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SOFTKEY INTERNATIONAL INC.


AND


STATE STREET BANK AND TRUST COMPANY


Trustee


INDENTURE


Dated as of October 16, 1995


5 1/2% Senior Convertible Notes Due 2000


2


TABLE OF CONTENTS


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ARTICLE I


DEFINITIONS . . . . . . . . . . . 1


Section 1.1 Definitions . . . . . . . . . . . . . . . . 1


ARTICLE II


ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES . . . . . . . . . 7


Section 2.1 Designation, Amount and Issue of Notes . . 7
Section 2.2 Form of Notes . . . . . . . . . . . . . . . 7
Section 2.3 Date and Denomination of Notes; Payments
of Interest . . . . . . . . . . . . . . . 8
Section 2.4 Execution of Notes . . . . . . . . . . . . 10
Section 2.5 Exchange and Registration of Transfer of
Notes; Restrictions on Transfer;
Depositary . . . . . . . . . . . . . . . 10
Section 2.6 Mutilated, Destroyed, Lost or Stolen
Notes . . . . . . . . . . . . . . . . . . 18
Section 2.7 Temporary Notes . . . . . . . . . . . . . . 19
Section 2.8 Cancellation of Notes Paid, Etc . . . . . . 19


ARTICLE III


REDEMPTION OF NOTES . . . . . . . . . 20


Section 3.1 Redemption Prices . . . . . . . . . . . . . 20
Section 3.2 Notice of Redemption; Selection of Notes . 20
Section 3.3 Payment of Notes Called for Redemption . . 22
Section 3.4 Conversion Arrangement on Call for
Redemption . . . . . . . . . . . . . . . 22
Section 3.5. Purchase of Notes Upon a Change of
Control . . . . . . . . . . . . . . . . . 23


ARTICLE IV


[RESERVED] . . . . . . . . . . . 24


ARTICLE V


PARTICULAR COVENANTS OF THE COMPANY . . . . . 24


Section 5.1 Payment of Principal, Premium and
Interest . . . . . . . . . . . . . . . . 24
Section 5.2 Maintenance of Office or Agency . . . . . . 25
Section 5.3 Appointments to Fill Vacancies in
Trustee's Office . . . . . . . . . . . . 25
Section 5.4 Provisions as to Paying Agent . . . . . . . 25
Section 5.5 Corporate Existence . . . . . . . . . . . . 26


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Section 5.6 Rule 144A Information Requirement . . . . . 27
Section 5.7 Stay, Extension and Usury Laws . . . . . . 27


ARTICLE VI


NOTEHOLDERS' LISTS AND REPORTS BY
THE COMPANY . . . . . . . . . . . 27


Section 6.1 Noteholders' Lists . . . . . . . . . . . . 27
Section 6.2 Reports by Company . . . . . . . . . . . . 28


ARTICLE VII


DEFAULTS AND REMEDIES . . . . . . . . . 28


Section 7.1 Events of Default . . . . . . . . . . . . . 28
Section 7.2 Payments of Notes on Default; Suit
Therefor . . . . . . . . . . . . . . . . 30
Section 7.3 Application of Monies Collected by
Trustee . . . . . . . . . . . . . . . . . 32
Section 7.4 Proceedings by Noteholder . . . . . . . . . 33
Section 7.5 Proceedings by Trustee . . . . . . . . . . 34
Section 7.6 Remedies Cumulative and Continuing . . . . 34
Section 7.7 Direction of Proceedings and Waiver of
Defaults by Majority of Noteholders . . . 35
Section 7.8 Notice of Defaults . . . . . . . . . . . . 35
Section 7.9 Undertaking to Pay Costs . . . . . . . . . 35


