<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended December 31, 1993
or
( ) Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from _______________
to _______________
COMMISSION FILE NO. 1-8465
STERLING SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-1873956
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
8080 NORTH CENTRAL EXPRESSWAY, SUITE 1100
DALLAS, TEXAS 75206
(Address of principal executive offices)
(214) 891-8600
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Title Shares Outstanding as of January 31, 1994
---------------------------- -----------------------------------------
Common Stock, $.10 par value 19,974,786
- 1 -
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Index to Financial Statements
Page
----
Sterling Software, Inc. Consolidated Balance Sheets at December 31, 1993
and September 30, 1993 . . . . . . . . . . . . . . . . . . . . . . . . 3
Sterling Software, Inc. Consolidated Statements of Operations for the
Three Months Ended December 31, 1993 and 1992. . . . . . . . . . . . . 4
Sterling Software, Inc. Consolidated Statements of Stockholders' Equity
for the Three Months Ended December 31, 1993 and 1992. . . . . . . . . 5
Sterling Software, Inc. Consolidated Statements of Cash Flows for the
Three Months Ended December 31, 1993 and 1992. . . . . . . . . . . . . 6
Sterling Software, Inc. Notes to Consolidated Financial Statements . . . . 7
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<PAGE>
STERLING SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share information)
A S S E T S
<TABLE>
<CAPTION>
December 31, September 30,
1993 1993
------------- -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,564 $ 29,752
Marketable securities. . . . . . . . . . . . . . . . . . . . . . . . . . . 49,288 51,354
Accounts and notes receivable, net . . . . . . . . . . . . . . . . . . . . 114,480 112,174
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 8,683 8,790
Prepaid expenses and other current assets. . . . . . . . . . . . . . . . . 11,602 12,764
--------- ---------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 213,617 214,834
Property and equipment, net of accumulated depreciation of $38,176 at
December 31, 1993 and $37,930 at September 30, 1993. . . . . . . . . . . . 29,268 27,124
Computer software, net of accumulated amortization of $77,816 at
December 31, 1993 and $74,720 at September 30, 1993. . . . . . . . . . . . 58,517 59,539
Excess cost over net assets acquired, net of accumulated amortization of
$16,835 at December 31, 1993 and $16,188 at September 30, 1993 . . . . . . 53,626 54,273
Noncurrent deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 14,449 19,958
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,527 21,933
--------- ---------
$409,004 $397,661
--------- ---------
--------- ---------
</TABLE>
L I A B I L I T I E S A N D S T O C K H O L D E R S ' E Q U I T Y
<TABLE>
<CAPTION>
<S> <C> <C>
Current liabilities:
Current portion of long-term debt. . . . . . . . . . . . . . . . . . . . . $ 2,958 $ 3,980
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . 83,301 88,847
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,757 70,709
--------- ---------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . 154,016 163,536
Long-term notes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . 116,573 116,817
Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . 21,275 20,095
Stockholders' equity:
Preferred stock, $.10 par value; 10,000,000 shares authorized; 200,000
shares issued and outstanding. . . . . . . . . . . . . . . . . . . . . . 20 20
Common stock, $.10 par value; 50,000,000 shares authorized; 20,244,000
and 19,610,000 shares issued at December 31, 1993 and September 30,
1993, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,024 1,961
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 177,771 169,855
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . (43,266) (55,065)
Less treasury stock, at cost: 1,823,000 and 1,837,000 shares at
December 31, 1993 and September 30, 1993, respectively . . . . . . . . . (19,409) (19,558)
--------- ---------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . 117,140 97,213
--------- ---------
$409,004 $397,661
--------- ---------
--------- ---------
</TABLE>
See accompanying notes.
-3-
<PAGE>
STERLING SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share information)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended December 31
-----------------------
1993 1992
-------- --------
<S> <C> <C>
Revenue:
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $39,516 $37,463
Product support. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,420 29,211
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,959 32,109
-------- --------
108,895 98,783
Costs and expenses:
Costs of sales:
Products and product support . . . . . . . . . . . . . . . . . . . . . . 16,065 15,733
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,309 24,894
-------- --------
41,374 40,627
Product development and enhancement. . . . . . . . . . . . . . . . . . . . 7,020 5,917
Selling, general and administrative. . . . . . . . . . . . . . . . . . . . 40,926 43,137
-------- --------
89,320 89,681
-------- --------
Income before other income (expense), income taxes and cumulative effect of
a change in accounting principle . . . . . . . . . . . . . . . . . . . . . 19,575 9,102
Other income (expense):
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,655) (1,946)
Investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677 458
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (825) 362
-------- --------
(1,803) (1,126)
-------- --------
Income before income taxes and cumulative effect of a change in accounting
principle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,772 7,976
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 6,753 2,951
-------- --------
Income before cumulative effect of a change in accounting principle. . . . . 11,019 5,025
Cumulative effect of a change in accounting principle, net of applicable
income tax benefit (Note 4). . . . . . . . . . . . . . . . . . . . . . . . (2,774)
-------- --------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,019 2,251
Preferred stock dividends. . . . . . . . . . . . . . . . . . . . . . . . . . 49 321
-------- --------
Income applicable to common stockholders . . . . . . . . . . . . . . . . . . $10,970 $ 1,930
-------- --------
-------- --------
Income per common share:
Income before cumulative effect of a change in accounting principle:
Primary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .49 $ .25
-------- --------
-------- --------
Fully diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .45 $ .25
-------- --------
-------- --------
Net income:
Primary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .49 $ .11
-------- --------
-------- --------
Fully diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .45 $ .11
-------- --------
-------- --------
Average common shares outstanding. . . . . . . . . . . . . . . . . . . . . . 18,093 16,559
-------- --------
-------- --------
</TABLE>
See accompanying notes
-4-
<PAGE>
STERLING SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three Months Ended December 31, 1993 and 1992
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Treasury Stock
----------------- ----------------- --------------------
Number Number Additional Retained Number Total
of Par of Par Paid-in Earnings of Stockholders'
Shares Value Shares Value Capital (Deficit) Shares Cost Equity
-------- ------- -------- ------- ---------- ---------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1992. 200 $20 18,330 $1,833 $149,448 $(13,657) 1,884 $(20,060) $117,584
Net income . . . . . . . . . 2,251 2,251
Preferred stock dividends. . (321) (321)
Issuance of common stock
pursuant to stock options,
warrants and employee
benefit plans. . . . . . . 251 25 2,090 2,115
Issuance of common stock
to retirement plan . . . . 47 (9) 96 143
Other. . . . . . . . . . . . (488) (488)
----- ----- -------- ------- --------- --------- ------- --------- ---------
Balance at December 31, 1992 . 200 $20 18,581 $1,858 $151,585 $(12,215) 1,875 $(19,964) $121,284
----- ----- -------- ------- --------- --------- ------- --------- ---------
----- ----- -------- ------- --------- --------- ------- --------- ---------
Balance at September 30, 1993. 200 $20 19,610 $1,961 $169,855 $(55,065) 1,837 $(19,558) $97,213
Net income . . . . . . . . . 11,019 11,019
Preferred stock dividends. . (49) (49)
Issuance of common stock
pursuant to stock options
and warrants . . . . . . . 634 63 7,799 7,862
Issuance of common stock
to retirement plan . . . . 117 (14) 149 266
Other. . . . . . . . . . . . 829 829
----- ----- -------- ------- --------- --------- ------- --------- ---------
Balance at December 31, 1993 . 200 $20 20,244 $2,024 $177,771 $(43,266) 1,823 $(19,409) $117,140
----- ----- -------- ------- --------- --------- ------- --------- ---------
----- ----- -------- ------- --------- --------- ------- --------- ---------
</TABLE>
See accompanying notes.
-5-
<PAGE>
STERLING SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended December 31,
-----------------------
1993 1992
-------- --------
<S> <C> <C>
Operating activities:
Income before cumulative effect of a change in accounting principle. . . . . $11,019 $ 5,025
Adjustments to reconcile income before cumulative effect of a change in
accounting principle to net cash provided by operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . 8,093 7,601
Provision for losses on accounts receivable. . . . . . . . . . . . . . . 3,201 205
Provision for deferred income taxes. . . . . . . . . . . . . . . . . . . 5,509 1,398
Foreign currency transaction loss (gain) . . . . . . . . . . . . . . . . 362 (94)
Changes in operating assets and liabilities:
Increase in accounts and notes receivable. . . . . . . . . . . . . . (8,755) (5,116)
Decrease (increase) in prepaids and other assets . . . . . . . . . . (25) 1,845
Decrease in accounts payable and accrued expenses. . . . . . . . . . (5,595) (8,046)
Increase (decrease) in deferred revenue. . . . . . . . . . . . . . . (1,349) 870
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (83) (85)
-------- --------
Net cash provided by operating activities. . . . . . . . . . . . . 12,377 3,603
Investing activities:
Purchases of property and equipment. . . . . . . . . . . . . . . . . . . . . (4,223) (2,038)
Purchases and capitalized cost of development of computer software . . . . . (4,400) (6,214)
Purchases of investments . . . . . . . . . . . . . . . . . . . . . . . . . . (20,971)
Proceeds from sales of investments . . . . . . . . . . . . . . . . . . . . . 7,603
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 422 210
-------- --------
Net cash used in investing activities. . . . . . . . . . . . . . . (21,569) (8,042)
Financing activities:
Retirement and redemption of debt and capital lease obligations. . . . . . . (3,255) (1,557)
Proceeds from issuance of debt . . . . . . . . . . . . . . . . . . . . . . . 2,961 3,489
Proceeds from issuance of common stock pursuant to stock options, warrants
and employee benefit plans . . . . . . . . . . . . . . . . . . . . . . . . 7,862 2,115
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,586 443
-------- --------
Net cash provided by financing activities. . . . . . . . . . . . . 9,154 4,490
Effect of foreign currency exchange rate changes on cash . . . . . . . . . . . (150) (672)
-------- --------
Decrease in cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . (188) (621)
Cash and equivalents at beginning of period. . . . . . . . . . . . . . . . . . 29,752 41,713
-------- --------
Cash and equivalents at end of period. . . . . . . . . . . . . . . . . . . . . $29,564 $41,092
-------- --------
-------- --------
Supplemental cash flow information:
Interest paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 73 $ 1,159
-------- --------
-------- --------
Income taxes paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 578 $ 1,113
-------- --------
-------- --------
Income tax refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 514 $ -
-------- --------
-------- --------
</TABLE>
See accompanying notes.
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<PAGE>
STERLING SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1993
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Sterling
Software, Inc. and its wholly owned subsidiaries (the "Company") after
elimination of all significant intercompany balances and transactions. The
Company's quarterly financial data should be read in conjunction with the
consolidated financial statements of the Company for the year ended
September 30, 1993.
REVENUE
Revenue from license fees, including leasing transactions, for standard
software products is recognized when the software is delivered, provided no
significant future vendor obligations exist and collection is probable. Service
revenue and revenue from certain products involving installation or other
services are recognized as the services are performed.
Product support contracts entitle the customer to telephone support, bug
fixing and the right to receive software updates as they are released. Revenue
from product support contracts, including product support included in initial
license fees, is recognized ratably over the annual contract period. All
significant costs and expenses associated with product support contracts are
expensed ratably over the contract period.
If software product transactions include the right to receive future
products, a portion of the software product revenue is deferred and recognized
as products are delivered. Contract accounting is applied for sales of software
products requiring significant modification or customization.
When products, product support and services are billed prior to the time
the related revenue may be recognized, deferred revenue is recorded and related
costs paid in advance are deferred.
CASH EQUIVALENTS, MARKETABLE SECURITIES AND OTHER LONG-TERM INVESTMENTS
Cash equivalents consist primarily of highly liquid investments in
investment-grade commercial paper of various issuers, with maturities of three
months or less when purchased. The carrying amount reported in the consolidated
balance sheet for cash and cash equivalents approximates its fair value.
Marketable securities and other long-term investments, all of which are
classified as available-for-sale, consist primarily of medium term notes,
U.S. government obligations, commercial paper, bond mutual funds, an investment
in an investment fund partnership and certificates of deposit. The fair values
for marketable securities are based on quoted market prices. The estimated fair
value of the investment in an investment fund partnership is based on quoted
market prices of the partnership's underlying securities.
