideration as permitted or required by the terms of the DECS) at the
Exchange Rate (as defined herein), and to pay interest (computed on the basis
of a 360-day year of twelve 30-day months) on such principal amount from the
date of original issuance or from the most recent Interest Payment Date (as
defined below) to which interest has been paid or duly provided for, quarterly
on February 15, May 15, August 15 and November 15 of each year (each, an
"Interest Payment Date" and, collectively, the "Interest Payment Dates"),
commencing November 15, 1998, at the rate per annum specified in the title of
this note, until Maturity. The interest so payable, and punctually
paid or duly provided for, on any Interest Payment Date will, as provided in
said Indenture, be paid to the person in whose name this DECS (or the DECS in
exchange or substitution for which this DECS was issued) is registered at the
close of business on the Regular Record Date (as defined below) for interest
payable on such Interest Payment Date. The Regular Record Date for any interest
payment is the close of business on the February 1, May 1, August 1 and
November 1 immediately preceding the relevant Interest Payment Date, whether or
not a Business Day (as defined below), provided that interest payable at
Maturity shall be payable to the person to whom the Learning Common Stock is
deliverable. In any case where such Interest Payment Date shall not be a
Business Day, then (notwithstanding any other provision of said Indenture or
this DECS) payment of such interest need not be made on such date, but may be
made on the next succeeding Business Day with the same force and effect as if
made on such Interest Payment Date, and, if such payment is so made, no
interest shall accrue for the period from and after such Interest Payment Date.
Any such interest not so punctually paid or duly provided for shall forthwith
cease to be payable to the registered Holder on such Regular Record Date, and
may be paid to the person in whose name this DECS (or the DECS in exchange or
substitution for which this DECS was issued) is registered at the close of
business on a record date for the payment of such interest to be fixed by the
Trustee for the DECS, notice whereof shall be given to Holders of the DECS not
less than ten days prior to such record date, or may be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the DECS may be listed and not deemed impracticable by the
Trustee, and upon such notice as may be required by such exchange.
At Maturity, the principal amount of this DECS will be mandatorily
exchanged into a number of shares of Learning Common Stock, at the Exchange
Rate. The "Exchange Rate" is equal to (a) if the Maturity Price (as defined
below) is greater than or equal to $33.625 (the "Threshold Appreciation
Price"), .8309 shares of Learning Common Stock per DECS, (b) if the Maturity
Price is less than the Threshold Appreciation Price but is greater than
$27.9375 (the "Initial Price"), a fraction equal to the Initial Price divided
by the Maturity Price of one share of Learning Common Stock per DECS (such
fractional share being calculated to the nearest 1/10,000th of a share or, if
there is not a nearest 1/10,000th of a share, to the next higher 1/10,000th of
a share) and (c) if the Maturity Price is less than or equal to the Initial
Price, one share of Learning Common Stock per DECS. Any shares of Learning
Common Stock delivered
F-2
<PAGE> 22
by the Company to the Holders of the DECS that are not affiliated with The
Learning Company shall be free of any transfer restrictions except to the
extent any transfer restrictions are caused by the Holders of DECS, and the
holders of DECS will be responsible for the payment of any and all brokerage
costs upon the subsequent sale of such shares. No fractional shares of
Learning Common Stock will be issued at Maturity as provided in the Indenture.
The Company may at its option, in lieu of delivering shares of Learning
Common Stock, deliver cash in an amount equal to the value of such number of
shares of Learning Common Stock at the Maturity Price as provided in the
Indenture; provided, however, that if such option is exercised, the Company
shall deliver cash with respect to all, but not less than all, of the shares of
Learning Common Stock that would otherwise be deliverable.
Notwithstanding the foregoing, (i) in the case of certain dilution events,
the Exchange Rate will be subject to adjustment and (ii) in the case of certain
adjustment events, the consideration received by Holders of DECS at Maturity
will be shares of Learning Common Stock, other securities and/or cash, each as
provided in the Indenture.
The "Maturity Price" is defined as the average Closing Price per share of
Learning Common Stock on the 20 Trading Days immediately prior to (but not
including) the date of Maturity or, under certain circumstances as provided in
the Indenture, the market value per share of Learning Common Stock as of the
date of Maturity as determined by a nationally recognized investment banking
firm retained for this purpose by the Company. The "Closing Price" of any
security on any date of determination means (i) the closing sale price (or, if
no closing sale price is reported, the last reported sale price) of such
security (regular way) on the New York Stock Exchange (the "NYSE") on such
date, (ii) if such security is not listed for trading on the NYSE on any such
date, as reported in the composite transactions for the principal United States
securities exchange on which such security is so listed, (iii) if such security
is not so listed on a United States national or regional securities exchange,
as reported by the Nasdaq Stock Market, (iv) if such security is not so
reported, the last quoted bid price for such security in the over-the counter
market as reported by the National Quotation Bureau or similar organization or
(v) if such security is not so quoted, the average of the mid-point of the last
bid and ask prices for such security from each of at least three nationally
recognized investment banking firms selected for this purpose by the Company.
A "Trading Day" is defined as a Business Day on which the security the Closing
Price of which is being determined (i) is not suspended from trading on any
national or regional securities exchange or association or over-the-counter
market at the close of business and (ii) has traded at least once on the
national or regional securities exchange or association or over-the-counter
market that is the primary market for the trading of such security. "Business
Day" means any day that is not a Saturday, a Sunday or a day on which the NYSE,
banking institutions or trust companies in The City of New York, New York are
authorized or obligated by law or executive order to close.
F-3
<PAGE> 23
Interest on this DECS will be payable, and delivery of Learning Common
Stock (or, at the Company's option, its cash equivalent and/or such other
consideration as permitted or required herein and in the Indenture) in exchange
for the principal amount of this DECS at Maturity will be made upon surrender
of this DECS, at the office or agency of the Company maintained for that
purpose, and payment of interest on (and, if the Company elects not to deliver
Learning Common Stock and/or other securities upon exchange at Maturity, the
cash equivalent thereof payable upon exchange for the principal amount of) this
DECS will be made in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company payment of interest may be
made by check mailed to the persons in whose names the DECS are registered on
the close of business on the February 1, May 1, August 1 and November 1
immediately preceding the relevant Interest payment Date. Initially, such
office shall be the principal corporate trust office of the Trustee in New York
City, which is located at 77 Water Street, New York, New York 10005
ADDITIONAL PROVISIONS OF THIS DECS ARE CONTAINED ON THE REVERSE HEREOF AND
SUCH PROVISIONS SHALL HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH IN THIS
PLACE.
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee for this DECS by manual signature, this DECS shall not be
entitled to any benefit under the Indenture, or be valid or obligatory for any
purpose. "DECS" and "Debt Exchangeable for Common Stock" are service marks of
Salomon Brothers Inc.
IN WITNESS WHEREOF, Tribune Company has caused this instrument to be duly
executed under its corporate seal.
Dated: TRIBUNE COMPANY
By:______________________
Name:
Title:
Attest:
Name:
F-4
<PAGE> 24
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Debt Securities issued under the within-mentioned Indenture.
BANK OF MONTREAL TRUST COMPANY, as
Trustee
By:_____________________________
Authorized Officer
F-5
<PAGE> 25
[Form of Reverse of DECS]
TRIBUNE COMPANY
6 1/4% Exchangeable Note Due August 15, 2001
(Subject to Exchange at Maturity into Shares of Common Stock,
Par Value $.01 Per Share, of The Learning Company, Inc.)
This DECS is one of a duly authorized issue of debentures, notes or other
evidences of indebtedness (hereinafter called the "Debt Securities") of the
Company of the series hereinafter specified, which DECS are limited in
aggregate principal amount to $200 million, all such Debt Securities issued
and to be issued under an indenture dated as of January 1, 1997, as
supplemented by the First Supplemental Indenture dated August 5, 1998 (as so
supplemented and as may be further supplemented from time to time, the
"Indenture") between the Company and Bank of Montreal Trust Company, as trustee
(herein called the "Trustee", which term includes any successor Trustee under
the Indenture), pursuant to which the Company has designated Bank of Montreal
Trust Company as Trustee for the DECS, to which Indenture and all other
indentures supplemental thereto reference is hereby made for a statement of the
rights and limitation of rights thereunder of the Holders of the Debt
Securities and of the rights, obligations, duties and immunities of the Trustee
for each series of Debt Securities and of the Company, and the terms upon which
the Debt Securities are and are to be authenticated and delivered. As provided
in the Indenture, the Debt Securities may be issued in one or more series,
which different series may be issued in various aggregate principal amounts,
may be denominated in currencies other than U.S. Dollars (including composite
currencies), may mature at different times, may bear interest, if any, at
different rates, may be subject to different redemption provisions, if any, may
be subject to different sinking fund or other purchase provisions, if any, may
be subject to different covenants and Events of Default and may otherwise vary
as in the Indenture provided or permitted. This DECS is one of a series of the
Debt Securities designated as 6 1/4% Exchangeable Notes Due August 15, 2001.
The DECS may not be redeemed prior to Stated Maturity and are not entitled
to the benefit of any sinking fund.
The provisions contained in the Indenture for defeasance of the Company's
obligations upon compliance by the Company with certain conditions set forth
therein will not be applicable to the DECS. Certain other provisions contained
in the Indenture pertaining to satisfaction and discharge of the Indenture upon
deposit of funds with the Trustee shall apply to the DECS in the manner set
forth in the First Supplemental Indenture referred to above.