ARTICLE VIII


CONCERNING THE TRUSTEE . . . . . . . . 36


Section 8.1 Duties and Responsibilities of Trustee . . 36
Section 8.2 Reliance on Documents, Opinions, Etc. . . 37
Section 8.3 No Responsibility for Recitals, Etc. . . . 38
Section 8.4 Trustee, Paying Agents, Conversion Agents
or Registrar May own Notes . . . . . . . 38
Section 8.5 Monies to Be Held in Trust . . . . . . . . 39
Section 8.6 Compensation and Expenses of Trustee . . . 39
Section 8.7 Officers' Certificate as Evidence . . . . 39
Section 8.8 Conflicting Interests of Trustee . . . . . 40
Section 8.9 Eligibility of Trustee . . . . . . . . . . 40
Section 8.10 Resignation or Removal of Trustee . . . . 40
Section 8.11 Acceptance by Successor Trustee . . . . . 41
Section 8.12 Successor, by Merger, Etc. . . . . . . . . 42
Section 8.13 Limitation on Rights of Trustee as
Creditor . . . . . . . . . . . . . . . . 42


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ARTICLE IX


CONCERNING THE NOTEHOLDERS . . . . . . . 42


Section 9.1 Action by Noteholders . . . . . . . . . . . 42
Section 9.2 Proof of Execution by Noteholders . . . . . 43
Section 9.3 Who Are Deemed Absolute Owners . . . . . . 43
Section 9.4 Company-Owned Notes Disregarded . . . . . . 44
Section 9.5 Revocation of Consents, Future Holders
Bound . . . . . . . . . . . . . . . . . . 44


ARTICLE X


NOTEHOLDERS MEETINGS . . . . . . . . . 45


SECTION 10.1. Purposes for Which Meetings May be
Called . . . . . . . . . . . . . . . . 45
SECTION 10.2. Manner of Calling Meetings; Record Date . 45
SECTION 10.3. Call of Meeting by Company or
Noteholders . . . . . . . . . . . . . . 46
SECTION 10.4. Who may Attend and Vote at Meetings . . . 46
SECTION 10.5. Manner of voting at Meetings and Record
to be Kept . . . . . . . . . . . . . . 46
SECTION 10.6. Exercise of Rights of Trustee and
Noteholders not to be Hindered or
delayed . . . . . . . . . . . . . . . . 47


ARTICLE XI


SUPPLEMENTAL INDENTURES . . . . . . . . 47


Section 11.1 Supplemental Indentures Without Consent
of Noteholders . . . . . . . . . . . . 47
Section 11.2 Supplemental Indentures with Consent of
Noteholders . . . . . . . . . . . . . . 49
Section 11.3 Effect of Supplemental Indentures . . . . 49
Section 11.4 Notation on Notes . . . . . . . . . . . . 50
Section 11.5 Evidence of Compliance of Supplemental
Indenture to Be Furnished Trustee . . . 50


ARTICLE XII


CONSOLIDATION, MERGER, SALE, CONVEYANCE,
TRANSFER AND LEASE . . . . . . . . . 50


Section 12.1 Company May Consolidate, Etc. on Certain
Terms . . . . . . . . . . . . . . . . . 50
Section 12.2 Successor Company to Be Substituted . . . 51
Section 12.3 Opinion of Counsel to Be Given Trustee . . 51


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ARTICLE XIII


SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS . . . . . . . . . . 52


Section 13.1 Legal Defeasance and Covenant Defeasance
of the Notes . . . . . . . . . . . . . 52
Section 13.2 Termination of Obligations upon
Cancellation of the Notes . . . . . . . 54
Section 13.3 Survival of Certain Obligations . . . . . 55
Section 13.4 Acknowledgment of Discharge by Trustee . . 55
Section 13.5 Application of Trust Assets . . . . . . . 55
Section 13.6 Repayment to the Company; Unclaimed
Money . . . . . . . . . . . . . . . . . 56
Section 13.7 Reinstatement. . . . . . . . . . . . . . . 56


ARTICLE XIV


IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS . . . . . . . . 56


Section 14.1 Indenture and Notes Solely Corporate
Obligations . . . . . . . . . . . . . . 56