-7-
<PAGE>
2. UNAUDITED INTERIM FINANCIAL STATEMENTS
The interim consolidated financial information contained herein is
unaudited but, in the opinion of management, includes all adjustments, which are
of a normal recurring nature, necessary for a fair presentation of the financial
position and results of operations for the periods presented. Results of
operations for the periods presented herein are not necessarily indicative of
results of operations for the entire year.
3. SEGMENT INFORMATION
The Company acquires, develops, markets and supports a broad range of
computer software products and services in three major markets classified as
Enterprise Software, Electronic Commerce and Federal Systems. Each major market
is represented through decentralized business groups. The Enterprise Software
Group provides enterprise-wide systems management and applications management
software for large computing environments. The Electronic Commerce Group
provides software and services to facilitate electronic commerce, defined by the
Company as the worldwide electronic interchange of business information,
including electronic data interchange software and services, data communications
and electronic payments software for financial institutions. The Federal
Systems Group provides highly technical services to the federal government,
generally under multi-year, cost-based contracts, primarily in support of
National Aeronautics and Space Administration aerospace research projects and
secure communications systems for the Department of Defense. A fourth business
group, International, is responsible for sales and level one support of the
Company's products outside the United States. International Group operating
results are included in the Company's Enterprise Software and Electronic
Commerce segments in the business segment tables contained herein.
International Group revenue of $29,889,000 and $29,245,000 and operating profit
of $4,275,000 and $784,000 for the three months ended December 31, 1993 and
1992, respectively, has been allocated to the business segments.
Financial information concerning the Company's operations, by business
segment, for the three months ended December 31, 1993 and 1992 follows (in
thousands):
<TABLE>
<CAPTION>
Three Months
Ended December 31
-------------------------
1993 1992
---------- ----------
<S> <C> <C>
Revenue:
Enterprise Software . . . . . . . . . . . . $ 47,885 $47,459
Electronic Commerce . . . . . . . . . . . . 34,179 25,243
Federal Systems . . . . . . . . . . . . . . 24,718 23,747
Corporate and other . . . . . . . . . . . . 2,113 2,334
---------- ----------
Consolidated totals . . . . . . . . . . . $108,895 $98,783
---------- ----------
---------- ----------
Operating Profit (Loss):
Enterprise Software . . . . . . . . . . . . $ 15,727 $10,152
Electronic Commerce . . . . . . . . . . . . 6,949 2,860
Federal Systems . . . . . . . . . . . . . . 1,614 1,580
Corporate and other . . . . . . . . . . . . (4,715) (5,490)
---------- ----------
Consolidated totals . . . . . . . . . . . $ 19,575 $ 9,102
---------- ----------
---------- ----------
</TABLE>
-8-
<PAGE>
The amounts presented for "Corporate and other" include corporate expense,
inter-segment eliminations and the results of operations of the Company's retail
software division.
4. CHANGE IN ACCOUNTING FOR POSTRETIREMENT BENEFITS
During the fourth quarter of 1993, the Company adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" ("FAS No. 106"), which requires
that the expected cost of postretirement benefits be charged to expense during
the years the employee renders service. The effect of adopting the new standard
as of October 1, 1992 was a charge of $2,774,000, representing the accumulated
benefit obligation existing at that date, net of related income tax benefit of
$1,813,000. This charge is shown as the cumulative effect of a change in
accounting principle. The results for the first quarter of 1993 have been
restated for the cumulative effect of the adoption of the new standard and the
ratable portion of the 1993 effect of the adoption of the new standard.
-9-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
MERGER WITH SYSTEMS CENTER, INC.
On July 1, 1993, Sterling Software Inc. ("Sterling Software") acquired
Systems Center, Inc. ("Systems Center"), a Delaware corporation based in Reston,
Virginia which developed, marketed and supported systems software products, in a
merger (the "Merger") accounted for as a pooling of interests, resulting in the
combined company, hereafter defined as the "Company." The merger of the equity
interests has been given retroactive effect and the Company's financial
statements for periods prior to the Merger represent the combined financial
statements of the previously separate entities adjusted to conform Systems
Center's fiscal years and accounting policies to those used by Sterling
Software.
In connection with the Merger, the Company eliminated duplicate facilities
and equipment, reduced its workforce and wrote off certain software products
which will not be actively marketed by the Company. There were no restructuring
charges incurred in the first quarter of 1994 in excess of the restructuring
charges accrued in the fourth quarter of 1993. The Company does not expect
there to be any material increase in costs and expenses in 1994 as a result of
the restructuring of the Company. In addition, future operating results are
expected to benefit from the reduction in workforce and elimination of duplicate
facilities and equipment. Approximately $8,500,000 of cash was expended in the
first quarter of 1994 relating to restructuring charges accrued in the fourth
quarter of 1993. Future cash expenditures related to the restructuring are
anticipated to be made from cash generated from operations.
THREE MONTHS ENDED DECEMBER 31, 1993 AND 1992
Effective with the Merger, Sterling Software changed Systems Center's
fiscal year-end from December 31 to September 30, affecting the timing of sales
incentives and changing the revenue pattern for products previously marketed by
Systems Center. Accordingly, the Company believes that the revenue for the
three months ended December 31, 1993, which is the Company's first and
traditionally lowest revenue quarter of its fiscal year, is not directly
comparable to revenue for the three months ended December 31, 1992, which
includes Systems Center's fourth and traditionally strongest revenue quarter of
its fiscal year. While the change in revenue patterns did not materially
impact revenues for the Electronic Commerce Group ("ECG") or the Federal
Systems Group ("FSG"), this change was relevant with respect to Enterprise
Software Group ("ESG") revenues because the majority of the products previously
marketed by Systems Center are now marketed by ESG. Revenue increased
$10,112,000, or 10%, in the first quarter of 1994 over the same period of 1993.
Foreign revenue represented approximately 27% and 30% of the Company's total
revenue in the first quarter of 1994 and 1993, respectively. All three
operating groups contributed to this revenue growth. ESG revenue increased
$426,000, or 1%, due to increases in product and product support revenue. ECG
revenue increased $8,936,000, or 35%, on the strength of a $3,695,000, or 44%,
increase in network services revenue, a $2,630,000, or 27%, increase in
product revenue and a $2,611,000, or 36%, increase in product support
revenue. The increase in network services revenue was due to an increase in
the network service customer base, primarily in the retail, grocery and
hardlines vertical markets, and increases in the network processing volume
for existing customers. ECG product revenue increased primarily as a result of
increased software sales in the Communications Software Division and
Interchange Software Division. ECG product support revenue increased primarily
as a result of an increase in the installed customer base and price increases
for some products.
-10-
<PAGE>
FSG revenue increased $971,000, or 4%, primarily due to higher contract billings
in the Information Technology Division and NASA Ames Division.
Total costs and expenses decreased $361,000. Total cost of sales increased
$747,000, or 2%, primarily due to a slight increase in amortization expense and
a $723,000, or 3%, increase in federal contract costs, commensurate with the
increase in FSG revenue. Increased amortization expense related to capitalized
software additions was offset by declines in the amortization of purchased
software due to the full amortization of certain purchased software and the
write-off in the fourth quarter of 1993 of certain software products which will
not be actively marketed by the Company as a result of the Merger. Product
development expense for the first quarter of 1994 was $7,020,000, net of
$4,400,000 of costs capitalized pursuant to Statement of Financial Accounting
Standards No. 86, "Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed" ("FAS No. 86"). In the first quarter of 1993,
product development expense was $5,917,000, net of $6,214,000 of costs
capitalized pursuant to FAS No. 86. Total product development costs continued
to grow, reflecting increases in the Company's development activities in ECG and
ESG. Selling, general and administrative expense decreased $2,211,000, or 5%,
reflecting reduced costs after the Company's fourth quarter 1993 restructuring
due to the Merger, which eliminated duplicate corporate overhead functions and
streamlined the sales and marketing functions, resulting in a reduced workforce,
and eliminated duplicate facilities.
Income before cumulative effect of an accounting change increased
$5,994,000, or 119%, primarily due to higher operating profits in ECG, up 143%,
and ESG, up 55%, coupled with decreased corporate overhead in the first quarter
of 1994 over the same period of 1993 due to the Merger, partially offset by an
increase in federal income tax expense due to higher pretax profit. Also
contributing to this increase was an increase of $219,000 in investment income
earned on higher average balances of cash equivalents and marketable securities
during the first quarter of 1994 resulting from the net cash generated from the
issuance in February 1993 of $115,000,000 principal amount of 5 3/4% Convertible
Subordinated Debentures Due 2003, net of $40,165,000 paid for the redemption of
the Company's 8% Convertible Senior Subordinated Debentures. Interest expense
also decreased $291,000 primarily due to interest accrued in the first quarter
of 1993 on the unpaid Systems Center Series A 9% Convertible Preferred Stock
("Systems Center Preferred Stock") dividends. The Systems Center Preferred
Stock dividends and accrued interest were paid on July 1, 1993 in connection
with the Merger. Other income and expense includes foreign currency exchange
losses in the first quarter of 1994 versus foreign currency exchange gains in
the first quarter of 1993.
The Company adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" ("FAS
No. 106") as of October 1, 1992 and recorded a charge of $2,774,000, net of
related income tax benefit of $1,813,000. This charge is shown as the
cumulative effect of a change in accounting principle. See Note 4 to the
Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company maintained a strong liquidity and financial position with
$59,601,000 of working capital at December 31, 1993, which includes $29,564,000
of cash and equivalents and
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<PAGE>
$49,288,000 of marketable securities. Net cash flows from operations increased
$8,774,000 in the first quarter of 1994 as compared to the first quarter of 1993
primarily due to higher operating profits before noncash charges. Cash flows
from operations and available cash balances were used to fund operations,
marketable securities purchases and capital expenditures, including software
additions.
Included in "Other Assets" in the Consolidated Balance Sheet at December
31, 1993 is a $10 million investment in an investment fund partnership managed
by Maverick Capital, Ltd., an investment fund management company ("Maverick").
The objective of the partnership is to achieve high total returns through
aggressive investments in debt and/or equity securities in the United States and
other world markets. The estimated fair value of the Company's investment in
this partnership is based on quoted market prices of the partnership's
underlying securities. Maverick, the fund manager, is owned by three directors
of the Company and various of their family trusts, including a trust for the
benefit of the wife of a fourth director. A fifth director serves as a managing
director of, and has an income interest in, Maverick. The Company believes that
the terms of its agreement with the partnership, which provide for a 1%
management fee to Maverick plus a special allocation of 20% of any net
investment gains, are fair to the Company and are typical of the terms of other,
comparable investment partnerships sponsored by unaffiliated investment
managers. Additionally, the Company has the right to withdraw all or part of
its investment at the end of any calendar quarter. In January 1994, the Company
made an additional investment of $5 million in the partnership.
As of December 13, 1993, the Company entered into an agreement with
Maverick pursuant to which Maverick is to provide investment management services
for a portion of the Company's available cash. The Company will pay a quarterly
fee equal to .125% of the average net assets being managed (approximately $65
million of net assets was being managed as of December 31, 1993). The Company
believes the fees under this agreement are comparable to those that would be
charged to the Company by unaffiliated third parties for comparable investment
management services.
During the first quarter of 1994, the Company capitalized software
development costs of $4,400,000 compared to $6,214,000 in the first quarter of
1993. ECG accounted for $2,644,000 of the first quarter of 1994 expenditures,
primarily for enhancements of products based on UNIX operating systems as well
as enhancements of other products in the Communications Software Division and
Interchange Software Division. ESG accounted for the remaining $1,756,000 first
quarter of 1994 expenditures which related to the development of new products
and product enhancements principally in the Systems Management, Storage
Management and Applications Management divisions. Property and equipment
purchases of $4,223,000 in the first quarter of 1994 include purchases made in
ECG for equipment upgrades for network processing systems and computer equipment
purchases to support the continuing growth in ECG. ESG's property and equipment
additions were made to expand customer support facilities and computer
operations in development laboratories and for computer purchases for
international facilities. Property and equipment purchases were $2,038,000 in
the first quarter of 1993. Net purchases of $13,368,000 in marketable
securities and other investments in the first quarter of 1994 were generally
from the net cash provided by operating activities and proceeds from issuances
of common stock pursuant to the exercise of stock options and warrants.
