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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 31, 1994
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Sterling Software, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 1-8467 75-1873956
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(State or other jurisdiction (Commission (IRS Employer
of incorporation File Number) Identification No.)
8080 N. Central Expwy., Suite 1100, Dallas, Texas 75206
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 891-8600
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Item 5. Other Events.
On July 31, 1994, Sterling Software, Inc., a Delaware corporation
("Sterling"), and SSI Corporation, a Georgia corporation and a wholly-owned
subsidiary of Sterling ("Sub"), entered into a definitive Agreement and Plan of
Merger (the "Merger Agreement") with KnowledgeWare, Inc., a Georgia corporation
("KWI"), pursuant to which Sterling will acquire KWI through a merger of Sub
with and into KWI (the "Merger").
Under the terms of the Merger Agreement, each outstanding share of the
common stock, without par value, of KWI will be converted into the right to
receive .2893 of a share of the common stock, par value $.10 per share, of
Sterling.
Consummation of the proposed Merger is subject to the approval of the
stockholders of each of Sterling and KWI and other conditions set forth in the
Merger Agreement.
Item 7. Exhibits.
Exhibit No. Description
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2 Agreement and Plan of Merger dated as of July 31,
1994, among Sterling Software, Inc., SSI
Corporation and KnowledgeWare, Inc.
99.1 Stock Option Agreement dated as of July 31, 1994,
between Sterling Software, Inc. and KnowledgeWare
Inc.
99.2 Press Release dated August 1, 1994
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
STERLING SOFTWARE, INC.
Date: August 2, 1994 By: /s/ Jeannette P. Meier
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Its: Executive Vice President
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INDEX TO EXHIBITS
Exhibit
Number Exhibit
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2 Agreement and Plan of Merger
dated as of July 31, 1994,
among Sterling Software, Inc.,
SSI Corporation and KnowledgeWare,
Inc.
99.1 Stock Option Agreement dated
as of July 31, 1993, between
Sterling Software, Inc. and KnowledgeWare,
Inc.
99.2 Press Release dated August 1, 1994
349306
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Exhibit 2
AGREEMENT AND PLAN OF MERGER
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AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of July 31, 1994,
among KNOWLEDGEWARE, INC., a Georgia corporation (the "Corporation"), STERLING
SOFTWARE, INC., a Delaware corporation ("Buyer"), and SSI CORPORATION, a Georgia
corporation and a wholly-owned subsidiary of Buyer ("Merger Sub").
RECITALS
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A. The Boards of Directors of the Corporation and Buyer each have
determined that a business combination between Buyer and the Corporation is in
the best interests of their respective companies and stockholders, and presents
an opportunity for their respective companies to achieve long-term strategic
objectives, and accordingly have agreed to effect the merger provided for herein
upon the terms and subject to the conditions set forth herein.
B. To induce Buyer to enter into this Agreement, simultaneously with the
execution and delivery of this Agreement, the Corporation and Buyer have entered
into a Stock Option Agreement, dated as of the date hereof (the "Stock Option
Agreement"), pursuant to which the Corporation has granted to Buyer an option to
acquire shares of common stock of the Corporation upon the occurrence of certain
events and in accordance with certain terms and conditions set forth in the
Stock Option Agreement.
C. To further induce Buyer to enter into this Agreement, certain holders
of common stock of the Corporation have entered into Stockholder Agreements,
dated as of the date hereof (the "Stockholder Agreements"), with Buyer pursuant
to which such stockholders have agreed to vote their Shares (as hereinafter
defined) in favor of the Merger (as hereinafter defined).
D. The Board of Directors of the Corporation has approved the acquisition
of shares of the Corporation pursuant to the Stock Option Agreement and the
transactions contemplated by the Stockholder Agreements in accordance with the
provisions of Sections 14-2-1111(1) and 14-2-1132(a)(1) of the Georgia Business
Corporation Code (the "GBCC").
E. The Corporation, Buyer and Merger Sub desire to make certain
representations, warranties and agreements in connection with the Merger.
F. It is intended that for federal income tax purposes the merger provided
for herein shall qualify as a reorganization within the meaning of Section 368
of the Internal Revenue Code of 1986, as amended (the "Code"), and for financial
accounting purposes shall be accounted for as a "pooling of interests."
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
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ARTICLE 1
1. The Merger.
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1.1. The Merger. Subject to the terms and conditions of this Agreement,
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at the Effective Time (as defined in Section 1.3), Merger Sub shall be merged
with and into the Corporation in accordance with this Agreement and the separate
corporate existence of Merger Sub shall thereupon cease (the "Merger"). The
Corporation shall be the surviving corporation in the Merger (sometimes
hereinafter referred to as the "Surviving Corporation") and shall continue to be
governed by the laws of the State of Georgia, and the separate corporate
existence of the Corporation with all its rights, privileges, powers,
immunities, purposes and franchises shall continue unaffected by the Merger,
except as set forth in Articles 2 and 3. The Merger shall have the effects
specified in the GBCC.
1.2. The Closing. The closing of the Merger (the "Closing") shall take
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place (i) at the executive offices of Buyer, in the State of Texas, at 9:00
a.m., local time, on the first business day immediately following the day on
which the last to be fulfilled or waived of the conditions set forth in Article
8 shall be fulfilled or waived in accordance herewith or (ii) at such other time
and place and/or on such other date as the Corporation and Buyer may agree. The
date on which the Closing occurs is hereafter referred to as the "Closing Date."
1.3. Effective Time. If all the conditions to the Merger set forth in
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Article 8 shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated in accordance with Article 9, the
parties hereto shall cause a Certificate of Merger meeting the requirements of
Section 14-2-1105(b) of the GBCC to be properly executed and filed in accordance
with such Section on the Closing Date. The Merger shall become effective at the
time of the filing of the Certificate of Merger in accordance with the GBCC or
at such later time which the parties hereto have theretofore agreed upon and
designated in such filing as the effective time of the Merger (the "Effective
Time").
ARTICLE 2
2. Articles of Incorporation and Bylaws of the Surviving Corporation.
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2.1. Articles of Incorporation. Effective at the Effective Time and
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subject to the provisions of Section 7.17, the Articles of Incorporation of the
Corporation shall be the Articles of Incorporation of the Surviving Corporation,
as amended as set forth in Exhibit 2.1.
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2.2. Bylaws. Subject to the provisions of Section 7.17, the Bylaws of
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Merger Sub in effect immediately prior to the Effective Time shall be the Bylaws
of the Surviving Corporation, until duly amended in accordance with their terms
and the GBCC.
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ARTICLE 3
3. Directors and Officers of the Surviving Corporation.
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3.1. Directors. The persons who are directors of Merger Sub immediately
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prior to the Effective Time shall, from and after the Effective Time, be and
become directors of the Surviving Corporation until their successors have been
duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's Articles
of Incorporation and Bylaws.
3.2. Officers. The officers of the Corporation shall continue as
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officers of the Surviving Corporation until their resignation or removal.
ARTICLE 4
4. Conversion of Shares in the Merger.
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4.1. Conversion of Shares. The manner of converting shares of the
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Corporation and Merger Sub in the Merger shall be as follows:
(i) At the Effective Time, each share of the Common Stock,
without par value (the "Shares"), of the Corporation issued and outstanding
immediately prior to the Effective Time (other than Shares owned by Buyer,
Merger Sub or any other subsidiary of Buyer (the "Buyer Group") and Shares which
are held by persons ("Dissenting Shareholders") exercising their right to
dissent, if any, from the Merger pursuant to Article 13 of the GBCC) shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into the right to receive .2893 share of Common Stock, par value
$.10 per share (the "Buyer Common Stock") of Buyer (the "Exchange Ratio").
(ii) As a result of the Merger and without any action on the
part of the holder thereof, all Shares (other than Shares owned by the Buyer
Group and Shares held by Dissenting Shareholders) shall cease to be outstanding
and shall be cancelled and retired and shall cease to exist, and each holder of
a certificate (a "Certificate") representing any Shares shall thereafter cease
to have any rights with respect to such Shares, except the right to receive,
without interest, the Buyer Common Stock and cash for fractional interests of
the Buyer Common Stock in accordance with Section 4.1(i) upon the surrender of
such Certificate, or the right, if any, of Dissenting Shareholders to receive
fair value pursuant to Section 4.1(i) of this Agreement.
(iii) The warrants (the "Warrants") issued pursuant to that
certain Warrant Agreement dated as of June 9, 1994 between the Corporation and
Trust Company Bank and outstanding at the Effective Time shall, by virtue of the
Merger, and without any further action on the part of the Corporation or the
holder of any Warrant, be assumed by Buyer. The
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Warrants assumed by Buyer shall be exercisable upon the same terms and
conditions existing at the date hereof except that (a) the Warrants shall be
exercisable for that whole number of shares of Buyer Common Stock (to the nearer
whole share) into which the number of Shares subject to the Warrants immediately
prior to the Effective Time would be converted, and (b) the exercise price per
share of Buyer Common Stock shall be an amount equal to the purchase price per
Share immediately prior to the Effective Time divided by the Exchange Ratio (the
price per share, as so determined, being rounded upward to the nearest full
cent). No payment shall be made for fractional interests.
(iv) To the extent there exists a right to dissent, each Share
issued and outstanding at the Effective Time and owned by any of the Buyer
Group, and each Share issued and held in the Corporation's treasury at the
Effective Time, by virtue of the Merger and without any action on the part of
the holder thereof, shall cease to be outstanding and shall be cancelled and
retired without payment of any consideration therefor and shall cease to exist.
(v) At the Effective Time, each share of Common Stock, par
value $.10 per share, of Merger Sub issued and outstanding immediately prior to
the Effective Time as result of the Merger shall be converted and exchanged for
one newly and validly issued, fully paid and nonassessable share of Common Stock
of the Surviving Corporation.
(vi) At the Effective Time, all options (individually, a
"Corporation Option" or collectively, the "Corporation Options") then
outstanding under the Corporation's Incentive Stock Option Plan of 1984, Second
Incentive Stock Option Plan of 1984, 1988 Stock Incentive Plan, 1989 Non-
Employee Directors Stock Option Plan, 1989 Employee Stock Purchase Plan and 1993
Non-Employee Directors Stock Option Plan (collectively, the "Corporation Stock
Option Plans") shall remain outstanding following the Effective Time and shall
remain exercisable pursuant to the terms of such plans. At the Effective Time,
such Corporation Options shall, by virtue of the Merger and without any further
action on the part of the Corporation or the holder of any such Corporation
Options, be assumed by Buyer in such manner that Buyer (a) is a corporation
"assuming a stock option in a transaction to which Section 424(a) applied"
within the meaning of Section 424 of the Code, or (b) to the extent that Section
424 of the Code does not apply to any such Corporation Option, would be such a
corporation were Section 424 applicable to such option. Each Corporation Option
assumed by Buyer shall be exercisable upon the same terms and conditions as
under the applicable Corporation Stock Option Plan and the applicable option
agreement issued thereunder, except that (a) each such Corporation Option shall
be exercisable for that whole number of shares of Buyer Common Stock (to the
nearer whole share) into which the number of Shares subject to such Option
immediately prior to the Effective Time would be converted under this Section
4.1, and (b) the option exercise price per share of Buyer Common Stock shall be
an amount equal to the option price per Share subject to such Corporation Option
in effect prior to the Effective Time divided by the Exchange Ratio (the price
per share, as so determined, being rounded upward to the nearest full cent). The
Corporation Disclosure Letter (as hereinafter defined) sets forth, as to each
holder of a Corporation Option, the name of such holder, the number of Shares
subject to such Corporation Option, the Corporation Stock Option Plan pursuant
to which such Corporation
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Option was issued, the vesting schedule and the expiration date of such
Corporation Option. No payment shall be made for fractional interests. From
and after the date of this Agreement, no additional options shall be granted by
the Corporation or its subsidiaries under the Corporation Stock Option Plans or
otherwise.
(vii) To the extent there exists a right to dissent, each Share
issued and outstanding at the Effective Time and held by Dissenting
Shareholders, by virtue of the Merger and without action on the part of the
holder thereof, shall cease to be outstanding and shall be cancelled and retired
and shall cease to exist, and each Dissenting Shareholder shall thereafter cease
to have any rights with respect to such Shares, except the right, if any, to
receive payment from the Surviving Corporation of the "fair value" of such
Shares as determined in accordance with the GBCC.
4.2. Exchange of Certificates Representing Shares.
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(i) As of the Effective Time, Buyer shall make available, or
shall cause to be made available, with an exchange agent selected by Buyer,
which shall be Buyer's Transfer Agent or such other party reasonably
satisfactory to the Corporation (the "Exchange Agent"), for the benefit of the
holders of Shares, for exchange in accordance with this Article 4, certificates
representing a sufficient number of shares of Buyer Common Stock necessary for
the Exchange Agent to make payments pursuant to Section 4.1 hereof (such
certificates for shares of Buyer Common Stock, together with the amount of any
dividends or distributions with respect thereto, being hereinafter referred to
as the "Exchange Fund") in exchange for outstanding Shares.
(ii) Promptly after the Effective Time, Buyer shall cause the
Exchange Agent to mail to each person who was, at the Effective Time, a holder
of record (other than any of the Buyer Group or any Dissenting Shareholder) of a
Certificate or Certificates (i) a letter of transmittal which shall specify that
delivery shall be effected, and the risk of loss and title to the Certificates
shall pass, upon (and only upon) delivery of the Certificates to the Exchange
Agent, and which shall be in such form and have such other provisions as Buyer
and the Exchange Agent may reasonably specify, and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing Buyer Common Stock. Promptly following the surrender to the
Exchange Agent of a Certificate for cancellation together with such letter of
transmittal, duly executed and completed in accordance with the instructions
thereto, the Exchange Agent shall deliver to the holder of such Certificate in
exchange therefor a certificate representing that number of shares of Buyer
Common Stock and unpaid dividends and distributions, if any, which such holder
has the right to receive in respect of the Certificate surrendered pursuant to
the provisions of this Article 4, after giving effect to any required tax
withholdings, and the Certificate so surrendered shall forthwith be cancelled.
No interest will be paid or accrued on the amount payable upon surrender of
Certificates. In the event of a transfer of ownership of Shares which is not
registered in the transfer records of the Corporation, a certificate
representing the proper number of shares of Buyer Common Stock may be issued to
such a transferee if the Certificate representing such
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Shares is presented to the Exchange Agent, accompanied by all documents required
by the Exchange Agent to evidence and effect such transfer of Shares and to
evidence that any applicable stock transfer taxes have been paid.