R-1
<PAGE> 26
If an Event of Default with respect to the DECS, as defined in the
Indenture, shall occur and be continuing, the principal of all DECS may be
declared due and payable and therefore will result in the mandatory exchange of
the principal amount thereof for Learning Common Stock (or, at the Company's
option, cash and/or such other consideration as permitted or required herein),
all in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Debt Securities of each series
under the Indenture at any time by the Company with the consent of the Holders
of not less than a majority in aggregate principal amount of the Debt
Securities at the time outstanding of each series to be affected thereby. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Debt Securities of any series
at the time outstanding, on behalf of the Holders of all the Debt Securities of
such series, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences
with respect to such series. Any such consent or waiver by the Holder of this
DECS shall be conclusive and binding upon such Holder and upon all future
Holders of this DECS and of any DECS issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent or
waiver is made upon this DECS.
No reference herein to the Indenture and no provision of this DECS or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the interest on this DECS and make the
mandatory exchange for Learning Common Stock at the times, place and rate, and
in the manner, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, this DECS is transferable on the register for the DECS, upon
surrender of this DECS for registration of transfer at the office or agency of
the Company to be maintained for that purpose in The City of New York, New
York, or at any other office or agency of the Company maintained for that
purpose, duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Company and the Registrar for the DECS duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new DECS, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees. No service charge shall be made for any such transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental. charge payable in connection with the registration
of such transfer or exchange, other than certain exchanges not involving any
transfer.
Certain capitalized terms used in this DECS but not defined herein
have the meanings set forth in the Indenture.
R-2
<PAGE> 27
THIS DECS SHALL FOR ALL PURPOSES BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAWS PRINCIPLES THEREOF.
The Company, the Trustee for the DECS and any agent of the Company or such
Trustee may treat the person in whose name this DECS is registered as the owner
hereof for the purpose of receiving payment as herein provided and for all
other purposes, whether or not this DECS be overdue, and neither the Company,
such Trustee nor any such agent shall be affected by notice to the contrary.
R-3
<PAGE> 28
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ___________Custodian___________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of Under Uniform Gifts to Minors Act
survivorship and not as _________________________________
tenants in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
___________________________________________________
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
Please insert Social Security or Taxpayer I.D. or other
Identifying Number of Assignee
________________
_______________________________________________________________________________
_______________________________________________________________________________
Please Print or Type Name and Address Including Postal Zip Code of Assignee
_______________________________________________________________________________
the within DECS and all rights thereunder, hereby irrevocably constituting and
appointing ________________ attorney to transfer said DECS on the books of
Tribune Company with full power of substitution in the premises.
Dated: _______________________
____________________________________
Signature
____________________________________
NOTICE: The signature to this
assignment must correspond with the
name as it appears upon the face of
the within DECS in every particular,
without alteration or enlargement or
any change whatsoever.
R-4
<PAGE> 1
EXHIBIT 4.2
[FORM OF NOTE]
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITARY OR A
NOMINEE OF THE DEPOSITARY. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN
PART FOR THE INDIVIDUAL DEBT SECURITIES REPRESENTED HEREBY, THIS GLOBAL
SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY
OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE
TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO., OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND
ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL SINCE THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
NO. CUSIP NO.
896047206
[Form of Face of DECS]
TRIBUNE COMPANY
DECS (SM)
(Debt Exchangeable for Common Stock (SM)
6 1/4% Exchangeable Note Due August 15, 2001
(Subject to Exchange at Maturity into Shares of Common Stock,
Par Value $.01 Per Share, of The Learning Company, Inc.)
Tribune Company, a Delaware corporation (hereinafter called the "Company",
which term includes any successor corporation under the Indenture hereinafter
referred to), for
<PAGE> 2
value received, hereby promises to exchange with CEDE & CO. or registered
assigns, on August 15, 2001 a number of shares of Common Stock, par value $.01
per share (the "Learning Common Stock"), of the Learning Company, Inc. ("The
Learning Company") (or, at the Company's option, the cash equivalent thereof
and/or such other consideration as permitted or required by the terms of the
DECS) at the Exchange Rate (as defined herein), and to pay interest (computed
on the basis of a 360-day year of twelve 30-day months) on such principal
amount from the date of original issuance or from the most recent Interest
Payment Date (as defined below) to which interest has been paid or duly
provided for, quarterly on February 15, May 15, August 15 and November 15 of
each year (each, an "Interest Payment Date" and, collectively, the "Interest
Payment Dates"), commencing November 15, 1998, at the rate per annum specified
in the title of this note, until Maturity. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in said Indenture, be paid to the person in whose name this
DECS (or the DECS in exchange or substitution for which this DECS was issued)
is registered at the close of business on the Regular Record Date (as defined
below) for interest payable on such Interest Payment Date. The Regular Record
Date for any interest payment is the close of business on the February 1, May
1, August 1 and November 1 immediately preceding the relevant Interest Payment
Date, whether or not a Business Day (as defined below), provided that interest
payable at Maturity shall be payable to the person to whom the Learning Common
Stock is deliverable. In any case where such Interest Payment Date shall not
be a Business Day, then (notwithstanding any other provision of said Indenture
or this DECS) payment of such interest need not be made on such date, but may
be made on the next succeeding Business Day with the same force and effect as
if made on such Interest Payment Date, and, if such payment is so made, no
interest shall accrue for the period from and after such Interest Payment Date.
Any such interest not so punctually paid or duly provided for shall forthwith
cease to be payable to the registered Holder on such Regular Record Date, and
may be paid to the person in whose name this DECS (or the DECS in exchange or
substitution for which this DECS was issued) is registered at the close of
business on a record date for the payment of such interest to be fixed by the
Trustee for the DECS, notice whereof shall be given to Holders of the DECS not
less than ten days prior to such record date, or may be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the DECS may be listed and not deemed impracticable by the
Trustee, and upon such notice as may be required by such exchange.
At Maturity, the principal amount of this DECS will be mandatorily
exchanged into a number of shares of Learning Common Stock, at the Exchange
Rate. The "Exchange Rate" is equal to (a) if the Maturity Price (as defined
below) is greater than or equal to $33.625 (the "Threshold Appreciation
Price"), .8309 shares of Learning Common Stock per DECS, (b) if the Maturity
Price is less than the Threshold Appreciation Price but is greater than
$27.9375 (the "Initial Price"), a fraction equal to the Initial Price divided
by the Maturity Price of one share of Learning Common Stock per DECS (such
fractional share being calculated to the nearest 1/10,000th of a share or, if
there is not a nearest 1/10,000th of a share, to the next higher 1/10,000th of
a share) and (c) if the Maturity Price is less than or equal to the Initial
Price, one
<PAGE> 3
share of Learning Common Stock per DECS. Any shares of Learning Common Stock
delivered by the Company to the Holders of the DECS that are not affiliated
with The Learning Company shall be free of any transfer restrictions except to
the extent any transfer restrictions are caused by the Holders of DECS, and the
holders of DECS will be responsible for the payment of any and all brokerage
costs upon the subsequent sale of such shares. No fractional shares of
Learning Common Stock will be issued at Maturity as provided in the Indenture.
The Company may at its option, in lieu of delivering shares of Learning
Common Stock, deliver cash in an amount equal to the value of such number of
shares of Learning Common Stock at the Maturity Price as provided in the
Indenture; provided, however, that if such option is exercised, the Company
shall deliver cash with respect to all, but not less than all, of the shares of
Learning Common Stock that would otherwise be deliverable.
Notwithstanding the foregoing, (i) in the case of certain dilution events,
the Exchange Rate will be subject to adjustment and (ii) in the case of certain
adjustment events, the consideration received by Holders of DECS at Maturity
will be shares of Learning Common Stock, other securities and/or cash, each as
provided in the Indenture.
The "Maturity Price" is defined as the average Closing Price per share of
Learning Common Stock on the 20 Trading Days immediately prior to (but not
including) the date of Maturity or, under certain circumstances as provided in
the Indenture, the market value per share of Learning Common Stock as of the
date of Maturity as determined by a nationally recognized investment banking
firm retained for this purpose by the Company. The "Closing Price" of any
security on any date of determination means (i) the closing sale price (or, if
no closing sale price is reported, the last reported sale price) of such
security (regular way) on the New York Stock Exchange (the "NYSE") on such
date, (ii) if such security is not listed for trading on the NYSE on any such
date, as reported in the composite transactions for the principal United States
securities exchange on which such security is so listed, (iii) if such security
is not so listed on a United States national or regional securities exchange,
as reported by the Nasdaq Stock Market, (iv) if such security is not so
reported, the last quoted bid price for such security in the over-the counter
market as reported by the National Quotation Bureau or similar organization or
(v) if such security is not so quoted, the average of the mid-point of the last
bid and ask prices for such security from each of at least three nationally
recognized investment banking firms selected for this purpose by the Company.
A "Trading Day" is defined as a Business Day on which the security the Closing
Price of which is being determined (i) is not suspended from trading on any
national or regional securities exchange or association or over-the-counter
market at the close of business and (ii) has traded at least once on the
national or regional securities exchange or association or over-the-counter
market that is the primary market for the trading of such security. "Business
Day" means any day that is not a Saturday, a Sunday or a day on which the NYSE,
banking institutions or trust companies in The City of New York, New York are
authorized or obligated by law or executive order to close.