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<PAGE>
The Company has a $35 million revolving credit and term loan agreement, of
which no amounts were borrowed or outstanding during the quarter. Borrowings,
if any, outstanding on December 31, 1994 will be payable in eight equal
quarterly payments. The Company's international operations borrowed $2,961,000
during the first quarter of 1994 on separate lines of credit, primarily for
foreign exchange exposure management and working capital requirements. Payments
of $2,965,000 were made during the first quarter of 1994 on these lines of
credit. Other debt payments related to capital leases.
Proceeds from the exercise of stock options and warrants were $7,862,000
during the first quarter of 1994, compared to $2,115,000 during the first
quarter of 1993. In January 1994, approximately 1,482,000 shares were issued
pursuant to the exercise of stock options and warrants, generating proceeds of
approximately $9,000,000.
At September 30, 1993, the Company's capital resource commitments consisted
of commitments under lease arrangements for office space and equipment. The
Company intends to meet such obligations primarily from internally generated
funds. No significant commitments exist for future capital expenditures. The
Company believes available balances of cash, cash equivalents and marketable
securities combined with cash flows from operations and amounts available under
credit and term loan agreements are sufficient to meet the Company's cash
requirements for the foreseeable future.
OTHER MATTERS
Demand for many of the Company's products tends to improve with increased
inflation as customers strive to increase employee productivity and reduce
costs. However, the effect of inflation on the Company's relatively labor
intensive cost structure could adversely affect its results of operations to the
extent the Company might not be able to recover increased operating costs
through increased product licensing and prices.
The assets and liabilities of non-U.S. operations are translated into U.S.
dollars at exchange rates in effect as of the respective balance sheet dates,
and revenue and expense accounts of these operations are translated at average
exchange rates during the month the transactions occur. Unrealized translation
gains and losses are included as an adjustment to the accumulated deficit. The
Company has mitigated a portion of its currency exposure through decentralized
sales, marketing and support operations and through international development
facilities, in which all costs are local currency based.
In November 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits" ("FAS No. 112"), which requires employers to recognize
the cost of postemployment benefits on an accrual basis, if certain defined
conditions are met. Postemployment benefits are all types of benefits provided
to former or inactive employees, their beneficiaries, and covered dependents.
The Company will be subject to the provisions of FAS No. 112 beginning in the
fiscal year ending September 30, 1995. However, the Company does not believe
the provisions of FAS No. 112 will have significant impact on the Company's
financial position and results of operations in the year of adoption, as the
majority of the postemployment benefits are a result of certain
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<PAGE>
employment contracts. Payments under these contracts are contingent upon future
events, the occurrence of which is not presently contemplated.
-14-
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this Quarterly Report
on Form 10-Q:
2(a) -- Agreement and Plan of Merger dated as of March 31, 1993
among the Company, Systems Center, Inc. and SSI Acquisition
Corporation ("Agreement and Plan of Merger") (1)
2(b) -- First Amendment to Agreement and Plan of Merger (10)
4(a) -- Certificate of Incorporation of the Company (2)
4(b) -- Certificate of Amendment of Certificate of Incorporation of
the Company (10)
4(c) -- Certificate of Amendment of Certificate of Incorporation of
the Company (3)
4(d) -- Restated Bylaws of the Company (4)
4(e) -- Form of Common Stock Certificate (5)
4(f) -- Form of Certificate of Designation, Preferences, Rights and
Limitations with respect to Series B Junior Preferred Stock
(10)
4(g) -- Form of Indenture between the Company and Bank of America
Texas, National Association, as Trustee, including the form
of 5 3/4% Convertible Subordinated Debenture attached as
Exhibit A thereto (6)
4(h) -- Preferred Stock and Warrant Purchase Agreement dated June
25, 1991 among Systems Center, Inc. and the Investors named
therein (7)
10(a) -- Stock Option Agreement dated as of March 31, 1993 between
the Company and Systems Center, Inc. (1)
10(b) -- Form of Stockholder Agreement dated as of March 31, 1993
between the Company and certain stockholders of Systems
Center, Inc. (1)
10(c) -- Form of Sterling Software, Inc. Stockholder Agreement
between Systems Center, Inc. and certain directors and/or
stockholders of the Company (1)
10(d) -- Amended Incentive Stock Option Plan of the Company (10)
10(e) -- Amended Form of Incentive Stock Option Agreement (10)
10(f) -- Amended Non-Statutory Stock Option Plan of the Company (10)
10(g) -- Amended Form of Non-Statutory Stock Option Agreement (10)
10(h) -- Supplemental Executive Retirement Plan II of Informatics
General Corporation (10)
10(i) -- Form of Supplemental Executive Retirement Plan II Agreement
(the "SERP II Agreement") (10)
10(j) -- Amendment to SERP II Agreement (10)
10(k) -- Form of Employment Agreement with Jeannette P. Meier,
George H. Ellis and Phillip A. Moore (10)
10(l) -- Form of Amendment No. 1 to Employment Agreement with
Jeannette P. Meier, George H. Ellis and Phillip A. Moore
(10)
10(m) -- Employment Agreement with Sam Wyly (10)
10(n) -- Employment Agreement with Charles J. Wyly, Jr. (10)
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<PAGE>
10(o) -- Employment Agreement with Sterling L. Williams (10)
10(p) -- Form of Amendment No. 1 to Employment Agreement with
Charles J. Wyly, Jr. and Sterling L. Williams (10)
10(q) -- Amendment No. 1 to Employment Agreement with Sam Wyly (10)
10(r) -- Amendment No. 2 to Employment Agreement with Sam Wyly (10)
10(s) -- Consultation Agreement with REC Enterprises, Inc. (10)
10(t) -- Employment Agreement with William D. Plumb (10)
10(u) -- Employment Agreement with William D. Plumb (10)
10(v) -- Form of Employment Agreement with Edward J. Lott, Warner C.
Blow, Werner L. Frank and Geno P. Tolari (10)
10(w) -- Employment Agreement with Sterling L. Williams (1)
10(x) -- Form of Employment Agreement with Jeannette P. Meier,
George H. Ellis, Phillip A. Moore, Warner C. Blow and
Geno P. Tolari (1)
10(y) -- Employment Agreement with Werner L. Frank (1)
10(z) -- Form of Series B Warrant Agreement (10)
10(aa) -- Form of Amendment to Series B Warrant Agreement
(January 1988) (10)
10(bb) -- Form of Amendment to Series B Warrant Agreement (May 1989)
(10)
10(cc) -- Form of Series E Warrant Agreement (10)
10(dd) -- Form of Amendment to Series E Warrant Agreement (May 1989)
(10)
10(ee) -- Form of Series F Warrant Agreement (10)
10(ff) -- Form of Amendment to Series F Warrant Agreement (May 1989)
(10)
10(gg) -- Amended and Restated Revolving Credit and Term Loan
Agreement dated June 8, 1990 between the Company and The
First National Bank of Boston and BankOne Texas N.A. ("Loan
Agreement") (10)
10(hh) -- First Amendment to Loan Agreement dated as of October 16,
1990 (10)
10(ii) -- Second Amendment to Loan Agreement dated as of September
19, 1991 (10)
10(jj) -- Third Amendment to Loan Agreement dated as of December 31,
1991 (10)
10(kk) -- Fourth Amendment to Loan Agreement dated as of June 15,
1992 (10)
10(ll) -- Fifth Amendment to Loan Agreement dated as of July 31, 1992
(10)
10(mm) -- Sixth Amendment to Loan Agreement dated as of August 31,
1992 (10)
10(nn) -- Seventh Amendment to Loan Agreement dated as of
September 9, 1992 (10)
10(oo) -- Eighth Amendment to Loan Agreement dated as of
September 30, 1992 (10)
10(pp) -- Ninth Amendment to Loan Agreement dated as of October 13,
1992 (10)
10(qq) -- Tenth Amendment to Loan Agreement dated as of December 17,
1992 (1)
10(rr) -- Form of Eleventh Amendment to Loan Agreement dated as of
March 29, 1993 (10)
10(ss) -- Twelfth Amendment to Loan Agreement dated as of June 30,
1993 (10)
10(tt) -- Form of Thirteenth Amendment to Loan Agreement dated as of
November 10, 1993 (10)
10(uu) -- Form of Fourteenth Amendment to Loan Agreement dated as of
November 22, 1993 (10)
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<PAGE>
10(vv) -- Fifteenth Amendment to Loan Agreement dated as of
December 21, 1993 (11)
10(ww) -- Sixteenth Amendment to Loan Agreement dated as of
December 30, 1993 (11)
10(xx) -- Seventeenth Amendment to Loan Agreement dated as of January
31, 1994 (11)
10(yy) -- 1992 Executive Compensation Plan for Group Presidents (10)
10(zz) -- 1993 Executive Compensation Plan for Group Presidents (1)
10(aaa) -- 1994 Executive Compensation Plan for Group Presidents (10)
10(bbb) -- Form of Series G Warrant Agreement (10)
10(ccc) -- Amended 1992 Non-Statutory Stock Option Plan (3)
10(ddd) -- Form of Stock Option Agreement - 1992 Non-Statutory Stock
Option Plan (10)
10(eee) -- Form of Indemnity Agreement between the Company and each of
its directors and officers (10)
10(fff) -- Systems Center, Inc. Restated and Amended Restricted Stock
Plan (8)
10(ggg) -- Systems Center, Inc. Amended and Restated Nondiscretionary
Restricted Stock Plan (8)
10(hhh) -- Systems Center, Inc. 1982 Stock Option Plan (8)
10(iii) -- Systems Center, Inc. 1992 Stock Incentive Plan (8)
10(jjj) -- Systems Center, Inc. 1983 Stock Plan (8)
10(kkk) -- Systems Center, Inc. Share Option Scheme (8)
10(lll) -- Registration Rights Agreement dated as of July 1, 1993
among the Company and the Selling Stockholders (9)
11(a) -- Computation of Earnings Per Share, Three Months Ended
December 31, 1993 (11)
11(b) -- Computation of Earnings Per Share, Three Months Ended
December 31, 1992 (11)
15 -- None
18 -- None
19 -- None
22 -- None
23 -- None
24 -- None
27 -- None
99 -- None
(b) Reports on Form 8-K.
On November 16, 1993, the Company filed a Current Report on Form 8-K
dated November 15, 1993, with respect to Item 5 of said form, which report
related to Sterling Software, Inc.'s acquisition of Systems Center, Inc. The
Company included in such report consolidated balance sheets of Sterling
Software, Inc. as of September 30, 1993 and 1992, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended September 30, 1993.
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<PAGE>
______________
(1) Previously filed as an exhibit to the Company's Registration Statement
No. 33-62028 on Form S-4 and incorporated herein by reference.
(2) Previously filed as an exhibit to the Company's Registration Statement
No. 2-82506 on Form S-1 and incorporated herein by reference.
(3) Previously filed as an exhibit to the Company's Registration Statement
No. 33-69926 on Form S-8 and incorporated herein by reference.
(4) Previously filed as an exhibit to the Company's Registration Statement
No. 33-47131 on Form S-8 and incorporated herein by reference.
(5) Previously filed as an exhibit to the Company's Registration Statement
No. 2-86825 on Form S-1 and incorporated herein by reference.
(6) Previously filed as an exhibit to the Company's Registration Statement
No. 33-57428 on Form S-3 and incorporated herein by reference.
(7) Previously filed as an exhibit to the Quarterly Report on Form 10-Q of
Systems Center, Inc. for the quarter ended June 30, 1991 and incorporated
herein by reference.
(8) Previously filed as an exhibit to the Company's Registration Statement
No. 33-65402 on Form S-8 and incorporated herein by reference.
(9) Previously filed as an exhibit to the Company's Registration Statement
No. 33-71706 on Form S-3 and incorporated herein by reference.