(iii) Notwithstanding any other provisions of this Agreement, no
dividends on Buyer Common Stock shall be paid with respect to any Shares or
other securities represented by a Certificate until such Certificate is
surrendered for exchange as provided herein. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the holder of certificates representing shares of Buyer Common Stock
issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore payable with respect to such shares of
Buyer Common Stock and not paid, less the amount of any withholding taxes which
may be required thereon, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time but
prior to surrender thereof and a payment date subsequent to surrender thereof
payable with respect to such shares of Buyer Common Stock, less the amount of
any withholding taxes which may be required thereon.
(iv) At or after the Effective Time, there shall be no
transfers on the stock transfer books of the Corporation of Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation, they shall be
cancelled and exchanged for certificates for shares of Buyer Common Stock in
accordance with the procedures set forth in this Article 4. Certificates
surrendered for exchange by any person constituting an "affiliate" of the
Corporation within the meaning of Rule 145(c) under the Securities Act of 1933,
as amended (the "Securities Act"), shall not be exchanged until Buyer has
received a written agreement from such person as provided in Section 7.13.
(v) Notwithstanding Section 4.1 or any other provision of this
Section 4.2, no fractional shares of Buyer Common Stock will be issued and any
holder of Shares entitled hereunder to receive a fractional share of Buyer
Common Stock but for this Section 4.2(v) will be entitled hereunder to receive
no such fractional share of Buyer Common Stock but a cash payment in lieu
thereof, which payment shall represent such holder's proportionate interest in
the net proceeds from the sale by the Exchange Agent on behalf of all such
holders of the aggregate fractional shares of Buyer Common Stock that such
holders would be entitled to receive but for this Section 4.2(v). Any such sale
shall be made by the Exchange Agent within ten business days after the date upon
which the Certificate(s) that would otherwise result in the issuance of shares
of Buyer Common Stock have been received by the Exchange Agent.
(vi) Any portion of the Exchange Fund (including the proceeds
of any investments thereof and any shares of Buyer Common Stock) that is
unclaimed by the former stockholders of the Corporation during the one year
period after the Effective Time shall be delivered to the Surviving Corporation.
Any former stockholders of the Corporation who
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have not theretofore complied with this Article 4 shall thereafter look to the
Surviving Corporation only as general creditors for payment of their shares of
Buyer Common Stock, and cash in lieu of fractional shares, and unpaid dividends
and distributions on shares of Buyer Common Stock, deliverable in respect of
each Share such stockholder holds as determined pursuant to this Agreement, in
each case without any interest thereon.
(vii) None of the Corporation, the Surviving Corporation, Merger
Sub, the Exchange Agent or any other person shall be liable to any former holder
of Shares for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(viii) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate shares of
Buyer Common Stock and cash in lieu of fractional shares, and unpaid dividends
and distributions on shares of Buyer Common Stock as provided in Section
4.2(iii), deliverable in respect thereof pursuant to this Agreement.
4.3. Adjustment of Exchange Ratio. In the event that between the date
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of this Agreement and the Effective Time, Buyer or the Corporation changes the
number of shares of Buyer Common Stock or Shares issued and outstanding as a
result of a stock split, reverse stock split, stock dividend, recapitalization
or other similar transaction, the Exchange Ratio shall be appropriately
adjusted.
4.4. Director Nominee. At the Effective Time, Buyer shall take such
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action as is necessary in order to enable one individual designated by the
Corporation to be elected to Buyer's Board of Directors (the "Designee").
Buyer's obligations under this Section 4.4 relate only to the Designee's initial
election to Buyer's Board of Directors and Buyer will have no continuing
obligation to the Corporation or the Designee with respect to the composition of
Buyer's Board of Directors. The Corporation has selected as the Designee
Francis A. Tarkenton.
4.5 Dissenters' Rights. To the extent there exists a right to dissent,
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any Dissenting Shareholder who shall be entitled to "fair value" of his Shares
as provided in Article 13 of the GBCC shall not be entitled to the Merger
Consideration, unless and until the holder thereof shall have failed to perfect
or shall have effectively withdrawn or lost his dissenter's rights with respect
to the Merger under the GBCC and shall be entitled to receive from Buyer only
the payment to the extent provided for in connection with Article 13 of the GBCC
with respect to such Shares. If any Dissenting Shareholder shall fail to
perfect or shall have effectively withdrawn his dissenter's rights, the Shares
held by such Dissenting Shareholder shall thereupon be treated as though such
Shares had been converted into the right to receive Buyer
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Common Stock pursuant to Section 4.1 and such Dissenting Shareholder shall
thereupon have the exchange rights provided under Section 4.2.
ARTICLE 5
5. Representations and Warranties of the Corporation. Except as set
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forth in the disclosure letter delivered at or prior to the execution hereof to
Buyer (the "Corporation Disclosure Letter"), the Corporation represents and
warrants to Buyer as of the date of this Agreement as follows:
5.1. Existence; Good Standing; Corporate Authority; Compliance With Law.
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The Corporation is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation. The Corporation
is duly licensed or qualified to do business as a foreign corporation and is in
good standing under the laws of any other state of the United States in which
the character of the properties owned or leased by it therein or in which the
transaction of its business makes such qualification necessary, except where the
failure to be so qualified would not have a material adverse effect on the
Corporation. As used in this Agreement, the term "material adverse effect"
means, with respect to any entity, a material adverse effect on the financial
condition, properties, business or results of operations of such entity and its
subsidiaries taken as a whole, or on the ability of such entity to perform its
obligations hereunder or to consummate the transactions contemplated hereby.
The Corporation has all requisite corporate power and authority to own, operate
and lease its properties and carry on its business as now conducted. The
Corporation is not in default with respect to any order of any court,
governmental authority or arbitration board or tribunal to which the Corporation
is a party or is subject, and the Corporation is not in violation of any laws,
ordinances, governmental rules or regulations to which it is subject, where such
default or violation would have a material adverse effect on the Corporation.
The Corporation has obtained all licenses, permits and other authorizations and
has taken all actions required by applicable law or governmental regulation in
connection with its business as now conducted where the failure to obtain any
such item or to take any such action would have a material adverse effect on the
Corporation. The copies of the Corporation's Articles of Incorporation and
Bylaws previously delivered to Buyer are true and correct.
5.2. Authorization, Validity and Effect of Agreements. The Corporation
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has the requisite corporate power and authority to execute and deliver this
Agreement and the Stock Option Agreement and all agreements and documents
contemplated hereby, and the consummation by the Corporation of the transactions
contemplated hereby and thereby have been duly authorized by all requisite
corporate action (subject, in the case of this Agreement, only to the approval
of the Merger by the holders of a majority of the outstanding Shares in
accordance with the GBCC). This Agreement and the Stock Option Agreement
constitute, and all agreements and documents contemplated hereby (when executed
and delivered pursuant hereto
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for value received) will constitute, the valid and legally binding obligations
of the Corporation enforceable in accordance with their terms.
5.3. Capitalization. The authorized capital stock of the Corporation
--------------
consists of 100,000,000 Shares and 50,000,000 shares of preferred stock, no par
value (the "Preferred Stock"). As of June 30, 1994, there were 14,562,381
Shares issued and outstanding. As of such date there were no shares of
Preferred Stock issued and outstanding. Since such date, no additional shares
of capital stock of the Corporation have been issued except pursuant to the
Corporation Stock Option Plans and the Warrants. Other than Shares reserved for
issuance pursuant to the Stock Option Agreement, the Corporation has no Shares
or shares of Preferred Stock reserved for issuance, except that, as of the
above-referenced date, 59,979 Shares were reserved for issuance pursuant to the
Incentive Stock Option Plan of 1984 and the Second Incentive Stock Option Plan
of 1984, 1,487,701 Shares were reserved for issuance pursuant to the 1988 Stock
Incentive Plan, 6,000 Shares were reserved for issuance pursuant to the 1989
Non-Employee Directors Stock Option Plan, 392,778 Shares were reserved for
issuance pursuant to the 1989 Employee Stock Purchase Plan, 50,000 Shares were
reserved for issuance pursuant to the 1993 Directors Plan and 500,000 Shares
were reserved for issuance pursuant to the Warrants. The Corporation has no
outstanding bonds, debentures, notes or other obligations the holders of which
have the right to vote (or are convertible into or exercisable for securities
having the right to vote) with the stockholders of the Corporation on any matter
("Voting Debt"). All such issued and outstanding Shares are duly authorized,
validly issued, fully paid, nonassessable and free of preemptive rights. Other
than as set forth above or in the Corporation Disclosure Letter, or as
contemplated by this Agreement or the Stock Option Agreement, there are not at
the date of this Agreement any existing options, warrants, calls, put rights,
subscriptions, convertible securities, or other rights or other agreements or
commitments which obligate the Corporation or any of its subsidiaries to issue,
transfer, sell or purchase any shares of capital stock of the Corporation or any
of its subsidiaries. After the Effective Time, the Surviving Corporation will
have no obligation to issue, transfer or sell any Shares or shares of Preferred
Stock or any other securities of the Surviving Corporation pursuant to any
Benefit Plan (as defined in Section 5.12) or Corporation Stock Option Plan.
5.4. Subsidiaries. The Corporation owns directly or indirectly each of
------------
the outstanding shares of capital stock of each of the Corporation's
subsidiaries (individually, a "Corporation Subsidiary" and collectively, the
"Corporation Subsidiaries"), except as set forth in the Corporation Reports (as
defined in Section 5.7) filed prior to the date of this Agreement and the
Corporation Disclosure Letter and except shares held by officers and directors
of the Corporation and Corporation Subsidiaries or agents of the Corporation as
nominees for the benefit of the Corporation or any Corporation Subsidiary. Each
of the outstanding shares of capital stock of each of the Corporation
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable
(or, in the case of foreign Corporation Subsidiaries, is appropriately
authorized, validly issued and, if applicable under local law, nonassessable),
and except as set forth in the Corporation Disclosure Letter are owned, directly
or indirectly, by the Corporation free and clear of all liens, pledges, security
interests, claims or other encumbrances. The following information for each
Corporation Subsidiary is set forth in the Corporation Disclosure
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Letter, as applicable: (i) its name and jurisdiction of incorporation; (ii) its
authorized capital stock or share capital; (iii) the number of issued and
outstanding shares of capital stock or share capital; and (iv) the names of its
directors, officers and/or managing director.
5.5. Other Interests. Except as set forth in the Corporation Disclosure
---------------
Letter, neither the Corporation nor any Corporation Subsidiary owns directly or
indirectly any interest or investment (whether equity or debt) in any
corporation, partnership, joint venture, business, trust or entity (other than
investments in short-term investment securities and teaming, corporate
partnering, development, cooperative marketing and similar undertakings and
arrangements entered into in the ordinary course of business).
5.6. Noncontravention. Except as set forth in the Corporation
----------------
Disclosure Letter, neither the execution and delivery by the Corporation of this
Agreement or the Stock Option Agreement, nor the consummation by the Corporation
of the transactions contemplated hereby and thereby in accordance with the terms
hereof and thereof, will: (i) conflict with or result in a breach of any
provisions of the Articles of Incorporation or Bylaws of the Corporation; (ii)
except as disclosed in the Corporation Reports (as hereinafter defined) or the
Corporation Disclosure Letter, result in a breach or violation of, a default
under, or the triggering of any payment or other material obligations pursuant
to, or accelerate vesting under, any of the Corporation Stock Option Plans or
any grant or award made under any of the Corporation Stock Option Plans, (iii)
violate, or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the material properties of the Corporation under, or result in being
declared void, voidable, or without further binding effect, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust
or any material license, franchise, permit, lease, contract, agreement or other
instrument or commitment or obligation to which the Corporation or any of the
Corporation Subsidiaries is a party ("Contracts") (other than Contracts with
customers, software license agreements with third parties relating to the use of
commercially available software and Contracts for the purchase or lease of
tangible personal property entered into in the ordinary and usual course of
business, but including without limitation, strategic alliance agreements, third
party software development agreements and third party software license
agreements relating to software incorporated into the Corporation's software
products, and other than Contracts which require the consent of the other party
or parties thereto to assign or transfer to Merger Sub or Buyer by reason of the
execution of this Agreement or the consummation of the transactions contemplated
hereby which required consents are set forth in the Corporation Disclosure
Letter and with respect to which the parties hereto shall use reasonable efforts
to obtain prior to the Closing), or by which the Corporation or any of its
properties is bound or affected except with respect to matters which are not
material to the Corporation; or (iv) other than the filings provided for in
Article 1, as required under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 (the "HSR Act") and under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Securities Act, applicable state securities and "Blue
Sky" laws, and the rules and regulations promulgated
10
<PAGE>
by the National Association of Securities Dealers, Inc. and in connection with
the maintenance of qualification to do business in other jurisdictions
(collectively, the "Regulatory Filings"), require any material consent, approval
or authorization of, or declaration, filing or registration with, any
governmental or regulatory authority, domestic or foreign, of which the failure
to obtain would have a material adverse effect on the Corporation.
5.7 Reports; Financial Statements. The Corporation has delivered to
-----------------------------
Buyer each registration statement, report, proxy statement or information
statement prepared by it since June 30, 1993, including, without limitation, (i)
its Annual Report on Form 10-K for the year ended June 30, 1993, and (ii) its
Quarterly Reports on Form 10-Q for the periods ended September 30, 1993,
December 31, 1993 and March 31, 1994, each in the form (including exhibits and
any amendments thereto) filed with the Securities and Exchange Commission (the
"SEC") (collectively, the "Corporation Reports"). As of their respective dates,
the Corporation Reports (i) were prepared in all material respects in accordance
with the requirements of the Securities Act, the Exchange Act, and the rules and
regulations thereunder and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. Each of the consolidated balance
sheets included in or incorporated by reference into the Corporation Reports
(including the related notes and schedules) fairly presents the consolidated
financial position of the Corporation and the Corporation Subsidiaries as of its
date and each of the consolidated statements of income, retained earnings and of
cash flows included in or incorporated by reference into the Corporation Reports
(including any related notes and schedules) fairly presents the results of
operations, retained earnings and cash flows, as the case may be, of the
Corporation and the Corporation Subsidiaries for the periods set forth therein
(subject, in the case of unaudited balance sheets and statements, to normal
year-end audit adjustments which would not be material in amount or effect), in
each case in accordance with the published rules and regulations of the SEC and
generally accepted accounting principles consistently applied during the periods
involved, except as may be noted therein. Except as and to the extent set forth
on the consolidated balance sheet of the Corporation and the Corporation
Subsidiaries at June 30, 1993, including all notes thereto, neither the
Corporation nor any of the Corporation Subsidiaries has any material liabilities
or obligations of any nature (whether accrued, absolute, contingent or
otherwise) that would be required to be reflected on, or reserved against in, a
balance sheet of the Corporation or in the notes thereto, prepared in accordance
with the published rules and regulations of the SEC and generally accepted
accounting principles consistently applied, except liabilities arising in the
ordinary course of business since such date. Except as set forth in the
Corporation Disclosure Letter, other than the Corporation Reports and any
reports filed subsequent to the date hereof, the Corporation has not filed any
other definitive reports or statements with the SEC since March 31, 1994.
