<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
..................
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended September 30, 1999 Commission file number 0-6355
GROUP 1 SOFTWARE, INC.
Incorporated in Delaware IRS EI No. 52-0852578
4200 Parliament Place, Suite 600, Lanham, MD 20706-1860
Telephone Number: (301) 918-0400
Indicate by check mark whether the registrant (1) has filed reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
------------- ---------------
Shares Outstanding Effective
Class November 12, 1999
- ---------------------------- -----------------
Common Stock, $.50 par value 3,727,490
1
<PAGE> 2
GROUP 1 SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PAR VALUE)
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, March 31,
1999 1999
----------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 13,537 $ 13,378
Short-term investments 8,892 1,471
Trade and installment accounts receivable, less
allowance of $3,552 and $3,383 16,993 22,596
Deferred income taxes 3,155 3,039
Prepaid expenses and other current assets 3,041 3,149
-------- --------
Total current assets 45,618 43,633
Installment accounts receivable, long-term 1,493 2,221
Property and equipment, net 3,968 3,678
Computer software, net 22,426 22,559
Other assets 5,177 5,708
-------- --------
Total assets $ 78,682 $ 77,799
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,846 $ 2,136
Current portion of long-term debt 104 99
Accrued expenses 6,637 5,647
Accrued compensation 5,437 7,095
Current deferred revenues 21,757 20,863
-------- --------
Total current liabilities 36,781 35,840
Long-term debt, net of current portion 144 198
Deferred revenues, long-term 1,775 2,670
Deferred income taxes 2,956 3,670
-------- --------
Total liabilities 41,656 42,378
-------- --------
Commitments and contingencies
Stockholders' equity:
6% cumulative convertible preferred stock $0.25 par
value; 200 shares authorized; 48 shares issued and
outstanding 916 916
Common stock $0.50 par value; 14,000 shares authorized;
4,048 and 4,045 shares issued and outstanding 2,024 2,023
Additional paid in capital 25,088 25,071
Retained earnings 10,912 9,451
Accumulated comprehensive income 140 14
Less treasury stock, 322 shares, at cost (2,054) (2,054)
-------- --------
Total stockholders' equity 37,026 35,421
-------- --------
Total liabilities and stockholders' equity $ 78,682 $ 77,799
======== ========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 3
GROUP 1 SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Month Period For the Six Month Period
Ended September 30, Ended September 30,
---------------------- ----------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Software license and related revenues $ 9,233 $ 7,130 $ 16,118 $ 11,705
Maintenance and services 10,037 7,431 19,909 14,785
-------- -------- -------- --------
Total revenue 19,270 14,561 36,027 26,490
-------- -------- -------- --------
Cost of revenue:
Software license expense 3,261 2,669 6,460 4,729
Maintenance and service expense 3,747 3,036 7,464 5,868
-------- -------- -------- --------
Total cost of revenue 7,008 5,705 13,924 10,597
-------- -------- -------- --------
Gross profit 12,262 8,856 22,103 15,893
Operating expenses:
Research and development 1,011 647 1,805 1,219
Sales and marketing 6,336 4,991 12,199 9,317
General and administrative 3,223 2,546 5,997 4,597
-------- -------- -------- --------
Total operating expenses 10,570 8,184 20,001 15,133
-------- -------- -------- --------
Income from operations 1,692 672 2,102 760
Non-operating income
Interest income 228 119 421 199
Interest expense (55) (12) (63) (26)
Other non-operating (30) (47) (7) (56)
-------- -------- -------- --------
Total non-operating income 143 60 351 117
-------- -------- -------- --------
Income from operations before provision for income taxes
and minority interest 1,835 732 2,453 877
Provision for income taxes 725 271 964 325
Minority interest in net income of consolidated subsidiary --- 74 --- 83
-------- -------- -------- --------
Net income 1,110 387 1,489 469
Preferred stock dividend requirements 14 14 28 59
-------- -------- -------- --------
Net income available to common stockholders $ 1,096 $ 373 $ 1,461 $ 410
======== ======== ======== ========
Basic earnings per share $ 0.29 $ 0.11 $ 0.39 $ 0.12
======== ======== ======== ========
Diluted earnings per share $ 0.29 $ 0.11 $ 0.39 $ 0.12
======== ======== ======== ========
Basic weighted average shares outstanding 3,725 3,314 3,725 3,296
======== ======== ======== ========
Diluted weighted average shares outstanding 3,782 3,559 3,779 3,439
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
GROUP 1 SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
FOR THE SIX MONTH PERIOD
ENDED SEPTEMBER 30,
-------------------------------------------------
1999 1998
------------------------ -------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,489 $ 469
Adjustments to reconcile net income from
Operations to net cash provided by operating activities:
Amortization expense 5,702 4,017
Depreciation expense 799 619
Provision for doubtful accounts 488 1,105
Net loss on disposal of assets 9 - - -
Deferred income taxes (836) (141)
Minority interest in income of consolidated subsidiary - - - 83
Changes in assets and liabilities:
Accounts receivable 5,893 6,997
Prepaid expenses and other current assets 112 504
Other assets 82 171
Deferred revenues (35) (1,961)
Accounts payable 701 214
Accrued expenses (703) (1,833)
------------------------ -------------------
Net cash provided by operating activities 13,701 10,244
------------------------ -------------------
Cash flows from investing activities:
Purchase and development of computer software (4,847) (3,413)
Purchase of property and equipment (1,214) (617)
Purchase of short-term investments (38,148) ---
Sale of short-term investments 30,727 ---
Purchase of minority interest - - - (454)
------------------------ -------------------
Net cash used in investing activities (13,482) (4,484)
------------------------ -------------------
Cash flows from financing activities:
Proceeds from exercise of stock options 18 161
Repayment of long-term debt (49) (106)
Dividends paid on preferred stock (29) (89)
Repurchase of common stock - - - (3,465)
Repurchase of preferred stock - - - (675)
------------------------ -------------------
Net cash used in financing activities (60) (4,174)
------------------------ -------------------
Net increase in cash and cash equivalents 159 1,586
Effect of exchange rate on cash and cash equivalents - - - (17)
Cash and cash equivalents at beginning of period 13,378 3,683
------------------------ -------------------
Cash and cash equivalents at end of period $ 13,537 $ 5,252
======================== ===================
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
GROUP 1 SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Month Period For the Six Month Period
Ended September 30, Ended September 30,
--------------------------------- -----------------------------
1999 1998 1999 1998
--------------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
Net income $1,110 $387 $1,489 $469
Foreign currency translation adjustments 163 58 126 21
--------------- --------------- -------------- -------------
Comprehensive income $1,273 $445 $1,615 $490
=============== =============== ============== =============
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
Group 1 Software, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
1. The consolidated financial statements for the three and six months ended
September 30, 1999 and 1998 are unaudited. In the opinion of management, all
adjustments considered necessary for a fair presentation have been included.
Limited footnote information is presented in accordance with quarterly reporting
requirements. The results of operations for the three and six months ended
September 30, 1999 are not necessarily indicative of the results for the year
ending March 31, 2000. The information contained in the annual report on the
Form 10-K for the year ended March 31, 1999, should be referred to in connection
with the unaudited interim financial information.
2. Research and development expense, before the capitalization of computer
software development costs, amounted to approximately $5.2 million and $4.5
million for the six months ended September 30, 1999 and 1998, respectively.
Capitalization of computer software development costs for the same six month
periods were $3.4 million and $3.3 million respectively.
3. Earnings per share
Earnings per share (EPS) is computed in accordance with SFAS No. 128, "Earnings
Per Share". Basic EPS is computed by dividing net income available to common
stockholders by the weighted number of common shares outstanding during the
period. Diluted EPS is computed using the weighted average number of shares of
common stock and potentially dilutive securities outstanding during the period.
Potentially dilutive securities consist of convertible preferred stock (using
the if converted method) and stock options (using the treasury stock method).
Potentially dilutive securities are excluded from the computation if the effect
is antidilutive.
Reconciliation of basic EPS calculations to the shares used in the diluted EPS
calculation (in thousands):
<TABLE>
<CAPTION>
For the Three Month Period For the Six Month Period
Ended September 30, Ended September 30,
------------------------------------------ -----------------------------------------
1999 1998 1999 1998
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Weighted common shares outstanding - basic 3,725 3,314 3,725 3,296
Effect of dilutive securities:
Stock options 57 103 54 143
Weighted preferred shares outstanding - - - 142 - - - ---
------------------ ------------------ ------------------ ------------------
Weighted average shares outstanding-diluted 3,782 3,559 3,779 3,439
================== ================== ================== ==================
</TABLE>
There were additional potentially dilutive convertible securities of 47,500 in
the three and six month periods ended September 30, 1999 and 145,000 in the six
months ended September 30, 1998, which were not included in the earnings per
share calculation due to their anti-dilutive effect.
6
<PAGE> 7
4. Legal Contingencies
The Company and certain of its directors have been named as defendants in a
purported shareholder class action filed on April 28, 1998 in the Court of
Chancery of the State of Delaware (CA. No. 16349), "Brickell Partners,
Individually and on Behalf of All Others Similarly Situated v. Robert S. Bowen,
et al". The suit alleges that in connection with the merger of Group 1 Software,
Inc. into COMNET Corporation ("COMNET") there were breaches of fiduciary duties
in that COMNET, as majority stockholder of Group 1 Software, Inc. "had greater
knowledge of Group 1 Software, Inc. than the public shareholders and has timed
the merger transaction to take advantage of Group 1 Software, Inc.'s increased
efficiency and prospects of profitability", to the unfair disadvantage of Group
1 Software, Inc.'s public shareholders. The Company believes that the complaint
is meritless and is pursuing dismissal of all the claims made by Plaintiff in
the lawsuit. The Company does not believe that the ultimate resolution of this
matter will have a material adverse effect on its financial position, results of
operations or cash flows.
5. Segment Information
The following table presents certain financial information relating to each
reportable segment:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
--------------------------- ---------------------------
Segment Information (in thousands)
-------------------- 1999 1998 1999 1998
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue:
Marketing support software $13,496 $ 9,735 $24,469 $17,502
Electronic document
composition software 5,774 4,826 11,558 8,988
------------ ------------- ----------- ------------
Total revenue $19,270 $14,561 $36,027 $26,490
============ ============= =========== ============
Gross Profit:
Marketing support software $ 7,390 $ 5,096 $12,822 $ 8,990
Electronic document
Composition software 4,872 3,976 9,763 7,277
Other --- (216) (482) (374)
------------ ------------- ----------- ------------
Total Gross Profit $12,262 $8,856 $22,103 $15,893
============ ============= =========== ============
</TABLE>
All of the Company's assets are retained and analyzed at the corporate level and
are not allocated to the individual segments. Amortization of capitalized
software associated with the marketing support software segment is $1.8 million
and $1.4 million for the quarters ended September 30, 1999 and 1998,
respectively. For the six month period ended September 30, 1999 and 1998,
amortization associated with the marketing support software segment is $3.3
million and $ 2.6 million, respectively. Amortization of capitalized software
associated with the electronic document composition software segment is $0.5
million for the quarters ending September 30, 1999 and 1998. For the six
7
<PAGE> 8
month period ending September 30, 1999 and 1998, amortization of capitalized
software associated with the electronic document composition software segment
is $1.1 million and $1.0 million, respectively.
6. Supplemental Cash Flow Information
<TABLE>
<CAPTION>
For the Six Month Period
Ended September 30,
---------------------------------------------
1999 1998
------------------- -------------------
<S> <C> <C>
Non Cash Investing and Financing Activities:
Issuance of common and treasury stock for minority interest
acquisition $ - - - $ 9,444
Excess of redemption value of preferred stock below carrying value $ - - - $ 1,254
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
Any statements in this quarterly report on Form 10-Q concerning the Company's
business outlook or future economic performance; anticipated profitability,
revenues, expenses or other financial items; together with other statements that
are not historical facts, are "forward-looking statements" as that term is
defined under the Federal Securities Laws. Forward-looking statements are
subject to risks, uncertainties and other factors which could cause actual
results to differ materially from those stated in such statements. Such risks,
uncertainties and factors include, but are not limited to, changes in currency
exchange rates, changes and delays in new product introduction, customer
acceptance of new products, changes in government regulations, changes in
pricing or other actions by competitors and general economic conditions, as well
as other risks detailed in the Company's filings with the Securities and
Exchange Commission.
For the quarters ended September 30, 1999 and 1998, the Company had revenues of
$19.3 million and $14.6 million, respectively. Net income available to common
stockholders for the quarter ended September 30, 1999 was $1.1 million or $0.29
diluted earnings per share compared with net income available to common
stockholders of $0.37 million or $0.11 diluted earnings per share in the same
quarter of fiscal 1999. For the six months ended September 30, 1999 and 1998,
the Company's revenues were $36.0 million and $26.5 million, respectively. The
Company's net income available to common stockholders for the six month period
was $1.5 million or $0.39 diluted earnings per share compared with $0.41 million
or $0.12 diluted earnings per share in the same period the prior year. The
increase in profitability for the latest fiscal 2000 three and six month periods
are primarily due to higher revenue in both of the Company's operating segments.
All of Group 1's operations are in the two business segments defined as
marketing support software and electronic document composition software. Group 1
recognizes maintenance and enhancement revenue over the life of the service
agreement, usually one or two years. International revenues accounted
8
<PAGE> 9
for 11% of Group 1's total revenue in the second quarter of fiscal 2000 and 18%
in the second quarter of fiscal 1999. International revenues accounted for 13%
and 18% of Group 1's total revenue for the six months ended September 30, 1999
and 1998, respectively. The decrease in international revenue as a percent of
total revenue for the quarter and six month period is due to slightly lower
European sales of electronic document composition software combined with
significantly higher domestic revenue in both business segments.
Software license fees and related revenues of $9.2 million for the second fiscal
quarter of 2000 increased 29% from the prior year period. As a percent of total
revenue, second quarter software licenses and related revenues were 48% in
fiscal 2000 compared with 49% in fiscal 1999. For the six month period, software
licenses and related revenues of $16.1 million were 38% above the prior year
period. The increase for the three and six month periods ended September 30,
1999 was due to higher license sales in both the marketing support segment and
the electronic document composition segment.
License fees from electronic document in systems increased 25% in the fiscal
second quarter over the same period the prior year. For the six month period
ended September 30, 1999, electronic document systems license fees increased 22%
over the comparable period the prior year. The increase in sales for the three
and six month period ended September 30, 1999 was due to higher Domestic and
Latin American sales slightly offset by lower European sales.
For the quarter ended September 30, 1999 license fees from database marketing
products increased by $0.5 million compared to the same period in the prior
year. For the six month period ended September 30, 1999 database marketing
products license fees increased by $1.4 million over the same period in the
prior year. The increase for the quarter and six month period was due to higher
sales across the product line.
The Company's mailing efficiency/data quality software license fees for the
second quarter of fiscal 2000 increased 18% over the same period in the prior
year. For the six month period ended September 30, 1999, mailing efficiency/data
quality software license fees increased 21% over the comparable period in the
prior year. The increase was due to strong demand across the product line.