(10) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1993 and incorporated herein by
reference.
(11) Filed herewith.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STERLING SOFTWARE, INC.
Date: February 14, 1994 /s/ Sterling L. Williams
------------------------------------
Sterling L. Williams
President, Chief Executive Officer
and Director
(Principal Executive Officer)
Date: February 14, 1994 /s/ George H. Ellis
------------------------------------
George H. Ellis
Executive Vice President
and Chief Financial Officer
(Principal Financial and Accounting Officer)
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<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Numbered
No. Description Page
- ------- ------------------------------------------------- ------------
2(a) -- Agreement and Plan of Merger dated as of March 31,
1993 among the Company, Systems Center, Inc. and SSI
Acquisition Corporation ("Agreement and Plan of
Merger") (1)
2(b) -- First Amendment to Agreement and Plan of Merger (10)
4(a) -- Certificate of Incorporation of the Company (2)
4(b) -- Certificate of Amendment of Certificate of
Incorporation of the Company (10)
4(c) -- Certificate of Amendment of Certificate of
Incorporation of the Company (3)
4(d) -- Restated Bylaws of the Company (4)
4(e) -- Form of Common Stock Certificate (5)
4(f) -- Form of Certificate of Designation, Preferences,
Rights and Limitations with respect to Series B
Junior Preferred Stock (10)
4(g) -- Form of Indenture between the Company and Bank of
America Texas, National Association, as Trustee,
including the form of 5 3/4% Convertible
Subordinated Debenture attached as Exhibit A thereto
(6)
4(h) -- Preferred Stock and Warrant Purchase Agreement dated
June 25, 1991 among Systems Center, Inc. and the
Investors named therein (7)
10(a) -- Stock Option Agreement dated as of March 31, 1993
between the Company and Systems Center, Inc. (1)
10(b) -- Form of Stockholder Agreement dated as of March 31,
1993 between the Company and certain stockholders of
Systems Center, Inc. (1)
10(c) -- Form of Sterling Software, Inc. Stockholder
Agreement between Systems Center, Inc. and certain
directors and/or stockholders of the Company (1)
10(d) -- Amended Incentive Stock Option Plan of the Company
(10)
10(e) -- Amended Form of Incentive Stock Option Agreement
(10)
10(f) -- Amended Non-Statutory Stock Option Plan of the
Company (10)
10(g) -- Amended Form of Non-Statutory Stock Option Agreement
(10)
10(h) -- Supplemental Executive Retirement Plan II of
Informatics General Corporation (10)
10(i) -- Form of Supplemental Executive Retirement Plan II
Agreement (the "SERP II Agreement") (10)
10(j) -- Amendment to SERP II Agreement (10)
10(k) -- Form of Employment Agreement with Jeannette P.
Meier, George H. Ellis and Phillip A. Moore (10)
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<PAGE>
10(l) -- Form of Amendment No. 1 to Employment Agreement with
Jeannette P. Meier, George H. Ellis and Phillip A.
Moore (10)
10(m) -- Employment Agreement with Sam Wyly (10)
10(n) -- Employment Agreement with Charles J. Wyly, Jr. (10)
10(o) -- Employment Agreement with Sterling L. Williams (10)
10(p) -- Form of Amendment No. 1 to Employment Agreement with
Charles J. Wyly, Jr. and Sterling L. Williams (10)
10(q) -- Amendment No. 1 to Employment Agreement with Sam
Wyly (10)
10(r) -- Amendment No. 2 to Employment Agreement with Sam
Wyly (10)
10(s) -- Consultation Agreement with REC Enterprises, Inc.
(10)
10(t) -- Employment Agreement with William D. Plumb (10)
10(u) -- Employment Agreement with William D. Plumb (10)
10(v) -- Form of Employment Agreement with Edward J. Lott,
Warner C. Blow, Werner L. Frank and Geno P. Tolari
(10)
10(w) -- Employment Agreement with Sterling L. Williams (1)
10(x) -- Form of Employment Agreement with Jeannette P.
Meier, George H. Ellis, Phillip A. Moore, Warner C.
Blow and Geno P. Tolari (1)
10(y) -- Employment Agreement with Werner L. Frank (1)
10(z) -- Form of Series B Warrant Agreement (10)
10(aa) -- Form of Amendment to Series B Warrant Agreement
(January 1988) (10)
10(bb) -- Form of Amendment to Series B Warrant Agreement
(May 1989) (10)
10(cc) -- Form of Series E Warrant Agreement (10)
10(dd) -- Form of Amendment to Series E Warrant Agreement
(May 1989) (10)
10(ee) -- Form of Series F Warrant Agreement (10)
10(ff) -- Form of Amendment to Series F Warrant Agreement
(May 1989) (10)
10(gg) -- Amended and Restated Revolving Credit and Term Loan
Agreement dated June 8, 1990 between the Company and
The First National Bank of Boston and BankOne Texas
N.A. ("Loan Agreement") (10)
10(hh) -- First Amendment to Loan Agreement dated as of
October 16, 1990 (10)
10(ii) -- Second Amendment to Loan Agreement dated as of
September 19, 1991 (10)
10(jj) -- Third Amendment to Loan Agreement dated as of
December 31, 1991 (10)
10(kk) -- Fourth Amendment to Loan Agreement dated as of
June 15, 1992 (10)
10(ll) -- Fifth Amendment to Loan Agreement dated as of
July 31, 1992 (10)
10(mm) -- Sixth Amendment to Loan Agreement dated as of
August 31, 1992 (10)
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<PAGE>
10(nn) -- Seventh Amendment to Loan Agreement dated as of
September 9, 1992 (10)
10(oo) -- Eighth Amendment to Loan Agreement dated as of
September 30, 1992 (10)
10(pp) -- Ninth Amendment to Loan Agreement dated as of
October 13, 1992 (10)
10(qq) -- Tenth Amendment to Loan Agreement dated as of
December 17, 1992 (1)
10(rr) -- Form of Eleventh Amendment to Loan Agreement dated
as of March 29, 1993 (10)
10(ss) -- Twelfth Amendment to Loan Agreement dated as of
June 30, 1993 (10)
10(tt) -- Form of Thirteenth Amendment to Loan Agreement dated
as of November 10, 1993 (10)
10(uu) -- Form of Fourteenth Amendment to Loan Agreement dated
as of November 22, 1993 (10)
10(vv) -- Fifteenth Amendment to Loan Agreement dated as of
December 21, 1993 (11)
10(ww) -- Sixteenth Amendment to Loan Agreement dated as of
December 30, 1993 (11)
10(xx) -- Seventeenth Amendment to Loan Agreement dated as of
January 31, 1994 (11)
10(yy) -- 1992 Executive Compensation Plan for Group
Presidents (10)
10(zz) -- 1993 Executive Compensation Plan for Group
Presidents (1)
10(aaa) -- 1994 Executive Compensation Plan for Group
Presidents (10)
10(bbb) -- Form of Series G Warrant Agreement (10)
10(ccc) -- Amended 1992 Non-Statutory Stock Option Plan (3)
10(ddd) -- Form of Stock Option Agreement - 1992 Non-Statutory
Stock Option Plan (10)
10(eee) -- Form of Indemnity Agreement between the Company and
each of its directors and officers (10)
10(fff) -- Systems Center, Inc. Restated and Amended Restricted
Stock Plan (8)
10(ggg) -- Systems Center, Inc. Amended and Restated
Nondiscretionary Restricted Stock Plan (8)
10(hhh) -- Systems Center, Inc. 1982 Stock Option Plan (8)
10(iii) -- Systems Center, Inc. 1992 Stock Incentive Plan (8)
10(jjj) -- Systems Center, Inc. 1983 Stock Plan (8)
10(kkk) -- Systems Center, Inc. Share Option Scheme (8)
10(lll) -- Registration Rights Agreement dated as of July 1,
1993 among the Company and the Selling Stockholders
(9)
11(a) -- Computation of Earnings Per Share, Three Months
Ended December 31, 1993 (11)
11(b) -- Computation of Earnings Per Share, Three Months
Ended December 31, 1992 (11)
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<PAGE>
15 -- None
18 -- None
19 -- None
22 -- None
23 -- None
24 -- None
27 -- None
99 -- None
______________
(1) Previously filed as an exhibit to the Company's Registration Statement
No. 33-62028 on Form S-4 and incorporated herein by reference.
(2) Previously filed as an exhibit to the Company's Registration Statement
No. 2-82506 on Form S-1 and incorporated herein by reference.
(3) Previously filed as an exhibit to the Company's Registration Statement
No. 33-69926 on Form S-8 and incorporated herein by reference.
(4) Previously filed as an exhibit to the Company's Registration Statement
No. 33-47131 on Form S-8 and incorporated herein by reference.
(5) Previously filed as an exhibit to the Company's Registration Statement
No. 2-86825 on Form S-1 and incorporated herein by reference.
(6) Previously filed as an exhibit to the Company's Registration Statement
No. 33-57428 on Form S-3 and incorporated herein by reference.
(7) Previously filed as an exhibit to the Quarterly Report on Form 10-Q of
Systems Center, Inc. for the quarter ended June 30, 1991 and incorporated
herein by reference.
(8) Previously filed as an exhibit to the Company's Registration Statement
No. 33-65402 on Form S-8 and incorporated herein by reference.
(9) Previously filed as an exhibit to the Company's Registration Statement
No. 33-71706 on Form S-3 and incorporated herein by reference.
(10) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1993 and incorporated herein by
reference.
(11) Filed herewith.
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<PAGE>
Exhibit 10 (VV)
FIFTEENTH AMENDMENT AGREEMENT
FIFTEENTH AMENDMENT AGREEMENT dated as of December 21, 1993 (this
"Amendment"), by and among STERLING SOFTWARE, INC., a Delaware corporation (the
"Company"), the direct and indirect subsidiaries of the Company listed on the
signature pages hereto (collectively, the "Sterling Subsidiaries"), THE FIRST
NATIONAL BANK OF BOSTON and BANK ONE, TEXAS, NATIONAL ASSOCIATION (collectively,
the "Banks") and THE FIRST NATIONAL BANK OF BOSTON, as agent (the "Agent") for
the Banks, amending certain provisions of an Amended and Restated Revolving
Credit and Term Loan Agreement dated as of June 8, 1990 (as heretofore amended,
the "Loan Agreement") by and among the Company, the Banks and the Agent and of
certain of the other Loan Documents (as defined in the Loan Agreement). Terms
not otherwise defined herein which are defined in the Loan Agreement shall have
the respective meanings herein assigned to such terms in the Loan Agreement.
WHEREAS, Sterling Software (Australia) Pty. Ltd. ("Sterling Australia")
desires to sell its rights to license fees and amounts receivable under certain
monthly license agreements (collectively, the "Australian Receivables") pursuant
to a Master Offer for Assignment dated on or about December 22, 1993 (the
"Australian Receivables Agreement") between Sterling Australia and Sanwa
Australia Finance Limited ("Sanwa Australia");
WHEREAS, the Company wishes to guarantee the obligations of Sterling
Australia under the Australian Receivables Agreement pursuant to a Guarantee and
Indemnity dated on or about December 22, 1993 (the "Australian Receivables
Guaranty") between the Company and Sanwa Australia;
WHEREAS, under the terms of the Loan Agreement, the foregoing transactions
may not be completed without the consent of the Banks and the amendment of the
Loan Agreement;
WHEREAS, the Company has requested that the Banks agree to amend the Loan
Agreement to provide for the transactions contemplated by the Australian
Receivables Agreement and the Australian Receivables Guaranty;
WHEREAS, the Banks are willing to amend the terms of the Loan Agreement and
provide such consents, upon the terms and subject to the conditions herein;
NOW, THEREFORE, in consideration of the mutual agreements contained in the
Loan Agreement, herein and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:
<PAGE>
-2-
SECTION 1. AMENDMENTS TO SECTION 1.1 OF THE LOAN AGREEMENT. Section 1.1 of
the Loan Agreement is hereby amended by inserting, in the places
required by alphabetical order, the following new definitions
with the following text:
"Australian Receivables. License fees and amounts receivable
under license agreements entered into by Sterling Australia, as
licensor,"
"Australian Receivables Agreement. The Master Offer For
Assignment dated on or about December 22, 1993 between Sterling
Australia and Sanwa Australia."