5.8. Litigation. Except as disclosed in the Corporation Disclosure
----------
Letter, there are no actions, suits or proceedings pending against the
Corporation or the Corporation Subsidiaries or, to the actual knowledge of the
executive officers of the Corporation, threatened against the Corporation or
the Corporation Subsidiaries, at law or in
11
<PAGE>
equity, or before or by any federal, state, commission, board, bureau, agency or
instrumentality that are reasonably likely to have a material adverse effect
on the Corporation.
5.9. Absence of Certain Changes. Except as disclosed in the Corporation
--------------------------
Reports filed with the SEC prior to the date hereof, the Corporation Disclosure
Letter and except for changes arising from the public announcement of the
transactions contemplated by this Agreement, since June 30, 1993, the
Corporation has conducted its business only in the ordinary course of such
business and there has not been (i) any change in the Corporation or any
development or combination of developments of which any of its executive
officers has actual knowledge which has resulted or is reasonably likely to
result in a material adverse effect on the Corporation; (ii) any declaration,
setting aside or payment of any dividend or other distribution with respect to
its capital stock; or (iii) any material change in its accounting principles,
practices or methods.
5.10. Taxes and Tax Returns. The Corporation and each Corporation
---------------------
Subsidiary (i) has timely filed all material federal, state and foreign income,
franchise, property, sales, use, payroll and other tax returns and reports
required to be filed by it for its tax years ended prior to the date of this
Agreement or requests for extensions have been timely filed and any such request
shall have been granted and not expired and all such filed returns are complete
in all material respects, (ii) has paid or accrued all taxes shown to be due
and payable on such returns, (iii) has properly accrued all such taxes for such
periods subsequent to the periods covered by such returns, and (iv) the "open"
years for federal income tax returns are set forth in the Corporation Disclosure
Letter.
5.11. Proprietary Rights. The Corporation and the Corporation
------------------
Subsidiaries own or have the right to use pursuant to lease or license computer
software programs, which, in the aggregate, are sufficient and adequate to
operate the business of the Corporation and the Corporation's Subsidiaries. The
Corporation Disclosure Letter sets forth all current versions or releases of the
computer software programs ("software") owned or marketed by the Corporation or
the Corporation Subsidiaries (other than commercially available software
products which are not material to the Corporation). Except as set forth in the
Corporation Disclosure Letter, the Corporation or one of the Corporation
Subsidiaries has good and marketable rights, title and interest in and to all
versions or releases of that software, free and clear of any liens, charges,
restrictions or encumbrances or rights of any third party. Neither the
existence nor use in the business of the Corporation or any Corporation
Subsidiary of any version or release of any software program set forth in the
Corporation Disclosure Letter infringes on any patent, trademark or copyright,
violates any trade secret, know how, process or proprietary information of any
third party or entitles any third party to any interest in or right to
compensation from the Corporation or any Corporation Subsidiary by reason of the
use, exploitation or sale of any such software programs. Except with respect to
programs licensed to the Corporation or one of the Corporation Subsidiaries and
set forth in the Corporation Disclosure Letter, the Corporation or one of the
Corporation Subsidiaries is in actual possession of the source code of each
software program set forth in the Corporation Disclosure Letter and the
Corporation or one of the Corporation Subsidiaries is in possession of all other
12
<PAGE>
documentation necessary for the effective use of each such software. The
Corporation Disclosure Letter lists, by program, all third parties which have
been provided with the source code to any of the software listed in the
Corporation Disclosure Letter and any parties who would be entitled to receive
such source code as a result of transactions contemplated by this Agreement.
There are no defects in any of the software offered by the Corporation or any of
the Corporation Subsidiaries in connection with its business which would, in any
material and adverse respect, affect the functioning of any such software in
accordance with the specifications therefor published by the Corporation or any
of the Corporation Subsidiaries or provided to its customers or prospective
customers, and each piece of such software, together with all know how and
process used in connection therewith, functions as intended, is in machine
readable form, conforms to all applicable standards, contains all current
revisions of such software and includes all computer programs, materials, tapes,
know how, object and source codes and procedures used by it in the conduct of
its business. Except for rights of customers under Contracts or as disclosed in
the Corporation Disclosure Letter, no other person has (i) any interest of any
kind or nature in or with respect to any software program or portion thereof set
forth in the Corporation Disclosure Letter, or (ii) any rights to use, market or
exploit any such software program or portion thereof. The Corporation has
registered the trademarks, service marks and copyrights identified in the
Corporation Disclosure Letter, such trademarks, service marks and copyrights do
not infringe upon the rights of any third parties, nor have any claims been
asserted with respect thereto, which infringement would have a material adverse
effect on the Corporation. To the actual knowledge of the executive officers of
the Corporation, there exist no material defaults under contracts with Rottger &
Osterberg Software - Technik GmbH, Burl Software Laboratories, Inc., Object
Design, Inc., Integrated Microcomputer Systems, Inc., and International Business
Machines Corporation ("IBM"); provided, however, this sentence shall not apply
to the following contracts: (i) Stockholders Agreement dated as of August 18,
1989, by and among IBM, Francis A. Tarkenton, James Martin, Arthur Young United
States and the Corporation, (ii) Common Stock Purchase Agreement by and between
the Corporation and IBM, and (iii) Revolving Loan and Security Agreement by and
between IBM Credit Corporation and the Corporation.
5.12. Employee Benefit Plans. All material employee benefit plans
----------------------
covering employees of the Corporation and the Corporation Subsidiaries, other
than the Corporation Stock Option Plans, are listed in the Corporation Reports
(the "Benefit Plans") and the Corporation Disclosure Letter. To the extent
applicable, the Benefit Plans comply, in all material respects, with the
requirements of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and the Code, and any Benefit Plan intended to be qualified under
Section 401(a) of the Code has been determined by the Internal Revenue Service
to be so qualified. No Benefit Plan is covered by Title IV of ERISA or Section
412 of the Code. Neither a Benefit Plan nor the Corporation has incurred any
liability or penalty under Section 4975 of the Code or Section 502(i) of ERISA.
Each Benefit Plan has been maintained and administered in all material respects
in compliance with its terms and with ERISA and the Code to the extent
applicable thereto. To the knowledge of the executive officers of the
Corporation, there are no pending or anticipated material claims against or
otherwise involving any of the Benefit Plans and no suit, action or other
litigation (excluding claims for benefits
13
<PAGE>
incurred in the ordinary course of Benefit Plan activities) has been brought
against or with respect to any such Benefit Plan. All material contributions
required to be made as of the date hereof to the Benefit Plans have been made or
provided for. All payments to employees pursuant to and vesting of benefits
under employment, severance or termination agreements and pursuant to severance
policies of the Corporation are set forth in the Corporation Disclosure Letter.
5.13. Labor Matters. The Corporation is not a party to or bound by any
-------------
collective bargaining agreement. There is no unfair labor practice or labor
arbitration proceedings pending or, to the actual knowledge of the executive
officers of the Corporation and except as provided in the Corporation
Disclosure Letter, threatened relating to its business. To the actual knowledge
of the executive officers of the Corporation, there are not any organizational
efforts presently being made or threatened involving employees of the
Corporation.
5.14. Pooling of Interests. To the actual knowledge of the executive
--------------------
officers of the Corporation, the Corporation has not taken or failed to take any
action which would prevent the accounting for the Merger as a pooling of
interests in accordance with Accounting Principles Board Opinion No. 16, the
interpretative releases issued pursuant thereto, and the pronouncements of the
SEC.
5.15. No Brokers. Except as set forth in the Corporation Disclosure
----------
Letter, the Corporation has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of
Buyer to pay, and the Corporation is not aware of any claim for payment of, any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby.
5.16. Takeover Statutes. The provisions of Parts 2 and 3 of Article 11
-----------------
of the GBCC as they relate to the Corporation, the provisions of Article 8 of
the Restated Articles of Incorporation of the Corporation and the provisions of
Articles 13, 14 and 15 of the Bylaws of the Corporation do not and will not
apply to this Agreement, the Stock Option Agreement, the Stockholder Agreements
or the transactions contemplated hereby and thereby because the Corporation's
Board of Directors has approved the execution and delivery of this Agreement and
the Stock Option Agreement and the transactions contemplated hereby and thereby
in accordance with those provisions of the GBCC, the Restated Articles of
Incorporation of the Corporation and the Bylaws of the Corporation.
5.17. Related Parties. Except as disclosed in the Corporation
---------------
Disclosure Letter or the Corporation Reports, to the actual knowledge of the
executive officers of the Corporation, none of the executive officers or
directors of the Corporation or the Corporation Subsidiaries, or any beneficial
owner of two percent (2%) or more of the outstanding Shares, or any entity
controlled by any of the foregoing or any member of the immediate family of any
of the foregoing:
14
<PAGE>
(i) owns, directly or indirectly, any interest in (except for
stock holdings not in excess of two percent (2%) held solely for investment
purposes in securities which are listed on a national securities exchange or
which are regularly traded in the over-the-counter market), or is an owner, sole
proprietor, stockholder, partner, director, officer, employee, provider,
consultant or agent of any person which is a competitor, lessor, lessee or
customer of, or supplier of goods or services to, the Corporation or any of the
Corporation Subsidiaries, except where the value to such person of any such
arrangement with the Corporation and the Corporation Subsidiaries has been less
than $60,000 in the last 12 months;
(ii) owns, directly or indirectly, in whole or in part, any
real property, leasehold interests, tangible property or intangible property
with a fair market value of $60,000 or more which the Corporation or any of the
Corporation Subsidiaries currently use in their respective businesses;
(iii) has any cause of action or other suit, action or claim
whatsoever against, or owes any amount to the Corporation or any of the
Corporation Subsidiaries, except for claims in the ordinary course of business,
such as for accrued vacation pay, accrued benefits under Compensation Plans and
similar matters; or
(iv) has sold to, or purchased from, the Corporation or any of
the Corporation Subsidiaries any assets or property for consideration in excess
of $60,000 in the aggregate since June 30, 1993.
As used in this Section 5.17, a person's immediate family shall mean such
person's spouse, parents, grandparents, uncles, aunts, first cousins, children,
siblings, mothers and fathers-in-law, sons and daughters-in-law, and brothers
and sisters-in-law.
ARTICLE 6
6. Representations and Warranties of Buyer. Except as set forth in the
---------------------------------------
disclosure letter delivered at or prior to the execution hereof by Buyer to the
Corporation (the "Buyer Disclosure Letter"), Buyer represents and warrants to
the Corporation as of the date of this Agreement as follows:
6.1. Existence; Good Standing; Corporate Authority; Compliance With Law.
------------------------------------------------------------------
Buyer is a corporation duly incorporated, validly existing in good standing
under the laws of its state of incorporation. Buyer is duly licensed or
qualified to do business as a foreign corporation and in good standing under the
laws of any other state of the United States in which the character of the
properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary, except where the failure to be so
qualified would not have a material adverse effect on Buyer. Buyer has all
requisite corporate power and authority to own, operate and lease its properties
and carry on its business as now conducted. Neither Buyer nor Merger Sub is in
default with respect to any order of any court, governmental
15
<PAGE>
authority or arbitration board or tribunal to which Buyer or Merger Sub is a
party or is subject, and neither Buyer nor Merger Sub is in violation of any
laws, ordinances, governmental rules or regulations to which it is subject,
where such default or violation would have a material adverse effect on Buyer.
Buyer and Merger Sub have obtained all licenses, permits and other
authorizations and have taken all actions required by applicable law or
governmental regulations in connection with their business as now conducted,
where the failure to obtain any such item or to take any such action would have
a material adverse effect on Buyer. The copies of Buyer's Certificate of
Incorporation and Bylaws previously delivered to the Corporation are true and
correct. Merger Sub is a corporation duly incorporated, validly existing and in
good standing under the laws of Georgia. Merger Sub has not conducted any
business or incurred any liabilities other than in connection with the
negotiation and execution of this Agreement. Merger Sub has the corporate power
and authority to execute and deliver this Agreement and consummate the
transactions contemplated hereby.
6.2. Authorization, Validity and Effect of Agreements. The sole
------------------------------------------------
stockholder of Merger Sub has approved this Agreement. Subject only to the
approval of the issuance of shares of Buyer Common Stock pursuant to this
Agreement by the holders of a majority of the shares of Buyer Common Stock
present and entitled to vote thereon, the execution and delivery of this
Agreement and all agreements and documents contemplated hereby by Buyer and
Merger Sub, and the consummation by them of the transactions contemplated hereby
and thereby, have been duly authorized by all requisite corporate action. This
Agreement constitutes, and all agreements and documents contemplated hereby
(when executed and delivered pursuant hereto for value received) will
constitute, the valid and legally binding obligations of Buyer and Merger Sub,
enforceable in accordance with their terms.
6.3. Capitalization. The authorized capital stock of Buyer consists of
--------------
50,000,000 shares of Buyer Common Stock and 10,000,000 shares of Preferred
Stock, par value $.10 per share. As of June 30, 1994, 20,275,521 shares of
Buyer Common Stock were issued and outstanding, 1,743,398 shares of Buyer Common
Stock were held in treasury and 200,000 shares of Preferred Stock were issued
and outstanding. On or about the date of this Agreement, Buyer will issue
approximately 306,550 shares of Buyer Common Stock in connection with an
acquisition previously disclosed to the Corporation. The Corporation has no
shares of Buyer Common Stock or Preferred Stock reserved for issuance, except
that, as of the above-referenced date, an aggregate of 8,891,036 shares of Buyer
Common Stock were reserved for issuance pursuant to stock option plans of, or
assumed by, Buyer, an aggregate of 230,017 shares of Buyer Common Stock were
reserved for issuance pursuant to certain warrants issued or assumed by Buyer
and 4,056,437 shares of Buyer Common Stock were reserved for issuance pursuant
to the terms of Buyer's 5 3/4% Convertible Subordinated Debentures. Buyer has
no outstanding bonds, debentures, notes or other obligations the holders of
which have the right to vote (or are convertible into or exercisable for
securities having the right to vote) with the stockholders of Buyer on any
matter ("Voting Debt"). All such issued and outstanding shares of Buyer Common
Stock and Preferred Stock are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. Other than as set forth in the
Buyer Disclosure Letter, or as contemplated by this Agreement, there are not at
the date of this Agreement any existing options, warrants,
16
<PAGE>
calls, subscriptions, convertible securities, or other rights or other
agreements or commitments which obligate Buyer or any of its subsidiaries to
issue, transfer or sell any shares of capital stock of Buyer or any of its
subsidiaries in excess of the reserved share amounts set forth above.