ARTICLE XV


CONVERSION OF NOTES . . . . . . . . . 57


Section 15.1 Right to Convert . . . . . . . . . . . . 57
Section 15.2 Exercise of Conversion Privilege;
Issuance of Common Stock on
Conversion; No Adjustment for Interest
or Dividends . . . . . . . . . . . . . 57
Section 15.3 Cash Payments in Lieu of Fractional
Shares . . . . . . . . . . . . . . . . 59
Section 15.4 Conversion Price . . . . . . . . . . . . 59
Section 15.5 Adjustment of Conversion Price . . . . . 60
Section 15.6 Effect of Reclassification,
Consolidation, Merger or Sale . . . . . 69
Section 15.7 Taxes on Shares Issued . . . . . . . . . 71
Section 15.8 Reservation of Shares; Shares to Be
Fully Paid; Listing of Common Stock . . 71
Section 15.9 Responsibility of Trustee . . . . . . . . 71
Section 15.10 Notice to Holders Prior to Certain
Actions . . . . . . . . . . . . . . . . 72


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ARTICLE XVI


MISCELLANEOUS PROVISIONS . . . . . . . . 73


Section 16.1 Pooling of Interests . . . . . . . . . . 73
Section 16.2 Provisions Binding on Company's
Successors . . . . . . . . . . . . . . 73
Section 16.3 Official Acts by Successor Company . . . 73
Section 16.4 Addresses for Notices, Etc. . . . . . . . 73
Section 16.5 Governing Law . . . . . . . . . . . . . . 74
Section 16.6 Evidence of Compliance with Conditions
Precedent; Certificates to Trustee . . 74
Section 16.7 Legal Holidays . . . . . . . . . . . . . 74
Section 16.8 No Security Interest Created . . . . . . 75
Section 16.9 Trust Indenture Act . . . . . . . . . . . 75
Section 16.10 Benefits of Indenture . . . . . . . . . . 75
Section 16.11 Table of Contents, Headings Etc. . . . . 75
Section 16.12 Authenticating Agent . . . . . . . . . . 75
Section 16.13 Execution in Counterparts . . . . . . . . 76


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INDENTURE dated as of October 16, 1995 between SOFTKEY INTERNATIONAL INC., a Delaware corporation (hereinafter sometimes called the "Company", as more fully set forth in Section 1.1), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts banking corporation (hereinafter sometimes called the "Trustee", as more fully set forth in Section 1.1).


W I T N E S S E T H :
- - - - - - - - - -


WHEREAS, for its lawful corporate purposes, the Company has duly authorized the issuance of its 5 1/2% Senior Convertible Notes Due 2000 (hereinafter sometimes called the "Notes"), in an aggregate principal amount not to exceed $402,500,000 and, to provide the terms and conditions upon which the Notes are to be authenticated, issued and delivered, the Company has duly authorized the execution and delivery of this Indenture; and


WHEREAS, the Notes, the certificate of authentication to be borne by the Notes, a form of assignment, a form of option to require repurchase by the Company upon a Change of Control (as hereinafter defined), a form of conversion notice and a certificate of transfer to be borne by the Notes are to be substantially in the forms hereinafter provided for; and


WHEREAS, all acts and things necessary to make the Notes, when executed by the Company and authenticated and delivered by the Trustee or a duly authorized authenticating agent, as in this Indenture provided, the valid, binding and legal obligations of the Company, and to constitute these presents a valid agreement according to its terms, have been done and performed, and the execution of this Indenture and the issuance hereunder of the Notes have in all respects been duly authorized.


NOW, THEREFORE, THIS INDENTURE WITNESSETH:


That in order to declare the terms and conditions upon which the Notes are, and are to be, authenticated, issued and delivered, and in consideration of the premises and of the purchase and acceptance of the Notes by the holders thereof, the Company covenants and agrees with the Trustee for the equal and proportionate benefit of the respective holders from time to time of the Notes (except as otherwise provided below), as follows:


ARTICLE I


DEFINITIONS


Section 1.1 DEFINITIONS. The terms defined in this Section 1.1 (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section 1.1. All other


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terms used in this Indenture which are defined in the Trust Indenture Act (as hereinafter defined) or which are by reference defined in the Securities Act, except as herein otherwise expressly provided or unless the context otherwise requires, shall have the meanings assigned to such terms in said Trust Indenture Act and in said Securities Act as in force at the date of the execution of this Indenture. The words "herein," "hereof," "hereunder" and words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other Subdivision. The terms defined in this Article include the plural as well as the singular.


ACCREDITED INVESTOR: The term "Accredited Investor" shall have the meaning given it in Rule 501(a) under the Securities Act.


