<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO
SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
------------------------
SOFTWARE ARTISTRY, INC.
(Name of Subject Company)
HOOSIER ACQUISITION CORP.
INTERNATIONAL BUSINESS MACHINES CORPORATION
(Bidders)
------------------------------
COMMON STOCK, NO PAR VALUE
(Title of Class of Securities)
------------------------------
83402810
(CUSIP Number of Class of Securities)
------------------------------
LAWRENCE R. RICCIARDI, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL AND INTERIM CHIEF FINANCIAL OFFICER
INTERNATIONAL BUSINESS MACHINES CORPORATION
NEW ORCHARD ROAD
ARMONK, NEW YORK 10504
(914) 499-1900
(Name, Address and Telephone Number of Persons Authorized to
Receive Notices and Communications on Behalf of Bidders)
------------------------------
COPY TO:
ALLEN FINKELSON, ESQ.
CRAVATH, SWAINE & MOORE
WORLDWIDE PLAZA
825 EIGHTH AVENUE
NEW YORK, NEW YORK 10019
(212) 474-1000
------------------------
DECEMBER 18, 1997
(Date of Event Which Requires Filing Statement on Schedule 13D)
------------------------------
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE
<S> <C>
$$216,032,131 $ 43,206
</TABLE>
* For purposes of calculating amount of filing fee only. The amount assumes
the purchase of 8,817,638 shares of Common Stock, no par value. Such number
of shares represents all the shares outstanding as of December 17, 1997,
plus the number of shares issuable upon the exercise of all options.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
<TABLE>
<S> <C> <C> <C>
Amount Previously Paid: N/A Filing N/A
Party:
Form or Registration N/A Date Filed: N/A
No.:
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 1 of 8 pages
Exhibit Index on page 8
<PAGE>
14D-1 AND 13D
CUSIP NO. 83402810 PAGE 2 OF 8 PAGES
<TABLE>
<C> <S> <C>
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
HOOSIER ACQUISITION CORP. (13-3980851)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) / /
3 SEC USE ONLY
4 SOURCE OF FUNDS
AF
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS / /
2(e) or 2(f)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
INDIANA
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,552,019*
8 CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
/ /
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
APPROXIMATELY 28.94% OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS
AS OF DECEMBER 18, 1997*
10 TYPE OF REPORTING PERSON
CO
</TABLE>
* See footnote on following page.
Page 2 of 8 pages
Exhibit Index on page 8
<PAGE>
14D-1 AND 13D
CUSIP NO. 83402810 PAGE 3 OF 8 PAGES
<TABLE>
<C> <S> <C>
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
INTERNATIONAL BUSINESS MACHINES CORPORATION (13-0871985)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) / /
3 SEC USE ONLY
4 SOURCE OF FUNDS
WC
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS / /
REQUIRED PURSUANT TO ITEMS 2(e) or 2(f)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
NEW YORK
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,552,019*
8 CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
/ /
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
APPROXIMATELY 28.94% OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS
AS OF DECEMBER 18, 1997*
10 TYPE OF REPORTING PERSON
CO
</TABLE>
* On December 18, 1997, International Business Machines Corporation ("IBM")
and Hoosier Acquisition Corp. (the "Purchaser") entered into a Shareholder
Agreement (the "Shareholder Agreement") with certain of the directors and
executive officers of Software Artistry Inc., an Indiana corporation (the
"Company"), and certain other persons (collectively, the "Selling
Shareholders"), pursuant to which each Selling Shareholder has
unconditionally agreed to tender into the Offer (as hereinafter defined),
and not to withdraw therefrom, all the shares of Common Stock, no par value
(the "Shares"), of the Company that such Selling Shareholder owned on
December 18, 1997 (comprising 1,487,516 Shares for all the Selling
Shareholders) as well as any Shares thereafter acquired by him, including
upon the exercise of stock options. In addition, each of the Selling
Shareholders has agreed to sell to the Purchaser, and the Purchaser has
agreed to purchase, all such Selling Shareholder's Shares (including those
acquired after the execution of the Shareholder Agreement) at a price per
share equal to the Offer Price (as hereinafter defined), subject to certain
conditions. Under the Shareholder Agreement, each Selling Shareholder has
granted to certain individuals designated by IBM an irrevocable proxy with
respect to the Shares subject to the Shareholder Agreement to vote such
Shares under certain circumstances. The Purchaser's right to purchase and
vote the Shares subject to the Shareholder Agreement is reflected in Rows 7
and 9 of each of the tables above, which information takes into account all
stock options owned by the Selling Shareholders on December 18, 1997. A copy
of the Shareholder Agreement is attached hereto as Exhibit (c)(2), and the
Shareholder Agreement is described more fully in Section 12 of the Offer to
Purchase dated December 23, 1997 (the "Offer to Purchase") attached hereto
as Exhibit (a)(1).
Page 3 of 8 pages
Exhibit Index on page 8
<PAGE>
This Tender Offer Statement on Schedule 14D-1 also constitutes a Statement
on Schedule 13D with respect to the acquisition by the Purchaser and IBM of
beneficial ownership of the Shares subject to the Shareholder Agreement. The
cover page above and item numbers and responses thereto below are in accordance
with the requirements of Schedule 14D-1.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Software Artistry, Inc., an Indiana
corporation, which has its principal executive offices at 9449 Priority Way West
Drive, Indianapolis, IN 46240.
(b) This Schedule 14D-1 relates to the offer by the Purchaser to purchase
all outstanding shares of Common Stock, no par value (the "Shares") of the
Company at a price of $24.50 per Share, net to the seller in cash (the "Offer
Price"), upon the terms and subject to the conditions set forth in the Offer to
Purchase and in the related Letter of Transmittal (which, together with any
amendments and supplements thereto, collectively constitute the "Offer"), copies
of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively.
Information concerning the number of outstanding Shares is set forth in
"Introduction" of the Offer to Purchase and is incorporated herein by reference.
(c) Information concerning the principal market in which the Shares are
traded and the high and low sales prices of the Shares for each quarterly period
during the past two years is set forth in Section 6 ("Price Range of the Shares;
Dividends on the Shares") of the Offer to Purchase and is incorporated herein by
reference.
ITEM 2. IDENTITY AND BACKGROUND.
This Schedule 14D-1 is being filed by the Purchaser, an Indiana corporation,
and IBM, a New York corporation. The Purchaser is a wholly owned subsidiary of
IBM. Information concerning the principal business and the address of the
principal offices of the Purchaser and IBM is set forth in Section 9 ("Certain
Information Concerning the Purchaser and IBM") of the Offer to Purchase and is
incorporated herein by reference. Information regarding the names, business
addresses, principal occupation and occupations, positions, offices or
employments during the last five years as well as the other information required
by Item 2 with respect to directors and executive officers of IBM and the
Purchaser is set forth in Schedule I to the Offer to Purchase and is
incorporated herein by reference.
The information set forth in Section 9 ("Certain Information Concerning the
Purchaser and IBM") and Section 15 ("Certain Legal Matters") of the Offer to
Purchase is incorporated herein by reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) The information set forth in Section 11 ("Contacts and Transactions with
the Company; Background of the Offer") and Section 12 ("Purpose of the Offer;
the Merger Agreement; the Shareholder Agreement; etc.") of the Offer to Purchase
is incorporated herein by reference.
(b) The information set forth in Section 11 ("Contacts and Transactions with
the Company; Background of the Offer") and Section 12 ("Purpose of the Offer;
the Merger Agreement; the Shareholder Agreement; etc.") of the Offer to Purchase
is incorporated herein by reference.
Page 4 of 8 pages
Exhibit Index on page 8
<PAGE>
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in Section 10 ("Source and Amount of Funds")
of the Offer to Purchase is incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in Section 12 ("Purpose of the Offer; the
Merger Agreement; the Shareholder Agreement; etc.") of the Offer to Purchase is
incorporated herein by reference.
(f) and (g) The information set forth in Section 7 ("Effect of the Offer on
the Market for the Shares; Share Quotation; Exchange Act Registration; Margin
Regulations") of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in "Introduction", Section 11
("Contacts and Transactions with the Company; Background of the Offer") and
Section 12 ("Purpose of the Offer; the Merger Agreement; the Shareholder
Agreement; etc.") of the Offer to Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT
COMPANY'S SECURITIES.
The information set forth in "Introduction", Section 11 ("Contacts and
Transactions with the Company; Background of the Offer") and Section 12
("Purpose of the Offer; the Merger Agreement; the Shareholder Agreement; etc.")
of the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in "Introduction" and in Section 16 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
Not applicable.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 12 ("Purpose of the Offer; the
Merger Agreement; the Shareholder Agreement; etc.") of the Offer to Purchase is
incorporated herein by reference.
(b) and (c) The information set forth in Section 15 ("Certain Legal
Matters") of the Offer to Purchase is incorporated herein by reference.
Page 5 of 8 pages
Exhibit Index on page 8
<PAGE>
(d) The information set forth in Section 7 ("Effect of the Offer on the
Market for the Shares; Share Quotation; Exchange Act Registration; Margin
Regulations") of the Offer to Purchase is incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase, the Letter of
Transmittal, the Agreement and Plan of Merger dated as of December 18, 1997,
among the IBM, the Purchaser and the Company, and the Shareholder Agreement,
copies of which are attached hereto as Exhibits (a)(1), (a)(2), (c)(1) and
(c)(2), respectively, is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a)(1) Offer to Purchase.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Banks, Trust Companies and Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Banks, Trust Companies and Other
Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form
W-9.
(a)(7) Summary Advertisement dated December 23, 1997.
(a)(8) Text of Press Release dated December 19, 1997, issued by the Company and IBM.
(c)(1) Agreement and Plan of Merger dated as of December 18, 1997, among IBM, the Purchaser
and the Company.
(c)(2) Shareholder Agreement dated as of December 18, 1997, among IBM, the Purchaser and
certain directors and executive officers of the Company and certain other persons.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
Page 6 of 8 pages
Exhibit Index on page 8
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Dated: December 23, 1997
HOOSIER ACQUISITION CORP.,
By /s/ LEE A. DAYTON
-----------------------------------------
Lee A. Dayton
Title: President
INTERNATIONAL BUSINESS MACHINES CORPORATION,
By /s/ LEE A. DAYTON
-----------------------------------------
Lee A. Dayton
Title: Vice President, Corporate
Development and Real Estate
Page 7 of 8 pages
Exhibit Index on page 8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT NAME NUMBER
- --------- ---------------------------------------------------------------------------------------------- ---------
<S> <C> <C>
(a)(1) Offer to Purchase.............................................................................
(a)(2) Letter of Transmittal.........................................................................
(a)(3) Notice of Guaranteed Delivery.................................................................
(a)(4) Letter to Brokers, Dealers, Banks, Trust Companies and Other Nominees.........................
(a)(5) Letter to Clients for use by Brokers, Dealers, Banks, Trust Companies and Other Nominees......
(a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.........
(a)(7) Form of Summary Advertisement dated December 23, 1997.........................................
(a)(8) Text of Press Release dated December 19, 1997, issued by the Company and IBM..................
(c)(1) Agreement and Plan of Merger dated as of December 18, 1997, among IBM, the Purchaser and the
Company.....................................................................................
(c)(2) Shareholder Agreement dated as of December 18, 1997, among IBM, the Purchaser and certain
directors and executive officers of the Company and certain other persons...................
(d) None..........................................................................................
(e) Not applicable................................................................................
(f) None..........................................................................................
</TABLE>
Page 8 of 8 pages
Exhibit Index on page 8
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SOFTWARE ARTISTRY, INC.
AT
$24.50 NET PER SHARE
BY
HOOSIER ACQUISITION CORP.,
A WHOLLY OWNED SUBSIDIARY OF
INTERNATIONAL BUSINESS MACHINES CORPORATION
-------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 11:59 P.M.,
NEW YORK CITY TIME, ON FRIDAY, JANUARY 23, 1998,
UNLESS THE OFFER IS EXTENDED.
------------------------
THE BOARD OF DIRECTORS OF SOFTWARE ARTISTRY, INC. (THE "COMPANY") HAS
UNANIMOUSLY APPROVED THE OFFER AND THE MERGER REFERRED TO HEREIN AND
DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN
THE BEST INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY AND UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND
TENDER THEIR SHARES.
------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT
NUMBER OF SHARES THAT WOULD CONSTITUTE A MAJORITY OF ALL OUTSTANDING
SHARES ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE AND (2)
ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST
IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE
REGULATIONS THEREUNDER APPLICABLE TO THE
PURCHASE OF SHARES PURSUANT TO THE OFFER
HAVING EXPIRED OR BEEN TERMINATED.
------------------------
IMPORTANT
ANY SHAREHOLDER DESIRING TO TENDER ALL OR ANY PORTION OF SUCH SHAREHOLDER'S
SHARES (AS DEFINED IN "INTRODUCTION") SHOULD EITHER (1) COMPLETE AND SIGN THE
LETTER OF TRANSMITTAL OR A FACSIMILE COPY THEREOF IN ACCORDANCE WITH THE
INSTRUCTIONS IN THE LETTER OF TRANSMITTAL, HAVE SUCH SHAREHOLDER'S SIGNATURE
THEREON GUARANTEED IF REQUIRED BY INSTRUCTION 1 TO THE LETTER OF TRANSMITTAL,
MAIL OR DELIVER THE LETTER OF TRANSMITTAL (OR SUCH FACSIMILE), OR, IN THE CASE
OF A BOOK-ENTRY TRANSFER EFFECTED PURSUANT TO THE PROCEDURE SET FORTH IN SECTION
2, AN AGENT'S MESSAGE (AS DEFINED IN SECTION 2), AND ANY OTHER REQUIRED
DOCUMENTS TO THE DEPOSITARY AND EITHER DELIVER THE CERTIFICATES FOR SUCH SHARES
TO THE DEPOSITARY ALONG WITH THE LETTER OF TRANSMITTAL (OR FACSIMILE) OR DELIVER
SUCH SHARES PURSUANT TO THE PROCEDURE FOR BOOK-ENTRY TRANSFER SET FORTH IN
SECTION 2 PRIOR TO THE EXPIRATION OF THE OFFER OR (2) REQUEST SUCH SHAREHOLDER'S
BROKER, DEALER, BANK, TRUST COMPANY OR OTHER NOMINEE TO EFFECT THE TRANSACTION
FOR SUCH SHAREHOLDER. A SHAREHOLDER HAVING SHARES REGISTERED IN THE NAME OF A
BROKER, DEALER, BANK, TRUST COMPANY OR OTHER NOMINEE MUST CONTACT SUCH BROKER,
DEALER, BANK, TRUST COMPANY OR OTHER NOMINEE IF SUCH SHAREHOLDER DESIRES TO
TENDER SUCH SHARES.
A SHAREHOLDER WHO DESIRES TO TENDER SHARES AND WHOSE CERTIFICATES FOR SUCH
SHARES ARE NOT IMMEDIATELY AVAILABLE OR WHO CANNOT COMPLY IN A TIMELY MANNER
WITH THE PROCEDURE FOR BOOK-ENTRY TRANSFER, OR WHO CANNOT DELIVER ALL REQUIRED
DOCUMENTS TO THE DEPOSITARY PRIOR TO THE EXPIRATION OF THE OFFER, MAY TENDER
SUCH SHARES BY FOLLOWING THE PROCEDURE FOR GUARANTEED DELIVERY SET FORTH IN
SECTION 2.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THIS OFFER
TO PURCHASE, THE LETTER OF TRANSMITTAL AND THE NOTICE OF GUARANTEED DELIVERY MAY
BE DIRECTED TO THE INFORMATION AGENT AT ITS ADDRESS AND TELEPHONE NUMBERS SET
FORTH ON THE BACK COVER OF THIS OFFER TO PURCHASE.
December 23, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Introduction............................................................................................... 1
The Tender Offer........................................................................................... 3
1. Terms of the Offer..................................................................................... 3
2. Procedure for Tendering Shares......................................................................... 4
3. Withdrawal Rights...................................................................................... 7
4. Acceptance for Payment and Payment..................................................................... 8
5. Certain U.S. Federal Income Tax Consequences........................................................... 9
6. Price Range of the Shares; Dividends on the Shares..................................................... 10
7. Effect of the Offer on the Market for the Shares; Share Quotation; Exchange Act
Registration; Margin Regulations........................................................................ 10
8. Certain Information Concerning the Company............................................................. 12
9. Certain Information Concerning the Purchaser and IBM................................................... 13
10. Source and Amount of Funds............................................................................. 14
11. Contacts and Transactions with the Company; Background of the Offer.................................... 14
12. Purpose of the Offer; the Merger Agreement; the Shareholder Agreement; etc............................. 15
13. Dividends and Distributions............................................................................ 25
14. Certain Conditions of the Offer........................................................................ 26
15. Certain Legal Matters.................................................................................. 27
16. Fees and Expenses...................................................................................... 30
17. Miscellaneous.......................................................................................... 30
Schedule I--Directors and Executive Officers of IBM and the Purchaser...................................... S-1
</TABLE>
ii
<PAGE>
To the Holders of Common Stock
of Software Artistry, Inc.
INTRODUCTION
Hoosier Acquisition Corp., an Indiana corporation (the "Purchaser") and a
wholly owned subsidiary of International Business Machines Corporation, a New
York corporation ("IBM"), hereby offers to purchase all outstanding shares of
Common Stock, no par value (the "Shares"), of Software Artistry, Inc., an
Indiana corporation (the "Company"), at a price of $24.50 per Share, net to the
seller in cash, without interest thereon (the "Offer Price"), upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the related
Letter of Transmittal (which, together with any amendments or supplements hereto
or thereto, collectively constitute the "Offer").
Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer. The
Purchaser will pay all fees and expenses of First Chicago Trust Company of New
York, which is acting as the Depositary (the "Depositary"), and Morrow & Co.,
Inc., which is acting as the Information Agent (the "Information Agent"),
incurred in connection with the Offer. See Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER AND
THE MERGER (AS DEFINED BELOW) AND DETERMINED THAT THE TERMS OF THE OFFER AND THE
MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF THE
COMPANY AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF THE COMPANY ACCEPT THE
OFFER AND TENDER THEIR SHARES. THE FACTORS CONSIDERED BY THE BOARD OF DIRECTORS
OF THE COMPANY IN ARRIVING AT ITS DECISION TO APPROVE THE OFFER AND THE MERGER
AND TO RECOMMEND THAT SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER
THEIR SHARES ARE DESCRIBED IN THE COMPANY'S SOLICITATION/RECOMMENDATION
STATEMENT ON SCHEDULE 14D-9 (THE "SCHEDULE 14D-9"), WHICH IS BEING MAILED TO
SHAREHOLDERS OF THE COMPANY HEREWITH.
BROADVIEW ASSOCIATES LLC ("BROADVIEW ASSOCIATES") HAS ACTED AS THE COMPANY'S
FINANCIAL ADVISOR. THE OPINION OF BROADVIEW ASSOCIATES DATED DECEMBER 18, 1997
THAT, AS OF SUCH DATE, THE CONSIDERATION TO BE RECEIVED BY HOLDERS OF SHARES IN
THE OFFER AND THE MERGER IS FAIR, FROM A FINANCIAL POINT OF VIEW, TO SUCH
HOLDERS, IS SET FORTH IN FULL AS AN ANNEX TO THE SCHEDULE 14D-9 FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") ON THE DATE HEREOF.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION
1) THAT NUMBER OF SHARES THAT WOULD CONSTITUTE A MAJORITY OF ALL OUTSTANDING
SHARES ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE (THE "MINIMUM
CONDITION") AND (II) ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST
IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER (THE "HSR
ACT") APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER HAVING EXPIRED
OR BEEN TERMINATED (THE "HSR CONDITION"). The Purchaser reserves the right
(subject to obtaining the consent of the Company (unless a Takeover Proposal (as
defined in Section 12) has been made) and the applicable rules and regulations
of the Commission), which it presently has no intention of exercising, to waive
or reduce the Minimum Condition. See Sections 1, 12 and 14.
The Offer is being made pursuant to the Agreement and Plan of Merger dated
as of December 18, 1997 (the "Merger Agreement"), among IBM, the Purchaser and
the Company pursuant to which, following the consummation of the Offer and the
satisfaction or waiver of certain conditions, the Purchaser will be merged with
and into the Company (the "Merger"). In the Merger, each outstanding Share
(other than Shares owned by IBM or the Company or any of their subsidiaries or
by shareholders, if any, who are entitled to and who properly exercise
dissenters' rights under Indiana law in the event the Shares are not registered
on a national securities exchange or quoted for trading on the Nasdaq National
Market at the record date for any shareholder vote on the Merger (if any such
vote is required)) will be converted into the right to receive an amount in cash
equal to the price per Share paid pursuant to the Offer, without interest
thereon. See Section 12.
1
<PAGE>
Consummation of the Merger is subject to a number of conditions, including
approval by shareholders of the Company if such approval is required under
applicable law. If the Purchaser acquires at least 90% of the outstanding Shares
pursuant to the Offer or otherwise, the Purchaser could effect the Merger
pursuant to the short-form merger provisions of the Indiana Business Corporation
Law (the "IBCL"), without prior notice to, or any action by, any other
shareholder of the Company. See Section 12.
In connection with the execution of the Merger Agreement, the Purchaser and
IBM entered into a Shareholder Agreement dated as of December 18, 1997 (the
"Shareholder Agreement"), with certain of the directors and executive officers
of the Company and certain other persons (collectively, the "Selling
Shareholders") pursuant to which each Selling Shareholder has unconditionally
agreed to tender into the Offer, and not to withdraw therefrom, all the Shares
that such Selling Shareholder owned on December 18, 1997 (comprising 1,487,516
Shares for all the Selling Shareholders) as well as any Shares thereafter
acquired by him, including upon the exercise of Stock Options (as defined
below). As of December 18, 1997, the Selling Shareholders held Stock Options to
purchase 1,064,503 Shares, of which Stock Options to purchase 949,503 Shares
would be exercisable immediately prior to the expiration of the Offer. In
addition, the Selling Shareholders have agreed to sell to the Purchaser, and the
Purchaser has agreed to purchase, all the Selling Shareholders' Shares
(including those acquired after the execution of the Shareholder Agreement) at a
price per Share equal to the Offer Price, provided that (a) such obligation of
the Purchaser to purchase such Shares is subject to the Purchaser having
accepted Shares for payment pursuant to the Offer and the Minimum Condition
having been satisfied, which conditions to such obligation may be waived by the
Purchaser in its reasonable discretion, and (b) such obligation of such Selling
Shareholders to sell such Shares is subject to either the Minimum Condition
having been satisfied or a Takeover Proposal having been made. Under the
Shareholder Agreement, each Selling Shareholder has granted to certain
individuals designated by IBM an irrevocable proxy with respect to the Shares
subject to the Shareholder Agreement to vote such Shares under the circumstances
described in Section 12.
The Merger Agreement and the Shareholder Agreement are more fully described
in Section 12.
The Company has informed the Purchaser that, as of December 17, 1997, there
were 7,085,433 Shares issued and outstanding and 1,732,205 Shares reserved for
issuance upon the exercise of outstanding options to purchase Shares from the
Company ("Stock Options"). Based upon the foregoing and assuming that no Stock
Options are granted or Shares otherwise issued (except pursuant to the exercise
of Stock Options) after December 17, 1997, there would be 8,817,638 Shares
outstanding on a fully diluted basis and the Minimum Condition will be satisfied
if at least 4,408,820 Shares are validly tendered and not withdrawn prior to the
Expiration Date. As described above, each Selling Shareholder has agreed to
tender the Shares owned by him on December 18, 1997 (comprising 1,487,516 Shares
for all the Selling Shareholders) and any Shares thereafter acquired by him,
including upon the exercise of Stock Options. If each Selling Shareholder
exercises all his vested Stock Options prior to the expiration of the Offer,
then an additional 949,503 Shares would be subject to the Shareholder Agreement,
such that an aggregate of 2,437,019 Shares would be subject to the Shareholder
Agreement, and 1,971,801 Shares would need to be tendered by other shareholders
in order for the Minimum Condition to be satisfied. The actual number of Shares
required to be tendered to satisfy the Minimum Condition will depend upon the
actual number of Shares outstanding on the date that the Purchaser accepts
Shares for payment pursuant to the Offer. If the Minimum Condition is satisfied
and the Purchaser accepts for payment Shares tendered pursuant to the Offer, the
Purchaser will be able to elect a majority of the members of the Company's Board
of Directors and to effect the Merger without the affirmative vote of any other
shareholder of the Company. See Section 12.
Certain U.S. federal income tax consequences of the sale of Shares pursuant
to the Offer and the conversion of Shares pursuant to the Merger are described
in Section 5.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
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THE TENDER OFFER
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer, the Purchaser
will accept for payment and pay for all Shares validly tendered prior to the
Expiration Date and not theretofore withdrawn in accordance with Section 3. The
term "Expiration Date" means 11:59 p.m., New York City time, on Friday, January
23, 1998 unless and until the Purchaser, in its sole discretion (but subject to
the terms of the Merger Agreement), shall have extended the period of time
during which the Offer is open, in which event the term "Expiration Date" shall
mean the latest time and date on which the Offer, as so extended by the
Purchaser, will expire.
In the Merger Agreement the Purchaser has agreed that it will not, without
the consent of the Company, extend the Offer, except that, without the consent
of the Company, the Purchaser may extend the Offer (a) if at the Expiration Date
any of the conditions to the Purchaser's obligation to accept Shares for payment
are not satisfied or waived, until such time as such conditions are satisfied or
waived, (b) for any period required by any rule, regulation, interpretation or
position of the Commission or the staff thereof applicable to the Offer and (c)
for any reason on one or more occasions for an aggregate period of not more than
10 business days beyond the latest expiration date that would otherwise be
permitted under the terms of the Merger Agreement as described in this sentence.
As used in this Offer to Purchase, "business day" has the meaning set forth in
Rule l4d-1 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
In addition, the Purchaser has agreed in the Merger Agreement that it will
not, without the consent of the Company, (a) reduce the number of Shares subject
to the Offer, (b) reduce the Offer Price, (c) add to the conditions set forth in
Section 14, (d) change the form of consideration payable in the Offer or (e)
amend any other term of the Offer in any manner adverse to the Company's
shareholders.
Subject to the terms of the Merger Agreement and the applicable rules and
regulations of the Commission, the Purchaser reserves the right (but shall not
be obligated), at any time and from time to time, and regardless of whether or
not any of the events or facts set forth in Section 14 hereof shall have
occurred, (a) to extend the period of time during which the Offer is open, and
thereby delay acceptance for payment of and the payment for any Shares, by
giving oral or written notice of such extension to the Depositary and (b) to
amend the Offer in any other respect by giving oral or written notice of such
amendment to the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE
PURCHASE PRICE FOR TENDERED SHARES, WHETHER OR NOT THE PURCHASER EXERCISES ITS
RIGHT TO EXTEND THE OFFER.
If by 11:59 p.m., New York City time, on Friday, January 23, 1998 (or any
date or time then set as the Expiration Date), any or all of the conditions to
the Offer have not been satisfied or waived, the Purchaser reserves the right
(but shall not be obligated), subject to the terms and conditions contained in
the Merger Agreement and to the applicable rules and regulations of the
Commission, (a) to terminate the Offer and not accept for payment or pay for any
Shares and return all tendered Shares to tendering shareholders, (b) to waive
all the unsatisfied conditions and accept for payment and pay for all Shares
validly tendered prior to the Expiration Date and not theretofore withdrawn, (c)
to extend the Offer and, subject to the right of shareholders to withdraw Shares
until the Expiration Date, retain the Shares that have been tendered during the
period or periods for which the Offer is extended or (d) to amend the Offer.
There can be no assurance that the Purchaser will exercise its right to
extend the Offer. Any extension, waiver, amendment or termination will be
followed as promptly as practicable by public announcement thereof. In the case
of an extension, Rule 14e-l(d) under the Exchange Act requires that the
announcement be issued no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date in accordance with
the public announcement requirements of Rule 14d-4(c) under the Exchange Act.
Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the
Exchange Act, which require that any material change in the information
published,
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sent or given to shareholders in connection with the Offer be promptly
disseminated to shareholders in a manner reasonably designed to inform
shareholders of such change) and without limiting the manner in which the
Purchaser may choose to make any public announcement, the Purchaser will not
have any obligation to publish, advertise or otherwise communicate any such
public announcement other than by making a release to the Dow Jones News
Service.
If the Purchaser extends the Offer or if the Purchaser is delayed in its
acceptance for payment of or payment (whether before or after its acceptance for
payment of Shares) for Shares or it is unable to pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer, the Depositary may retain tendered Shares on behalf of the Purchaser,
and such Shares may not be withdrawn except to the extent tendering shareholders
are entitled to withdrawal rights as described in Section 3. However, the
ability of the Purchaser to delay the payment for Shares that the Purchaser has
accepted for payment is limited by Rule 14e-l(c) under the Exchange Act, which
requires that a bidder pay the consideration offered or return the securities
deposited by or on behalf of holders of securities promptly after the
termination or withdrawal of such bidder's offer, and by the terms of the Merger
Agreement, which require that the Purchaser pay for Shares accepted for payment
as soon as practicable after the Expiration Date.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer
(including, any waiver of the Minimum Condition, which waiver may not be made
without the Company's consent unless a Takeover Proposal has been made), the
Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and l4e-1 under the
Exchange Act. The minimum period during which an offer must remain open
following material changes in the terms of such offer or information concerning
such offer, other than a change in price or a change in the percentage of
securities sought, will depend upon the facts and circumstances then existing,
including the relative materiality of the changed terms or information. With
respect to a change in price or a change in the percentage of securities sought,
a minimum period of 10 business days is generally required to allow for adequate
dissemination to shareholders.
Consummation of the Offer is conditioned upon satisfaction of the Minimum
Condition, the HSR Condition and the other conditions set forth in Section 14.
Subject to the terms and conditions contained in the Merger Agreement, the
Purchaser reserves the right (but shall not be obligated) to waive any or all
such conditions. However, if the Purchaser waives or amends the Minimum
Condition (which action may not be taken without the Company's consent) during
the last five business days during which the Offer is open, the Purchaser will
be required to extend the Expiration Date so that the Offer will remain open for
at least five business days after the announcement of such waiver or amendment
is first published, sent or given to holders of Shares and may also be required
to extend the Offer if other conditions to the Offer are waived, depending upon
the materiality of the waiver.
The Company has provided the Purchaser with the Company's shareholder lists
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase, the related Letter of Transmittal and
other relevant materials will be mailed by the Purchaser to record holders of
Shares, and will be furnished to brokers, dealers, banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
shareholder lists, or, if applicable, who are listed as participants in a
clearing agency's security position listing, for subsequent transmittal to
beneficial owners of Shares.
2. PROCEDURE FOR TENDERING SHARES
VALID TENDER. For a shareholder validly to tender Shares pursuant to the
Offer, either (a) a Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, together with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message (as defined below),
and any other required documents, must be received by the Depositary at one of
its addresses set forth on the
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back cover of this Offer to Purchase prior to the Expiration Date and either
certificates for tendered Shares must be received by the Depositary at one of
such addresses or such Shares must be delivered pursuant to the procedures for
book-entry transfer set forth below (and a Book-Entry Confirmation (as defined
below) received by the Depositary), in each case prior to the Expiration Date,
or (b) the tendering shareholder must comply with the guaranteed delivery
procedures set forth below.
The Depositary will establish accounts with respect to the Shares at The
Depository Trust Company, the Midwest Securities Trust Company and the
Philadelphia Depository Trust Company (the "Book-Entry Transfer Facilities") for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in any of the
Book-Entry Transfer Facilities' systems may make book-entry delivery of Shares
by causing a Book-Entry Transfer Facility to transfer such Shares into the
Depositary's account in accordance with such Book-Entry Transfer Facility's
procedures for such transfer. However, although delivery of Shares may be
effected through book-entry transfer into the Depositary's account at a
Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees, or
an Agent's Message, and any other required documents, must, in any case, be
transmitted to, and received by, the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase prior to the Expiration Date,
or the tendering shareholder must comply with the guaranteed delivery procedures
described below. The confirmation of a book-entry transfer of Shares into the
Depositary's account at a Book-Entry Transfer Facility as described above is
referred to herein as a "Book-Entry Confirmation". DELIVERY OF DOCUMENTS TO A
BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER
FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
SIGNATURE GUARANTEES. No signature guarantee is required on the Letter of
Transmittal (a) if the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section, includes any participant in
any of the Book-Entry Transfer Facilities' systems whose name appears on a
security position listing as the owner of the Shares) of Shares tendered
therewith and such registered holder has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (b) if such Shares are tendered
for the account of a financial institution (including most commercial banks,
savings and loan associations and brokerage houses) that is a participant in the
Security Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(such participant, an "Eligible Institution"). In all other cases, all
signatures on the Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instructions 1 and 5 to the Letter of Transmittal. If the
certificates for Shares are registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made or certificates
for Shares not tendered or not accepted for payment are to be returned to a
person other than the registered holder of the certificates surrendered, the
tendered certificates must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name or names of the registered
holders or owners appear on the certificates, with the
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signatures on the certificates or stock powers guaranteed as aforesaid. See
Instructions 1 and 5 to the Letter of Transmittal.
GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's certificates for Shares are not immediately
available or the procedure for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such shareholder's tender may be
effected if all the following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser, is received
by the Depositary, as provided below, prior to the Expiration Date; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation with respect to all such Shares),
together with a Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees, or, in
the case of a book-entry transfer, an Agent's Message, and any other
required documents are received by the Depositary within three trading days
after the date of execution of such Notice of Guaranteed Delivery. A
"trading day" is any day on which the Nasdaq National Market (the "Nasdaq
National Market") operated by the National Association of Securities
Dealers, Inc. (the "NASD") is open for business.
The Notice of Guaranteed Delivery may be delivered by hand to the Depositary
or transmitted by telegram, facsimile transmission or mail to the Depositary and
must include a guarantee by an Eligible Institution in the form set forth in
such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (a) certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (b) a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book entry transfer, an Agent's
Message, and (c) any other documents required by the Letter of Transmittal.
Accordingly, tendering shareholders may be paid at different times depending
upon when certificates for Shares or Book-Entry Confirmations with respect to
Shares are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE
PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT.
The valid tender of Shares pursuant to one of the procedures described above
will constitute a binding agreement between the tendering shareholder and the
Purchaser upon the terms and subject to the conditions of the Offer.
APPOINTMENT. By executing a Letter of Transmittal as set forth above, the
tendering shareholder will irrevocably appoint designees of the Purchaser as
such shareholder's attorneys-in-fact and proxies in the manner set forth in the
Letter of Transmittal, each with full power of substitution, to the full extent
of such shareholder's rights with respect to the Shares tendered by such
shareholder and accepted for payment by the Purchaser and with respect to any
and all other Shares or other securities or rights issued or issuable in respect
of such Shares on or after December 18, 1997. All such proxies will be
considered coupled with an interest in the tendered Shares. Such appointment
will be effective when, and only to the extent that, the Purchaser accepts for
payment Shares tendered by such shareholder as provided herein. Upon such
appointment, all prior powers of attorney, proxies and consents given by such
shareholder with respect to such Shares or other securities or rights will,
without further action, be revoked and no subsequent powers of attorney,
proxies, consents or revocations may be given (and, if given, will not be deemed
effective). The designees of the Purchaser will thereby be empowered to exercise
all voting and other rights with respect to such Shares and other securities or
rights in respect of any annual, special or adjourned meeting of the
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Company's shareholders, actions by written consent in lieu of any such meeting
or otherwise, as they in their sole discretion deem proper. The Purchaser
reserves the right to require that, in order for Shares to be deemed validly
tendered, immediately upon the Purchaser's acceptance for payment of such
Shares, the Purchaser must be able to exercise full voting, consent and other
rights with respect to such Shares and other securities or rights, including
voting at any meeting of shareholders.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Purchaser in its sole discretion, which determination
will be final and binding. The Purchaser reserves the absolute right to reject
any or all tenders determined by it not to be in proper form or the acceptance
for payment of or payment for which may, in the opinion of the Purchaser's
counsel, be unlawful. The Purchaser also reserves the absolute right to waive
any defect or irregularity in the tender of any Shares of any particular
shareholder whether or not similar defects or irregularities are waived in the
case of other shareholders. No tender of Shares will be deemed to have been
validly made until all defects or irregularities relating thereto have been
cured or waived. None of the Purchaser, IBM, the Depositary, the Information
Agent or any other person will be under any duty to give notification of any
defects or irregularities in tenders or incur any liability for failure to give
any such notification. The Purchaser's interpretation of the terms and
conditions of the Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding.