Maintenance and service revenue of $10.0 million for the second quarter of
fiscal 2000 increased 35% over the prior year period. For the six month period,
maintenance and service revenue of $19.9 million was 35% above the same period
in the prior year. Maintenance and service revenue accounted for 52% and 55% of
total revenue for the quarter and six months ended September 30, 1999 compared
with 51% and 56% in the prior year. Recognized maintenance fees included in
maintenance and service revenue, were $7.8 million and $15.1 million for the
quarter and six months ended September 30, 1999, increases of 38% and 34% over
the comparable periods in the prior year. The increase in revenue is due to the
recognition of higher maintenance deferrals based on higher aggregate sales from
prior periods and from increased maintenance renewals based on an increased
installed customer base. Professional and educational service revenue of $2.2
million for the quarter and $4.8 million for the six months ended September 30,
1999, were 25% and 37% over the comparable period in the prior year.
The increase in service revenue is due to higher services associated with all
of the Company's product lines.
9
<PAGE> 10
During the second quarter of fiscal 2000, total operating costs of $17.6
million amounted to 91% of revenue compared with $13.9 million or 95% of
revenue during the same period in the prior year. For the six months ended
September 30, 1999, total operating costs of $33.9 million were 94% of revenue
as compared with $25.7 million or 97% of revenue the prior year. The various
components of operating expenses are discussed below.
Software license expense increased to $3.3 million for the three months ended
September 30, 1999, from $2.7 million in the prior year period, representing 35%
and 37% of software license fees and related revenue, respectively. For the six
months ended September 30, 1999 and 1998 software license expense represented
40% of the software license fees and related revenue.
Maintenance and service expense increased to $3.7 million in the current quarter
from $3.0 million in the comparable period in fiscal 1999, representing 37% and
41% of maintenance and service revenue, respectively. For the six months ended
September 30, 1999 and 1998, maintenance and service expense represented 37% and
40% of maintenance and service revenue, respectively. The decrease in expense as
a percentage of revenue can be attributed to higher maintenance and service
revenue.
Included in maintenance and service expense discussed above are professional and
educational service costs of $1.9 million which were 87% of professional service
and education revenue for the second quarter compared with $1.4 million or 81%
for the comparable period in the prior year. For the six month period ended
September 30, 1999, professional and education service costs of $3.9 million
were 81% of professional service and education revenue compared with $2.6
million or 82% in the comparable period of the prior year. The increase in
expense as a percent of revenue for the quarter can be attributed to the
increased use of high cost third party vendors to perform services associated
with the mailing efficiency/data quality products.
Costs of maintenance were $1.8 million for the second fiscal quarter of 2000
representing 24% of maintenance revenue. Costs of maintenance for the same
quarter in the prior year were $1.6 million or 28% of maintenance revenue. For
the six month period ended September 30, 1999, maintenance costs of $3.6 million
were 24% of maintenance revenue compared with $3.2 million or 29% in the
comparable period the prior year. The lower cost as a percentage of revenue
reflects economies of scale achieved with maintenance and support costs spread
over a larger revenue base.
Research, development and indirect support expenses (after capitalization of
certain software development costs) totaled $1.0 million for the second fiscal
quarter of 2000 and $0.6 million for the same period of fiscal 1999,
representing 5% and 4% of revenue respectively. These same expenses were $1.8
million and $1.2 million for the six months ended September 30, 1999 and 1998,
which represented 5% of revenue for both periods. The Company expects these
costs to remain relatively constant as a percentage of revenue for the
foreseeable future.
Sales and marketing expenses totaled $6.3 million or 33% of revenue in the
second quarter of fiscal 2000 and $5.0 million or 34% in the prior year same
period. For the six month period, sales and marketing expenses were $12.2
million or 34% and $9.3 million or 35% for fiscal 2000 and 1999, respectively.
The decrease in cost as a percent of revenue for the three and six month periods
versus the prior year same period was primarily due to higher revenue.
10
<PAGE> 11
General and administrative expenses were $3.2 million or 17% of total revenue
compared with $2.5 million or 17% of revenue for the three months ended
September 30, 1999 and 1998, respectively. For the six months ended September
30, 1999 and 1998, general and administrative expenses were $6.0 million or 17%
of revenue and $4.6 million or 17% of revenue, respectively.
Net non-operating income was $0.1 million for the quarter ended September 30,
1999 as compared with net non-operating income of $60,000 for the same period in
the prior year. For the six months ended September 30, 1999 and 1998,
respectively, net non-operating income was $0.4 million and $0.1 million,
respectively. This increase represents higher interest income generated from
higher cash and short term investment balances in the current period compared to
the same period of fiscal 1999.
The Company's effective tax rate was 39% and 37% for the six month period ended
September 30, 1999, and 1998, respectively. The current year's rate is the net
effect of a 33% effective tax rate on foreign taxable income and a 46% rate on
domestic taxable income.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was $8.8 million at September 30, 1999, as
compared with $7.8 million at March 31, 1999. The current ratio was 1.2 to 1
at both September 30, 1999 and March 31, 1999.
The Company provides for its cash requirements through cash funds generated from
operations. Additionally, the Company maintains a $10 million line of credit
arrangement with a commercial bank, expiring October 31, 2000. The line of
credit bears interest at the bank's prime rate, or Libor plus 150 basis points
at Group 1's option. The line of credit is not collateralized and requires Group
1 to maintain certain operating ratios. At September 30, 1999 and at March 31,
1999 there were no borrowings outstanding under the line of credit.
For the six months ended September 30, 1999, net cash provided by operating
activities was $13.7 million. This amount included net income of $1.5 million
plus non-cash expenses of $6.1 million. Also included in cash provided by
operating activities was a $5.9 million decrease in accounts receivable, offset
by a $0.7 million decrease in accrued expenses and $0.9 million provided by
other operating activities. The decrease in accounts receivable is due to
increased cash collections. Investment in purchased and developed software of
$4.8 million, and capital equipment of $1.2 million, in addition to the increase
of $7.5 million in short-term investments resulted in $13.5 million used by
investing activities. The $4.8 million dollar investment in purchased and
developed software included $1.2 million for the acquisition of a source code
license to a data quality system that was previously sold by Group 1 under a
royalty arrangement. For the six months ended September 30, 1999, $60,000 was
used in financing activities.
Group 1 continually evaluates the credit and market risks associated with
outstanding receivables. In the course of this review, Group 1 considers many
factors specific to the individual client as well as to the concentration of
receivables within industry groups. Group 1's installment receivables are
predominately with clients (service bureaus) who provide computer services to
11
<PAGE> 12
the direct marketing industry. Many of these clients have limited capital and
insufficient assets to secure their liability with the Group 1. The service
bureaus are highly dependent on Group 1's software and services to offer their
customers the economic benefit of postal discounts and mailing efficiency. To
qualify for the U.S. Postal Service and Canada Post Corporation postal
discounts, service bureaus require continuous regulatory product updates from
the Company. The service bureau industry is also highly competitive and subject
to general economic cycles, as they impact advertising and direct marketing
expenditures. The Company is aware of no current market risk associated with
the installment receivables. Service bureaus represent approximately $3.1
million or 68%, of the installment receivables at September 30, 1999.
As of September 30, 1999, the Company's capital resource commitments consisted
primarily of non-cancelable operating lease commitments for office space and
equipment. The Company believes that its current minimum lease obligations and
other short-term and long-term liquidity needs can be met from its existing cash
and short-term investment balances and cash flows from operations. The Company
believes that its long-term liquidity needs are minimal and no large capital
expenditures are anticipated, except for the continuing investment in
capitalized software development costs, which the Company believes can be funded
from operations during the next twelve months.
The Year 2000 Issue
The Year 2000 issue affects virtually all companies and organizations. Many
existing computer programs and digital systems used by, and sold by, Group 1
Software, use only two digits to identify a year in the date field, creating the
possibility of system malfunction after December 31, 1999.
In 1997, the Company formed two special task forces:
- The first task force was established to identify and evaluate
our internal systems and applications that may be affected by the
Year 2000 issue; modify or replace those systems and applications
so they will work properly in the Year 2000, and communicate with
our suppliers to make sure they are prepared for the Year 2000.
- The second task force was established to evaluate the products
sold by us, to ensure they will function as designed after the
Year 2000.
The Company has identified and evaluated all of our systems and
applications that may be affected by the Year 2000 issue, and have developed
plans to ready these systems and applications for the century change.
Modification and replacement projects are currently under way. The Company has
completed upgrading and testing on its major finance, customer information
management and other critical systems for Year 2000 functionality. Other less
critical systems continue to be tested and upgraded as required. Current
releases of all products sold by the Company have been modified to ensure Year
2000 functionality. The costs of the readiness program for products and internal
systems are primarily costs of existing internal resources largely absorbed
within existing spending levels. These costs were incurred primarily in 1998 and
earlier years and were not broken out from other operating costs. No future
material product readiness costs are anticipated. Although the Company expects
to be Year 2000 ready when necessary, failure of the Company
12
<PAGE> 13
or significant key suppliers or customers to be fully Year 2000 ready could
potentially have a material adverse impact on the results of the Company's
operations. The Company is currently evaluating contingency plans.
Legal Contingencies
The Company and certain of its directors have been named as defendants in a
purported shareholder class action filed on April 28, 1998 in the Court of
Chancery of the State of Delaware (CA. No. 16349), "Brickell Partners,
Individually and on Behalf of All Others Similarly Situated v. Robert S. Bowen,
et al". The suit alleges that in connection with the merger of Group 1 Software,
Inc. into COMNET there were breaches of fiduciary duties in that COMNET, as
majority stockholder of Group 1 Software, Inc. "had greater knowledge of Group 1
Software, Inc. than the public shareholders and has timed the merger transaction
to take advantage of Group 1 Software, Inc.'s increased efficiency and prospects
of profitability", to the unfair disadvantage of Group 1 Software, Inc.'s public
shareholders. The Company believes that the complaint is meritless and is
pursuing dismissal of all the claims made by Plaintiff in the lawsuit. The
Company does not believe that the ultimate resolution of this matter will have a
material adverse effect on its financial position, results of operations or cash
flows.
Quantitative and Qualitative Disclosures about Market Risk
The Company has a subsidiary in the United Kingdom with offices in
Germany, Italy and Denmark. Additionally, the Company uses third party
distributors to market and distribute its products in other international
regions. Transactions conducted by the subsidiary are typically denominated in
the local country currency, while transactions conducted by the distributors are
typically denominated in pounds sterling. As a result, the Company is primarily
exposed to foreign exchange rate fluctuations as the financial results of its
subsidiary and third party distributors are translated into U.S. dollars in
consolidation. As exchange rates vary, these results, when translated, may vary
from expectations and impact overall expected profitibility. However, through
and as of September 30, 1999, the Company's exposure was not material to the
overall financial statements taken as a whole. The Company has not entered into
any foreign currency hedging transactions with respect to its foreign currency
market risk. The Company does not have any financial instruments subject to
material market risk.
Euro Currency
The European Union's adoption of the Euro currency raises a variety
of issues associated with the Company's European operations. Although the
transition from national currencies to the Euro will be phased in over several
years, the Euro became the single currency for most European countries on
January 1, 1999. The Company is assessing Euro issues related to its treasury
operations, product pricing, contracts and accounting systems. Although the
evaluation of these issues is still in process, management currently believes
that the Company's existing or planned hardware and software systems will
accommodate the transition to the Euro and any required operating changes will
not have a material effect on future results of operations or financial
condition.
13
<PAGE> 14
PART II OTHER INFORMATION
Item 1. Legal Proceedings
NONE
Item 2. Changes in Securities
NONE
Item 3. Defaults Upon Senior Securities
NONE
Item 4. The following matters were submitted to, and approved by, the required
vote of security holders of the Company at the Company's Annual Shareholders'
Meeting held on September 23, 1999:
1. To elect three directors to hold office until the third Annual Meeting
of Shareholders of the Company following their election and their
successors have been elected and qualified.
<TABLE>
<CAPTION>
NOMINEES FOR WITHHELD
------------------ ------------ --------
<S> <C> <C>
Robert S. Bowen 3,136,214 254,937
Thomas S. Buchsbaum 3,136,214 254,937
Ronald F. Friedman 3,136,219 254,922
</TABLE>
All nominees were duly elected.
In addition to the newly elected directors, the term of office as a
director of Messrs. James V. Manning, James P. Marden, Charles A. Mele,
Charles J. Sindelar, Richard H. Eisenberg and Bruce J. Spohler continued
after the Meeting.
2. To amend the Company's Incentive Stock Option, Non-Qualified Stock Option
and Stock Appreciation Rights Plan to increase by 200,000 shares the
number of shares subject to stock options which may be granted under the
plan:
FOR AGAINST ABSTAIN
-------------- ------------- ----------------
2,045,233 563,481 22,559
The proposal was duly approved.
3. To amend the Company's Certificate of Incorporation to increase the
number of authorized shares of preferred stock from 200,000 shares to
1,200,000 shares:
FOR AGAINST ABSTAIN
-------------- ------------- ----------------
2,070,276 541,166 19,821
The proposal was duly approved.
In accordance with Delaware law and the Company's Certificate and By-Laws,
the Board of Directors of the Company withdrew from consideration at the
14
<PAGE> 15
Meeting the question of whether to approve and adopt the proposed 1999
Non-Employee Directors Stock Plan. The Plan was originally proposed in response
to a new rule announced by the Financial Accounting Standards Board ("FASB").
However, subsequent to the Board's inclusion of the proposed Stock Plan on the
proxy for the Meeting but prior to the Meeting, FASB reversed its position,
eliminating the rationale that prompted the Company to consider adopting the
proposed Stock Plan in the first place.
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
Exhibit 4.16 Stockholder Protection Rights Agreement
Dated August 12, 1999.
Exhibit 4.17 First Amendment to 1995 Incentive Stock Option,
Non-Qualified Stock Option and Stock Appreciaiton Unit
Plan dated September 23, 1999.
Exhibit 10.57 Sixth Amendment to Employment Agreement, dated as of
April 1, 1998, by and between Group 1 Software, Inc.
and Ronald F. Friedman.
Exhibit 10.58 Seventh Amendment to Employment Agreement, dated as of
April 1, 1999, by and between Group 1 Software, Inc.
and Ronald F. Friedman.
No filings on Form 8-K have been made during the quarter
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Group 1 Software, Inc.
Date: November 15, 1999
/s/ Mark Funston
Mark Funston
Chief Financial Officer
<PAGE> 1
EXHIBIT 4.16
- --------------------------------------------------------------------------------
STOCKHOLDER PROTECTION RIGHTS AGREEMENT
dated as of
August 12, 1999
between
GROUP 1 SOFTWARE, INC.
and
AMERICAN STOCK TRANSFER & TRUST COMPANY
as Rights Agent
- --------------------------------------------------------------------------------
<PAGE> 2
STOCKHOLDER PROTECTION RIGHTS AGREEMENT
Table of Contents
<TABLE>
<CAPTION>
Page
----
ARTICLE I
CERTAIN DEFINITIONS
<S> <C> <C>
1.1 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
THE RIGHTS
2.1 Summary of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Legend on Common Stock Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 Exercise of Rights; Separation of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 Adjustments to Exercise Price; Number of Rights . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.5 Date on Which Exercise is Effective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.6 Execution, Authentication, Delivery and Dating of Rights Certificates . . . . . . . . . . . . . . 10
2.7 Registration, Registration of Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . 10
2.8 Mutilated, Destroyed, Lost and Stolen Rights Certificates . . . . . . . . . . . . . . . . . . . . 11
2.9 Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.10 Delivery and Cancellation of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.11 Agreement of Rights Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE III
ADJUSTMENTS TO THE RIGHTS IN THE EVENT OF CERTAIN
TRANSACTIONS
3.1 Flip-in . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.2 Flip-over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE IV
THE RIGHTS AGENT
4.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2 Merger or Consolidation or Change of Name of Rights Agent . . . . . . . . . . . . . . . . . . . . 15
4.3 Duties of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.4 Change of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
ARTICLE V
MISCELLANEOUS
<S> <C> <C>
5.1 Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2 Expiration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.3 Issuance of New Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.4 Supplements and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.5 Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.6 Rights of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.7 Holder of Rights Not Deemed a Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.8 Notice of Proposed Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.10 Suspension of Exercisability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.11 Costs of Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.12 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.13 Benefits of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.14 Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.15 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.16 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.17 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.18 Determination and Actions by the Board of Directors, Etc. . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
EXHIBITS
Exhibit A Form of Rights Certificate (Together with Form of Election to
Exercise)
-ii-
<PAGE> 4
STOCKHOLDER PROTECTION RIGHTS AGREEMENT
STOCKHOLDER PROTECTION RIGHTS AGREEMENT (this "Agreement"),
dated as of August 12, 1999, between GROUP 1 SOFTWARE, INC., a Delaware
corporation (the "Company"), and AMERICAN STOCK TRANSFER & TRUST COMPANY, as
Rights Agent (the "Rights Agent", which term shall include any successor Rights
Agent hereunder).