6.4. Subsidiaries. Buyer owns directly or indirectly each of the
------------
outstanding shares of capital stock of each of Buyer's subsidiaries
(individually, a "Buyer Subsidiary" and collectively, the "Buyer Subsidiaries"),
except as set forth in Buyer Reports (as defined in Section 6.6) filed prior to
the date of this Agreement and except shares held by officers and directors of
Buyer and Buyer Subsidiaries or agents of Buyer as nominees for the benefit of
Buyer or any Buyer Subsidiary. The following information for each Buyer
Subsidiary has been previously provided to the Corporation or will be provided
in the Buyer Disclosure Letter as applicable: (i) its name and jurisdiction of
incorporation; (ii) its authorized capital stock or share capital; (iii) the
number of issued and outstanding shares of capital stock or share capital; and
(iv) the names of its directors, officers and managing director.
6.5. Noncontravention. Except as set forth in the Buyer Disclosure
----------------
Letter, neither the execution and delivery by Buyer of this Agreement or the
Stock Option Agreement, nor the consummation by Buyer of the transactions
contemplated hereby and thereby in accordance with the terms hereof and thereof,
will: (i) conflict with or result in a breach of any provisions of the
Certificate of Incorporation or Bylaws of Buyer; (ii) violate, or conflict with,
or result in a material breach of any provision of, or constitute a default (or
an event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination or in a right of termination or
cancellation of, or accelerate the performance required by, or result in the
creation of any material lien, security interest, charge or encumbrance upon any
of the material properties of Buyer under, or result in being declared void,
voidable, or without further binding effect, any of the terms, conditions or
provisions of any Contract, to which Buyer is a party, or by which Buyer or any
of its properties is bound or affected except with respect to matters which are
not material to Buyer; or (iii) other than Regulatory Filings, require any
material consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority, of which the
failure to obtain which would have a material adverse effect on Buyer.
6.6. Reports; Financial Statements. Buyer has delivered to the
-----------------------------
Corporation each registration statement, report, proxy statement or information
statement prepared by it since September 30, 1993, including, without
limitation, (i) its Annual Report on Form 10-K for the year ended September 30,
1993, and (ii) its Quarterly Reports on Form 10-Q for the periods ended December
31, 1993, and March 31, 1994, each in the form (including exhibits and any
amendments thereto) filed with the SEC collectively, the "Buyer Reports"). As
of their respective dates, the Buyer Reports (i) were prepared in accordance
with the requirements of the Securities Act, the Exchange Act, and the rules and
regulations thereunder and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. Each of the consolidated
17
<PAGE>
balance sheets included in or incorporated by reference into the Buyer Reports
(including any related notes and schedules) fairly presents the consolidated
financial position of Buyer and the Buyer Subsidiaries as of its date and each
of the consolidated statements of income, retained earnings and of cash flows
included in or incorporated by reference into the Buyer Reports (including any
related notes and schedules) fairly presents the results of operations, retained
earnings and cash flows, as the case may be, of Buyer and the Buyer Subsidiaries
for the periods set forth therein (subject, in the case of unaudited balance
sheets and statements, to normal year-end adjustments which would not be
material in amount or effect), in each case in accordance with the published
rules and regulations of the SEC and generally accepted accounting principles
consistently applied during the periods involved, except as may be noted
therein. Except as and to the extent set forth on the consolidated balance
sheet of Buyer and the Buyer Subsidiaries at September 30, 1993, including all
notes thereto, neither Buyer nor any of the Buyer Subsidiaries has any material
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) that would be required to be reflected on, or reserved against in,
a balance sheet of Buyer or in the notes thereto, prepared in accordance with
the published rules and regulations of the SEC and generally accepted accounting
principles except liabilities arising in the ordinary course of business since
such date.
6.7. Litigation. Except as disclosed in the Buyer Disclosure Letter,
----------
there are no actions, suits or proceedings pending against Buyer or the Buyer
Subsidiaries or, to the actual knowledge of the executive officers of Buyer,
threatened against Buyer or the Buyer Subsidiaries, at law or in equity, or
before or by any federal, state, commission, board, bureau, agency or
instrumentality that are reasonably likely to have a material adverse effect on
Buyer.
6.8. Absence of Certain Changes. Except as disclosed in the Buyer
--------------------------
Reports filed with the SEC prior to the date hereof and except for changes
arising from the public announcement of the transactions contemplated by this
Agreement, since September 30, 1993, Buyer has conducted its business only in
the ordinary course of such business and there has not been (i) any change in
Buyer or any development or combination of developments of which any of its
executive officers has actual knowledge which has resulted or is reasonably
likely to result in a material adverse effect on Buyer; (ii) except for regular
dividends on Buyer's Preferred Stock, any declaration, setting aside or payment
of any dividend or other distribution with respect to its capital stock; or
(iii) any material change in its accounting principles, practices or methods.
6.9. Taxes and Tax Returns. Buyer (i) has timely filed all material
---------------------
federal, state and foreign income, franchise, property, sales, use, payroll and
other tax returns and reports required to be filed by it for the years ended
prior to the date of this Agreement or requests for extensions have been timely
filed and any such request shall have been granted and not expired and all such
filed returns are complete in all material respects, (ii) has paid or accrued
all taxes shown to be due and payable on such returns and (iii) has properly
accrued all such taxes for periods subsequent to the periods covered by such
returns.
18
<PAGE>
6.10. Proprietary Rights. Buyer and Buyer Subsidiaries own or have the
------------------
right to use pursuant to lease or license computer software programs, which, in
the aggregate, are sufficient and adequate to operate the business of the Buyer
Subsidiaries. To the knowledge of the executive officers of Buyer, and except
as described in the Buyer Disclosure Letter, Buyer's trademarks, service marks
and copyrights do not infringe upon the rights of any third parties, nor have
any claims been asserted with respect thereto except for such infringement which
would not have a material adverse effect on Buyer.
6.11. Labor Matters. Buyer is not a party to or bound any collective
-------------
bargaining agreement. There is no unfair labor practice or labor arbitration
proceeding pending or, to the actual knowledge of the executive officers of
Buyer, threatened relating to its business. To the actual knowledge of the
executive officers of Buyer, there are not any organizational efforts presently
being made or threatened involving employees of Buyer.
6.12. Pooling of Interests. To the actual knowledge of the executive
--------------------
officers of Buyer, neither Buyer nor any "affiliate" of Buyer has taken or
failed to take any action which would prevent the accounting for the Merger as a
pooling of interests in accordance with Accounting Principles Board Opinion No.
16, the interpretative releases issued pursuant thereto, and the pronouncements
of the SEC.
6.13. No Brokers. Except as set forth in the Buyer Disclosure Letter,
----------
Buyer has not entered into any contract, arrangement or understanding with any
person or firm which may result in the obligation of Buyer to pay, and Buyer is
not aware of any claim for payment of, any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby.
6.14. Capital Stock. The shares of Common Stock of Merger Sub are
-------------
validly issued, fully paid and nonassessable and are owned directly by Buyer,
free and clear of all liens, claims and encumbrances. The issuance and delivery
by Buyer of shares of Buyer Common Stock in connection with the Merger have been
duly and validly authorized by all necessary corporate action on the part of
Buyer except for the approval of its shareholders contemplated by this
Agreement. The shares of Buyer Common Stock to be issued in connection with the
Merger, when issued in accordance with the terms of this Agreement, will be
validly issued, fully paid and nonassessable and listed on the New York Stock
Exchange ("NYSE").
ARTICLE 7
7. Covenants.
---------
7.1. Acquisition Proposals. Prior to the earlier of the Effective Time
---------------------
or the termination of this Agreement, the Corporation agrees (a) that neither
the Corporation nor any of the Corporation Subsidiaries, and the Corporation
shall direct and use its best efforts to
19
<PAGE>
cause their respective officers, directors, employees, agents and
representatives (including, without limitation, any investment banker, attorney
or accountant retained by it or any of the Corporation Subsidiaries) not to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to its stockholders) with respect to a merger,
acquisition, consolidation or similar transaction involving, or any purchase of
all or any significant portion of the assets or any equity securities of, the
Corporation or any of the Corporation Subsidiaries (any such proposal or offer
being hereinafter referred to as an "Acquisition Proposal") or engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal; (b) that the Corporation will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing and will take the
necessary steps to inform the individuals or entities referred to in the first
sentence hereof of the obligations undertaken in this Section 7.1; and (c) that
the Corporation will notify Buyer immediately if any such inquiry or proposal is
received by, any such information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with, the Corporation;
provided, however, that nothing contained in this Section 7.1 shall prohibit the
Board of Directors of the Corporation from (i) furnishing information to or
entering into discussions or negotiations with, any person or entity that makes
an unsolicited proposal to acquire the Corporation pursuant to a merger,
consolidation, share exchange, purchase of a substantial portion of the assets,
business combination or other similar transaction, if, and only to the extent
that, (A) the Board of Directors, after consultation with and consideration of
the written advice of independent legal counsel, determines in good faith that
such action is required for the Board of Directors to comply with the
Corporation's fiduciary duties to stockholders imposed by applicable law, (B)
prior to furnishing such information to, or entering into discussions or
negotiations with, such person or entity, the Corporation provides written
notice to Buyer to the effect that the Corporation is furnishing information to,
or entering into discussions or negotiations with, such person or entity, and
(C) the Corporation keeps Buyer informed, on a current basis, of the status of
any such discussions or negotiations (but the Corporation need not inform Buyer
of the substance of such discussions or negotiations); and (ii) complying with
Rule 14e-2 promulgated under the Exchange Act with regard to an Acquisition
Proposal. The Corporation will use reasonable efforts to cause a person
provided proprietary information in accordance with the foregoing to enter into
a confidentiality agreement.
7.2. Interim Operations of the Corporation. The Corporation covenants
-------------------------------------
and agrees as to itself and the Corporation Subsidiaries that, from and after
the date hereof until the Effective Time (except as Buyer shall otherwise agree
or except as otherwise contemplated by this Agreement or the Stock Option
Agreement):
(i) To the extent reasonably practicable taking into account any
operational matters that may arise that are attributable to the pendency of the
Merger, the business of the Corporation and the Corporation Subsidiaries shall
be conducted only in the
20
<PAGE>
ordinary course and, to the extent consistent therewith, the Corporation and the
Corporation Subsidiaries shall use their commercially reasonable efforts to
preserve their business organization intact and maintain their existing
relations with customers and suppliers.
(ii) The Corporation shall not (a) sell, pledge or otherwise
transfer, or agree to sell, pledge or otherwise transfer any stock owned by it
in any of its subsidiaries; (b) amend its Articles of Incorporation or Bylaws;
(c) split, combine or reclassify any outstanding capital stock; (d) declare, set
aside or pay any dividend payable in cash, stock or property with respect to any
of its capital stock; or (e) repurchase, redeem or otherwise acquire, or permit
any Corporation Subsidiary to purchase or otherwise acquire, directly or
indirectly, any shares of its capital stock or any securities convertible into
or exercisable for any shares of its capital stock.
(iii) Neither the Corporation nor any of the Corporation
Subsidiaries shall (a) issue, sell, pledge, dispose of or encumber, or authorize
or propose the issuance, sale, pledge, disposition or encumbrance of, any shares
of, or securities convertible or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of its capital stock of
any class or Voting Debt other than Shares issuable pursuant to options
outstanding on the date hereof under the Corporation Stock Option Plans, the
Warrants and the Stock Option Agreement; (b) transfer, lease, license,
guarantee, sell, mortgage, pledge, dispose of any other property or assets or
encumber any property or assets or incur or modify any indebtedness or other
liability other than in the ordinary course of business; (c) authorize capital
expenditures other than in the ordinary course of business; (d) make any
acquisitions of, or investment in, the assets of or stock of any other person or
entity; or (e) make any payment to third parties for goods or services which are
not commercially reasonable or on an arm's length basis.
(iv) Neither the Corporation nor any of the Corporation
Subsidiaries shall grant any bonus or pay increase or any severance or
termination pay to, or enter into any Employment Agreement with, any director,
officers or other employee of the Corporation or any of the Corporation
Subsidiaries, except as (x) may be required to satisfy existing contractual
obligations of the Corporation and the Corporation Subsidiaries as of the date
hereof which are set forth in the Corporation Disclosure Letter or (y) required
by applicable law.
(v) Except as set forth in the Corporate Disclosure Letter or
as may be required to satisfy existing contractual obligations of the
Corporation and the Corporation Subsidiaries existing as of the date hereof and
the requirements of applicable law, neither the Corporation nor any of the
Corporation Subsidiaries shall establish, adopt, enter into, make or amend any
collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, employee stock ownership,
deferred compensation, employment, termination, severance or other plan, trust,
fund, policy or arrangement for the benefit of any class of directors, officers
or employees or make, or accelerate the vesting of, any grants, awards, benefits
or options under any such plans.
21
<PAGE>
(vi) Neither the Corporation nor any of the Corporation
Subsidiaries shall, except in the ordinary and usual course of business and on
commercially reasonable terms, modify, amend or terminate any of its Contracts
or waive, release or assign any rights or claims.
(vii) The Corporation shall not change its method of accounting
as in effect at June 30, 1993, except as required by changes in generally
accepted accounting principles as concurred to by the Corporation's independent
auditors. The Corporation will not change its fiscal year.
(viii) The Corporation shall not take or cause to be taken any
action which would disqualify the Merger as a "pooling of interests" for
accounting purposes or as a "reorganization" within the meaning of Section
368(a) of the Code; provided, however, that nothing hereunder shall limit the
ability of the Corporation to exercise any of its rights or perform any of its
obligations under the Stock Option Agreement.
(ix) Neither the Corporation nor any of the Corporation
Subsidiaries will authorize or enter into an agreement to do any of the actions
referred to in paragraphs (i) through (viii) above unless such agreement is
conditioned upon the consent of Buyer.
To the extent that the Corporation seeks approval to take any of the actions
referred to in paragraphs (i) through (ix) above, such approval shall not be
unreasonably withheld, giving effect however, to Buyer's operational objectives
with respect to the Merger.