BACKUP WITHHOLDING. In order to avoid "backup withholding" of U.S. federal
income tax on payments of cash pursuant to the Offer, a shareholder surrendering
Shares in the Offer must, unless an exemption applies, provide the Depositary
with such shareholder's correct taxpayer identification number ("TIN") on a
Substitute Form W-9 and certify under penalties of perjury that such TIN is
correct and that such shareholder is not subject to backup withholding. If a
shareholder does not provide such shareholder's correct TIN or fails to provide
the certifications described above, the Internal Revenue Service (the "IRS") may
impose a penalty on such shareholder and payment of cash to such shareholder
pursuant to the Offer may be subject to backup withholding of 31 %. All
shareholders surrendering Shares pursuant to the Offer should complete and sign
the main signature form and the Substitute Form W-9 included as part of the
Letter of Transmittal to provide the information and certification necessary to
avoid backup withholding (unless an applicable exemption exists and is proved in
a manner satisfactory to the Purchaser and the Depositary). Certain shareholders
(including, among others, all corporations and certain foreign individuals and
entities) are not subject to backup withholding. Noncorporate foreign
shareholders should complete and sign the main signature form and a Form W-8,
Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 9 to the
Letter of Transmittal.
3. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 3, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to
the procedures set forth below at any time prior to the Expiration Date and,
unless theretofore accepted for payment and paid for by the Purchaser pursuant
to the Offer, may also be withdrawn at any time after Saturday, February 21,
1998.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase and
must specify the name of the person having tendered the Shares to be withdrawn,
the number of Shares to be withdrawn and the name of the registered holder of
the Shares to be withdrawn, if different from the name of the person who
tendered the Shares. If certificates for Shares have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Depositary and, unless such Shares have been tendered by an Eligible
Institution, the signatures on the notice of withdrawal must be guaranteed by an
Eligible Institution. If Shares have been delivered pursuant to the procedures
for book-entry transfer as set forth in Section 2, any notice of withdrawal must
also specify the name and number of
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the account at the appropriate Book-Entry Transfer Facility to be credited with
the withdrawn Shares and otherwise comply with such Book-Entry Transfer
Facility's procedures. Withdrawals of tenders of Shares may not be rescinded,
and any Shares properly withdrawn will thereafter be deemed not validly tendered
for purposes of the Offer. However, withdrawn Shares may be retendered by again
following one of the procedures described in Section 2 at any time prior to the
Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser in its sole
discretion, which determination will be final and binding. None of the
Purchaser, IBM, the Depositary, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchaser will accept for payment and will pay for all Shares
validly tendered prior to the Expiration Date and not properly withdrawn in
accordance with Section 3 promptly after the Expiration Date. All determinations
concerning the satisfaction of such terms and conditions will be within the
Purchaser's sole discretion, which determinations will be final and binding. See
Sections 1 and 14. The Purchaser expressly reserves the right to delay
acceptance for payment of or payment for Shares in order to comply in whole or
in part with any applicable law, including, without limitation, the HSR Act. Any
such delays will be effected in compliance with Rule 14e-l(c) under the Exchange
Act (relating to a bidder's obligation to pay for or return tendered securities
promptly after the termination or withdrawal of such bidder's offer).
IBM filed a Notification and Report Form with respect to the Offer under the
HSR Act on Tuesday, December 23, 1997. The waiting period under the HSR Act with
respect to the Offer will expire at 11:59 p.m., New York City time, on
Wednesday, January 7, 1998 unless early termination of the waiting period is
granted. However, the Antitrust Division of the Department of Justice (the
"Antitrust Division") or the Federal Trade Commission (the "FTC") may extend the
waiting period by requesting additional information or documentary material from
IBM. If such a request is made, such waiting period will expire at 11:59 p.m.,
New York City time, on the 10th day after substantial compliance by IBM with
such request. See Section 15 hereof for additional information concerning the
HSR Act and the applicability of antitrust laws to the Offer.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (a) certificates for
(or a timely Book-Entry Confirmation with respect to) such Shares, (b) a Letter
of Transmittal (or facsimile thereof), properly completed and duly executed,
with any required signature guarantees, or, in the case of a book-entry
transfer, an Agent's Message, with respect to such Shares and (c) any other
documents required by the Letter of Transmittal. The per Share consideration
paid to any shareholder pursuant to the Offer will be the highest per Share
consideration paid to any other shareholder pursuant to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered to the Purchaser and
not withdrawn as, if and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance for payment of such Shares. Payment for
Shares accepted for payment pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as an agent for
tendering shareholders for the purpose of receiving payment from the Purchaser
and transmitting payment to tendering shareholders. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE
PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT.
If the Purchaser is delayed in its acceptance for payment of or payment for
Shares or is unable to accept for payment or pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the
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Purchaser's rights under the Offer (but subject to compliance with Rule 14e-l(c)
under the Exchange Act, which requires that a tender offeror pay the
consideration offered or return the tendered securities promptly after
termination or withdrawal of a tender offer, and to the terms of the Merger
Agreement), the Depositary may, nevertheless, on behalf of the Purchaser, retain
tendered Shares, and such Shares may not be withdrawn except to the extent
tendering shareholders are entitled to exercise, and duly exercise, withdrawal
rights as described in Section 3.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, certificates for any such Shares will be returned, without expense to
the tendering shareholder (or, in the case of Shares delivered by book-entry
transfer of such Shares into the Depositary's account at a Book-Entry Transfer
Facility pursuant to the procedure set forth in Section 2, such Shares will be
credited to an account maintained at the appropriate Book-Entry Transfer
Facility), as promptly as practicable after the expiration or termination of the
Offer.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to IBM, or to one or more direct or indirect wholly owned
subsidiaries of IBM, the right to purchase Shares tendered pursuant to the
Offer, but any such transfer or assignment will not relieve the Purchaser of its
obligations under the Offer and will in no way prejudice the rights of tendering
shareholders to receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer.
5. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The receipt of cash pursuant to the Offer or the Merger will be a taxable
transaction for U.S. federal income tax purposes under the Internal Revenue Code
of 1986, as amended (the "Code"), and may also be a taxable transaction under
applicable state, local or foreign income or other tax laws. Generally, for U.S.
federal income tax purposes, a tendering shareholder will recognize gain or loss
equal to the difference between the amount of cash received by the shareholder
pursuant to the Offer or the Merger and the aggregate tax basis in the Shares
tendered by the shareholder and purchased pursuant to the Offer or converted in
the Merger, as the case may be. Gain or loss will be calculated separately for
each block of Shares tendered and purchased pursuant to the Offer or converted
in the Merger, as the case may be.
If Shares are held by a shareholder as capital assets, gain or loss
recognized by the shareholder will be capital gain or loss, which will be
long-term capital gain or loss if the shareholder's holding period for the
Shares exceeds one year and, in the case of a noncorporate shareholder, would be
eligible for a reduced maximum tax rate of 28% (if the Shares were held for more
than one year and no more than eighteen months) or 20% (if the Shares were held
for more than eighteen months). In addition, under present law the ability to
use capital losses to offset ordinary income is limited.
A shareholder that tenders Shares may be subject to 31% backup withholding
unless the shareholder provides its TIN and certifies that such number is
correct or properly certifies that it is awaiting a TIN, or unless an exemption
applies. Exemptions are available for shareholders that are corporations and for
certain foreign individuals and entities. A shareholder that does not furnish a
required TIN may be subject to a penalty imposed by the IRS. See "Backup
Withholding" under Section 2.
If backup withholding applies to a shareholder, the Depositary is required
to withhold 31% from payments to such shareholder. Backup withholding is not an
additional tax. Rather, the amount of the backup withholding can be credited
against the U.S. federal income tax liability of the person subject to the
backup withholding, provided that the required information is given to the IRS.
If backup withholding results in an overpayment of tax, a refund can be obtained
by the shareholder upon filing an income tax return.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO SHARES
RECEIVED PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS
COMPENSATION OR WITH RESPECT TO HOLDERS OF SHARES WHO ARE SUBJECT TO SPECIAL TAX
TREATMENT UNDER THE CODE, SUCH AS NON-U.S. PERSONS, LIFE INSURANCE COMPANIES,
TAX-EXEMPT
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ORGANIZATIONS AND FINANCIAL INSTITUTIONS, AND MAY NOT APPLY TO A HOLDER OF
SHARES IN LIGHT OF INDIVIDUAL CIRCUMSTANCES. SHAREHOLDERS ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM
(INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME AND
OTHER TAX LAWS) OF THE OFFER AND THE MERGER.
6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES
The Shares are traded in the over-the-counter market and prices are quoted
on the Nasdaq National Market under the symbol SWRT, and have been at all times
since March 3, 1995. Prior to such time, there was no public market in the
Shares. The following table sets forth, for each of the periods indicated, the
high and low last reported sales prices per Share as reported by the Nasdaq
National Market.
SOFTWARE ARTISTRY, INC.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
FISCAL YEAR ENDED DECEMBER 31, 1995:
First Quarter (March 3, 1995 through March 31, 1995)....................................... $ 26.00 $ 17.50
Second Quarter............................................................................. 28.00 20.00
Third Quarter.............................................................................. 27.50 17.00
Fourth Quarter............................................................................. 19.25 12.50
FISCAL YEAR ENDED DECEMBER 31, 1996:
First Quarter.............................................................................. 15.00 11.00
Second Quarter............................................................................. 12.00 6.38
Third Quarter.............................................................................. 9.13 6.25
Fourth Quarter............................................................................. 10.25 6.13
FISCAL YEAR ENDING DECEMBER 31, 1997:
First Quarter.............................................................................. 10.25 6.75
Second Quarter............................................................................. 16.25 7.00
Third Quarter.............................................................................. 19.75 11.50
Fourth Quarter (through December 22, 1997)................................................. 24.38 11.75
</TABLE>
On December 18, 1997, the last full trading day before the public
announcement of the execution of the Merger Agreement, the last reported sales
price of the Shares on the Nasdaq National Market was $17.75 per Share. On
December 22, 1997, the last full trading day before commencement of the Offer,
the last reported sales price of the Shares on the Nasdaq National Market was
$24.25 per Share. SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR
THE SHARES.
The Company has informed the Purchaser that it has never paid any dividends
on the Shares.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; SHARE QUOTATION; EXCHANGE
ACT REGISTRATION; MARGIN REGULATIONS
MARKET FOR THE SHARES. The purchase of Shares pursuant to the Offer will
reduce the number of holders of Shares and the number of Shares that might
otherwise trade publicly and could adversely affect the liquidity and market
value of the remaining Shares held by the public.
SHARE QUOTATION. Depending upon the number of Shares purchased pursuant to
the Offer, the Shares may no longer meet the requirements of the NASD for
continued inclusion in the Nasdaq National Market, which require that an issuer
have at least 300,000 publicly held shares, held by at least 400 shareholders or
300 shareholders of round lots, with a market value of at least $1,000,000, and
have net tangible assets of at least $1,000,000, $2,000,000 or $4,000,000
depending on profitability levels during the issuer's four most recent fiscal
years. If these standards are not met, the Shares might nevertheless continue to
be included in the NASD's Nasdaq Stock Market (the "Nasdaq Stock Market") with
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<PAGE>
quotations published in the Nasdaq "additional list" or in one of the "local
lists", but if the number of holders of the Shares were to fall below 300, or if
the number of publicly held Shares were to fall below 100,000 or there were not
at least two registered and active market makers for the Shares, the NASD's
rules provide that the Shares would no longer be "qualified" for Nasdaq Stock
Market reporting and the Nasdaq Stock Market would cease to provide any
quotations. Shares held directly or indirectly by directors, officers or
beneficial owners of more than 10% of the Shares are not considered as being
publicly held for this purpose. According to the Company, as of December 19,
1997, there were approximately 198 holders of record of Shares. According to the
Company, as of December 17, 1997, there were 7,085,433 Shares outstanding. If,
as a result of the purchase of Shares pursuant to the Offer or otherwise, the
Shares no longer meet the requirements of the NASD for continued inclusion in
the Nasdaq National Market or in any other tier of the Nasdaq Stock Market and
the Shares are no longer included in the Nasdaq National Market or in any other
tier of the Nasdaq Stock Market, as the case may be, the market for Shares could
be adversely affected.
In the event that the Shares no longer meet the requirements of the NASD for
continued inclusion in any tier of the Nasdaq Stock Market, it is possible that
the Shares would continue to trade in the over-the-counter market and that price
quotations would be reported by other sources. The extent of the public market
for the Shares and the availability of such quotations would, however, depend
upon the number of holders of Shares remaining at such time, the interests in
maintaining a market in Shares on the part of securities firms, the possible
termination of registration of the Shares under the Exchange Act, as described
below, and other factors.
EXCHANGE ACT REGISTRATION. The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the Commission if the Shares are
neither listed on a national securities exchange nor held by 300 or more holders
of record. Termination of registration of the Shares under the Exchange Act
would substantially reduce the information required to be furnished by the
Company to its shareholders and to the Commission and would make certain
provisions of the Exchange Act no longer applicable to the Company, such as the
short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the
requirement of furnishing a proxy statement pursuant to Section 14(a) of the
Exchange Act in connection with shareholders' meetings and the related
requirement of furnishing an annual report to shareholders and the requirements
of Rule 13e-3 under the Exchange Act with respect to "going private"
transactions. Furthermore, the ability of "affiliates" of the Company and
persons holding "restricted securities" of the Company to dispose of such
securities pursuant to Rule 144 or 144A promulgated under the Securities Act of
1933 may be impaired or eliminated. The Purchaser intends to seek to cause the
Company to apply for termination of registration of the Shares under the
Exchange Act as soon after the completion of the Offer as the requirements for
such termination are met.
If registration of the Shares is not terminated prior to the Merger, then
the Shares will be delisted from all stock exchanges and the registration of the
Shares under the Exchange Act will be terminated following the consummation of
the Merger.
MARGIN REGULATIONS. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of allowing
brokers to extend credit on the collateral of the Shares. Depending upon factors
similar to those described above regarding listing and market quotations, it is
possible that, following the Offer, the Shares would no longer constitute
"margin securities" for the purposes of the margin regulations of the Federal
Reserve Board and therefore could no longer be used as collateral for loans made
by brokers.
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8. CERTAIN INFORMATION CONCERNING THE COMPANY
The Company is an Indiana corporation with its principal offices at 9449
Priority Way West Drive, Indianapolis, Indiana 46240. The Company develops,
markets and supports internal and external customer support software
applications.
Set forth below is certain selected financial information with respect to
the Company excerpted from the information contained in the Company's Annual
Report to Shareholders for the year ended December 31, 1996 (the "Company 1996
Annual Report") and the Company's Quarterly Report on Form 10-Q for the three
months ended September 30, 1997 (the "Company 1997 10-Q"). More comprehensive
financial information is included in the Company 1996 Annual Report, the Company
1997 10-Q and other documents filed by the Company with the Commission, and the
following summary is qualified in its entirety by reference to the Company 1996
Annual Report, the Company 1997 10-Q and such other documents and all the
financial information (including any related notes) contained therein. The
Company 1996 Annual Report, the Company 1997 10-Q and such other documents
should be available for inspection and copies thereof should be obtainable in
the manner set forth below under "Available Information".
SOFTWARE ARTISTRY, INC.
SELECTED FINANCIAL INFORMATION
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED AND AT DECEMBER 31, AND AT SEPTEMBER 30,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1996 1995 1994 1997 1996
--------- --------- --------- --------- ---------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues................................................ $ 34,395 $ 25,628 $ 14,652 $ 11,843 $ 8,261
Operating income (loss)................................. 2,479 4,940 2,471 (3,064)* 266
Net income (loss)....................................... 1,937 3,748 1,666 (1,983) 310
Balance Sheet Data:
Working capital......................................... 20,217 21,902 16,608
Total assets............................................ 40,077 35,494 39,352
Total shareholders' equity.............................. 26,452 25,638 26,178
</TABLE>
- ------------------------
* Includes a $4,100,000 non-recurring charge taken in connection with an
August 1997 acquisition by the Company.
CERTAIN COMPANY PROJECTIONS. During the course of its due diligence review,
IBM was given access to the Company's budgets and forecasts for the remainder of
1997, as well as drafts of the same for 1998. The information contained fourth
quarter revenue expectations of approximately $16 million to $18.5 million and
operating earnings expectations of approximately $4 million to $5 million (the
most recent forecast received by IBM, which reflected preliminary results of
operations through November, reflected fourth quarter revenue expectations of
$17.8 million and operating earnings expectations of $3.9 million). For 1998,
very preliminary budget and forecast information was provided, including
full-year revenue estimates of $70 million to $87 million, and operating
earnings expectations of $11 to $18 million. The Company does not as a matter of
course make public any projections as to future performance or earnings, and the
projections set forth above are included in this Offer to Purchase only because
the information was provided to IBM. The projections were not prepared with a
view to public disclosure or compliance with the published guidelines of the
Commission or the guidelines established by the American Institute of Certified
Public Accountants regarding projections or forecasts. These projections were
based on a number of assumptions that are beyond the control of the Company, the
Purchaser or IBM or their respective advisors, including economic forecasting
(both general and specific to the Company's business),
12
<PAGE>
which is inherently uncertain and subjective. None of the Company, the Purchaser
or IBM or their respective advisors assumes any responsibility for the accuracy
of any of these projections. The inclusion of the foregoing projections should
not be regarded as an indication that the Company, the Purchaser, IBM or any
other person who received such information considers it an accurate prediction
of future events. Neither the Company nor IBM intends to update, revise or
correct these projections if they become inaccurate (even in the short term).
AVAILABLE INFORMATION. The Company is subject to the informational
requirements of the Exchange Act and, in accordance therewith, is required to
file reports relating to its business, financial condition and other matters.
Information as of particular dates concerning the Company's directors and
officers, their remuneration, stock options and other matters, the principal
holders of the Company's securities and any material interest of such persons in
transactions with the Company is required to be disclosed in the Company's proxy
statements distributed to the Company's shareholders and filed with the
Commission. Such information should be available for inspection at the public
reference facilities of the Commission at 450 Fifth Street, N.W., Washington, DC
20549, and at the regional offices of the Commission located at Seven World
Trade Center, 13th Floor, New York, NY 10048 and Citicorp Center, 500 West
Madison Street (Suite 1400), Chicago, IL 60661. Copies of such information
should be obtainable, by mail, upon payment of the Commission's customary
charges, by writing to the Commission's principal office at 450 Fifth Street,
N.W., Washington, DC 20549. The Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. Such reports, proxy
and information statements and other information may be found on the
Commission's Web site address, http:/www.sec.gov. Such material should also be
available for inspection at the offices of Nasdaq Operations, 1735 K Street,
N.W., Washington, DC 20006.
Except as otherwise stated in this Offer to Purchase, the information
concerning the Company contained herein has been taken from or based upon
publicly available documents on file with the Commission and other publicly
available information. Although the Purchaser and IBM do not have any knowledge
that any such information is untrue, neither the Purchaser nor IBM takes any
responsibility for the accuracy or completeness of such information or for any
failure by the Company to disclose events that may have occurred and may affect
the significance or accuracy of any such information.
9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND IBM
The Purchaser, an Indiana corporation which is a wholly owned subsidiary of
IBM, was organized to acquire the Company and has not conducted any unrelated
activities since its organization. The principal office of the Purchaser is
located at the principal office of IBM. All outstanding shares of capital stock
of the Purchaser are owned by IBM.
IBM is a New York corporation with its principal office located at New
Orchard Road, Armonk, NY 10504. IBM has two fundamental missions. First, IBM
strives to lead in the creation, development and manufacture of the industry's
most advanced information technologies, including computer systems, software,
networking systems and microelectronics. Second, IBM translates these advanced
technologies into value for its customers worldwide through its sales and
professional services units in North America, Europe/Middle East/Africa, Asia
Pacific and Latin America.
AVAILABLE INFORMATION. IBM is subject to the informational requirements of
the Exchange Act and, in accordance therewith, files reports relating to its
business, financial condition and other matters. Information, as of particular
dates, concerning IBM's directors and officers, their remuneration, stock
options and other matters, the principal holders of IBM's securities and any
material interest of such persons in transactions with IBM is required to be
disclosed in proxy statements distributed to IBM's shareholders and filed with
the Commission. Such reports, proxy statements and other information should be
available for inspection at the Commission and copies thereof should be
obtainable from the Commission in the same manner as is set forth with respect
to the Company in Section 8. Such material should also be
13
<PAGE>
available for inspection at the offices of The New York Stock Exchange, Inc., 20
Broad Street, New York, NY 10005.
10. SOURCE AND AMOUNT OF FUNDS
The Purchaser estimates that the total amount of funds required to purchase
pursuant to the Offer the number of Shares that are outstanding on a fully
diluted basis and to pay fees and expenses related to the Offer and the Merger
will be approximately $200 million. The Purchaser plans to obtain all funds
needed for the Offer and the Merger through a capital contribution. IBM intends
to use its available cash on hand to make this capital contribution.
11. CONTACTS AND TRANSACTIONS WITH THE COMPANY; BACKGROUND OF THE OFFER
The Company develops, markets and supports suites of internal and external
customer support software applications. Tivoli Systems, Inc. ("Tivoli"), a
wholly owned subsidiary of IBM, provides TME 10, a leading solution for end to
end management of distributed computing environments. Tivoli and the Company
have had a business relationship for several years. The Company is a member of
the Tivoli 10/Plus Association for business partners, and has worked together
with Tivoli and other help desk vendors to enable greater integration options
for all applications desiring inventory data.
During the summer of 1997, representatives of the Company and Tivoli had
several discussions and meetings about ways to achieve a closer business
relationship or strategic partnership between the Company and Tivoli.
In October 1997, the discussions between the Company and Tivoli that had
begun over the summer evolved into discussions of a possible acquisition of the
Company by IBM. The discussions included at various times W. Scott Webber,
President and Chief Executive Officer of the Company, Thomas E. Vanneman, Vice
President and Chief Financial Officer of the Company, Stephen J. O'Leary,
Managing Director of Broadview Associates, financial advisor to the Company, Jan
Lindelow, President and Chief Executive Officer of Tivoli, and Archie W.
Colburn, Business Development Executive of IBM. On October 13, 1997, the Company
and Tivoli entered into a confidentiality agreement with respect to information
exchanged between the parties in the course of due diligence investigations.
Between October 13 and November 21, 1997, representatives of the Company,
including Mr. Webber, Mr. Vanneman and Mr. O'Leary, and representatives of IBM
and Tivoli, including Mr. Colburn and Mr. Lindelow, continued their discussions
regarding a possible acquisition, and discussed in greater detail the Company's
products, business prospects and financial plan and the benefits of an
acquisition of the Company by IBM.
On November 21, 1997, Lee Dayton, Vice President, Corporate Development and
Real Estate, of IBM, Mr. Lindelow and Mr. Colburn met with Mr. Webber, Mr.
Vanneman and Mr. O'Leary to discuss the possible acquisition of the Company by
IBM. At this meeting, IBM indicated it might be interested in acquiring the
Company at a price in the range of $16 to $21 per share. Broadview Associates
delivered a presentation with regard to the Company's views as to valuation. The
representatives of the Company indicated that they would be looking for a price
substantially above the levels indicated by IBM.
The parties had additional conversations over the next week as to possible
means for bridging the valuation gap between them and ways to address IBM's
concerns with respect to employee retention.
On November 24, 1997 the Board of Directors of the Company held a telephonic
meeting and discussed the status of the negotiations. The Board directed
Broadview Associates to call IBM and indicate the Board's view that the
acquisition price should be higher than $24 per share, which call was made the
next day. On November 26, 1997, Mr. Colburn advised Broadview Associates that
IBM would be at or close to the top of the range of values it would be willing
to pay for the Company at $24 per share. On
14
<PAGE>
December 3, 1997, Mr. O'Leary called Mr. Colburn and advised him that the Board
of Directors of the Company had met and requested that IBM provide its best and
final offer.
On December 5, 1997, Mr. Dayton called Mr. O'Leary and told him IBM would be
prepared to increase its offer to $24.50 per share, but that IBM's offer would
be contingent on satisfactory completion of due diligence and resolution of
several other concerns of IBM with respect to employee retention, the obtaining
of an agreement from certain significant Company shareholders to sell their
shares to IBM and noncompetition agreements with several members of the
Company's management.
Mr. O'Leary called Mr. Dayton back on December 5, 1997 and advised him that
the Company's Board had met and agreed to go forward on the basis proposed by
IBM, subject to the satisfactory negotiation of definitive documentation.
During the period from December 10 to December 13, 1997, representatives of
IBM met with representatives of the Company to continue IBM's due diligence
review of the Company and to discuss, among other things, personnel retention
matters. IBM's legal counsel distributed draft documentation on December 12,
1997. During the period from December 15, 1997 to December 17, 1997,
representatives of IBM, including IBM's legal counsel, on the one hand, and
representatives of the Company, including the Company's legal counsel and
financial advisor, on the other hand, negotiated the documentation for the
contemplated transaction.
On December 16, 1997, the executive committee of the Board of Directors of
IBM approved the contemplated transactions, subject to the satisfactory
negotiation of definitive documentation.
On December 18, 1997, the Board of Directors of the Company and the
Purchaser each adopted the Merger Agreement and approved the other documentation
for the contemplated transactions.
Following such approvals, the Merger Agreement and the other related
agreements were executed and delivered and the transactions were publicly
announced before the financial markets opened on December 19, 1997.
Except as described in this Offer to Purchase (including Schedule I hereto),
none of the Purchaser, IBM or, to the best knowledge of the Purchaser and IBM,
any of the persons listed in Schedule I hereto, or any associate or
majority-owned subsidiary of the Purchaser, IBM or any of the persons so listed,
beneficially owns any equity security of the Company, and none of the Purchaser,
IBM or, to the best knowledge of the Purchaser and IBM, any of the other persons
referred to above, or any of the respective directors, executive officers or
subsidiaries of any of the foregoing, has effected any transaction in any equity
security of the Company during the past 60 days. The Purchaser and IBM disclaim
beneficial ownership of any Shares owned by any pension plan of IBM or any
affiliate of IBM.
Except as described in this Offer to Purchase, as of the date hereof (a)
there have not been any contacts, transactions or negotiations between the
Purchaser or IBM, any of their respective subsidiaries or, to the best knowledge
of the Purchaser, any of the persons listed in Schedule I hereto, on the one
hand, and the Company or any of its directors, officers or affiliates, on the
other hand, that are required to be disclosed pursuant to the rules and
regulations of the Commission and (b) none of the Purchaser, IBM or, to the best
knowledge of the Purchaser and IBM, any of the persons listed in Schedule I
hereto has any contract, arrangement, understanding or relationship with any
person with respect to any securities of the Company. During the Offer, the
Purchaser and IBM intend to have ongoing contacts and negotiations with the
Company and its directors, officers and shareholders.
12. PURPOSE OF THE OFFER, THE MERGER AGREEMENT; THE SHAREHOLDER AGREEMENT; ETC.
PURPOSE
The purpose of the Offer is to enable IBM to acquire control of, and the
entire equity interest in, the Company. The Offer, as the first step in the
acquisition of the Company, is intended to facilitate the
15
<PAGE>
acquisition of all the Shares. The purpose of the Merger is to acquire all
Shares not tendered and purchased pursuant to the Offer, the Shareholder
Agreement or otherwise.
THE MERGER AGREEMENT
The Merger Agreement provides that following the satisfaction or waiver of
the conditions described below under "Conditions to the Merger", the Purchaser
will be merged with and into the Company, and each then outstanding Share (other
than Shares owned by IBM or the Company or any of their subsidiaries or by
shareholders, if any, who are entitled to and who properly exercise dissenters'
rights under Indiana law in the event the Shares are not registered on a
national securities exchange or quoted for trading on the Nasdaq National Market
at the record date for any shareholder vote on the Merger (if any such vote is
required)) will be converted into the right to receive an amount in cash equal
to the price per Share paid pursuant to the Offer.
VOTE REQUIRED TO APPROVE MERGER. The IBCL requires, among other things,
that any plan of merger or consolidation of the Company must be adopted by the
Board of Directors and, if the "short-form" merger procedure described below is
not available, approved by the holders of the Company's outstanding voting
securities. The Board of Directors of the Company has adopted the Merger
Agreement and approved the Offer and the Merger; consequently, the only
additional action of the Company that may be necessary to effect the Merger is
approval of the Merger Agreement by the Company's shareholders, if such "short-
form" merger procedure is not available. Under the IBCL, if shareholder approval
of the Merger Agreement is required in order to consummate the Merger, the vote
required is the affirmative vote of the holders of a majority of the outstanding
Shares. If the Purchaser acquires, through the Offer, the Shareholder Agreement
or otherwise, voting power with respect to a majority of the outstanding Shares
(which would be the case if the Minimum Condition were satisfied and the
Purchaser were to accept for payment Shares tendered pursuant to the Offer), it
would have sufficient voting power to effect the Merger without the affirmative
vote of any other shareholder of the Company.
The IBCL also provides that if a parent company owns at least 90% of the
outstanding shares of each class of stock of a subsidiary, the parent company
and that subsidiary may merge without the approval of the shareholders of the
parent or the subsidiary. Accordingly, if, as a result of the Offer, the
Shareholder Agreement or otherwise, the Purchaser owns at least 90% of the
outstanding Shares, the Purchaser could effect the Merger without prior notice
to, or any action by, any shareholder of the Company.
CONDITIONS TO THE MERGER. The Merger Agreement provides that the respective
obligations of each party to effect the Merger is subject to the satisfaction or
waiver of the following conditions: (a) if required by applicable law, the
Merger having been approved by the affirmative vote of the holders of a majority
of the Shares; (b) no statute, law, ordinance, rule, or regulation (a "Law"), or
judgment, order, writ, preliminary or permanent injunction or decree (an
"Order") issued by any federal, state or local government or any court,
tribunal, administrative agency or commission or other governmental or other
regulatory authority or agency, domestic, foreign or supranational (a
"Governmental Entity"), or other legal restraint or prohibition preventing the
consummation of the Merger being in effect; PROVIDED, HOWEVER, that each of the
Company, the Purchaser and IBM has used reasonable efforts to prevent the entry
of any such Order and to appeal as promptly as possible any Order that may have
been entered; and (c) the Purchaser having previously accepted for payment and
paid for Shares pursuant to the Offer.
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be terminated
at any time prior to the effective time of the Merger, whether before or after
approval of the terms of the Merger Agreement by the shareholders of the
Company:
(1) by mutual written consent of the Company and IBM;
(2) by either the Company or IBM (a) if (i) as a result of the failure
of any of the conditions to the Offer, the Offer has terminated or expired
in accordance with its terms without the Purchaser having accepted for
payment any Shares pursuant to the Offer or (ii) the Purchaser has not
accepted
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for payment any Shares pursuant to the Offer prior to June 30, 1998,
PROVIDED, HOWEVER, that the right to terminate the Merger Agreement
described in this clause (2) is not available to any party whose failure to
perform any of its obligations under the Merger Agreement results in the
failure of any such condition or if the failure of such condition results
from facts or circumstances that constitute a breach of a representation or
warranty under the Merger Agreement by such party; or (b) if any
Governmental Entity has issued an Order or taken any other action
permanently enjoining, restraining or otherwise prohibiting the acceptance
for payment of, or payment for, Shares pursuant to the Offer or the Merger
and such Order or other action has become final and nonappealable;
(3) by the Purchaser or IBM (a) prior to the purchase of Shares pursuant
to the Offer in the event of a breach or failure to perform by the Company
of any representation, warranty, covenant or other agreement contained in
the Merger Agreement that (i) would give rise to the failure of a condition
described in paragraph (e) or (f) of Section 14 and (ii) cannot be or has
not been cured within 20 days after the giving of written notice to the
Company or (b) if either the Purchaser or IBM is entitled to terminate the
Offer as a result of the occurrence of (i) the Board of Directors of the
Company or any committee thereof having withdrawn or modified in a manner
adverse to the Purchaser or IBM its approval or recommendation of the Offer
or the Merger or its adoption of the Merger Agreement, or approved or
recommended any Takeover Proposal, (ii) the Company having entered into any
agreement with respect to any Superior Proposal (as defined below in
"Takeover Proposals") or (iii) the Board of Directors of the Company or any
committee thereof having resolved to take any of the actions described in
clauses (3)(b)(i) or (3)(b)(ii) above; or
(4) by the Company (a) in accordance with the terms of the Merger
Agreement described below under "Takeover Proposals", provided it has
complied with all provisions thereof, including the notice provisions
therein, and that it complies with the applicable requirements relating to
the payment (including the timing of any payment) of the Termination Fee (as
such term is defined below under "Fees and Expenses") or (b) if the
Purchaser or IBM has breached or failed to perform in any material respect
any of their respective representations, warranties, covenants or other
agreements contained in the Merger Agreement, which breach or failure to
perform is incapable of being cured or has not been cured within 20 days
after the giving of written notice to the Purchaser or IBM, as applicable,
except, in any case, such breaches and failures which are not reasonably
likely to affect adversely the Purchaser's or IBM's ability to consummate
the Offer or the Merger.
TAKEOVER PROPOSALS. The Merger Agreement provides that the Company will,
and will cause its officers, directors, employees, representatives and agents
to, immediately cease any discussions or negotiations with any parties that may
be ongoing with respect to a Takeover Proposal. The Merger Agreement provides
further that the Company will not, nor will it permit any of its subsidiaries
to, nor will it authorize or permit any of its directors, officers or employees
or any investment banker, financial advisor, attorney, accountant or other
representative or agent retained by it to, directly or indirectly, (a) solicit,
initiate or encourage (including by way of furnishing information), or take any
other action designed or reasonably likely to facilitate, any inquiries or the
making of any proposal which constitutes, or may reasonably be expected to lead
to, any Takeover Proposal or (b) participate in any discussions or negotiations
regarding any Takeover Proposal; PROVIDED, HOWEVER, that if, at any time prior
to the acceptance for payment of Shares pursuant to the Offer, the Board of
Directors of the Company determines in good faith, after consultation with
outside counsel, that it is necessary to do so in order to comply with its
fiduciary duties to the Company's shareholders under applicable law, the Company
may, in response to a Takeover Proposal that was not solicited subsequent to the
date of the Merger Agreement, and subject to compliance with the notification
provisions described below, (i) furnish information with respect to the Company
to any person pursuant to a confidentiality agreement in a form approved by IBM
(such approval not to be unreasonably withheld) and (ii) participate in
negotiations regarding such Takeover Proposal. The Merger Agreement defines
"Takeover Proposal" as any inquiry, proposal or offer, or any expression of
interest by any third party relating to the Company's willingness or ability to
receive or discuss a proposal or offer, other than a proposal or offer by IBM or
any of its subsidiaries, for a merger, consolidation or other business
17
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combination involving, or any purchase of, more than 10% of the consolidated
assets of the Company or more than 10% of the Shares.
The Merger Agreement provides further that, except as described below,
neither the Board of Directors of the Company nor any committee thereof may (a)
withdraw or modify, or propose to withdraw or modify, in a manner adverse to
IBM, the approval or recommendation by such Board of Directors or such committee
of the Offer, the Merger Agreement or the Merger, (b) approve or recommend, or
propose to approve or recommend, any Takeover Proposal or (c) cause the Company
to enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement (each, an "Acquisition Agreement") related
to any Takeover Proposal. Notwithstanding the foregoing, in the event that prior
to the acceptance for payment of Shares pursuant to the Offer the Board of
Directors of the Company determines in good faith, after consultation with
outside counsel, that it is necessary to do so in order to comply with its
fiduciary duties to the Company's shareholders under applicable law, such Board
of Directors may, in response to a Superior Proposal that was not solicited
subsequent to the date of the Merger Agreement (subject to the provisions
described in this and the following sentences), (i) withdraw or modify its
approval or recommendation of the Offer, the Merger Agreement or the Merger or
(ii) approve or recommend such Superior Proposal or terminate the Merger
Agreement (and concurrently with or after such termination, if it so chooses,
cause the Company to enter into any Acquisition Agreement with respect to such
Superior Proposal), but in each of the cases set forth above, only at a time
that is after the second business day following IBM's receipt of written notice
advising IBM that the Board of Directors of the Company has received a Superior
Proposal, specifying the material terms and conditions of such Superior Proposal
and identifying the person making such Superior Proposal. The Merger Agreement
defines "Superior Proposal" as any bona fide Takeover Proposal (except that
references to "10%" in the definition of Takeover Proposal shall be deemed to be
"50%") made by a third party on terms which the Board of Directors of the
Company determines in its good faith judgment (based on the advice of a
financial advisor of nationally recognized reputation) to be more favorable to
the Company's shareholders than the Offer and the Merger and for which
financing, to the extent required, is then committed or which, in the good faith
judgment of the Board of Directors of the Company, is reasonably capable of
being financed by such third party.