<PAGE> 4
Interest on this DECS will be payable, and delivery of Learning Common
Stock (or, at the Company's option, its cash equivalent and/or such other
consideration as permitted or required herein and in the Indenture) in exchange
for the principal amount of this DECS at Maturity will be made upon surrender
of this DECS, at the office or agency of the Company maintained for that
purpose, and payment of interest on (and, if the Company elects not to deliver
Learning Common Stock and/or other securities upon exchange at Maturity, the
cash equivalent thereof payable upon exchange for the principal amount of) this
DECS will be made in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company payment of interest may be
made by check mailed to the persons in whose names the DECS are registered on
the close of business on the February 1, May 1, August 1 and November 1
immediately preceding the relevant Interest payment Date. Initially, such
office shall be the principal corporate trust office of the Trustee in New York
City, which is located at 77 Water Street, New York, New York 10005
ADDITIONAL PROVISIONS OF THIS DECS ARE CONTAINED ON THE REVERSE HEREOF AND
SUCH PROVISIONS SHALL HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH IN THIS
PLACE.
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee for this DECS by manual signature, this DECS shall not be
entitled to any benefit under the Indenture, or be valid or obligatory for any
purpose. "DECS" and "Debt Exchangeable for Common Stock" are service marks of
Salomon Brothers Inc.
IN WITNESS WHEREOF, Tribune Company has caused this instrument to be duly
executed under its corporate seal.
Dated: TRIBUNE COMPANY
By:
Name:
Title:
Attest:
Name:
<PAGE> 5
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Debt Securities issued under the within-mentioned Indenture.
BANK OF MONTREAL TRUST
COMPANY, as Trustee
By:
Authorized Officer
<PAGE> 6
[Form of Reverse of DECS]
TRIBUNE COMPANY
6 1/4% Exchangeable Note Due August 15, 2001
(Subject to Exchange at Maturity into Shares of Common Stock,
Par Value $.01 Per Share, of The Learning Company, Inc.)
This DECS is one of a duly authorized issue of debentures, notes or other
evidences of indebtedness (hereinafter called the "Debt Securities") of the
Company of the series hereinafter specified, which DECS are limited in
aggregate principal amount to $200 million, all such Debt Securities issued
and to be issued under an indenture dated as of January 1, 1997, as
supplemented by the First Supplemental Indenture dated July __, 1998 (as so
supplemented and as may be further supplemented from time to time, the
"Indenture") between the Company and Bank of Montreal Trust Company, as trustee
(herein called the "Trustee", which term includes any successor Trustee under
the Indenture), pursuant to which the Company has designated Bank of Montreal
Trust Company as Trustee for the DECS, to which Indenture and all other
indentures supplemental thereto reference is hereby made for a statement of the
rights and limitation of rights thereunder of the Holders of the Debt
Securities and of the rights, obligations, duties and immunities of the Trustee
for each series of Debt Securities and of the Company, and the terms upon which
the Debt Securities are and are to be authenticated and delivered. As provided
in the Indenture, the Debt Securities may be issued in one or more series,
which different series may be issued in various aggregate principal amounts,
may be denominated in currencies other than U.S. Dollars (including composite
currencies), may mature at different times, may bear interest, if any, at
different rates, may be subject to different redemption provisions, if any, may
be subject to different sinking fund or other purchase provisions, if any, may
be subject to different covenants and Events of Default and may otherwise vary
as in the Indenture provided or permitted. This DECS is one of a series of the
Debt Securities designated as 6 1/4% Exchangeable Notes Due August 15, 2001.
The DECS may not be redeemed prior to Stated Maturity and are not entitled
to the benefit of any sinking fund.
The provisions contained in the Indenture for defeasance of the Company's
obligations upon compliance by the Company with certain conditions set forth
therein will not be applicable to the DECS. Certain other provisions contained
in the Indenture pertaining to satisfaction and discharge of the Indenture upon
deposit of funds with the Trustee shall apply to the DECS in the manner set
forth in the First Supplemental Indenture referred to above.
<PAGE> 7
If an Event of Default with respect to the DECS, as defined in the
Indenture, shall occur and be continuing, the principal of all DECS may be
declared due and payable and therefore will result in the mandatory exchange of
the principal amount thereof for Learning Common Stock (or, at the Company's
option, cash and/or such other consideration as permitted or required herein),
all in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Debt Securities of each series
under the Indenture at any time by the Company with the consent of the Holders
of not less than a majority in aggregate principal amount of the Debt
Securities at the time outstanding of each series to be affected thereby. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Debt Securities of any series
at the time outstanding, on behalf of the Holders of all the Debt Securities of
such series, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences
with respect to such series. Any such consent or waiver by the Holder of this
DECS shall be conclusive and binding upon such Holder and upon all future
Holders of this DECS and of any DECS issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent or
waiver is made upon this DECS.
No reference herein to the Indenture and no provision of this DECS or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the interest on this DECS and make the
mandatory exchange for Learning Common Stock at the times, place and rate, and
in the manner, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, this DECS is transferable on the register for the DECS, upon
surrender of this DECS for registration of transfer at the office or agency of
the Company to be maintained for that purpose in The City of New York, New
York, or at any other office or agency of the Company maintained for that
purpose, duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Company and the Registrar for the DECS duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new DECS, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees. No service charge shall be made for any such transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental. charge payable in connection with the registration
of such transfer or exchange, other than certain exchanges not involving any
transfer.
Certain capitalized terms used in this DECS but not defined herein
have the meanings set forth in the Indenture.
<PAGE> 8
THIS DECS SHALL FOR ALL PURPOSES BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAWS PRINCIPLES THEREOF.
The Company, the Trustee for the DECS and any agent of the Company or such
Trustee may treat the person in whose name this DECS is registered as the owner
hereof for the purpose of receiving payment as herein provided and for all
other purposes, whether or not this DECS be overdue, and neither the Company,
such Trustee nor any such agent shall be affected by notice to the contrary.
<PAGE> 9
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ___________Custodian___________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of Under Uniform Gifts to Minors Act
survivorship and not as _________________________________
tenants in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
___________________________________________________
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
Please insert Social Security or Taxpayer I.D. or other
Identifying Number of Assignee
________________
_______________________________________________________________________________
_______________________________________________________________________________
Please Print or Type Name and Address Including Postal Zip Code of Assignee
_______________________________________________________________________________
the within DECS and all rights thereunder, hereby irrevocably constituting and
appointing ________________ attorney to transfer said DECS on the books of
Tribune Company with full power of substitution in the premises.
Dated: _______________________
____________________________________
Signature
____________________________________
NOTICE: The signature to this
assignment must correspond with the
name as it appears upon the face of
the within DECS in every particular,
without alteration or enlargement or
any change whatsoever.
<PAGE> 1
EXHIBIT 99.1
Public Securities Association
40 Broad Street, New York, NY 10004-2373
Telephone (212) 809-7000
MASTER SECURITIES LOAN AGREEMENT
Dated as of August 5, 1998
Between:
Smith Barney, Inc
- ----------------------------
and
Tribune Company
- ----------------------------
This Agreement sets forth the terms and conditions under which one party
("Lender") may, from time to time, lend to the other party ("Borrower") certain
securities against a pledge of collateral. Capitalized terms not otherwise
defined herein shall have the meanings provided in Section 26.
The parties hereto agree as follows:
1. Loans of Securities.
1.1 Subject to the terms and conditions of this Agreement, Borrower or
Lender may, from time to time, orally seek to initiate a transaction in which
Lender will lend securities to Borrower. Borrower and Lender shall agree
orally on the terms of each Loan, including the issuer of the securities, the
amount of securities to be lent, the basis of compensation, and the amount of
Collateral to be transferred by Borrower, which terms may be amended during the
Loan.
1.2 Notwithstanding any other provision in this Agreement regarding when a
Loan commences, a Loan hereunder shall not occur until the Loaned Securities
and the Collateral therefor have been transferred in accordance with Section
16.
1.3 WITHOUT WAIVING ANY RIGHTS GIVEN TO LENDER HEREUNDER, IT IS UNDERSTOOD
AND AGREED THAT THE PROVISIONS OF THE SECURITIES INVESTOR PROTECTION ACT OF
1970 MAY NOT PROTECT LENDER WITH RESPECT TO LOANED SECURITIES HEREUNDER AND
THAT, THEREFORE, THE COLLATERAL
<PAGE> 2
DELIVERED TO LENDER MAY CONSTITUTE THE ONLY SOURCE OF SATISFACTION OF
BORROWER'S OBLIGATIONS IN THE EVENT BORROWER FAILS TO RETURN THE LOANED
SECURITIES.
2. Transfer of Loaned Securities.
2.1 Unless otherwise agreed, Lender shall transfer Loaned Securities to
Borrower hereunder on or before the Cutoff Time on the date agreed to by
Borrower and Lender for the commencement of the Loan.
2.2 Unless otherwise agreed, Borrower shall provide Lender, in each Loan
in which Lender is a Customer, with a schedule and receipt listing the Loaned
Securities. Such schedule and receipt may consist of (a) a schedule provided
to Borrower by Lender and executed and returned by Borrower when the Loaned
Securities are received, (b) in the case of securities transferred through a
Clearing Organization which provides transferors with a notice evidencing such
transfer, such notice, or (c) a confirmation or other document provided to
Lender by Borrower.