7.3. Interim Operations of Buyer. Buyer covenants and agrees as to
---------------------------
itself and the Buyer Subsidiaries that, from and after the date hereof and until
the Effective Time (except as the Corporation shall otherwise agree or except as
otherwise contemplated by this Agreement, the Stock Option Agreement, or the
Stockholder Agreements), neither Buyer nor Merger Sub shall take or cause to be
taken any action which would disqualify the Merger as a "pooling of interests"
for accounting purposes or as a "reorganization" within the meaning of Section
368(a) of the Code; provided, however, that nothing hereunder shall limit the
ability of Buyer to exercise any of its rights or perform any of its obligations
under the Stock Option Agreement, the Stockholder Agreements, or Section 9.5(b)
of this Agreement. Neither Buyer nor any of the Buyer Subsidiaries will
authorize or enter into an agreement to do any of the actions referred to in
this Section 7.3. Subject to the foregoing, as of the date hereof, Buyer does
not anticipate that the business of Buyer and the Buyer Subsidiaries will be
conducted in any manner materially inconsistent with its business in the
ordinary and usual course, including the acquisition from time to time of the
assets or stock of other businesses.
7.4. Meetings of Shareholders. Each of Buyer and the Corporation will
------------------------
take all action necessary in accordance with applicable law and its Certificate
or Articles of Incorporation and Bylaws to convene a meeting of its shareholders
as promptly as practicable to consider and vote upon the approval of the Merger,
in the case of the Corporation, and the
22
<PAGE>
issuance of the Buyer Common Stock pursuant to the terms hereof, in the case of
Buyer. The Board of Directors of each of the Corporation and Buyer shall,
except to the extent such Board of Directors determines in good faith is
required by fiduciary obligations under applicable law, to recommend such
approval and the Corporation and the Buyer shall each take all lawful action to
solicit such approval. The Corporation and Buyer shall coordinate and cooperate
with respect to the timing of such meetings and shall use their reasonable
efforts to hold such meetings on the same day. At any such meeting all of the
Shares, if any, then owned by Buyer (or as to which Buyer shall have received a
proxy) will be voted in favor of the Merger.
7.5. Filings; Other Action. Subject to the terms and conditions herein
---------------------
provided, the Corporation and Buyer shall: (a) promptly make their respective
filings and thereafter make any other required submissions under the HSR Act
with respect to the Merger; and (b) use all reasonable efforts to cooperate with
one another in (i) determining which filings are required to be made prior to
the Effective Time with, and which consents, approvals, permits or
authorizations are required to be obtained prior to the Effective Time from,
governmental or regulatory authorities of the United States, the several States
and foreign jurisdictions in connection with the execution and delivery of this
Agreement , the Stock Option Agreement and the consummation of the transactions
contemplated hereby and thereby and (ii) timely making all such filings and
timely seeking all such consents, approvals, permits or authorizations; and (c)
use all reasonable efforts to take, or cause to be taken, all other action and
do, or cause to be done, all other things, necessary, proper or appropriate to
consummate and make effective the transactions contemplated by this Agreement.
In case at any time after the Effective Time any further action is necessary or
desirable to carry out the purpose of this Agreement or the Stock Option
Agreement, the proper officers and/or directors of Buyer, Merger Sub and the
Corporation shall take all such necessary action.
7.6. Access. Each of the Corporation and Buyer shall afford the other
------
and their respective officers, employees, counsel, accountants and other
authorized representatives reasonable access, upon reasonable notice and during
normal business hours throughout the period prior to the Effective Time, to all
of the properties, books, contracts, commitments and records of the Corporation
and the Corporation Subsidiaries, on the one hand, and Buyer, on the other hand,
and, during such period, each of the Corporation and Buyer shall furnish
promptly to Buyer and the Corporation, as the case may be, a copy of each
report, schedule and other document filed or received by it pursuant to this
Section 7.6.
7.7. Publicity. The initial press release shall be a joint press
---------
release and thereafter the Corporation and Buyer shall consult with each other
in issuing any press releases or otherwise making public statements with respect
to the transactions contemplated hereby and in making any filings with any
federal or state governmental or regulatory agency or with any national
securities exchange with respect thereto.
7.8. Registration Statement. Buyer and the Corporation shall cooperate
----------------------
and promptly prepare and file with the SEC as soon as practicable a Registration
Statement on Form S-4 ("S-4") under the Securities Act, with respect to Buyer
Common Stock issuable in the
23
<PAGE>
Merger, a portion of which Registration Statement shall also serve as the joint
proxy statement with respect to the meetings of the shareholders of the
Corporation and of Buyer to approve the Merger (the "Proxy
Statement/Prospectus"). The respective parties will use all reasonable efforts
to cause the Proxy Statement/Prospectus and the S-4 to comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder, and to cause the S-4 to comply as to form in all
material respect with the provisions of the Securities Act and the rules and
regulations thereunder. Buyer shall use all reasonable efforts, and the
Corporation will cooperate with Buyer, to have the S-4 declared effective by the
SEC as promptly as practicable. Buyer shall use its reasonable efforts to
obtain, prior to the effective date of the Proxy Statement/Prospectus, all
necessary state securities law or "Blue Sky" permits or approvals required to
carry out the transactions contemplated by this Agreement and will pay all
expenses incident thereto. Buyer agrees that the S-4, when declared effective
by the SEC, will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the foregoing shall not apply to the
extent that any such untrue statement of a material fact or omission to state a
material fact was made by Buyer in reliance upon and in conformity with written
information concerning the Corporation furnished to Buyer by the Corporation.
The Corporation agrees that the information provided by it for inclusion in the
Proxy Statement/Prospectus, when the Proxy Statement/Prospectus is mailed to
Buyer's stockholders, will not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. No amendment or supplement to the Proxy
Statement/Prospectus will be made by Buyer until it has consulted with the
Corporation and its counsel. Buyer will advise the Corporation, promptly after
it receives notice thereof, of the time when the S-4 has become effective or any
supplement or amendment has been filed, of the issuance of any stop order, or
the suspension of the qualification of Buyer Common Stock issuable in connection
with the Merger for offering or sale in any jurisdiction or any request by the
SEC for amendment of the Proxy Statement/Prospectus or the S-4 or comments
thereon and responses thereto or requests for additional information. The
Corporation represents that it meets the Registrant Requirements of Part I.A. of
the General Instructions of Form S-3 promulgated under the Securities Act.
7.9. Listing Application. Buyer shall prepare and submit to the NYSE a
-------------------
listing application covering Buyer Common Stock to be issued in connection with
the Merger and shall use its reasonable efforts to obtain, prior to the
Effective Time, approval for the listing of such Buyer Common Stock upon
official notice of issuance.
7.10. Further Action. Each party hereto shall, subject to the
--------------
fulfillment at or before the Effective Time of each of the conditions of
performance set forth herein or the waiver thereof, perform such further acts
and execute such documents as may be reasonably required to effectuate the
Merger.
7.11. Notification of Certain Matters. The Corporation shall give
-------------------------------
prompt notice to Buyer of: (a) any notice of, or other communication which
becomes known to an
24
<PAGE>
executive officer of the Corporation relating to, a default or event that, with
notice or lapse of time or both, would become a default, received by the
Corporation, or any of the Corporation Subsidiaries, subsequent to the date of
this Agreement and prior to the Effective Time, under any Contract material to
the businesses of the Corporation and to which the Corporation or one of the
Corporation Subsidiaries is a party or is subject; and (b) any change that
results in a material adverse effect on such party. The Corporation shall give
prompt notice to Buyer of any notice or other communication from any third party
that becomes known to an executive officer of the Corporation alleging that the
consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement.
7.12. Legal Conditions to Merger. Each party shall, and shall cause
--------------------------
each of its subsidiaries to, use its reasonable efforts to take, or cause to be
taken, all actions necessary to comply promptly with all legal requirements
which may be imposed on such party or its subsidiaries with respect to the
Merger and, subject to the terms and conditions set forth in this Agreement, to
consummate the transactions contemplated by this Agreement, the Stock Option
Agreement, and the Stockholder Agreements; provided, however, that nothing in
this Agreement shall limit the ability of Buyer or the Corporation to exercise
any of its rights or perform any of its obligations under the Stock Option
Agreement, the Stockholder Agreements or Section 9(b) of this Agreement. Each
party will promptly cooperate with and furnish information to each other party
in connection with any such restriction suffered by, or requirement imposed
upon, it or any of its subsidiaries in connection with the foregoing.
7.13. Agreements by Affiliated Shareholders of the Corporation and
------------------------------------------------------------
Buyer.
- - -----
(i) At least ten days prior to the date of the meeting of the
Corporation's shareholders contemplated by Section 7.4, the Corporation shall
deliver to Buyer a list of names and addresses of those persons who were, in the
Corporation's reasonable judgment, at the record date for such meeting,
"affiliates" of the Corporation within the meaning of Rule 145 (each such
person, together with the persons identified below, an "Affiliate") of the rules
and regulations promulgated under the Securities Act ("Rule 145"). The
Corporation shall provide Buyer such information and documents as Buyer shall
reasonably request for purposes of reviewing such list. There shall be added to
such list the names and addresses of any other person (within the meaning of
Rule 145) which Buyer reasonably identifies (by written notice to the
Corporation within five business days after Buyer's receipt of such list) as
being a person who may be deemed to be an Affiliate of the Corporation within
the meaning of Rule 145; provided, however, that no such person identified by
Buyer shall be added to the list of Affiliates of the Corporation if Buyer shall
receive from the Corporation, on or before the Effective Time, an opinion of
counsel reasonably satisfactory to Buyer to the effect that such person is not
an Affiliate. The Corporation shall use all reasonable efforts to deliver or
cause to be delivered to Buyer, prior to the Effective Time, from each of the
Affiliates of the Corporation identified in the foregoing list (as the same may
be supplemented as aforesaid), Affiliates Letters in the form attached hereto as
Exhibit 7.13(i). Buyer and Merger Sub shall be entitled to place legends as
- - ---------------
specified in such Affiliates Letters on the certificate evidencing
25
<PAGE>
any Buyer Common Stock to be received by such Affiliates pursuant to the terms
of this Agreement, and to issue appropriate stop transfer instructions to the
transfer agent for Buyer Common Stock, consistent with the terms of such
Agreements.
(ii) At least ten days prior to the date of the meeting of
Buyer's shareholders contemplated by Section 7.4, Buyer shall deliver to the
Corporation a list of names and address of those persons who were, in Buyer's
reasonable judgment, at the record date for such meeting, Affiliates of Buyer.
Buyer shall provide the Corporation such information and documents as the
Corporation shall reasonably request for purposes of reviewing such list. There
shall be added to such list the names and addresses of any other person (within
the meaning of Rule 145) which the Corporation reasonably identifies (by written
notice to Buyer within five business days after the Corporation's receipt of
such list) as being a person who may be deemed to be an Affiliate of Buyer
within the meaning of Rule 145; provided, however, that no such person
identified by the Corporation shall be added to the list of Affiliates of Buyer
if the Corporation shall receive from Buyer, on or before the Effective Time, an
opinion of counsel reasonably satisfactory to the Corporation to the effect that
such person is not an Affiliate. Buyer shall use all reasonable efforts to
deliver or cause to be delivered to the Corporation, prior to the Effective
Time, from each of the Affiliates of Buyer identified in the foregoing list (as
the same may be supplemented as aforesaid), Affiliates Letters in the form
attached hereto as Exhibit 7.13(ii).
----------------
(iii) At the Closing, Buyer will enter into with each of the
Affiliates of the Corporation a Registration Rights Agreement in the form
attached hereto as Exhibit 7.13(iii).
-----------------
7.14. Employee Benefits.
-----------------
(i) Buyer hereby agrees to cause the Surviving Corporation to
pay, in accordance with their terms as in effect on the date hereof, all amounts
due and payable under the terms of all written employment, severance and
termination contracts, agreements, plans, policies and commitments of the
Corporation and its subsidiaries with or with respect to its current or former
employees, officers and directors as set forth in the Corporation Disclosure
Letter (the "Employee Agreements"), which amounts are vested on or prior to the
date of this Agreement or which become vested as a result of the transactions
contemplated hereby and will cause the Surviving Corporation to assume and
continue to honor the terms of such Employee Agreements.
(ii) Buyer hereby acknowledges that the consummation of the
Merger will constitute a "friendly" change of control of the Corporation (to the
extent relevant) for all Benefit Plans, Employee Agreements, Corporation Stock
Option Plans and other compensation arrangements of the Corporation.
26
<PAGE>
7.15. Expenses. Whether or not the Merger is consummated, all costs and
--------
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expense except as
expressly provided herein.
7.16. Documentation; Registration. Promptly following the Effective
---------------------------
Time of the Merger, Buyer shall file a Registration Statement covering the
shares of Buyer Common Stock issuable upon the exercise of the assumed
Corporation Options. Buyer will use its reasonable efforts to cause such shares
to be registered under the Securities Act and to maintain such registration in
effect until the exercise or termination of all such Corporation Options.
7.17. Director and Officer Indemnification. Buyer agrees that all rights
------------------------------------
to indemnification and advancement of expenses existing in favor of the
directors and officers of the Corporation (the "Indemnified Parties") under the
provisions existing on the date hereof of the Articles of Incorporation, By-Laws
and indemnification agreements of the Corporation shall survive the Effective
Date for at least six years thereafter and Buyer agrees to indemnify and advance
expenses to the Indemnified Parties to the full extent as would be required or
permitted by the Corporation under the provisions existing on the date hereof of
the Articles of Incorporation, Bylaws and indemnification agreements of the
Corporation. Until the third anniversary of the Effective Time, Buyer shall
cause the Surviving Corporation to maintain in effect with respect to matters
occurring prior to the Effective Time, to the extent available, the policies of
directors' and officers' liability insurance currently maintained by the
Corporation; provided that the Surviving Corporation may substitute therefor
policies containing coverage, terms and conditions which are no less
advantageous; provided that in no event shall Buyer or the Surviving Corporation
be required to expend more than $500,000 in the aggregate to maintain or procure
insurance coverage pursuant hereto and further provided that if Buyer or the
Surviving Corporation is unable to obtain the insurance called for by this
Section, Buyer or the Surviving Corporation will obtain as much comparable
insurance as is available for an aggregate expenditure of $500,000.
ARTICLE 8
8. Conditions.
----------
8.1. Conditions to Each Party's Obligation to Effect the Merger. The
----------------------------------------------------------
respective obligation of each party to effect the Merger shall be subject to the
fulfillment in all material respects at or prior to the Effective Time of the
following conditions:
(i) The Merger shall have been approved in the manner required
by law by the holders of the issued and outstanding shares of the Corporation's
capital stock entitled to vote thereon.
(ii) The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
27
<PAGE>
(iii) None of the parties hereto shall be subject to any order or
injunction against the consummation of the transaction contemplated by this
Agreement. In the event any such order or injunction shall have been issued,
each party agrees to use its reasonable efforts to have any such injunction
lifted.
(iv) The Registration Statement contemplated by Section 7.8
shall have become effective and no stop order with respect thereto shall be in
effect.