In addition to the obligations of the Company described in the preceding two
paragraphs, the Merger Agreement provides that the Company will immediately
advise IBM orally and in writing of any request for information or of any
Takeover Proposal, the material terms and conditions of such request or Takeover
Proposal and the identity of the person making any such request or Takeover
Proposal. The Company is further required under the terms of the Merger
Agreement to immediately inform IBM of any material change in the details
(including amendments or proposed amendments) of any such request or Takeover
Proposal.
The Merger Agreement provides that nothing contained therein will prohibit
the Company from taking and disclosing to its shareholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making
any disclosure to the Company's shareholders if, in the good faith judgment of
the Board of Directors of the Company, after consultation with outside counsel,
failure so to disclose would be inconsistent with applicable law; PROVIDED,
HOWEVER, that neither the Company nor its Board of Directors nor any committee
thereof may, except as specifically permitted by the Merger Agreement and as
described above, withdraw or modify, or propose to withdraw or modify, its
position with respect to the Offer, the Merger or the Merger Agreement or
approve or recommend, or propose to approve or recommend, a Takeover Proposal.
FEES AND EXPENSES. The Merger Agreement provides that, except as described
below, all fees and expenses incurred in connection with the Offer, the Merger,
the Merger Agreement and the transactions contemplated by the Merger Agreement
will be paid by the party incurring such fees or expenses, whether or not the
Offer or the Merger is consummated. The Merger Agreement further provides that
the Company will pay, or cause to be paid, in same day funds to IBM the sum of
$6,000,000 (the "Termination
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Fee") under the circumstances and at the times set forth as follows: (a) if the
Company terminates the Merger Agreement in accordance with the provisions
described above in clause (4)(a) under "Termination of the Merger Agreement",
the Company will pay the Termination Fee upon demand; (b) if the Purchaser or
IBM terminates the Merger Agreement in accordance with the provisions described
above in clause (3)(b) under "Termination of the Merger Agreement", the Company
will pay the Termination Fee upon demand; and (c) if, at the time of any other
termination of the Merger Agreement (other than in accordance with the
provisions described above in clause (1) or clause (2)(b) under "Termination of
the Merger Agreement" or by the Company in accordance with the provisions
described above in clause (4)(b) under "Termination of the Merger Agreement"), a
Takeover Proposal has been made (other than a Takeover Proposal made prior to
the date of the Merger Agreement), and within 12 months of such termination the
Company enters into an Acquisition Agreement providing for a Takeover Proposal
or a transaction resulting from a Takeover Proposal is consummated, the Company
will pay the Termination Fee concurrently with the earlier of the entering into
of such Acquisition Agreement or the consummation of such transaction.
CONDUCT OF BUSINESS BY THE COMPANY. The Merger Agreement provides that,
except as expressly contemplated or permitted by the Merger Agreement or to the
extent that IBM shall otherwise consent in writing, until such time as IBM's
designees constitute a majority of the Board of Directors of the Company, (a)
the Company will, and will cause its subsidiaries to, carry on their respective
business in the usual, regular and ordinary course in substantially the same
manner as conducted prior to the execution of the Merger Agreement and in
compliance in all material respects with all applicable laws and regulations and
will use all reasonable efforts to preserve intact their present business
organizations, keep available the services of their present officers and
employees and preserve their relationships with customers, suppliers and others
having business dealings with the Company and its subsidiaries; (b) the Company
will not, and will not permit any of its subsidiaries to, (i) declare or pay any
dividends on or make other distributions in respect of any of its capital stock
(except for dividends by a direct or indirect wholly owned subsidiary of the
Company to its parent), (ii) split, combine or reclassify any of its capital
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock or
(iii) repurchase, redeem or other-wise acquire any shares of capital stock of
the Company or any of its subsidiaries or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities; (c)
the Company will not, and will not permit any of its subsidiaries to, issue,
deliver, sell, pledge or encumber, or authorize or propose the issuance,
delivery, sale, pledge or encumbrance of, any shares of its capital stock of any
class or any securities convertible into, or rights, warrants, calls,
subscriptions or options to acquire, any such shares or convertible securities,
or any other ownership interest (including stock appreciation rights or phantom
stock) other than the issuance of Shares (i) upon the exercise of Stock Options
outstanding on the date of the Merger Agreement and in accordance with the terms
of such Stock Options and (ii) in accordance with the terms of the Software
Artistry, Inc. 1996 Employee Stock Purchase Plan as in effect on the date of the
Merger Agreement (the "Share Purchase Plan"); (d) the Company will not, and will
not permit any of its subsidiaries to, amend or propose to amend its articles of
incorporation or by-laws (or similar organizational documents); (e) the Company
will not, and will not permit any of its subsidiaries to, acquire or agree to
acquire (i) by merging or consolidating with, or by purchasing a substantial
equity interest in or substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, joint venture, association
or other business organization or division thereof or (ii) any assets that are
material, individually or in the aggregate, to the Company and its subsidiaries
taken as a whole, except purchases of inventory in the ordinary course of
business consistent with past practice; (f) the Company will not, and will not
permit any of its subsidiaries to, sell, lease, license, encumber or otherwise
dispose of, or agree to sell, lease, license, encumber or otherwise dispose of,
any of its assets, other than sales or licenses of its products in the ordinary
course of business consistent with past practice; (g) the Company will not, and
will not permit any of its subsidiaries to, (i) incur or suffer to exist any
indebtedness for borrowed money or guarantee any such indebtedness or issue or
sell any debt securities or warrants or rights to acquire any debt securities of
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the Company or any of its subsidiaries, guarantee any debt securities of others,
enter into any "keep-well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, except for working capital borrowings
incurred in the ordinary course of business consistent with practice, or (ii)
make any loans, advances or capital contributions to, or investments in, any
other person, other than to the Company or to or in any direct or indirect
wholly owned subsidiary of the Company; (h) the Company will confer on a regular
and frequent basis with IBM, as reasonably requested by IBM, report to IBM on
operational matters and promptly advise IBM orally and in writing of any
material adverse change with respect to the Company, and promptly provide to IBM
(or its counsel) copies of all filings made by the Company with any Governmental
Entity in connection with the Merger Agreement and the transactions contemplated
thereby; (i) the Company will not make any tax election that would have a
material adverse effect on the tax liability or tax attributes of the Company or
any of its subsidiaries or settle or compromise any tax liability of the Company
or any of its subsidiaries, and the Company will, before filing or causing to be
filed any tax return of the Company or any of its subsidiaries or settling any
tax liability not described in the previous clause, consult with IBM and its
advisors as to the positions and elections that may be taken or made with
respect to such return, and take such positions or make such elections as the
Company and IBM shall jointly agree; (j) except as set forth on its disclosure
schedule to the Merger Agreement, neither the Company nor any of its
subsidiaries will make or agree to make any new capital expenditure or
expenditures, which capital expenditures would exceed $100,000 in the aggregate;
(k) the Company will not, and will not permit any of its subsidiaries to, pay,
discharge, settle or satisfy any claims, liabilities or obligations other than
the payment, discharge, settlement or satisfaction, in the ordinary course of
business consistent with past practice or in accordance with their terms, of
claims, liabilities or obligations recognized or disclosed in the most recent
financial statements (or notes thereto) of the Company included in the documents
required to be filed by the Company since January 1, 1996 under the Exchange Act
which are filed and publicly available prior to the date of the Merger Agreement
or incurred since the date of such financial statements; (l) except in the
ordinary course of business neither the Company nor any of its subsidiaries will
(i) modify, amend or terminate any material note, bond, mortgage, indenture,
lease, license, permit, concession, franchise, contract, agreement or other
instrument or obligation to which the Company or such subsidiary is a party,
(ii) waive, release or assign any material rights or claims or (iii) waive the
benefits of, or agree to modify in any manner, any confidentiality, standstill
or similar agreement to which the Company or such subsidiary is a party; (m) the
Company will not, and will not permit any of its subsidiaries to, (i) increase
the compensation or benefits of any director, officer or employee, except for
increases in the ordinary course that are consistent with past practice, (ii)
adopt any amendment to any benefit plan or similar arrangement of the Company
specified in the Merger Agreement that materially increases the cost thereof,
(iii) enter into any employment or consulting agreement with any director,
officer or employee or (iv) accelerate the payment of compensation or benefits
to any director, officer or employee; and (n) the Company will not, and will not
permit any of its subsidiaries to, authorize any of, or commit or agree to take
any of, the foregoing actions.
In addition to the foregoing, in the Merger Agreement the Company has agreed
that it will not, and will not permit any of its subsidiaries to, take any
action that would, or that could reasonably be expected to, result in (a) any of
the representations and warranties of the Company set forth in the Merger
Agreement that are qualified as to materiality becoming untrue, (b) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect or (c) any of the conditions to the Offer described in Section
14 not being satisfied, provided that these obligations of the Company are
subject to the Company's right to take actions specifically permitted by the
Merger Agreement described above in "Takeover Proposals".
BOARD OF DIRECTORS. The Merger Agreement provides that promptly upon the
acceptance for payment of, and payment for, Shares by the Purchaser pursuant to
the Offer, the Purchaser will be entitled to designate such number of directors
on the Board of Directors of the Company as will give the Purchaser a majority
of such directors and subject to compliance with Section 14(f) of the Exchange
Act, the Company
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will, at such time, cause the Purchaser's designees to be so elected by its
existing Board of Directors; PROVIDED HOWEVER, that from the time that the
Purchaser's designees are so elected to the Board of Directors of the Company
until the effective time of the Merger, the Board of Directors of the Company
will include at least two directors who were directors of the Company as of the
date of the Merger Agreement and who are not officers of the Company. Subject to
applicable law, the Company has agreed to take all action requested by IBM
necessary to effect any such election, including mailing to its shareholders the
Information Statement containing the information required by Section 14(f) of
the Exchange Act and Rule l4f-1 promulgated thereunder, which Information
Statement is attached as Appendix A to the Schedule 14D-9.
STOCK OPTIONS. The Merger Agreement provides that as soon as practicable
following the date of the Merger Agreement, the Board of Directors of the
Company (or, if appropriate, any committee administering the Software Artistry,
Inc. Amended and Restated Incentive Stock Option Plan (the "Stock Plans")) will
adopt such resolutions or take other actions as may be required to (a) adjust
the terms of all outstanding Stock Options granted under the Stock Plans as
necessary to provide that, at the effective time of the Merger, each outstanding
Stock Option granted thereunder will be converted into an option to acquire, on
the same terms and conditions as were applicable under such Stock Option, the
number of shares of common stock of IBM, par value $.50 per share ("IBM Common
Stock") (rounded down to the nearest whole share) determined by multiplying the
number of Shares subject to such Stock Option by a fraction, the numerator of
which is the Offer Price and the denominator of which is the average closing
price of IBM Common Stock on the New York Stock Exchange Composite Transactions
Tape on the ten trading days immediately preceding the date on which the
effective time of the Merger occurs (the "Exchange Ratio"), at a price per share
of IBM Common Stock (rounded up to the nearest tenth of a cent) equal to (i) the
aggregate exercise price for the Shares otherwise purchasable pursuant to such
Stock Option divided by (ii) the Exchange Ratio (each, as so adjusted, a
"Substitute Option") and (b) amend the Stock Plan to eliminate the final
sentence of Section 4(c) thereof relating to the lapse of such Stock Options
upon the consummation of the transactions contemplated by the Merger Agreement
and (c) make such other changes to the Stock Plans as IBM and the Company may
agree are appropriate to give effect to the Merger.
The Merger Agreement further provides that (a) by virtue of the Merger and
without the need of any further corporate action, upon the effective time of the
Merger, IBM will assume all obligations of the Company under the Stock Plans,
including with respect to the outstanding Stock Options granted thereunder, (b)
no later than the effective time of the Merger, IBM will prepare and file with
the Commission a registration statement on Form S-8 (or another appropriate
form) registering a number of shares of IBM Common Stock equal to the number of
shares subject to the Substitute Options and will keep such registration
statement effective (and maintain the current status of the initial offering
prospectus or prospectuses required thereby) at least for so long as any
Substitute Options remain outstanding, (c) except as otherwise contemplated
under this caption and except to the extent required under the respective terms
of the Stock Options or other applicable agreements, all restrictions or
limitations on transfer and vesting with respect to Stock Options awarded under
the Stock Plans or any other plan, program or arrangement of the Company, to the
extent that such restrictions or limitations shall not have already lapsed, will
remain in full force and effect with respect to such options after giving effect
to the Merger and the assumption by IBM as described above, and notwithstanding
the foregoing, the Substitute Options will not be subject to the provision of
the Stock Plan providing for the lapse of Stock Options upon the consummation of
the transactions contemplated by the Merger Agreement and (d) the Company will
amend the Stock Purchase Plan to terminate the commencement of any Offering (as
defined therein) that is scheduled to commence after the date of the Merger
Agreement.
Except as described below, all Stock Options will become fully vested as a
result of the transaction unless the holder of Stock Options that would
otherwise accelerate elects to waive such acceleration.
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In connection with the execution of the Merger Agreement, the Stock Option
Agreements between the Company and Mr. Webber and Michael J. Robbins, the
Company's Senior Vice President, Worldwide Operations, were amended to provide
that the unvested Stock Options held by them (i) would not be accelerated as a
result of the transaction, (ii) would be assumed by IBM and (iii) would vest in
two equal segments, one segment becoming fully vested on the first anniversary
of the effective time of the Merger and the second segment becoming fully vested
on the second anniversary of the effective time of the Merger; PROVIDED HOWEVER,
that all unvested Stock Options held by Mr. Webber and Mr. Robbins would vest
immediately upon any termination of Mr. Webber or Mr. Robbins, as the case may
be, without "good cause" and, in the case of Mr. Robbins, upon a Special
Termination Event (as hereinafter defined).
In connection therewith, IBM agreed to make payments to Mr. Webber equal to
$150,000 and to Mr. Robbins equal to $125,000 upon the vesting of each segment
of Stock Options (other than, in the case of Mr. Robbins, a vesting pursuant to
the occurence of a Special Termination Event); PROVIDED that all such payments
would be paid immediately to Mr. Webber or Mr. Robbins, as the case may be, upon
any termination of Mr. Webber or Mr. Robbins, as the case may be, without "good
cause".
INDEMNIFICATION; INSURANCE. In the Merger Agreement, the Purchaser and IBM
have agreed that all rights to indemnification for acts or omissions occurring
prior to the effective time of the Merger that are in existence as of the date
of the Merger Agreement in favor of the current or former directors or officers
of the Company and its subsidiaries as provided in their respective articles of
incorporation or by-laws (or similar organizational documents) will survive the
Merger and will continue in full force and effect in accordance with their
terms. Pursuant to the Merger Agreement, IBM will, for a period of six years
from the effective time of the Merger, unless IBM agrees in writing to guarantee
the indemnification obligations described above, maintain in effect the
Company's current directors' and officers' liability insurance covering those
persons who are currently covered by the Company's directors' and officers'
liability insurance policy or, in lieu of maintaining such insurance, cause
coverage to be provided under any policy maintained for the benefit of IBM or
any of its subsidiaries or otherwise obtained by IBM, so long as the terms
thereof are no less advantageous to the intended beneficiaries thereof than to
those of the Company policy, except that in either case, to the extent that such
coverage is not obtainable at less than or equal to 200% of the current annual
premiums, IBM will be obligated to purchase only so much coverage as may then be
obtained for such amount.
REASONABLE EFFORTS. The Merger Agreement provides that each of the Company,
IBM and the Purchaser will use its reasonable efforts to take, or cause to be
taken, all actions necessary to comply promptly with all legal requirements that
may be imposed on itself with respect to the Offer and the Merger and will
promptly cooperate with and furnish information to each other in connection with
any such requirements imposed upon any of them or any of their subsidiaries in
connection with the Offer and the Merger and will, and will cause each of its
subsidiaries, to use its reasonable efforts to take all reasonable actions
necessary to obtain (and will cooperate with each other in obtaining) any
consent, authorization, order or approval of, or any exemption by, any
Governmental Entity or other public or private third party required to be
obtained or made by any of them or any of their subsidiaries in connection with
the Offer and the Merger or the taking of any action contemplated thereby or by
the Merger Agreement, except that no party need waive any substantial rights or
agree to any substantial limitation on its operations or to dispose of any
assets. The Merger Agreement further provides that IBM will cause the Purchaser
to comply with its obligations under the Merger Agreement.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties.
PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER. The Merger
Agreement provides that in the event the Purchaser's designees are appointed or
elected to the Board of Directors of the Company as described above under "Board
of Directors", after the acceptance for payment of Shares pursuant to the Offer
and prior to the effective time of the Merger, the affirmative vote of the
directors of the Company not designated by the Purchaser or IBM is required for
the Company to amend or terminate the Merger Agreement, exercise or waive any of
its rights or remedies under the Merger Agreement or extend the time for
performance of IBM's and the Purchaser's respective obligations under the Merger
Agreement.
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The foregoing summary of the Merger Agreement is qualified in its entirety
by reference to the Merger Agreement, a copy of which is filed as Exhibit (c)(1)
to the Company's Tender Offer Statement on Schedule 14D-1 filed with the
Commission on the date hereof (the "Schedule 14D-1"). The Merger Agreement
should be read in its entirety for a more complete description of the matters
summarized above.
THE SHAREHOLDER AGREEMENT
Pursuant to the Shareholder Agreement, each of the Selling Shareholders has
unconditionally agreed to tender into the Offer, and not to withdraw therefrom,
all the Shares that such Selling Shareholder owned on December 18, 1997
(comprising 1,487,516 Shares for all of the Selling Shareholders), as well as
any Shares thereafter acquired by such Selling Shareholder after such time,
including upon the exercise of Stock Options. As of December 18, 1997, the
Selling Shareholders held stock options to purchase 1,064,503 Shares, of which
Stock Options to purchase 949,503 Shares would be exercisable immediately prior
to the expiration of the Offer. In addition, each of the Selling Shareholders
has agreed to sell to the Purchaser, and the Purchaser has agreed to purchase,
all of such Selling Shareholder's Shares (including those acquired after the
execution of the Shareholder Agreement) at a price per Share equal to the Offer
Price, PROVIDED that (a) such obligation of the Purchaser to purchase such
Shares is subject to the Purchaser having accepted Shares for payment pursuant
to the Offer and the Minimum Condition having been satisfied, which conditions
to such obligation may be waived by the Purchaser in its reasonable discretion,
and (b) such obligation of such Selling Shareholder to sell such Shares is
subject to either the Minimum Condition having been satisfied or a Takeover
Proposal having been made.
Each of the Selling Shareholders has further agreed in the Shareholder
Agreement that it will not (a) sell, transfer, pledge, assign or otherwise
dispose of, or enter into any contract, option or other arrangement (including
any profit sharing arrangement) or understanding with respect to the sale,
transfer, pledge, assignment or other disposition of Shares to any person other
than the Purchaser or the Purchaser's designee, (b) enter into any voting
arrangement, whether by proxy, voting agreement, voting trust, power-of-attorney
or otherwise, with respect to Shares or (c) take any other action that would in
any way restrict, limit or interfere with the performance of its obligations
under the Shareholder Agreement or the transactions contemplated by the
Shareholder Agreement. Each of the Selling Shareholders has also agreed in the
Shareholder Agreement that it will not solicit, initiate or encourage (including
by way of furnishing information), or participate in any discussions or
negotiations regarding, any Takeover Proposal.
Under the Shareholder Agreement, each Selling Shareholder has granted to
certain individuals designated by IBM an irrevocable proxy with respect to the
Shares subject to the Shareholder Agreement to IBM to vote such Shares in favor
of the Merger, the adoption of the Merger Agreement and the approval of the
other transactions contemplated by the Merger Agreement and against (i) any
merger agreement or merger (other than the Merger Agreement and the Merger),
consolidation, combination, sale of substantial assets, reorganization, joint
venture, recapitalization, dissolution, liquidation or winding up of or by the
Company and (ii) any amendment of the Company's Third Amended and Restated
Articles of Incorporation or its Bylaws, as amended and restated, or other
proposal or transaction (including any consent solicitation to remove or elect
any directors of the Company) involving the Company, which amendment or other
proposal or transaction would in any manner impede, frustrate, prevent or
nullify, or result in a breach of any covenant, representation or warranty or
any other obligation or agreement of the Company under or with respect to, the
Offer, the Merger, the Merger Agreement or any of the other transactions
contemplated by the Merger Agreement.
The foregoing summary of the Shareholder Agreement is qualified in its
entirety by reference to the Shareholder Agreement, a copy of which is filed as
Exhibit (c)(2) to the Schedule 14D-1. The Shareholder Agreement should be read
in its entirety for a more complete description of the matters summarized above.
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In addition, in connection with his execution of the Shareholder Agreement,
Donald E. Brown, M.D., a shareholder and former director of the Company, and a
company with which he is affiliated both executed an agreement that had the
effect of confirming the absence of certain claims by them with respect to the
intellectual property used by the Company.
NONCOMPETITION AGREEMENTS
Mr. Webber; Mr. Robbins; William M. Godfrey, the Company's Vice President,
Channel Marketing; Steven Ehrlich, the Company's Vice President, Enterprise
Support Management Business Unit; Jon E. Stevenson, the Company's Vice
President, Domestic Sales; Scott S. McCorkle, the Company's Vice President,
Customer Relationship Management Business Unit; Robert Davies, the Company's
Vice President and General Manager, Asia/Pacific Operations; Peter Prince, the
Company's Vice President, European Operations; and Mr. Vanneman have entered
into noncompetition agreements with IBM pursuant to which each such person has
agreed that for a period up to three years following the termination of such
person's employment with IBM or any of its subsidiaries (such period may be less
than three years depending upon the timing and circumstances of such termination
of employment), such person shall not, among other things, have any Relationship
(as defined below) with any entity in the course of which Relationship such
person engages in or assists such entity with respect to the development,
marketing or sales of systems management products or services for use in
host-based or distributed environments or on the Internet. The noncompetition
agreements provide that any such person will be deemed to have a "Relationship"
with an entity if such person (i) owns, manages, operates, joins or is employed
by such entity, (ii) is a director, member, agent, shareholder, owner or general
partner of such entity, (iii) acts as a consultant or advisor to such entity or
(iv) controls or participates in the ownership, management or operation of, such
entity; PROVIDED, HOWEVER, that the foregoing provisions of the noncompetition
agreements do not prohibit any such person from acquiring, solely as an
investment and through market purchases, less than 5% of the outstanding equity
securities of any corporation that is registered under Section 12(b) or Section
12(g) of the Exchange Act and that is publicly traded so long as such person is
not part of any control group of such corporation.
WAIVER OF SEVERANCE PAY
In connection with the execution of the Merger Agreement, (i) Mr. Godfrey,
Mr. Ehrlich, Mr. McCorkle and Mr. Webber waived their rights to receive
severance payments as a result of a constructive termination occurring at any
time or as a result of any termination occurring after the first anniversary of
the effective time of the Merger, (ii) Mr. Vanneman waived his right to receive
severance payments in exchange for a lump sum payment of $170,000 and (iii) Mr.
Robbins agreed that, for purposes of determining whether severance payments
would be due to him as a result of a constructive termination, a constructive
termination would be defined as a reduction in his base compensation or a
relocation of his place of employment to a location that is more than fifty
miles from his current place of employment (a "Special Termination Event") and
waived his right to receive severance payments as a result of any termination
occurring after the first anniversary of the effective time of the Merger.
CERTAIN ARRANGEMENTS
In connection with the execution of the Merger Agreement, IBM agreed to the
payment by the Company to Mr. Webber and Mr. Robbins of special bonuses of
$450,000 and $300,000, respectively, and to the making of certain future stock
option grants in connection with the Company's sales compensation program.
PLANS FOR THE COMPANY
IBM's current intention is to continue the Company's operations under the
Company name in Indianapolis, Indiana. IBM expects that the Company will
continue to develop, market and support internal and external customer support
software applications as a business unit of Tivoli. Mr. Webber, the
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Chief Executive Officer of the Company, will report to Mr. Lindelow, the
President and Chief Executive Officer of Tivoli.
DISSENTERS' RIGHTS
Holders of Shares do not have dissenters' rights as a result of the Offer.
However, in the event the Shares are not registered on a national securities
exchange or quoted for trading on the Nasdaq National Market at the record date
for any shareholder vote on the Merger (if any such vote is required) holders of
Shares at the effective time of the Merger will have certain rights pursuant to
the provisions of Chapter 44 of the IBCL ("Chapter 44") to dissent and demand
fair value of their Shares, PROVIDED that dissenters' rights will not be
available if the Merger is effected pursuant to the short-form merger provisions
of the IBCL as described in Section 12. Under Chapter 44, dissenting
shareholders who comply with the applicable statutory procedures will be
entitled to receive a judicial determination of the fair value of their Shares
(excluding any appreciation or depreciation in anticipation of the Merger unless
such exclusion would be inequitable) and to receive payment of such fair value
in cash, together with a fair rate of interest, if any. Any such judicial
determination of the fair value of Shares could be based upon factors other
than, or in addition to, the price per Share to be paid in the Merger or the
market value of the Shares. The value so determined could be more or less than
the price per Share to be paid in the Merger.
The foregoing summary of Chapter 44 does not purport to be complete and is
qualified in its entirety by reference to Chapter 44. FAILURE TO FOLLOW THE
STEPS REQUIRED BY CHAPTER 44 OF THE IBCL FOR PERFECTING DISSENTERS' RIGHTS MAY
RESULT IN THE LOSS OF SUCH RIGHTS.
GOING PRIVATE TRANSACTIONS
The Commission has adopted Rule 13e-3 under the Exchange Act which is
applicable to certain "going private" transactions. The Purchaser does not
believe that Rule 13e-3 will be applicable to the Merger unless the Merger is
consummated more than one year after the termination of the Offer. If
applicable, Rule 13e-3 requires, among other things, that certain financial
information concerning the fairness of the Merger and the consideration offered
to minority shareholders in the Merger be filed with the Commission and
disclosed to shareholders prior to the consummation of the Merger.
Except as otherwise described in this Offer to Purchase, the Purchaser and
IBM have no current plans or proposals that would relate to, or result in, any
extraordinary corporate transaction involving the Company, such as a merger,
reorganization or liquidation involving the Company, a sale or transfer of a
material amount of assets of the Company, any change in the Company's
capitalization or dividend policy or any other material change in the Company's
business, corporate structure or personnel.
13. DIVIDENDS AND DISTRIBUTIONS
Pursuant to the terms of the Merger Agreement, the Company is prohibited
from taking any of the actions described in the two succeeding paragraphs, and
nothing herein shall constitute a waiver by the Purchaser or IBM of any of its
rights under the Merger Agreement or a limitation of remedies available to the
Purchaser or IBM for any breach of the Merger Agreement, including termination
thereof.
If the Company should (a) split, combine or otherwise change the Shares or
its capitalization, (b) acquire or otherwise cause a reduction in the number of
outstanding Shares or other securities or (c) issue or sell additional Shares,
shares of any other class of capital stock, other voting securities or any
securities convertible into, or rights, warrants or options, conditional or
otherwise, to acquire any of the foregoing, other than Shares issued pursuant to
the exercise of outstanding Stock Options or pursuant to the Share Purchase
Plan, then, subject to the provisions described in Section 14, the Purchaser, in
its sole discretion, may make such adjustments as it deems appropriate in the
Offer Price and other terms of the Offer, including, without limitation, the
number or type of securities offered to be purchased.
If, on or after December 18, 1997, the Company should declare or pay any
cash dividend on the Shares or other distribution on the Shares, or issue with
respect to the Shares any additional Shares, shares
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of any other class of capital stock, other voting securities or any securities
convertible into, or rights, warrants or options, conditional or otherwise, to
acquire, any of the foregoing, payable or distributable to shareholders of
record on a date prior to the transfer of the Shares purchased pursuant to the
Offer to the Purchaser or its nominee or transferee on the Company's stock
transfer records, then, subject to the provisions described in Section 14, (a)
the Offer Price may, in the sole discretion of the Purchaser, be reduced by the
amount of any such cash dividend or cash distribution and (b) the whole of any
such noncash dividend, distribution or issuance to be received by the tendering
shareholders will (i) be received and held by the tendering shareholders for the
account of the Purchaser and will be required to be promptly remitted and
transferred by each tendering shareholder to the Depositary for the account of
the Purchaser, accompanied by appropriate documentation of transfer, or (ii) at
the direction of the Purchaser, be exercised for the benefit of the Purchaser,
in which case the proceeds of such exercise will promptly be remitted to the
Purchaser. Pending such remittance and subject to applicable law, the Purchaser
will be entitled to all rights and privileges as owner of any such noncash
dividend, distribution, issuance or proceeds and may withhold the entire Offer
Price or deduct from the Offer Price the amount or value thereof, as determined
by the Purchaser in its sole discretion.
14. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other term of the Offer or the Merger Agreement, the
Purchaser will not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act (relating to the Purchaser's obligation to pay for or
return tendered Shares promptly after the termination or withdrawal of the
Offer), to pay for any Shares tendered pursuant to the Offer unless prior to the
Expiration Date (i) the Minimum Condition shall have been satisfied and (ii) the
HSR Condition shall have been satisfied. Furthermore, notwithstanding any other
term of the Offer or the Merger Agreement, the Purchaser will not be required to
accept for payment or, subject as aforesaid, to pay for any Shares not
theretofore accepted for payment or paid for, and may terminate the Offer if, at
any time on or after the date of the Merger Agreement and prior to the
Expiration Date, any of the following conditions exists (other than as a result
of any action or inaction of IBM or any of its subsidiaries that constitutes a
breach of the Merger Agreement):
(a) there shall be threatened, instituted or pending by any Governmental
Entity any suit, action or proceeding (i) challenging the acquisition by IBM
or the Purchaser of any Shares under the Offer, seeking to restrain or
prohibit the making or consummation of the Offer or the Merger or seeking to
obtain from the Company, IBM or the Purchaser any damages that are material
in relation to the Company and its subsidiaries taken as a whole, (ii)
seeking to prohibit or materially limit the ownership or operation by the
Company, IBM or any of their respective subsidiaries of a material portion
of the business or assets of the Company and its subsidiaries, taken as a
whole, or IBM and its subsidiaries, taken as a whole, or to compel the
Company and its subsidiaries, taken as a whole, or IBM to dispose of or hold
separate any material portion of the business or assets of the Company or
IBM and its subsidiaries, taken as a whole, in each case as a result of the
Offer or any of the other transactions contemplated by the Merger Agreement,
(iii) seeking to impose material limitations on the ability of IBM or the
Purchaser to acquire or hold, or exercise full rights of ownership of, any
Shares to be accepted for payment pursuant to the Offer, including, without
limitation, the right to vote such Shares on all matters properly presented
to the shareholders of the Company, (iv) seeking to prohibit IBM or any of
its subsidiaries from effectively controlling in any material respect any
material portion of the business or operations of the Company or its
subsidiaries or (v) which otherwise is reasonably likely to have any effect
(or any development that, insofar as can reasonably be foreseen, is likely
to result in any effect) that, individually or in the aggregate with any
such other effects, is materially adverse to the business, properties,
financial condition or results of operations of the Company.
(b) there shall be any Law or Order enacted, entered, enforced,
promulgated or deemed applicable to the Offer or the Merger, by any
Governmental Entity, other than the application to the
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Offer or the Merger of applicable waiting periods under the HSR Act, that is
reasonably likely to result, directly or indirectly, in any of the
consequences referred to in clauses (i) through (v) of paragraph (a) above;
(c) there shall have occurred any change (or any development that,
insofar as reasonably can be foreseen, is reasonably likely to result in any
change) that, individually or in the aggregate with any other such changes,
is materially adverse to the business, properties, financial condition or
results of operations of the Company;
(d) (i) the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified in a manner adverse to IBM or the Purchaser
its approval or recommendation of the Offer or the Merger or its adoption of
the Merger Agreement, or approved or recommended any Takeover Proposal, (ii)
the Company shall have entered into any agreement with respect to any
Superior Proposal or (iii) the Board of Directors of the Company or any
committee thereof shall have resolved to take any of the foregoing actions
(see "The Merger Agreement--Takeover Proposals" in Section 12);
(e) any of the representations and warranties of the Company set forth
in the Merger Agreement that are qualified as to materiality shall not be
true and correct or any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each
case at the date of the Merger Agreement and at the scheduled or extended
expiration of the Offer;
(f) the Company shall have failed to perform in any material respect any
material obligation or to comply in any material respect with any material
agreement or covenant of the Company to be performed or complied with by it
under the Merger Agreement, which failure to perform or comply has not been
cured within five business days after the giving of written notice to the
Company; or
(g) the Merger Agreement shall have been terminated in accordance with
its terms.
The foregoing conditions are for the sole benefit of the Purchaser and IBM
and may, subject to the terms of the Merger Agreement, be waived by the
Purchaser and IBM in whole or in part at any time and from time to time in their
reasonable discretion. The failure by the Purchaser or IBM at any time to
exercise any of the foregoing rights will not be deemed a waiver of any such
right, the waiver of any such right with respect to particular facts and
circumstances will not be deemed a waiver with respect to any other facts and
circumstances and each such right will be deemed an ongoing right that may be
asserted at any time and from time to time.
15. CERTAIN LEGAL MATTERS
Except as described in this Section 15, based on a review of publicly
available filings made by the Company with the Commission and other publicly
available information concerning the Company and discussions of representatives
of IBM with representatives of the Company, neither the Purchaser nor IBM is
aware of any license or regulatory permit that appears to be material to the
business of the Company that might be adversely affected by the Purchaser's
acquisition of Shares as contemplated herein or of any approval or other action
by any Governmental Entity that would be required or desirable for the
acquisition or ownership of Shares by the Purchaser as contemplated herein.
Should any such approval or other action be required or desirable, the Purchaser
and IBM currently contemplate that such approval or other action will be sought,
except as described below under "State Takeover Laws". While (except as
otherwise expressly described in this Section 15) the Purchaser does not
presently intend to delay the acceptance for payment of or payment for Shares
tendered pursuant to the Offer pending the outcome of any such matter, there can
be no assurance that any such approval or other action, if needed, would be
obtained or would be obtained without substantial conditions or that failure to
obtain any such approval or other action might not result in consequences
adverse to the Company's business or that certain parts of the Company's
business might not have to be disposed of if such approvals were not obtained or
such other actions were not taken or in order to obtain any such approval or
other action. If certain types of adverse
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action are taken with respect to the matters discussed below, the Purchaser
could decline to accept for payment or pay for any Shares tendered. See Section
14 for a description of certain conditions to the Offer.
STATE TAKEOVER LAWS. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable to
attempts to acquire securities of corporations that are incorporated or have
assets, shareholders, executive offices or places of business in such states. In
EDGAR V. MITE CORP., the Supreme Court of the United States held that the
Illinois Business Takeover Act, which involved state securities laws that made
the takeover of certain corporations more difficult, imposed a substantial
burden on interstate commerce and therefore was unconstitutional. In CTS CORP.
V. DYNAMICS CORP. OF AMERICA, however, the Supreme Court of the United States
held that a state may, as a matter of corporate law and, in particular, those
laws concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without prior
approval of the remaining shareholders, provided that such laws were applicable
only under certain conditions. Subsequently, a number of Federal courts ruled
that various state takeover statutes were unconstitutional insofar as they apply
to corporations incorporated outside the state of enactment.
Under Chapter 42 of the IBCL ("Chapter 42"), unless the articles of
incorporation or the by-laws of an "issuing public corporation" (as defined
below) such as the Company provide that the provisions of Chapter 42 do not
apply to acquisitions of shares of such issuing public corporation, an acquiring
person, such as the Purchaser, who makes a "control share acquisition" (as
defined below) with respect to such issuing public corporation may not exercise
voting rights pertaining to any "control shares" (as defined below) unless such
rights are conferred by holders of a majority of the outstanding shares of
voting stock of such issuing public corporation, excluding shares held by such
acquiring person, at a meeting of the shareholders. Chapter 42 defines "issuing
public corporation" generally as any corporation that has (i) 100 or more
shareholders, (ii) its principal office or substantial assets within Indiana and
(ii) more than 10% of its shareholders resident in Indiana, more than 10% of its
shares owned by Indiana residents or 10,000 shareholders resident in Indiana.