3. Collateral.
3.1 Unless otherwise agreed, Borrower shall, prior to or concurrently with
the transfer of the Loaned Securities to Borrower, but in no case later than
the close of business on the day of such transfer, transfer to Lender
Collateral with a market value at least equal to a percentage of the market
value of the Loaned Securities agreed to by Borrower and Lender (which shall be
not less than 100% of the market value of the Loaned Securities) (the "Margin
Percentage").
3.2 The Collateral transferred by Borrower to Lender, as adjusted pursuant
to Section 8, shall be security for Borrower's obligations in respect of such
Loan and for any other obligations of Borrower to Lender. Borrower hereby
pledges with, assigns to, and grants Lender a continuing first security
interest in, and a lien upon, the Collateral, which shall attach upon the
transfer of the Loaned Securities by Lender to Borrower and which shall cease
upon the transfer of the Loaned Securities by Borrower to Lender. In addition
to the rights and remedies given to Lender hereunder, Lender shall have all the
rights and remedies of a secured party under the New York Uniform Commercial
Code. It is understood that Lender may use or invest the Collateral, if such
consists of cash, at its own risk, but that (unless Lender is a Broker-Dealer)
Lender shall, during the term of any Loan hereunder, segregate Collateral from
all securities or other assets in its possession. Lender may pledge, repledge,
hypothecate, rehypothecate, lend, relend, sell or otherwise transfer the
Collateral, or re-register Collateral evidenced by physical certificates in any
name other than Borrower's, only (a) if Lender is Broker-Dealer or (b) in the
event of a Default by Borrower. Segregation of Collateral may be accomplished
by appropriate identification on the books and records of Lender if it is a
"financial intermediary" or a "clearing corporation" within the meaning of the
New York Uniform Commercial Code.
2
<PAGE> 3
3.3 Except as otherwise provided herein, upon transfer to Lender of the
Loaned Securities on the day a Loan is terminated pursuant to Section 5, Lender
shall be obligated to transfer the Collateral (as adjusted pursuant to Section
8) to Borrower no later than the Cutoff Time on such day or, if such day is not
a day on which a transfer of such Collateral may be effected under Section 16,
the next day on which such a transfer may be effected.
3.4 If Borrower transfers Collateral to Lender, as provided in Section 3.1,
and Lender does not transfer the Loaned Securities to Borrower, Borrower shall
have the absolute right to the return of the Collateral, and if Lender transfers
Loaned Securities to Borrower and Borrower does not transfer Collateral to
Lender as provided in Section 3.1, Lender shall have the absolute right to the
return of the Loaned Securities.
3.5 Borrower may, upon reasonable notice to Lender (taking into account
all relevant factors, including industry practice, the type of Collateral to be
substituted and the applicable method of transfer), substitute Collateral for
Collateral securing any Loan or Loans; provided, however, that such substituted
Collateral shall (a) consist only of cash, securities or other property that
Borrower and Lender agreed would be acceptable Collateral prior to the Loan or
Loans and (b) have a market value such that the aggregate market value of such
substituted Collateral, together with all other Collateral for Loans in which
the party substituting such Collateral is acting as Borrower, shall equal or
exceed the agreed upon Margin Percentage of the market value of the Loaned
Securities. Prior to the expiration of any letter of credit supporting
Borrower's obligations hereunder, Borrower shall, no later than the Cutoff Time
on the date such letter of credit expires, obtain an extension of the
expiration of such letter of credit or replace such letter of credit by
providing Lender with a substitute letter of credit in an amount at least equal
to the amount of the letter of credit for which it is substituted.
3.6 Lender acknowledges that, in connection with Loans of Government
Securities and as otherwise permitted by applicable law, some securities
provided by Borrower as Collateral under this Agreement may not be guaranteed
by the United States.
4. Fees for Loan.
4.1 Unless otherwise agreed, (a) Borrower agrees to pay Lender a loan fee
(a "Loan Fee"), computed daily on each Loan to the extent such Loan is secured
by Collateral other than cash, based on the aggregate par value (in the case of
Loans of Government Securities) or the aggregate market value (in the case of
all other Loans) of the Loaned Securities on the day for which such Loan Fee is
being computed, and (b) Lender agrees to pay Borrower a fee or rebate (a "Cash
Collateral Fee") on Collateral consisting of cash, computed daily based on the
amount of cash held by Lender as Collateral, in the case of each of the Loan Fee
and the Cash Collateral Fee at such rates as Borrower and Lender may agree.
Except as Borrower and Lender may otherwise agree (in the event that cash
Collateral is transferred by clearing house funds or otherwise), Loan Fees shall
accrue from and including the date on which the Loaned Securities
3
<PAGE> 4
are transferred to Borrower to, but excluding, the date on which such Loaned
Securities are returned to Lender, and Cash Collateral Fees shall accrue from
and including the date on which the cash Collateral is transferred to Lender to,
but excluding, the date on which such cash Collateral is returned to Borrower.
4.2 Unless otherwise agreed, any Loan Fee or Cash Collateral Fee payable
hereunder shall be payable:
(a) in the case of any Loan of securities other than Government
Securities, upon the earlier of (i) the fifteenth day of the month
following the calendar month in which such fee was incurred or (ii)
the termination of all Loans hereunder (or, if a transfer of cash in
accordance with Section 16 may not be effected on such fifteenth day
or the day of such termination, as the case may be, the next day on
which such a transfer may be effected); and
(b) in the case of any Loan of Government Securities, upon the
termination of such Loan.
Notwithstanding the foregoing, all Loan Fees shall be payable by Borrower
immediately in the event of a Default hereunder by Borrower and all Cash
Collateral Fees shall be payable immediately by Lender in the event of a
Default by Lender.
5. Termination of the Loan. Unless otherwise agreed, (a) Borrower may
terminate a Loan on any Business Day by giving notice to Lender and
transferring the Loaned Securities to Lender before the Cutoff Time on such
Business Day, and (b) Lender may terminate a Loan on a termination date
established by notice given to Borrower prior to the close of business on a
Business Day. The termination date established by a termination notice given
by Lender to Borrower shall be a date no earlier than the standard settlement
date for trades of the Loaned Securities entered into on the date of such
notice, which date shall, unless Borrower and Lender agree to the contrary, be
(i) in the case of Government Securities, the next Business Day following such
notice and (ii) in the case of all other securities, the fifth Business Day
following such notice. Unless otherwise agreed, Borrower shall, on or before
the Cutoff Time on the termination date of a Loan, transfer the Loaned
Securities to Lender; provided, however, that upon such transfer by Borrower,
Lender shall transfer the Collateral (as adjusted pursuant to Section 8) to
Borrower in accordance with Section 3.3.
6. Rights of Borrower in Respect of the Loaned Securities. Except as set forth
in Sections 7.1 and 7.2 and as otherwise agreed by Borrower and Lender, until
Loaned Securities are required to be redelivered to Lender upon termination of
a Loan hereunder, Borrower shall have all of the incidents of ownership of the
Loaned Securities, including the right to transfer the Loaned Securities to
others. Lender hereby waives the right to vote, or to provide any consent or
4
<PAGE> 5
to take any similar action with respect to, the Loaned Securities in the event
that the record date or deadline for such vote, consent or other action falls
during the term of the Loan.
7. Dividends, Distributions, Etc.
7.1 Lender shall be entitled to receive all distributions made on or in
respect of the Loaned Securities which are not otherwise received by Lender, to
the full extent it would be so entitled if the Loaned Securities had not been
lent to Borrower, including, but not limited to: (a) cash and all other
property; (b) stock dividends; (c) securities received as a result of split ups
of the Loaned Securities and distributions in respect thereof; (d) interest
payments; and (e) all rights to purchase additional securities.
7.2. Any cash distributions made on or in respect of the Loaned
Securities, which Lender is entitled to receive pursuant to Section 7.1 shall
be paid by the transfer of cash to Lender by Borrower, on the date any such
distribution is paid, in an amount equal to such cash distribution, so long as
Lender is not in Default at the time of such payment. Non-cash distributions
received by Borrower shall be added to the Loaned Securities on the date of
distribution and shall be considered such for all purposes, except that if the
Loan has terminated, Borrower shall forthwith transfer the same to Lender.
7.3 Borrower shall be entitled to receive all cash distributions made on
or in respect of non-cash Collateral which are not otherwise received by
Borrower, to the full extent it would be so entitled if the Collateral had not
been transferred to Lender. Any distributions of cash made on or in respect of
such Collateral which Borrower is entitled to receive hereunder shall be paid
by the transfer of cash to Borrower by Lender, on the date any such
distribution is paid, in an amount equal to such cash distribution, so long as
Borrower is not in Default at the time of such payment.