WHEREAS, the Board of Directors of the Company has (a)
authorized and declared a dividend of one right ("Right") in respect of each
share of Common Stock (as hereinafter defined) held of record as of the close
of business on August 27, 1999 (the "Record Time") and (b) authorized the
issuance of one Right in respect of each share of Common Stock issued after the
Record Time and prior to the Separation Time (as hereinafter defined);
WHEREAS, each Right entitles the holder thereof, after the
Separation Time, to purchase securities of the Company (or, in certain cases,
of certain other entities) pursuant to the terms and subject to the conditions
set forth herein; and
WHEREAS, the Company desires to appoint the Rights Agent to
act on behalf of the Company, and the Rights Agent is willing so to act, in
connection with the issuance, transfer, exchange and replacement of Rights
Certificates (as hereinafter defined), the exercise of Rights and other matters
referred to herein;
NOW THEREFORE, in consideration of the premises and the
respective agreements set forth herein, the parties hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 Certain Definitions. For purposes of this Agreement,
the following terms have the meanings indicated:
"Acquiring Person" shall mean any Person who is a Beneficial
Owner of 20% or more of the outstanding shares of Common Stock; provided,
however, that the term "Acquiring Person" shall not include any Person who is
the Beneficial Owner of 20% or more of the outstanding shares of Common Stock
on the date of this Agreement or who shall become the Beneficial Owner of 20%
or more of the outstanding shares of Common Stock solely as a result of an
acquisition by the Company of shares of Common Stock, until such time hereafter
or thereafter as such Person shall become the Beneficial Owner (other than by
means of a stock dividend or stock split) of any additional shares of Common
Stock. Notwithstanding the foregoing, if the Board of Directors of the Company
determines in good faith that a Person who would otherwise be an "Acquiring
Person" as defined pursuant to the foregoing provisions of this paragraph (a)
has become such inadvertently, and such Person divests as promptly as
practicable (as determined in good faith by the Board of Directors) a
sufficient number of shares of Common Stock so that such Person would no longer
be an "Acquiring Person" as defined
-1-
<PAGE> 5
pursuant to the foregoing provisions of this paragraph (a), then such Person
shall not be deemed an "Acquiring Person" for any purposes of this Rights
Agreement.
"Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 under the Securities Exchange Act of 1934,
as such Rule is in effect on the date of this Agreement.
"Beneficial Owner" - A Person shall be deemed the "Beneficial
Owner", and to have "Beneficial Ownership", of, and to "Beneficially Own", any
securities as to which such Person or any of such Person's Affiliates or
Associates is or may be deemed to be the beneficial owner pursuant to Rules
13d-3 and 13d-5 under the Securities Exchange Act of 1934, as such Rules are in
effect on the date of this Agreement, as well as any securities as to which
such Person or any of such Person's Affiliates or Associates has the right to
become Beneficial Owner (whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement, arrangement or
understanding, or upon the exercise of conversion rights, exchange rights,
rights (other than the Rights), warrants or options, or otherwise; provided,
however, that a Person shall not be deemed the "Beneficial Owner", or to have
"Beneficial Ownership", of, or to "Beneficially Own", any security (i) solely
because such security has been tendered pursuant to a tender or exchange offer
made by such Person or any of such Person's Affiliates or Associates until such
tendered security is accepted for payment or exchange, (ii) solely because such
Person or any of such Person's Affiliates or Associates has or shares the power
to vote or direct the voting of such security pursuant to a revocable proxy
given in response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable rules and regulations under the
Securities Exchange Act of 1934, except if such power (or the arrangements
relating thereto) is then reportable under Item 6 of Schedule 13D under the
Securities Exchange Act of 1934 (or any similar provision of a comparable or
successor report), (iii) solely because of the grant by the Company to such
Person, in connection with the execution of an agreement to acquire the
Company, of options to acquire such security or (iv) held for or pursuant to
the terms of any employee stock ownership or other employee benefit plan of the
Company or a majority-owned Subsidiary of the Company. For purposes of this
Agreement, in determining the percentage of the outstanding shares of Common
Stock with respect to which a Person is the Beneficial Owner, all shares as to
which such Person is deemed the Beneficial Owner shall be deemed outstanding.
"Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in The City of New York are
generally authorized or obligated by law or executive order to close.
"close of Business" on any given date shall mean the time on
such date (or, if such date is not a Business Day, the time on the next
succeeding Business Day) at which the offices of the transfer agent for the
Common Stock (or, after the Separation Time, the offices of the Rights Agent)
are closed to the public.
"Common Stock" shall mean the shares of Common Stock, par
value $.50 per share, of the Company.
-2-
<PAGE> 6
"Election to Exercise" shall mean a certificate, in
substantially the form attached to the Rights Certificate of Exhibit A, in
which the holder irrevocably elects to exercise the Common Stock Rights.
"Exchange Ratio" shall mean the ratio as determined in
accordance with Section 3.1(c).
"Exchange Time" shall mean the time at which the right to
exercise the Rights shall terminate pursuant to Section 3.1(c) hereof.
"Exercise Price" shall mean, as of any date, the price at
which a holder may purchase the securities issuable upon exercise of one whole
Right. Until adjustment thereof in accordance with the terms hereof, the
Exercise Price shall equal $60.00.
"Expansion Factor" shall mean the Exercise Price in effect
immediately prior to such adjustment listed in Section 2.4 divided by the
number of shares of Common Stock that a holder of one share of Common Stock
immediately prior to such dividend, subdivision or combination would hold
thereafter as a result thereof.
"Expiration Time" shall mean the earliest of (i) the Exchange
Time, (ii) the Redemption Time and (iii) the close of business on the
tenth-year anniversary of the date hereof.
"Flip-in Date" shall mean any Stock Acquisition Date which is
not the result of a Flip-over Transaction or Event.
"Flip-over Entity" shall mean the person engaging in such
Flip-over Transaction or Event.
"Flip-over Stock" of any Person shall mean the capital stock
(or similar equity interest) with the greatest voting power in respect of the
election of directors (or similar persons responsible for direction of the
business and affairs) of such other Person or, if such other Person is a
Subsidiary of another Person, the Person or Persons which ultimately controls
such first-mentioned Person.
"Flip-over Transaction or Event" shall mean a transaction or
series of transactions after the time when an Acquiring Person has become such
in which, directly or indirectly, (A) the Company shall consolidate or merge
with any other Person or (B) the Company shall sell or otherwise transfer (or
one or more of its Subsidiaries shall sell or otherwise transfer) assets (i)
aggregating more than 50% of the assets (measured by either book value or fair
market value) or (ii) generating more than 50% of the operating income or cash
flow, of the Company and its Subsidiaries (taken as a whole) to any other
Person (other than the Company or one or more of its wholly owned Subsidiaries)
or to two or more such Persons which are affiliated or otherwise acting in
concert, (C) any Acquiring Person shall (i) obtain, with or without
consideration, over any period of 12 consecutive calendar months, any
additional shares of any class of capital stock of the Company or any of its
Subsidiaries equal in the aggregate to more than [1%] of the outstanding shares
of such class, or securities exercisable or exchangeable for or convertible
into more than [1%] of the outstanding shares of any class of capital stock of
the Company or any of its Subsidiaries (in each case other than as part of a
pro rata distribution to all holders of such
-3-
<PAGE> 7
stock or pursuant to the exercise of rights or warrants, or the conversion or
exchange of securities, issued pro rata in such a distribution), (ii) sell,
purchase, lease, exchange, mortgage, pledge, transfer or otherwise acquire or
dispose of, to, from, or with, as the case may be, the Company or any of its
Subsidiaries, over any period of 12 consecutive calendar months, assets (x)
having an aggregate fair market value of more than $10,000,000 or (y) on terms
and conditions less favorable to the Company than the Company would be able to
obtain through arm's-length negotiations with an unaffiliated third party,
(iii) receive any compensation for services from the Company or any of its
Subsidiaries, other than compensation for full-time employment as a regular
employee at rates in accordance with the Company's (or its Subsidiaries') past
practices, or (iv) receive the benefit, directly or indirectly (except
proportionately as a shareholder), over any period of 12 consecutive calendar
months, of any loans, advances, guarantees, pledges, insurance, reinsurance or
other financial assistance or any tax credits or other tax advantage provided
by the Company or any of its Subsidiaries involving an aggregate principal
amount in excess of $5,000,000 or an aggregate cost or transfer of benefits
from the Company or any of its Subsidiaries in excess of $5,000,000 or, in any
case, on terms and conditions less favorable to the Company than the company
would be able to obtain through arm's-length negotiations with a third party,
or (D) as a result of any reclassification of securities (including any reverse
stock split), or recapitalization, of the Company, or any merger or
consolidation of the Company with any of its Subsidiaries or any other
transaction or series of transactions (whether or not with or into or otherwise
involving an Acquiring Person), the proportionate share of the outstanding
shares of any class of equity or convertible securities of the Company or any
of its Subsidiaries which is directly or indirectly owned by any Acquiring
Person is increased by more than 1%. For purposes of the foregoing
description, the term "Acquiring Person" shall include any Acquiring Person and
its Affiliates and Associates (other than the Company, a wholly owned
Subsidiary of the Company or an employee stock ownership or other employee
benefit plan of the Company or a wholly owned Subsidiary of the Company),
counted together as a single Person.
"Independent Directors' Committee" shall be comprised of the
Directors of the Corporation who are not officers, employees or otherwise
Affiliates of the Company.
"Market Price" per share of any securities on any date shall
mean the average of the daily closing prices per share of such securities
(determined as described below) on each of the 20 consecutive Trading Days
through and including the Trading Day immediately preceding such date;
provided, however, that if an event of a type analogous to any of the events
described in Section 2.4 hereof shall have caused the closing prices used to
determine the Market Price on any Trading Days not to be fully comparable with
the closing price on such date, each such closing price so used shall be
appropriately adjusted in order to make it fully comparable with the closing
price on such date. The closing price per share of any securities on any date
shall be the last sale price or, in case no such sale takes place or is quoted
on such date, the average of the closing bid and asked prices for each share of
such securities, in either case as reported on the National Market of The
Nasdaq Stock Market, Inc. ("Nasdaq National Market") or, if the securities are
not reported on the Nasdaq National Market, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the securities are listed
or admitted to trading or, if the securities are not listed or admitted to
trading on any national securities exchange, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System or such
other
-4-
<PAGE> 8
system then in use, or, if on any such date the securities are not listed or
admitted to trading on any national securities exchange or quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the securities selected by the
Board of Directors of the Company; provided, however, that if on any such date
the securities are not listed or admitted to trading on a national securities
exchange or traded in the over-the-counter market, the closing price per share
of such securities on such date shall mean the fair value per share of
securities on such date as determined in good faith by the Board of Directors
of the Company, after consultation with a nationally recognized investment
banking firm, and set forth in a certificate delivered to the Rights Agent.
"Person" shall mean any individual, firm, partnership,
association, group (as such term is used in Rule 13d-5 under the Securities
Exchange Act of 1934, as such Rule is in effect on the date of this Agreement),
corporation, limited liability company or other entity.
"Record Time" shall mean close of business August 27, 1999.
"Redemption Price" shall mean an amount (calculated to the
nearest one one-hundredth of a cent) equal to the Exercise Price, as in effect
at the Redemption Time, divided by 6000 (i.e., initially $0.01).
"Redemption Time" shall mean the time at which the right to
exercise the Rights shall terminate pursuant to Section 5.1 hereof.
"Rights Agent" shall mean American Stock Transfer & Trust
Company and shall include any successor Rights Agent hereunder.
"Rights Certificate" shall mean a certificate, in
substantially the form of Exhibit A hereto, appropriately completed and
certifying the number of Rights held by such holder at the Separation Time and
having such marks of identification of designation and such legends, summaries
or endorsements printed thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Agreement, or as may be required
to comply with any law or with any rule or regulation made pursuant thereto or
with any rule or regulation of any stock exchange or quotation system n which
the Rights may from time to time be listed or traded, or to conform to usage.
"Rights Registrar" shall mean the Right Agent and shall
maintain the Rights Register for Company and register Rights and transfers of
Rights after the Separation Time as herein provided.
"Separation Time" shall mean the close of business on the
earlier of (i) the tenth day (or such later date as the Board of Directors of
the Company may from time to time fix by resolution adopted prior to the
Separation Time that would otherwise have occurred) after the date on which any
Person (other than the Company, a majority-owned Subsidiary of the Company or
an employee stock ownership or other employee benefit plan of the Company or a
majority-owned Subsidiary of the Company) commences a tender or exchange offer
which, if consummated, would result in such Person's becoming an Acquiring
Person and (ii) the Flip-in Date; provided that, if the foregoing results in
the Separation Time being prior to the Record Time, the Separation Time shall
be the Record Time and provided further that, if any tender or
-5-
<PAGE> 9
exchange offer referred to in clause (i) of this definition is canceled,
terminated or otherwise withdrawn prior to the Separation Time, such offer
shall be deemed, for purposes of this definition, never to have been made.
"Stock Acquisition Date" shall mean the first date of public
announcement by the Company (by any means) or by an Acquiring Person (by means
of filing a Schedule 13D under the Securities Exchange Act of 1934 (or any
comparable or successor report or schedule) or an amendment thereto) that an
Acquiring Person has become such.
"Subsidiary" of any specified Person shall mean any
corporation or other entity of which a majority of the voting power of the
equity securities or a majority of the equity interest is Beneficially Owned,
directly or indirectly, by such Person.
"Trading Day", when used with respect to any securities, shall
mean a day on which The Nasdaq National Market is open for the transaction of
business or, if such securities are not listed or admitted to trading on The
Nasdaq National Market, a day on which the principal national securities
exchange on which such securities are listed or admitted to trading is open for
the transaction of business or, if such securities are not listed or admitted
to trading on any national securities exchange, a Business Day.
ARTICLE II
THE RIGHTS
2.1 Summary of Rights. As soon as practicable after the
Record Time, the Company will mail a copy of a letter to stockholders
summarizing the terms of the Rights to each holder of record of Common Stock as
of the Record Time, at such holder's address as shown by the records of the
Company.