Chapter 42 defines "control shares" generally as an aggregate number of shares
owned by a person or in respect of which the person may exercise or direct the
exercise of one-fifth, one-third or a majority of the voting power of the
issuing public corporation in an election of directors. Chapter 42 defines a
"control share acquisition" generally as the acquisition of either ownership or
the power to direct the voting power of issued and outstanding control shares.
The Board of Directors of the Company has adopted a by-law providing that
Chapter 42 of the IBCL does not apply to control share acquisitions of Shares.
Therefore, Chapter 42 of the IBCL is inapplicable to the Offer.
Chapter 43 of the IBCL, in general, prohibits an Indiana corporation such as
the Company from engaging in a "business combination" (defined as a variety of
transactions, including mergers) with an "interested shareholder" (defined
generally as a person that is the beneficial owner of 10% or more of a
corporation's outstanding voting stock) for a period of five years following the
date that such person became an interested shareholder unless, among other
things, prior to the date such person became an interested shareholder, the
board of directors of the corporation approved either the business combination
or the transaction that resulted in the shareholder becoming an interested
shareholder. The Company's Board of Directors has approved the Merger Agreement,
the Shareholder Agreement and the Purchaser's acquisition of Shares pursuant to
the Offer and the Shareholder Agreement. Therefore, Chapter 43 of the IBCL is
inapplicable to the Merger.
Indiana also has a takeover offers statute that by its terms would be
applicable to the Offer. This statute requires the Purchaser to file a takeover
offer statement with the Indiana Securities Commissioner (the "Commissioner").
The Commissioner will hold a hearing within 20 business days to determine
whether the takeover offer statement provides full and fair disclosure and,
according to the statute, the Commissioner has the power to prohibit purchases
under the Offer unless the takeover offer statement is deemed adequate by the
Commissioner.
Based on information supplied by the Company, the Purchaser does not believe
that any other state takeover statutes or similar laws to apply to the Offer or
the Merger. Neither the Purchaser nor IBM has
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currently complied with any state takeover statute or regulation. The Purchaser
reserves the right to challenge the applicability or validity of any state law
purportedly applicable to the Offer or the Merger including those referred to
above and nothing in this Offer to Purchase or any action taken in connection
with the Offer or the Merger is intended as a waiver of such right. If it is
asserted that any state takeover statute is applicable to the Offer or the
Merger and an appropriate court does not determine that it is inapplicable or
invalid as applied to the Offer or the Merger, the Purchaser might be required
to file certain information with, or to receive approvals from, the relevant
state authorities, and the Purchaser might be unable to accept for payment or
pay for Shares tendered pursuant to the Offer, or be delayed in consummating the
Offer or the Merger. In such case, the Purchaser may not be obligated to accept
payment or pay for any Shares tendered pursuant to the Offer. See Section 14.
ANTITRUST. Under the provisions of the HSR Act applicable to the Offer, the
acquisition of Shares under the Offer may be consummated after the expiration of
a 15-calendar day waiting period commenced by the filing by IBM of a
Notification and Report Form with respect to the Offer, unless IBM receives a
request for additional information or documentary material from the Antitrust
Division or the FTC or unless early termination of the waiting period is
granted. IBM made such filing on Tuesday, December 23, 1997. If, within the
initial 15-day waiting period, either the Antitrust Division or the FTC requests
additional information or material from IBM concerning the Offer, the waiting
period will be extended and would expire at 11:59 p.m., New York City time, on
the tenth calendar day after the date of substantial compliance by IBM with such
request. Only one extension of the waiting period pursuant to a request for
additional information is authorized by the HSR Act. Thereafter, such waiting
period may be extended only by court order or with the consent of IBM. In
practice, complying with a request for additional information or material can
take a significant amount of time. In addition, if the Antitrust Division or the
FTC raises substantive issues in connection with a proposed transaction, the
parties frequently engage in negotiations with the relevant governmental agency
concerning possible means of addressing those issues and may agree to delay
consummation of the transaction while such negotiations continue. Expiration or
termination of the applicable waiting period under the HSR Act is a condition to
the Purchaser's obligation to accept for payment and pay for Shares tendered
pursuant to the Offer.
The provisions of the HSR Act would similarly apply to any purchase, other
than pursuant to the Offer, of the Shares subject to the Shareholder Agreement,
except that the initial waiting period for any purchase of such Shares would
expire 30 calendar days following the filing of HSR Act Notification and Report
Forms by IBM and the Company. IBM made such filing on Tuesday, December 23, 1997
and the Company also intends to make such filing on such date. A request for
additional information or material from IBM or the Company during the initial
30-day waiting period would extend the waiting period until 11:59 p.m. New York
City time on the 20th calendar day after the date of substantial compliance by
IBM and the Company with such request. If the purchase of Shares pursuant to the
Shareholder Agreement is effected through a tender of such Shares pursuant to
the Offer, the HSR requirements applicable to the Offer described in the prior
paragraph would apply rather than the requirements described in this paragraph.
The Merger would not require an additional filing under the HSR Act if the
Purchaser owns 50% or more of the outstanding Shares at the time of the Merger
or if the Merger occurs within one year after the HSR Act waiting period
applicable to the Offer expires or is terminated.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's proposed acquisition
of the Company. At any time before or after the Purchaser's acquisition of
Shares pursuant to the Offer, the Antitrust Division or the FTC could take such
action under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of Shares pursuant to the
Offer or the consummation of the Merger or seeking the divestiture of Shares
acquired by the Purchaser or the divestiture of substantial assets of the
Company or its subsidiaries or IBM or its subsidiaries. Private parties may also
bring legal action under the antitrust
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laws under certain circumstances. There can be no assurance that a challenge to
the Offer on antitrust grounds will not be made or, if such a challenge is made,
of the result thereof.
16. FEES AND EXPENSES
The Purchaser and IBM have retained Morrow & Co., Inc. to act as the
Information Agent and First Chicago Trust Company of New York to serve as the
Depositary in connection with the Offer. The Information Agent and the
Depositary each will receive reasonable and customary compensation for their
services, be reimbursed for certain reasonable out-of-pocket expenses and be
indemnified against certain liabilities and expenses in connection therewith,
including certain liabilities and expenses under the U.S. federal securities
laws.
Neither the Purchaser nor IBM will pay any fees or commissions to any broker
or dealer or other person (other than the Information Agent) in connection with
the solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers,
banks and trust companies will be reimbursed by the Purchaser upon request for
customary mailing and handling expenses incurred by them in forwarding material
to their customers.
17. MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. Neither the Purchaser nor IBM is aware of any jurisdiction in
which the making of the Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. To the extent the Purchaser or
IBM becomes aware of any state law that would limit the class of offerees in the
Offer, the Purchaser will amend the Offer and, depending on the timing of such
amendment, if any, will extend the Offer to provide adequate dissemination of
such information to holders of Shares prior to the expiration of the Offer.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR IBM NOT CONTAINED HEREIN OR IN THE
LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
The Purchaser and IBM have filed with the Commission the Schedule 14D-1
pursuant to Rule 14d-3 under the Exchange Act, together with exhibits,
furnishing certain additional information with respect to the Offer, and may
file amendments thereto. In addition, the Company has filed the Schedule 14D-9
pursuant to Rule 14d-9 under the Exchange Act, together with exhibits, setting
forth its recommendation with respect to the Offer and the reasons for such
recommendation and furnishing certain additional related information. Such
Schedules and any amendments thereto, including exhibits, should be available
for inspection and copies should be obtainable in the manner set forth in
Section 8 (except that such material will not be available at the regional
offices of the Commission).
HOOSIER ACQUISITION CORP.
December 23, 1997
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
IBM AND THE PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF IBM. The name, business address,
present principal occupation or employment and five-year employment history of
each of the directors and executive officers of IBM are set forth below. All
such directors and executive officers listed below are citizens of the United
States except Mr. Dormann, who is a citizen of Germany, Mr. Makihara, who is a
citizen of Japan, Mr. van Wachem, who is a citizen of the Netherlands, and Mr.
Thompson, who is a citizen of Canada. Unless otherwise indicated, the principal
business address of each director or executive officer is International Business
Machines Corporation, New Orchard Road, Armonk, NY 10504.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME, AGE AND BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- ------------------------------------------------ ---------------------------------------------------------------
<S> <C>
Louis V. Gerstner, Jr. (55)..................... Chairman of the Board and Chief Executive Officer of IBM since
1993. From 1989 until joining IBM, Mr. Gerstner was Chairman of
the Board and Chief Executive Officer of RJR Nabisco Holdings
Corp. Mr. Gerstner is a director of Bristol-Myers Squibb
Company and the Vice Chairman of the Board of the New American
Schools Development Corp., a director of The Council on Foreign
Relations and a member of the Smithsonian Board of Regents.
Cathleen Black (53)............................. Director of IBM since 1995. President, Hearst Magazines, a
Hearst Magazines division of The Hearst Corporation, beginning January 1996.
959 Eighth Avenue From 1991 to 1996, Ms. Black served as President and Chief
New York, NY 10019 Executive Officer of the Newspaper Association of America. From
1985 to 1991, Ms. Black was Executive Vice President/Marketing
for Gannett Company, Inc. and also President, then publisher,
of USA TODAY from 1983 to 1991. Ms. Black is a director of The
Hearst Corporation, The Coca-Cola Company, the Advertising
Council and a Trustee of the University of Notre Dame.
Harold Brown (70)............................... Director of IBM from 1972 to 1977 and since 1981. Counselor,
Center for Strategic and Center for Strategic and International Studies, Washington,
International Studies D.C., and a general partner of Warburg, Pincus & Company. Mr.
Suite 400 Brown is a former U.S. Secretary of Defense and a former U.S.
1800 K Street, N.W. Secretary of the Air Force. Mr. Brown is a director of Alumax
Washington, DC 20006 Inc., Cummins Engine Company, Inc., Philip Morris Companies
Inc. and Mattel, Inc.; a member of the National Academy of
Sciences and the National Academy of Engineering; and a trustee
and President Emeritus of the California Institute of
Technology.
</TABLE>
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<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME, AGE AND BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- ------------------------------------------------ ---------------------------------------------------------------
<S> <C>
Juergen Dormann (57)............................ Director of IBM since January 1996. Chairman of the Management
Hoechst AG Board of Hoechst AG. Mr. Dormann joined Hoechst in 1963 and was
Frankfurt G65926 elected Finance and Accounting Director in 1987 and to his
Germany present position in 1994. Mr. Dormann is a director of Allianz
Lebensversicherungs AG.
Nannerl O. Keohane (57)......................... Director of IBM since 1986. President of, and professor of
Duke University political science at, Duke University. Dr. Keohane is a former
Officer of the President President of Wellesley College and a former faculty member of
207 Allen Building Swarthmore College and Stanford University. Dr. Keohane is a
Box 90001 member of The Council on Foreign Relations and the American
Durham, NC 27708-0001 Academy of Arts and Sciences and a trustee of the Colonial
Williamsburg Foundation. Dr. Keohane is a member of the MIT
Corporation and has served as Vice President of the American
Political Science Association.
Charles F. Knight (61).......................... Director of IBM since 1993. Chairman, Chief Executive Officer
Emerson Electric Co. and President of Emerson Electric Co. Mr. Knight joined Emerson
8000 West Florissant Avenue Electric Co. in 1972 as Vice Chairman and was elected Chief
P.O. Box 4100 Executive Officer in 1973, Chairman in 1974 and President in
St. Louis, MO 63136-8506 1995. Mr. Knight is a director of SBC Communications Inc.,
Anheuser Busch Companies, Inc. and The British Petroleum
Company p.l.c.
Minoru Makihara (68)............................ Director of IBM since July 1997. President of Mitsubishi
Mitsubishi Corporation Corporation since 1992. Mr. Makihara joined Mitsubishi in 1956
6-3 Marunouchi 2-chome and was elected president of Mitsubishi International
Chiyoda-Ku Corporation in 1987 and chairman of Mitsubishi International
Tokyo 100-86 Corporation in 1990.
Japan
Lucio A. Noto (59).............................. Director of IBM since 1995. Chairman and Chief Executive
Mobil Corporation Officer of Mobil Corporation. Mr. Noto joined Mobil in 1962 and
3225 Gallows Road was elected to Mobil's board in 1988. Mr. Noto was elected
Fairfax, VA 22037 Chief Financial Officer of Mobil in 1989, President and Chief
Operating Officer of Mobil in 1993 and to his present position
in 1994. Mr. Noto also serves as Chairman of the executive
committee of Mobil's Board of Directors. Mr. Noto is a member
of The Council on Foreign Relations and a member of the Board
of Trustees of the Urban Institute.
</TABLE>
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<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME, AGE AND BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- ------------------------------------------------ ---------------------------------------------------------------
<S> <C>
John B. Slaughter (63).......................... Director of IBM since 1988. President of Occidental College.
Office of the President Mr. Slaughter is a former chancellor of the University of
Occidental College Maryland and a former director of the National Science
1600 Campus Road Foundation. Mr. Slaughter is a director of the Atlantic
Los Angeles, CA 90041 Richfield Company, Avery Dennison Corporation, Norththrop
Grumman Corporation and Solutia, Inc. Mr. Slaughter is a member
of the National Academy of Engineering, a member of the
American Academy of Arts and Sciences, a fellow of the American
Association for the Advancement of Science, a fellow of the
Institute of Electrical and Electronics Engineers and a member
of the Hall of Fame of the American Society for Engineering
Education.
Alex Trotman (64)............................... Director of IBM since 1994. Chairman and Chief Executive
Ford Motor Company Officer of the Ford Motor Company. Mr. Trotman joined Ford of
American Road Britain in 1955 and was elected President of Ford Asia-Pacific
Dearborn, MI 48121-1899 in 1983 and Chairman of Ford of Europe in 1988. Mr. Trotman
became President and Chief Operating Officer of Ford Automotive
Group and a director of the Ford Motor Company in 1993. Mr.
Trotman was subsequently elected to his present position in
1993. Mr. Trotman is a director of the New York Stock Exchange.
Lodewijk C. van Wachem (66)..................... Director of IBM since 1992. Chairman of the supervisory board
Royal Dutch Petroleum Company of Royal Dutch Petroleum Company. In 1992, Mr. van Wachem
P.O. Box 162 retired as President of Royal Dutch Petroleum, a post he had
2501 AN The Hague held since 1982. Mr. van Wachem is a director of ATCO Ltd., ABB
Netherlands Asea Brown Boveri Ltd. and Zurich Versicherungs-Gesellschaft;
and a member of the supervisory boards of AKZO Nobel N.V.,
Philips Electronics N.V., Bavarian Motor Works A.G. and Bayer
A.G.
Charles M. Vest (56)............................ Director of IBM since 1994. President of, and professor of
Massachusetts Institute of Technology mechanical engineering at, the Massachusetts Institute of
President's Office Technology. Dr. Vest was formerly the Provost and Vice
Room 3-208 President for Academic Affairs of the University of Michigan.
77 Massachusetts Avenue Dr. Vest is a director of E.I. du Pont de Nemours and Company,
Cambridge, MA 02139 a fellow of the American Association for the Advancement of
Science, a member of the National Academy of Engineering and
the Corporation of Woods Hole Oceanographic Institution and a
trustee of Wellesley College.
</TABLE>
S-3
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<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME, AGE AND BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- ------------------------------------------------ ---------------------------------------------------------------
<S> <C>
J. Thomas Bouchard (57)......................... Senior Vice President, Human Resources of IBM since 1994. Mr.
Bouchard was Senior Vice President, Chief Human Resources
Officer of U.S. West, Inc. from 1989 to 1994.
Nicholas M. Donofrio (52)....................... Senior Vice President and Group Executive of IBM since 1995.
Mr. Donofrio was General Manager, Large Scale Computing
Division, from 1994 to 1995; IBM Senior Vice President and
General Manager, Large Scale Computing Division, from 1993 to
1994; IBM Senior Vice President and General Manager, Enterprise
Systems, 1993; IBM Vice President and General Manager,
Enterprise Systems, from 1991 to 1993; IBM Vice President and
President, Data Systems Division, 1991; IBM Vice President and
President, Advanced Workstations Division, from 1988 to 1991.
J. Bruce Harreld (47)........................... Senior Vice President, Strategy of IBM since 1995. Mr. Harreld
was President of Boston Chicken Company from 1993 to 1995,
Senior Vice President, Marketing and Information Services of
Kraft General Foods from 1992 to 1993 and Senior Vice
President, Chief Information Officer of Kraft General Foods
from 1989 to 1992.
Paul M. Horn (51)............................... Senior Vice President, Research of IBM since 1996. Dr. Horn was
Vice President, Storage Systems Division and Director, Almaden
Research Center from 1994 to 1995, Director, Advanced
Semiconductor Technology Lab from 1992 to 1994 and Director,
Silicon Technology from 1990 to 1992.
Ned C. Lautenbach (53).......................... Senior Vice President and Group Executive, Worldwide Sales and
Services of IBM and Chairman, IBM World Trade Corporation since
1995. Mr. Lautenbach was IBM Senior Vice President and Group
Executive and Chairman, IBM World Trade Corporation, from 1993
to 1995; IBM Senior Vice President and Chairman, IBM World
Trade Corporation, 1993; IBM Senior Vice President and
President and Representative Director, Asia Pacific, from 1992
to 1993; IBM Vice President and President and Representative
Director, Asia Pacific, from 1991 to 1992; IBM Vice President
and Senior Managing Director, Operations, Asia Pacific, 1991;
and IBM Vice President and General Manager, Application
Solutions, from 1988 to 1991.
</TABLE>
S-4
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME, AGE AND BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- ------------------------------------------------ ---------------------------------------------------------------
<S> <C>
Lawrence R. Ricciardi (57)...................... Senior Vice President and General Counsel of IBM since 1995 and
interim Chief Financial Officer of IBM since June 1997. Mr.
Ricciardi was President and General Counsel of RJR Nabisco
Holdings Corp. from 1993 to 1995, Co-Chairman and Chief
Executive Officer and General Counsel of RJR Nabisco Holdings
Corp. from March to May 1993 and Executive Vice President and
General Counsel of RJR Nabisco Holdings Corp. from 1989 to
1993.
Samuel J. Palmisano (46)........................ Senior Vice President and Group Executive, Personal Systems
Group, of IBM since July 1997. Mr. Palmisano was also General
Manager, Personal Computer Company from 1996 to 1997; President
and Chief Executive Officer, Integrated Systems Solutions
Corporation from 1993 to 1996; President, Integrated Systems
Solution Corporation in 1993; General Manager-Systems, Asia
Pacific from 1992 to 1993; and Senior Managing Director, Staff
Operations, IBM Japan from 1991 to 1992.
Robert M. Stephenson (59)....................... Senior Vice President and Group Executive of IBM since 1995.
Mr. Stephenson was also General Manager, IBM North America in
1995 and IBM Vice President & Representative Director, then
General Manager, Asia Pacific from 1993 to 1995; IBM Vice
President and President, Services Sector Division, Application
Solutions, from 1991 to 1993; and IBM Vice President and
Assistant General Manager, Operations, Finance & Planning, IBM
U.S., from 1989 to 1991.
John M. Thompson (55)........................... Senior Vice President and Group Executive of IBM since 1994 and
Chairman, IBM Canada, from 1990 to 1995. Mr. Thompson was IBM
Senior Vice President and Group Executive, from 1993 to 1994;
IBM Senior Vice President and General Manager, Applications
Business Systems, 1993; IBM Vice President and General Manager,
Applications Business Systems, from 1991 to 1993; IBM Vice
President, Corporate Marketing and Services, 1991; IBM Vice
President, from 1990 to 1991; IBM Vice President, Chairman and
Chief Executive Officer, Americas Group, from 1989 to 1990.
</TABLE>
S-5
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME, AGE AND BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- ------------------------------------------------ ---------------------------------------------------------------
<S> <C>
Dennie M. Welsh (54)............................ Senior Vice President and Group Executive, IBM Global Services
of IBM since April 1997. Mr. Welsh was also General Manager,
IBM Global Services from 1995 to 1997; General Manager,
Industry and Global Network Solutions, IBM U.S. from 1994 to
1995; IBM Vice President and General Manager, Services, IBM
U.S. from 1993 to 1994; IBM Vice President, Chairman and Chief
Executive Officer, Integrated Systems Solutions Corporation
from 1992 to 1993; and President, Integrated Systems Solutions
Corporation from 1991 to 1992.
John E. Hickey (54)............................. Vice President, Assistant General Counsel and Secretary of IBM
since 1994. Mr. Hickey was IBM Secretary and Assistant General
Counsel from 1990 to 1994 and Assistant General Counsel from
1989 to 1990.
John R. Joyce (44).............................. Vice President and Controller of IBM since June 1996. Mr. Joyce
was Vice President, Finance and Planning, IBM North America,
from 1995 to 1996; Vice President, Finance, Asia Pacific, from
1994 to 1995; Chief Financial Officer, IBM Japan, from 1993 to
1994; and Managing Director, Finance, Planning and Accounting,
Asia Pacific, from 1991 to 1993.
Jeffrey D. Serkes (38).......................... Vice President and Treasurer of IBM since 1995. Mr. Serkes was
Assistant Treasurer of IBM from 1994 to 1995. Previously, Mr.
Serkes was Vice President and Deputy Treasurer of RJR Nabisco,
Inc., from 1993 to 1994; Vice President and Assistant
Treasurer--Corporate Finance from 1991 to 1993; and
Director--Capital Markets from 1989 to 1991.
</TABLE>
S-6
<PAGE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER. The name, business
address, present principal occupation or employment and five-year employment
history of each of the directors and executive officers of the Purchaser are set
forth below. The business address of each such director and executive officer is
Hoosier Acquisition Corp. in care of International Business Machines
Corporation, New Orchard Road, Armonk, NY 10504. All such directors and
executive officers listed below are citizens of the United States.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME, AGE AND BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- ------------------------------------------------ ---------------------------------------------------------------
<S> <C>
Lee A. Dayton (54).............................. Director and President of the Purchaser, Vice President,
Corporate Development and Real Estate of IBM since 1996. Mr.
Dayton was General Manager, Real Estate and Business
Development of IBM from 1994 to 1996; General Manager, Real
Estate and Procurement Services, General Manager, Real Estate
Services, and IBM Director, Real Estate and Construction Staff,
from 1990 to 1994; and Senior Managing Director, Asia Pacific,
from 1988 to 1990.
Donald D. Westfall (59)......................... Director, Vice President and Secretary of the Purchaser.
Associate General Counsel of IBM since 1988.
Archie W. Colburn (45).......................... Director, Vice President, Treasurer and Assistant Secretary of
the Purchaser. Business Development Executive of IBM since
1995. Mr. Colburn was Business Development Consultant of IBM
from 1994 to 1995; and Business Development Associate from 1989
to 1994.
</TABLE>
S-7
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and any other
required documents should be sent or delivered by each shareholder of the
Company or such shareholder's broker, dealer, bank, trust company or other
nominee to the Depositary at one of its addresses set forth below.
THE DEPOSITARY FOR THE OFFER IS
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<CAPTION>
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
<S> <C> <C>
First Chicago Trust Company of First Chicago Trust Company of First Chicago Trust Company of
New York New York New York
Tenders & Exchanges Tenders & Exchanges Tenders & Exchanges
Suite 4660 14 Wall Street c/o The Depository Trust
P.O. Box 2565 8th Floor, Suite 4680 Company
Jersey City, NJ 07303-2565 New York, NY 10005 55 Water Street, DTC TAD
Vietnam Veterans Memorial Plaza
New York, NY 10041
</TABLE>
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Information Agent at its telephone numbers and location
listed below. You may also contact your broker, dealer, bank, trust company or
other nominee for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
909 Third Avenue
20th Floor
New York, NY 10022
(212) 754-8000
Toll Free (800) 566-9061
Banks and Brokerage Firms
please call:
(800) 662-5200
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
SOFTWARE ARTISTRY, INC.
PURSUANT TO THE OFFER TO PURCHASE DATED DECEMBER 23, 1997
BY
HOOSIER ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
INTERNATIONAL BUSINESS MACHINES CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 11:59 P.M., NEW YORK CITY TIME,
ON FRIDAY, JANUARY 23, 1998, UNLESS THE OFFER IS EXTENDED.
TO: FIRST CHICAGO TRUST COMPANY OF NEW YORK, AS DEPOSITARY
<TABLE>
<S> <C> <C>
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
First Chicago Trust Company First Chicago Trust Company First Chicago Trust Company
of of of
New York New York New York
Tenders & Exchanges Tenders & Exchanges Tenders & Exchanges
Suite 4660 14 Wall Street c/o The Depository Trust
P.O. Box 2565 8th Floor, Suite 4680 Company
Jersey City, NJ 07303-2565 New York, NY 10005 55 Water Street, DTC TAD
Vietnam Veterans Memorial
Plaza
New York, NY 10041
</TABLE>
------------------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used either if certificates for Shares
(as defined below) are to be forwarded herewith or, unless an Agent's Message
(as defined in Section 2 of the Offer to Purchase (as defined below)) is
utilized, if delivery of Shares is to be made by book-entry transfer to an
account maintained by the Depositary at a Book-Entry Transfer Facility as
defined in and pursuant to the procedures set forth in Section 2 of the Offer to
Purchase, Shareholders who deliver Shares by book-entry transfer are referred to
herein as "Book-Entry Shareholders" and other shareholders are referred to
herein as "Certificate Shareholders". Shareholders whose certificates for Shares
are not immediately available or who cannot deliver either the certificates for,
or a Book-Entry Confirmation (as defined in Section 2 of the Offer to Purchase)
with respect to, their Shares and all other documents required hereby to the
Depositary prior to the Expiration Date (as defined in Section 1 of the Offer to
Purchase) must tender their Shares in accordance with the guaranteed delivery
procedures set forth in Section 2 of the Offer to Purchase. See Instruction 2.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
<PAGE>
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF SHARES TENDERED
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN EXACTLY AS NAME(S) APPEAR(S) ON SHARES TENDERED
CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY)
<S> <C> <C> <C>
<CAPTION>
NUMBER OF
SHARES NUMBER OF
CERTIFICATE REPRESENTED BY SHARES
NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2)
<S> <C> <C> <C>
TOTAL SHARES
(1) Need not be completed by Book-Entry Shareholders.
(2) Unless otherwise indicated, it will be assumed that all Shares described above are being tendered. See
Instruction 4.
</TABLE>
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY
TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution ______________________________________________
Check box of Book-Entry Transfer Facility:
/ / The Depository Trust Company
Account Number _____________________________________________________________
Transaction Code Number ____________________________________________________
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO BE THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s) _____________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institutution that Guaranteed Delivery _____________________________
If delivered by book-entry transfer check box:
/ / The Depository Trust Company
Account Number _____________________________________________________________
Transaction Code Number ____________________________________________________
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTION CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Hoosier Acquisition Corp., an Indiana
corporation (the "Purchaser") and a wholly owned subsidiary of International
Business Machines Corporation, a New York corporation, the above-described
shares of Common Stock, no par value (the "Shares"), of Software Artistry, Inc.,
an Indiana corporation (the "Company"), upon the terms and subject to the
conditions set forth in the Purchaser's Offer to Purchase dated December 23,
1997 (the "Offer to Purchase"), and this Letter of Transmittal (which, together
with any amendments or supplements thereto or hereto, collectively constitute
the "Offer"), receipt of which is hereby acknowledged.
Upon the terms of the Offer, subject to, and effective upon, acceptance for
payment of, and payment for, the Shares tendered here within accordance with the
terms of the Offer, the undersigned hereby sells, assigns and transfers to, or
upon the order of, the Purchaser all right, title and interest in and to all the
Shares that are being tendered hereby (and any and all other Shares or other
securities or rights issued or issuable in respect thereof on or after December
18, 1997) and irrevocably constitutes and appoints First Chicago Trust Company
of New York (the "Depositary"), the true and lawful agent and attorney-in-fact
of the undersigned, with full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with an interest), to the full
extent of the undersigned's rights with respect to such Shares (and any such
other Shares or securities or rights), (a) to deliver certificates for such
Shares (and any such other Shares or securities or rights) or transfer ownership
of such Shares (and any such other Shares or securities or rights) on the
account books maintained by a Book-Entry Transfer Facility together, in any such
case, with all accompanying evidences of transfer and authenticity to, or upon
the order of, the Purchaser, (b) to present such Shares (and any such other
Shares or securities or rights) for transfer on the Company's books and (c) to
receive all benefits and otherwise exercise all rights of beneficial ownership
of such Shares (and any such other Shares or securities or rights), all in
accordance with the terms of the Offer.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the tendered Shares
(and any and all other Shares or other securities or rights issued or issuable
in respect of such Shares on or after December 18, 1997) and, when the same are
accepted for payment by the Purchaser, the Purchaser will acquire good title
thereto, free and clear of all liens, restrictions, claims and encumbrances, and
the same will not be subject to any adverse claim. The undersigned will, upon
request, execute any additional document deemed by the Depositary or the
Purchaser to be necessary or desirable to complete the sale, assignment and
transfer of the tendered Shares (and any all such other Shares or securities or
rights).
All authority conferred or agreed to be conferred pursuant to this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
Except as stated in the Offer to Purchase this tender is irrevocable.
The undersigned hereby irrevocably appoints Lee A. Dayton, Donald D.
Westfall and Archie W. Colburn, and each of them, and any other designees of the
Purchaser, the attorneys-in-fact and proxies of the undersigned, each with full
power of substitution, to vote at any annual, special or adjourned meeting of
the Company's shareholders or otherwise in such manner as each such
attorney-in-fact and proxy or his substitute shall in his sole discretion deem
proper with respect to, to execute any written consent concerning any matter as
each such attorney-in-fact and proxy or his substitute shall in his sole
discretion deem proper with respect to, and to otherwise act as each such
attorney-in-fact and proxy or his substitute shall in his sole discretion deem
proper with respect to, the Shares tendered hereby that have been accepted for
payment by the Purchaser prior to the time any such action is taken and with
respect to which the undersigned is entitled to vote (and any and all other
Shares or other securities or rights issued or issuable in respect of such
Shares on or after December 18, 1997). This appointment is effective when, and
only to the extent that, the Purchaser accepts for payment such Shares as
provided in the Offer to Purchase. This power of attorney and proxy are
irrevocable and are granted in consideration of the acceptance for payment of
such Shares in accordance with the terms of the Offer. Upon such acceptance for
payment, all prior powers of attorney, proxies and consents given by the
undersigned with respect to such Shares (and any such other Shares or securities
or rights) will, without further action, be revoked and no subsequent powers of
attorney, proxies, consents or revocations may be given (and, if given, will not
be deemed effective) by the undersigned.
The undersigned understands that the valid tender of Shares pursuant to any
of the procedures described in Section 2 of the Offer to Purchase and in the
Instructions hereto will constitute a binding agreement between the undersigned
and the Purchaser upon the terms and subject to the conditions of the Offer.
<PAGE>
Unless otherwise indicated herein under "Special Payment Instructions",
please issue the check for the purchase price and/or return any certificates for
Shares not tendered or accepted for payment in the name(s) of the registered
holder(s) appearing under "Description of Shares Tendered". Similarly, unless
otherwise indicated under "Special Delivery Instructions", please mail the check
for the purchase price and/or return any certificates for Shares not tendered or
accepted for payment (and accompanying documents, as appropriate) to the
address(es) of the registered holder(s) appearing under "Description of Shares
Tendered". In the event that both "Special Delivery Instructions" and "Special
Payment Instructions" are completed, please issue the check for the purchase
price and/or return any certificates for Shares not tendered or accepted for
payment (and any accompanying documents, as appropriate) in the name of, and
deliver such check and/or return such certificates (and any accompanying
documents, as appropriate) to, the person or persons so indicated. Please credit
any Shares tendered herewith by book-entry transfer that are not accepted for
payment by crediting the account at the Book-Entry Transfer Facility designated
above. The undersigned recognizes that the Purchaser has no obligation pursuant
to "Special Payment Instructions" to transfer any Shares from the name of the
registered holder thereof if the Purchaser does not accept for payment any of
the Shares so tendered.
/ / CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN HAVE
BEEN LOST OR DESTROYED AND SEE INSTRUCTION 11.
Number of Shares represented by the lost or destroyed
certificates: ____________________________
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if certificates for Shares not tendered or not accepted
for payment and/or the check for the purchase price of Shares accepted for
payment are to be issued in the name of someone other than the undersigned.
Issue: / / Check / / Certificate(s) to:
Name ___________________________________________________________________________
(PLEASE PRINT)
Address ________________________________________________________________________
_______________________________________________________________________________
(INCLUDE ZIP CODE)
_______________________________________________________________________________
(EMPLOYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if certificates for Shares not tendered or not accepted
for payment and/or the check for the purchase price of Shares accepted for
payment are to be sent to someone other than the undersigned, or to the
undersigned at an address other than that above.
Mail: / / Check / / Certificate(s) to:
Name ___________________________________________________________________________
(PLEASE PRINT)
Address ________________________________________________________________________
_______________________________________________________________________________
(INCLUDE ZIP CODE)
_______________________________________________________________________________
(EMPLOYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
<PAGE>
SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
________________________________________________________________
. ,
________________________________________________________________
. ,
(Signature(s) of Stockholder(s))
Dated: ____________________________
(Must be signed by registered holder(s) as name(s) appear(s)
on the Certificate(s) for the Shares or on a security position
listing or by person(s) authorized to become registered
holder(s) by certificates and documents transmitted herewith. If
signature is by trustees, executors, administrators, guardians,
attorneys-in fact, officers of corporations or others acting in
a fiduciary or representative capacity, please provide the
following information and see Instruction 5.)
Name(s) ________________________________________________________
________________________________________________________________
(Please Print)
Capacity (Full Title) __________________________________________
Address ________________________________________________________
________________________________________________________________
(Include Zip Code)
Daytime Area Code and Telephone No. ____________________________
Employer Identification or
Social Security Number _________________________________________
(See Substitute Form W-9)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)
________________________________________________________________
Authorized Signature
________________________________________________________________
Name (Please Print)
________________________________________________________________
Name of Firm
________________________________________________________________
Address
________________________________________________________________
(Include Zip Code)
________________________________________________________________
Daytime Area Code and Telephone No.
Dated: ____________________________
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this Section, includes any
participant in any of the Book-Entry Transfer Facilities' systems whose name
appears on a security position listing as the owner of the Shares) of Shares
tendered herewith, unless such registered holder(s) has completed either the box
entitled "Special Payment Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (b) if such Shares are tendered
for the account of a financial institution (including most commercial banks,
savings and loan associations and brokerage houses) that is a participant in the
Security Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(such participant, an "Eligible Institution"). In all other cases, all
signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 5.
2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed by
shareholders either if certificates are to be forwarded herewith or, unless an
Agent's Message (as defined below) is utilized, if delivery of Shares is to be
made pursuant to the procedures for book-entry transfer set forth in Section 2
of the Offer to Purchase. For a shareholder validly to tender Shares pursuant to
the Offer, either (a) a Letter of Transmittal (or facsimile thereof), property
completed and duly executed, together with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message, and any other
required documents, must be received by the Depositary at one of its addresses
set forth herein prior to the Expiration Date and either certificates for
tendered Shares must be received by the Depositary at one of such addresses or
Shares must be delivered pursuant to the procedures for book-entry transfer set
forth herein (and a Book-Entry Confirmation received by the Depositary), in each
case prior to the Expiration Date, or (b) the tendering shareholder must comply
with the guaranteed delivery procedures set forth below and in Section 2 of the
Offer to Purchase.