"Australian Receivables Guaranty. The Guarantee and Indemnity
dated on or about December 22, 1993 between the Company, as
guarantor, and Sanwa Australia."
"Australian Receivables Purchase Price. The aggregate amount paid
by Sanwa Australia to Sterling Australia for Australian
Receivables, calculated by using the Discount Rate (as defined in
the Australian Receivables Agreement)."
"Sanwa Australia. Sanwa Australia Finance Limited."
"Sterling Australia. Sterling Software (Australia) Pty. Ltd."
SECTION 2. AMENDMENTS TO SECTION 8.4 OF THE LOAN AGREEMENT. Section 8.4 of
the Loan Agreement is hereby amended by:
(a) deleting the word "and" at the end of subparagraph (i) thereof;
(b) deleting the period (".") at the end of subparagraph (j) thereof
and substituting in lieu thereof the text "; and"; and
(c) inserting a new subparagraph (k) at the end thereof with the
following text:
"(k) as soon as practicable but, in any event, within forty-five
(45) Business Days after the end of each of the Company's fiscal quarters, a
report, in form and substance satisfactory to the Agent and the Banks and
certified by an officer of the Company, setting forth (i) the aggregate
Australian Receivables Purchase Price of Australian Receivables purchased by
Sanwa Australia from Sterling Australia under the Australian Receivables
Agreement during the immediately preceding fiscal quarter and cumulatively
since December 22, 1993; (ii) the amounts of all payments made or required
to be made by Sterling Australia or the Company to Sanwa Australia under the
terms of the Australian Receivables Agreement or the Australian Receivables
Guaranty in order to repay any amounts paid by Sanwa Australia to Sterling
Australia in respect of Australian Receivables during the immediately
preceding fiscal quarter,
<PAGE>
-3-
and (iii) such other information with respect to the Australian Receivables
Agreement as the Agent or either of the Banks may from time to time
request."
SECTION 3. AMENDMENT TO SECTION 9.1 OF THE LOAN AGREEMENT. Section 9.1 of
the Loan Agreement is hereby amended by:
(a) deleting the word "and" at the end of subsection (s) thereof;
(b) deleting the period (".") at the end of subsection (t) thereof
and substituting in lieu thereof the text "; and"; and
(c) inserting at the end thereof the following new subsection (u):
"(u) Indebtedness incurred by Sterling Australia pursuant to the
Australian Receivables Agreement and by the Company pursuant to the
Australian Receivables Guaranty in connection with the purchase by Sanwa
Australia of Australian Accounts Receivable; provided, however, that the
aggregate Australian Receivables Purchase Price of such Australian
Accounts Receivable so purchased by Sanwa Australia shall not exceed
$3,000,000."
SECTION 4. AMENDMENTS TO SECTION 9.5 OF THE LOAN AGREEMENT. Section 9.5 of
the Loan Agreement is hereby amended by:
(a) deleting the word "and" at the end of subparagraph (a)(iv)
thereof;
(b) deleting the period (".") at the end of subparagraph (a)(v)
thereof and substituting in lieu thereof the text "; and"; and
(c) inserting a new subparagraph (a)(vi) with the following text:
"(a)(vi) Sterling Australia may acquire Australian Receivables
previously purchased by Sanwa Australia to the extent required or
permitted by the Australian Receivables Agreement."
SECTION 5. AMENDMENTS TO SECTION 9.9 OF THE LOAN AGREEMENT. Section 9.9 of
the Loan Agreement is hereby amended by:
(a) deleting the word "and" from the end of subparagraph (f) thereto;
(b) deleting the period (".") at the end of subparagraph (g) thereof;
and substituting in lieu thereof the text "; and"; and
(c) inserting, after subparagraph (g) thereof, a new subparagraph (h)
with the following text:
<PAGE>
-4-
"(h) Sales of up to an aggregate Australian Receivables Purchase
Price of $3,000,000 of Australian Accounts Receivable pursuant to the
Australian Receivables Agreement."
SECTION 6. AMENDMENT OF SECTION 9.16 OF THE LOAN AGREEMENT. Section 9.16 of
the Loan Agreement is hereby amended by inserting, after the words "the UK
Receivables Programme, the UK Receivables Guaranty," and before the words "the
US Receivables Agreement, US Receivables Guaranty or any of the Originator
Agreements without the prior written consent of the Banks;" the words: "the
Australian Receivables Agreement, the Australian Receivables Guaranty".
SECTION 7. LIMITED CONSENT TO AMENDMENT TO US RECEIVABLES AGREEMENT. The
Company has informed the Agent and the Banks that it wishes to cause Sterling
Software Leasing to amend the US Receivables Agreement to amend the pricing
provisions and eliminate certain documentation requirements thereof. The Company
has further informed the Agent and the Banks that, pursuant to SECTION 9.16 of
the Loan Agreement, any amendment of the US Receivables Agreement requires the
prior written consent of the Banks. The Company has requested that the Agent and
the Banks consent to the proposed amendment to the US Receivables Agreement.
Each of the Agent and the Banks hereby consents to the amendment of the US
Receivables Agreement but solely pursuant to an amendment in the form attached
hereto as Exhibit A (the "Sanwa Amendment"). The consent granted herein is
limited strictly to its terms, shall apply only to the specific amendment
described herein, shall not extend to or affect any of the Company's other
obligations contained in the Loan Agreement and the other Loan Documents and
shall not impair any rights consequent thereon. None of the Banks or the Agent
shall have any obligation to issue any other or further consent or waiver with
respect to the subject matter of this SECTION 7 or of any other matter.
SECTION 8. CONDITIONS TO EFFECTIVENESS. This Amendment shall be deemed to be
effective as of December 22, 1993 (the "Effective Date") upon the receipt by the
Agent of each of the following, each in form and substance satisfactory to the
Agent and the Banks:
(a) facsimile copies of original counterparts (to be followed promptly by
original counterparts) or original counterparts of this Amendment, duly
executed by each of the Company, the Sterling Subsidiaries, the Agent and
the Banks;
(b) by January 31, 1994, fully executed copies of the Australian
Receivables Agreement and the Australian Receivables Guaranty, in the forms
attached hereto as Exhibit B-1 and Exhibit B-2 respectively; and
(c) by January 31, 1994, fully executed copies of the Sanwa
Amendment, in the form attached hereto as Exhibit A.
SECTION 9. REPRESENTATIONS AND WARRANTIES; NO DEFAULT; AUTHORIZATION. The
Company hereby represents and warrants to each of the Agent and the Banks as
follows:
<PAGE>
-5-
(a) Each of the representations and warranties of the Company and the
Sterling Subsidiaries contained in the Loan Agreement, the other Loan Documents
or in any document or instrument delivered pursuant to or in connection with the
Loan Agreement, the other Loan Documents or this Amendment was true as of the
date as of which it was made and is true as and at the date of this Amendment,
and no Default or Event of Default has occurred and is continuing as of the date
of this Amendment; and
(b) This Amendment has been duly authorized, executed and delivered
by the Company and each of the Sterling Subsidiaries and shall be in full force
and effect upon the satisfaction of the conditions set forth in SECTION 7
hereof, and the agreements of the Company and each of the Sterling Subsidiaries
party hereto contained herein, in the Loan Agreement, and in the other Loan
Documents, as amended, respectively constitute the legal, valid and binding
obligations of the Company and each of the Sterling Subsidiaries party hereto,
enforceable against the Company or such Sterling Subsidiaries in accordance with
their respective terms.
SECTION 10. RATIFICATION, ETC. Except as expressly amended hereby, the Loan
Agreement, the other Loan Documents and all documents, instruments and
agreements related thereto are hereby ratified and confirmed in all respects and
shall continue in full force and effect. All references in the Loan Agreement or
such other Loan Documents or in any related agreement or instrument to the Loan
Agreement or such other Loan Documents shall hereafter refer to such agreements
as amended hereby and as previously amended, if previously amended, pursuant to
the provisions of SECTION 23 of the Loan Agreement.
SECTION 11. NO IMPLIED WAIVER. Except as expressly provided herein, nothing
contained herein shall constitute a waiver of, impair or otherwise affect any
Obligations, any other obligations of the Company or any right of the Agent or
the Banks consequent thereon.
SECTION 12. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.
SECTION 13. GOVERNING LAW. THIS AMENDMENT SHALL FOR ALL PURPOSES BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS (WITHOUT REFERENCE TO CONFLICTS OF LAW).
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as a
document under seal as of the date first above written.
THE FIRST NATIONAL BANK OF BOSTON,
Individually and as Agent
By:_____________________________________
Vice President
<PAGE>
-6-
BANK ONE, TEXAS, NATIONAL ASSOCIATION
By:_____________________________________
Michael Silverman
Vice President
STERLING SOFTWARE, INC.
By:_____________________________________
Vicki L. Hill
Vice President,
Treasurer
Each of the undersigned hereby acknowledges the foregoing Amendment as of the
Effective Date and agrees that its obligations under the Guaranty will extend to
the Loan Agreement, as so amended.
STERLING SOFTWARE (MIDWEST), INC.
(formerly Creative Data Systems, Inc.)
By:____________________________
Vicki L. Hill
Assistant Treasurer
STERLING SOFTWARE (NORTHERN AMERICA), INC.
(formerly Directions, Inc.)
By:____________________________
Vicki L. Hill
Assistant Treasurer
<PAGE>
-7-
STERLING SOFTWARE (UNITED STATES), INC.
(formerly Zanthe, Inc. Dylakor, Inc. and
Answer Systems, Inc.)
By:____________________________
Vicki L. Hill
Assistant Treasurer
STERLING SOFTWARE (AMERICA), INC.
(formerly Ordernet Services, Inc.)
By:____________________________
Vicki L. Hill
Assistant Treasurer
STERLING CHECK LIQUIDATION, INC.
By:____________________________
Vicki L. Hill
Treasurer
STERLING SOFTWARE (U.S.A.), INC.
(formerly Systems Software Marketing,
Inc. and Software Laboratories, Inc.)
By:____________________________
Vicki L. Hill
Assistant Treasurer
STERLING DISTRIBUTION SERVICES,
INC.
By:____________________________
Vicki L. Hill
Assistant Treasurer
<PAGE>
-8-
STERLING SOFTWARE (US), INC.
(formerly known as Sterling Federal Systems, Inc. and
Sterling IMD, Inc.)
By:____________________________
Vicki L. Hill
Assistant Treasurer
SYSTEMS CENTER, INC.
(formerly Sterling Software, Inc.,
a Wyoming corporation)
By:____________________________
Vicki L. Hill
Assistant Treasurer
STERLING SOFTWARE LEASING COMPANY
By:____________________________
Vicki L. Hill
President
STERLING SOFTWARE
INTERNATIONAL, INC.
By:____________________________
Vicki L. Hill
Assistant Treasurer
STERLING ZEROONE, INC.
By:____________________________
Vicki L. Hill
Assistant Treasurer
<PAGE>
-9-
ZEROONE SYSTEMS, INC.
By:____________________________
Vicki L. Hill
Treasurer
STERLING SOFTWARE (UNITED STATES
OF AMERICA), INC.
By:_____________________________________
Vicki L. Hill
Assistant Treasurer
STERLING SOFTWARE (NORTH AMERICA), INC.
By:_____________________________________
Vicki L. Hill
Assistant Treasurer
STERLING SOFTWARE (U.S. OF AMERICA), INC.