7.4 (a) Unless otherwise agreed, if (i) Borrower is required to make a
payment (a "Borrower Payment") with respect to cash distributions on Loaned
Securities under Sections 7.1 and 7.2 ("Securities Distributions"), or (ii)
Lender is required to make a payment (a "Lender Payment") with respect to cash
distributions on Collateral under Section 7.3 ("Collateral Distributions"), and
(iii) Borrower or Lender, as the case may be ("Payor"), shall be required by
law to collect any withholding or other tax, duty, fee, levy or charge required
to be deducted or withheld from such Borrower Payment or Lender Payment
("Tax"), then Payor shall (subject to subsections (b) and (c) below, pay such
additional amounts as may be necessary in order that the net amount of the
Borrower Payment or Lender Payment received by the Lender or Borrower, as the
case may be ("Payee"), after payment of such Tax equals the net amount of the
Securities Distribution or Collateral Distribution that would have been
received if such Securities Distribution or Collateral Distribution had been
paid directly to the Payee.
5
<PAGE> 6
(b) No additional amounts shall be payable to a Payee under subsection (a)
above to the extent that Tax would have been imposed on a Securities
Distribution or Collateral Distribution paid directly to the Payee.
(c) No additional amounts shall be payable to a Payee under subsection (a)
above to the extent that such Payee is entitled to an exemption from, or
reduction in the rate of, Tax on a Borrower Payment or Lender Payment subject
to the provision of a certificate or other documentation, but has failed timely
to provide such certificate or other documentation.
(d) Each party hereto shall be deemed to represent that, as of the
commencement of any Loan hereunder, no Tax would be imposed on any cash
distribution paid to it with respect to (i) Loaned Securities subject to a Loan
in which it is acting as Lender or (ii) Collateral for any Loan in which it is
acting as Borrower, unless such party has given notice to the contrary to the
other party hereto (which notice shall specify the rate at which such Tax would
be imposed). Each party agrees to notify the other of any change that occurs
during the term of a Loan in the rate of any Tax that would be imposed on any
such cash distributions payable to it.
7.5 To the extent that, under the provisions of Sections 7.1 through 7.4
(a) a transfer of cash or other property by Borrower would give rise to a
Margin Excess (as defined in Section 8.3 below) or (b) a transfer of cash or
other property by Lender would give rise to a Margin Deficit (as defined in
Section 8.2 below), Borrower or Lender (as the case may be) shall not be
obligated to make such transfer of cash or other property in accordance with
such Sections, but shall in lieu of such transfer immediately credit the
amounts that would have been transferable under such Sections to the account of
Lender or Borrower (as the case may be).
8. Mark to Market
8.1 Borrower shall daily mark to market any Loan hereunder and in the
event that at the close of trading on any Business Day the market value of the
Collateral for any Loan to Borrower shall be less that 100% of the market value
of all the outstanding Loaned Securities subject to such Loan, Borrower shall
transfer additional Collateral no later than the close of the next Business Day
so that the market value of such additional Collateral, when added to the
market value of the other Collateral for such Loan, shall equal 100% of the
market value of the Loaned Securities.
8.2 In addition to any rights of Lender under Section 8.1, in the event
that at the close of trading on any Business Day the aggregate market value of
all Collateral for Loans by Lender shall be less than the Margin Percentage of
the market value of all the outstanding Loaned Securities subject to such Loans
(a "Margin Deficit"), Lender may, by notice to Borrower, demand that Borrower
transfer to Lender additional Collateral so that the market value of such
additional Collateral, when added to the market value of all other Collateral
for such Loans, shall
6
<PAGE> 7
equal or exceed the agreed upon Margin Percentage of the market value of the
Loaned Securities. Unless otherwise agreed, such transfer is to be made no
later than the close of the next Business Day following the day of Lender's
notice to Borrower.
8.3 In the event that at the close of trading on any Business Day the
market value of all Collateral for Loans to Borrower shall be greater than the
Margin Percentage of the market value of all the outstanding Loaned Securities
subject to such Loans (a "Margin Excess"), Borrower may, by notice to Lender,
demand that Lender transfer to Borrower such amount of the Collateral selected
by Borrower so that the market value of the Collateral for such Loans, after
deduction of such amounts, shall thereupon not exceed the Margin Percentage of
the market value of the Loaned Securities. Unless otherwise agreed, such
transfer is to be made no later than the close of the next Business Day
following the day of Borrower's notice to Lender.
8.4 Borrower and Lender may agree, with respect to one or more Loans
hereunder, to mark the values to market pursuant to Sections 8.2 and 8.3 by
separately valuing the Loaned Securities lent and the Collateral given in
respect thereof on a Loan-by-Loan basis.
8.5 Borrower and Lender may agree, with respect to any or all Loans
hereunder, that the respective rights of Lender and Borrower under Sections 8.2
and 8.3 may be exercised only where a Margin Excess or Margin Deficit exceeds a
specified dollar amount or a specified percentage of the market value of the
Loaned Securities under such Loans (which amount or percentage shall be agreed
to by Borrower and Lender prior to entering into any such Loans).
9. Representations. Each party to this Agreement hereby makes the following
representations and warranties, which shall continue during the term of any
Loan hereunder:
9.1 Each party hereto represents and warrants that (a) it has the power to
execute and deliver this Agreement, to enter into the Loans contemplated hereby
and to perform its obligations hereunder; (b) it has taken all necessary action
to authorize such execution, delivery and performance; and (c) this Agreement
constitutes a legal, valid and binding obligation enforceable against it in
accordance with its terms.
9.2 Each party hereto represents and warrants that the execution, delivery
and performance by it of this Agreement and each Loan hereunder will at all
times comply with all applicable laws and regulations including those of
applicable regulatory and self-regulatory organizations.
9.3 Each party hereto represents and warrants that it has not relied on
the other for any tax or accounting advice concerning this Agreement and that
it has made its own determination as to the tax and accounting treatment of any
Loan and any dividends, remuneration or other funds received hereunder.
7
<PAGE> 8
9.4 Borrower represents and warrants that it is acting for its own
account. Lender represents and warrants that it is acting for its own account
unless it expressly specifies otherwise in writing and complies with Section
10.3(b).
9.5 Borrower represents and warrants that (a) has, or will have at the
time of transfer of any Collateral, the right to grant a first security
interest therein subject to the terms and conditions hereof, and (b) it (or the
person to whom it relends the Loaned Securities) is borrowing or will borrow
the Loaned Securities (except for Loaned Securities that qualify as "exempted
securities" under Regulation T of the Board of Governors of the Federal Reserve
System) for the purpose of making delivery of such securities in the case of
short sales, failure to receive securities required to be delivered, or as
otherwise permitted pursuant to Regulation T as in effect from time to time.
9.6 Lender represents and warrants that it has, or will have at the time
of transfer of any Loaned Securities, the right to transfer the Loaned
Securities subject to the terms and conditions hereof.
10. Covenants
10.1 Each party hereto agrees and acknowledges that (a) each Loan
hereunder is a "securities contract," as such term is defined in Section 741(7)
of Title 11 of the United States Code (the "Bankruptcy Code"), (b) each and
every transfer of funds, securities and other property under this Agreement and
each Loan hereunder is a "settlement payment" or a "margin payment," as such
terms are used in Sections 362(b)(6) and 546(e) of the Bankruptcy Code, and (c)
the rights given to Borrower and Lender hereunder upon a Default by the other
constitute the right to cause the liquidation of a securities contract and the
right to set off mutual debts and claims in connection with a securities
contract, as such terms are used in Sections 555 and 362(b)(6) of the
Bankruptcy Code. Each party hereto further agrees and acknowledges that if a
party hereto is an "insured depository institution," as such term is defined in
the Federal Deposit Insurance Act, as amended ("FDIA"), then each Loan
hereunder is a "securities contract" and "qualified financial contract," as
such terms are defined in the FDIA and any rules, orders or policy statements
thereunder.
10.2 Borrower agrees to be liable as principal with respect to its
obligations hereunder.
10.3 Lender agrees either (a) to be liable as principal with respect to
its obligations hereunder or (b) to execute and comply fully with the
provisions of Annex I (the terms and conditions of which Annex are incorporated
herein and made a part hereof).
10.4 Promptly upon (and in any event within seven (7) Business Days after)
demand by Lender, Borrower shall furnish Lender with Borrower's most recent
publicly-available financial statements and any other financial statements
mutually agreed upon by Borrower and
8
<PAGE> 9
Lender. Unless otherwise agreed, if Borrower is subject to the requirements of
Rule 17a-5(c) under the Exchange Act, it may satisfy the requirements of this
Section by furnishing Lender with its most recent statement required to be
furnished to customers pursuant to such Rule.
10.5 Except to the extent required by applicable law or regulation or as
otherwise agreed, Borrower and Lender agree that Loans hereunder shall in no
event be "exchange contracts" for purposes of the rules of any securities
exchange and that Loans hereunder shall not be governed by the buy-in or
similar rules of any such exchange, registered national securities or other
self-regulatory organization.