ACQUISITION PRICE: The term "Acquisition Price" means the volume weighted average of the per share prices paid by a specified person or group in acquiring Voting Stock.


AFFILIATE: The term "Affiliate" of any specified person shall mean an "affiliate" as defined in Rule 144(a) as promulgated under the Securities Act.


BOARD OF DIRECTORS: The term "Board of Directors" shall mean the Board of Directors of the Company or a committee of such Board duly authorized to act for it hereunder.


BOARD RESOLUTION: The term "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors, or a duly authorized committee thereof (to the extent permitted by applicable law), and to be in full force and effect on the date of such certification, and delivered to the Trustee.


BUSINESS DAY: The term "Business Day" shall mean a day, other than a Saturday, a Sunday or other day on which the banking institutions in the State of New York, the State of California or the Commonwealth of Massachusetts are authorized or obligated by law or executive order to close or a day which is declared a national or New York, California or Massachusetts state holiday.


CHANGE OF CONTROL: The term "Change of Control" means an event or series of events pursuant to which (i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) acquires beneficial ownership (as determined in accordance with Rule 13d-3 under the Exchange Act), directly or indirectly, of more than 50% of the total Voting Stock of the Company at an Acquisition Price less than the conversion price then in effect with respect to the Notes and (ii) holders of Common Stock receive consideration which is not all or substantially all common stock that is (or upon consummation of


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or immediately following such event or events will be) listed on a United States national securities exchange or approved for quotation on the Nasdaq National Market or any similar United States system of automated dissemination of quotations of securities prices; provided, however, that any such person or group shall not be deemed to be the beneficial owner of, or to beneficially own, any Voting Stock tendered into a tender offer until such tendered Voting Stock is accepted for purchase under the tender offer.


COMMISSION: The term "Commission" shall mean the Securities and Exchange Commission.


COMMON STOCK: The term "Common Stock" shall mean any stock of any class of the Company which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which is not subject to redemption by the Company. Subject to the provisions of Section 15.6, however, shares issuable on conversion of Notes shall include only shares of the class designated as common stock of the Company at the date of this Indenture or shares of any class or classes resulting from any reclassification or reclassifications thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which are not subject to redemption by the Company; PROVIDED that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications.


COMPANY: The term "Company" shall mean SoftKey International Inc., a Delaware corporation, and subject to the provisions of Article XII, shall include its successors and assigns.


CONVERSION PRICE: The term "Conversion Price" shall have the meaning specified in Section 15.4.


CORPORATE TRUST OFFICE OF THE TRUSTEE: The term "Corporate Trust office of the Trustee," or other similar term, shall mean the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office is, at the date as of which this Indenture is dated, located at 225 Franklin Street, Boston, Massachusetts 02110 (Attention: Corporate Trust Department).


CUSTODIAN: The term "Custodian" means State Street Bank and Trust Company, as custodian with respect to the Notes in global form, or any successor entity thereto.


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DEFAULT: The term "default" shall mean any event that is, or after notice or passage of time, or both, would be, an Event of Default.


DEPOSITARY: The term "Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the person specified in Section 2.5(d) as the Depositary with respect to the Notes, until a successor shall have been appointed and become such pursuant to the applicable provisions of this Indenture, and thereafter, "Depositary" shall mean or include such successor.


EXCHANGE ACT: The term "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.


EVENT OF DEFAULT: The term "Event of Default" shall mean any event specified in Section 7.1(a), (b), (c), (d) or (e).


INDENTURE: The term "Indenture" shall mean this instrument as originally executed or, if amended or supplemented as herein provided, as so amended or supplemented.


NOTE OR NOTES: The terms "Note" or "Notes " shall mean any Note or Notes, as the case may be, authenticated and delivered under this Indenture.


NOTEHOLDER; HOLDER: The terms "Noteholder" or "holder" as applied to any Note, or other similar terms (but excluding the term "beneficial holder"), shall mean any person in whose name at the time a particular Note is registered on the Note registrar's books.


NOTE REGISTER: The term "Note register" shall have the meaning specified in Section 2.5.