Shareholders whose certificates for Shares are not immediately available or
who cannot deliver their certificates and all other required documents to the
Depositary or complete the procedures for book-entry transfer prior to the
Expiration Date may tender their Shares by properly completing and duly
executing the Notice of Guaranteed Delivery pursuant to the guaranteed delivery
procedures set forth in Section 2 of the Offer to Purchase. Pursuant to such
procedures, (a) such tender must be made by or through an Eligible Institution,
(b) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by the Purchaser, must be received by the
Depositary prior to the Expiration Date and (c) the certificates for all
tendered Shares in proper form for transfer (or a Book-Entry Confirmation with
respect to all such Shares), together with a Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message, and
any other required documents, must be received by the Depositary within three
trading days after the date of execution of such Notice of Guaranteed Delivery
as provided in Section 2 of the Offer to Purchase. A "trading day" is any day on
which the Nasdaq National Market operated by the National Association of
Securities Dealers, Inc. is open for business.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering shareholders, by execution of
this Letter of Transmittal (or facsimile hereof), waive any right to receive any
notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. PARTIAL TENDERS (APPLICABLE TO CERTIFICATE SHAREHOLDERS ONLY). If fewer
than all the Shares evidenced by any certificate submitted are to be tendered,
fill in the number of Shares that are to be tendered in the box entitled "Number
of Shares Tendered". In any case, new certificate(s) for the remainder of the
Shares that were evidenced by the old certificate(s) will be sent to the
registered holder, unless otherwise provided in the appropriate box on this
Letter of Transmittal, as soon as practicable after the acceptance for payment
of, and payment for, the Shares tendered herewith. All Shares represented by
certificates delivered to the Depositary will be deemed to have been tendered
unless otherwise indicated.
<PAGE>
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder of the Shares
tendered hereby, the signature must correspond with the name as written on the
face of the certificate(s) without any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and proper evidence satisfactory to the
Purchaser of their authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to, or
certificates for Shares not tendered or accepted for payment are to be issued
to, a person other than the registered owner(s). Signatures on such certificates
or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the certificates listed, the certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered owner or owners appear on the
certificates. Signatures on such certificates or stock powers must be guaranteed
by an Eligible Institution.
6. STOCK TRANSFER TAXES. The Purchaser will pay any stock transfer taxes
with respect to the transfer and sale of Shares to it or its order pursuant to
the Offer. If, however, payment of the purchase price is to be made to, or if
certificates for Shares not tendered or accepted for payment are to be
registered in the name of, any person(s) other than the person(s) signing this
Letter of Transmittal, the amount of any stock transfer taxes (whether imposed
on the registered owner(s) or such person(s)) payable on account of the transfer
to such person(s) will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes or exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL BE NECESSARY FOR TRANSFER
TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in
the name of, and/or certificates for Shares not accepted for payment are to be
returned to, a person other than the signer of this Letter of Transmittal or if
a check is to be sent and/or such certificates are to be returned to a person
other than the signer of this Letter of Transmittal or to an address other than
that shown above, the appropriate boxes on this Letter of Transmittal should be
completed.
8. WAIVER OF CONDITIONS. The Purchaser reserves the absolute right in its
reasonable discretion to waive any of the specified conditions of the Offer, in
whole or in part, in the case of any Shares tendered.
9. 31% BACKUP WITHHOLDING. In order to avoid backup withholding of Federal
income tax on payments of cash pursuant to the Offer, a shareholder surrendering
Shares in the Offer must, unless an exemption applies, provide the Depositary
with such shareholder's correct taxpayer identification number ("TIN") on
Substitute Form W-9 below in this Letter of Transmittal and certify under
penalties of perjury that such TIN is correct and that such shareholder is not
subject to backup withholding. If a shareholder does not provide such
shareholder's correct TIN or fails to provide the certifications described
above, the Internal Revenue Service (the "IRS") may impose a $50 penalty on such
shareholder and payment of cash to such shareholder pursuant to the Offer may be
subject to backup withholding of 31%.
Backup withholding is not an additional income tax. Rather, the amount of
the backup withholding can be credited against the U.S. federal income tax
liability of the person subject to the backup withholding, provided that the
required information is given to the IRS. If backup withholding results in an
overpayment of tax, a refund can be obtained by the shareholder upon filing an
income tax return.
The shareholder is required to give the Depositary the TIN (i.e, social
security number or employer identification number) of the record owner of the
Shares. If the Shares are held in more than one name or are not in the name of
the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
number to report.
The box in Part 3 of the Substitute Form W-9 may be checked if the tendering
shareholder has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 3 is checked, the
shareholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% on all payments made prior to the time a properly certified TIN is
provided to the Depositary. However, such amounts will be refunded to such
shareholder if a TIN is provided to the Depositary within 60 days.
<PAGE>
Certain shareholders (including, among others, all corporations and certain
foreign individuals and entities) are not subject to backup withholding.
Noncorporate foreign shareholders should complete and sign the main signature
form and a Form W-8, Certificate of Foreign Status, a copy of which may be
obtained from the Depositary, in order to avoid backup withholding. See the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute W-9" for more instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance or additional copies of the Offer to Purchase, this Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
directed to the Information Agent at its address set forth below.
11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate representing
Shares has been lost, destroyed or stolen, the shareholder should promptly
notify the Depositary by checking the box immediately preceding the special
payment/special delivery instructions and indicating the number of Shares lost.
The shareholder will then be instructed as to the steps that must be taken in
order to replace the certificate. This Letter of Transmittal and related
documents cannot be processed until the procedures for replacing lost or
destroyed certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), TOGETHER WITH
ANY REQUIRED SIGNATURE GUARANTEES, OR, IN THE CASE OF A BOOK-ENTRY TRANSFER, AN
AGENT'S MESSAGE, AND ANY OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE
DEPOSITARY PRIOR TO THE EXPIRATION DATE AND EITHER CERTIFICATES FOR TENDERED
SHARES MUST BE RECEIVED BY THE DEPOSITARY OR SHARES MUST BE DELIVERED PURSUANT
TO THE PROCEDURES FOR BOOK-ENTRY TRANSFER, IN EACH CASE PRIOR TO THE EXPIRATION
DATE, OR THE TENDERING SHAREHOLDER MUST COMPLY WITH THE PROCEDURES FOR
GUARANTEED DELIVERY.
<PAGE>
<TABLE>
<S> <C> <C>
PAYER'S NAME: THE FIRST CHICAGO TRUST
COMPANY OF NEW YORK
SUBSTITUTE PART 1--PLEASE
FORM W-9 PROVIDE YOUR TIN Social
IN THE BOX AT Security
RIGHT AND Number(s)
CERTIFY BY OR
SIGNING AND
DATING BELOW Employer
Identification
Number(s)
PART
2--Certification--Under
penalties of perjury, I
certify that:
Part 3--
Awaiting
(1) the number TIN
shown on this / /
form is my
correct Taxpayer
Identification
Number (or I
am waiting
for a number
to be issued
to me) and
Part 4--
Exempt
(2) I am not TIN
subject to / /
backup
withholding
because (a) I am
exempt from
backup
withholding
or (b) I
have not
been
notified by
the Internal
Revenue
Service
("IRS") that
I am subject
to backup
withholding
as a result
of a failure
to report
all interest
or dividends
or (c) the
IRS has
notified me
that I am no
longer
subject to
backup
withholding.
Certification
instructions--You must
cross out item (2) in Part
2 above if you have been
notified by the IRS that
you are subject to backup
withholding because of
under reporting interest or
dividends on your tax
Department returns. However, if after
of the being notified by the IRS
Treasury that you were subject to
Internal backup withholding you
Revenue received another
Service notification from the IRS
Payer's stating that you are no
Request longer subject to backup
for withholding, do not cross
Taxpayer out such item (2). If you
Identification are exempt from backup
Number withholding, check the box
(TIN) in Part 4 above.
SIGNATURE DATE
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver such an application in the near future. I understand
that, if I do not provide a taxpayer identification number to the Depositary,
31% of all reportable payments made to me will be withheld, but will be refunded
if I provide a certified taxpayer identification number within 60 days.
- -------------------------------------------------
- -------------------------------------------------
Signature Date
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL INFORMATION.
<PAGE>
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
909 Third Avenue
20th Floor
New York, NY 10022
(212) 754-8000
Toll Free (800) 566-9061
Banks and Brokerage Firms
please call:
(800) 662-5200
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
SOFTWARE ARTISTRY, INC.
As set forth in Section 2 of the Offer to Purchase (as defined below), this
form or one substantially equivalent hereto must be used to accept the Offer (as
defined below) if certificates for shares of Common Stock, no par value (the
"Shares"), of Software Artistry, Inc., an Indiana corporation (the "Company"),
are not immediately available or if the procedure for book-entry transfer cannot
be completed on a timely basis or time will not permit all required documents to
reach the Depositary prior to the Expiration Date (as defined in Section 1 of
the Offer to Purchase). This form may be delivered by hand to the Depositary or
transmitted by telegram, facsimile transmission or mail to the Depositary and
must include a guarantee by an Eligible Institution (as defined in Section 2 of
the Offer to Purchase). See Section 2 of the Offer to Purchase.
<TABLE>
<S> <C> <C>
THE DEPOSITARY:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
First Chicago Trust Company First Chicago Trust Company First Chicago Trust Company
of New York of New York of New York
Tenders & Exchanges Tenders & Exchanges Tenders & Exchanges
Suite 4660 14 Wall Street c/o The Depository Trust
P.O. Box 2565 8th Floor, Suite 4680 Company
Jersey City, NJ 07303-2565 New York, NY 10005 55 Water Street, DTC TAD
Vietnam Veterans Memorial
Plaza
New York, NY 10041
BY FACSIMILE TRANSMISSION:
201-222-4720
201-222-4721
FOR CONFIRMATION OF FACSIMILE:
201-222-4707
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS
VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Hoosier Acquisition Corp., an Indiana
corporation (the "Purchaser") and a wholly owned subsidiary of International
Business Machines Corporation, a New York corporation, upon the terms and
subject to the conditions set forth in the Purchaser's Offer to Purchase dated
December 23, 1997 (the "Offer to Purchase"), and the related Letter of
Transmittal (which, together with any amendments or supplements thereto,
collectively constitute the "Offer"), receipt of which is hereby acknowledged,
the number of Shares set forth below, all pursuant to the guaranteed delivery
procedures set forth in Section 2 of the Offer to Purchase.
<TABLE>
<S> <C>
Number of Shares: --------------------------- Name(s) of Record Holder(s):
-----------------
Certificate Nos.
(if available): --------------------------------------------
- --------------------------------
- -------------------------------------------- --------------------------------------------
Please Print
- --------------------------------------------- Address(es):
---------------------------------
(CHECK BOX IF SHARES --------------------------------------------
WILL BE TENDERED BY BOOK-ENTRY TRANSFER) Zip Code
/ / The Depository Trust Company
Daytime Area Code
and Tel. No.:
--------------------------------
Account Number: ---------------------------- Signature(s): -------------------------------
Dated: -------------------------------------- --------------------------------------------
</TABLE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a participant in the Security Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Guarantee Program or
the Stock Exchange Medallion Program, hereby guarantees to deliver to the
Depositary either the certificates representing the Shares tendered hereby, in
proper form for transfer, or a Book-Entry Confirmation (as defined in the Offer
to Purchase) with respect to such Shares, in any such case together with a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees, or an Agent's Message (as
defined in the Offer to Purchase), and any other required documents, within
three trading days (as defined in the Offer to Purchase) after the date hereof.
The Eligible Institution that completes this form must communicate this
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible Institution.
<TABLE>
<S> <C>
Name of Firm: ------------------------------ --------------------------------------------
Authorized Signature
Address: ------------------------------------ Name: --------------------------------------
Please Print
------------------------------------------------------- Title: ---------------------------------------
Zip Code
Area Code and Tel No.: ---------------------- Dated: --------------------------------------
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES FOR
SHARES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SOFTWARE ARTISTRY, INC.
AT
$24.50 NET PER SHARE
BY
HOOSIER ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
INTERNATIONAL BUSINESS MACHINES CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 11:59 P.M., NEW YORK CITY TIME,
ON FRIDAY, JANUARY 23, 1998, UNLESS THE OFFER IS EXTENDED.
December 23, 1997
To Brokers, Dealers, Banks,
Trust Companies and Other Nominees:
Hoosier Acquisition Corp, an Indiana corporation (the "Purchaser") and a
wholly owned subsidiary of International Business Machines Corporation, a New
York corporation ("IBM"), is offering to purchase all outstanding shares of
Common Stock, no par value (the "Shares"), of Software Artistry, Inc., an
Indiana corporation (the "Company"), at a price of $24.50 per Share, net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Purchaser's Offer to Purchase dated December 23,
1997 (the "Offer to Purchase"), and in the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer"). Please furnish copies of the enclosed materials to those of your
clients for whom you hold Shares registered in your name or in the name of your
nominee.
Enclosed herewith are copies of the following documents:
1. Offer to Purchase dated December 23, 1997;
2. Letter of Transmittal to be used by shareholders of the Company in
accepting the Offer;
3. The Letter to Shareholders of the Company from the Chairman of the
Board of Directors of the Company and the President and Chief Executive
Officer of the Company accompanied by the Company's
Solicitation/Recommendation Statement on Schedule 14D-9;
4. A printed form of letter that may be sent to your clients for whose
account you hold Shares in your name or in the name of a nominee, with space
provided for obtaining such clients' instructions with regard to the Offer;
5. Notice of Guaranteed Delivery;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. Return envelope addressed to First Chicago Trust Company of New
York, the Depositary.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES THAT WOULD CONSTITUTE A MAJORITY OF ALL OUTSTANDING SHARES ON A FULLY
DILUTED BASIS ON THE DATE OF PURCHASE AND (2) ANY WAITING PERIOD UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE
REGULATIONS THEREUNDER APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE
OFFER HAVING EXPIRED OR BEEN TERMINATED.
<PAGE>
WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE OFFER AND
WITHDRAWAL RIGHTS WILL EXPIRE AT 11:59 P.M., NEW YORK CITY TIME, ON FRIDAY,
JANUARY 23, 1998, UNLESS THE OFFER IS EXTENDED BY THE PURCHASER.
The Board of Directors of the Company has unanimously approved the Offer and
the Merger (as defined below) and determined that the terms of the Offer and the
Merger are fair to, and in the best interests of, the shareholders of the
Company and unanimously recommends that shareholders of the Company accept the
Offer and tender their Shares.
The Offer is being made pursuant to the Agreement and Plan of Merger dated
as of December 18, 1997 (the "Merger Agreement"), among IBM, the Purchaser and
the Company pursuant to which, following the consummation of the Offer and the
satisfaction or waiver of certain conditions, the Purchaser will be merged with
and into the Company (the "Merger"). In the Merger, each outstanding Share
(other than Shares owned by IBM or the Company or any of their subsidiaries, or
by shareholders, if any, who are entitled to and who properly exercise
dissenters' rights under Indiana law in the event the Shares are not registered
on a national securities exchange or quoted for trading on the Nasdaq National
Market at the record date for any shareholder vote on the Merger (if any such
vote is required)) will be converted into the right to receive an amount in cash
equal to the price per share paid pursuant to the Offer, without interest
thereon, as set forth in the merger Agreement and described in the Offer to
Purchase.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (a) certificates for
(or a timely Book-Entry Confirmation (as defined in the Offer to Purchase) with
respect to) such Shares, (b) a Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
or, in the case of a book-entry transfer effected pursuant to the procedure set
forth in Section 2 of the offer to Purchase, an Agent's Message (as defined in
the Offer to Purchase), and (c) any other documents required by the Letter of
Transmittal. Accordingly, tendering shareholders may be paid at different times
depending upon when certificates for Shares or Book-Entry Confirmations with
respect to Shares are actually received by the Depositary. UNDER NO
CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE
PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN
MAKING SUCH PAYMENT.
Neither the Purchaser nor IBM will pay any fees or commissions to any broker
or dealer or other person (other than the Information Agent as described in the
Offer to Purchase) in connection with the solicitation of tenders of Shares
pursuant to the Offer. You will be reimbursed upon request for customary mailing
and handling expenses incurred by you in forwarding the enclosed offering
materials to your customers.
Questions and requests for additional copies of the enclosed material may be
directed to the Information Agent at its address and telephone numbers set forth
on the back cover of the enclosed Offer to Purchase.
Very truly yours,
HOOSIER ACQUISITION CORP.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR
ANY OTHER PERSON THE AGENT OF THE PURCHASER, IBM, THE DEPOSITARY OR THE
INFORMATION AGENT OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION
OR MAKE ANY REPRESENTATION ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER
NOT CONTAINED IN THE OFFER TO PURCHASE OR THE LETTER OF TRANSMITTAL.
2
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SOFTWARE ARTISTRY, INC.
AT
$24.50 NET PER SHARE
BY
HOOSIER ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
INTERNATIONAL BUSINESS MACHINES CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 11:59 P.M., NEW YORK CITY
TIME, ON FRIDAY, JANUARY 23, 1998, UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated December 23,
1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer") relating to the offer by Hoosier Acquisition Corp., an Indiana
corporation (the "Purchaser") and a wholly owned subsidiary of International
Business Machines Corporation, a New York corporation ("IBM"), to purchase all
outstanding shares of Common Stock, no par value (the "Shares"), of Software
Artistry, Inc., an Indiana corporation (the "Company"), at a price of $24.50 per
Share, net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in the Offer. Also enclosed is the Letter to
Shareholders of the Company from the Chairman of the Board of Directors of the
Company accompanied by the Company's Solicitation/ Recommendation Statement on
Schedule 14D-9.
WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER
OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.
We request instructions as to whether you wish to tender any of or all the
Shares held by us for your account, pursuant to the terms and conditions set
forth in the Offer.
Your attention is directed to the following:
1. The offer price is $24.50 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the
conditions of the Offer.
2. The Offer is being made for all outstanding Shares.
3. The Board of Directors of the Company has unanimously approved the
Offer and the Merger (as defined below) and determined that the
terms of the Offer and the Merger are fair to, and in the best
interest of, the shareholders of the Company and unanimously
recommends that shareholders of the Company accept the Offer and
tender their Shares.
4. The Offer is being made pursuant to the Agreement and Plan of Merger
dated as of December 18, 1997 (the "Merger Agreement"), among IBM,
the Purchaser and the Company pursuant to which, following the
consummation of the Offer and the satisfaction or waiver of certain
conditions, the Purchaser will be merged with and into the Company
(the "Merger"). In the Merger, each outstanding Share (other than
Shares owned by IBM or the Company or any of their subsidiaries or
by shareholders, if any, who are entitled to and who properly
exercise dissenters' rights under Indiana law in the event the
Shares are not registered on a national securities exchange or
quoted for trading on the Nasdaq National
<PAGE>
Market at the record date for any shareholder vote on the Merger (if
any such vote is required)) will be converted into the right to
receive an amount in cash equal to the price per Share paid pursuant
to the Offer, without interest thereon, as set forth in the Merger
Agreement and described in the Offer to Purchase.
5. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 11:59 P.M., NEW YORK
CITY TIME, ON FRIDAY, JANUARY 23, 1998, UNLESS THE OFFER IS EXTENDED
BY THE PURCHASER (THE "EXPIRATION DATE").
6. The Offer is conditioned upon, among other things, (1) there being
validly tendered and not withdrawn prior to the expiration of the
Offer that number of Shares that would constitute a majority of all
outstanding Shares on a fully diluted basis on the date of purchase
and (2) any waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the regulations thereunder
applicable to the purchase of Shares pursuant to the Offer having
expired or been terminated.
7. Any stock transfer taxes applicable to a sale of Shares to the
Purchaser will be borne by the Purchaser, except as otherwise
provided in Instruction 6 of the Letter of Transmittal.
Your instructions to us should be forwarded promptly to permit us to submit
a tender on your behalf prior to the Expiration Date.
If you wish to have us tender any of or all the Shares held by us for your
account, please so instruct us by completing, executing, detaching and returning
to us the instruction form on the detachable part hereof. An envelope to return
your instructions to us is enclosed. If you authorize the tender of your Shares,
all such Shares will be tendered unless otherwise specified on the detachable
part hereof. Your instructions should be forwarded to us in ample time to permit
us to submit a tender on your behalf prior to the Expiration Date.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by First Chicago Trust Company of New
York (the "Depositary"), of (a) certificates for (or a timely Book-Entry
Confirmations (as defined in the Offer to Purchase) with respect to) such
Shares, (b) a Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees, or, in the case of a
book-entry transfer effected pursuant to the procedure set forth in Section 2 of
the Offer to Purchase, an Agent's Message (as defined in the Offer to Purchase),
and (c) any other documents required by the Letter of Transmittal. Accordingly,
tendering shareholders may be paid at different times depending upon when
certificates for Shares or Book-Entry Confirmations with respect to Shares are
actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE
PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS
OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or acceptance thereof would not be in compliance with the laws of such
jurisdiction.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SOFTWARE ARTISTRY, INC.
The undersigned acknowledge(s) receipt of your letter, the Offer to Purchase
of Hoosier Acquisition Corp. dated December 23, 1997 (the "Offer to Purchase"),
and the related Letter of Transmittal relating to shares of Common Stock, no par
value (the "Shares"), of Software Artistry, Inc., an Indiana corporation.
This will instruct you to tender the number of Shares indicated below held
by you for the account of the undersigned, on the terms and subject to the
conditions set forth in the Offer to Purchase and related Letter of Transmittal.
SIGN HERE
NUMBER OF SHARES TO BE TENDERED:*
____________ SHARES
------------------------------
DAYTIME AREA CODE
AND TEL. NO.____________________________________________________________________
----------------------------------------
SIGNATURE(S)
TAXPAYER IDENTIFICATION
NO. OR SOCIAL
SECURITY NO.____________________________________________________________________
------------------------------
DATED:__________________________________________________________________________
----------------------------------------
(PLEASE PRINT NAME(S) AND ADDRESS(ES))
- ------------------------
* Unless otherwise indicated, it will be assumed that all your Shares are to
be tendered.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- -----------------------------------------------------
GIVE THE TAXPAYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -----------------------------------------------------
<S> <C> <C>
1. An individual's The individual
account
2. Two or more The actual owner of
individuals (joint the account or, if
account) combined funds, the
first individual on
the account(1)
3. Custodian account of The minor(2)
a minor (Uniform
Gift to Minors Act)
4. a. The usual The
revocable savings grantor-trustee(1)
trust (grantor is
also trustee)
b. So-called trust
account that is The actual owner(1)
not a legal or
valid trust under
state law.
5. Sole proprietorship The owner(3)
6. A valid trust, The legal entity (Do
estate, or pension not furnish the
trust identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated in
the account
title.)(4)
- -----------------------------------------------------
<CAPTION>
GIVE THE TAXPAYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
<S> <C> <C>
- -----------------------------------------------------
7. Corporate account The corporation
8. Religious, The organization
charitable, or
educational
organization account
9. Partnership account The partnership
10. Association, club, The organization
or other tax-exempt
organization
11. A broker or The broker or
registered nominee nominee
12. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
state or local
government, school
district, or prison)
that receives
agricultural program
payments
</TABLE>
- ---------------------------------------------
- ---------------------------------------------
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has an SSN, that person's number must be
furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show your individual name. You may also enter your business or "doing
business as" name. You may use either your social security number or your
employer identification number.
(4) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name listed, the number
will be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
Note: Section references are to the Internal Revenue Code unless otherwise
noted.
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service (the "IRS") and apply for a
number.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees exempt from backup withholding and for which
no information reporting is required. For interest and dividends, all listed
payees are exempt except item (9). For broker transactions, payees listed in
items (1) through (13) and a person registered under the Investment Advisors Act
of 1940 who regularly acts as a broker are exempt. Payments subject to reporting
under sections 6041 and 6041A are generally exempt from backup withholding only
if made to payees described in items (1) through (7), except a corporation
(other than certain hospitals described in Regulations section 1.6041-3(c)) that
provides medical and health care services or bills and collects payments for
such services is not exempt from backup withholding or information reporting.
Only payees described in items (1) through (5) are exempt from backup
withholding for barter exchange transactions and patronage dividends.
(1) An organization exempt from tax under section 501(a), or an IRA, or a
custodial account under section 403(b)(7), if the account satisfies the
requirements of section 401(f)(2).
(2) The United States or any of its agencies or instrumentalities.
(3) A state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities.
(4) A foreign government or any of its political subdivisions, agencies or
instrumentalities.
(5) An international organization or any of its agencies or instrumentalities.
(6) A corporation.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the United
States, the District of Columbia or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures Trading
Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the Investment
Company Act of 1940
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries, Inc.,
Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
Payments of dividends and patronage dividends that generally are exempt from
backup withholding include the following:
- - Payments to nonresident aliens subject to withholding under section 1441.
- - Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident alien partner.
- - Payments of patronage dividends not paid in money.
- - Payments made by certain foreign organizations.
- - Section 404(k) payments made by an ESOP.
Payments of interest that generally are exempt from backup withholding include
the following:
- - Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have not provided your
correct taxpayer identification number to the payor.
- - Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- - Payments described in section 6049(b)(5) to non-resident aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
- - Payments of mortgage interest to you.
Exempt payees described above should file substitute Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND
DATE THE FORM AND RETURN IT TO THE PAYER. IF YOU ARE A NON-RESIDENT ALIEN OR A
FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A COMPLETED
INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS).
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see sections 6041, 6041A, 6042, 6044, 6045,
6049, 6050A and 6050N and the regulations promulgated thereunder.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payors
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must generally withhold 31% of taxable interest,
dividend, and certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your correct taxpayer identification number to a requester, you are
subject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
================================================================================
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase dated
December 23, 1997, and the related Letter of Transmittal and is
not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in
which the making of the Offer or the acceptance
thereof would not be in compliance with
the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SOFTWARE ARTISTRY, INC.
AT
$24.50 NET PER SHARE
BY
HOOSIER ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
INTERNATIONAL BUSINESS MACHINES CORPORATION
Hoosier Acquisition Corp., an Indiana corporation (the "Purchaser") and a
wholly owned subsidiary of International Business Machines Corporation, a New
York corporation ("IBM"), is offering to purchase all outstanding shares of
Common Stock, no par value (the "Shares"), of Software Artistry, Inc., an
Indiana corporation (the "Company"), at a price of $24.50 per Share, net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated December 23, 1997, and in
the related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer").
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 11:59 P.M., NEW YORK CITY
TIME, ON FIRDAY, JANUARY 23, 1998, UMLESS THE OFFER IS EXTENDED
- --------------------------------------------------------------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES THAT WOULD CONSTITUTE A MAJORITY OF ALL OUTSTANDING SHARES ON A FULLY
DILUTED BASIS ON THE DATE OF PURCHASE AND (2) ANY WAITING PERIOD UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE
REGULATIONS THEREUNDER APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE
OFFER HAVING EXPIRED OR BEEN TERMINATED.
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of December 18, 1997 (the "Merger Agreement"), among IBM, the Purchaser and
the Company pursuant to which, following the consummation of the Offer and the
satisfaction or waiver of certain conditions, the Purchaser will be merged with
the Company (the "Merger"). In the Merger, each outstanding Share (other than
Shares owned by IBM or the Company or any of their subsidiaries or by
shareholders, if any, who are entitled to and who properly exercise dissenters
rights under Indiana law) will be converted into the right to receive $24.50 in
cash, without interest.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER
AND THE MERGER AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE
FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY AND
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND
TENDER THEIR SHARES.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares properly tendered to the Purchaser
and not withdrawn as, if and when the Purchaser gives oral or written notice to
the Depositary set forth below of the Purchaser s acceptance for payment of such
Shares. Upon the terms and subject to the conditions of the Offer, payment for
Shares accepted for payment pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as an agent for
tendering shareholders for the purpose of receiving payment from the Purchaser
and transmitting payment to tendering shareholders. In all cases, payment for
Shares accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of (a) certificates for such Shares or timely
confirmation of book-entry transfer of such Shares into the Depositary s account
at a Book-Entry Transfer Facility (as defined in the Offer to Purchase) pursuant
to the procedures set forth in Section 2 of the Offer to Purchase, (b) a Letter
of Transmittal (or facsimile thereof), properly completed and duly executed,
with any required signature guarantees, or, in the case of a book-entry
transfer, an Agent s Message (as defined in the Offer to Purchase) and (c) any
other documents required by the Letter of Transmittal. Under no circumstances
will interest be paid on the purchase price of the Shares to be paid by the
Purchaser, regardless of any extension of the Offer or any delay in making such
payment.
The term "Expiration Date" means 11:59 P.M., New York City time, on Friday,
January 23, 1998, unless and until the Purchaser, in its sole discretion (but
subject to the terms of the Merger Agreement), shall have extended the period of
time during which the Offer is open, in which event the term "Expiration Date"
shall mean the latest time and date on which the Offer, as so extended by the
Purchaser, shall expire. Subject to the terms of the Merger Agreement and the
applicable rules and regulations of the Securities and Exchange Commission, the
Purchaser reserves the right (but shall not be obligated), at any time and from
time to time, and regardless of whether or not any of the events or facts set
forth in Section 14 of the Offer to Purchase shall have occurred, (i) to extend
the period of time during which the Offer is open, and thereby delay acceptance
for payment of and the payment for any Shares, by giving oral or written notice
of such extension to the Depositary and (ii) to amend the Offer in any other
respect by giving oral or written notice of such amendment to the Depositary.
Under no circumstances will interest be paid on the purchase price for tendered
Shares, whether or not the Purchaser exercises its right to extend the Offer.
There can be no assurance that the Purchaser will exercise its right to extend
the Offer. Any such extension will be followed by a public announcement thereof
no later than 9:00 A.M., New York City time, on the next business day after the
previously scheduled Expiration Date. During any such extension, all Shares
previously tendered and not withdrawn will remain subject to the Offer, subject
to the right of a tendering shareholder to withdraw such shareholder s Shares.
Except as otherwise provided below, tenders of Shares are irrevocable.
Shares tendered pursuant to the Offer may be withdrawn pursuant to the
procedures set forth below at any time prior to the Expiration Date and, unless
theretofore accepted for payment and paid for by the Purchaser pursuant to the
Offer, may also be withdrawn at any time after Saturday, February 21, 1998. For
a withdrawal to be effective, a written, telegraphic or facsimile transmission
notice of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover of the Offer to Purchase and must specify
the name of the person having tendered the Shares to be withdrawn, the number of
Shares to be withdrawn and the name of the registered holder of the Shares to be
withdrawn, if different from the name of the person who tendered the Shares. If
certificates for Shares have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such certificates, the serial
numbers shown on such certificates must be submitted to the Depositary and,
unless such Shares have been tendered by an Eligible Institution (as defined in
Section 2 of the Offer to Purchase), the signatures on the notice of withdrawal
must be guaranteed by an Eligible Institution. If Shares have been delivered
pursuant to the procedures for book-entry transfer as set forth in Section 2 of
the Offer to Purchase, any notice of withdrawal must also specify the name and
number of the account at the appropriate Book-Entry Transfer Facility to be
credited with the withdrawn Shares and otherwise comply with such Book-Entry
Transfer Facility s procedures. Withdrawals of tenders of Shares may not be
rescinded, and any Shares properly withdrawn will thereafter be deemed not
validly tendered for purposes of the Offer. However, withdrawn Shares may be
retendered by again following one of the procedures described in Section 2 of
the Offer to Purchase at any time prior to the Expiration Date. All questions as
to the form and validity (including time of receipt) of notices of withdrawal
will be determined by the Purchaser in its sole discretion, which determination
will be final and binding.
The Company has provided the Purchaser with the Company s shareholder lists
and security position listings for the purpose of disseminating the Offer to
holders of Shares. The Offer to Purchase, the related Letter of Transmittal and
other relevant materials will be mailed to record holders of Shares and will be
furnished to brokers, dealers, banks, trust companies and similar persons whose
names, or the names of whose nominees, appear on the shareholder lists or, if
applicable, who are listed as participants in a clearing agency s security
position listing for subsequent transmittal to beneficial owners of Shares.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
Securities Exchange Act of 1934, as amended, is contained in the Offer to
Purchase and is incorporated herein by reference.
THE OFFER TO PURCHASE AND LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE
OFFER.
Requests for copies of the Offer to Purchase, the Letter of Transmittal and
other tender offer materials may be directed to the Information Agent as set
forth below, and copies will be furnished promptly at the Purchaser s expense.
No fees or commissions will be payable to brokers, dealers or other persons
other than the Information Agent for soliciting tenders of Shares pursuant to
the Offer.
The Information Agent for the Offer is:
MORROW & CO., INC
909 Third Avenue
20th Floor
New York, New York 10022
(212) 754-8000
Toll Free (800) 566-9061
Banks and Brokerage Firms please call:
(800) 662-5200
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<CAPTION>
<S> <C> <C>
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
First Chicago Trust Company First Chicago Trust Company First Chicago Trust Company
of New York of New York of New York
Tenders & Exchanges Tenders & Exchanges Tenders & Exchanges
Suite 4660 14 Wall Street c/o The Depository Trust Company
P.O. Box 2565 8th Floor, Suite 4680 55 Water Street, DTC TAD
Jersey City, NJ 07303-2565 New York, NY 10005 Vietnam Veterans Memorial Plaza
New York, NY 10041
</TABLE>
December 23, 1997
================================================================================
<PAGE>
EXHIBIT 99.9
FOR RELEASE:
IMMEDIATE [IBM LOGO]
- --------------------------------------------------------------------------------
International Business Machines Corporation
Armonk, NY 10504
Contacts: Yvonne Donaldson Jeff Cross
Tivoli Systems, Inc. IBM
512-436-8311 914-766-1265
[email protected] [email protected]
Joanie Hasch
Software Artistry
317-843-1663
[email protected]
IBM'S TIVOLI SYSTEMS AND SOFTWARE ARTISTRY, INC.
REACH MERGER AGREEMENT
ARMONK, N.Y. and INDIANAPOLIS, December 19, 1997 . . .
Tivoli Systems, a subsidiary of IBM, and Software Artistry, Inc.,
(NASDAQ: SWRT) today announced the two companies have reached an agreement
under which IBM will shortly commence a cash tender offer for all outstanding
Software Artistry shares at $24.50 per share. Software Artistry is a leading
provider of both consolidated service desk and customer relationship
management solutions for distributed enterprise environments.
The chairman of the board, CEO, the largest shareholder of Software
Artistry and certain other executive officers of Software Artistry have
agreed to tender their shares, representing approximately 20% of the
outstanding shares, into the offer. The net cost of the transaction to IBM is
expected to be approximately $200 million. Under the terms of the agreement,
Software Artistry will become a Tivoli business unit.
The acquisition will expand Tivoli's Managmenet Software solutions to
include Software Artistry's suite of robust consolidated help desk products,
expressly designed for network computing environments.
- more -
<PAGE>
- 2 -
"IBM is a leader in helping customers manage their complex IT
environments," said John M. Thompson, IBM senior vice president and Software
Group executive. "Combining the technology and resources of these two
companies will enable businesses to use management solutions to make customer
interaction in areas as e-business a reality."
"In today's competitive market place, CIOs are building the heart of
their IT operation around consolidated service desk solutions," said Tivoli
President and Chief Executive Officer Jan Lindelow. "This merger offers our
customers both near- and long-term benefits. Shortly, we will offer customers
a consolidated service desk solution, integrated across network, systems and
applications management disciplines to automate the processes of change,
request and configuration management. Longer term, our vision is to provide
customers with an automated, service level management offering that will not
only solve problems quickly, but actually prevent them before they surface."
"Tivoli is widely recognized as the industry's premier systems management
vendor," said C. Scott Webber, Software Artistry's President and CEO. "This
agreement offers a good return for our stockholders and will provide our
customers with Tivoli's breadth of expertise and IBM's sweeping global reach.
Additionally, our employees gain the tremendous opportunities for growth with
a recognized worldwide leader."
Software Artistry provides two suites of enterprise applications,
SA-EXPERTISE for Enterprise Support Management (ESM)* and SA-EXPERTISE for
Customer Relationship Management (CRM). The ESM suite fulfills an
organization's service level management requirements through the seamless
intergration of decision support, problem management, asset and change
management, network and system management integration, and end-user
empowerment.
- more -
<PAGE>
- 3 -
Software Artistry's CRM suite of products empowers organizations to become
truly customer driven by managing every customer interaction. Specifically,
the suite combines the components of sales and marketing management; customer
support, customer self-service and decision support in managing all aspects
of the customer relationship cycle, from attracting and acquiring customers,
to supporting and retaining them.
About Tivoli Systems and Software Artistry
Tivoli Systems provides TME 10, the industry's leading solution for
end-to-end management of distributed computing environments, from mobile
computers to mainframes. Thousands of companies around the globe use TME 10
and compatible third-party products to reduce the cost and complexity of
managing networks, systems, databases and applications.
Headquartered in Austin, Texas, Tivoli is an IBM company. Tivoli
distributes its products worldwide, through a network of domestic and
international sales offices, system integrators, resellers and IBM sales
channels. For more information, visit Tivoli's World Wide Web site at
http://www.tivoli.com.