11. Events of Default. All Loans hereunder may, at the option of the
non-defaulting party exercised by notice to the defaulting party (which option
shall be deemed to have been exercised even if no notice is given, immediately
upon the occurrence of an event specified in subsection(e) below), be
terminated immediately upon the occurrence of any one or more of the following
events (individually a "Default"):
(a) if any Loaned Securities shall not be transferred to Lender
upon termination of the Loan as required by Section 5;
(b) if any Collateral shall not be transferred to Borrower upon
termination of the Loan as required by Sections 3.3 and 5;
(c) if either party shall fail to transfer Collateral as required
by Section 8;
(d) if either party (i) shall fail to transfer to the other party
amounts in respect of distributions required to be transferred by
Section 7, (ii) shall have received notice of such failure from the
non-defaulting party, and (iii) shall not have cured such default by
the Cutoff Time on the next day after such notice on which a transfer
of cash may be effected in accordance with Section 16;
(e) if (i) either party shall commence as debtor any case or proceeding
under any bankruptcy, insolvency, reorganization, liquidation,
dissolution or similar law, or seek the appointment of a receiver,
conservator, trustee, custodian or similar official for such party or
any substantial part of its property, (ii) any such case or proceeding
shall be commenced against either party, or another shall seek such an
appointment, or any application shall be filed against either party
for a protective decree under the provisions of the Securities
Investor Protection Act of 1970, which (A) is consented to or not
timely contested by such party, (B) results in the entry of any order
for relief, such an appointment, the issuance of such a protective
decree or the entry of an order having similar effect, or (C) is not
dismissed within 15 days, (iii) either party shall make a general
assignment for the
9
<PAGE> 10
benefit of creditors, or (iv) either party shall admit in writing its
inability to pay its debts as they become due;
(f) if either party shall have been suspended or expelled from
membership or participation in any national securities exchange or
registered national securities association of which it is a member or
other self-regulatory organization to whose rules it is subject or if
it is suspended from dealing in securities by any federal or state
government agency thereof;
(g) if either party shall have its license, charter, or other
authorization necessary to conduct a material portion of its business
withdrawn, suspended or revoked by any applicable federal or state
government or agency thereof;
(h) if any representation made by either party in respect of this
Agreement or any Loan or Loans hereunder shall be incorrect or untrue
in any material respect during the term of any Loan hereunder;
(i) if either party notifies the other, orally or in writing, of
its inability to or its intention not to perform its obligations
hereunder or otherwise disaffirms, rejects or repudiates any if its
obligations hereunder; or
(j) if either party (i) shall fail to perform any material obligation
under this Agreement not specifically set forth in clauses (a) through
(i) above, including but not limited to the payment of fees as
required by Section 4, and the payment of transfer taxes as required
by Section 14, (ii) shall have received notice of such failure from
the non-defaulting party and (iii) shall not have cured such failure
by the Cutoff Time on the next day after such notice on which a
transfer of cash may be effected under Section 16.
12. Lender's Remedies. Upon the occurrence of a Default under Section 11
entitling Lender to terminate all Loans hereunder, Lender shall have the right
(without further notice to Borrower), in addition to any other remedies
provided herein or under applicable law, (a) to purchase a like amount of
Loaned Securities ("Replacement Securities") in the principal market for such
Collateral in a commercially reasonable manner, (b) to sell any Collateral in
the principal market for such Collateral in a commercially reasonable manner
and (c) to apply and set off the Collateral and any proceeds thereof (including
any amounts drawn under a letter of credit supporting any Loan) against the
payment of the purchase price for such Replacement Securities and any amounts
due to Lender under Sections 4, 7, 14 and 17. In the event Lender shall
exercise such rights, Borrower's obligation to return a like amount of the
Loaned Securities shall terminate, Lender may similarly apply the Collateral
and any proceeds thereof to any other obligation of Borrower under this
Agreement, including Borrower's obligations with respect to distributions paid
to Borrower (and not forwarded to Lender) in respect of Loaned Securities. In
10
<PAGE> 11
the event that (i) the purchase price of Replacement Securities (plus all other
amounts, if any, due to Lender hereunder) exceeds (ii) the amount of the
Collateral, Borrower shall be liable to Lender for the amount of such excess
together with interest thereon at a rate equal to (A) in the case of purchases
of Foreign Securities, LIBOR, (B) in the case of purchases of any other
securities (or other amounts, if any, due to Lender hereunder), the Federal
Funds Rate or (C) such other rate as may be specified in Schedule B, in each
case as such rate fluctuates from day to day, from the date of such purchase
until the date of payment of such excess. As security for Borrower's
obligation to pay such excess, Lender shall have, and Borrower hereby grants, a
security interest in any property of Borrower then held by or for Lender and a
right of setoff with respect to such property and any other amount payable by
Lender to Borrower. The purchase price of Replacement Securities purchased
under this Section 12 shall include, and the proceeds of any sale of Collateral
shall be determined after deduction of, broker's fees and commissions and all
other reasonable costs, fees and expenses related to such purchase or sale (as
the case may be). In the event Lender exercises its rights under this Section
12, Lender may elect in its sole discretion, in lieu of purchasing all or a
portion of the Replacement Securities or selling all or a portion of the
Collateral, to be deemed to have made, respectively, such purchase of
Replacement Securities or sale of Collateral for an amount equal to the price
therefor on the date of such exercise obtained from a generally recognized
source or the most recent closing bid quotation from such a source. Subject to
Section 19, upon the satisfaction of all obligations hereunder, any remaining
Collateral shall be returned to Borrower.
13. Borrower's Remedies. Upon the occurrence of a Default under Section 11
entitling Borrower to terminate all Loans hereunder, Borrower shall have the
right (without further notice to Lender), in addition to any other remedies
provided herein or under applicable law, (a) to purchase a like amount of
Collateral ("Replacement Collateral") in the principal market for such
Collateral in a commercially reasonable manner, (b) to sell a like amount of
the Loaned Securities in the principal market for such securities in a
commercially reasonable manner and (c) to apply and set off the Loaned
Securities and any proceeds thereof against (i) the payment of the purchase
price for such Replacement Collateral, (ii) Lender's obligation to return any
cash or other Collateral and (iii) any amounts due to Borrower under Sections
4, 7 and 17. In such event, Borrower may treat the Loaned Securities as its
own and Lender's obligation to return a like amount of the Collateral shall
terminate; provided, however, that Lender shall immediately return any letters
of credit supporting any Loan upon the exercise or deemed exercise by Borrower
of its termination rights under Section 11. Borrower may similarly apply the
Loaned Securities and any proceeds thereof to any other obligation of Lender
under this Agreement, including Lender's obligations with respect to
distributions paid to Lender (and not forwarded to Borrower) in respect of
Collateral. In the event that (i) the sales price received from such Loaned
Securities is less than (ii) the purchase price of Replacement Collateral (plus
the amount of any cash or other Collateral not replaced by Borrower and all
other amounts, if any, due to Borrower hereunder), Lender shall be liable to
Borrower for the amount of any such deficiency, together with interest on such
amounts at a rate equal to (A) in the case of Collateral consisting of Foreign
Securities, LIBOR, (B) in the case of Collateral consisting of any other
securities (or other amounts due, if
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any, to Borrower hereunder), the Federal Funds Rate or (C) such other rate as
may be specified in Schedule B, in each case as such rate fluctuates from day
to day, from the date of such sale until the date of payment of such
deficiency. As security for Lender's obligation to pay such deficiency,
Borrower shall have, and Lender hereby grants, a security interest in any
property of Lender then held by or for Borrower and a right of setoff with
respect to such property and any other amount payable by Borrower to Lender.
The purchase price of any Replacement Collateral purchased under this Section
13 shall include, and the proceeds of any sale of Loaned Securities shall be
determined after deduction of, broker's fees and commissions and all other
reasonable costs, fees and expenses related to such purchase or sale (as the
case may be). In the event Borrower exercises its rights under this Section
13, Borrower may elect in its sole discretion, in lieu of purchasing all or a
portion of the Replacement Collateral or selling all or a portion of the Loaned
Securities, to be deemed to have made, respectively, such purchase of
Replacement Collateral or sale of Loaned Securities for an amount equal to the
price therefor on the date of such exercise obtained from a generally
recognized source or the most recent closing bid quotation from such a source.
Subject to Section 19, upon the satisfaction of all Lender's obligations
hereunder, any remaining Loaned Securities (or remaining cash proceeds thereof)
shall be returned to Lender. Without limiting the foregoing, the parties
hereto agree that they intend the Loans hereunder to be loans of securities.
If, however, any Loan is deemed to be a loan of money by Borrower to Lender,
then Borrower shall have, and Lender shall be deemed to have granted, a
security interest in the Loaned Securities and the proceeds thereof.
14. Transfer Taxes. All transfer taxes with respect to the transfer of the
Loaned Securities by Lender to Borrower and by Borrower to Lender upon
termination of the Loan shall be paid by Borrower.
15. Market Value.
15.1 Unless otherwise agreed, if the principal market for the securities
to be valued is a national securities exchange in the United States, their
market value shall be determined by their last sale price on such exchange on
the preceding Business Day or, if there was no sale on that day, by the last
sale price on the next preceding Business Day on which there was a sale on such
exchange, all as quoted on the Consolidated Tape or, if not quoted on the
Consolidated Tape, then as quoted by such exchange.
15.2 Except as provided in Section 15.3 or 15.4 or as otherwise agreed, if
the principal market for the securities to be valued is the over-the-counter
market, their market value shall be determined as follows. If the securities
are quoted on the National Association of Securities Dealers Automated
Quotations System ("NASDAQ"), their market value shall be the closing sale
price on NASDAQ on the preceding Business Day or, if the securities are issues
for which last sale prices are not quoted on NASDAQ, the closing bid price on
such day. If the securities to be valued are not quoted on NASDAQ, their
market value shall be the highest bid quotation as quoted in any of The Wall
Street Journal, the National Quotation Bureau pink sheets, the
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Salomon Brothers quotation sheets, quotations sheets of registered market
makers and, if necessary, dealers' telephone quotations on the preceding
Business Day. In each case, if the relevant quotation did not exist on such
day, then the relevant quotation on the next preceding Business Day in which
there was such a quotation shall be the market value.