2.2 Legend on Common Stock Certificates. Certificates
for the Common Stock issued after the Record Time but prior to the Separation
Time shall evidence one Right for each share of Common Stock represented
thereby and shall have impressed on, printed on, written on or otherwise
affixed to them the following legend:
Until the Separation Time (as defined in the Rights Agreement referred
to below), this certificate also evidences and entitles the holder
hereof to certain Rights as set forth in a Rights Agreement, dated as
of August 12, 1999 (as such may be amended from time to time, the
"Rights Agreement"), between Group 1 Software, Inc. (the "Company")
and American Stock Transfer & Trust Company, as Rights Agent, the
terms of which are hereby incorporated herein by reference and a copy
of which is on file at the principal executive offices of the Company.
Under certain circumstances, as set forth in the Rights Agreement,
such Rights may be terminated, may be exchanged for shares of Common
Stock or other securities or assets of the Company, may expire, may
become void (if they are "Beneficially Owned" by an "Acquiring Person"
or an Affiliate or Associate thereof, as such terms are defined in the
Rights Agreement, or by any transferee of any of the foregoing) or may
be evidenced by separate certificates and may no longer be
-6-
<PAGE> 10
evidenced by this certificate. The Company will mail or arrange for
the mailing of a copy of the Rights Agreement to the holder of this
certificate without charge within ten days after the receipt of a
written request therefor.
Certificates representing shares of Common Stock that are issued and
outstanding at the Record Time shall evidence one Right for each share of
Common Stock evidenced thereby notwithstanding the absence of the foregoing
legend.
2.3 Exercise of Rights; Separation of Rights. (a)
Subject to adjustment as herein set forth, each Right will entitle the holder
thereof, after the Separation Time, to purchase, for the Exercise Price, one
share of Common Stock as follows.
(b) Until the Separation Time, (i) no Right may be
exercised and (ii) each Right will be evidenced by the certificate for the
associated share of Common Stock (together, in the case of certificates issued
prior to the Record Time, with the letter mailed to the record holder thereof
pursuant to Section 2.1) and will be transferable only together with, and will
be transferred by a transfer (whether with or without such letter) of, such
associated share. Notwithstanding any other provision of this Agreement, any
Rights held by the Company or any of its Subsidiaries shall be void.
(c) After the Separation Time and prior to the Expiration
Time, the Rights (i) may be exercised and (ii) will be transferable independent
of Common Stock. Promptly following the Separation Time, the Rights Agent will
mail to each holder of record of Common Stock as of the Separation Time, at
such holder's address as shown by the records of the Company (the Company
hereby agreeing to furnish copies of such records to the Rights Agent for this
purpose), (x) a certificate (a "Rights Certificate") in substantially the form
of Exhibit A hereto appropriately completed, representing the number of Rights
held by such holder at the Separation Time and having such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
law or with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange or quotation system on which the Rights may
from time to time be listed or traded, or to conform to usage, and (y) a
disclosure statement describing the Rights.
(d) Subject to Section 5.10, Rights may be exercised on
any Business Day after the Separation Time and prior to the Expiration Time by
submitting to the Rights Agent the Rights Certificate evidencing such Rights
with an Election to Exercise (an "Election to Exercise") substantially in the
form attached to the Rights Certificate duly completed, accompanied by payment
in cash, or by certified check or money order payable to the order of the
Company, of a sum equal to the Exercise Price multiplied by the number of
Rights being exercised and a sum sufficient to cover any transfer tax or charge
which may be payable in respect of any transfer involved in the transfer or
delivery of Rights Certificates or the issuance or delivery of certificates for
shares or depositary receipts (or both) in a name other than that of the holder
of the Rights being exercised.
(e) Upon receipt of a Rights Certificate, with an
Election to Exercise accompanied by payment as set forth in Section 2.3(d)
above, and subject to Section 5.10, the
-7-
<PAGE> 11
Rights Agent will thereupon promptly (i)(A) requisition from a transfer agent
stock certificates for the number of shares to be purchased (the Company hereby
irrevocably authorizing its transfer agents to comply with all such
requisitions) and (B) if the Company elects pursuant to Section 5.5 hereof not
to issue certificates representing fractional shares, requisition from the
depositary selected by the Company depositary receipts representing the
fractional shares to be purchased or requisition from the Company the amount of
cash to be paid in lieu of fractional shares in accordance with Section 5.5
hereof and (ii) after receipt of such certificates, depositary receipts and/or
cash, deliver the same to or upon the order of the registered holder of such
Rights Certificate, registered (in the case of certificates or depositary
receipts) in such name or names as may be designated by such holder.
(f) In case the holder of any Rights shall exercise less
than all the Rights evidenced by such holder's Rights Certificate, a new Rights
Certificate evidencing the Rights remaining unexercised will be issued by the
Rights Agent to such holder or to such holder's duly authorized assigns.
(g) The Company covenants and agrees that it will (i)
cause to be kept available until the Expiration Time out of its authorized and
unissued shares of capital stock a number of shares of Common Stock that will
be sufficient to permit the exercise in full of all outstanding Rights; (ii)
take all such action as may be necessary to ensure that all shares delivered
upon exercise of Rights shall, at the time of delivery of the certificates for
such shares (subject to payment of the Exercise Price), be duly and validly
authorized, executed, issued and delivered and fully paid and nonassessable;
(iii) take all such action as may be necessary to comply with any applicable
requirements of the Securities Act of 1933 or the Securities Exchange Act of
1934, and the rules and regulations thereunder, and any other applicable law,
rule or regulation, in connection with the issuance of any shares upon exercise
of Rights; (iv) use its best efforts to cause all shares issued upon exercise
of Rights to be listed, upon issuance, on the Nasdaq National Market or such
other exchange or trading system as the Common Stock of the Company is then
listed on; and (v) pay when due and payable any and all federal and state
transfer taxes and charges which may be payable in respect of the original
issuance or delivery of the Rights Certificates or of any shares issued upon
the exercise of Rights, provided that the Company shall not be required to pay
any transfer tax or charge which may be payable in respect of any transfer
involved in the transfer or delivery of Rights Certificates or the issuance or
delivery of certificates for shares in a name other than that of the holder of
the Rights being transferred or exercised.
2.4 Adjustments to Exercise Price; Number of Rights. (a)
In the event the Company shall at any time after the Record Time and prior to
the Separation Time (i) declare or pay a dividend on Common Stock payable in
Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the
outstanding Common Stock into a smaller number of shares of Common Stock, (x)
the Exercise Price in effect after such adjustment will be equal to the
Exercise Price in effect immediately prior to such adjustment divided by the
number of shares of Common Stock (the "Expansion Factor") that a holder of one
share of Common Stock immediately prior to such dividend, subdivision or
combination would hold thereafter as a result thereof and (y) each Right held
prior to such adjustment will become that number of Rights equal to the
Expansion Factor, and the adjusted number of Rights will be deemed to be
distributed among the shares of Common Stock with respect to which the original
Rights were associated (if
-8-
<PAGE> 12
they remain outstanding) and the shares issued in respect of such dividend,
subdivision or combination, so that each such share of Common Stock will have
exactly one Right associated with it. Each adjustment made pursuant to this
paragraph shall be made as of the payment or effective date for the applicable
dividend, subdivision or combination.
In the event the Company shall at any time after the Record
Time and prior to the Separation Time issue any shares of Common Stock
otherwise than in a transaction referred to in the preceding paragraph, each
such share of Common Stock so issued shall automatically have one new Right
associated with it, which Right shall be evidenced by the certificate
representing such share.
(b) In the event the Company shall at any time after the
Record Time and prior to the Separation Time issue or distribute any securities
or assets in respect of, in lieu of or in exchange for Common Stock (other than
pursuant to a regular periodic cash dividend or a dividend paid solely in
Common Stock) whether by dividend, in a reclassification or recapitalization
(including any such transaction involving a merger, consolidation or binding
share exchange), or otherwise, the Company shall make such adjustments, if any,
in the Exercise Price, number of Rights and/or securities or other property
purchasable upon exercise of Rights as the Board of Directors of the Company,
in its sole discretion, may deem to be appropriate under the circumstances in
order to adequately protect the interests of the holders of Rights generally,
and the Company and the Rights Agent shall amend this Agreement as necessary to
provide for such adjustments.
(c) Each adjustment to the Exercise Price made pursuant
to this Section 2.4 shall be calculated to the nearest cent. Whenever an
adjustment to the Exercise Price is made pursuant to this Section 2.4, the
Company shall (i) promptly prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (ii)
promptly file with the Rights Agent and with each transfer agent for the Common
Stock a copy of such certificate and (iii) mail a brief summary thereof to each
holder of Rights.
(d) Irrespective of any adjustment or change in the
securities purchasable upon exercise of the Rights, the Rights Certificates
theretofore and thereafter issued may continue to express the securities so
purchasable which were expressed in the initial Rights Certificates issued
hereunder.
2.5 Date on Which Exercise is Effective. Each person in
whose name any certificate for shares is issued upon the exercise of Rights
shall for all purposes be deemed to have become the holder of record of the
shares represented thereby on, and such certificate shall be dated, the date
upon which the Rights Certificate evidencing such Rights was duly surrendered
and payment of the Exercise Price for such Rights (and any applicable taxes and
other governmental charges payable by the exercising holder hereunder) was
made; provided, however, that if the date of such surrender and payment is a
date upon which the stock transfer books of the Company are closed, such person
shall be deemed to have become the record holder of such shares on, and such
certificate shall be dated, the next succeeding Business Day on which the stock
transfer books of the Company are open.
-9-
<PAGE> 13
2.6 Execution, Authentication, Delivery and Dating of
Rights Certificates. (a) The Rights Certificates shall be executed on behalf
of the Company by its Chairman of the Board, Vice Chairman of the Board,
President or one of its Vice Presidents, under its corporate seal reproduced
thereon attested by its Secretary or one of its Assistant Secretaries. The
signature of any of these officers on the Rights Certificates may be manual or
facsimile.
Rights Certificates bearing the manual or facsimile signatures
of individuals who were at any time the proper officers of the Company shall
bind the Company, notwithstanding that such individuals or any of them have
ceased to hold such offices prior to the countersignature and delivery of such
Rights Certificates.
Promptly after the Company learns of the Separation Time, the
Company will notify the Rights Agent of such Separation Time and will deliver
Rights Certificates executed by the Company to the Rights Agent for
countersignature, and the Rights Agent shall manually countersign and deliver
such Rights Certificates to the holders of the Rights pursuant to Section
2.3(c) hereof. No Rights Certificate shall be valid for any purpose until
manually countersigned by the Rights Agent.
(b) Each Rights Certificate shall be dated the date of
countersignature thereof.
2.7 Registration, Registration of Transfer and Exchange.
(a) After the Separation Time, the Company will cause to be kept a register
(the "Rights Register") in which, subject to such reasonable regulations as it
may prescribe, the Company will provide for the registration and transfer of
Rights. The Rights Agent is hereby appointed "Rights Registrar" for the
purpose of maintaining the Rights Register for the Company and registering
Rights and transfers of Rights after the Separation Time as herein provided.
In the event that the Rights Agent shall cease to be the Rights Registrar, the
Rights Agent will have the right to examine the Rights Register at all
reasonable times after the Separation Time.
After the Separation Time and prior to the Expiration Time,
upon surrender for registration of transfer or exchange of any Rights
Certificate, and subject to the provisions of Section 2.7(c) below, the Company
will execute, and the Rights Agent will countersign and deliver, in the name of
the holder or the designated transferee or transferees, as required pursuant to
the holder's instructions, one or more new Rights Certificates evidencing the
same aggregate number of Rights as did the Rights Certificate so surrendered.
(b) All Rights issued upon any registration of transfer
or exchange of Rights Certificates shall be the valid obligations of the
Company, and such Rights shall be entitled to the same benefits under this
Agreement as the Rights surrendered upon such registration of transfer or
exchange.
(c) Every Rights Certificate surrendered for registration
of transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company or the Rights Agent,
as the case may be, duly executed by the holder thereof or such holder's
attorney duly authorized in writing. As a condition to the issuance of any new
Rights Certificate under this Section 2.7, the Company may require the payment
of a
-10-
<PAGE> 14
sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto.
(d) The Company shall not be required to register the
transfer or exchange of any Rights after the Rights have been redeemed under
Section 5.1 hereof.
2.8 Mutilated, Destroyed, Lost and Stolen Rights
Certificates. (a) If any mutilated Rights Certificate is surrendered to the
Rights Agent prior to the Expiration Time, the Company shall execute and the
Rights Agent shall countersign and deliver in exchange therefor a new Rights
Certificate evidencing the same number of Rights as did the Rights Certificate
so surrendered.
(b) If there shall be delivered to the Company and the
Rights Agent prior to the Expiration Time (i) evidence to their satisfaction of
the destruction, loss or theft of any Rights Certificate and (ii) such security
or indemnity as may be required by them to save each of them and any of their
agents harmless, then, in the absence of notice to the Company or the Rights
Agent that such Rights Certificate has been acquired by a bona fide purchaser,
the Company shall execute and upon its request the Rights Agent shall
countersign and deliver, in lieu of any such destroyed, lost or stolen Rights
Certificate, a new Rights Certificate evidencing the same number of Rights as
did the Rights Certificate so destroyed, lost or stolen.
(c) As a condition to the issuance of any new Rights
Certificate under this Section 2.8, the Company may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses (including the fees and
expenses of the Rights Agent) connected therewith.
(d) Every new Rights Certificate issued pursuant to this
Section 2.8 in lieu of any destroyed, lost or stolen Rights Certificate shall
evidence an original additional contractual obligation of the Company, whether
or not the destroyed, lost or stolen Rights Certificate shall be at any time
enforceable by anyone, and shall be entitled to all the benefits of this
Agreement equally and proportionately with any and all other Rights duly issued
hereunder.
2.9 Persons Deemed Owners. Prior to due presentment of a
Rights Certificate (or, prior to the Separation Time, the associated Common
Stock certificate) for registration of transfer, the Company, the Rights Agent
and any agent of the Company or the Rights Agent may deem and treat the person
in whose name such Rights Certificate (or, prior to the Separation Time, such
Common Stock certificate) is registered as the absolute owner thereof and of
the Rights evidenced thereby for all purposes whatsoever, and neither the
Company nor the Rights Agent shall be affected by any notice to the contrary.
As used in this Agreement, unless the context otherwise requires, the term
"holder" of any Rights shall mean the registered holder of such Rights (or,
prior to the Separation Time, the associated shares of Common Stock).
2.10 Delivery and Cancellation of Certificates. All
Rights Certificates surrendered upon exercise or for redemption, registration
of transfer or exchange shall, if surrendered to any person other than the
Rights Agent, be delivered to the Rights Agent and, in any case, shall be
promptly canceled by the Rights Agent. The Company may at any time deliver to
the Rights Agent for cancellation any Rights Certificates previously
countersigned and
-11-
<PAGE> 15
delivered hereunder which the Company may have acquired in any manner
whatsoever, and all Rights Certificates so delivered shall be promptly canceled
by the Rights Agent. No Rights Certificates shall be countersigned in lieu of
or in exchange for any Rights Certificates canceled as provided in this Section
2.10, except as expressly permitted by this Agreement. The Rights Agent shall
destroy all canceled Rights Certificates and deliver a certificate of
destruction to the Company.