Software Artistry, Inc., is the leading provider of strategic Enterprise
Management solutions. The company's suite of applications, SA-EXPERTISE,
uniquely enable organizations to proactively manage and improve their
processes for help desk, network management integration, asset and change
management, and end-user empowerment. Software Artistry is also a leading
contender in the emerging Customer Relationship Management marketplace with a
leading suite of products to address the complete customer lifecycle,
including marketing, sales, and customer service and support. Software
Artistry's customer base spans multiple industries, including one-third of
the Fortune 100 companies. Founded in 1988, Software Artistry sells its
products and services through its direct sales force located in regional
- more -
<PAGE>
- 4 -
offices throughout North America, international offices in the United
Kingdom, France, Australia, and Singapore, and through a network of domestic
and international partners.
# # #
IBM is a registered trademark of International Business Machines Corporation.
Tivoli Management Environment and TME 10 are trademarks of Tivoli Systems,
Inc., and IBM company. All other company and product names may be trademarks
of the respective companies with which they are associated.
<PAGE>
==============================================================================
AGREEMENT AND PLAN OF MERGER
among
INTERNATIONAL BUSINESS MACHINES CORPORATION,
HOOSIER ACQUISITION CORP.
and
SOFTWARE ARTISTRY, INC.
Dated as of December 18, 1997
===============================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
The Offer
SECTION 1.01. The Offer.................................................... 2
SECTION 1.02 Company Actions.............................................. 4
ARTICLE II
The Merger
SECTION 2.01. The Merger................................................... 5
SECTION 2.02. Closing...................................................... 6
SECTION 2.03. Effective Time............................................... 6
SECTION 2.04. Effects of the Merger........................................ 6
SECTION 2.05. Articles of Incorporation and By-laws........................ 6
SECTION 2.06. Directors.................................................... 7
SECTION 2.07 Officers..................................................... 7
ARTICLE III
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 3.01. Effect on Capital Stock................................... 7
(a) Capital Stock of Sub.................................. 7
(b) Cancelation of Parent Owned Stock..................... 7
(c) Conversion of Shares.................................. 7
(d) Shares of Dissenting Shareholders..................... 8
(e) Withholding Tax....................................... 8
SECTION 3.02. Exchange of Certificates.................................. 8
(a) Paying Agent.......................................... 8
(b) Exchange Procedure.................................... 9
(c) No Further Ownership Rights in Shares................. 9
(d) No Liability.......................................... 10
<PAGE>
Contents, p. 2
Page
----
ARTICLE IV
Representations and Warranties of the Company
SECTION 4.01. Organization.............................................. 10
SECTION 4.02. Subsidiaries.............................................. 11
SECTION 4.03. Capitalization............................................ 11
SECTION 4.04. Authority................................................. 12
SECTION 4.05. Consents and Approvals; No Violations..................... 12
SECTION 4.06. SEC Reports and Financial Statements...................... 13
SECTION 4.07. Absence of Certain Changes or Events...................... 14
SECTION 4.08. No Undisclosed Liabilities................................ 15
SECTION 4.09. Information Supplied...................................... 15
SECTION 4.10. Benefit Plans; Employees and Employment Practices......... 15
SECTION 4.11. Contracts................................................. 17
SECTION 4.12. Litigation................................................ 18
SECTION 4.13. Compliance with Applicable Law............................ 18
SECTION 4.14. Tax Matters............................................... 19
SECTION 4.15. State Takeover Statutes................................... 21
SECTION 4.16. Brokers; Schedule of Fees and Expenses.................... 21
SECTION 4.17. Opinion of Financial Advisor.............................. 21
SECTION 4.18. Intellectual Property..................................... 22
ARTICLE V
Representations and Warranties
of Parent and Sub
SECTION 5.01. Organization.............................................. 24
SECTION 5.02. Authority................................................. 24
SECTION 5.03. Consents and Approvals; No Violations..................... 25
SECTION 5.04. Information Supplied...................................... 25
SECTION 5.05. Interim Operations of Sub................................. 26
SECTION 5.06. Brokers................................................... 26
SECTION 5.07. Financing................................................. 26
<PAGE>
Contents, p. 3
Page
----
ARTICLE VI
Covenants
SECTION 6.01. Covenants of the Company.................................. 26
(a) Ordinary Course....................................... 27
(b) Dividends; Changes in Stock........................... 27
(c) Issuance of Securities................................ 27
(d) Governing Documents................................... 27
(e) No Acquisitions....................................... 27
(f) No Dispositions....................................... 28
(g) Indebtedness.......................................... 28
(h) Advice of Changes; Filings............................ 28
(i) Tax Matters........................................... 28
(j) Capital Expenditures.................................. 29
(k) Discharge of Liabilities.............................. 29
(l) Material Contracts.................................... 29
(m) Benefits Changes...................................... 29
(n) General............................................... 29
SECTION 6.02. No Solicitation........................................... 30
SECTION 6.03. Other Actions............................................. 32
ARTICLE VII
Additional Agreements
SECTION 7.01. Shareholder Approval; Preparation of
Proxy Statement.......................................... 32
SECTION 7.02. Access to Information..................................... 33
SECTION 7.03. Reasonable Efforts........................................ 34
SECTION 7.04. Company Stock Options..................................... 34
SECTION 7.05. Directors................................................. 36
SECTION 7.06. Fees and Expenses......................................... 37
SECTION 7.07. Indemnification........................................... 37
SECTION 7.08. Certain Litigation........................................ 38
ARTICLE VIII
Conditions
SECTION 8.01. Conditions to Each Party's Obligation To
Effect the Merger....................................... 39
(a) Company Shareholder Approval.......................... 39
(b) No Injunctions or Restraints.......................... 39
(c) Purchase of Shares.................................... 39
<PAGE>
Contents, p. 4
Page
----
ARTICLE IX
Termination and Amendment
SECTION 9.01. Termination............................................... 39
SECTION 9.02. Effect of Termination..................................... 41
SECTION 9.03. Amendment................................................. 41
SECTION 9.04. Extension; Waiver......................................... 41
ARTICLE X
Miscellaneous
SECTION 10.01. Nonsurvival of Representations, Warranties
and Agreements........................................ 42
SECTION 10.02. Notices.................................................. 42
SECTION 10.03. Interpretation........................................... 43
SECTION 10.04. Counterparts............................................. 44
SECTION 10.05. Entire Agreement; No Third Party Beneficiaries........... 44
SECTION 10.06. Governing Law............................................ 44
SECTION 10.07. Publicity................................................ 44
SECTION 10.08. Assignment............................................... 44
SECTION 10.09. Enforcement.............................................. 45
EXHIBIT A - Conditions of the Offer
<PAGE>
AGREEMENT AND PLAN OF MERGER dated as of December 18, 1997,
among INTERNATIONAL BUSINESS MACHINES CORPORATION, a New York
corporation ("Parent"), HOOSIER ACQUISITION CORP., an Indiana
corporation and a wholly owned subsidiary of Parent ("Sub"), and
SOFTWARE ARTISTRY, INC., an Indiana corporation (the "Company").
WHEREAS, Parent proposes to cause Sub to make a tender offer (as it
may be amended from time to time as permitted under this Agreement, the "Offer")
to purchase all the outstanding shares of Common Stock, no par value, of the
Company (the "Company Common Stock"; the outstanding shares of Company Common
Stock being hereinafter collectively referred to as the "Shares"), at a purchase
price (the "Offer Price") of $24.50 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set forth
in this Agreement; and the Board of Directors of the Company has adopted
resolutions approving the Offer and recommending that holders of Shares accept
the Offer;
WHEREAS, the merger of Sub with the Company (the "Merger") upon the
terms and subject to the conditions set forth in this Agreement, whereby each
issued and outstanding Share, other than Shares owned directly or indirectly by
Parent and, if applicable, Dissenting Shares (as defined in Section 3.01(d)),
will be converted into the right to receive in cash the price per share paid in
the Offer, has been authorized by all necessary corporate action on behalf of
Parent and Sub and has been adopted by the Board of Directors of the Company;
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Parent to enter into this Agreement, Parent, Sub and certain
shareholders of the Company are entering into a Shareholder Agreement (the
"Shareholder Agreement") pursuant to which such shareholders have, among other
things, agreed to sell all such shareholders' Shares to Sub at the price per
Share paid in the Offer, upon the terms and subject to the conditions set forth
in the Shareholder Agreement; and the Shareholder Agreement has been approved by
the Board of Directors of the Company;
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Parent to enter into this Agreement, Parent and certain
shareholders of the Company who are employed by the Company are entering into
<PAGE>
Noncompetition Agreements (the "Noncompetition Agreements") pursuant to which
such shareholders have, among other things, agreed to not have any Relationship
(as defined in the Noncompetition Agreements) with certain third parties during
the Noncompetition Period (as defined in the Noncompetition Agreements); and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Sub and the Company hereby agree as follows:
ARTICLE I
The Offer
SECTION 1.01. The Offer. (a) Subject to the provisions of this
Agreement, as promptly as practicable but in no event later than five business
days after the date of the public announcement by Parent and the Company of this
Agreement, Sub shall, and Parent shall cause Sub to, commence the Offer. The
obligation of Sub to, and of Parent to cause Sub to, commence the Offer and
accept for payment, and pay for, any Shares tendered pursuant to the Offer shall
be subject only to the conditions set forth in Exhibit A (the "Offer
Conditions") (any of which may be waived in whole or in part by Sub in its
reasonable discretion, except that Sub shall not waive the Minimum Condition (as
defined in Exhibit A) without the consent of the Company) and to the terms and
conditions of this Agreement. Sub expressly reserves the right to modify the
terms of the Offer, except that, without the consent of the Company, Sub shall
not (i) reduce the number of Shares subject to the Offer, (ii) reduce the Offer
Price, (iii) amend or add to the Offer Conditions, (iv) except as provided in
the next sentence, extend the Offer, (v) change the form of consideration
payable in the Offer or (vi) amend any other term of the Offer in any manner
adverse to the holders of the Shares. Notwithstanding the foregoing, Sub may,
without the consent of the Company, (i) extend the Offer, if at the scheduled or
extended expiration date of the Offer any of the Offer Conditions shall not be
satisfied or waived, until such time as such conditions are satisfied or waived,
(ii) extend the
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Offer for any period required by any rule, regulation, interpretation or
position of the Securities and Exchange Commission (the "SEC") or the staff
thereof applicable to the Offer and (iii) extend the Offer for any reason on one
or more occasions for an aggregate period of not more than 10 business days
beyond the latest expiration date that would otherwise be permitted under
clause (i) or (ii) of this sentence. Subject to the terms and conditions of the
Offer and this Agreement, Sub shall, and Parent shall cause Sub to, accept for
payment, and pay for, all Shares validly tendered and not withdrawn pursuant to
the Offer that Sub becomes obligated to accept for payment, and pay for,
pursuant to the Offer as promptly as practicable after the expiration of the
Offer.
(b) On the date of commencement of the Offer, Parent and Sub shall
file with the SEC a Tender Offer Statement on Schedule 14D-1 (the
"Schedule 14D-1") with respect to the Offer, which shall contain an offer to
purchase and a related letter of transmittal and summary advertisement (such
Schedule 14D-1 and the documents included therein pursuant to which the Offer
will be made, together with any supplements or amendments thereto, the "Offer
Documents"). Parent and Sub agree that the Offer Documents shall comply as to
form in all material respects with the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations promulgated
thereunder and the Offer Documents, on the date first published, sent or given
to the Company's shareholders, shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
covenant is made by Parent or Sub with respect to information supplied by the
Company or any of its shareholders specifically for inclusion or incorporation
by reference in the Offer Documents. Each of Parent, Sub and the Company agree
promptly to correct any information provided by it for use in the Offer
Documents if and to the extent that such information shall have become false or
misleading in any material respect, and Parent and Sub further agree to take all
steps necessary to cause the Schedule 14D-1 as so corrected to be filed with the
SEC and the other Offer Documents as so corrected to be disseminated to the
Company's shareholders, in each case as and to the extent required by applicable
federal securities laws. The Company and its counsel shall be given reasonable
opportunity to review and comment upon the Offer Documents prior to their filing
with the SEC or dissemination to the shareholders of the Company. Parent and
Sub agree to provide the Company
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and its counsel any comments Parent, Sub or their counsel may receive from the
SEC or its staff with respect to the Offer Documents promptly after the receipt
of such comments.
(c) Parent shall provide or cause to be provided to Sub on a timely
basis the funds necessary to accept for payment, and pay for, any Shares that
Sub becomes obligated to accept for payment, and pay for, pursuant to the Offer.
SECTION 1.02. Company Actions. (a) The Company hereby approves of
and consents to the Offer and represents that the Board of Directors of the
Company, at a meeting duly called and held, duly and unanimously adopted
resolutions adopting this Agreement and authorizing the Company to execute and
deliver the Shareholder Agreement, approving the Offer and the Merger (and
effecting the other actions referred to in Section 4.15), determining that the
terms of the Offer and the Merger are fair to, and in the best interests of, the
Company's shareholders, recommending that the Company's shareholders accept the
Offer, tender their shares pursuant to the Offer and approve this Agreement (if
required) and approving the acquisition of Shares by Sub pursuant to the Offer
and the Shareholder Agreement and the other transactions contemplated by this
Agreement and the Shareholder Agreement. The Company has been advised by each
of its directors and executive officers that each such person intends to tender
all Shares owned by such person pursuant to the Offer.
(b) On the date the Offer Documents are filed with the SEC, the
Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended from
time to time, the "Schedule 14D-9") containing the recommendation described in
paragraph (a) and shall mail the Schedule 14D-9 to the shareholders of the
Company. The Company agrees that the Schedule 14D-9 shall comply as to form in
all material respects with the requirements of the Exchange Act and the rules
and regulations promulgated thereunder and, on the date filed with the SEC and
on the date first published, sent or given to the Company's shareholders, shall
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that no covenant is made by the Company with respect to
information supplied by Parent or Sub specifically for inclusion in the
Schedule 14D-9. Each of the Company, Parent and Sub agrees promptly to correct
any information provided by it for use in the Schedule 14D-9 if and to the
extent that such
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information shall have become false or misleading in any material respect, and
the Company further agrees to take all steps necessary to amend or supplement
the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or supplemented
to be filed with the SEC and disseminated to the Company's shareholders, in each
case as and to the extent required by applicable federal securities laws.
Parent and its counsel shall be given reasonable opportunity to review and
comment upon the Schedule 14D-9 prior to its filing with the SEC or
dissemination to shareholders of the Company. The Company agrees to provide
Parent and its counsel any comments the Company or its counsel may receive from
the SEC or its staff with respect to the Schedule 14D-9 promptly after the
receipt of such comments.
(c) In connection with the Offer and the Merger, the Company shall
cause its transfer agent to furnish Sub promptly with mailing labels containing
the names and addresses of the record holders of Shares as of a recent date and
of those persons becoming record holders subsequent to such date, together with
copies of all lists of shareholders, security position listings and computer
files and all other information in the Company's possession or control regarding
the beneficial owners of Shares, and shall furnish to Sub such information and
assistance (including updated lists of shareholders, security position listings
and computer files) as Parent may reasonably request in communicating the Offer
to the Company's shareholders. Subject to the requirements of applicable law,
and except for such steps as are necessary to disseminate the Offer Documents
and any other documents necessary to consummate the Merger, Parent and Sub and
their agents shall hold in confidence the information contained in any such
labels, listings and files, will use such information only in connection with
the Offer and the Merger and, if this Agreement shall be terminated, will, upon
request, deliver, and will use their reasonable efforts to cause their agents to
deliver, to the Company all copies and any extracts or summaries from such
information then in their possession or control.
ARTICLE II
The Merger
SECTION 2.01. The Merger. Subject to the last two sentences of this
Section 2.01, upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the Indiana Business Corporation Law (the
"IBCL"), Sub shall be merged with and into the Company at
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the Effective Time (as defined in Section 2.03). Following the Effective Time,
the separate corporate existence of Sub shall cease and the Company shall
continue as the surviving corporation (the "Surviving Corporation") and shall
succeed to and assume all the rights and obligations of Sub in accordance with
the IBCL. At the election of Parent, any direct or indirect wholly owned
subsidiary (as defined in Section 10.03) of Parent may be substituted for and
assume all of the rights and obligations of Sub as a constituent corporation in
the Merger. In such event, the parties agree to execute an appropriate
amendment to this Agreement in order to reflect the foregoing.
SECTION 2.02. Closing. The closing of the Merger will take place at
10:00 a.m. (New York City time) on a date to be specified by Parent or Sub,
which shall be no later than the second business day after satisfaction or
waiver of the conditions set forth in Article VIII (the "Closing Date"), at the
offices of Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue,
New York, New York 10019, unless another date, time or place is agreed to in
writing by the parties hereto.
SECTION 2.03. Effective Time. Subject to the provisions of this
Agreement, as soon as practicable on or after the Closing Date, the parties
shall file articles of merger or other appropriate documents (in any such
case, the "Articles of Merger") executed in accordance with the relevant
provisions of the IBCL and shall make all other filings or recordings
required under the IBCL. The Merger shall become effective at such time as
the Articles of Merger are duly filed with the Indiana Secretary of State, or
at such other time as Sub and the Company shall agree and shall be specified
in the Articles of Merger (the time the Merger becomes effective being
hereinafter referred to as the "Effective Time").
SECTION 2.04. Effects of the Merger. The Merger shall have the
effects set forth in Section 23-1-40-6 of the IBCL.
SECTION 2.05. Articles of Incorporation and By-laws. (a) The Third
Amended and Restated Articles of Incorporation of the Company as in effect
immediately prior to the Effective Time shall be the articles of incorporation
of the Surviving Corporation,
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until thereafter changed or amended as provided therein or by applicable law.
(b) The By-laws of the Company, as amended and restated and as in
effect immediately prior to the Effective Time, shall be the By-laws of the
Surviving Corporation, until thereafter changed or amended as provided therein
or by applicable law.
SECTION 2.06. Directors. The directors of Sub immediately prior to
the Effective Time shall be the directors of the Surviving Corporation, until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
SECTION 2.07. Officers. The officers of the Company immediately
prior to the Effective Time shall be the officers of the Surviving Corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
ARTICLE III
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 3.01. Effect on Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
Shares or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of
capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of Common Stock, no par value, of the Surviving
Corporation.
(b) Cancelation of Treasury Stock and Parent Owned Stock. Each Share
that is owned by the Company and each Share that is owned by Parent or Sub
shall automatically be canceled and retired and shall cease to exist, and
no consideration shall be delivered in exchange therefor.
(c) Conversion of Shares. Subject to Section 3.01(d), each issued
and outstanding Share (other than Shares to be canceled in accordance with
Section 3.01(b) and Shares owned by any subsidiary of the Company, Parent
(other than Sub) or Sub) shall be converted into the right to receive from
the Surviving Corporation in cash, without interest, the price per share
paid in the Offer (the "Merger Consideration"). As of the Effective Time,
all such Shares shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each
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holder of a certificate representing any such Shares shall cease to have
any rights with respect thereto, except the right to receive the Merger
Consideration, without interest.
(d) Shares of Dissenting Shareholders. Notwithstanding anything in
this Agreement to the contrary, if the Merger is not effected pursuant to
Section 23-1-40-4 of the IBCL, any issued and outstanding Shares held by a
person (a "Dissenting Shareholder") who does not vote to approve the Merger
and complies with all the provisions of the IBCL concerning the right of
holders of Shares to dissent from the Merger and require payment of fair
value (as defined in the IBCL) for their Shares ("Dissenting Shares") shall
not be converted as described in Section 3.01(c), but shall be converted
into the right to receive such consideration as may be determined to be due
to such Dissenting Shareholder pursuant to the IBCL. If, after the
Effective Time, such Dissenting Shareholder withdraws his demand or fails
to perfect or otherwise loses his rights as a Dissenting Shareholder to
payment of fair value, in any case pursuant to the IBCL, his Shares shall
be deemed to be converted as of the Effective Time into the right to
receive the Merger Consideration. The Company shall give Parent (i) prompt
notice of any demands for fair value for Shares received by the Company and
(ii) the opportunity to participate in and direct all negotiations and
proceedings with respect to any such demands. The Company shall not,
without the prior written consent of Parent, make any payment with respect
to, or settle, offer to settle or otherwise negotiate, any such demands.
(e) Withholding Tax. The right of any shareholder to receive the
Merger Consideration shall be subject to and reduced by the amount of any
required tax withholding obligation.
SECTION 3.02. Exchange of Certificates. (a) Paying Agent. Prior to
the Effective Time, Parent shall designate a bank or trust company to act as
paying agent in the Merger (the "Paying Agent"), and, from time to time on,
prior to or after the Effective Time, Parent shall make available, or cause the
Surviving Corporation to make available, to the Paying Agent cash in amounts and
at the times necessary for the prompt payment of the Merger Consideration upon
surrender of certificates formerly representing Shares as part of the Merger
pursuant to Section 3.01 (it being understood that any and all interest
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earned on funds made available to the Paying Agent pursuant to this Agreement
shall be turned over to Parent).
(b) Exchange Procedure. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates that immediately prior to the Effective Time
represented Shares (the "Certificates"), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Paying
Agent and shall be in a form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate to the Paying Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly executed,
and such other documents as may reasonably be required by the Paying Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor the
amount of cash into which the Shares theretofore represented by such Certificate
shall have been converted pursuant to Section 3.01, and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of
ownership of Shares that is not registered in the transfer records of the
Company, payment may be made to a person other than the person in whose name the
Certificate so surrendered is registered, if such Certificate shall be properly
endorsed or otherwise be in proper form for transfer and the person requesting
such payment shall pay any transfer or other taxes required by reason of the
payment to a person other than the registered holder of such Certificate or
establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered as contemplated by this
Section 3.02, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the amount of
cash, without interest, into which the Shares theretofore represented by such
Certificate shall have been converted pursuant to Section 3.01. No interest
will be paid or will accrue on the cash payable upon the surrender of any
Certificate.
(c) No Further Ownership Rights in Shares. All cash paid upon the
surrender of Certificates in accordance with the terms of this Article III shall
be deemed to have been paid in full satisfaction of all rights pertaining to the
Shares theretofore represented by such Certificates. At the Effective Time, the
stock transfer books of the Company shall be closed, and there shall be no
further registration
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of transfers on the stock transfer books of the Surviving Corporation of the
Shares that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation or
the Paying Agent for any reason, they shall be canceled and exchanged as
provided in this Article III.
(d) No Liability. None of Parent, Sub, the Company or the Paying
Agent shall be liable to any person in respect of any cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any Certificates shall not have been surrendered prior to seven years after
the Effective Time (or immediately prior to such earlier date on which any
payment pursuant to this Article III would otherwise escheat to or become the
property of any Governmental Entity (as defined in Section 4.05)), the cash
payment in respect of such Certificate shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interests of any person previously entitled thereto.
ARTICLE IV
Representations and Warranties of the Company
Except as set forth in the disclosure schedule delivered by the
Company to Parent prior to the execution of this Agreement (the "Company
Disclosure Schedule"), the Company represents and warrants to Parent and Sub as
follows:
SECTION 4.01. Organization. The Company and each of its Significant
Subsidiaries (as defined in Section 10.03) is a corporation duly organized,
validly existing and in good standing (to the extent the jurisdiction recognizes
such concept) under the laws of the jurisdiction of its organization and has all
requisite corporate power and authority to carry on its business as now being
conducted. The Company and each of its Significant Subsidiaries is duly
qualified or licensed to do business and in good standing in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary, except
in such jurisdictions where the failure to be so duly qualified or licensed and
in good standing would not have a material adverse effect (as defined in
Section 10.03) on the Company or prevent or materially delay the consummation of
the Offer and/or the Merger. The Company has delivered to Parent complete and
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correct copies of its Third Amended and Restated Articles of Incorporation and
By-laws, as amended and restated and the articles of incorporation and by-laws
(or similar organizational documents) of its Significant Subsidiaries.
SECTION 4.02. Subsidiaries. Schedule 4.02 lists each subsidiary of
the Company. All the outstanding shares of capital stock of each such
subsidiary are owned by the Company, by another wholly owned subsidiary of the
Company or by the Company and another wholly owned subsidiary of the Company,
free and clear of all pledges, claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever (collectively, "Liens"), and are duly
authorized, validly issued, fully paid and nonassessable. Except for the
capital stock of its subsidiaries, the Company does not own, directly or
indirectly, any capital stock or other ownership interest in any corporation,
partnership, joint venture or other entity.
SECTION 4.03. Capitalization. The authorized capital stock of the
Company consists of 10,000,000 Shares. At the close of business on December 17,
1997, (i) 7,085,433 Shares were issued and outstanding and (ii) 1,726,205 Shares
were reserved for issuance upon exercise of options to purchase Shares ("Company
Stock Options"). Except as set forth above, as of the close of business on
December 17, 1997, no shares of capital stock or other voting securities of the
Company were issued, reserved for issuance or outstanding. All outstanding
shares of capital stock of the Company are, and all shares which may be issued
will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. There are no bonds,
debentures, notes or other indebtedness of the Company having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matters on which shareholders of the Company may vote. Except as set
forth above, as of the date of this Agreement, there are no securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound obligating the Company or
any of its subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting securities
of the Company or any of its subsidiaries. As of the date of this Agreement,
there are no outstanding contractual obligations of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock of the Company or to vote or to dispose of any shares of the capital stock
of any of the Company's subsidiaries.
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SECTION 4.04. Authority. The Company has the requisite corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby (subject to, with respect to the Merger, if the
Merger is not effected pursuant to Section 23-1-40-4 of the IBCL, the approval
of this Agreement by the holders of a majority of the Shares (the "Company
Shareholder Approval")). The execution, delivery and performance of this
Agreement and the consummation by the Company of the Merger and of the other
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the transactions so contemplated (in each case, other than, with
respect to the Merger, the Company Shareholder Approval (if required)). This
Agreement has been duly executed and delivered by the Company and, assuming this
Agreement constitutes a valid and binding obligation of Parent and Sub,
constitutes a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms.
SECTION 4.05. Consents and Approvals; No Violations. Except for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act (including the
filing with the SEC of the Schedule 14D-9 and a proxy statement relating to the
Company Shareholder Approval, if required (the "Proxy Statement")), the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the IBCL, Section 23-2-3.1 et seq. of the Indiana Code or the laws of
other states in which the Company is qualified to do or is doing business,
neither the execution, delivery or performance of this Agreement by the Company
nor the consummation by the Company of the transactions contemplated hereby will
(i) conflict with or result in any breach of any provision of the Third Amended
and Restated Articles of Incorporation or By-laws, as amended and restated, of
the Company or any of the similar organizational documents of any of its
Significant Subsidiaries, (ii) require any filing with, or permit,
authorization, consent or approval of, any federal, state or local government or
any court, tribunal, administrative agency or commission or other governmental
or regulatory authority or agency, domestic, foreign or supranational (a
"Governmental Entity") (except where the failure to make such filings or to
obtain such permits, authorizations, consents or approvals would not have a
material adverse effect on the Company or prevent or materially delay the
consummation of the Offer and/or the Merger), (iii) result in a violation or
breach of, or constitute (with or without
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due notice or lapse of time or both) a default under, or give rise to any right
of termination, amendment, cancelation or acceleration under, or result in the
creation of any Lien upon any of the properties or assets of the Company or any
of its subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, lease, license, permit, concession, franchise,
contract, agreement or other instrument or obligation (a "Contract") to which
the Company or any of its subsidiaries is a party or by which any of its
properties or assets may be bound or (iv) violate any judgment, order, writ,
preliminary or permanent injunction or decree (an "Order") or any statute, law,
ordinance, rule or regulation of any Governmental Entity (a "Law") applicable to
the Company, any of its subsidiaries or any of their properties or assets,
except in the case of clauses (iii) or (iv) for violations, breaches or defaults
that could not reasonably be expected to have a material adverse effect on the
Company or prevent or materially delay the consummation of the Offer and/or the
Merger.
SECTION 4.06. SEC Reports and Financial Statements. The Company
and each of its subsidiaries has filed with the SEC, and has heretofore made
available to Parent, true and complete copies of, all forms, reports,
schedules, statements and other documents required to be filed by it since
January 1, 1996 under the Exchange Act or the Securities Act of 1933 (the
"Securities Act") (such forms, reports, schedules, statements and other
documents, including any financial statements or schedules included therein,
are referred to as the "Company SEC Documents"). The Company SEC Documents,
at the time filed, (a) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading and (b) complied in
all material respects with the applicable requirements of the Exchange Act
and the Securities Act, as the case may be, and the applicable rules and
regulations of the SEC thereunder. Except to the extent that information
contained in any Company SEC Document has been revised or superseded by a
subsequently filed Company Filed SEC Document (as defined in Section 4.07) (a
copy of which has been made available to Parent prior to the date hereof),
none of the Company SEC Documents contains an untrue statement of a material
fact or omits to state a material fact required to be stated or incorporated
by reference therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the Company SEC
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Documents comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-Q of the SEC) and fairly present
(subject, in the case of the unaudited statements, to normal, recurring audit
adjustments) the consolidated financial position of the Company and its
consolidated subsidiaries as at the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended.
SECTION 4.07. Absence of Certain Changes or Events. Except as
disclosed in the Company SEC Documents filed and publicly available prior to the
date of this Agreement (the "Company Filed SEC Documents"), since December 31,
1996, the Company and its subsidiaries have conducted their respective business
only in the ordinary course, and there has not been (i) any material adverse
change (as defined in Section 10.03) with respect to the Company, (ii) any
declaration, setting aside or payment of any dividend or other distribution with
respect to its capital stock or any redemption, repurchase or other acquisition
of any of its capital stock, (iii) any split, combination or reclassification of
any of its capital stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for shares of
its capital stock, (iv) (x) any granting by the Company or any of its
subsidiaries to any officer of the Company or any of its subsidiaries of
any increase in compensation (including in connection with promotions), except
in the ordinary course of business consistent with past practice or as was
required under employment agreements in effect as of December 31, 1996, (y) any
granting by the Company or any of its subsidiaries to any such officer of any
increase in severance or termination pay, except as required under employment,
severance or termination agreements in effect as of December 31, 1996, or
(z) except employment or consulting agreements in the ordinary course of
business consistent with past practice with employees other than any executive
officer of the Company, any entry by the Company or any of its subsidiaries into
any employment or consulting agreement, with any such employee or executive
officer, (v) any damage, destruction or loss, whether or not covered by
insurance, that has or reasonably could be expected to have a material adverse
effect on the Company, (vi) any revaluation by the Company of any of its
material assets,
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(vii) any material change in accounting methods, principles or practices by the
Company or (viii) (A) any licensing or other agreement with regard to the
acquisition or disposition of any material Intellectual Property (as defined in
Section 4.18) or rights thereto other than sales or licenses of its products to
customers in the ordinary course of business consistent with past practice or
(B) any amendment or consent with respect to any licensing or other agreement
described in clause (A) above.
SECTION 4.08. No Undisclosed Liabilities. Except as and to the
extent set forth in the Company Filed SEC Documents, neither the Company nor any
of its subsidiaries has any liabilities of any nature, whether or not accrued,
contingent or otherwise, that would be reasonably expected to have a material
adverse effect on the Company.
SECTION 4.09. Information Supplied. None of the information supplied
or to be supplied by the Company specifically for inclusion or incorporation by
reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the
information to be filed by the Company in connection with the Offer pursuant to
Rule 14f-1 promulgated under the Exchange Act (the "Information Statement") or
(iv) the Proxy Statement, will, in the case of the Offer Documents, the
Schedule 14D-9 and the Information Statement, at the respective times the Offer
Documents, the Schedule 14D-9 and the Information Statement are filed with the
SEC or first published, sent or given to the Company's shareholders, or, in the
case of the Proxy Statement, at the time the Proxy Statement is first mailed to
the Company's shareholders or at the time of the Shareholders Meeting (as
defined in Section 7.01), contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Schedule 14D-9, the Information Statement
and the Proxy Statement will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder,
except that no representation or warranty is made by the Company with respect to
statements made or incorporated by reference therein based on information
supplied by Parent or Sub specifically for inclusion or incorporation by
reference therein.
SECTION 4.10. Benefit Plans; Employees and Employment Practices.
(a) Except as disclosed in the Company Filed SEC Documents, since December 31,
1996, there has not been any adoption or amendment in any material respect
(including any increase or improvements in benefits
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or coverage) by the Company or any of its subsidiaries of any Benefit Plan (as
defined in Section 4.10(b)). Except as disclosed in the Company Filed SEC
Documents, there exist no employment or consulting agreements, or any other
similar arrangements or understandings (whether or not in writing), between the
Company or any of its subsidiaries and any current or former employee, officer
or director of the Company or any of its subsidiaries.
(b) Schedule 4.10(b) lists each "employee pension benefit plan" (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") (sometimes referred to herein as "Pension Plans"),
"employee welfare benefit plan" (as defined in Section 3(1) of ERISA), bonus,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, vacation, severance, change of control,
disability, death benefit, hospitalization, medical, fringe benefit, excess
benefit, supplemental executive compensation, stock appreciation, restricted
stock, indemnification, collective bargaining agreement or other material
employee benefit plan, policy, agreement, arrangement or understanding (whether
or not in writing) providing benefits to any current or former employee,
officer, director or independent contractor of the Company or any of its
subsidiaries or any entity that is or required under Section 414 of the Code to
be treated with the Company as a single employer (an "ERISA Affiliate") or with
respect to which the Company or any ERISA Affiliate could have any liability
(collectively, the "Benefit Plans"). The Company has made available to Parent
true, complete and correct copies of (i) each Benefit Plan (or, in the case of
any unwritten Benefit Plans, descriptions thereof) and each employment and
consulting agreement, arrangement or understanding between the Company or any of
its subsidiaries and any current or former employee, officer or director of the
Company or any of its subsidiaries, (ii) the most recent annual report on
Form 5500 (and related schedules and financial statements or opinions required
in connection therewith) filed with the Internal Revenue Service with respect to
each Benefit Plan (if any such report was required), (iii) the most recent
actuarial report with respect to each Benefit Plan, as applicable, (iv) the most
recent summary plan description (and a summary of material modifications, if
applicable) for each Benefit Plan, (v) each trust agreement and group annuity
contract relating to any Benefit Plan, and (vi) the most recent determination
letter, if any, issued with respect to such Benefit Plan.
(c) Each Benefit Plan has been administered in all material respects
in accordance with its terms and the
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applicable requirements of ERISA, the Internal Revenue Code of 1986, as amended
(the "Code") and all other applicable laws. No event has occurred and to the
knowledge of the Company there exists no condition or set of conditions in
connection with the Benefit Plans that, individually or in the aggregate, could
have a material adverse effect on, or give rise to material liability to, the
Company or any ERISA Affiliate under ERISA, the Code or any other applicable
law.
(d) Each Pension Plan intended to be qualified under Section 401(a)
of the Code has been the subject of a determination letter from the Internal
Revenue Service to the effect that such Pension Plan is so qualified under all
currently applicable provisions of Section 401(a) of the Code and, to the
knowledge of the Company, no circumstances exist that would adversely affect the
qualification of any such Pension Plan.
(e) No Benefit Plan is subject to Title IV of ERISA.
(f) Each Benefit Plan may be amended or terminated without material
liability to the Company or any ERISA Affiliate.
(g) The Company has previously delivered to Parent a list which sets
forth the names of all current officers, directors and employees of the Company
and each of its subsidiaries, together with each employee's current salary and
date of employment.
(h) (i) There are no material controversies, strikes, work stoppages
or disputes pending or threatened between the Company or any of its subsidiaries
and any current or former employees, (ii) no labor union or other collective
bargaining unit represents or has ever represented any employee of the Company
or any of its subsidiaries with respect to employment by the Company or such
subsidiary and (iii) no organizational effort by any labor union or other
collective bargaining unit currently is under way or threatened with respect to
any employee.
SECTION 4.11. Contracts. Except as disclosed in the Company Filed
SEC Documents and except for Contracts that have previously been delivered to
Parent, there are no Contracts that are material to the business, properties,
financial condition or results of operations of the Company and its subsidiaries
taken as a whole. Neither the Company nor any of its subsidiaries is in
violation or breach of or in default under (nor does there exist any condition
which upon the passage of time or the giving of notice would cause
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such a violation or breach of or default under) any Contract to which it is a
party or by which it or any of its properties or assets is bound, except for
violations, breaches or defaults that could not reasonably be expected to have a
material adverse effect on the Company.