15.3 Unless otherwise agreed, if the securities to be valued are
Government Securities, their market value shall be the average of the bid and
ask prices as quoted on Prophesy at 3:30 P.M. New York time on the Business Day
preceding the date on which such determination is made. If the securities are
not so quoted on such day, their market value shall be determined as of the
next preceding Business Day on which they were so quoted. If the securities to
be valued are Government Securities that are not quoted on Prophesy, their
market value shall be determined as of the close of business on the preceding
Business Day in accordance with market practice for such securities.
15.4 Unless otherwise agreed, if the securities to be valued are Foreign
Securities, their market value shall be determined as of the close of business
on the preceding Business Day in accordance with market practice in the
principal market for such securities.
15.5 Unless otherwise agreed, the market value of a letter of credit shall
be the undrawn amount thereof.
15.6 All determinations of market value under Sections 15.1, 15.2, 15.3
and 15.4 shall include, where applicable, accrued interest to the extent not
already included therein (other than any interest transferred to the other
party pursuant to Section 7), unless market practice with respect to the
valuation of such securities in connection with securities loans is to the
contrary. All determinations of market value that are required to be made at
the close of trading on any Business Day pursuant to Section 8 or otherwise
hereunder shall be made as if being determined at the commencement of trading
on the next Business Day. The determinations of market value provided for in
this Section 15 shall apply for all purposes under this Agreement, except for
purposes of Sections 12 and 13.
16. Transfers.
16.1 All transfers of securities hereunder shall be by (a) physical
delivery of certificates representing such securities together with duly
executed stock and bond transfer powers, as the case may be, with signatures
guaranteed by a bank or a member firm of the New York Stock Exchange, Inc., (b)
transfer on the books of a Clearing Organization, or (c) such other means as
Borrower and Lender may agree. In every transfer of securities hereunder, the
transferor shall take all steps necessary (i) to effect a "transfer" under
Section 8-313 of the New York Uniform Commercial Code or, where applicable,
under any U.S. federal regulation governing transfers of securities and (ii) to
provide the transferee with comparable rights under any applicable foreign law
or regulation.
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16.2 All transfers of cash Collateral hereunder shall be by (a) wire
transfer in immediately available, freely transferable funds or (b) such other
means as Borrower and Lender may agree. All other transfers of cash hereunder
shall be made in accordance with the preceding sentence or by delivery of a
certified or official bank check representing next-day New York Clearing House
Funds.
16.3 All transfers of a letter of credit from Borrower to Lender shall be
made by physical delivery to Lender of an irrevocable letter of credit issued
by a "bank" as defined in Section 3(a)(6)(A)-(C) of the Exchange Act. Transfer
of a letter of credit from Lender to Borrower shall be made by causing such
letter of credit to be returned or by causing the amount of such letter of
credit to be reduced to the amount required after such transfer.
16.4 A transfer of securities, cash or letters of credit may be effected
under this Section 16 on any day except (a) a day on which the transferee is
closed for business at its address set forth in Schedule A hereto or (b) a day
on which a Clearing Organization or wire transfer system is closed, if the
facilities of such Clearing Organization or wire transfer system are required
to effect such transfer.
17. Contractual Currency.
17.1 Borrower and Lender agree that: (a) any payment in respect of a
distribution under Section 7 shall be made in the currency in which the
underlying distribution of cash was made; (b) any return of cash shall be made
in the currency in which the underlying transfer of cash was made and (c) any
other payment of cash in connection with a Loan under this Agreement shall be
in the currency agreed upon by Borrower and Lender in connection with such Loan
(the currency established under clause (a), (b) or (c) hereinafter referred to
as the "Contractual Currency"). Notwithstanding the foregoing, the payee of
any such payment may, at its option, accept tender thereof in any other
currency; provided, however, that, to the extent permitted by applicable law,
the obligation of the payor to make such payment will be discharged only to the
extent of the amount of Contractual Currency that such payee may, consistent
with normal banking procedures, purchase with such other currency (after
deduction of any premium and costs of exchange) on the banking day next
succeeding its receipt of such currency.
17.2 If for any reason the amount in the Contractual Currency received
under Section 17.1, including amounts received after conversion of any recovery
under any judgment or order expressed in a currency other than the Contractual
Currency, falls short of the amount in the Contractual Currency due in respect
of this Agreement, the party required to make the payment will (unless a
Default has occurred and such party is the non-defaulting party) as a separate
and independent obligation and to the extent permitted by applicable law,
immediately pay such additional amount in the Contractual Currency as may be
necessary to compensate for the shortfall.
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17.3 If for any reason the amount in the Contractual Currency received
under Section 17.1 exceeds the amount in the Contractual Currency due in
respect of this Agreement, then the party receiving the payment will (unless a
Default has occurred and such party is the nondefaulting party) refund promptly
the amount of such excess.
18. ERISA. Lender shall, if any of the securities transferred to the Borrower
hereunder for any Loan have been or shall be obtained, directly or indirectly,
from or using the assets of any Plan, so notify Borrower in writing upon the
execution of the Agreement or upon initiation of such Loan under Section 1.1.
If Lender so notifies Borrower, then Borrower and Lender shall conduct the Loan
in accordance with the terms and conditions of Department of Labor Prohibited
Transaction Exemption 81-6 (46 Fed. Reg. 7527, Jan. 23, 1981; as amended, 52
Fed. Reg. 18754, May 19, 1987), or any successor thereto (unless Borrower and
Lender have agreed prior to entering into a Loan that such Loan will be
conducted in reliance on another exemption, or without relying on any
exemption, from the prohibited transaction provisions of Section 406 of the
Employee Retirement Income Security Act of 1974, as amended, and Section 4975
of the Internal Revenue Code of 1986, as amended). Without limiting the
foregoing and notwithstanding any other provision of this Agreement, if the
Loan will be conducted in accordance with Prohibited Transaction Exemption
81-6, then:
(a) Borrower represents and warrants to Lender that it is either
(i) a bank subject to federal or state supervision, (ii) a
broker-dealer registered under the Exchange Act or (iii) exempt from
registration under Section 15(a)(1) of the Exchange Act as a dealer
in Government Securities.
(b) Borrower represents and warrants that, during the term of any
Loan hereunder, neither Borrower nor any affiliate of Borrower has
any discretionary authority or control with respect to the investment
of the assets of the Plan involved in the Loan or renders investment
advice (within the meaning of 29 C.F.R. Section 2510.3-21(c)) with
respect to the assets of the Plan involved in the Loan. Lender
agrees that, prior to or at the commencement of any Loan hereunder,
it will communicate to Borrower information regarding the Plan
sufficient to identify to Borrower any person or persons that have
discretionary authority or control with respect to the investment of
the assets of the Plan involved in the Loan or that render investment
advice (as defined in the preceding sentence) with respect to the
assets of the Plan involved in the Loan. In the event Lender fails
to communicate and keep current during the term of any Loan such
information, Lender rather than Borrower shall be deemed to have made
the representation and warranty in the first sentence of this clause
(b).
(c) Borrower and Lender agree that:
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(i) the term "Collateral" shall mean cash, securities issued or
guaranteed by the United States government or its agencies or
instrumentalities, or irrevocable bank letters of credit
issued by a person other than Borrower or an affiliate
thereof;
(ii) prior to the making of any Loans hereunder, Borrower shall
provide Lender with (A) the most recent available audited
statement of Borrower's financial condition and (B) the most
recent available unaudited statement of Borrower's financial
condition (if more recent than the most recent audited
statement), and each Loan made hereunder shall be deemed a
representation by Borrower that there has been no material
adverse change in Borrower's financial condition subsequent to
the date of the latest financial statements or information
furnished in accordance herewith;
(iii) the Loan may be terminated by Lender at any time, whereupon
Borrower shall deliver the Loaned Securities to Lender within
the lesser of (A) the customary delivery period for such
securities; (B) five Business Days and (C) the time negotiated
for such delivery between Borrower and Lender; provided,
however, that Borrower and Lender may agree to a longer period
only if permitted by Prohibited Transaction Exemption 81-6;
and
(iv) the Collateral transferred shall be security only for
obligations of Borrower to the Plan with respect to Loans, and
shall not be security for any obligation of Borrower to any
agent or affiliate of the Plan.
19. Single Agreement. Borrower and Lender acknowledge that, and have entered
into this Agreement in reliance of the fact that, all Loans hereunder
constitute a single business and contractual relationship and have been entered
into in consideration of each other. Accordingly, Borrower and Lender hereby
agree that payments, deliveries and other transfers made by either of them in
respect of any Loan shall be deemed to have been made in consideration of
payments, deliveries and other transfers in respect of any other Loan
hereunder, and the obligations to make any such payments, deliveries and other
transfers may be applied against each other and netted. In addition, Borrower
and Lender acknowledge that, and have entered into this Agreement in reliance
on the fact that, all Loans hereunder have been entered into in consideration
of each other. Accordingly, Borrower and Lender hereby agree that (a) each
shall perform all of its obligations in respect of each Loan hereunder, and
that a default in the performance of any such obligation by Borrower or by
Lender (the "Defaulting Party") in any Loan hereunder shall constitute a
default by the Defaulting Party under all such Loans hereunder, and (b) the
non-defaulting party shall be entitled to set off claims and apply property
held by it in respect of any Loan hereunder against obligations owing to it in
respect of any other Loan with the Defaulting Party.