2.11 Agreement of Rights Holders. Every holder of Rights
by accepting the same consents and agrees with the Company and the Rights Agent
and with every other holder of Rights that:
(a) prior to the Separation Time, each Right will be
transferable only together with, and will be transferred by a transfer of, the
associated share of Common Stock;
(b) after the Separation Time, the Rights Certificates
will be transferable only on the Rights Register as provided herein;
(c) prior to due presentment of a Rights Certificate (or,
prior to the Separation Time, the associated Common Stock certificate) for
registration of transfer, the Company, the Rights Agent and any agent of the
Company or the Rights Agent may deem and treat the person in whose name the
Rights Certificate (or, prior to the Separation Time, the associated Common
Stock certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby for all purposes whatsoever, and neither the Company
nor the Rights Agent shall be affected by any notice to the contrary;
(d) Rights beneficially owned by certain Persons will
under the circumstances set forth in Section 3.1(b) become void; and
(e) this Agreement may be supplemented or amended from
time to time pursuant to Section 2.4(b) or 5.4 hereof.
ARTICLE III
ADJUSTMENTS TO THE RIGHTS IN THE EVENT OF CERTAIN TRANSACTIONS
3.1 Flip-in. (a) In the event that prior to the
Expiration Time a Flip-in Date shall occur, the Company shall take such action
as shall be necessary to ensure and provide that, except as provided below,
each Right shall constitute the right to purchase from the Company, upon
exercise thereof in accordance with the terms hereof (but subject to Section
5.10 hereof), that number of shares of Common Stock having an aggregate Market
Price on the Stock Acquisition Date equal to twice the Exercise Price for an
amount in cash equal to the Exercise Price (such right to be appropriately
adjusted in order to protect the interests of the holders of Rights generally
in the event that on or after such Stock Acquisition Date an event of a type
analogous to any of the events described in Section 2.4(a) or (b) shall have
occurred with respect to the Common Stock).
-12-
<PAGE> 16
(b) Notwithstanding the foregoing, any Rights that are or
were Beneficially Owned on or after the Stock Acquisition Date by an Acquiring
Person or an Affiliate or Associate thereof or by any transferee, direct or
indirect, of any of the foregoing shall become void and any holder of such
Rights (including transferees) shall thereafter have no right to exercise or
transfer such Rights under any provision of this Agreement. If any Rights
Certificate is presented for assignment or exercise and the Person presenting
the same will not complete the certification set forth at the end of the form
of assignment or notice of election to exercise and provide such additional
evidence of the identity of the Beneficial Owner and its Affiliates and
Associates (or former Beneficial Owners and their Affiliates and Associates) as
the Company shall reasonably request, then the Company shall be entitled to
conclusively deem the Beneficial Owner thereof to be an Acquiring Person or an
Affiliate or Associate thereof or a transferee of any of the foregoing and
accordingly will deem the Rights evidenced thereby to be void and not
transferable or exercisable.
(c) The Board of Directors of the Company may, at its
option, at any time after a Flip-in Date and prior to the time that an
Acquiring Person becomes the Beneficial Owner of more than 50% of the
outstanding shares of Common Stock, elect to exchange all (but not less than
all) the then outstanding Rights (which shall not include Rights that have
become void pursuant to the provisions of Section 3.1(b)) for shares of Common
Stock at an exchange ratio of one share of Common Stock per Right,
appropriately adjusted in order to protect the interests of holders of Rights
generally in the event that after the Separation Time an event of a type
analogous to any of the events described in Section 2.4(a) or (b) shall have
occurred with respect to the Common Stock (such exchange ratio, as adjusted
from time to time, being hereinafter referred to as the "Exchange Ratio").
Immediately upon the action of the Board of Directors of the
Company electing to exchange the Rights, without any further action and without
any notice, the right to exercise the Rights will terminate and each Right will
thereafter represent only the right to receive a number of shares of Common
Stock equal to the Exchange Ratio. Promptly after the action of the Board of
Directors electing to exchange the Rights, the Company shall give notice
thereof (specifying the steps to be taken to receive shares of Common Stock in
exchange for Rights) to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice in accordance with Section 5.9.
(d) In the event that there shall not be sufficient
treasury shares or authorized but unissued shares of Common Stock of the
Company to permit the exercise or exchange in full of the Rights in accordance
with Section 3.1(a) or (c), the Company shall either (i) call a meeting of
stockholders seeking approval to cause sufficient additional shares to be
authorized (provided that if such approval is not obtained the Company will
take the action specified in clause (ii) of this sentence) or (ii) take such
action as shall be necessary to ensure and provide, to the extent permitted by
applicable law and any agreements or instruments in effect on the Stock
Acquisition Date to which it is a party, that each Right shall thereafter
constitute the right to receive, (x) at the Company's option, either (A) in
return for the Exercise Price, debt or equity securities (including Preferred
Stock) or other assets (or a combination thereof) having a fair value equal to
twice the Exercise Price, or (B) without payment of consideration (except as
otherwise required by applicable law), debt or equity securities (including
Preferred Stock) or other assets (or a combination thereof) having a fair value
equal to the Exercise Price, or (y) if
-13-
<PAGE> 17
the Board of Directors of the Company elects to exchange the Rights in
accordance with Section 3.1(c), debt or equity securities (including Preferred
Stock) or other assets (or a combination thereof) having a fair value equal to
the product of the Market Price of a share of Common Stock on the Flip-in Date
times the Exchange Ratio in effect on the Flip-in Date, where in any case set
forth in (x) or (y) above the fair value of such debt or equity securities or
other assets shall be as determined in good faith by the Board of Directors of
the Company, after consultation with a nationally recognized investment banking
firm.
3.2 Flip-over. (a) Prior to the Expiration Time, the
Company shall not enter into any agreement with an Acquiring Person with
respect to, consummate or permit to occur any Flip-over Transaction or Event
unless and until it shall have entered into a supplemental agreement with the
Person engaging in such Flip-over Transaction or Event (the "Flip-over
Entity"), for the benefit of the holders of the Rights, providing, that upon
consummation or occurrence of the Flip-over Transaction or Event (i) each Right
shall thereafter constitute the right to purchase from the Flip-over Entity,
upon exercise thereof in accordance with the terms hereof, that number of
shares of Flip-over Stock of the Flip-over Entity having an aggregate Market
Price on the date of consummation or occurrence of such Flip-over Transaction
or Event equal to twice the Exercise Price for an amount in cash equal to the
Exercise Price (such right to be appropriately adjusted in order to protect the
interests of the holders of Rights generally in the event that after such date
of consummation or occurrence an event of a type analogous to any of the events
described in Section 2.4(a) or (b) shall have occurred with respect to the
Flip-over Stock) and (ii) the Flip-over Entity shall thereafter be liable for,
and shall assume, by virtue of such Flip-over Transaction or Event and such
supplemental agreement, all the obligations and duties of the Company pursuant
to this Agreement. The provisions of this Section 3.2 shall apply to
successive Flip-over Transactions or Events.
(b) Prior to the Expiration Time, unless the Rights will
be redeemed pursuant to Section 5.1 hereof in connection therewith, the Company
shall not enter into any agreement with respect to, consummate or permit to
occur any Flip-over Transaction or Event if at the time thereof there are any
rights, warrants or securities outstanding or any other arrangements,
agreements or instruments which would eliminate or otherwise diminish in any
respect the benefits intended to be afforded by this Rights Agreement to the
holders of Rights upon consummation of such transaction.
ARTICLE IV
THE RIGHTS AGENT
4.1 General. (a) The Company hereby appoints the Rights
Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company agrees to pay to the Rights Agent reasonable compensation for all
services rendered by it hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and other disbursements
incurred in the administration and execution of this Agreement and the exercise
and performance of its duties hereunder. The Company also agrees to indemnify
the Rights Agent for, and to hold it harmless against, any loss, liability, or
expense, incurred without negligence, bad faith or willful misconduct on the
part of the Rights Agent, for anything done or omitted by the Rights Agent in
-14-
<PAGE> 18
connection with the acceptance and administration of this Agreement, including
the costs and expenses of defending against any claim of liability.
(b) The Rights Agent shall be protected and shall incur
no liability for or in respect of any action taken, suffered or omitted by it
in connection with its administration of this Agreement in reliance upon any
certificate for securities purchasable upon exercise of Rights, Rights
Certificate, certificate or other securities of the Company, instrument of
assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper person or persons.
4.2 Merger or Consolidation or Change of Name of Rights
Agent. (a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent is a party, or any corporation succeeding
to the shareholder services business of the Rights Agent or any successor
Rights Agent, will be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, provided that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 4.4
hereof. In case at the time such successor Rights Agent succeeds to the agency
created by this Agreement any of the Rights Certificates have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates have not been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such
cases such Rights Certificates will have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent is
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates shall
not have been countersigned, the Rights Agent may countersign such Rights
Certificates either in its prior name or in its changed name; and in all such
cases such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
4.3 Duties of Rights Agent. The Rights Agent undertakes
the duties and obligations imposed by this Agreement upon the following terms
and conditions, by all of which the Company and the holders of Rights
Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who
may be legal counsel for the Company), and the opinion of such counsel will be
full and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent deems it necessary or desirable that any fact or
matter be proved or established by
-15-
<PAGE> 19
the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by a person believed by the Rights Agent to be the Chairman
of the Board, the President or any Vice President and by the Treasurer or any
Assistant Treasurer or the Secretary or any Assistant Secretary of the Company
and delivered to the Rights Agent; and such certificate will constitute full
authorization to the Rights Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent will be liable hereunder only for
its own breach hereunder, negligence, bad faith or willful misconduct.
(d) The Rights Agent will not be liable for or by reason
of any of the statements of fact or recitals contained in this Agreement or in
the certificates for securities purchasable upon exercise of Rights or the
Rights Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and will be deemed to
have been made by the Company only.
(e) The Rights Agent will not be under any responsibility
in respect of the validity of this Agreement or the execution and delivery
hereof (except the due authorization, execution and delivery hereof by the
Rights Agent) or in respect of the validity or execution of any certificate for
securities purchasable upon exercise of Rights or Rights Certificate (except
its countersignature thereof); nor will it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor will it be responsible for any change in the
exercisability of the Rights (including the Rights becoming void pursuant to
Section 3.1(b) hereof) or any adjustment required under the provisions of
Section 2.4, 3.1 or 3.2 hereof or responsible for the manner, method or amount
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
after receipt of the certificate contemplated by Section 2.4 describing any
such adjustment); nor will it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
securities purchasable upon exercise of Rights or any Rights or as to whether
any securities purchasable upon exercise of Rights will, when issued, be duly
and validly authorized, executed, issued and delivered and fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing
by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder
from any person believed by the Rights Agent to be the Chairman of the Board,
the President or any Vice President or the Secretary or any Assistant Secretary
or the Treasurer or any Assistant Treasurer of the Company, and to apply to
such persons for advice or instructions in connection with its duties, and it
shall not be liable for any action taken or suffered by it in good faith in
accordance with instructions of any such person.
-16-
<PAGE> 20
(h) The Rights Agent and any stockholder, director,
officer or employee of the Rights Agent may buy, sell or deal in Common Stock,
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though it
were not Rights Agent under this Agreement. Nothing herein shall preclude the
Rights Agent from acting in any other capacity for the Company or for any other
legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys or agents, and the Rights Agent will not
be answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct, provided no breach has been committed
hereunder and reasonable care was exercised in the selection and continued
employment thereof.
4.4 Change of Rights Agent. The Rights Agent may resign
and be discharged from its duties under this Agreement upon 90 days' notice (or
such lesser notice as is acceptable to the Company) in writing mailed to the
Company and to each transfer agent of Common Stock by registered or certified
mail, and to the holders of the Rights in accordance with Section 5.9. The
Company may remove the Rights Agent upon 30 days' notice in writing, mailed to
the Rights Agent and to each transfer agent of the Common Stock by registered
or certified mail, and to the holders of the Rights in accordance with Section
5.9. If the Rights Agent should resign or be removed or otherwise become
incapable of acting, the Company will appoint a successor to the Rights Agent.
If the Company fails to make such appointment within a period of 30 days after
such removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of
any Rights (which holder shall, with such notice, submit such holder's Rights
Certificate for inspection by the Company), then the holder of any Rights may
apply to any court of competent jurisdiction for the appointment of a new
Rights Agent. Any successor Rights Agent, whether appointed by the Company or
by such a court, shall be a corporation organized and doing business under the
laws of the United States, the State of New York or the State of Delaware, in
good standing, having its principal office in the State of New York or the
State of Delaware, which is authorized under such laws to exercise the powers
of the Rights Agent contemplated by this Agreement and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $50,000,000. After appointment, the successor Rights Agent will be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for the purpose. Not
later than the effective date of any such appointment, the Company will file
notice thereof in writing with the predecessor Rights Agent and each transfer
agent of the Common Stock, and mail a notice thereof in writing to the holders
of the Rights. Failure to give any notice provided for in this Section 4.4,
however, or any defect therein, shall not affect the legality or validity of
the resignation or removal of the Rights Agent or the appointment of the
successor Rights Agent, as the case may be.
-17-
<PAGE> 21
ARTICLE V
MISCELLANEOUS
5.1 Redemption. (a) The Board of Directors of the
Company may, at its option, at any time prior to the Flip-in Date, elect to
redeem all (but not less than all) the then outstanding Rights at the
Redemption Price.
(b) Immediately upon the action of the Board of Directors
of the Company electing to redeem the Rights (or, if the resolution of the
Board of Directors electing to redeem the Rights states that the redemption
will not be effective until the occurrence of a specified future time or event,
upon the occurrence of such future time or event), without any further action
and without any notice, the right to exercise the Rights will terminate and
each Right will thereafter represent only the right to receive the Redemption
Price in cash. Promptly after the Rights are redeemed, the Company shall give
notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice in accordance with Section 5.9.
5.2 Expiration. No Person shall have any rights pursuant
to this Agreement or any Right after the Expiration Time, except, if the Rights
are exchanged or redeemed, as provided in Section 3.1(c) or 5.1 hereof.
5.3 Issuance of New Rights Certificates. Notwithstanding
any of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect any
adjustment or change in the number or kind or class of shares of stock
purchasable upon exercise of Rights made in accordance with the provisions of
this Agreement.
5.4 Supplements and Amendments. The Company and the
Rights Agent may from time to time supplement or amend this Agreement without
the approval of any holders of Rights (i) in any respect prior to the Flip-in
Date (other than to change the Exercise Price, the Redemption Price or the
Expiration Time, except as contemplated elsewhere herein), (ii) to make any
changes following the close of business on the Flip-in Date which the Company
may deem necessary or desirable and which shall not materially adversely affect
the interests of the holders of Rights generally or (iii) in order to cure any
ambiguity or to correct or supplement any provision contained herein which may
be inconsistent with any other provisions herein or otherwise defective. The
Rights Agent will duly execute and deliver any supplement or amendment hereto
requested by the Company which satisfies the terms of the preceding sentence.
5.5 Fractional Shares. If the Company elects not to
issue certificates representing fractional shares upon exercise of Rights, the
Company shall, in lieu thereof, (a) evidence such fractional shares by
depositary receipts issued pursuant to an appropriate agreement between the
Company and a depositary selected by it, provided that such agreement shall
provide that each holder of a depositary receipt shall have all of the rights,
privileges and preferences to which he would be entitled as a beneficial owner
of such fractional share, or (b) pay to the registered holder of such Rights
the same fraction of the Market Price of one share of the stock issuable upon
such exercise on the day of exercise.
-18-
<PAGE> 22
5.6 Rights of Action. Subject to the terms of this
Agreement, rights of action in respect of this Agreement, other than rights of
action vested solely in the Rights Agent, are vested in the respective holders
of the Rights; and any holder of any Rights, without the consent of the Rights
Agent or of the holder of any other Rights, may, on such holder's own behalf
and for such holder's own benefit and the benefit of other holders of Rights,
enforce, and may institute and maintain any suit, action or proceeding against
the Company to enforce, or otherwise act in respect of, such holder's right to
exercise such holder's Rights in the manner provided in such holder's Rights
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened
violations of, the obligations of any Person subject to this Agreement.