By:_____________________________________
Vicki L. Hill
Assistant Treasurer
<PAGE>
Exhibit 10 (WW)
SIXTEENTH AMENDMENT AGREEMENT
SIXTEENTH AMENDMENT AGREEMENT dated as of December 30, 1993 (this
"Amendment"), by and among STERLING SOFTWARE, INC., a Delaware corporation (the
"Company"), the direct and indirect subsidiaries of the Company listed on the
signature pages hereto (collectively, the "Sterling Subsidiaries"), THE FIRST
NATIONAL BANK OF BOSTON and BANK ONE, TEXAS, NATIONAL ASSOCIATION (collectively,
the "Banks") and THE FIRST NATIONAL BANK OF BOSTON, as agent (the "Agent") for
the Banks, amending certain provisions of an Amended and Restated Revolving
Credit and Term Loan Agreement dated as of June 8, 1990 (as heretofore amended,
the "Loan Agreement") by and among the Company, the Banks and the Agent and of
certain of the other Loan Documents (as defined in the Loan Agreement). Terms
not otherwise defined herein which are defined in the Loan Agreement shall have
the respective meanings herein assigned to such terms in the Loan Agreement.
WHEREAS, the Company, the Agent and the Banks wish to amend the terms of
the Loan Agreement, upon the terms and subject to the conditions herein;
NOW, THEREFORE, in consideration of the mutual agreements contained in the
Loan Agreement, herein and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:
SECTION 1. AMENDMENT TO SECTION 1.1 OF THE LOAN AGREEMENT. Section 1.1 of
the Loan Agreement is hereby amended by deleting, from the definition of
"Conversion Date", the date "December 31, 1993" and inserting in lieu thereof
the date "January 31, 1994".
SECTION 2. CONDITIONS TO EFFECTIVENESS. This Amendment shall be deemed to
be effective as of December 30, 1993 (the "Effective Date") upon the receipt by
the Agent of facsimile copies of original counterparts (to be followed promptly
by original counterparts) or original counterparts of this Amendment, duly
executed by each of the Company, the Sterling Subsidiaries, the Agent and the
Banks.
SECTION 3. REPRESENTATIONS AND WARRANTIES; NO DEFAULT; AUTHORIZATION. The
Company hereby represents and warrants to each of the Agent and the Banks as
follows:
(a) Each of the representations and warranties of the Company and the
Sterling Subsidiaries contained in the Loan Agreement, the other Loan Documents
or in any document or instrument delivered pursuant to or in connection with the
Loan Agreement, the other Loan Documents or this Amendment was true as of the
date as of which it was made and is true as and
<PAGE>
-2-
at the date of this Amendment, and no Default or Event of Default has
occurred and is continuing as of the date of this Amendment; and
(b) This Amendment has been duly authorized, executed and delivered
by the Company and each of the Sterling Subsidiaries and shall be in full force
and effect upon the satisfaction of the conditions set forth in SECTION 2
hereof, and the agreements of the Company and each of the Sterling Subsidiaries
party hereto contained herein, in the Loan Agreement, and in the other Loan
Documents, as amended, respectively constitute the legal, valid and binding
obligations of the Company and each of the Sterling Subsidiaries party hereto,
enforceable against the Company or such Sterling Subsidiaries in accordance with
their respective terms.
SECTION 4. RATIFICATION, ETC. Except as expressly amended hereby, the
Loan Agreement, the other Loan Documents and all documents, instruments and
agreements related thereto are hereby ratified and confirmed in all respects and
shall continue in full force and effect. All references in the Loan Agreement
or such other Loan Documents or in any related agreement or instrument to the
Loan Agreement or such other Loan Documents shall hereafter refer to such
agreements as amended hereby and as previously amended, if previously amended,
pursuant to the provisions of SECTION 23 of the Loan Agreement.
SECTION 5. NO IMPLIED WAIVER. Except as expressly provided herein,
nothing contained herein shall constitute a waiver of, impair or otherwise
affect any Obligations, any other obligations of the Company or any right of the
Agent or the Banks consequent thereon.
SECTION 6. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.
SECTION 7. GOVERNING LAW. THIS AMENDMENT SHALL FOR ALL PURPOSES BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS (WITHOUT REFERENCE TO CONFLICTS OF LAW).
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as a
document under seal as of the date first above written.
THE FIRST NATIONAL BANK OF BOSTON,
Individually and as Agent
By:_____________________________________
Title:
<PAGE>
-3-
BANK ONE, TEXAS, NATIONAL ASSOCIATION
By:_____________________________________
Michael Silverman
Vice President
STERLING SOFTWARE, INC.
By:_____________________________________
Vicki L. Hill
Vice President,
Treasurer
Each of the undersigned hereby acknowledges the foregoing Amendment as of the
Effective Date and agrees that its obligations under the Guaranty will extend to
the Loan Agreement, as so amended.
STERLING SOFTWARE (MIDWEST), INC.
(formerly Creative Data Systems, Inc.)
By:____________________________
Vicki L. Hill
Assistant Treasurer
STERLING SOFTWARE (NORTHERN AMERICA), INC.
(formerly Directions, Inc.)
By:____________________________
Vicki L. Hill
Assistant Treasurer
<PAGE>
-4-
STERLING SOFTWARE (UNITED STATES), INC.
(formerly Zanthe, Inc. Dylakor, Inc. and
Answer Systems, Inc.)
By:____________________________
Vicki L. Hill
Assistant Treasurer
STERLING SOFTWARE (AMERICA), INC.
(formerly Ordernet Services, Inc.)
By:____________________________
Vicki L. Hill
Assistant Treasurer
STERLING CHECK LIQUIDATION, INC.
By:____________________________
Vicki L. Hill
Treasurer
STERLING SOFTWARE (U.S.A.), INC.
(formerly Systems Software Marketing,
Inc. and Software Laboratories, Inc.)
By:____________________________
Vicki L. Hill
Assistant Treasurer
STERLING DISTRIBUTION SERVICES,
INC.
By:____________________________
Vicki L. Hill
Assistant Treasurer
<PAGE>
-5-
STERLING SOFTWARE (US), INC.
(formerly known as Sterling Federal Systems, Inc. and
Sterling IMD, Inc.)
By:____________________________
Vicki L. Hill
Assistant Treasurer
SYSTEMS CENTER, INC.
(formerly Sterling Software, Inc.,
a Wyoming corporation)
By:____________________________
Vicki L. Hill
Assistant Treasurer
STERLING SOFTWARE LEASING COMPANY
By:____________________________
Vicki L. Hill
President
STERLING SOFTWARE
INTERNATIONAL, INC.
By:____________________________
Vicki L. Hill
Assistant Treasurer
STERLING ZEROONE, INC.
By:____________________________
Vicki L. Hill
Assistant Treasurer
<PAGE>
-6-
ZEROONE SYSTEMS, INC.
By:____________________________
Vicki L. Hill
Treasurer
STERLING SOFTWARE (UNITED STATES
OF AMERICA), INC.
By:_____________________________________
Vicki L. Hill
Assistant Treasurer
STERLING SOFTWARE (NORTH AMERICA), INC.
By:_____________________________________
Vicki L. Hill
Assistant Treasurer
STERLING SOFTWARE (U.S. OF AMERICA), INC.
By:_____________________________________
Vicki L. Hill
Assistant Treasurer
<PAGE>
Exhibit 10 (XX)
SEVENTEENTH AMENDMENT AGREEMENT
SEVENTEENTH AMENDMENT AGREEMENT dated as of January 31, 1994 (this
"Amendment"), by and among STERLING SOFTWARE, INC., a Delaware corporation (the
"Company"), the direct and indirect subsidiaries of the Company listed on the
signature pages hereto (collectively, the "Sterling Subsidiaries"), THE FIRST
NATIONAL BANK OF BOSTON and BANK ONE, TEXAS, NATIONAL ASSOCIATION (collectively,
the "Banks") and THE FIRST NATIONAL BANK OF BOSTON, as agent (the "Agent") for
the Banks, amending certain provisions of an Amended and Restated Revolving
Credit and Term Loan Agreement dated as of June 8, 1990 (as heretofore amended,
the "Loan Agreement") by and among the Company, the Banks and the Agent and of
certain of the other Loan Documents (as defined in the Loan Agreement). Terms
not otherwise defined herein which are defined in the Loan Agreement shall have
the respective meanings herein assigned to such terms in the Loan Agreement.
WHEREAS, upon the terms and subject to the conditions contained herein, the
Company, the Agent and the Banks wish to amend the terms of the Loan Agreement,
to, among other things, extend the Conversion Date and the Final Maturity;
NOW, THEREFORE, in consideration of the mutual agreements contained in the
Loan Agreement, herein and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:
SECTION 1. AMENDMENTS TO SECTION 1.1 OF THE LOAN AGREEMENT. Section
1.1 of the Loan Agreement is hereby amended by:
(a) inserting, in the place required by alphabetical order, the following
new definitions:
"ADDITIONAL ACCOUNTS RECEIVABLE. Amounts receivable by any Subsidiary
of the Company for goods sold or leased or services rendered by such
Subsidiary other than US Accounts Receivable, UK Accounts Receivable and
Australian Accounts Receivable."
"ADDITIONAL RECEIVABLES AGREEMENT. Any agreement between a Subsidiary
of the Company and an affiliate of Sanwa US or another entity pursuant to
which such affiliate of Sanwa US or such other entity agrees to purchase
Additional Accounts Receivable of such Subsidiary."
"ADDITIONAL RECEIVABLES GUARANTY. Any guaranty issued by the Company
in favor of an affiliate of Sanwa US or another entity party to an
Additional Receivables
<PAGE>
-2-
Agreement pursuant to which the Company guaranties the obligations of any
of its Subsidiaries pursuant to an Additional Receivables Agreement."
(b) deleting, from the definition of "Conversion Date", the date "January
31, 1994" and inserting in lieu thereof the date "December 31, 1994";
(c) deleting, from the definition of "Final Maturity", the date "June 15,
1995" and substituting in lieu thereof the date "December 31, 1996";
(d) inserting, in the place required by alphabetical order, the following
new definition:
"FOREIGN OBLIGATIONS. All Indebtedness, obligations and liabilities of the
Company to The First National Bank of Boston or any of its affiliates in
respect of guaranties by, and other contingent obligations of, the Company,
existing on the Closing Date or arising thereafter, direct or indirect,
joint or several, absolute or contingent, matured or unmatured, liquidated
or unliquidated, secured or unsecured, in respect of Indebtedness of any
Subsidiary of the Company which is not organized under the laws of any
jurisdiction of the United States of America and which does not have its
principal place of business in the United States of America."
(e) deleting the definition of Sterling France in its entirety and
substituting in lieu thereof the following new definition:
"Sterling France. Sterling Software International (France) SARL, a
company incorporated under the laws of France, and Sterling Software
(France), S.A., a company incorporated under the laws of France and
assignee of substantially all of the assets of Sterling Software
International (France) SARL."; and
(f) inserting, in the place required by alphabetical order, the following
new definition:
"TOTAL DEBT. At any time of determination, the sum of (a) any
Indebtedness of the Company or any of its Subsidiaries under the UK
Receivables Programme, the Australian Receivables Agreement, the US
Receivables Agreement, any Additional Receivables Agreement or, to the
extent not included in any of the foregoing, the UK Receivables Guaranty,
the Australian Receivables Guaranty, the US Receivables Guaranty or any
Additional Receivables Guaranty (but solely to the extent that any of the
foregoing Indebtedness is on a full or partial recourse basis or, in the
case of non-recourse Indebtedness, exceeds $10,000,000 in the aggregate)
PLUS (b) the sum of (i) all Loans Outstanding PLUS (ii) the Maximum Drawing
Amount PLUS (iii) all Unpaid Reimbursement Obligations, plus (c) the amount
of any Foreign Obligations then outstanding."
<PAGE>
-3-
SECTION 2. AMENDMENT TO SECTION 2.4 OF THE LOAN AGREEMENT. Section 2.4
of the Loan Agreement is hereby amended by
(a) deleting subparagraph (a) thereof in its entirety and substituting in
lieu thereof the following new subparagraph (a):
"(a) For Base Rate Loans, the applicable interest rate shall be equal
to the Base Rate in effect from time to time";
(b) deleting subparagraph (b) thereof in its entirety and substituting in
lieu thereof the following new subparagraph (b):
"(b) For Eurodollar Rate Loans, the applicable interest rate shall be
2 - 3/4% above the Eurodollar Rate."; and
(c) deleting subparagraph (c) thereof in its entirety.