SECTION 4.12. Litigation. Except as disclosed in the Company Filed
SEC Documents, there is no suit, claim, action, proceeding or investigation
pending before any Governmental Entity or, to the best knowledge of the Company,
threatened against the Company or any of its subsidiaries that could reasonably
be expected to have a material adverse effect on the Company or prevent or
materially delay the consummation of the Offer and/or the Merger. Except as
disclosed in the Company Filed SEC Documents, neither the Company nor any of its
subsidiaries is subject to any outstanding Order that could reasonably be
expected to have a material adverse effect on the Company or prevent or
materially delay the consummation of the Offer and/or the Merger.
SECTION 4.13. Compliance with Applicable Law. The Company and its
subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of their
respective businesses (the "Company Permits"), except for failures to hold such
Company Permits that would not have a material adverse effect on the Company or
prevent or materially delay the consummation of the Offer and/or the Merger.
The Company and its subsidiaries are in compliance with the terms of the Company
Permits, except where the failure so to comply would not have a material adverse
effect on the Company or prevent or materially delay the consummation of the
Offer and/or the Merger. Except as disclosed in the Company Filed SEC
Documents, to the best knowledge of the Company, the businesses of the Company
and its subsidiaries are not being conducted in violation of any Law, except for
possible violations that would not have a material adverse effect on the Company
or prevent or materially delay the consummation of the Offer and/or the Merger.
As of the date of this Agreement, no investigation or review by any Governmental
Entity with respect to the Company or any of its subsidiaries is pending or, to
the best knowledge of the Company, threatened, nor has any Governmental Entity
indicated an intention to conduct any such investigation or review, other than,
in each case, those the outcome of which would not be reasonably expected to
have a material adverse effect on the Company or prevent or materially delay the
consummation of the Offer and/or the Merger.
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SECTION 4.14. Tax Matters.
(a) The Company and each of its subsidiaries has timely filed all
federal, state and local, domestic and foreign, income and franchise tax returns
and reports and all other material tax returns and reports required to be filed
by it. All such returns and reports are complete and correct in all material
respects. The Company and each of its subsidiaries has timely paid (or the
Company has paid on its subsidiaries' behalf) all taxes due with respect to the
taxable periods covered by such returns and reports and all other material taxes
(as defined below), and the most recent financial statements contained in the
Company Filed SEC Documents reflect an adequate reserve for all taxes payable by
the Company and its subsidiaries for all taxable periods and portions thereof
through the date of such financial statements.
(b) No federal, state or local, domestic or foreign, income or
franchise tax return or report or any other material tax return or report of the
Company or any of its subsidiaries is under audit or examination by any taxing
authority, and no written or unwritten notice of such an audit or examination
has been received by the Company. Each material deficiency resulting from any
audit or examination relating to taxes by any taxing authority has been timely
paid. No material issues relating to taxes were raised by the relevant taxing
authority during any presently pending audit or examination, and no material
issues relating to taxes were raised by the relevant taxing authority in any
completed audit or examination that can reasonably be expected to recur in a
later taxable period. No federal, state or local, domestic or foreign, tax
return or report of the Company or any of its subsidiaries has ever been under
audit or examination by the Internal Revenue Service or other relevant taxing
authority, except for federal income tax examinations for 1994 and 1995 and
Indiana tax examinations for 1993, 1994 and 1995. The relevant statute of
limitations is closed with respect to the U.S. federal tax returns of the
Company and its subsidiaries for all years through 1993.
(c) There is no agreement or other document extending, or having the
effect of extending, the period of assessment or collection of any taxes and no
power of attorney with respect to any taxes has been executed or filed with any
taxing authority.
(d) No material liens for taxes exist with respect to any assets or
properties of the Company or any of
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its subsidiaries, except for statutory liens for taxes not yet due.
(e) Neither the Company nor any of its subsidiaries is a party to or
bound by any tax sharing agreement, tax indemnity obligation or similar
agreement, arrangement or practice with respect to taxes (including any advance
pricing agreement, closing agreement or other agreement relating to taxes with
any taxing authority).
(f) Neither the Company nor any of its subsidiaries will be required
to include in a taxable period ending after the Effective Time taxable income
attributable to income that accrued in a prior taxable period but was not
recognized in any prior taxable period as a result of the installment method of
accounting, the completed contract method of accounting, the long-term contract
method of accounting, the cash method of accounting or Section 481 of the Code
or comparable provisions of state or local tax law, domestic or foreign, or for
any other reason.
(g) The disallowance of a deduction under Section 162(m) of the Code
for employee remuneration will not apply to any amount paid or payable by the
Company or any of its subsidiaries under any Benefit Plan or other compensation
arrangement currently in effect.
(h) Any amount or other entitlement that could be received (whether
in cash or property or the vesting of property) as a result of any of the
transactions contemplated by this Agreement by any employee, officer or director
of the Company or any of its affiliates who is a "disqualified individual" (as
such term is defined in proposed Treasury Regulation Section 1.280G-1) under any
Benefit Plan or other compensation arrangement currently in effect would not be
characterized as an "excess parachute payment" or a "parachute payment" (as such
terms are defined in Section 280G(b)(1) of the Code).
(i) The Company has complied in all respects with all applicable
laws, rules and regulations relating to the payment and withholding of taxes
(including, without limitation, withholding of taxes pursuant to Sections 1441,
1442, 3121 and 3402 of the Code or similar provisions under any foreign federal
laws or any state or local laws, domestic and foreign) and has, within the time
and the manner prescribed by law, withheld from and paid over to the proper
governmental authorities all amounts required to be so withheld and paid over
under applicable laws.
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(j) As used in this Agreement, "taxes" shall include all federal,
state and local, domestic and foreign, income, franchise, property, sales,
excise, employment, payroll, social security, value-added, ad valorem,
transfer, withholding and other taxes, including taxes based on or measured
by gross receipts, profits, sales, use or occupation, tariffs, levies,
impositions, assessments or governmental charges of any nature whatsoever,
including any interest penalties or additions with respect thereto.
SECTION 4.15. State Takeover Statutes. The Board of Directors of the
Company has (i) adopted a by-law providing that Chapter 42 of the IBCL does not
apply to control share acquisitions of Shares and (ii) adopted this Agreement
and approved the Offer, the Shareholder Agreement, the acquisition of Shares by
Sub pursuant to the Offer and the Shareholder Agreement and the other
transactions contemplated by this Agreement and the Shareholder Agreement, and
such adoptions and approvals are sufficient to render inapplicable to the Offer,
the Merger, this Agreement, the Shareholder Agreement, the acquisition of Shares
by Sub pursuant to the Offer and the Shareholder Agreement and the other
transactions contemplated by this Agreement and the Shareholder Agreement the
provisions of Chapters 42 and 43 of the IBCL. To the best knowledge of the
Company, no other state takeover statute (other than Section 23-2-3.1 et seq. of
the IBCL) or similar Law applies or purports to apply to the Offer, the Merger,
this Agreement, the Shareholder Agreement, the acquisition of Shares by Sub
pursuant to the Offer and the Shareholder Agreement or any of the transactions
contemplated by this Agreement or the Shareholder Agreement.
SECTION 4.16. Brokers; Schedule of Fees and Expenses. No broker,
investment banker, financial advisor or other person, other than Broadview
Associates, the fees and expenses of which will be paid by the Company (as
reflected in an agreement between such firm and the Company, a copy of which has
been delivered to Parent), is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company.
SECTION 4.17. Opinion of Financial Advisor. The Company has received
the opinion of Broadview Associates, dated the date of this Agreement, to the
effect that, as of the date of this Agreement, the consideration to be received
in the Offer and the Merger by the Company's shareholders is fair to the
Company's shareholders from a financial point of view, and a complete and
correct signed copy of such opinion
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has been, or promptly upon receipt thereof will be, delivered to Parent.
SECTION 4.18. Intellectual Property. (a) The Company has provided
Parent with true and correct copies of all Contracts relating to Intellectual
Property to which the Company or any of its subsidiaries is a party except that,
with respect to employee confidentiality agreements, the Company has provided
Parent with a specimen of the form of agreement signed by all former and current
employees, agents, consultants and contractors who have contributed to or
participated in the conception and development of computer software or other
Intellectual Property of the Company or any of its subsidiaries.
(b) Except to the extent that the inaccuracy of any of the following
(or the circumstances giving rise to such inaccuracy) would not have a material
adverse effect on the Company:
(1) the Company and each of its subsidiaries owns, or is licensed or
otherwise has the right to use (in each case, clear of any Liens), all
Intellectual Property used in or necessary for the conduct of its business
as currently conducted;
(2) there is no suit, claim, action, investigation or proceeding
pending or, to the best knowledge of the Company, threatened that the
Company or any of its subsidiaries is infringing on or otherwise violating
the rights of any person with regard to any Intellectual Property owned by,
licensed to and/or otherwise used by the Company or any of its
subsidiaries;
(3) to the best knowledge of the Company, no person is infringing on
or otherwise violating any right of the Company or any of its subsidiaries
with respect to any Intellectual Property owned by, licensed to and/or
otherwise used by the Company or any of its subsidiaries;
(4) none of the former or current members of management or key
personnel of the Company or any of its subsidiaries, including all former
and current employees, agents, consultants and contractors who have
contributed to or participated in the conception and development of
computer software or other Intellectual Property of the Company or any of
its subsidiaries, has asserted or threatened in writing any claim against
the Company or any of its subsidiaries in connection with
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the involvement of such persons in the conception and development of any
computer software or other Intellectual Property of the Company or any of
its subsidiaries and to the best knowledge of the Company no basis exists
for any such claim;
(5) the execution and delivery of this Agreement, compliance with its
terms and the consummation of the transactions contemplated hereby do not
and will not conflict with or result in any violation, breach or default
(with or without notice or lapse of time or both) under, or give rise to
any right, license or Lien relating to, Intellectual Property owned by the
Company or any of its subsidiaries or with respect to which the Company or
any of its subsidiaries now has or has had any Contract with any third
party, or any right of termination, cancelation or acceleration of any
material Intellectual Property right or obligation set forth in any
agreement to which the Company or any of its subsidiaries is a party, or
the loss or encumbrance of any Intellectual Property or material benefit
related thereto, or result in or require the creation, imposition or
extension of any Lien upon any Intellectual Property or right;
(6) no licenses or rights have been granted to distribute the source
code of, or to use the source code to create Derivative Works (as
hereinafter defined) of, any product currently marketed by, commercially
available from or under development by the Company or any of its
subsidiaries other than applications source code written in SA-Script
(formerly known as KML); and
(7) the Company and each of its subsidiaries has taken reasonable and
necessary steps to protect its Intellectual Property and their rights
thereunder, and to the best knowledge of the Company, no such rights to
Intellectual Property have been lost or are in jeopardy of being lost
through failure to act by the Company or any of its subsidiaries.
As used herein, "Derivative Work" shall mean a work that is based upon
one or more preexisting works, such as a revision, enhancement, modification,
abridgement, condensation, expansion or any other form in which such preexisting
works may be recast, transformed or adapted, and which, if prepared without
authorization of the owner of the copyright in such preexisting work, would
constitute a copyright infringement. For purposes hereof, a Derivative Work
shall also include any compilation that incorporates
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such a preexisting work as well as translations from one human language to
another and from one type of code to another.
(c) For purposes of this Agreement, "Intellectual Property" shall
mean trademarks (registered or unregistered), service marks, brand names,
certification marks, trade dress, assumed names, trade names and other
indications of origin, the goodwill associated with the foregoing and
registrations in any jurisdiction of, and applications in any jurisdiction to
register, the foregoing, including any extension, modification or renewal of any
such registration or application; inventions, discoveries and ideas, whether
patented, patentable or not in any jurisdiction; nonpublic information, trade
secrets and confidential information and rights in any jurisdiction to limit the
use or disclosure thereof by any person; writings and other works, whether
copyrighted, copyrightable or not in any jurisdiction; registration or
applications for registration of copyrights in any jurisdiction, and any
renewals or extensions thereof; any similar intellectual property or proprietary
rights and computer programs and software (including source code, object code
and data); licenses, immunities, covenants not to sue and the like relating to
the foregoing; and any claims or causes of action arising out of or related to
any infringement or misappropriation of any of the foregoing.
ARTICLE V
Representations and Warranties
of Parent and Sub
Parent and Sub jointly and severally represent and warrant to the
Company as follows:
SECTION 5.01. Organization. Each of Parent and Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power
and authority would not be reasonably expected to prevent or materially delay
the consummation of the Offer and/or the Merger.
SECTION 5.02. Authority. Parent and Sub have the requisite corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and
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performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Parent and Sub and no other corporate proceedings on the part of
Parent and Sub are necessary to authorize this Agreement or to consummate such
transactions. No vote of Parent shareholders is required to approve this
Agreement or the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Parent and Sub, as the case may be, and, assuming this
Agreement constitutes a valid and binding obligation of the Company, constitutes
a valid and binding obligation of each of Parent and Sub enforceable against
them in accordance with its terms.
SECTION 5.03. Consents and Approvals; No Violations. Except for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act (including the
filing with the SEC of the Offer Documents), the HSR Act, the IBCL or the laws
of other states in which Parent is qualified to do or is doing business, neither
the execution, delivery or performance of this Agreement by Parent and Sub nor
the consummation by Parent and Sub of the transactions contemplated hereby will
(i) conflict with or result in any breach of any provision of the respective
certificate or articles of incorporation or By-laws of Parent and Sub,
(ii) require any filing with, or permit, authorization, consent or approval of,
any Governmental Entity (except where the failure to make such filings or to
obtain such permits, authorizations, consents or approvals would not be
reasonably expected to prevent or materially delay the consummation of the Offer
and/or the Merger), (iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancelation or acceleration) under, any of
the terms, conditions or provisions of any Contract to which Parent or any of
its subsidiaries is a party or by which any of them or any of their properties
or assets may be bound or (iv) violate any Order or Law applicable to Parent,
any of its subsidiaries or any of their properties or assets, except in the case
of clauses (iii) and (iv) for violations, breaches or defaults that could not,
individually or in the aggregate, reasonably be expected to prevent or
materially delay the consummation of the Offer and/or the Merger.
SECTION 5.04. Information Supplied. None of the information supplied
or to be supplied by Parent or Sub specifically for inclusion or incorporation
by reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the
Information Statement or (iv) the Proxy Statement will, in
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the case of the Offer Documents, the Schedule 14D-9 and the Information
Statement, at the respective times the Offer Documents, the Schedule 14D-9 and
the Information Statement are filed with the SEC or first published, sent or
given to the Company's shareholders, or, in the case of the Proxy Statement, at
the time the Proxy Statement is first mailed to the Company's shareholders or at
the time of the Shareholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. The Offer Documents will comply as
to form in all material respects with the requirements of the Exchange Act and
the rules and regulations thereunder, except that no representation or warranty
is made by Parent or Sub with respect to statements made or incorporated by
reference therein based on information supplied by the Company specifically for
inclusion or incorporation by reference therein.
SECTION 5.05. Interim Operations of Sub. Sub was formed solely for
the purpose of engaging in the transactions contemplated hereby, has engaged in
no other business activities and has conducted its operations only as
contemplated hereby.
SECTION 5.06. Brokers. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent or Sub.
SECTION 5.07. Financing. Parent has sufficient funds available to
purchase, or to cause Sub to purchase, all the Shares pursuant to the Offer and
the Merger and to pay all fees and expenses related to the transactions
contemplated by this Agreement.
ARTICLE VI
Covenants
SECTION 6.01. Covenants of the Company. Until such time as Parent's
designees shall constitute a majority of the members of the Board of Directors
of the Company, the Company agrees as to itself and its subsidiaries that
(except as expressly contemplated or permitted by this Agreement or except to
the extent that Parent shall otherwise consent in writing):
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(a) Ordinary Course. The Company shall, and shall cause its
subsidiaries to, carry on their respective businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and in
compliance in all material respects with all applicable laws and regulations and
shall use all reasonable efforts to preserve intact their present business
organizations, keep available the services of their present officers and
employees and preserve their relationships with customers, suppliers and others
having business dealings with the Company and its subsidiaries.
(b) Dividends; Changes in Stock. The Company shall not, and shall
not permit any of its subsidiaries to, (i) declare or pay any dividends on or
make other distributions in respect of any of its capital stock (except for
dividends by a direct or indirect wholly owned subsidiary of the Company to its
parent), (ii) split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock or (iii) repurchase,
redeem or otherwise acquire any shares of capital stock of the Company or any of
its subsidiaries or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities.
(c) Issuance of Securities. The Company shall not, and shall not
permit any of its subsidiaries to, issue, deliver, sell, pledge or encumber, or
authorize or propose the issuance, delivery, sale, pledge or encumbrance of, any
shares of its capital stock of any class or any securities convertible into, or
any rights, warrants, calls, subscriptions or options to acquire, any such
shares or convertible securities, or any other ownership interest (including
stock appreciation rights or phantom stock) other than the issuance of Shares
(i) upon the exercise of Company Stock Options outstanding on the date of this
Agreement and in accordance with the terms of such Company Stock Options and
(ii) in accordance with the terms of the Software Artistry, Inc. 1996 Employee
Stock Purchase Plan as in effect on the date of this Agreement.
(d) Governing Documents. The Company shall not, and shall not permit
any of its subsidiaries to, amend or propose to amend its articles of
incorporation or by-laws (or similar organizational documents).
(e) No Acquisitions. The Company shall not, and shall not permit any
of its subsidiaries to, acquire or agree to acquire (i) by merging or
consolidating with, or by
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purchasing a substantial equity interest in or substantial portion of the assets
of, or by any other manner, any business or any corporation, partnership, joint
venture, association or other business organization or division thereof or
(ii) any assets that are material, individually or in the aggregate, to the
Company and its subsidiaries taken as a whole, except purchases of inventory in
the ordinary course of business consistent with past practice.
(f) No Dispositions. Other than sales or licenses of its products in
the ordinary course of business consistent with past practice, the Company shall
not, and shall not permit any of its subsidiaries to, sell, lease, license,
encumber or otherwise dispose of, or agree to sell, lease, license, encumber or
otherwise dispose of, any of its assets.
(g) Indebtedness. The Company shall not, and shall not permit any of
its subsidiaries to, (i) incur or suffer to exist any indebtedness for borrowed
money or guarantee any such indebtedness or issue or sell any debt securities or
warrants or rights to acquire any debt securities of the Company or any of its
subsidiaries, guarantee any debt securities of others, enter into any
"keep-well" or other agreement to maintain any financial statement condition of
another person or enter into any arrangement having the economic effect of any
of the foregoing, except for working capital borrowings incurred in the ordinary
course of business consistent with past practice, or (ii) make any loans,
advances or capital contributions to, or investments in, any other person, other
than to the Company or any direct or indirect wholly owned subsidiary of the
Company.
(h) Advice of Changes; Filings. The Company shall confer on a
regular and frequent basis with Parent, as reasonably requested by Parent,
report on operational matters and promptly advise Parent orally and in writing
of any material adverse change with respect to the Company. The Company shall
promptly provide to Parent (or its counsel) copies of all filings made by the
Company with any Governmental Entity in connection with this Agreement and the
transactions contemplated hereby.
(i) Tax Matters. The Company shall not make any tax election that
would have a material adverse effect on the tax liability or tax attributes of
the Company or any of its subsidiaries or settle or compromise any tax liability
of the Company or any of its subsidiaries. The Company shall, before filing or
causing to be filed any tax return of the Company or any of its subsidiaries or
settling any
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tax liability not described in the preceding sentence, consult with Parent and
its advisors as to the positions and elections that may be taken or made with
respect to such return, and shall take such positions or make such elections as
the Company and Parent shall jointly agree.
(j) Capital Expenditures. Except as set forth on Schedule 6.01(j),
neither the Company nor any of its subsidiaries shall make or agree to make any
new capital expenditure or expenditures which capital expenditures would exceed
$100,000 in the aggregate.
(k) Discharge of Liabilities. The Company shall not, and shall not
permit any of its subsidiaries to, pay, discharge, settle or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction, in the ordinary course of business consistent with past practice
or in accordance with their terms, of claims, liabilities or obligations
recognized or disclosed in the most recent financial statements (or the notes
thereto) of the Company included in the Company Filed SEC Documents or incurred
since the date of such financial statements in the ordinary course of business
consistent with past practice.
(l) Material Contracts. Except in the ordinary course of business,
neither the Company nor any of its subsidiaries shall (i) modify, amend or
terminate any material Contract to which the Company or such subsidiary is a
party, (ii) waive, release or assign any material rights or claims or
(iii) waive the benefits of, or agree to modify in any manner, any
confidentiality, standstill or similar agreement to which the Company or such
subsidiary is a party.
(m) Benefits Changes. The Company shall not, and shall not permit
any of its subsidiaries to, (i) increase the compensation or benefits of any
director, officer or employee, except for increases in the ordinary course that
are consistent with past practice, (ii) adopt any amendment to a Benefit Plan
that materially increases the cost thereof, (iii) enter into any employment or
consulting agreement with any director, officer or employee or (iv) accelerate
the payment of compensation or benefits to any director, officer or employee.
(n) General. The Company shall not, and shall not permit any of its
subsidiaries to, authorize any of, or commit or agree to take any of, the
foregoing actions otherwise prohibited by this Section 6.01.
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SECTION 6.02. No Solicitation. (a) The Company shall, and shall
cause its officers, directors, employees, representatives and agents to,
immediately cease any discussions or negotiations with any parties that may be
ongoing with respect to a Takeover Proposal (as hereinafter defined). The
Company shall not, nor shall it permit any of its subsidiaries to, nor shall it
authorize or permit any of its directors, officers, or employees or any
investment banker, financial advisor, attorney, accountant or other
representative or agent retained by it to, directly or indirectly, (i) solicit,
initiate or encourage (including by way of furnishing information), or take any
other action designed or reasonably likely to facilitate, any inquiries or the
making of any proposal which constitutes, or may reasonably be expected to lead
to, any Takeover Proposal or (ii) participate in any discussions or negotiations
regarding any Takeover Proposal; provided, however, that if, at any time prior
to the acceptance for payment of Shares pursuant to the Offer, the Board of
Directors of the Company determines in good faith, after consultation with
outside counsel, that it is necessary to do so in order to comply with its
fiduciary duties to the Company's shareholders under applicable law, the Company
may, in response to a Takeover Proposal that was not solicited subsequent to the
date hereof, and subject to compliance with Section 6.02(c), (x) furnish
information with respect to the Company to any person pursuant to a
confidentiality agreement in a form approved by Parent (such approval not to be
unreasonably withheld) and (y) participate in negotiations regarding such
Takeover Proposal. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding sentence by any
director, officer or employee of the Company or any of its subsidiaries or any
investment banker, financial advisor, attorney, accountant or other
representative or agent of the Company or any of its subsidiaries, whether or
not such person is purporting to act on behalf of the Company or any of its
subsidiaries or otherwise, shall be deemed to be a breach of this
Section 6.02(a) by the Company. For purposes of this Agreement, "Takeover
Proposal" means any inquiry, proposal or offer, or any expression of interest by
any third party relating to the Company's willingness or ability to receive or
discuss a proposal or offer, other than a proposal or offer by Parent or any of
its subsidiaries, for a merger, consolidation or other business combination
involving, or any purchase of, more than 10% of the consolidated assets of the
Company or more than 10% of the Shares.
(b) Except as set forth in this Section 6.02, neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw or modify,
or propose
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to withdraw or modify, in a manner adverse to Parent, the approval or
recommendation by such Board of Directors or such committee of the Offer, the
Merger or this Agreement, (ii) approve or recommend, or propose to approve or
recommend, any Takeover Proposal or (iii) cause the Company to enter into any
letter of intent, agreement in principle, acquisition agreement or other
similar agreement (each, an "Acquisition Agreement") related to any Takeover
Proposal. Notwithstanding the foregoing, in the event that prior to the
acceptance for payment of Shares pursuant to the Offer the Board of Directors
of the Company determines in good faith, after consultation with outside
counsel, that it is necessary to do so in order to comply with its fiduciary
duties to the Company's shareholders under applicable law, the Board of
Directors of the Company may, in response to a Superior Proposal (as defined
below) that was not solicited subsequent to the date hereof (subject to this
and the following sentences), (x) withdraw or modify its approval or
recommendation of the Offer, the Merger or this Agreement or (y) approve or
recommend such Superior Proposal or terminate this Agreement (and
concurrently with or after such termination, if it so chooses, cause the
Company to enter into any Acquisition Agreement with respect to such Superior
Proposal), but in each of the cases set forth above, only at a time that is
after the second business day following Parent's receipt of written notice
advising Parent that the Board of Directors of the Company has received a
Superior Proposal, specifying the material terms and conditions of such
Superior Proposal and identifying the person making such Superior Proposal.
For purposes of this Agreement, a "Superior Proposal" means any bona fide
Takeover Proposal (except that references to "10%" in the definition of
Takeover Proposal shall be deemed to be "50%") made by a third party on terms
which the Board of Directors of the Company determines in its good faith
judgment (based on the advice of a financial advisor of nationally recognized
reputation) to be more favorable to the Company's shareholders than the Offer
and the Merger and for which financing, to the extent required, is then
committed or which, in the good faith judgment of the Board of Directors of
the Company, is reasonably capable of being financed by such third party.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 6.02, the Company shall immediately
advise Parent orally and in writing of any request for information or of any
Takeover Proposal, the material terms and conditions of such request or Takeover
Proposal and the identity of the person making such request or Takeover
Proposal. The Company will immediately inform Parent of any material change in
the
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details (including amendments or proposed amendments) of any such request or
Takeover Proposal.
(d) Nothing contained in this Section 6.02 shall prohibit the Company
from taking and disclosing to its shareholders a position contemplated by
Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure
to the Company's shareholders if, in the good faith judgment of the Board of
Directors of the Company, after consultation with outside counsel, failure so to
disclose would be inconsistent with applicable law; provided, however, neither
the Company nor its Board of Directors nor any committee thereof shall, except
as specifically permitted by Section 6.02(b), withdraw or modify, or propose to
withdraw or modify, its position with respect to the Offer, the Merger or this
Agreement or approve or recommend, or propose to approve or recommend, a
Takeover Proposal.
SECTION 6.03. Other Actions. The Company shall not, and shall not
permit any of its subsidiaries to, take any action that would, or that could
reasonably be expected to, result in (i) any of the representations and
warranties of the Company set forth in this Agreement that are qualified as to
materiality becoming untrue, (ii) any of such representations and warranties
that are not so qualified becoming untrue in any material respect or (iii) any
of the Offer Conditions not being satisfied (subject to the Company's right to
take actions specifically permitted by Section 6.02).
ARTICLE VII
Additional Agreements
SECTION 7.01. Shareholder Approval; Preparation of Proxy Statement.
(a) If the Company Shareholder Approval is required by law, the Company shall,
as soon as practicable following the expiration of the Offer, duly call, give
notice of, convene and hold a meeting of its shareholders (the "Shareholders
Meeting") for the purpose of obtaining the Company Shareholder Approval. The
Company shall, through its Board of Directors, recommend to its shareholders
that the Company Shareholder Approval be given. Notwithstanding the foregoing,
if Sub or any other subsidiary of Parent shall acquire at least 90% of the
outstanding Shares, the parties shall, at the option and request of Parent, take
all necessary and appropriate action to cause the Merger to become effective as
soon as practicable after the expiration of the Offer without a
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Shareholders Meeting in accordance with Section 23-1-40-4 of the IBCL. Without
limiting the generality of the foregoing, except as specifically permitted by
Section 6.02(b) the Company agrees that its obligations pursuant to the first
sentence of this Section 7.01(a) shall not be affected by (i) the commencement,
public proposal, public disclosure or communication to the Company of any
Takeover Proposal or (ii) the withdrawal or modification by the Board of
Directors of the Company of its approval or recommendation of the Offer, this
Agreement or the Merger.
(b) If the Company Shareholder Approval is required by law, the
Company shall, as soon as practicable following the expiration of the Offer,
prepare and file a preliminary Proxy Statement with the SEC and shall use its
best efforts to respond to any comments of the SEC or its staff and to cause the
Proxy Statement to be mailed to the Company's shareholders as promptly as
practicable after responding to all such comments to the satisfaction of the
staff. The Company shall notify Parent promptly of the receipt of any comments
from the SEC or its staff and of any request by the SEC or its staff for
amendments or supplements to the Proxy Statement or for additional information
and will supply Parent with copies of all correspondence between the Company or
any of its representatives, on the one hand, and the SEC or its staff, on the
other hand, with respect to the Proxy Statement or the Merger. If at any time
prior to the Shareholders Meeting there shall occur any event that should be set
forth in an amendment or supplement to the Proxy Statement, the Company shall
promptly prepare and mail to its shareholders such an amendment or supplement.
The Company shall not mail any Proxy Statement, or any amendment or supplement
thereto, to which Parent reasonably objects.
(c) Parent agrees to cause all Shares purchased pursuant to the Offer
and all other Shares owned by Parent or any subsidiary of Parent to be voted in
favor of the Company Shareholder Approval.
SECTION 7.02. Access to Information. Upon reasonable notice and
subject to restrictions contained in confidentiality agreements to which the
Company is subject (from which it shall use reasonable efforts to be released),
the Company shall, and shall cause each of its subsidiaries to, afford to Parent
and to the officers, employees, accountants, counsel and other representatives
of Parent access, during normal business hours during the period prior to the
Effective Time, to all its properties, books, contracts, commitments and records
and, during such period, the Company shall, and shall cause each of its
subsidiaries
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to, furnish promptly to Parent (a) a copy of each report, schedule, registration
statement and other document filed or received by it during such period pursuant
to the requirements of the federal or state securities laws or the federal tax
laws, or state, local or foreign tax laws and (b) all other information
concerning its business, properties and personnel as Parent may reasonably
request (including the Company's outside accountants' work papers). Except as
otherwise agreed to by the Company, unless and until Parent and Sub shall have
purchased a majority of the outstanding Shares pursuant to the Offer or
otherwise, and notwithstanding termination of this Agreement, the terms of the
Confidential Disclosure Agreement dated October 13, 1997 between an affiliate of
Parent and the Company shall apply to all information about the Company which
has been furnished under this Agreement by the Company to Parent or Sub.
SECTION 7.03. Reasonable Efforts. Each of the Company, Parent and
Sub agree to use its reasonable efforts to take, or cause to be taken, all
actions necessary to comply promptly with all legal requirements that may be
imposed on itself with respect to the Offer and the Merger (which actions shall
include furnishing all information required under the HSR Act and in connection
with approvals of or filings with any other Governmental Entity) and shall
promptly cooperate with and furnish information to each other in connection with
any such requirements imposed upon any of them or any of their subsidiaries in
connection with the Offer and the Merger. Each of the Company, Parent and Sub
shall, and shall cause its subsidiaries to, use its reasonable efforts to take
all reasonable actions necessary to obtain (and shall cooperate with each other
in obtaining) any consent, authorization, order or approval of, or any exemption
by, any Governmental Entity or other public or private third party required to
be obtained or made by the Company, Parent, Sub or any of their subsidiaries in
connection with the Offer and the Merger or the taking of any action
contemplated thereby or by this Agreement, except that no party need waive any
substantial rights or agree to any substantial limitation on its operations or
to dispose of any assets. Parent shall cause Sub to comply with its obligations
under this Agreement.
SECTION 7.04. Company Stock Options.
(a) As soon as practicable following the date of this Agreement, the
Board of Directors of the Company (or, if appropriate, any committee
administering the Software Artistry, Inc. Amended and Restated Incentive Stock
Option Plan (the "Company Stock Plans")) shall adopt such
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resolutions or take other actions as may be required to effect the following:
(i) adjust the terms of all outstanding Company Stock Options granted
under the Company Stock Plans as necessary to provide that, at the
Effective Time, each Company Stock Option outstanding immediately after the
Effective Time shall be converted into an option to acquire, on the same
terms and conditions as were applicable under the Company Stock Option, the
number of shares of Parent common stock, par value $.50 per share ("Parent
Common Stock") (rounded down to the nearest whole share) determined by
multiplying the number of shares of Company Common Stock subject to such
Company Stock Option by a fraction, the numerator of which is the Offer
Price and the denominator of which is the average closing price of Parent
Common Stock on the New York Stock Exchange Composite Transactions Tape on
the 10 trading days immediately preceding the date on which the Effective
Time occurs (the "Exchange Ratio"), at a price per share of Parent Common
Stock (rounded up to the nearest tenth of a cent) equal to (A) the
aggregate exercise price for the shares of Company Common Stock otherwise
purchasable pursuant to such Company Stock Option divided by (B) the
Exchange Ratio (each, as so adjusted, a "Substitute Option"); and
(ii) amend the Incentive Stock Option Plan to eliminate the final
sentence of Section 4(c) thereof and make such other changes to the Company
Stock Plans as Parent and the Company may agree are appropriate to give
effect to the Merger.
(b) By virtue of the Merger and without the need of any further corporate
action, Parent shall assume all obligations of the Company under the Company
Stock Plans, including with respect to the Company Stock Options outstanding
immediately after the Effective Time.
(c) No later than the Effective Time, Parent shall prepare and file with
the SEC a registration statement on Form S-8 (or another appropriate form)
registering a number of shares of Parent Common Stock equal to the number of
shares subject to the Substitute Options. Such registration statement shall be
kept effective (and the current status of the initial offering prospectus or
prospectuses required thereby shall be maintained) at least for so long as any
Substitute Options may remain outstanding.
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(d) Except as otherwise contemplated by this Section 7.04 and except to the
extent required under the respective terms of the Company Stock Options or other
applicable agreements, all restrictions or limitations on transfer and vesting
with respect to Company Stock Options awarded under the Company Stock Plans or
any other plan, program or arrangement of the Company, to the extent that such
restrictions or limitations shall not have already lapsed, shall remain in full
force and effect with respect to such options after giving effect to the Merger
and the assumption by Parent as set forth above. Notwithstanding the foregoing,
the Substitute Options shall not be subject to the provision of the Company
Stock Plan providing for the lapse of Company Stock Options upon the
consummation of the transactions contemplated by this Agreement.
(e) The Company shall amend the Stock Purchase Plan to terminate the
commencement of any Offering (as defined therein) that is scheduled to commence
after the date hereof.
SECTION 7.05. Directors. Promptly upon the acceptance for payment
of, and payment for, Shares by Sub pursuant to the Offer, Sub shall be entitled
to designate such number of directors on the Board of Directors of the Company
as will give Sub, subject to compliance with Section 14(f) of the Exchange Act,
a majority of such directors, and the Company shall, at such time, cause Sub's
designees to be so elected by its existing Board of Directors; provided,
however, that in the event that Sub's designees are elected to the Board of
Directors of the Company, until the Effective Time such Board of Directors shall
have at least two directors who are directors on the date of this Agreement and
who are not officers of the Company (the "Independent Directors"); and provided
further that, in such event, if the number of Independent Directors shall be
reduced below two for any reason whatsoever, the remaining Independent Director
shall designate a person to fill such vacancy who shall be deemed to be an
Independent Director for purposes of this Agreement or, if no Independent
Directors then remain, the other directors shall designate two persons to fill
such vacancies who shall not be officers or affiliates of the Company, or
officers or affiliates of Parent or any of its subsidiaries, and such persons
shall be deemed to be Independent Directors for purposes of this Agreement.
Subject to applicable law, the Company shall take all action requested by Parent
necessary to effect any such election, including mailing to its shareholders the
Information Statement containing the information required by Section 14(f) of
the Exchange Act and Rule 14f-1 promulgated thereunder, and the Company
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agrees to make such mailing with the mailing of the Schedule 14D-9 (provided
that Sub shall have provided to the Company on a timely basis all information
required to be included in the Information Statement with respect to Sub's
designees). In connection with the foregoing, the Company will promptly, at the
option of Parent, either increase the size of the Company's Board of Directors
and/or obtain the resignation of such number of its current directors as is
necessary to enable Sub's designees to be elected or appointed to, and to
constitute a majority of the Company's Board of Directors as provided above.
SECTION 7.06. Fees and Expenses. (a) Except as provided below in
this Section 7.06, all fees and expenses incurred in connection with the Offer,
the Merger, this Agreement and the transactions contemplated by this Agreement
shall be paid by the party incurring such fees or expenses, whether or not the
Offer or the Merger is consummated.