5.7 Holder of Rights Not Deemed a Stockholder. No
holder, as such, of any Rights shall be entitled to vote, receive dividends or
be deemed for any purpose the holder of shares or any other securities which
may at any time be issuable on the exercise of such Rights, nor shall anything
contained herein or in any Rights Certificate be construed to confer upon the
holder of any Rights, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting stockholders (except as provided in Section 5.8 hereof), or
to receive dividends or subscription rights, or otherwise, until such Rights
shall have been exercised in accordance with the provisions hereof.
5.8 Notice of Proposed Actions. In case the Company
shall propose after the Separation Time and prior to the Expiration Time (i) to
effect or permit (in cases where the Company's permission is required)
occurrence of any Flip-in Date or Flip-over Transaction or Event or (ii) to
effect the liquidation, dissolution or winding up of the Company, then, in each
such case, the Company shall give to each holder of a Right, in accordance with
Section 5.9 hereof, a notice of such proposed action, which shall specify the
Flip-in Date or the date on which such Flip-over Transaction or Event,
liquidation, dissolution, or winding up is to take place, and such notice shall
be so given at least 20 Business Days prior to the date of the taking of such
proposed action.
5.9 Notices. Notices or demands authorized or required
by this Agreement to be given or made by the Rights Agent or by the holder of
any Rights to or on the Company shall be sufficiently given or made if
delivered or sent by facsimile, first-class mail, postage prepaid, addressed or
Federal Express (until another address is filed in writing with the Rights
Agent) as follows:
GROUP 1 SOFTWARE, INC.
4200 Parliament Place
Suite 600
Lanham, MD 20706-1844
Attention: General Counsel
Fax Number: 301-918-0430
-19-
<PAGE> 23
Any notice or demand authorized or required by this Agreement to be given or
made by the Company or by the holder of any Rights to or on the Rights Agent
shall be sufficiently given or made if delivered or sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Company) as follows:
AMERICAN STOCK TRANSFER & TRUST COMPANY
40 Wall Street, 46th Floor
New York, New York 10005
Attention: Corporate Trust Department
Notices or demands authorized or required by this Agreement to be given or made
by the Company or the Rights Agent to or on the holder of any Rights shall be
sufficiently given or made if delivered or sent by first-class mail, postage
prepaid, addressed to such holder at the address of such holder as it appears
upon the registry books of the Rights Agent or, prior to the Separation Time,
on the registry books of the transfer agent for the Common Stock. Any notice
which is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice.
5.10 Suspension of Exercisability. To the extent that the
Company determines in good faith that some action need be taken pursuant to
Section 3.1(e) or to comply with federal or state securities laws, the Company
may suspend the exercisability of the Rights for a period of up to one hundred
twenty (120) days following the date of the occurrence of the Separation Time
or the Flip-in Date in order to take such action or comply with such laws. In
the event of any such suspension, the Company shall issue as promptly as
practicable a public announcement stating that the exercisability of the Rights
has been temporarily suspended.
5.11 Costs of Enforcement. The Company agrees that if the
Company or any other Person the securities of which are purchasable upon
exercise of Rights fails to fulfill any of its obligations pursuant to this
Agreement, then the Company or such Person will reimburse the holder of any
Rights for the costs and expenses (including legal fees) incurred by such
holder in actions to enforce his rights pursuant to any Rights or this
Agreement.
5.12 Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
5.13 Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the holders of the Rights any legal or equitable right, remedy
or claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the holders of the
Rights.
5.14 Descriptive Headings. Descriptive headings appear
herein for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
-20-
<PAGE> 24
5.15 Governing Law. This Agreement and each Right issued
hereunder shall be deemed to be a contract made under the laws of the State of
New York and for all purposes shall be governed by and construed in accordance
with the laws of such state applicable to contracts to be made and performed
entirely within such state.
5.16 Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
5.17 Severability. If any term or provision hereof or the
application thereof to any circumstance shall, in any jurisdiction and to any
extent, be invalid or unenforceable, such term or provision shall be
ineffective as to such jurisdiction to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remaining
terms and provisions hereof or the application of such term or provision to
circumstances other than those as to which it is held invalid or unenforceable.
5.18 Determination and Actions by the Board of Directors,
Etc. (a) The Board of Directors of the Company shall have the exclusive power
and authority to administer this Rights Agreement and to exercise all rights
and powers specifically granted to the Board of Directors or to the Company, or
as may be necessary or advisable in the administration of this Rights
Agreement, including, without limitation, the right and power to (i) interpret
the provisions of this Rights Agreement and (ii) make all determinations deemed
necessary or advisable for the administration of this Rights Agreement
(including a determination to redeem or not redeem the Rights or to amend the
Rights Agreement and a determination of whether there is an Acquiring Person).
All such actions, calculations, interpretations and determinations (including,
for purposes of clause (y) below, all omissions with respect to the foregoing)
which are done or made by the Board of Directors in good faith shall (x) be
final, conclusive and binding on the Company, the Rights Agent, the holders of
the Rights and all other parties, and (y) not subject the Board of Directors to
any liability to the holders of the Rights.
(b) It is understood that the Independent Directors
Committee (as defined herein) of the Board of Directors shall review and
evaluate this Rights Agreement in order to consider whether the maintenance of
this Rights Agreement continues to be in the interests of the Company, its
shareholders and any other relevant constituencies of the Company, at least
once every three years during the term of this Rights Agreement, or sooner if
any Person shall have made a proposal to the Company, or taken any other
action, that, if effective, could cause such Person to become an Acquiring
Person hereunder, if a majority of the members of the Independent Directors
Committee shall deem such review and evaluation appropriate after giving due
regard to all relevant circumstances. Following each such review, the
Independent Directors' Committee will communicate its conclusions to the full
Board of Directors, including any recommendation in light thereof as to whether
this Rights Agreement should be modified or the Rights should be redeemed.
-21-
<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the date first above written.
GROUP 1 SOFTWARE, INC.
By:
-----------------------------------------
Name:
Title:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By:
-----------------------------------------
Name:
Title:
-22-
<PAGE> 26
EXHIBIT A
[Form of Common Stock Rights Certificate]
Certificate No. W- _______________ Rights
THE RIGHTS ARE SUBJECT TO REDEMPTION OR MANDATORY EXCHANGE, AT THE
OPTION OF THE COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
RIGHTS BENEFICIALLY OWNED BY ACQUIRING PERSONS OR AFFILIATES OR
ASSOCIATES THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT)
OR TRANSFEREES OF ANY OF THE FOREGOING WILL BE VOID.
Rights Certificate
GROUP 1 SOFTWARE, INC.
This certifies that ____________________________, or
registered assigns, is the registered holder of the number of Rights set forth
above, each of which entitles the registered holder thereof, subject to the
terms, provisions and conditions of the Shareholder Protection Rights
Agreement, dated as of August 12, 1999 (as such may be amended from time to
time, the "Rights Agreement"), between Group 1 Software, Inc., a Delaware
corporation (the "Company"), and American Stock Transfer & Trust Company, as
Rights Agent (the "Rights Agent," which term shall include any successor Rights
Agent under the Rights Agreement), to purchase from the Company at any time
after the Separation Time (as such term is defined in the Rights Agreement) and
prior to the close of business on August 12, 2009, one fully paid share of
Common Stock, par value $.50 per share (the "Common Stock"), of the Company
(subject to adjustment as provided in the Rights Agreement) at the Exercise
Price referred to below, upon presentation and surrender of this Rights
Certificate with the Form of Election to Exercise duly executed at the
principal office of the Rights Agent. The Exercise Price shall initially be
$60.00 per Right and shall be subject to adjustment in certain events as
provided in the Rights Agreement.
In certain circumstances described in the Rights Agreement,
the Rights evidenced hereby may entitle the registered holder thereof to
purchase securities of an entity other than the Company or securities or assets
of the Company other than Common Stock, all as provided in the Rights
Agreement.
This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description
of the rights, limitations of rights, obligations, duties and immunities
hereunder of the Rights Agent, the Company and the holders of the Rights
Certificates. Copies of the Rights Agreement are on file at the principal
office of the Company and are available without cost upon written request.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the office of the Rights Agent designated for
such purpose, may be exchanged for another
A-1
<PAGE> 27
Rights Certificate or Rights Certificates of like tenor and date evidencing an
aggregate number of Rights equal to the aggregate number of Rights evidenced by
the Rights Certificate or Rights Certificates surrendered. If this Rights
Certificate shall be exercised in part, the registered holder shall be entitled
to receive, upon surrender hereof, another Rights Certificate or Rights
Certificates for the type and number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be (a) redeemed by the Company under certain
circumstances at its option at an initial redemption price of $0.01 per Right,
as may be adjusted from time to time or (b) exchanged by the Company under
certain circumstances at its option for one share of Common Stock per Right
(or, in certain cases, other securities or assets of the Company), subject in
each case to adjustment in certain events as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be
entitled to vote or receive dividends or be deemed for any purpose the holder
of any securities which may at any time be issuable on the exercise hereof, nor
shall anything contained in the Rights Agreement or herein be construed to
confer upon the holder hereof, as such, any of the rights of a shareholder or
any right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Rights evidenced by
this Rights Certificate shall have been exercised as provided in the Rights
Agreement.
This Rights Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal.
Date:_____________________
ATTEST: GROUP 1 SOFTWARE, INC.
By:
- --------------------------------- -------------------------
Secretary
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By:
-----------------------------
Authorized Signature
A-2
<PAGE> 28
[Form of Reverse Side of Common Stock Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires
to transfer the Rights Certificates.)
FOR VALUE RECEIVED _____________________________ hereby sells,
assigns and transfers unto _____________________________________________________
_______________________________________________________ (Please print name and
address of transferee) this Rights Certificate, together with all right, title
and interest therein, and does hereby irrevocably constitute and appoint
______________________________ Attorney, to transfer the within Rights
Certificate on the books of the within-named Company, with full power of
substitution.
Dated: _______________, 19__
Signature Guaranteed:
---------------------------------------------
Signature
(Signature must correspond to name as written
upon the face of this Rights Certificate in
every particular, without alteration or
enlargement or any change whatsoever)
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States.
________________________________________________________________________________
(To be completed if true)
The undersigned hereby represents, for the benefit of all holders of Rights and
shares of Common Stock, that the Rights evidenced by this Rights Certificate
are not, and, to the knowledge of the undersigned, have never been,
Beneficially Owned by an Acquiring Person or an Affiliate or Associate thereof
(as defined in the Rights Agreement).
---------------------------------------------
Signature
________________________________________________________________________________
A-3
<PAGE> 29
NOTICE
In the event the certification set forth above is not completed in connection
with a purported assignment, the Company will deem the Beneficial Owner of the
Rights evidenced by the enclosed Rights Certificate to be an Acquiring Person
or an Affiliate or Associate thereof (as defined in the Rights Agreement) or a
transferee of any of the foregoing and accordingly will deem the Rights
evidenced by such Rights Certificate to be void and not transferable or
exercisable.
A-4
<PAGE> 30
[To be attached to each Common Stock Rights Certificate]
FORM OF ELECTION TO EXERCISE
(To be executed if holder desires to
exercise the Rights Certificate.)
TO: GROUP 1 SOFTWARE, INC.
The undersigned hereby irrevocably elects to exercise
_______________ whole Common Stock Rights represented by the attached Rights
Certificate to purchase the shares of Common Stock issuable upon the exercise
of such Common Stock Rights and requests that certificates for such shares be
issued in the name of:
-----------------------------------
Address:
---------------------------
-----------------------------------
Social Security or Other Taxpayer
Identification Number:
-------------
If such number of Common Stock Rights shall not be all the
Common Stock Rights evidenced by this Rights Certificate, a new Rights
Certificate for the balance of such Common Stock Rights shall be registered in
the name of and delivered to:
-----------------------------------
Address:
---------------------------
-----------------------------------
Social Security or Other Taxpayer
Identification Number:
-------------
Dated: ________________, 19__
Signature Guaranteed:
---------------------------------------------
Signature
(Signature must correspond to name as written
upon the face of this Rights Certificate in
every particular, without alteration or
enlargement or any change whatsoever)
A-5
<PAGE> 31
________________________________________________________________________________
(To be completed if true)
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States.
________________________________________________________________________________
(To be completed if true)
The undersigned hereby represents, for the benefit of all
holders of Rights and shares of Common Stock, that the Rights evidenced by the
enclosed Rights Certificate are not, and, to the knowledge of the undersigned,
have never been, Beneficially Owned by an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement).
-------------------------------------------
Signature
________________________________________________________________________________
NOTICE
In the event the certification set forth above is not
completed in connection with a purported exercise, the Company will deem the
Beneficial Owner of the Rights evidenced by the enclosed Rights Certificate to
be an Acquiring Person or an Affiliate thereof (as defined in the Rights
Agreement) or a transferee of any of the foregoing and accordingly will deem
the Rights evidenced by such Rights Certificate to be void and not transferable
or exercisable.
A-6
<PAGE> 1
EXHIBIT 4.17
as amended
09/23/99
GROUP 1 SOFTWARE, INC.
INCENTIVE STOCK OPTION,
NON-QUALIFIED STOCK OPTION AND
STOCK APPRECIATION UNIT PLAN
Group 1 Software, Inc., a Delaware corporation (hereinafter referred
to as the "Company"), adopted and established a non-qualified stock option and
stock appreciation incentive unit plan (the "Plan") for its officers and other
key employees (whether full-time or otherwise) effective as of September 12,
1995, the date it was approved by the Company's shareholders at their annual
meeting.
The provisions of the Plan are set forth below:
SECTION ONE
DESIGNATION AND PURPOSE OF THE PLAN
A. Designation. This document is designated the "GROUP 1 SOFTWARE,
INC. INCENTIVE STOCK OPTION, NON-QUALIFIED STOCK OPTION AND STOCK APPRECIATION
UNIT PLAN" (hereinafter referred to as the "Plan").
B. Purpose. The purpose of the Plan is to advance the growth and
development of the Company by affording an opportunity to the officers and other
employees (whether full-time or otherwise) of the Company or a Subsidiary to
invest in shares of the Company's Stock and/or to receive a cash or Stock
distribution representing increases in the value of the Company's Stock. The
acquisition of such Stock by such employees and/or the payment of cash
distributions to such employees, who contribute to responsible for the Company's
success, provides a continuing incentive for them to promote the best interests
of the Company and induces them to continue their employment with the Company or
a Subsidiary. Finally, the Plan will enable the Company or a Subsidiary to
attract competent personnel to enter its employ.
<PAGE> 2
SECTION TWO
DEFINITIONS
The following definitions shall be applicable to the terms used in
the Plan:
A. "Code" means the Internal Revenue Code of 1986, as presently in
effect or as hereafter amended.
B. "Committee" means the Compensation Committee appointed to
administer the Plan pursuant to Section Four.
C. "Company" means Group 1 Software Corporation, a Delaware
corporation.
D. "Eligible Individual" means any officer or other key employee
(whether full-time or otherwise) of the Company or a Subsidiary. Options and
Stock Units may be granted under the Plan only to such officers and other key
employees (whether full-time or otherwise) of the Company or a Subsidiary.
E. "Incentive Stock Option" shall mean an option granted under this
Plan that meets the requirements of Code Section 422.