SECTION 3. AMENDMENT TO SECTION 3.1 OF THE LOAN AGREEMENT. Section 3.1
of the Loan Agreement is hereby amended by deleting the first sentence thereof
in its entirety and substituting in lieu thereof the following sentence:
"All Loans Outstanding at the close of business on the Conversion Date
shall be payable in eight equal (as nearly as may be) consecutive quarterly
installments due on the last day of each calendar quarter, with a final
payment at Final Maturity (each such date being called, hereinafter, a
"Repayment Date"), which final payment shall in any event be in an amount
sufficient to repay in full the remaining principal balance of the Loans
then Outstanding."
SECTION 4. AMENDMENT TO SECTION 8.4 OF THE LOAN AGREEMENT. Section 8.4
of the Loan Agreement is hereby amended by:
(a) adding the word "and" at the end of subparagraph (g) thereof;
(b) deleting the semicolon (";") and the word "and" at the end of
subparagraph (h) thereof and substituting in lieu thereof a period ("."); and
(c) deleting subparagraphs i, j and k thereof in their entirety.
SECTION 5. AMENDMENT TO SECTION 9.1 OF THE LOAN AGREEMENT. Section 9.1
of the Loan Agreement is hereby amended by deleting subsections (p), (q), (r),
(s), (s), (t) and (u) thereof in their entirety and substituting in lieu thereof
the following new subsections (p), (q), (r) and (s):
"(p) Indebtedness consisting of contingent liabilities to which
reference is or should be made by a footnote to the consolidated balance
sheets of the Company and its Subsidiaries in accordance with generally
accepted accounting principles, which
<PAGE>
-4-
contingent liabilities are incurred by Sterling France pursuant to certain
licensing and/or leasing arrangements to be entered into between Sterling
France and Promodata, a French company; PROVIDED, HOWEVER, that (i) any
such contingent liabilities arise solely with respect to failures of
product performance in accordance with warranties or contractual
requirements, (ii) the aggregate amount of contingent liabilities permitted
by this subsection (p) shall not exceed at any time $5,000,000, and (iii)
such contingent liabilities are not guaranteed by the Company;
(q) Indebtedness in respect of the Letter of Credit Guaranty and of
the reimbursement obligations of Sterling Software (United States of
America) in respect of the SCI Letter of Credit;
(r) Indebtedness of Sterling Software (United States of America) or
any of its Subsidiaries existing on the date hereof and listed on SCHEDULE
9.1(T) hereto; and
(s) So long as no Default or Event of Default has occurred and is
continuing or would occur after giving effect thereto, Indebtedness
incurred by the Company or any of its Subsidiaries in connection with the
purchase by Sanwa US, Sanwa UK, Sanwa Australia, any other affiliate of
Sanwa US or any other entity party to an Additional Receivables Agreement
of US Accounts Receivable, UK Accounts Receivable, Australian Accounts
Receivable or Additional Accounts Receivable; PROVIDED, HOWEVER, that
nothing contained in this subparagraph (s) shall be deemed to permit, in
connection with the sale or transfer of Additional Accounts Receivable, the
release of any lien of the Agent, for the benefit of the Agent and the
Banks, on such Additional Accounts Receivable."
SECTION 6. AMENDMENTS TO SECTION 9.5 OF THE LOAN AGREEMENT. Section
9.5 of the Loan Agreement is hereby amended by:
(a) deleting from the end of subparagraph (a)(i) thereof the text "during
the period from the Closing Date through Final Maturity, $20,000,000;" and
substituting in lieu thereof the following text: "during the period from
January 1, 1993 through Final Maturity, $10,000,000;"; and
(b) deleting from subparagraph (ii) thereof the text "during the period
commencing on the Closing Date through Final Maturity," and substituting in lieu
thereof the text "during the period commencing on January 1, 1993 through Final
Maturity,";
(c) deleting subparagraphs (a)(iii), (iv), (v) and (vi) thereof in their
entirety and substituting in lieu thereof the following new subparagraphs
(a)(iii) and (iv):
"(iii) the Company may acquire Systems Center, Inc. pursuant to the
terms of the Merger Agreement; and
<PAGE>
-5-
(iv) the Company or any of its Subsidiaries may acquire US Accounts
Receivable, UK Accounts Receivable, Australian Accounts Receivable or
Additional Accounts Receivable to the extent required or permitted by the
US Receivables Agreement, any of the Originator Agreements, the UK
Receivables Programme, the Australian Receivables Agreement or any
Additional Receivables Agreement."
SECTION 7. AMENDMENT TO SECTION 9.7 OF THE LOAN AGREEMENT. Section
9.7. of the Loan Agreement is hereby deleted in its entirety, and the following
new Section 9.7 is substituted in lieu thereof:
"SECTION 9.7 SUBORDINATED DEBT REPURCHASE. The Company will not, and
will not permit any of the Sterling Subsidiaries to, make any payment
(other than a regularly scheduled payment in accordance with the terms of
the relevant Subordinated Debt Documents) in respect of, redeem or
repurchase any Subordinated Debt."
SECTION 8. AMENDMENT TO SECTION 9.8 OF THE LOAN AGREEMENT. Section 9.8
of the Loan Agreement is hereby amended by deleting the first paragraph thereof
and table therein in their entirety and substituting in lieu thereof the
following text:
"Net capital expenditures unrelated to acquisitions permitted under Section
9.5 hereof shall not exceed, during any fiscal period set forth in the table
below, the amount set forth opposite such period in the table below:
<TABLE>
<CAPTION>
MAXIMUM
PERIOD PERMISSIBLE AMOUNT
------ ------------------
<S> <C>
October 1, 1993--September 30, 1994 $17,000,000
October 1, 1994--September 30, 1995 $14,000,000
October 1, 1995--December 31, 1996 $14,000,000"
</TABLE>
SECTION 9. ELIMINATION OF SECTIONS 9.10 AND 9.16 OF THE LOAN AGREEMENT.
Sections 9.10 and 9.16 of the Loan Agreement are hereby deleted in their
entirety.
SECTION 10. RENUMBERING OF SECTIONS 9.11, 9.12, 9.13, 9.14, 9.15 AND
9.17 OF THE LOAN AGREEMENT. The section number references to Sections 9.11,
9.12, 9.13, 9.14, 9.15 and 9.17 of the Loan Agreement are hereby deleted and the
following new section number references are respectively substituted in lieu
thereof: "9.10, 9.11, 9.12, 9.13, 9.14, and 9.15."
SECTION 11. AMENDMENT TO SECTION 10.1 OF THE LOAN AGREEMENT. Section
10.1 of the Loan Agreement is hereby deleted in its entirety, and the following
new Section 10.1 is hereby substituted in lieu thereof:
<PAGE>
-6-
"SECTION 10.1 PROFITABILITY. The Company shall not (a) cause or
permit Consolidated Net Income or Consolidated Net Operating Income (i) at
the end of any two consecutive fiscal quarters (other than the two
consecutive fiscal quarters ending December 31, 1993) or (ii) at the end of
the fiscal quarter ending December 31, 1993 to be less than $1.00 and (b)
shall not incur any loss on Consolidated Net Income or Consolidated Net
Operating Income in any fiscal quarter of the Company (other than the
fiscal quarter ending December 31, 1993) in excess of $1,000,000."
SECTION 12. AMENDMENT TO SECTION 10.2. Section 10.2 of the Loan
Agreement is hereby deleted in its entirety and the following new Section 10.2
is substituted in lieu thereof:
"SECTION 10.2. OPERATING CASH FLOW TO INTEREST CHARGES. The
Company's ratio of Operating Cash Flow to Interest Charges (a) for any
period of two consecutive fiscal quarters (other than the two consecutive
fiscal quarter period ended December 31, 1993) shall be greater than
3.50:l.00, and (b) for the fiscal quarter of the Company ended December 31,
1993 shall be greater than 3.50:1.00."
SECTION 13. AMENDMENT TO SECTION 10.3 OF THE LOAN AGREEMENT. Section
10.3 of the Loan Agreement is hereby deleted in its entirety, and the following
new Section 10.3 is hereby substituted in lieu thereof:
"SECTION 10.3. QUICK RATIO. The Company's ratio of Quick Assets to
the sum of Current Liabilities plus Loans Outstanding at the end of any
fiscal quarter shall not be less than 1.00:1.00."
SECTION 14. AMENDMENT TO SECTION 10.4 OF THE LOAN AGREEMENT. Section
10.4 of the Loan Agreement is hereby deleted in its entirety, and the following
new Section 10.4 is substituted in lieu thereof:
"SECTION 10.4. NET WORTH. The Company shall not cause or permit its
Consolidated New Worth at the end of any fiscal quarter of the Company to
be less than (a) $85,000,000, plus (b) on a cumulative basis, commencing
with the fiscal quarter ending September 30, 1993, 75% of the excess of
Consolidated Net Income for each fiscal quarter (calculated without
deduction for any net losses) after preferred stock dividends actually paid
by the Company since September 30, 1993, as adjusted from time to time to
reflect stock splits, distributions, or together recapitalizations or
reclassifications, plus (c) 100% of the net proceeds received by the
Company of any new equity issued by the Company since September 30, 1993."
SECTION 15. AMENDMENT TO SECTION 10.5 OF THE LOAN AGREEMENT. Section
10.5 of the Loan Agreement is hereby deleted in its entirety, and the following
new Section 10.5 is substituted in lieu thereof:
"SECTION 10.5. LIABILITIES TO NEW WORTH RATIO. The Company shall not
cause or permit its ratio of Consolidated Total Liabilities to Consolidated
Net Worth at the end
<PAGE>
-7-
of any fiscal quarter set forth in the table below to be equal to or
greater than the ratio set forth opposite such fiscal quarter in the table
below:
<TABLE>
<CAPTION>
FISCAL QUARTER
ENDING RATIO
-------------- -----
<S> <C>
December 31, 1993 3.25:1.00
March 31, 1994 3.25:1.00
June 30, 1994 3.00:1.00
September 30, 1994
and thereafter 2.50:1.00"
</TABLE>
SECTION 16. AMENDMENT TO SECTION 10.6 OF THE LOAN AGREEMENT. Section
10.6 of the Loan Agreement is hereby deleted in its entirety, and the following
new Section 10.6 is substituted in lieu thereof:
"SECTION 10.6. TOTAL DEBT TO OPERATING CASH FLOW RATIO. The Company
shall not permit the ratio of Total Debt to Operating Cash Flow at any time
to exceed 2.00:1.00."
SECTION 17. AMENDMENT TO SECTION 18 OF THE LOAN AGREEMENT. Section 18
of the Loan Agreement is hereby amended by deleting the text:
"Jackson & Walker
6000 First Republic Bank Plaza
901 Main Street
Dallas, Texas 75202
Attention: Eileen S. Price, Esq."
from subparagraph (a) thereof and substituting in lieu thereof the following
text:
"Jackson & Walker
300 Convent Street
Suite 2450
San Antonio, Texas 78205
Attention: Eileen S. Scherlen, Esq."
SECTION 18. AMENDMENT OF SCHEDULE 5.6 TO THE LOAN AGREEMENT. SCHEDULE
5.6 to the Loan Agreement is hereby deleted in its entirety, and SCHEDULE 5.6
attached hereto is hereby substituted in lieu thereof.
SECTION 19. AGREEMENT AS TO THE ASSIGNMENT AGREEMENT. Each of the
Company, the Sterling Subsidiaries, the Agent and the Banks hereby confirms
that, for purposes of the Assignment Agreement, the term "Loan Agreement" shall
mean the Amended and Restated Revolving Credit and Term Loan Agreement dated as
of June 8, 1990 among the Company, the
<PAGE>
-8-
Agent and the Banks, as the same may be amended, modified, supplemented or
amended and restated from time to time.