(v) Each party shall have received an opinion from its
independent auditors to the effect that the Merger should be treated as a
"pooling of interests" under applicable accounting standards.
(vi) The issuance of Buyer Common Stock pursuant to the Merger
shall have been approved by the holders of a majority of the outstanding shares
of Buyer Common Stock represented at a special meeting of stockholders called
for such purpose and at which a quorum is present, in accordance with applicable
law, and the Certificate of Incorporation and Bylaws of Buyer.
8.2. Conditions to Obligation of the Corporation to Effect the Merger.
----------------------------------------------------------------
The obligation of the Corporation to effect the Merger shall be subject to the
fulfillment in all material respects at or prior to the Effective Time of the
following conditions:
(i) Buyer and Merger Sub shall have performed each agreement
contained in this Agreement required to be performed on or prior to the
Effective Time and the representations and warranties of Buyer contained in this
Agreement shall be true in all material respects on and as of the Effective Time
(other than any failure to so perform or any misrepresentation or omission which
would not materially influence the investment decision of a reasonable purchaser
of securities); and the Corporation shall have received a certificate of the
President or a Vice President of Buyer, certifying to such effect.
(ii) The Designee shall have been elected to the Board of
Directors of Buyer, effective as of the Effective Time.
(iii) The Corporation shall have received the opinion of counsel
to the Corporation, dated the Closing Date, to the effect that the Merger will
be treated for Federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, and that the Corporation, Merger Sub and
Buyer will each be a party to that reorganization within the meaning of Section
368(b) of the Code.
8.3. Conditions to Obligation of Buyer and Merger Sub to Effect the
--------------------------------------------------------------
Merger. The obligation of Buyer and Merger Sub to effect the Merger shall be
- - ------
subject to the fulfillment in all material respects at or prior to the Effective
Time of the following conditions:
28
<PAGE>
(i) The Corporation shall have performed its agreements
contained in this Agreement required to be performed on or prior to the
Effective Time and the representations and warranties of the Corporation
contained in this Agreement shall be true in all material respects on and as of
the Effective Time (other than any failure to so perform or any
misrepresentation or omission which would not materially influence the
investment decision of a reasonable purchaser of securities); and Buyer shall
have received a certificate of the President or a Vice President of the
Corporation certifying to such effect.
(ii) Buyer shall have received the opinion of Jackson & Walker,
L.L.P., counsel to Buyer, dated the Closing Date, to the effect that the Merger
will be treated for Federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, and that Buyer, Merger Sub and the
Corporation will each be a party to that reorganization within the meaning of
Section 368(b) of the Code.
(iii) Holders of Shares representing in the aggregate the right
to receive 5% or more of the Buyer Common Stock issuable upon effectiveness of
the Merger shall not have delivered to the Corporation written notice of their
intent to demand payment for their shares of Corporation Common Stock pursuant
to the exercise of dissenters' rights, if any.
ARTICLE 9
9. Termination.
-----------
9.1. Termination by Mutual Consent. This Agreement may be terminated
-----------------------------
and may be abandoned at any time prior to the Effective Time, before or after
the approval of this Agreement by the shareholders of the Corporation or Buyer,
by the mutual consent of Buyer, Merger Sub and the Corporation.
9.2. Termination by Either Buyer or the Corporation. This Agreement may
----------------------------------------------
be terminated and the Merger may be abandoned by action of the Board of
Directors of either Buyer or the Corporation if (i) the Merger shall not have
been consummated by January 31, 1995, (ii) the approval of the Corporation's
stockholders required by Section 8.1(i) shall not have been obtained at a
meeting duly convened therefor or at any adjournment thereof, or (iii) the
approval of Buyer's stockholders as required by Section 8.1(vi) shall not have
been obtained at a meeting duly convened therefor, provided, in the case of a
termination pursuant to clause (i) above, the terminating party shall not have
breached in any material respect its obligations under this Agreement in any
manner that shall have proximately contributed to the occurrence of the failure
referred to in said clause.
9.3. Termination by the Corporation. This Agreement may be terminated
------------------------------
and the Merger may be abandoned at any time prior to the Effective Time, before
or after the adoption and approval by stockholders of the Corporation referred
to in Section 8.1(i), by action of the Board of Directors of the Corporation, if
(i) the Board of
29
<PAGE>
Directors of Buyer shall have withdrawn or modified in a manner adverse to the
Corporation its approval or recommendation of this Agreement or the Merger, (ii)
the average closing price for Buyer Common Stock on the NYSE Composite Tape for
five consecutive business days shall be $22.00 or less, or (iii) there has been
a breach by Buyer or Merger Sub of any representation, warranty, covenant or
agreement contained in this Agreement or the Stock Option Agreement which would
have a material adverse effect on Buyer which is not curable or, if curable, is
not cured within 30 days after written notice of such breach is given by the
Corporation to the party committing such breach.
9.4. Termination by Buyer. This Agreement may be terminated and the
--------------------
Merger may be abandoned at any time prior to the Effective Time, before or after
the approval by the stockholders of Buyer referred to in Section 8.1(vi), by
action of the Board of Directors of Buyer, if (i) the Board of Directors of the
Corporation shall have withdrawn or modified in a manner adverse to Buyer its
approval or recommendation of the Merger, or shall have recommended to
stockholders of the Corporation an Acquisition Proposal, (ii) any person shall
have made an Acquisition Proposal for the Corporation and the conditions
specified in Sections 8.1(iii) or 8.3(i) cannot be or are not satisfied on or
prior to January 31, 1995 or (iii) there has been a breach by the Corporation of
any representation, warranty, covenant or agreement contained in this Agreement
or the Stock Option Agreement which would have a material adverse effect on the
Corporation which is not curable or, if curable, is not cured within 30 days
after written notice of such breach is given by Buyer to the Corporation.
9.5. Effect of Termination and Abandonment. (a) In the event of
-------------------------------------
termination of this Agreement and the abandonment of the Merger pursuant to this
Article 9, no party hereto (or any of its directors or officers) shall have any
liability or further obligation to any other party to this Agreement except as
provided in Section 9.5(b), Section 7.15 (subject to Section 9.5(b)) and Section
10.6 below, other than the Confidentiality Agreement and except that nothing
herein will relieve any party from liability for any breach of this Agreement.
(b) In the event that any person shall have made an Acquisition
Proposal for the Corporation and thereafter the Agreement is terminated by
either party (other than pursuant to the breach of this Agreement by Buyer),
then the Corporation, if requested by Buyer, shall, subject to the provisions
set forth below, promptly, but in no event later than two days after the date of
such request, pay Buyer a fee of $4,000,000, which amount shall be payable by
wire transfer of same day funds; provided however, that no fee shall be payable
to Buyer pursuant to this Section 9.5(b) unless and until (i) any person (other
than Buyer) (an "Acquiring Party") has entered into a definitive agreement to
acquire, by purchase, merger, consolidation, sale, assignment, lease, transfer
or otherwise, in a transaction or a series of transactions, a majority of the
voting power of the outstanding securities of the Corporation or 50% or more of
the assets of the Corporation, (ii) there has been executed a definitive
agreement with respect to a consolidation, merger or similar transaction between
the Corporation and an Acquiring Party in which the stockholders of the
Corporation immediately prior to such proposed consolidation, merger or similar
transaction do not own securities representing at least 50% of the outstanding
voting power of the surviving entity (or, if applicable, any entity in control
of such Acquiring Party) of such proposed consolidation, merger or similar
transaction immediately following the consummation thereof, or (iii) an
Acquiring Party, or any "group"
30
<PAGE>
(as such term is defined under Section 13(d) of the Exchange Act) acquires
beneficial ownership or the right to acquire beneficial ownership of 50% of the
common stock of the Corporation, whether by tender offer, exchange offer or
otherwise (any such transaction described in clauses (i) through (iii) being a
"Business Combination"). The Corporation acknowledges that the agreements
contained in this Section 9.5(b) are an integral part of the transactions
contemplated in this Agreement, and that, without these agreements, Buyer and
Merger Sub would not enter into this Agreement; accordingly, if the Corporation
fails to promptly pay the amount due pursuant to this Section 9.5(b), and, in
order to obtain such payment, Buyer or Merger Sub commences a suit which results
in a judgment against the Corporation for the fee set forth in this paragraph
(b), the non-prevailing party shall pay to the prevailing party its costs and
expenses (including attorneys' fees) in connection with such suit, together with
interest on the amount of the fee at the prime rate of Bank of Boston, N.A. in
effect on the date such payment was required to be made.
9.6. Extension; Waiver. At any time prior to the Effective Time of the
-----------------
Merger, any party hereto, by action taken by its Board of Directors, may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE 10
10. General Provisions.
------------------
10.1. Nonsurvival of Representations, Warranties and Agreements. All
---------------------------------------------------------
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall be deemed to the extent
expressly provided herein to be conditions to the Merger and shall not survive
the Merger, provided, however, that the agreements contained in Article 4 and
in Sections 7.12, 7.13(ii), 7.14, 7.15, 7.17, and 10.6 and the Agreements
delivered pursuant to this Agreement shall survive this Agreement.
10.2. Notices. Any notice required to be given hereunder shall be in
-------
writing and given by facsimile transmission, overnight courier service, hand
delivery or certified or registered mail (return receipt requested and first-
class postage prepaid), addressed as follows:
31
<PAGE>
If to the Corporation:
KnowledgeWare, Inc.
3340 Peachtree Road, N.E.
Suite No. 1100
Atlanta, Georgia 30326
Attention: President
FAX: (404) 364-0883
Copy to: Hicks, Maloof & Campbell
Suite 2200, Marquis Two Tower
285 Peachtree Center Avenue, N.E.
Atlanta, Georgia 30303
Attention: Maurice N. Maloof
FAX: (404) 420-7474
If to Buyer or Merger Sub:
8080 N. Central Expressway
Dallas, Texas 75206
Attention: President
FAX: (214) 750-0905
Copy to: 8080 N. Central Expressway
Dallas, Texas 75206
Attention: General Counsel
FAX: (214) 750-0905
Copy to: Jackson & Walker, L.L.P.
901 Main Street, Suite 6000
Dallas, Texas 75202
Attention: Charles D. Maguire, Jr.
FAX: (214) 953-5822
or to such other address as any party shall specify by written notice so given.
Such notice shall be deemed given and received on the date it is delivered if
given by telecopy, overnight courier or hand-delivery or on the fifth business
day following the date it is so mailed.
10.3. Binding Effect; Benefit. This Agreement shall be binding upon and
-----------------------
shall inure to the benefit of the parties hereto and their respective successors
and assigns.
32
<PAGE>
Notwithstanding anything contained in this Agreement to the contrary, except for
the provisions of Article 4 and Sections 7.12, 7.13(ii), 7.14, 7.15, 7.17, and
10.6 nothing in this Agreement, expressed or implied, is intended to confer on
any person other than the parties hereto or their respective heirs, successors,
executors, administrators and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
10.4. Entire Agreement. This Agreement, the Stock Option Agreement, the
----------------
Confidentiality Agreement, the Exhibits, Disclosure Letters and other documents
and agreements among the parties hereto, constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
10.5. Amendment. This Agreement may be amended by the parties hereto,
---------
by action taken by their respective Board of Directors, at any time before or
after approval of matters presented in connection with the Merger by the
stockholders of the Corporation but after any such stockholder approval, no
amendment shall be made which by law requires the further approval of
stockholders without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
10.6. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Delaware without regard to its rules
of conflict of laws; provided, however, the Merger of Merger Sub into the
Corporation shall be governed by the laws of the State of Georgia.
10.7. Counterparts. This Agreement may be executed by the parties
------------
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.
10.8. Headings. Headings of the Articles and Sections of this
--------
Agreement are for the convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
10.9. Interpretation. In this Agreement, unless the context otherwise
--------------
requires, words describing the singular number shall include the plural and vice
----
versa, and words denoting any gender shall include all genders and words
- - -----
denoting natural persons shall include corporations and partnerships and vice
----
versa.
- - -----
10.10. Waivers. Except as provided in this Agreement, no action taken
-------
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of
33
<PAGE>
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants or
agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
10.11. Incorporation of Exhibits and Disclosure Letters. All Exhibits and
------------------------------------------------
Disclosure Letters attached hereto and referred to herein are hereby
incorporated herein and made a part hereof for all purposes as if fully set
forth herein.
10.12. Severability. If for any reason whatsoever, any one or more of the
------------
provisions of this Agreement shall be held or deemed to be inoperative,
unenforceable or invalid as applied to any particular case or in all cases, such
circumstances shall not have the effect of rendering such provision invalid in
any other case or of rendering any of the other provisions of this Agreement
inoperative, unenforceable or invalid.
10.13. Obligation of Buyer. Buyer shall cause Merger Sub to perform each
-------------------
of its duties and obligations under this Agreement.
[page intentionally left blank]
34
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first hereinabove
written.
THE CORPORATION:
---------------
KNOWLEDGEWARE, INC., a Georgia corporation
By: /s/ Francis A. Tarkenton
-------------------------------------------
Francis A. Tarkenton, Chairman of the Board
and Chief Executive Officer
BUYER:
-----
STERLING SOFTWARE, INC., a
Delaware corporation
By: /s/ Sterling L. Williams
-------------------------------------------
Sterling L. Williams,
President
MERGER SUB:
----------
SSI CORPORATION, a Georgia corporation
By: /s/ Sterling L. Williams
-------------------------------------------
Sterling L. Williams,
President
35
<PAGE>
EXHIBIT 2.1
(i) Paragraph (b) of Article 4 of the Corporation's Restated
Articles of Incorporation shall be amended and restated to read in its entirety
as follows:
"(b) The total number of shares of stock which the Corporation
shall have authority to issue is Eleven Thousand (11,000) shares,
consisting of Ten Thousand (10,000) shares of Common Stock, having a par
value of $.10 per share, and One Thousand (1,000) shares of Preferred
Stock, having a par value of $.10 per share."
(ii) Article 8 of the Corporation's Restated Articles of
Incorporation shall be deleted in their entirety, and all subsequent Articles
(except as provided herein) and cross-references thereto shall be deemed
renumbered accordingly.
(iii) Article 9 of the Corporation's Restated Articles of
Incorporation (to be renumbered Article 7 pursuant to the amendments to be
effected hereby) shall be amended and restated to read in its entirety as
follows:
"7
The number of directors of the Corporation shall be determined in
accordance with the Bylaws of the Corporation."
<PAGE>
EXHIBIT 7.13(i)
FORM OF AFFILIATE LETTER
Sterling Software, Inc.