F. "Incentive Stock Option Plan" shall mean that part of the Plan
the provisions of which are specifically designated as relating solely to
Incentive Stock Options as well as those provisions of the Plan which relate to
Options generally or to both Options and Stock Units.
G. "Non-Qualified Stock Option" means any options granted under the
Plan that are not Incentive Stock Options.
H. "Non-Qualified Stock Option Plan" shall mean that part of the
Plan the provisions of which are specifically designated as relating solely to
Non-Qualified Stock Options as well as those provisions of the Plan which relate
to Options generally or to both Options and Stock Units.
I. "Option" shall mean an Incentive Stock Option and a Non-Qualified
Stock Option granted under this Plan to purchase authorized but unissued or
treasury shares of the Company's Stock.
J. "Participant" means any Eligible Individual who is granted an
Option or Stock Unit as provided in this Plan, and
2
<PAGE> 3
shall also mean the successor in interest, if any, of a deceased Eligible
Individual.
K. "Plan" shall mean the Group 1 Software Corporation Incentive
Stock Option, Non-Qualified Stock Option and Stock Appreciation Unit Plan as set
forth in this document, and as hereafter amended, the provisions of which,
unless otherwise designated, form a part of each of the incentive Stock Options
Plan, the Non-Qualified Stock Option Plan, and the Stock Appreciation Unit Plan.
L. "Redemption Date" for a Stock Unit shall be the earlier of (i)
the date so designated in the written instrument granting the Stock Unit, which
shall in no event be earlier than the first anniversary of the date of grant of
the Stock Unit (except as otherwise expressly provided herein) nor later than
the tenth anniversary of the date of grant of the Stock Unit; (ii) the date of
the death of the Participant to whom the Stock Unit was granted; or (iii) the
date which is the first day of the sixth month following the termination of
employment of the Participant to whom the Stock Unit was granted if such
termination of employment is due to "total disability" of the Participant. If
the termination of employment is due to any other cause which the Committee, in
its sole discretion, determines should permit a redemption rather than a
forfeiture of outstanding vested Stock Units, the redemption rules of Section
Twelve A shall apply.
M. "Stock" means the Common Stock of the Company.
N. "Stock Appreciation Unit Plan" shall mean that part of the Plan
the provisions of which are specifically designated as relating solely to Stock
Units as well as those provisions of the Plan which relate to both Stock Units
and Options.
O. "Stock Unit" means a stock appreciation incentive unit granted to
a Participant by the Committee under this Plan.
P. "Subsidiary" shall mean an affiliate controlled by the Company,
directly or indirectly, through one or more intermediaries, subject to Section
Twelve(A)(vi), below.
Q. "Vesting Date" for a Stock Unit shall mean the date or dates upon
which all or any portion of the Stock Units shall become non-forfeitable in the
event of the subsequent
3
<PAGE> 4
total disability or death of the participant or in the event of the termination
of employment of the Participant for other causes approved by the Committee.
R. Wherever appropriate, words used in this Plan in the singular may
mean the plural, the plural may mean the singular, and the masculine may mean
the feminine or neuter.
SECTION THREE
STOCK SUBJECT TO STOCK OPTIONS AND STOCK UNITS
Subject to the adjustment provided in Section Ten, the total number
of shares of Stock which may be delivered to all participants upon the exercise
of all Options granted under this Plan, shall not exceed 800,000 and the total
number of shares of Stock which may be so issued may be increased only by a
resolution adopted by the Board of Directors of the Company and approved by the
stockholders of the Company. Shares delivered under this Plan upon the exercise
of an Option shall be fully paid and non-assessable. Subject to the adjustment
provided in Section Ten, the total number of Stock Units which may be issued by
the Committee to all Participants under this Plan shall not exceed 100,000 and
the total of such Stock Units may be increased only by a resolution adopted by
the Board of Directors of the Company and approved by the stockholders of the
Company. Such Stock may either be authorized and unissued or treasury stock.
Subject to the adjustment provided in Section Ten, the total number of Shares of
Stock which may be issued by the Committee in redemption of Stock Units to all
Participants under the Plan shall not exceed 75,000 shares and the total number
of shares of Stock which may be so issued may be increased only by a resolution
adopted by the Board of Directors of the Company and approved by the
stockholders of the Company.
SECTION FOUR
ADMINISTRATION OF THE PLAN
A. Appointment of Committee. The Board of Directors shall appoint a
Compensation Committee (the "Committee") which shall consist of not less than
three (3) members of such Board of Directors, none of whom is, or has been
during the one (1) year period prior to his appointment, an Eligible Individual,
who shall not be eligible during the period of service on the Committee. In
addition, the Board of Directors may designate a
4
<PAGE> 5
member of the Committee to act as Chairman of the Committee. The Board of
Directors, in its sole discretion, may at any time, remove any member of the
Committee and appoint a director to fill any vacancy on the Committee. No
individual may participate as a member of the Committee in the administration of
this Plan if he shall have been eligible to receive a grant of an award of any
options or stock appreciation rights of the Company or any of its affiliates (as
that term is used in SEC Rule 16b-3) under this Plan or any other discretionary
plan of the Company or its affiliates (as that term is used in SEC Rule 16b-3)
at any time within one year prior to serving on the Committee.
B. Committee Meetings. The Committee shall hold its meetings at such
times and places as are specified by the Committee. A majority of the Committee
shall constitute a quorum. All actions of the Committee shall be taken by a
majority of a quorum present at the meeting duly called by any member of the
Committee; provided, however, that any action taken by a written document signed
by a majority of the Committee members shall be as effective as actions taken by
the Committee at a meeting duly called and held.
C. Committee Powers. Subject to the terms and provisions of this
Plan, the Committee shall have full power and authority to (i) designate the
Eligible Individuals to whom Options or Stock Units shall be granted, (ii)
determine the number of Options and/or Stock Units to be granted to each
Participant, (iii) determine the Redemption Date of any Stock Units and the
Vesting Date for any Stock Units, (iv) determine whether a vested Stock Unit
shall be redeemed for cash or for Stock or for a combination of cash and Stock,
(v) determine the purchase price to be paid for each share of Stock deliverable
upon the exercise of any Options, which shall be at least equal to the fair
market value of a share of Stock at the time the Option is granted, (vi)
determine the period during which an Option may be exercised, which period may
not (except as otherwise expressly provided herein commence prior to the first
anniversary of the date of grant of the Options nor extend beyond the tenth
anniversary of the date of grant of the Options, (vii) establish the provisions
of Non-Qualified Options to avoid such Options being deemed to constitute
incentive stock options under Section 422 of the Code and regulations
thereunder, including but not limited to extending the terms of Non-Qualified
Options to a term not to exceed ten years and seven days and (viii) determine
any other conditions to which the exercise of an Option shall be subject,
including, subject to the provisions of Section Twelve,
5
<PAGE> 6
the effect upon an Option of the termination of employment or death of a
Participant. The Committee shall have all rights, powers and authority necessary
or appropriate to administer this Plan in accordance with its terms, including,
without limitation, the power to make binding interpretations of this Plan and
to resolve all questions (whether express or implied) arising thereunder. The
Committee may prescribe such rules and regulations for administering this Plan
as the Committee, in its sole discretion, deems necessary or appropriate.
SECTION FIVE
SELECTION OF PARTICIPANTS
In determining which Eligible Individuals shall be granted Options
and/or Stock Units, the Committee shall evaluate, inter alia, (i) the duties and
responsibilities of the Eligible Individuals, (ii) their past and prospective
contributions to the success of the Company, (iii) the extent to which they are
performing and will continue to perform valuable services for the benefit of the
Company, and (iv) such other factors as the Committee deems relevant.
SECTION SIX
ISSUANCE OF OPTIONS AND STOCK UNITS
A. Form of Options and Stock Units. Subject to the provisions of
this Plan, each group of Options and/or Stock Units granted to a Participant
shall be set forth in a written instrument upon such terms and conditions as the
Committee determines. The Redemption Date of any Stock Unit and the Vesting Date
of any Stock Unit shall be set forth in such written instrument. Each such
instrument shall incorporate the provisions of this Plan by reference.
B. Date of Grant of Stock Units and Options. The date of grant for a
Stock Unit shall be the date on which the Stock Unit instrument was issued to
the Participant and for an Option shall be the date such options were granted by
the Committee.
C. Delivery of Shares on Exercise of Option. Except as otherwise
expressly provided herein, no Option may be exercised prior to the first
anniversary of the date of grant of the Option. Upon exercise of any Option, or
any portion thereof, the Committee shall deliver to the Participant such number
of
6
<PAGE> 7
shares of Stock as the Participant elects to purchase, as soon as practicable
after the Committee receives (i) written notice of such exercise under and
pursuant to the terms and conditions of the applicable Option document and (ii)
the full purchase price for such shares which shall be paid in cash or shares of
stock, or a combination thereof. The Participant shall be entitled to pyramid
the shares received upon exercise of Options by simultaneously delivering such
shares of stock in payment of the purchase price of shares subject to additional
Options; any share delivered in payment of the exercise price must have been
held of record by the Optionee for a least six months or such other period as
may be required to avoid any adverse effect on the financial position of the
Company or a Subsidiary as a result of incurring compensation expense or
otherwise. Such shares, which shall be fully paid and non-assessable upon the
issuance thereof, shall be represented by a certificate or certificates
registered in the name of the Participant and stamped with any appropriate
legend.
SECTION SEVEN
VESTING AND REDEMPTION OF STOCK UNITS
A. Vesting. The amount to be paid in redemption of any Stock Unit as
of the Redemption Date of such Stock Unit shall be equal to the percentage of
the "Stock Unit Value" of the Stock Unit in which the Participant has a vested
interest as of the Redemption Date. The Committee may, in its discretion, issue
Stock Units to a participant in which the Participant has an immediate fully
vested interest or may impose such vesting requirements, expressed in terms of
years of continuous employment with the Company and/or a Subsidiary, as the
Committee, in its sole discretion, may determine is appropriate in any given
situation.
B. Stock Unit Value. The "Stock Unit Value" of a Stock Unit shall be
determined as of the Redemption Date of the Stock Unit and shall consist of the
appreciation, if any, in the value of one share of Stock of the Company, between
(i) the value of one share of the Company's Stock as of the date of grant of the
Stock Unit, and (ii) the value of one share of Stock of the Company as of the
Redemption Date of such Stock Unit.
C. Payment of Stock Unit Value. Each Stock Unit granted to a
Participant which has become vested shall be redeemed by the Committee on the
Redemption Date of such Stock Unit. The
7
<PAGE> 8
"Stock Unit Value" of the Stock Unit shall be paid to the Participant in cash,
in Stock or in a combination of cash and Stock as soon as is practicable after
the Redemption Date, at the discretion of the Committee. To the extent that
payment of the Stock Unit Value is made in shares of Stock, the value of the
Company's Stock as of the Redemption Date shall be used in determining the
number of shares of Stock to be received by the Participant. Any shares of stock
received by a Participant upon exercise of a Stock Unit shall be
non-transferable until a period of at least six months has elapsed since the
date of the grant of such Stock Unit.
SECTION EIGHT
NON-TRANSFERABILITY OF OPTIONS AND STOCK UNITS
Any Option or Stock Unit granted to an Eligible Individual may not
be sold, exchanged, assigned, pledged, discounted, hypothecated or otherwise
transferred except by will or by the laws of descent and distribution. During
the lifetime of the Eligible Individual to whom an Option or Stock Unit is
issued, such Option or Stock Unit may be exercised only by the Eligible
Individual to whom it was issued or his representative. Upon any attempt to so
sell, transfer, assign, pledge, discount, hypothecate or otherwise transfer any
Option or Stock Unit, or any right thereunder, contrary to the provisions
hereof, such Option of Stock Unit and all rights thereunder shall immediately
become null and void.
SECTION NINE
COMPLIANCE WITH SECURITIES LAWS
Unless a registration statement under the Securities Act of 1933 is
then in effect with respect to the Stock a Participant receives upon the
exercise of an Option or the redemption of a Stock Unit the Committee, in its
discretion, may require, at the time that a Participant so receives such Stock,
that the Participant agrees in writing to acquire any such Stock he may so
receive for investment and not for distribution, or to consent to such other
agreement as the Committee, in its discretion, may deem to be necessary to
comply with the requirements of the Securities Act of 1933 or any applicable
state securities laws. A reference to any such agreement shall be inscribed on
the Stock certificate(s). Each Option shall be
8
<PAGE> 9
subject to the requirement that, if at any time the Committee determines, in its
discretion, that the listing, registration or qualification of the shares of
Stock subject to the Option upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the issuance or
purchase of shares thereunder, the Option may not be exercised in whole or in
part unless such listing, registration, qualification, consent or approval shall
have been effected or obtained and the same shall have been free of any
conditions not acceptable to the Committee.
SECTION TEN
CHANGES IN CAPITAL STRUCTURE OF COMPANY
In the event of the splitting or consolidation of shares of Stock of
the Company, the payment of a stock dividend by the Company or a similar
transaction, the number of shares of Stock specified in Section Three of this
Plan, the number of shares of Stock upon which the value of each outstanding
Stock Unit shall be based and the value per share and the number and price per
share of shares subject to then outstanding Options shall be proportionately
adjusted.
SECTION ELEVEN
REORGANIZATION, DISSOLUTION, LIQUIDATION
CHANGE OF CONTROL OR SIMILAR EVENT
A. Treatment of Options. In the event of an occurrence of any of the
following events and upon approval of the Committee:
(i) the commencement of a bona fide "tender offer" acceptable to
the Company's Board for the shares of the Company as provided under Rule 14d-2
promulgated under the Federal Securities Exchange Act of 1934, as amended, or
any subsequent comparable Federal rule or regulation governing tender offers;
(ii) a successful tender offer not previously approved by the
Company's Board of Directors resulting in a change of control of the Board;
9
<PAGE> 10
(iii) the Company's execution of an agreement concerning the sale
of substantially all of its assets (other than to a subsidiary in a mere
corporate restructuring);
(iv) the Company's adoption of a plan of dissolution or
liquidation; or
(v) the Company's execution of an agreement concerning a merger
or consolidation involving the Company in which the Company is not the surviving
corporation or if, immediately following such merger or consolidation, less than
fifty percent (50%) of the surviving corporation's outstanding voting stock is
held by persons who were shareholders of the Company immediately prior to such
merger or consolidation; each Participant shall have the right, immediately
following such occurrence, to exercise his or her Option in full to the extent
not theretofore exercised regardless of any provision herein or any provision in
the Option contract providing for the deferment of the vesting or exercise
thereof.
The Participant shall be entitled to exercise the options regardless of whether
the tender offer (described in subsection A(i), directly above), is successful,
regardless of whether the dissolution or liquidation is consummated, and
regardless of whether the other corporation which is the surviving corporation
in a merger or consolidation shall adopt and maintain any plan under which
options are granted to the Participant. In the event the agreement concerning
the sale of substantially all of its assets or the agreement concerning a merger
or consolidation is not consummated by the parties, then the Options not
exercised prior to the formal determination by the Board that the contemplated
transaction will not be consummated shall on and after the date of such
determination again be subject to the exercise restrictions set forth in the
Option agreement. In the case of a merger, consolidation, reorganization,
reclassification, sale of assets or similar event, all outstanding Options shall
pertain to the securities or other property to which a holder of the number of
shares of Stock covered by the Option would have been entitled to receive in
connection with such event, and in the case of any other event specified herein,
each outstanding Option shall remain outstanding and exercisable in accordance
with its terms.