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20. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.
21. Waiver. The failure of a party to this Agreement to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. All waivers in
respect of a Default must be in writing.
22. Remedies. All remedies hereunder and all obligations with respect to any
Loan shall survive the termination of the relevant Loan, return of Loaned
Securities or Collateral and termination of this Agreement.
23. Notices and Other Communications. Unless another address is specified in
writing by the respective party to whom any notice or other communication is to
be given hereunder, all such notices or communications shall be in writing or
confirmed in writing and delivered at the respective addresses set forth in
Schedule A attached hereto. All notices shall be effective upon actual
receipt, provided, however, that if any notice shall be received by a party on
a day on which such party is not open for business at its office located at the
address set forth in Schedule A, such notice shall be deemed to have been
received by such party at the opening of business on the next day on which such
party is open for business at such address.
24. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
24.1 EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY (A) SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT
SITTING IN NEW YORK CITY, AND ANY APPELLATE COURT FROM ANY SUCH COURT, SOLELY
FOR THE PURPOSE OF ANY SUIT, ACTION OR PROCEEDING BROUGHT TO ENFORCE ITS
OBLIGATIONS HEREUNDER OR RELATING IN ANY WAY TO THIS AGREEMENT OR ANY LOAN
HEREUNDER AND (B) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT AND ANY RIGHT OF JURISDICTION ON ACCOUNT OF ITS
PLACE OF RESIDENCE OR DOMICILE.
24.2 EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY RIGHT THAT IT MAY
HAVE TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
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25. Miscellaneous. This Agreement supersedes any other agreement between the
parties hereto concerning loans of securities between Borrower and Lender.
This Agreement shall not be assigned by either party without the prior written
consent of the other party and any attempted assignment without such consent
shall be null and void. Subject to the foregoing, this Agreement shall be
binding upon and shall ensure to the benefit of Borrower and Lender and their
respective heirs, representatives, successors and assigns. This Agreement may
be terminated by either party upon written notice to the other, subject only to
fulfillment of any obligations then outstanding. This Agreement shall not be
modified, except by an instrument in writing signed by the party against whom
enforcement is sought. The parties hereto acknowledge and agree that, in
connection with this Agreement and each Loan hereunder, time is of the essence.
Each provision and agreement herein shall be treated as separate and
independent from any other provision herein and shall be enforceable
notwithstanding the unenforceability of any such other provision or agreement.
26. Definitions. For the purposes hereof:
26.1 "Broker-Dealer" shall mean any person that is a broker (including a
municipal securities broker), dealer, municipal securities dealer, government
securities broker or government securities dealer as defined in the Exchange
Act, regardless of whether the activities of such person are conducted in the
United States or otherwise require such person to register with the Securities
and Exchange Commission or other regulatory body.
26.2 "Business Day" shall mean, with respect to any Loan hereunder, a day
on which regular trading occurs in the principal market for the Loaned
Securities subject to such Loan, provided, however, that for purposes of
Section 15, such term shall mean a day on which regular trading occurs in the
principal market for the securities whose value is being determined.
Notwithstanding the foregoing, (i) for purposes of Section 8, "Business Day"
shall mean any day on which regular trading occurs in the principal market for
any Loaned Securities or for any securities Collateral under any outstanding
Loan hereunder and "next Business Day" shall mean the next day on which a
transfer of Collateral may be effected in accordance with Section 16; and (ii)
in no event shall a Saturday or Sunday be considered a Business Day.
26.3 "Clearing Organization" shall mean The Depository Trust Company, or,
if agreed to by Borrower and Lender, such other clearing agency at which
Borrower (or Borrower's agent) and Lender (or Lender's agent) maintain
accounts, or a book-entry system maintained by a Federal Reserve Bank.
26.4 "Collateral" shall mean, whether now owned or hereafter acquired and
to the extent permitted by applicable law, (a) any property which Borrower and
Lender agree shall be acceptable collateral prior to the Loan and which is
transferred to Lender pursuant to Section 3 or 8 (including as collateral, for
definitional purposes, any letters of credit mutually acceptable to Lender and
Borrower), (b) any property substituted therefor pursuant to Section 3.5, (c)
all
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accounts in which such property is deposited and all securities and the like in
which any cash collateral is invested or reinvested, and (d) any proceeds of
any of the foregoing. For purposes of return of Collateral by Lender or
purchase or sale of securities pursuant to Section 12 or 13, such term shall
include securities of the same issuer, class and quantity as the Collateral
initially transferred by Borrower to Lender.
26.5 "Customer" shall mean any person that is a customer of Borrower under
Rule 15c3-3 under the Exchange Act or any comparable regulation of the
Secretary of the Treasury under Section 15C of the Exchange Act (to the extent
that Borrower is subject to such Rule or comparable regulation).
26.6 "Cutoff Time" shall mean a time on a Business Day by which a transfer
of cash, securities or other property must be made by Borrower or Lender to the
other, as shall be agreed by Borrower and Lender in Schedule B or otherwise
orally or in writing or, in the absence of any such agreement, as shall be
determined in accordance with market practice.
26.7 "Default" shall have the meaning assigned in Section 11.
26.8 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
26.9 "Federal Funds Rate" shall mean the rate of interest (expressed as an
annual rate), as published in Federal Reserve Statistical Release H.15(519) or
any publication substituted therefor, charged for federal funds (dollars in
immediately available funds borrowed by banks on an overnight unsecured basis)
on that day or, if that day is not a banking day in New York City, on the next
preceding banking day.
26.10 "Foreign Securities" shall mean, unless otherwise agreed, securities
that are principally cleared and settled outside the United States.
26.11 "Government Securities" shall mean government securities as defined
in Section 3(a)(42)(A)-(C) of the Exchange Act.
26.12 "LIBOR" shall mean for any date, the offered rate for deposits in
U.S. dollars for a period of three months which appears on the Reuters Screen
LIBO page as of 11:00 A.M., London time, on such date (or, if at least two such
rates appear, the arithmetic mean of such rates).
26.13 "Loan" shall mean a loan of securities hereunder.
26.14 "Loaned Security" shall mean any security which is a security as
defined in the Exchange Act, transferred in a Loan hereunder until such
security (or an identical security) is transferred back to Lender hereunder,
except that, if any new or different security shall be
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exchanged for any loaned security by recapitalization, merger, consolidation or
other corporate action, such new or different security shall, effective upon
such exchange, be deemed to become a Loaned Security in substitution for the
former Loaned Security for which such exchange is made. For purposes of return
of Loaned Securities by Borrower or purchase or sale of securities pursuant to
Section 12 or 13, such term shall include securities of the same issuer, class
and quantity as the Loaned Securities, as adjusted pursuant to the preceding
sentence.
26.15 "Plan" shall mean (a) any "employee benefit plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974 which is
subject to Part 4 of Subtitle B of Title I of such Act; (b) any "plan" as
defined in Section 4975(e)(1) of the Internal Revenue Code of 1986; or (c) any
entity the assets of which are deemed to be assets of any such "employee
benefit plan" or "plan" by reason of the Department of Labor's plan asset
regulation, 29 C.F.R. Section 2510.3-101.
SMITH BARNEY, INC.
By:
-------------------------------
Title: Managing Director
-----------------------------
Date:
------------------------------
TRIBUNE COMPANY
By:
------------------------------
Title:
-----------------------------
Date:
------------------------------
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\
Schedule B
DEFINED TERMS AND SUPPLEMENTAL PROVISIONS
1. Section 4.1 is amended by deleting clause (a) and replacing it with the
following:
(a) Borrower agrees to pay Lender a loan fee (a "Loan Fee"), computed
daily on each Loan to the extent such Loan is secured by Collateral other
than cash, based on the aggregate market value of the Loaned Securities on
the day for which such Loan Fee is being computed, and
2. Section 4.1 is amended by adding to the end the following new sentence:
Unless otherwise agreed, such Loan Fees and Cash Collateral Fees shall be
calculated on the basis of a 360-day year for the actual number of days
the Loaned Securities are outstanding in accordance with the preceding
sentence.
3. Section 5 is amended by deleting the second sentence and replacing it
with the following new sentence:
The termination date established by a termination notice given by Lender
to Borrower shall be a date no earlier than the standard settlement date
for trades of the Loaned Securities entered into on the date of such
notice, which date shall, unless Borrower and Lender agree to the
contrary, be (i) in the case of Government Securities, the next Business
Day following such notice, (ii) in the case of Foreign Securities, the next
Business Day following the standard settlement date for trades of the
Loaned Securities entered into on the date of such notice and (iii) in the
case of all other securities, the standard settlement date for trades of
the Loaned Securities entered into on the date of such notice.
4. Section 15.3 is amended by deleting the clause "on Prophecy" in the first
sentence and substituting the clause "by a mutually acceptable source or
mutually acceptable sources," and by deleting the third sentence in its
entirety.
5. The "Cutoff Time" shall be 3 p.m. New York time.
21