SECTION 20. CONDITIONS TO EFFECTIVENESS. This Amendment shall be deemed
to be effective as of January 31, 1994 (the "Effective Date") upon the receipt
by the Agent, on or before January 31, 1994, of each of the following, each in
form and substance satisfactory to the Agent and the Banks:
(a) facsimile copies of original counterparts (to be followed promptly by
original counterparts) or original counterparts of this Amendment, duly executed
by each of the Company, the Sterling Subsidiaries, the Agent and the Banks;
(b) from the Company and each of the Sterling Subsidiaries, copies,
certified by a duly authorized officer of each such entity, of the charter
documents and by-laws of each such entity as in effect on the date hereof or, if
applicable, a certificate from a duly authorized officer of each of the Company
and the Sterling Subsidiaries to the effect that the charter documents and
by-laws of each such entity previously delivered to the Agent and the Banks are
still in full force and effect;
(c) from the Company and each of the Sterling Subsidiaries, copies,
certified by the secretary or assistant secretary of each such entity, of the
records of the actions taken by each such entity to authorize (i) the execution
and delivery of this Amendment and the other documents, agreements and
instruments executed in connection herewith, and (ii) the performance of each
such entity's obligations under the Loan Agreement, as amended by this
Amendment, and the other Loan Documents, as applicable;
(d) from the Company and each of the Sterling Subsidiaries other than
Sterling Software (United States of America), Sterling Software (Northern
America) and Sterling Software (U.S. of America), a legal existence and good
standing certificate, certified by an authorized official of each such entity's
jurisdiction of incorporation;
(e) results of UCC lien searches requested by the Agent, together with
supplemental perfection certificates for the Company and each of the Sterling
Subsidiaries;
(f) an opinion of counsel to the Company and each of the Sterling
Subsidiaries, in form and substance satisfactory to the Agent; and
(g) payment to the Agent, for the pro rata accounts of each of the Banks,
an amendment fee of $25,000 in immediately available funds (the Company hereby
authorizing the Agent to debit its account with the Agent for purposes of making
such payment).
SECTION 21. REPRESENTATIONS AND WARRANTIES; NO DEFAULT; AUTHORIZATION.
The Company hereby represents and warrants to each of the Agent and the Banks as
follows:
<PAGE>
-9-
(a) each of the following, each in form and substance satisfactory to the
Agent and the Banks:
(b) Each of the representations and warranties of the Company and the
Sterling Subsidiaries contained in the Loan Agreement, the other Loan Documents
or in any document or instrument delivered pursuant to or in connection with the
Loan Agreement, the other Loan Documents or this Amendment was true as of the
date as of which it was made and is true as and at the date of this Amendment,
and no Default or Event of Default has occurred and is continuing as of the date
of this Amendment; and
(c) This Amendment has been duly authorized, executed and delivered by the
Company and each of the Sterling Subsidiaries and shall be in full force and
effect upon the satisfaction of the conditions set forth in Section 20 hereof,
and the agreements of the Company and each of the Sterling Subsidiaries party
hereto contained herein, in the Loan Agreement, and in the other Loan Documents,
as amended, respectively constitute the legal, valid and binding obligations of
the Company and each of the Sterling Subsidiaries party hereto, enforceable
against the Company or such Sterling Subsidiaries in accordance with their
respective terms.
SECTION 22. RATIFICATION, ETC. Except as expressly amended hereby, the
Loan Agreement, the other Loan Documents and all documents, instruments and
agreements related thereto are hereby ratified and confirmed in all respects and
shall continue in full force and effect. All references in the Loan Agreement
or such other Loan Documents or in any related agreement or instrument to the
Loan Agreement or such other Loan Documents shall hereafter refer to such
agreements as amended hereby and as previously amended, if previously amended,
pursuant to the provisions of Section 23 of the Loan Agreement.
SECTION 23. NO IMPLIED WAIVER. Except as expressly provided herein,
nothing contained herein shall constitute a waiver of, impair or otherwise
affect any Obligations, any other obligations of the Company or any right of the
Agent or the Banks consequent thereon.
SECTION 24. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.
SECTION 25. GOVERNING LAW. THIS AMENDMENT SHALL FOR ALL PURPOSES BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS (WITHOUT REFERENCE TO CONFLICTS OF LAW).
<PAGE>
-10-
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as a
document under seal as of the date first above written.
THE FIRST NATIONAL BANK OF BOSTON,
Individually and as Agent
By:_____________________________________
Title:
BANK ONE, TEXAS, NATIONAL ASSOCIATION
By:_____________________________________
Michael Silverman
Vice President
STERLING SOFTWARE, INC.
By:_____________________________________
Vicki L. Hill
Vice President,
Treasurer
Each of the undersigned hereby (1) executes this Amendment for purposes of
Section 18 hereof and (2) acknowledges the foregoing Amendment as of the
Effective Date and agrees that its obligations under the Guaranty will extend to
the Loan Agreement, as so amended.
STERLING SOFTWARE (MIDWEST), INC.
(formerly Creative Data Systems, Inc.)
By:____________________________
Vicki L. Hill
Assistant Treasurer
<PAGE>
-11-
STERLING SOFTWARE (NORTHERN AMERICA), INC.
(formerly Directions, Inc.)
By:____________________________
Vicki L. Hill
Assistant Treasurer
STERLING SOFTWARE (UNITED STATES), INC.
(formerly Zanthe, Inc. Dylakor, Inc. and
Answer Systems, Inc.)
By:____________________________
Vicki L. Hill
Assistant Treasurer
STERLING SOFTWARE (AMERICA), INC.
(formerly Ordernet Services, Inc.)
By:____________________________
Vicki L. Hill
Assistant Treasurer
STERLING CHECK LIQUIDATION, INC.
By:____________________________
Vicki L. Hill
Treasurer
STERLING SOFTWARE (U.S.A.), INC.
(formerly Systems Software Marketing,
Inc. and Software Laboratories, Inc.)
By:____________________________
Vicki L. Hill
Assistant Treasurer
<PAGE>
-12-
STERLING DISTRIBUTION SERVICES,
INC.
By:____________________________
Vicki L. Hill
Assistant Treasurer
STERLING SOFTWARE (US), INC.
(formerly known as Sterling Federal Systems, Inc. and
Sterling IMD, Inc.)
By:____________________________
Vicki L. Hill
Assistant Treasurer
SYSTEMS CENTER, INC.
(formerly Sterling Software, Inc.,
a Wyoming corporation)
By:____________________________
Vicki L. Hill
Assistant Treasurer
STERLING SOFTWARE LEASING COMPANY
By:____________________________
Vicki L. Hill
President
<PAGE>
-13-
STERLING SOFTWARE
INTERNATIONAL, INC.
By:____________________________
Vicki L. Hill
Assistant Treasurer
STERLING ZEROONE, INC.
By:____________________________
Vicki L. Hill
Assistant Treasurer
ZEROONE SYSTEMS, INC.
By:____________________________
Vicki L. Hill
Treasurer
STERLING SOFTWARE (UNITED STATES
OF AMERICA), INC.
By:_____________________________________
Vicki L. Hill
Assistant Treasurer
STERLING SOFTWARE (NORTH AMERICA), INC.
By:_____________________________________
Vicki L. Hill
Assistant Treasurer
<PAGE>
-14-
STERLING SOFTWARE (U.S. OF AMERICA), INC.
By:_____________________________________
Vicki L. Hill
Assistant Treasurer
<PAGE>
SCHEDULE 5.6
Sterling Software (Midwest), Inc.
(formerly Creative Data Systems, Inc.)
3659 South Green Road
Beachwood, OH 44122
Sterling Software (Northern
America), Inc.
(formerly Directions, Inc.)
15301 Dallas Parkway
Suite 400, LB 23
Dallas, TX 75248
Sterling Software (United
States), Inc.
(formerly Zanthe, Inc., Dylakor, Inc. and Answer Systems, Inc.)
5900 Canoga Avenue
Woodland Hills, CA 91367-4237
Sterling Software (America), Inc.
(formerly Ordernet Services, Inc.)
4600 Lakehurst Court
Dublin, OH 43220
Sterling Distribution Services, Inc.
4600 Lakehurst Court
Dublin, OH 43220
Sterling Check Liquidation, Inc.
15301 Dallas Parkway
Suite 400, LB 23
Dallas, TX 75248
Sterling Software (US), Inc.
(formerly Sterling Federal Systems, Inc.
and Sterling IMD, Inc.)
950 Tower Lane
Suite 870
Foster City, CA 94404
<PAGE>
-2-
Systems Center, Inc.
(formerly Sterling Software, Inc.,
a Wyoming corporation)
8080 N. Central Expy
Suite 1100
Dallas, TX 75206
Sterling Software International, Inc.
8080 N. Central Expressway
Suite 1100
Dallas, TX 75206
Sterling Software Leasing Company
8080 N. Central Expressway
Suite 1100
Dallas, TX 75206
Sterling ZeroOne, Inc.
950 Tower Lane
Suite 870
Foster City, CA 94404
Sterling Software (U.S.A.), Inc. (California)
(formerly Systems Software Marketing,
Inc. and Software Laboratories, Inc.)
11050 White Rock Road
Suite 100
Rancho Cordova, CA 95670
ZeroOne Systems, Inc.
8080 N. Central Expy
Suite 1100
Dallas, TX 75206
Sterling Software (United States
of America), Inc.
1800 Alexander Bell Drive
Reston, Virginia 22091
Sterling Software (U.S. of America), Inc.
1800 Alexander Bell Drive
Reston, Virginia 22091
<PAGE>
-3-
Sterling Software (North America), Inc.
2477 Gateway
Irving, Texas 75063
Net/Master, Inc.
1800 Alexander Bell Drive
Reston, VA 22091
Data Management Information, Inc.
1800 Alexander Bell Drive
Reston, VA 22091
<PAGE>
STERLING SOFTWARE, INC. EXHIBIT 11(a)
COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS ENDED DECEMBER 31, 1993
(in thousands, except per share information)
<TABLE>
<CAPTION>
Fully
Primary Diluted
--------- ---------
<S> <C> <C>
Earnings:
Earnings applicable to common stockholders . . . . . . . . . . . . . . . . $10,970 $10,970
Add: Interest expense on amounts outstanding for the 5 3/4% Convertible
Subordinated Debentures (net of applicable income taxes) . . . . . 219 1,064
Interest income on investment of proceeds from assumed conversion
of options and warrants (net of applicable income taxes) . . . . . 143
-------- --------
$11,189 $12,177
-------- --------
-------- --------
Shares:
Weighted average of shares outstanding . . . . . . . . . . . . . . . . . . 18,093 18,093
Add common shares issued on assumed exercise of options and warrants . . . 8,400 8,400
Less common shares assumed repurchased . . . . . . . . . . . . . . . . . . (3,684) (3,684)
-------- --------
22,809 22,809
--------
--------
Common shares issued on assumed conversion of 5 3/4% Convertible
Subordinated Debentures. . . . . . . . . . . . . . . . . . . . . . . . . . 4,056
--------
26,865
--------
--------
Earnings per common share:
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .49
--------
--------
Fully diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .45
--------
--------
</TABLE>
<PAGE>
STERLING SOFTWARE, INC. EXHIBIT 11(b)
COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS ENDED DECEMBER 31, 1992
(in thousands, except per share information)
<TABLE>
<CAPTION>
Fully
Primary Diluted
--------- ---------
<S> <C> <C>
Earnings:
Earnings applicable to common stockholders . . . . . . . . . . . . . . . . $ 1,930 $ 1,930
Add: Interest expense on amounts outstanding for the 8% Convertible
Senior Subordinated Debentures (net of applicable income taxes). . 284 633
Interest expense on use of proceeds from assumed conversion of
options and warrants to pay off amounts outstanding on Systems
Center, Inc. line of credit (net of applicable income taxes) . . . 187
-------- --------
$ 2,214 $ 2,750
-------- --------
-------- --------
Shares:
Weighted average of shares outstanding . . . . . . . . . . . . . . . . . . 16,559 16,559
Add common shares issued on assumed exercise of options and warrants . . . 6,360 6,360
Less common shares assumed repurchased . . . . . . . . . . . . . . . . . . (3,341) (3,341)
-------- --------
19,578
--------
--------
Common shares issued on assumed conversion of 8% Convertible Senior
Subordinated Debentures. . . . . . . . . . . . . . . . . . . . . . . . . . 2,437
--------
22,015
--------
--------
Earnings per common share:
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .11
--------
--------
Fully diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .11
--------
--------
</TABLE>