B. Treatment of Stock Units. In the event of an occurrence of any of
the following events and upon approval of the Committee:
10
<PAGE> 11
(i) the commencement of a bona fide "tender offer" acceptable to
the Company's Board for the shares of the Company as provided under Rule 14d-2
promulgated under the Federal Securities Exchange Act of 1934, as amended, or
any subsequent comparable Federal rule or regulation governing tender offers;
(ii) a successful tender offer not previously approved by the
Company's Board of Directors resulting in a change of control of the Board;
(iii) the Company's execution of an agreement concerning the sale
of substantially all of its assets (other than to a subsidiary in a mere
corporate restructuring);
(iv) the Company's adoption of a plan of dissolution or
liquidation; or
(v) the Company's execution of an agreement concerning a merger
or consolidation involving the Company in which the Company is not the surviving
corporation or if, immediately following such merger or consolidation, less than
fifty percent (50%) of the surviving corporation's outstanding voting stock is
held by persons who were shareholders of the Company immediately prior to such
merger or consolidation; the Redemption Date with respect to all Stock Units
theretofore granted hereunder and outstanding at that time shall be the date of
such event, regardless of any provision herein or any provision in the Stock
Unit contract providing for the deferment of the vesting or redemption of any
provision herein or any provision in the Stock Unit contract providing for the
deferment of the vesting or redemption thereof.
The Participant shall be entitled to require redemption (the "Redemption Date")
of the Stock Units regardless of whether the tender offer is successful,
regardless of whether the dissolution or liquidation is consummated, and
regardless of whether the other corporation which is the surviving corporation
in a merger or consolidation shall adopt and maintain any plan under which Stock
Units are granted to the Participant. In the event the agreement concerning the
sale of substantially all of its assets or the agreement concerning a merger or
consolidation is not consummated by the parties, then the Stock Units not
exercised prior to the formal determination by the Board that the contemplated
transaction will not be consummated shall on and after the date of such
determination again be subject to the vesting restrictions set forth in the
Option agreement.
11
<PAGE> 12
In the case of a merger, consolidation, reorganization,
reclassification, sale of assets or similar event, the Stock Unit Value of any
Stock Unit upon the redemption of such Stock Unit shall be determined on the
basis of the difference, if any, between (i) the value of a single share of the
Company's Stock as of the date of grant of such Stock Unit, and (ii) the current
value, as of the Redemption Date of such Stock Unit, of the shares of stock or
other securities into which a single share of the Company's Stock would have
been converted on the date of such reclassification, consolidation, merger,
reorganization, sale of assets or other similar event.
SECTION TWELVE
TERMINATION OF EMPLOYMENT
A. Severance.
(i) Stock Units - Termination of Employment. In the event that a
Participant's employment with the Company or a Subsidiary terminates for any
reason, other than due to his death or "total disability," any Stock Unit
granted to him will be forfeited, whether or not such Stock Unit had been
vested, unless the Committee, in its sole discretion, decides to authorize the
redemption of the Stock Unit, to the extent then vested. If the Committee so
decides to redeem the Stock Unit, it shall be redeemed as of the third business
day following the next date on which quarterly and/or annual summary statements
of sales and sales earnings of the Company are released for publication on a
wire service, in a financial news service, in a newspaper of general publication
or are otherwise made publicly available.
(ii) Stock Units - Total Disability. In the event that a
Participant's employment with the Company or a Subsidiary is terminated due to
his incurring a "total disability", any Stock Units granted to him will be
redeemed, to the extent then vested, upon the expiration of six months following
the date of termination of employment due to a "total disability".
(iii) Options - Termination of Employment. In the event that a
Participant's employment with the Company or a Subsidiary terminates for any
reason, other than due to his death or "total disability", any Option granted to
such Participant will expire in accordance with the provisions of the Options
document dealing with the effect of a termination of
12
<PAGE> 13
employment. Such provisions must provide for an expiration of the Option not
later than six months after the date of such termination. Notwithstanding the
foregoing, in the event that the Participant's employment is terminated for
cause any Option granted to him shall be revoked as of the date his employment
terminates. Notwithstanding any other provisions of this Plan, no payment under
any Stock Unit or issuance of any Stock pursuant to any Option or Stock Unit
shall be made and all rights of the Participant who received such Option or
Stock Unit (or his designated beneficiary or legal representatives) under this
Plan shall be forfeited if, prior to the time of such payment or issuance, the
Participant (1) shall be employed without the Company's or affiliate's consent
by a competitor of, or shall be engaged in any activity in competition with, the
Company or an affiliate; (2) divulges without the consent of the Company any
secret or confidential information belonging to the Company or an affiliate; (3)
has been dishonest or fraudulent in any matter affecting the Company or (4) has
committed any act which, in the sole judgment of the Committee, has been
substantially detrimental to the interests of the Company. The Company shall
give a Participant written notice of the occurrence of any such event (described
in the foregoing clauses (1) - (4)) prior to making any such forfeiture. The
determination of the Committee as to the occurrence of any of the events
specified in the foregoing clauses (1)-(4) of this Section 11 shall be
conclusive and binding upon all persons for all purposes. Any Award shall be
subject to forfeiture for the reasons provided in this Section in such manner as
shall be provided by the Committee.
(iv) Options - Total Disability. In the event that a
Participant's employment with the Company or a Subsidiary is terminated due to
his incurring a "total disability," any Option granted to such Participant will
expire twelve months after the date of such termination.
(v) Definition of "Total Disability". For purposes of this
Section Twelve, a Participant is totally disabled if he is unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or which
has lasted or can be expected to last for a continuous period of not less than
12 months.
(vi) Definition of "Subsidiary". For purposes of this Section
Twelve, a Participant's employer shall continue to be deemed a Subsidiary
notwithstanding that such entity is no
13
<PAGE> 14
longer directly or indirectly controlled by the Company and therefore no longer
a Subsidiary, provided that the Participant's employer was a Subsidiary at the
time the Options or Stock Units were granted to such Participant.
B. Death. If a Participant dies while in the employ of the Company
or a Subsidiary, his vested Stock Units will be redeemed as soon as is
practicable after his death and the proceeds of such redemption shall be paid
over to the executor or administrator of the estate of the Participant or to the
person to whom the Stock Units shall pass by will or by the laws of descent and
distribution. If a Participant dies while in the employ of the Company or a
Subsidiary, any Option may provide that it can be exercisable not later than six
months after his death by the executor or administrator of the estate of the
Participant or by the person to whom the Option shall pass by will or by the
laws of descent and distribution, but only to the extent the Participant was
entitled to exercise the Options as of the date of his death.
SECTION THIRTEEN
PARTICIPANT'S RIGHTS AS A HOLDER OF SHARES
A Participant has no rights as a stockholder with respect to any
shares of Stock paid in redemption of any Stock Units or acquired pursuant to
the exercise of an Option until the date a certificate is issued to him for such
shares. Except as otherwise provided in Section Ten of this Plan, no adjustment
shall be made for dividends or other rights for which the record date occurs
prior to the date such stock certificate is issued.
SECTION FOURTEEN
AMENDMENTS TO THE PLAN
The Board of Directors of the Company may amend or terminate this
Plan at any time; provided, however, that (i) any such amendment or termination
shall not adversely affect the rights of Participants under Options or Stock
Units granted prior thereto; and (ii) any amendment which increases the total
number of Options, Stock Units or shares of Stock covered by this Plan, changes
the definition of Eligible Individual, changes the criteria for becoming a
member of the Compensation Committee or any other material change to this Plan
shall be
14
<PAGE> 15
subject to obtaining the approval thereof by the Company's stockholders.
Notwithstanding the foregoing, this Plan shall not be amended more than once
every six months, other than to comport with changes in the, the Code, the
Employee Retirement Income Security Act of 1974, as amended or the rules
thereunder.
SECTION FIFTEEN
EFFECTIVE AND EXPIRATION DATES OF THE PLAN
This Plan shall be effective on September 12, 1995, after approval
of it by the Company's shareholders. No Option shall be granted after September
10, 2005.
SECTION SIXTEEN
INCENTIVE STOCK OPTIONS PROVISIONS
The provisions of this Section Sixteen shall apply only to Incentive
Stock Options.
A. Over Ten-Percent Shareholders. Incentive Stock Options shall not
be issued to individuals then owning more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any parent or
subsidiary of the Company.
B. Limit. Incentive Stock Options shall not be granted which will
cause the aggregate fair market value (determined at the time each Option is
granted) of the Stock for which options are granted to any Eligible Individual
under all incentive stock option plans of the Company during the calendar year
to exceed $100,000 plus the "unused limit carry-over" referred to in Section
422(b)(8) of the Internal Revenue Code of 1954.
15
<PAGE> 1
EXHIBIT 10.57
SIXTH AMENDMENT TO
EMPLOYMENT AGREEMENT
This SIXTH AMENDMENT TO EMPLOYMENT AGREEMENT (the "SIXTH Amendment")
is made and entered into as of April 1, 1996, by and between Group 1 Software,
Inc., a Delaware corporation ("Company") and Ronald F. Friedman, a Maryland
resident ("Employee").
WHEREAS, Company and Employee entered into that certain Agreement
dated October 31, 1990 (the "1990 Agreement"), regarding various terms and
conditions of employment of Employee with respect to Company; and
WHEREAS, Company and Employee entered into that certain First
Amendment to the 1990 Agreement (the "First Amendment") dated June 24, 1991,
that certain Second Amendment to the 1990 Agreement (the "Second Amendment")
dated August 24, 1992, that certain Third Amendment to the 1990 Agreement (the
"Third Amendment") dated as of October 1, 1993, that certain Fourth Amendment to
the 1990 Agreement (the "Fourth Amendment") dated January 6, 1994, and that
certain Fifth Amendment dated as of April 1, 1995 (the October 31, 1990
Agreement and the First, Second, Third, Fourth and Fifth Amendments,
collectively, referred to hereinafter as the "Agreement"); and
WHEREAS, Company and Employee wish to amend the Agreement, but only
with respect to the terms set out herein; and
WHEREAS, Company and Employee are mutually desirous that such
satisfactory employment relationship should continue under the terms and
conditions of the Agreement, as amended.
NOW THEREFORE, in consideration of mutual promises contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Company and Employee intending to be legally bound
hereby agree to amend the Agreement as follows:
1. Section 1 of the Agreement is hereby modified such that the
references to the date on the third and fourth lines of the 1990 Agreement shall
read "March 31, 1999".
2. Section 8 of the Agreement is hereby modified on the third line
of the 1990 Agreement to read "April 1, 1996 through March 31, 1997"; further,
the reference in the third sentence of the 1990 Agreement to the minimum bonus,
as modified by the Third Amendment, shall continue to read "$140,000", while, in
that same sentence, the numerical reference to the "Budget" level of Company
profit" is hereby modified to read "$7,819,000".
<PAGE> 2
3. Company and Employee hereby affirm that the Agreement, as amended
hereby, remains in full force and effect, and is not further modified hereby.
IN WITNESS WHEREOF, the parties have executed and delivered this
SIXTH Amendment as of the date first written above.
GROUP 1 SOFTWARE, INC.
By:
-------------------------------
Its:
-------------------------------
-----------------------------------
Ronald F. Friedman, Individually
<PAGE> 1
EXHIBIT 10.58
SEVENTH AMENDMENT TO
EMPLOYMENT AGREEMENT
THIS SEVENTH AMENDMENT TO EMPLOYMENT AGREEMENT (the "Seventh
Amendment") is made and entered into as of April 1, 1999, by and between Group 1
Software, Inc., a Delaware corporation ("Company") and Ronald F. Friedman, a
Maryland resident ("Employee").
WHEREAS, Company and Employee entered into that certain Agreement
dated October 31, 1990 (the "1990 Agreement"), regarding various terms and
conditions of employment of Employee with respect to Company; and
WHEREAS, Company and Employee entered into that certain First
Amendment to the 1990 Agreement (the "First Amendment") dated June 24, 1991,
that certain Second Amendment to the 1990 Agreement (the "Second Amendment")
dated August 24, 1992, that certain Third Amendment to the 1990 Agreement (the
"Third Amendment") dated as of October 1, 1993, that certain Fourth Amendment to
the 1990 Agreement (the "Fourth Amendment") dated January 6, 1994, that certain
Fifth Amendment to the 1990 Agreement, dated as of April 1, 1995, and and that
certain Sixth Amendment to the 1990 Agreement, dated as of April 1, 1996 (the
October 31, 1990 Agreement and the First, Second, Third, Fourth, Fifth and Sixth
Amendments, collectively, referred to hereinafter as the "Agreement"); and
WHEREAS, Company and Employee wish to amend the Agreement, but only
with respect to the terms set out herein; and
WHEREAS, Company and Employee are mutually desirous that such
satisfactory employment relationship should continue under the terms and
conditions of the Agreement, as amended.
NOW THEREFORE, in consideration of mutual promises contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Company and Employee intending to be legally bound
hereby agree to amend the Agreement as follows:
1. Section 1 of the Agreement is hereby modified such that the
references to the Agreement's expiration date on the third and fourth lines of
the 1990 Agreement shall read "March 31, 2002".
2. Section 5(A) of the Agreement is hereby modified so that the
salary compensation referenced therein is hereby changed to One Hundred
Fifty-Five Thousand Dollars ($155,000) on an annualized basis.
3. The first two paragraphs of Section 8 of the Agreement are hereby
deleted and the following is hereby inserted in lieu
<PAGE> 2
thereof: For each of the fiscal years during the Term of this Agreement, Company
will pay Employee a bonus in accordance with a new compensation program covering
such period. Such compensation programs will be designed to provide a bonus to
Employee of $160,000 upon achievement of 100% level of annual budgeted earnings
for those Company operations under the Employee's direction, before Employee
bonus, CEO and CFO bonuses and after allocated marketing, allocated operations,
allocated bad debt expense and division Q&A management fees and taxes; provided
(a) that such 100% level of profit as defined above equals at least $9,565,600
for the fiscal year, and (b) that such level of profit as defined reflects, in
the opinion of the Compensation Committee of the Board of Directors,
satisfactory growth over actual prior year results. Bonus for any fiscal year is
considered earned only on completion of the audit and Board of Directors'
approval, and only if Employee remains in Company employ at completion of the
audit, except in the case of bonus for any fiscal year during which Company or
Employee have elected to terminate this Agreement in accordance with Paragraph
1.
4. Company and Employee hereby affirm that the Agreement, as amended
hereby, remains in full force and effect, and is not further modified hereby.
IN WITNESS WHEREOF, the parties have executed and delivered this
Sixth Amendment as of the date first written above.
Group 1 Software, Inc.
By:
------------------------------
Its:
------------------------------
------------------------------
Ronald F. Friedman, Individually
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 13,537
<SECURITIES> 8,892
<RECEIVABLES> 18,486
<ALLOWANCES> 3,552
<INVENTORY> 0
<CURRENT-ASSETS> 45,618
<PP&E> 3,968
<DEPRECIATION> 6,181
<TOTAL-ASSETS> 78,682
<CURRENT-LIABILITIES> 36,781
<BONDS> 0
0
916
<COMMON> 27,112
<OTHER-SE> 8,998
<TOTAL-LIABILITY-AND-EQUITY> 78,682
<SALES> 19,270
<TOTAL-REVENUES> 19,270
<CGS> 7,008
<TOTAL-COSTS> 17,578
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55
<INCOME-PRETAX> 1,835
<INCOME-TAX> 725
<INCOME-CONTINUING> 1,096
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,096
<EPS-BASIC> 0.29
<EPS-DILUTED> 0.29
</TABLE>