8080 N. Central Expressway, Suite 1100
Dallas, Texas 75206
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of KnowledgeWare, Inc, a Georgia corporation (the
"Corporation"), as the term "affiliate" is (i) defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act"), and/or (ii) used in and for
purposes of Accounting Series, Releases 130 and 135, as amended, of the
Commission. Pursuant to the terms of the Agreement and Plan of Merger dated as
of July 31, 1994 (the "Merger Agreement") among Sterling Software, Inc., a
Delaware corporation (the "Buyer"), SSI Corporation, a Georgia corporation
("Merger Sub"), and the Corporation, Merger Sub will be merged with and into the
Corporation (the "Merger").
As a result of the Merger, I may receive shares of common stock, par
value $.10 per share, of the Buyer (the "Buyer Securities") in exchange for
shares owned by me of common stock, no par value, of the Corporation (the
"Shares").
I represent, warrant and covenant to the Buyer that in the event I
receive any Buyer Securities as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the
Buyer Securities in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of Buyer
Securities to the extent I felt necessary, with my counsel or counsel for
the Corporation.
C. I have been advised that the issuance of Buyer Securities to me
pursuant to the Merger has been registered with the Commission under the
Act on a Registration Statement on Form S-4. However, I have also been
advised that, since at the time the Merger was submitted for a vote of the
stockholders of the Corporation, I may be deemed to have been an affiliate
of the Corporation and the distribution by me of the Buyer Securities has
not been registered under the Act, I may not sell, transfer or otherwise
dispose of Buyer Securities issued to me in the Merger unless (i) such
sale,
- 1 -
<PAGE>
transfer or other disposition has been registered under the Act, (ii) such
sale, transfer or other disposition is made in conformity with the volume
and other limitations of Rule 145 promulgated by the Commission under the
Act, or (iii) in the opinion of counsel reasonably acceptable to Buyer,
such sale, transfer or other disposition is otherwise exempt from
registration under the Act.
D. I understand that the Buyer is under no obligation to register the
sale, transfer or other disposition of the Buyer Securities by me or on my
behalf under the Act or to take any other action necessary in order to make
compliance with an exemption from such registration available except, as
applicable, as set forth in the Merger Agreement.
E. I also understand that stop transfer instructions will be given to
the Buyer's transfer agent with respect to the Buyer Securities and that
there will be placed on the certificates for the Buyer Securities issued to
me, or any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED
________, 1994 BETWEEN THE REGISTERED HOLDER HEREOF AND STERLING
SOFTWARE, INC., A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICES OF KNOWLEDGEWARE, INC.
F. I also understand that unless the transfer by me of my Buyer
Securities has been registered under the Act or is a sale made in
conformity with the provisions of Rule 145, the Buyer reserves the right to
put the following legend on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN
ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION
WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF SECURITIES ACT OF
1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth in paragraphs E and
F above shall be removed by delivery of substitute certificates without such
legend if such legend is not required for purposes of the Act or this Agreement.
- 2 -
<PAGE>
I further represent to and covenant with the Buyer that I have not and will
not, during the 30 days prior to the Effective Time (as defined in the Merger
Agreement), sell, transfer or otherwise dispose of any Shares that I may hold
and, furthermore, that I will not sell, transfer or otherwise dispose of any
shares of the Buyer Securities received by me in the Merger or any other shares
of the capital stock of the Buyer or enter into any transaction or agreement
with respect to any securities issued by or related to Buyer or its securities
(including, without limitation, options, derivative securities, convertible
securities or similar instruments or securities or "short sale" transactions)
until after such time as results covering at least 30 days of combined
operations of the Corporation and the Buyer have been published by the Buyer, in
the form of a quarterly earnings report, an effective registration statement
filed with the Commission, a report to the Commission on Form 10-K, 10-Q, or 8-
K, or any other public filing or announcement which includes the combined
results of operations.
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of the Corporation as described in the first paragraph
of this letter, or as a waiver of any rights I may have to object to any claim
that I am such an affiliate on or after the date of this letter.
Very truly yours,
-----------------------------------
(Signature)
-----------------------------------
(Printed Name)
- 3 -
<PAGE>
EXHIBIT 7.13(ii)
FORM OF AFFILIATE LETTER
KnowledgeWare, Inc.
3340 Peachtree Road, N.E.
Suite No. 1100
Atlanta, GA 30326
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Sterling Software, Inc., a Delaware corporation (the
"Buyer"), as the term "affiliate" is (i) defined for purposes of paragraphs (c)
and (d) of Rule 145 of the rules and regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"), and/or (ii) used in and for
purposes of Accounting Series, Releases 130 and 135, as amended, of the
Commission. Pursuant to the terms of the Agreement and Plan of Merger dated as
of July 31, 1994 (the "Merger Agreement") among KnowledgeWare, Inc., a Georgia
corporation (the "Corporation"), SSI Corporation, a Georgia corporation ("Merger
Sub"),and Buyer, Merger Sub will be merged with and into the Corporation.
I represent to and covenant with the Corporation that I have not and
will not, during the 30 days prior to the Effective Time (as defined in the
Merger Agreement), sell, transfer or otherwise dispose of any shares of common
stock, par value $.10 per share, of Buyer ("Buyer Common Stock") that I may hold
and, furthermore, that I will not sell, transfer or otherwise dispose of any
shares of the Buyer Common Stock received by me in the Merger or any other
shares of the capital stock of the Buyer or enter into any transaction or
agreement with respect to any securities issued by or related to Buyer or its
securities (including without limitation, options, derivative securities,
convertible securities, or similar instruments or securities or "short sale"
transactions) until after such time as results covering at least 30 days of
combined operations of the Corporation and the Buyer have been published by the
Buyer, in the form of a quarterly earnings report, an effective registration
statement filed with the Commission, a report to the Commission on Form 10-K,
10-Q, or 8-K, or any other public filing or announcement which includes the
combined results of operations.
- 1 -
<PAGE>
Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of the Buyer as described in the first paragraph
of this letter, or as a waiver of any rights I may have to object to any claim
that I am such an affiliate on or after the date of this letter.
Very truly yours,
___________________________________
(Signature)
___________________________________
(Printed Name)
- 2 -
<PAGE>
EXHIBIT 7.13(iii)
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is dated as of
___________ ___, 1994 by and among Sterling Software, Inc., a Delaware
corporation (the "Buyer"), and the former stockholders of KnowledgeWare, Inc., a
Georgia corporation (the "Corporation"), listed on the signature page hereto
(the "Stockholders").
WHEREAS, the Buyer, SSI Corporation, a Georgia corporation and a wholly
owned subsidiary of the Buyer ("Merger Sub") and the Corporation entered into an
Agreement and Plan of Merger dated as of July 31 (the "Merger Agreement";
capitalized terms not defined herein shall have the meanings set forth in the
Merger Agreement); and
WHEREAS, Section 7.13 of the Merger Agreement contemplates that Buyer will
enter into this Agreement; and
WHEREAS, the Stockholders executed Stockholders Agreements dated as of
_________, 1994 providing that the Stockholders would vote in favor of the
transactions contemplated by the Merger Agreement; and
WHEREAS, to induce the Stockholders to enter into the Stockholders
Agreement, the Buyer has agreed to grant the Stockholders certain registration
rights as set forth herein;
NOW THEREFORE, in consideration of the foregoing and the covenants set
forth herein, in the Merger Agreement and the Stockholders Agreements, the
Stockholder and Buyer agree as follows:
1. Registration Rights. The Buyer shall prepare and file a registration
statement (on an appropriate form) under the Securities Act to permit the sale
or other disposition, on a delayed or continuous basis, of any or all shares of
Buyer Common Stock that have been acquired by or are issuable to the
Stockholders with respect to the Shares and the Corporation Options (if such
Stockholder is not otherwise able to sell such shares free from restriction
under the federal securities laws). The Buyer shall use its reasonable efforts
to cause such registration statement to become effective as promptly as
reasonably practicable following the publication of 30 days of combined
financial results of Buyer and the Surviving Corporation, and to obtain all
consents or waivers of other parties which are required thereof and to keep such
registration statement effective for such period as may be reasonably necessary
to effect such sale or other disposition; provided, however, Buyer shall not be
obligated to keep such registration statement effective after such time as all
Stockholders are eligible to sell their shares of Buyer Common Stock pursuant to
Rule 144 or 145 under the Securities Act without being subject to volume resale
limitations; and provided, further, the Buyer shall not be required to prepare
auditedfinancial statements (other than annual audited financial statements) in
order to maintain the effectiveness of the registration statement. In connection
with any sale by any Stockholder of Buyer Common Stock pursuant to such
registration statement, such Stockholder must give and
<PAGE>
the Buyer must receive written notice of such Stockholder's intention to make
such a sale no less than two (2) nor more than twenty (20) business days prior
to the date of the proposed sale, which notice shall include the number of
shares proposed to be sold, the proposed plan of distribution and the time
period during the thirty (30) days following the date of such notice during
which the shares may be sold (the "Sale Period"), and such Stockholder shall
not, during any Sale Period, deliver any prospectus that is part of such
registration statement during any period of time when, but only so long as, the
Buyer gives such Stockholder written notice (a "Delay Notice") that the Buyer is
in possession of material non-public information that, in the exercise of its
reasonable judgement, would be required to be disclosed in such registration
statement in order to comply with the Securities Act and the rules and
regulations of the SEC thereunder; provided that the Buyer shall promptly
provide written notice to such Stockholder when such delay is no longer
applicable; provided further that no stockholder shall be so prevented from
selling such Buyer Common Stock for a period longer than ninety (90) consecutive
days (a "Delay Period") following receipt of a Delay Notice and any two Delay
Periods must be at least fifteen (15) days apart.
2. Indemnification; Contribution.
(a) Indemnification by the Buyer. The Buyer agrees to indemnify and hold
harmless each Stockholder, its officers, directors, agents, employees,
representatives and each person or entity who controls such Stockholder (within
the meaning of the Securities Act), against all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation) arising
out of or based upon any untrue or alleged untrue statement of material fact
contained in any registration statement, any amendment or supplement thereto,
any prospectus or preliminary prospectus or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as the same arise out of
or are based upon any such untrue statement or omission contained in any
information furnished in writing to the Buyer by such Stockholder for use in the
preparation thereof. In connection with an underwritten offering, the Buyer
will indemnify the underwriters thereof, their officers and directors and each
person who controls such underwriters (within the meaning of the Securities Act)
to the same extent as provided above with respect to the indemnification of the
Stockholders.
(b) Indemnification by Stockholders. In connection with any registration
statement in which a Stockholder is participating, each such Stockholder will
furnish to the Buyer in writing such information with respect to the name and
address of such Stockholder, the amount of Buyer Common Stock held by such
Stockholder and the nature of such holdings, and such other information as is
required by the Buyer for use in connection with any such registration statement
or prospectus and agrees to indemnify and hold harmless the Buyer, its
directors, officers, agents, employees, representatives and each person or
entity who controls the Buyer (within the meaning of the Securities Act),
against all losses, claims, damages, liabilities and expenses (including
reasonable costs of investigation) arising out of or based upon any untrue or
alleged untrue statement of material fact contained in any registration
statement, any amendment or supplement thereto, any prospectus or preliminary
prospectus or any omission to
2
<PAGE>
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, to the extent that such untrue statement
is contained in or omission arises from any information furnished in writing by
such Stockholder for use in the preparation thereof. In no event shall the
liability of any selling Stockholder of Buyer Common Stock hereunder be greater
in amount than the dollar amount of the proceeds received by such Stockholder
upon the sale of the Buyer Common Stock giving rise to such indemnification
obligation.
(c) Conduct of Indemnification Proceedings. Any person entitled to
indemnification hereunder agrees to give prompt written notice to the
indemnifying party after the receipt by such person of any written notice of the
commencement of any action, suit, proceeding or investigation or threat thereof
made in writing for which such person will claim indemnification or contribution
pursuant to this Agreement and, unless in the reasonable judgment of such
indemnified party (i) a conflict of interest may exist between such indemnified
party and the indemnifying party with respect to such claim or (ii) the named
parties to any such action, suit, proceeding or investigation (including any
impleaded parties) include both an indemnifying party and an indemnified party,
and such indemnified party shall have been advised by counsel that there may be
one or more legal defenses available to it which are different from or
additional to those available to the indemnifying party, permit the indemnifying
party to assume the defense of such claim with counsel reasonably satisfactory
to such indemnified party. Whether or not such defense is assumed by the
indemnifying party, the indemnifying party will not be subject to any liability
for any settlement made without its consent (but such consent will not be
unreasonably withheld). No indemnifying party will consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect of such claim or litigation. If the
indemnifying party is not entitled to, or elects not to, assume the defense of a
claim, it will not be obligated to pay the fees and expenses of more than one
counsel with respect to such claim, unless in the reasonable judgment of any
indemnified party a conflict of interest may exist between such indemnified
party and any other of such indemnified parties with respect to such claim, in
which event the indemnifying party shall be obligated to pay the fees and
expenses of one additional counsel.
(d) Contribution. If the indemnification provided for in this Section 2
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any statement of a material fact or omission or alleged omission to
state a material fact has been made by, or relates to information supplied by,
such indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party as a result
3
<PAGE>
of the losses, claims, damages, liabilities and expenses referred to above shall
be deemed to include, subject to the limitations set forth in Section 2(c), any
legal or other fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 2(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 2(d), no selling Stockholder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Buyer Common Stock of such selling Stockholder were
offered to the public exceeds the amount of any damages which such selling
Stockholder has otherwise been required to pay by reason of such untrue
statement or omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
If indemnification is available under this Section 2, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Section 2(a) and (b) without regard to the relative fault of said indemnifying
party or indemnified party or any other equitable consideration provided for in
this Section 2(d).
3. Miscellaneous.
(a) Expenses. Except as otherwise provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the exercise of registration rights granted hereunder,
including fees and expenses of its own counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be waived at
any time by the party that is entitled to the benefits of such provision. This
Agreement may not be modified, amended, altered or supplemented except upon the
execution and delivery of a written agreement executed by the parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary; Severability. Except as
otherwise set forth in the Merger Agreement, this Agreement (including other
documents and instruments referred to herein or therein) (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof
and (ii) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or a
governmental entity to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
4
<PAGE>
(d) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained herein are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be in
writing and shall be given by overnight courier, by delivering the same in
person, by telecopy (with confirmation) or by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
If to the Buyer to:
Sterling Software, Inc.
8080 N. Central Expressway, Suite 1100
Dallas, Texas 75206
Telecopier No.: (214) 750-0905
Attention: President
with a copy to:
Jackson & Walker, L.L.P.
901 Main Street, Suite 6000
Dallas, Texas 75202
Telecopier No.: (214) 953-5822
Attention: Charles D. Maguire, Jr.