OFFICERS' CERTIFICATE: The term "Officers' Certificate," when used with respect to the Company, shall mean a certificate signed by the President, the Chief Executive Officer, the Chief Financial Officer or any Vice President or the Secretary or any Assistant Secretary of the Company, which is delivered to the Trustee. Each such certificate shall include the statements provided for in Section 16.5 if and to the extent required by the provisions of such Section.


OPINION OF COUNSEL: The term "Opinion of Counsel" shall mean an opinion in writing signed by legal counsel, who may be an employee of or counsel to the Company or other counsel acceptable to the Trustee, which is delivered to the Trustee. Each such opinion shall include the statements provided for in Section 16.6 if and to the extent required by the provisions of such Section.


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OUTSTANDING: The term "outstanding," when used with reference to Notes, shall, subject to the provisions of Section 9.4, mean, as of any particular time, all Notes authenticated and delivered by the Trustee under this Indenture, except


(a) Notes theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;


(b) Notes, or portions thereof, for which monies in
the necessary amount shall have been deposited in trust with
the Trustee for payment or redemption; PROVIDED that if such
Notes are to be redeemed prior to the maturity thereof,
notice of such redemption shall have been given as in
Article III provided, or provision satisfactory to the
Trustee shall have been made for giving such notice;


(c) Notes in lieu of or in substitution for which
other Notes shall have been authenticated and delivered
pursuant to the terms of Section 2.6 unless proof
satisfactory to the Trustee is presented that any such Notes
are held by bona fide holders in due course; and


(d) Notes converted into Common Stock pursuant to
Article XV and Notes not deemed outstanding pursuant to
Section 3.2.


PERSON: The term "person" shall mean a corporation, an association, a partnership, an individual, a joint venture, a joint stock company, a trust, an unincorporated organization or a government or an agency or a political subdivision thereof.


PORTAL MARKET: The term "PORTAL Market" shall mean the Private Offerings, Resales and Trading through Automated Linkages Market operated by the National Association of Securities Dealers, Inc. or any successor thereto.


PREDECESSOR NOTE: The term "Predecessor Note" of any particular Note shall mean every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 2.6 in lieu of a lost, destroyed or stolen Note shall be deemed to evidence the same debt as the lost, destroyed or stolen Note.


QIB: The term "QIB" shall mean a "qualified institutional buyer" as defined in Rule 144A (as hereinafter defined).


RESPONSIBLE OFFICER: The term "Responsible Officer," when used with respect to the Trustee, shall mean an officer of the Trustee assigned and duly authorized by the Trustee to administer its corporate trust matters.


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RESTRICTED SECURITIES: The term "Restricted Securities" has the meaning specified in Section 2.5(d).


RULE 144A: The term "Rule 144A" shall mean Rule 144A as promulgated under the Securities Act.


SECURITIES ACT: The term "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.


SUBSIDIARY: The term "subsidiary" of any specified person shall mean (i) a corporation a majority of whose capital stock with voting power under ordinary circumstances, to elect directors is at the time directly or indirectly owned by such person or (ii) any other person (other than a corporation) in which such person or such person and a subsidiary or subsidiaries of such person or a subsidiary or subsidiaries of such person directly or indirectly, at the date of determination thereof, has at least majority ownership.


SUCCESSOR COMPANY: The term "Successor Company" shall have the meaning specified in Section 12.1.


TRUST INDENTURE ACT: The term "Trust Indenture Act" shall mean the Trust Indenture Act of 1939, as amended, as it was in force at the date of execution of this Indenture, except as provided in Sections 11.3 and 15.6; PROVIDED, HOWEVER, that in the event said Trust Indenture Act of 1939 is amended after the date hereof, the term "Trust Indenture Act" shall mean, to the extent required by such amendment, said Trust Indenture Act of 1939 as so amended.


TRUSTEE: The term "Trustee" shall mean State Street Bank and Trust Company, its successors and any corporation resulting from or surviving any consolidation or merger to which it or its successors may be a party and any successor trustee at the time serving as successor trustee hereunder.


U.S. GOVERNMENT OBLIGATIONS: The term "U.S. Government Obligations" means securities that are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by, and acting as an agency or instrumentality of, the United States of America the timely payme
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