(b) The Company shall pay, or cause to be paid, in same day funds to
Parent $6,000,000 (the "Termination Fee") under the circumstances and at the
times set forth as follows:
(i) if the Company terminates this Agreement under Section 9.01(e), or
if Parent or Sub terminates this Agreement under Section 9.01(d), the
Company shall pay the Termination Fee upon demand; and
(ii) if, at the time of any other termination of this Agreement (other
than pursuant to Section 9.01(a) or Section 9.01(b)(ii) or by the Company
pursuant to Section 9.01(f)), a Takeover Proposal shall have been made
(other than a Takeover Proposal made prior to the date hereof), and within
12 months of such termination, the Company shall enter into an Acquisition
Agreement providing for a Takeover Proposal or a transaction resulting from
a Takeover Proposal shall be consummated, the Company shall pay the
Termination Fee concurrently with the earlier of the entering into of such
Acquisition Agreement or the consummation of such transaction.
SECTION 7.07. Indemnification; Insurance. (a) Parent and Sub agree
that all rights to indemnification for acts or omissions occurring prior to the
Effective Time now existing in favor of the current or former directors or
officers (the "Indemnified Parties") of the Company and its subsidiaries as
provided in their respective articles of incorporation or by-laws (or similar
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organizational documents), shall survive the Merger and shall continue in full
force and effect in accordance with their terms.
(b) For six years from the Effective Time, Parent shall, unless
Parent agrees in writing to guarantee the indemnification obligations set forth
in Section 7.07(a), maintain in effect the Company's current directors' and
officers' liability insurance covering those persons who are currently covered
by the Company's directors' and officers' liability insurance policy (a copy of
which has been heretofore delivered to Parent) (or, in lieu of maintaining such
insurance, cause coverage to be provided under any policy maintained for the
benefit of Parent or any of its subsidiaries or otherwise obtained by Parent, so
long as the terms thereof are no less advantageous to the intended beneficiaries
thereof than those of the Company's policy); provided, however, that in no event
shall Parent be required to expend in any one year an amount in excess of 200%
of the annual premiums currently paid by the Company for such insurance, which
the Company represents is $70,000; and, provided further, that if the annual
premiums of such insurance coverage exceed such amount, Parent shall be
obligated to obtain a policy with the greatest coverage available for a cost not
exceeding such amount.
(c) This Section 7.07 shall survive the consummation of the Merger at
the Effective Time, is intended to benefit the Company, Parent, the Surviving
Corporation and the Indemnified Parties, and shall be binding on all successors
and assigns of Parent and the Surviving Corporation.
SECTION 7.08. Certain Litigation. The Company agrees that it shall
not settle any litigation commenced after the date hereof against the Company or
any of its directors by any shareholder of the Company relating to the Offer,
the Merger, this Agreement, the Shareholder Agreement or the Noncompetition
Agreements, without the prior written consent of Parent. In addition, the
Company shall not voluntarily cooperate with any third party that may hereafter
seek to restrain or prohibit or otherwise oppose the Offer or the Merger and
shall cooperate with Parent and Sub to resist any such effort to restrain or
prohibit or otherwise oppose the Offer or the Merger.
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ARTICLE VIII
Conditions
SECTION 8.01. Conditions to Each Party's Obligation To Effect the
Merger. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction or waiver prior to the Closing Date of the following
conditions:
(a) Company Shareholder Approval. If required by applicable law, the
Company Shareholder Approval shall have been obtained.
(b) No Injunctions or Restraints. No Law or Order issued by any
court of competent jurisdiction or other Governmental Entity or other legal
restraint or prohibition preventing the consummation of the Merger shall be
in effect; provided, however, that each of the parties shall have used
reasonable efforts to prevent the entry of any such Order and to appeal as
promptly as possible any Order that may be entered.
(c) Purchase of Shares. Sub shall have previously accepted for
payment and paid for Shares pursuant to the Offer.
ARTICLE IX
Termination and Amendment
SECTION 9.01. Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval of the terms
of this Agreement by the shareholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if (x) as a result of the failure of any of the Offer
Conditions the Offer shall have terminated or expired in accordance
with its terms without Sub having accepted for payment any Shares
pursuant to the Offer or (y) Sub shall not have accepted for payment
any Shares pursuant to the Offer prior to June 30, 1998; provided,
however, that the right to terminate this Agreement pursuant to this
Section 9.01(b)(i) shall not be
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available to any party whose failure to perform any of its obligations
under this Agreement results in the failure of any such condition or
if the failure of such condition results from facts or circumstances
that constitute a breach of representation or warranty under this
Agreement by such party; or
(ii) if any Governmental Entity shall have issued an Order or
taken any other action permanently enjoining, restraining or otherwise
prohibiting the acceptance for payment of, or payment for, Shares
pursuant to the Offer or the Merger and such Order or other action
shall have become final and nonappealable;
(c) by Parent or Sub prior to the purchase of Shares pursuant to the
Offer in the event of a breach or failure to perform by the Company of any
representation, warranty, covenant or other agreement contained in this
Agreement that (i) would give rise to the failure of a condition set forth
in paragraph (e) or (f) of Exhibit A and (ii) cannot be or has not been
cured within 20 days after the giving of written notice to the Company;
(d) by Parent or Sub if either Parent or Sub is entitled to terminate
the Offer as a result of the occurrence of any event set forth in
paragraph (d) of Exhibit A to this Agreement;
(e) by the Company in accordance with Section 6.02(b), provided that
it has complied with all provisions thereof, including the notice
provisions therein, and that it complies with applicable requirements
relating to the payment (including the timing of any payment) of the
Termination Fee; or
(f) by the Company, if Parent or Sub shall have breached or failed to
perform in any material respect any of their respective representations,
warranties, covenants or other agreements contained in this Agreement,
which breach or failure to perform is incapable of being cured or has not
been cured within 20 days after the giving of written notice to Parent or
Sub, as applicable, except, in any case, such breaches and failures which
are not reasonably likely to affect adversely Parent's or Sub's ability to
consummate the Offer or the Merger.
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SECTION 9.02. Effect of Termination. In the event of a termination
of this Agreement by either the Company or Parent as provided in Section 9.01,
this Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Sub or the Company or their respective
officers or directors, except with respect to the last sentence of
Section 1.02(c), Section 4.16, Section 5.06, the last sentence of Section 7.02,
Section 7.06, this Section 9.02 and Article X; provided, however, that nothing
herein shall relieve any party for liability for any wilful breach hereof.
SECTION 9.03. Amendment. This Agreement may be amended by the
parties hereto, by duly authorized action taken, at any time before or after
obtaining the Company Shareholder Approval, but, after the purchase of Shares
pursuant to the Offer, no amendment shall be made which decreases the Merger
Consideration and, after the Company Shareholder Approval, no amendment shall be
made which by law requires further approval by such shareholders without
obtaining such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto. Following
the election or appointment of the Sub's designees pursuant to Section 7.05 and
prior to the Effective Time, the affirmative vote of a majority of the
Independent Directors then in office shall be required by the Company to
(i) amend or terminate this Agreement by the Company, (ii) exercise or waive any
of the Company's rights or remedies under this Agreement or (iii) extend the
time for performance of Parent and Sub's respective obligations under this
Agreement.
SECTION 9.04. Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed, subject to
Section 9.03, (i) extend the time for the performance of any of the obligations
or other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto or (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
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ARTICLE X
Miscellaneous
SECTION 10.01. Nonsurvival of Representations, Warranties and
Agreements. None of the representations and warranties in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time or, in the case of the Company, shall survive the acceptance for payment
of, and payment for, Shares by Sub pursuant to the Offer. This Section 10.01
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time of the Merger, including
Section 7.07.
SECTION 10.02. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed), sent by overnight courier (providing proof of
delivery) or mailed by registered or certified mail (return receipt requested)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Parent or Sub, to
International Business Machines Corporation
New Orchard Road
Armonk, NY 10504
Attention: Mr. Lee A. Dayton
Telecopy No.: (914) 499-7803
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Attention: Allen Finkelson, Esq.
Telecopy No.: (212) 474-3700
and
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(b) if to the Company, to
Software Artistry, Inc.
9449 Priority Way West Drive
Indianapolis, IN 46240
Attention: W. Scott Webber
Telecopy No.: (317) 843-7477
with a copy to:
Hinckley, Allen & Snyder
28 State Street
Boston, MA 02109
Attention: Paul Bork, Esq.
Telecopy No.: (617) 345-9020
SECTION 10.03. Interpretation. When a reference is made in this
Agreement to an Article or a Section, such reference shall be to an Article or a
Section of this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation". The phrase
"made available" in this Agreement shall mean that the information referred to
has been made available if requested by the party to whom such information is to
be made available. As used in this Agreement, "material adverse change" or
"material adverse effect" means, when used in connection with the Company, any
change or effect (or any development that, insofar as can reasonably be
foreseen, is likely to result in any change or effect) that, individually or in
the aggregate with any such other changes or effects, is materially adverse to
the business, properties, financial condition or results of operations of the
Company and its subsidiaries taken as a whole. As used in this Agreement, the
term "subsidiary" of any person means another person, an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first person,
and the term "Significant Subsidiary" of any person means ]any Significant
Subsidiary
43
<PAGE>
of such person within the meaning of Rule 1-02 of Regulation S-X of the SEC.
SECTION 10.04. Counterparts. This Agreement may be executed in two
or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
SECTION 10.05. Entire Agreement; No Third Party Beneficiaries. This
Agreement (including the documents and the instruments referred to herein)
(a) constitutes the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) except as provided in Section 7.07, is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
SECTION 10.06. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of New York without regard to
any applicable conflicts of law, except to the extent the IBCL shall be held to
govern the terms of the Merger.
SECTION 10.07. Publicity. Except as otherwise required by law, court
process or the rules of the NYSE or the Nasdaq National Market or as
contemplated or provided elsewhere herein, for so long as this Agreement is in
effect, neither the Company nor Parent shall, or shall permit any of its
subsidiaries to, issue or cause the publication of any press release or other
public announcement with respect to the transactions contemplated by this
Agreement, the Shareholder Agreement or the Noncompetition Agreements without
the consent of the other party, which consent shall not be unreasonably
withheld.
SECTION 10.08. Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly owned subsidiary of Parent. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
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<PAGE>
SECTION 10.09. Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States located in the State of New York or any New York state court, this
being in addition to any other remedy to which they are entitled at law or in
equity. In addition, each of the parties hereto waives any right to trial by
jury with respect to any claim
45
<PAGE>
or proceeding related to or arising out of this Agreement or any of the
transactions contemplated hereby.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
INTERNATIONAL BUSINESS MACHINES
CORPORATION,
by /s/ Lee A. Dayton
----------------------------------
Name: Lee A. Dayton
Title: Vice President, Corporate
Development and Real
Estate
HOOSIER ACQUISITION CORP.,
by /s/ Lee A. Dayton
----------------------------------
Name: Lee A. Dayton
Title: President
SOFTWARE ARTISTRY, INC.
by /s/ W. Scott Webber
----------------------------------
Name: W. Scott Webber
Title:
46
<PAGE>
EXHIBIT A
Conditions of the Offer
Notwithstanding any other term of the Offer or this Agreement, Sub
shall not be required to accept for payment or, subject to any applicable rules
and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Sub's obligation to pay for or return tendered Shares after the
termination or withdrawal of the Offer), to pay for any Shares tendered pursuant
to the Offer unless prior to the Expiration Date (as defined in the Offer)
(i) there shall have been validly tendered and not withdrawn prior to the
expiration of the Offer such number of Shares that would constitute a majority
of the outstanding Shares (determined on a fully diluted basis for all
outstanding stock options and any other rights to acquire Shares) (the "Minimum
Condition") and (ii) any waiting period under the HSR Act applicable to the
purchase of Shares pursuant to the Offer shall have expired or been terminated.
Furthermore, notwithstanding any other term of the Offer or this Agreement, Sub
shall not be required to accept for payment or, subject as aforesaid, to pay for
any Shares not theretofore accepted for payment or paid for, and may terminate
the Offer if, at any time on or after the date of this Agreement and prior to
the Expiration Date, any of the following conditions exists (other than as a
result of any action or inaction of Parent or any of its subsidiaries that
constitutes a breach of this Agreement):
(a) there shall be threatened, instituted or pending by any
Governmental Entity any suit, action or proceeding (i) challenging the
acquisition by Parent or Sub of any Shares under the Offer, seeking to
restrain or prohibit the making or consummation of the Offer or the Merger
or seeking to obtain from the Company, Parent or Sub any damages that are
material in relation to the Company and its subsidiaries taken as a whole,
(ii) seeking to prohibit or materially limit the ownership or operation by
the Company, Parent or any of their respective subsidiaries of a material
portion of the business or assets of the Company and its subsidiaries,
taken as a whole, or Parent and its subsidiaries, taken as a whole, or to
compel the Company and its subsidiaries, taken as a whole or Parent to
dispose of or hold separate any material portion of the business or assets
of the Company or Parent and its subsidiaries, taken as a whole, in each
case as a result of the Offer or any of the other transactions contemplated
by this Agreement, (iii) seeking to impose material limitations on the
ability of Parent or Sub to acquire or hold, or
<PAGE>
exercise full rights of ownership of, any Shares to be accepted for payment
pursuant to the Offer including, without limitation, the right to vote such
Shares on all matters properly presented to the shareholders of the
Company, (iv) seeking to prohibit Parent or any of its subsidiaries from
effectively controlling in any material respect any material portion of the
business or operations of the Company or its subsidiaries or (v) which
otherwise is reasonably likely to have a material adverse effect on the
Company;
(b) there shall be any Law or Order enacted, entered, enforced,
promulgated or deemed applicable to the Offer or the Merger, by any
Governmental Entity, other than the application to the Offer or the Merger
of applicable waiting periods under the HSR Act, that is reasonably likely
to result, directly or indirectly, in any of the consequences referred to
in clauses (i) through (v) of paragraph (a) above;
(c) there shall have occurred any material adverse change with respect
to the Company;
(d) (i) the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified in a manner adverse to Parent or Sub its
approval or recommendation of the Offer or the Merger or its adoption of
this Agreement, or approved or recommended any Takeover Proposal, (ii) the
Company shall have entered into any agreement with respect to any Superior
Proposal or (iii) the Board of Directors of the Company or any committee
thereof shall have resolved to take any of the foregoing actions;
(e) any of the representations and warranties of the Company set forth
in this Agreement that are qualified as to materiality shall not be true
and correct or any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each
case at the date of this Agreement and at the scheduled or extended
expiration of the Offer;
(f) the Company shall have failed to perform in any material respect
any material obligation or to comply in any material respect with any
material agreement or material covenant of the Company to be performed or
complied with by it under this Agreement, which failure to perform or
comply has not been cured within 5 business days after the giving of
written notice to the Company; or
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<PAGE>
(g) this Agreement shall have been terminated in accordance with its
terms.
The foregoing conditions are for the sole benefit of Parent and Sub
and may, subject to the terms of this Agreement, be waived by Parent and Sub in
whole or in part at any time and from time to time in their reasonable
discretion. The failure by Parent or Sub at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and circumstances shall not be
deemed a waiver with respect to any other facts and circumstances and each such
right shall be deemed an ongoing right that may be asserted at any time and from
time to time. Terms used but not defined herein shall have the meanings
assigned to such terms in the Agreement to which this Exhibit A is a part.
3
<PAGE>
SHAREHOLDER AGREEMENT, dated as of December 18, 1997, among
INTERNATIONAL BUSINESS MACHINES CORPORATION, a New York
corporation ("Parent"), HOOSIER ACQUISITION CORP., an Indiana
corporation and a wholly owned subsidiary of Parent ("Sub"), and
the persons listed on Schedule A hereto (each a "Shareholder",
and, collectively, the "Shareholders").
WHEREAS, Parent, Sub and Software Artistry, Inc., an Indiana
corporation (the "Company"), propose to enter into an Agreement and Plan of
Merger of even date herewith (as the same may be amended or supplemented, the
"Merger Agreement") providing for (i) the making of a cash tender offer (as such
offer may be amended from time to time as permitted under the Merger Agreement,
the "Offer") by Sub for all the outstanding shares of Common Stock, no par
value, of the Company (the "Company Common Stock") and (ii) the merger of Sub
with the Company (the "Merger");
WHEREAS, each Shareholder is the record and beneficial owner of the
number of shares of Company Common Stock set forth opposite such Shareholder's
name on Schedule A hereto; such shares of Company Common Stock, as such shares
may be adjusted by stock dividend, stock split, recapitalization, combination or
exchange of shares, merger, consolidation, reorganization or other change or
transaction of or by the Company, together with shares of Company Common Stock
that may be acquired after the date hereof by such Shareholder, including shares
of Company Common Stock issuable upon the exercise of options to purchase
Company Common Stock (as the same may be adjusted as aforesaid), being
collectively referred to herein as the "Shares"; and
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, Parent and Sub have requested that the Shareholders enter into this
Agreement;
NOW, THEREFORE, to induce Parent and Sub to enter into, and in
consideration of their entering into, the Merger Agreement, and in consideration
of the premises and the
<PAGE>
representations, warranties and agreements contained herein, the parties agree
as follows:
1. Purchase and Sale of Shares.
(a) Each Shareholder hereby severally and not jointly agrees that it
shall tender its Shares into the Offer and that it shall not withdraw any
Shares so
tendered (it being understood that the obligation contained in this
sentence is unconditional, subject to Section 8). In addition, each
Shareholder hereby severally and not jointly agrees to sell to Sub, and Sub
hereby agrees to purchase, all such Shareholder's Shares at a price per
Share equal to the Offer Price (as defined in the Merger Agreement,
provided that (i) such obligation of Sub to purchase is subject to Sub
having accepted Shares for payment under the Offer and the Minimum
Condition (as defined in Exhibit A to the Merger Agreement) having been
satisfied, which conditions may be waived by Sub in its sole discretion,
and (ii) such obligation of such Shareholder to sell is subject to the
Minimum Condition having been satisfied or a Takeover Proposal (as defined
in the Merger Agreement) having been made.
(b) Subject to the satisfaction or waiver of the requirements of the
second sentence in paragraph (a) above, (i) if a Takeover Proposal shall
have been made and the Minimum Condition shall not have been satisfied,
such Shareholder's Shares shall be purchased within three business days of
the delivery by Sub to the Shareholder of notice of Sub's intention to so
purchase such Shareholder's Shares, which notice may be given by Sub at any
time following the time such Takeover Proposal shall have been made and
shall specify the place, time and date for the closing of the purchase by
Sub pursuant to this paragraph (b), or (ii) if Sub shall have accepted
Shares for payment in the Offer and the Minimum Condition shall have been
satisfied, such Shareholder's Shares shall be purchased under the Offer.
(c) (i) In the event that the Merger Agreement shall have been
terminated and Sub would be entitled to purchase each Shareholder's Shares
pursuant to Section 1(b)(i), Sub may elect, by notice given in the manner
set forth in Section 1(b)(i), in lieu of purchasing such Shareholder's
Shares, to receive from such Shareholder, and each Shareholder hereby
agrees to pay to Sub on demand, an amount equal to all profit
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<PAGE>
(determined in accordance with Section 1(c)(ii)) of such Shareholder from
the consummation of any Takeover Proposal that is consummated within one
year of such termination.
(ii) For purposes of this Section 1(c), the profit of any Shareholder
from any Takeover Proposal shall equal (A) the aggregate consideration
received by such Shareholder pursuant to such Takeover Proposal, valuing
any non-cash consideration (including any residual interest in the Company)
at its fair market value on the date of such consummation plus (B) the
value of all Shares of such Shareholder disposed of after the termination
of the Merger Agreement and prior to the date of such consummation (which
shall be the greater of (i) the aggregate consideration received by such
Shareholder in connection with the disposition of such Shares (valuing any
non-cash consideration at its fair market value on the date of disposition)
or (ii) the fair market value, on the date of disposition, of such Shares),
less (C) the product of (x) the number of Shares held by such Shareholder
on the date of termination of the Merger Agreement and (y) the original
Offer Price.
(iii) For purposes of this Section 1(c), the fair market value of any
non-cash consideration consisting of:
(A) securities listed on a national securities exchange or traded on
the Nasdaq National Market shall be equal to the average closing
price per share of such security as reported on such exchange or
Nasdaq National Market for the five trading days after the date
of determination; and
(B) consideration which is other than securities of the form
specified in clause (A) of this Section 1(c)(iii) shall be
determined by a nationally recognized independent investment
banking firm mutually agreed upon by the parties within
10 business days of the event requiring selection of such banking
firm; provided, however, that if the parties are unable to agree
within two business days after the date of such event as to the
investment banking firm, then the parties shall each select one
firm, and those firms shall select a third investment banking
firm,
3
<PAGE>
which third firm shall make such determination; provided further,
that the fees and expenses of such investment banking firm shall
be borne equally by Parent, on the one hand, and the
Shareholders, on the other hand. The determination of the
investment banking firm shall be binding upon the parties.
(iv) Any payment of profit under this Section 1(c) shall be paid by
wire transfer of same day funds to an account designated by Parent. If all
or a portion of the consideration received for the Shares by the
Shareholder is in the form of non-cash consideration, the Shareholder shall
pay to Parent the profit on such portion by either, at Parent's election,
(i) transferring to Parent Parent's pro rata share of such non-cash
consideration (which transfer shall be made immediately following the
determination of the value of such non-cash consideration) or (ii) selling
such non-cash consideration (which sale shall be effected as soon as
practicable and the allocable portion of the proceeds of which shall be
paid to Parent immediately following the settlement of such sale).
2. Representations and Warranties of the Shareholders. Each
Shareholder hereby, severally and not jointly, represents and warrants to Parent
and Sub as follows:
(a) Authority. The Shareholder has all requisite power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by the Shareholder. This Agreement has been duly
executed and delivered by the Shareholder and, assuming this Agreement
constitutes a valid and binding obligation of Parent and Sub, constitutes a
valid and binding obligation of the Shareholder enforceable against the
Shareholder in accordance with its terms. Except for the expiration or
termination of the waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") and informational
filings with the Securities and Exchange Commission, neither the execution,
delivery or performance of this Agreement by the Shareholder nor
4
<PAGE>
the consummation by the Shareholder of the transactions contemplated hereby
will (i) require any filing with, or permit, authorization, consent or
approval of, any federal, state or local government or any court, tribunal,
administrative agency or commission or other governmental or regulatory
authority or agency, domestic, foreign or supranational (a "Governmental
Entity"), (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default under, or give rise
to any right of termination, amendment, cancelation or acceleration under,
or result in the creation of any pledge, claim, lien, charge, encumbrance
or security interest of any kind or nature whatsoever (a "Lien") upon any
of the properties or assets of the Shareholder under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease,
license, permit, concession, franchise, contract, agreement or other
instrument or obligation (a "Contract") to which the Shareholder is a party
or by which the Shareholder or any of the Shareholder's properties or
assets, including the Shareholder's Shares, may be bound or (iii) violate
any judgment, order, writ, preliminary or permanent injunction or decree
(an "Order") or any statute, law, ordinance, rule or regulation of any
Governmental Entity (a "Law") applicable to the Shareholder or any of the
Shareholder's properties or assets, including the Shareholder's Shares.
(b) The Shares. The Shareholder's Shares and the certificates
representing such Shares are now, and at all times during the term hereof
will be, held by such Shareholder, or by a nominee or custodian for the
benefit of such Shareholder, and the Shareholder has good and marketable
title to such Shares, free and clear of any Liens, proxies, voting trusts
or agreements, understandings or arrangements, except for any such Liens or
proxies arising hereunder. The Shareholder owns of record or beneficially
no shares of Company Common Stock other than such Shareholder's Shares and
shares of Company Common Stock issuable upon the exercise of Company Stock
Options.
(c) Brokers. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf
of such Shareholder.
5
<PAGE>
(d) Merger Agreement. The Shareholder understands and acknowledges
that Parent is entering into, and causing Sub to enter into, the Merger
Agreement in reliance upon the Shareholder's execution and delivery of this
Agreement.
3. Representations and Warranties of Parent and Sub. Parent and Sub
hereby jointly and severally represent and warrant to the Shareholders as
follows:
(a) Authority. Parent and Sub have the requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance
of this Agreement by Parent and Sub and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent and Sub. This Agreement has been
duly executed and delivered by Parent and Sub and, assuming this Agreement
constitutes a valid and binding obligation of the Shareholders, constitutes
a valid and binding obligation of Parent and Sub enforceable in accordance
with its terms.
(b) Securities Act. The Shares will be acquired in compliance with,
and Sub will not offer to sell or otherwise dispose of any Shares so
acquired by it in violation of any of, the Securities Exchange Act of 1934,
as amended, or the registration requirements of the Securities Act of 1933,
as amended.
(c) Financing. Sub has, or will have at the time that any payment is
required to be made to any Shareholder hereunder, the funds necessary to
make such payment to such Shareholder.
4. Covenants of the Shareholders. Each Shareholder, severally and
not jointly, agrees as follows:
(a) The Shareholder shall not, except as contemplated by the terms of
this Agreement, (i) sell, transfer, pledge, assign or otherwise dispose of,
or enter into any Contract, option or other arrangement (including any
profit sharing arrangement) or understanding with respect to the sale,
transfer, pledge, assignment or other disposition of, the Shares to any
person other than Sub or Sub's designee, (ii) enter into any voting
arrangement, whether by proxy, voting agreement, voting trust,
power-of-attorney or otherwise, with respect to the Shares or
6
<PAGE>
(iii) take any other action that would in any way restrict, limit or
interfere with the performance of its obligations hereunder or the
transactions contemplated hereby.
(b) Until the Merger is consummated or the Merger Agreement is
terminated, the Shareholder shall not, nor shall the Shareholder permit any
investment banker, financial adviser, attorney, accountant or other
representative or agent of the Shareholder to, directly or indirectly
(i) solicit, initiate or encourage (including by way of furnishing
information), or take any other action designed or reasonably likely to
facilitate, any inquiries or the making of any proposal which constitutes,
or may reasonably be expected to lead to, any Takeover Proposal or
(ii) participate in any discussions or negotiations regarding any Takeover
Proposal. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding sentence by an
investment banker, financial advisor, attorney, accountant or other
representative or agent of the Shareholder shall be deemed to be a
violation of this Section 4(b) by the Shareholder.
(c) At any meeting of shareholders of the Company called to vote upon
the Merger and the Merger Agreement or at any adjournment thereof or in any
other circumstances upon which a vote, consent or other approval (including
by written consent) with respect to the Merger and the Merger Agreement is
sought, each Shareholder shall, including by initiating a written consent
solicitation if requested by Parent, vote (or cause to be voted) such
Shareholder's Shares in favor of the Merger, the adoption by the Company of
the Merger Agreement and the approval of the other transactions
contemplated by the Merger Agreement. At any meeting of shareholders of
the Company or at any adjournment thereof or in any other circumstances
upon which the Shareholder's vote, consent or other approval is sought,
such Shareholder shall vote (or cause to be voted) such Shareholder's
Shares against (i) any merger agreement or merger (other than the Merger
Agreement and the Merger), consolidation, combination, sale of substantial
assets, reorganization, recapitalization, dissolution, liquidation or
winding up of or by the Company or any other Takeover Proposal
(collectively, "Alternative Transactions") or (ii) any amendment of the
Company's Third Amended and Restated Articles of Incorporation or By-laws
or other proposal or
7
<PAGE>
transaction involving the Company or any of its subsidiaries, which
amendment or other proposal or transaction would in any manner impede,
frustrate, prevent or nullify the Offer, the Merger, the Merger Agreement
or any of the other transactions contemplated by the Merger Agreement
(collectively, "Frustrating Transactions").
5. Grant of Irrevocable Proxy; Appointment of Proxy. (a) Each
Shareholder hereby irrevocably grants to, and appoints, Lee A. Dayton, Donald
D. Westfall and Archie W. Colburn, and any other individual who shall hereafter
be designated by Parent, and each of them, such Shareholder's proxy and
attorney-in-fact (with full power of substitution), for and in the name, place
and stead of such Shareholder, to vote such Shareholder's Shares, or grant a
consent or approval in respect of such Shares, at any meeting of shareholders of
the Company or at any adjournment thereof or in any other circumstances upon
which their vote, consent or other approval is sought, (i) in favor of the
Merger, the adoption by the Company of the Merger Agreement and the approval of
the other transactions contemplated by the Merger Agreement and against (i) any
merger agreement or merger (other than the Merger Agreement and the Merger),
consolidation, combination, sale of substantial assets, reorganization,
recapitalization, dissolution, liquidation or winding up of or by the Company
and (ii) any Alternative Transaction or Frustrating Transaction.
(b) Each Shareholder represents that any proxies heretofore given in
respect of such Shareholder's Shares are not irrevocable, and that any such
proxies are hereby revoked.
(c) Each Shareholder hereby affirms that the irrevocable proxy set
forth in this Section 5 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the performance of
the duties of such Shareholder under this Agreement. Such Shareholder hereby
further affirms that the irrevocable proxy is coupled with an interest and may
under no circumstances be revoked, subject to Section 8. Such Shareholder
hereby ratifies and confirms all that such irrevocable proxy may lawfully do or
cause to be done by virtue hereof. Such irrevocable proxy is executed and
intended to be irrevocable in accordance with the provisions of Section
23-1-30-3 of the Indiana Business Corporation Law. Such irrevocable proxy shall
be valid until the later to occur of (i) eleven months from the date hereof or
8
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(ii) the termination of this Agreement pursuant to Section 8.
6. Further Assurances. Each Shareholder will, from time to time,
execute and deliver, or cause to be executed and delivered, such additional or
further transfers, assignments, endorsements, consents and other instruments as
Parent or Sub may reasonably request for the purpose of effectively carrying out
the transactions contemplated by this Agreement and to vest the power to vote
such Shareholder's Shares as contemplated by Section 5. Parent and Sub jointly
and severally agree to use reasonable efforts to take, or cause to be taken, all
actions necessary to comply promptly with all legal requirements that may be
imposed with respect to the transactions contemplated by this Agreement
(including legal requirements of the HSR Act).
7. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties, except that Sub may
assign, in its sole discretion, any or all of its rights, interests and
obligations hereunder to Parent or to any direct or indirect wholly owned
subsidiary of Parent. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns. Each Shareholder agrees that this
Agreement and the obligations of such Shareholder hereunder shall attach to such
Shareholder's Shares and shall be binding upon any person or entity to which
legal or beneficial ownership of such Shares shall pass, whether by operation of
law or otherwise, including without limitation such Shareholder's heirs,
guardians, administrators or successors.
8. Termination. This Agreement, and all rights and obligations of
the parties hereunder, shall terminate upon the earliest of (a) the date upon
which the Merger Agreement is terminated pursuant to Section 9.01(a) thereof,
(b) 18 months from the date of this Agreement; provided, however, that
Sections 1, 6, 8, 10 and 13 hereof shall survive until the date that is 10
business days after the later of (i) the first anniversary of the date of any
termination of the Merger Agreement (other than any termination pursuant to
Section 9.01(a) thereof) and (ii) the date on which all waiting periods under
the HSR Act applicable to the purchase of Shares pursuant to Section 1 shall
have expired or been terminated and (c) the date that Parent or Sub shall have
purchased and paid for the Shareholders' Shares pursuant to Section 1.
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<PAGE>
9. Stop Transfer. The Company agrees with, and covenants to, Parent
and Sub that the Company shall not register the transfer of any certificate
representing any Shareholder's Shares unless such transfer is made in accordance
with the terms of this Agreement.
10. General Provisions.
(a) Payments. All payments required to be made to any party to this
Agreement shall be made by wire transfer of immediately available funds to
an account designated by such party at least one trading day prior to such
payment.
(b) Expenses. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expense.
(c) Amendments. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
(d) Notice. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed), sent by overnight courier (providing proof of
delivery) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(i) if to Parent, to
International Business Machines Corporation
New Orchard Road
Armonk, NY 10504
Attention: Mr. Lee Dayton
Telecopy No: (914) 499-7803
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with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Attention: Allen Finkelson, Esq.
Telecopy No: (212) 474-3700
and
(ii) if to a Shareholder, to the address set forth under the name of
such Shareholder on Schedule A hereto
with a copy to:
Hinckley, Allen & Snyder
28 State Street
Boston, Massachusetts 02109-1775
Attention: Paul Bork, Esq.
Telecopy No: (617) 345-9020
(e) Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Wherever the words "include", "includes"
or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation".
(f) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed
by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
(g) Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein)
(i) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the
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parties with respect to the subject matter hereof and (ii) is not intended
to confer upon any person other than the parties hereto any rights or
remedies hereunder.
(h) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York without regard to any
applicable conflicts of law.
(i) Publicity. Except as otherwise required by law, court process or
the rules of a national securities exchange or the Nasdaq National Market
or as contemplated or provided in the Merger Agreement, for so long as this
Agreement is in effect, neither any Shareholder nor Parent shall issue or
cause the publication of any press release or other public announcement
with respect to the transactions contemplated by this Agreement or the
Merger Agreement without the consent of the other parties, which consent
shall not be unreasonably withheld.
11. Shareholder Capacity. No person executing this Agreement who is
or becomes during the term hereof a director or officer of the Company makes any
agreement or understanding herein in his or her capacity as such director or
officer. Each Shareholder signs solely in his or her capacity as the record
holder and beneficial owner of, or the trustee of a trust whose beneficiaries
are the beneficial owners of, such Shareholder's Shares and nothing herein shall
limit or affect any actions taken by a Shareholder in its capacity as an officer
or director of the Company to the extent specifically permitted by the Merger
Agreement.
12. Performance by Sub. Parent covenants and agrees for the benefit
of the Shareholders that it shall cause Sub to perform in full each obligation
of Sub set forth in this Agreement.
13. Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in court of the United States located
in the State of New York or any New York State court, this being in addition to
any other remedy
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to which they are entitled at law or in equity. In addition, each of the
parties hereto waives any right to trial by jury with respect to any claim or
proceeding related to or arising out of this Agreement or any of the
transactions contemplated hereby.
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IN WITNESS WHEREOF, each of Parent and Sub has caused this Agreement
to be signed by its officer thereunto duly authorized and each Shareholder has
signed this Agreement, all as of the date first written above.
INTERNATIONAL BUSINESS
MACHINES CORPORATION,
By /s/ Lee A. Dayton
----------------------------
Name: Lee A. Dayton
Title: Vice President,
Corporate Development
and Real Estate
HOOSIER ACQUISITION CORP.
By /s/ Lee A. Dayton
----------------------------
Name: Lee A. Dayton
Title: President
SHAREHOLDERS
/s/ Joseph A. Piscopo
----------------------------
Name: Joseph A. Piscopo
/s/ W. Scott Webber
----------------------------
Name: W. Scott Webber
/s/ Donald E. Brown, M.D.
----------------------------
Name: Donald E. Brown, M.D.
/s/ Thomas E. Vanneman
----------------------------
Name: Thomas E. Vanneman
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/s/ Michael J. Robbins
----------------------------
Name: Michael J. Robbins
/s/ William M. Godfrey
----------------------------
Name: William M. Godfrey
/s/ Steven M. Ehrlich
----------------------------
Name: Steven M. Ehrlich
/s/ Scott S. McCorkle
----------------------------
Name: Scott S. McCorkle
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ACKNOWLEDGED AND AGREED
TO AS TO SECTION 9:
SOFTWARE ARTISTRY, INC.
By /s/ W. Scott Webber
-----------------------
Name: W. Scott Webber
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SCHEDULE A
NAME AND ADDRESS OF NUMBER OF NUMBER OF SHARES
SHAREHOLDER RECORD AND UNDERLYING OPTIONS
BENEFICIAL
SHARES
Joseph A. Piscopo 575,344 31,500
18 Natoma Drive
Oak Brook, IL 60523
W. Scott Webber 198,900 385,820
4914 Deer Ridge Dr.
Carmel, IN 46033-6033
Donald E. Brown, M.D. 707,000 120,000
832 Deer Ridge Dr.
Indianapolis, IN 46260
Thomas E. Vanneman 5,772 25,000
5236 Woodfield Dr.
Carmel, IN 46033-6033
Michael J. Robbins 0 257,160
11342 St. Andrews
Carmel, IN 46032
William M. Godfrey 0 100,875
14520 Quail Pointe Drive
Carmel, IN 46032-9783
Steven M. Ehrlich 500 87,148
5116 Hummingbird
Carmel, IN 46033
Scott S. McCorkle 0 57,000
10078 Bent Tree
Fishors, IN 46038-6038
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