If to the Stockholder to:
Such address as appears on the signature page hereof
Such notice shall be deemed delivered and received on the date on which it is
received if sent by overnight courier, hand-delivered or telecopy, or on the
fifth business day following the date on which it is so mailed.
(g) Counterparts. This Agreement and any amendments hereto may be executed
in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed by
each of the parties and delivered to the other party, it being understood that
both parties need not sign the same counterpart.
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<PAGE>
(h) Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any party hereto.
(i) Specific Performance. The parties hereto agree that this Agreement may
be enforced by either party through specific performance, injunctive relief and
other equitable relief. The parties further agree to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
equitable relief and that this provision is without prejudice to any other
rights that the parties hereto may have for any failure to perform this
Agreement.
IN WITNESS WHEREOF, the Stockholders and the Buyer have caused this
Registration Rights Agreement to be signed, all as of the date first written
above.
BUYER:
-----
STERLING SOFTWARE, INC.
By:___________________________
Name:_________________________
Title:________________________
Address for Notice: STOCKHOLDERS:
------------
6
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Exhibit 99.1
------------
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT (this "Agreement") is dated as of July 31, 1994
by and between KnowledgeWare, Inc., a Georgia corporation (the "Corporation"),
and Sterling Software, Inc., a Delaware corporation (the "Buyer").
WHEREAS, the Buyer, SSI Corporation, a Georgia corporation and a wholly
owned subsidiary of the Buyer ("Merger Sub"), and the Corporation propose to
enter into an Agreement and Plan of Merger dated as of the date hereof (the
"Merger Agreement"; capitalized terms not defined herein shall have the meanings
set forth in the Merger Agreement), providing for, among other things, the
merger of Merger Sub with and into the Corporation with the Corporation as the
surviving corporation; and
WHEREAS, as a condition and an inducement to the Buyer's willingness to
enter into the Merger Agreement, the Buyer has requested that the Corporation
agree, and the Corporation has agreed, to grant the Buyer the Option (as defined
below);
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, the Corporation and the Buyer agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth herein,
the Corporation hereby grants to the Buyer an irrevocable option (the "Option")
to acquire up to 1,200,000 (as adjusted as set forth in Section 6 hereof) shares
(the "Option Shares") of Common Stock, no par value, of the Corporation
("Corporation Common Stock") at an exercise price of $8.75 per Option Share (the
"Purchase Price").
2. Exercise of Option. (a) The Buyer may exercise the Option, in whole or
in part, at any time and from time to time following the occurrence of an
Exercise Event (as defined below); provided that, except as otherwise provided
in this Section 2(a), the right to exercise the Option pursuant to this Section
2 shall expire and be of no further force and effect upon: (i) the Effective
Time; or (ii) twelve months following the first occurrence of an Exercise Event.
Notwithstanding the expiration of the Option, the Buyer shall be entitled to
acquire those Option Shares with respect to which it has exercised the Option in
accordance with the terms hereof prior to the expiration of the Option.
(b) An "Exercise Event" shall occur for purposes of this Agreement upon the
occurrence of any of the following:
(i) (x) the Merger Agreement shall have been terminated by mutual
consent of the Corporation and the Buyer, (y) an Acquisition Proposal shall
have been received by the Corporation prior to such termination and (z)
within twelve months after such termination, the Corporation shall have
consummated a Business Combination with any person or entity (other than
the Buyer or its subsidiaries or affiliates);
(ii) the Board of Directors of the Corporation shall have withdrawn,
modified or changed its recommendation of the Merger Agreement or the
Merger in a manner
<PAGE>
adverse to the Buyer or shall have resolved to do any of the foregoing at a
time when Buyer is not in material breach of the Merger Agreement and,
within twelve months after termination of the Merger Agreement, the
Corporation shall have consummated an Acquisition Proposal with any person
or entity;
(iii) (x) a tender offer or exchange offer for twenty percent (20%)
or more of the outstanding shares of capital stock of the Corporation shall
have been commenced while the Merger Agreement is in effect, (y) the Board
of Directors of the Corporation, within 10 business days after such tender
offer or exchange offer has been so commenced, either fails to recommend
against acceptance of such tender offer or exchange offer by its
stockholders or takes no position with respect to the acceptance of such
tender offer or exchange offer by its stockholders and such tender offer is
consummated and (z) the Buyer shall have terminated the Merger Agreement;
(iv) (x) any person shall have acquired beneficial ownership or the
right to acquire beneficial ownership, or any "group" (as such term is
defined under Section 13(d) of the Exchange Act) shall have been formed
which beneficially owns, or has the right to acquire beneficial ownership
of, twenty-five percent (25%) or more of the then outstanding Corporation
Common Stock while the Merger Agreement is in effect, and (y) the Buyer
shall have terminated the Merger Agreement; provided, however, this Section
2(b)(iv) shall not apply with respect to any person who has executed a
Stockholder Agreement or any "group" of which such person is a member; or
(v) (v) the Merger Agreement shall have failed to receive the
requisite vote for approval and adoption by the stockholders of the
Corporation at the stockholders' meeting called for that purpose, (w) at
such time, an Acquisition Proposal shall have been made and the Board of
Directors of the Corporation either fails to recommend against acceptance
of such Acquisition Proposal by its stockholders or takes no position with
respect to such Acquisition Proposal, (x) at the time of such stockholders'
meeting, the Buyer shall not have been in material breach of the Merger
Agreement, (y) the Merger Agreement shall have been terminated, and (z)
within twelve months after the termination, the Corporation consummates
such Acquisition Proposal.
(c) In the event the Buyer wishes to exercise the Option, it shall send to
the Corporation a written notice (the "Notice"; the date of such notice being
herein referred to as the "Notice Date") specifying (i) the total number of
Option Shares it intends to acquire pursuant to such exercise and (ii) a place
and date not earlier than three business days nor later than 15 business days
from the Notice Date for the closing of such acquisition (the "Closing Date");
provided that, if the closing of the acquisition pursuant to the exercise of the
Option (the "Closing") cannot be consummated by reason of any applicable law,
the period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which such restriction on consummation has expired or
been terminated; and provided further, without limiting the foregoing, that if
prior notification to or approval of any governmental or regulatory authority,
agency, court or other entity (a "Governmental Entity") is required in
connection with such acquisition, the Buyer shall promptly file the required
notice or application for approval and shall expeditiously process the same (and
the Corporation shall cooperate with the Buyer in the filing of any such notice
or application and the obtaining of any such approval), and the period
2
<PAGE>
of time that otherwise would run pursuant to this sentence shall run instead
from the date on which, as the case may be (i) any required notification period
has expired or been terminated or (ii) such approval has been obtained, and in
either event, any requisite waiting period has passed.
(d) Notwithstanding Section 2(c), in no event shall any Closing Date be
more than 12 months after the related Notice Date, and if the Closing Date shall
not have occurred within 12 months after the related Notice Date due to the
failure to obtain any such required approval, the exercise of the Option
effected on the Notice Date shall be deemed to have expired. Notwithstanding
the first sentence of this paragraph (d), in the event (i) the Buyer receives
official notice that an approval of any Governmental Entity required for the
purchase of Option Shares would not be issued or granted or (ii) a Closing Date
shall not have occurred within 12 months after the related Notice Date due to
the failure to obtain any such required approval, the Buyer shall be entitled to
exercise the Option in connection with the resale of Corporation Common Stock or
other securities pursuant to a registration statement as provided in Section 7.
3. Payment and Delivery of Certificates. (a) On each Closing Date, the
Buyer shall pay the Corporation, in immediately available funds by wire transfer
to a bank account designated by the Corporation, an amount equal to the Purchase
Price multiplied by the number of Option Shares to be purchased on such Closing
Date.
(b) At such Closing, simultaneously with the delivery of the consideration
specified in Section 3(a), the Corporation shall deliver to the Buyer a
certificate or certificates representing the Option Shares to be acquired at
such Closing, which Option Shares shall be free and clear of all liens, claims,
charges and encumbrances of any kind whatsoever (including any preemptive rights
of any shareholder).
(c) Certificates evidencing the shares delivered at each Closing pursuant
to Section 3(b) shall be endorsed with the restrictive legend set forth below in
its entirety:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO REGISTRATION OF TRANSFER
OF SUCH SECURITIES WILL BE MADE ON THE BOOKS OF THE ISSUER UNLESS SUCH
TRANSFER IS MADE IN CONNECTION WITH AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT OR SUCH ACT DOES NOT APPLY."
It is understood and agreed that this legend shall be removed by delivery of
substitute certificate(s) without such legend if the Buyer shall have delivered
to the Corporation a copy of a letter from the staff of the Securities and
Exchange Commission, or an opinion of counsel (from counsel reasonably
acceptable to the Corporation) in form and substance reasonably satisfactory to
the Corporation and its counsel, to the effect that such legend is not required
for purposes of the Securities Act of 1933, as amended (the "Securities Act").
4. Representations and Warranties of the Corporation. The
representations and warranties of the Corporation set forth in Sections 5.2 and
5.6 of the Merger Agreement are
3
<PAGE>
incorporated herein by reference as though set forth herein in full and shall
survive any termination of the Merger Agreement. In addition, the Corporation
hereby represents and warrants to the Buyer that (i) the Corporation has taken
all necessary corporate and other action to reserve, and at all times from the
date hereof until the obligation to deliver Corporation Common Stock upon the
exercise of the Option terminates will have reserved for issuance, upon exercise
of the Option, shares of Corporation Common Stock equal to the number of shares
of Corporation Common Stock for which the Option may be exercised, and the
Corporation will take all necessary corporate action to reserve for issuance all
additional shares of Corporation Common Stock or other securities which may be
issued upon exercise of the Option pursuant to Section 6 of this Agreement and
(ii) the shares of Corporation Common Stock to be issued upon due exercise of
the Option, including all additional shares of Corporation Common Stock or other
securities which may be issuable pursuant to Section 6 of this Agreement, upon
issuance and payment therefor pursuant hereto, shall be validly issued, fully
paid and nonassessable, and shall be delivered free and clear of all liens,
claims, charges and encumbrances of any kind whatsoever, including any
preemptive rights of any shareholder of the Corporation.
5. Representations and Warranties of the Buyer. The representations and
warranties of the Buyer set forth in the second and third sentences of Section
6.2 and Section 6.5 of the Merger Agreement are incorporated herein by reference
as if set forth herein in full and shall survive any termination of the Merger
Agreement. In addition, the Buyer hereby represents and warrants to the
Corporation that the Option is not being taken, and any Option Shares or other
securities acquired by the Buyer upon exercise of the Option will not be taken,
with a view to the public distribution thereof and will not be transferred or
otherwise disposed of except in a transaction registered or exempt from
registration under the Securities Act.
6. Adjustment upon Share Issuances, Changes in Capitalization, Etc. (a)
In the event of any change in Corporation Common Stock by reason of, without
limitation, a stock dividend, split-up, recapitalization, combination, exchange
of shares or similar transaction, the type and number of shares or securities to
be delivered by the Corporation pursuant to the Option shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transaction, so that the Buyer shall receive upon exercise of the Option
the number and class of shares or other securities or property that the Buyer
would have received if the Option had been exercised immediately prior to such
event, or the record date therefor, as applicable.
(b) In the event that the Corporation shall enter into an agreement (i) to
consolidate with or merge into any person, other than the Buyer or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than the Buyer or one
of its subsidiaries, to merge into the Corporation and the Corporation shall be
the continuing or surviving corporation, but, in connection with such merger,
the then outstanding shares of Corporation Common Stock shall be changed into or
exchanged for stock or other securities of the Corporation or any other person
or cash or any other property or then outstanding shares of Corporation Common
Stock shall after such merger represent less than 50% of the outstanding shares
and share equivalents of the merged company or (iii) to sell or otherwise
transfer all or substantially all of its assets to any person, other than the
Buyer or one of its subsidiaries, then, and in each such case, the agreement
governing such transaction shall make proper provision so that the Option shall,
upon the consummation of any
4
<PAGE>
such transaction and upon the terms and conditions set forth in this Agreement,
be converted into, or exchanged for, an option to acquire the same consideration
received by the holders of Corporation Common Stock pursuant to such a
transaction had the Option been exercised in full prior to the consummation of
such transaction. The provisions of this Agreement, including Sections 1, 2, 6
and 7, shall apply with appropriate adjustments to any securities for which the
Option becomes exercisable pursuant to this Section 6.
7. Registration Rights. The Corporation shall, if requested by the Buyer
at any time and from time to time (a) within three years after the first Closing
Date or (b) for 20 business days following the occurrence of either of the
events set forth in clauses (i) and (ii) of Section 2(d), as expeditiously as
possible prepare and file up to three registration statements under the
Securities Act if such registration is necessary in order to permit the sale or
other disposition of any or all shares of Corporation Common Stock or other
securities that have been acquired by or are issuable to the Buyer upon exercise
of the Option by the Buyer, including a "shelf" registration statement under
Rule 415 under the Securities Act or any successor provision, and the
Corporation shall use its best efforts to qualify such shares or other
securities under any applicable state securities laws. The Buyer agrees to use
all reasonable efforts to cause, and to cause any underwriters of any sale or
other disposition to cause, any sale or other disposition pursuant to such
registration statement to be effected on a widely distributed basis so that upon
consummation thereof no purchaser or transferee shall own beneficially 5% or
more of the then outstanding voting power of the Corporation. The Corporation
shall use all reasonable efforts to cause each such registration statement to
become effective, to obtain all consents or waivers of other parties which are
required thereof and to keep such registration statement effective for such
period as may be reasonably necessary to effect such sale or other disposition;
provided, however, the Corporation shall not be required to prepare audited
financial statements in order to maintain the effectiveness of the registration
statement. In the event that the Buyer requests the Corporation to file a
registration statement following the failure to obtain a required approval for
an exercise of the Option as described in Section 2(d), the closing of the sale
or other disposition of Corporation Common Stock or other securities pursuant to
such registration statement shall occur substantially simultaneously with the
exercise of the Option. The obligations of the Corporation hereunder to file a
registration statement and to maintain its effectiveness may be suspended for
one or more periods of time not exceeding 90 days in the aggregate for all such
periods (and such periods being at least 15 days apart) if the Board of
Directors of the Corporation shall have determined that the filing of such
registration statement or the maintenance of its effectiveness would require
disclosure of nonpublic information that would materially and adversely affect
the Corporation. Any registration statement prepared and filed under this
Section 7, and any sale covered thereby, shall be at the Corporation's expense
except for underwriting discounts or commissions, brokers' fees and the fees and
disbursements of the Buyer's counsel related thereto. The Buyer shall provide
all information reasonably requested by the Corporation for inclusion in any
registration statement to be filed hereunder. In connection with any
registration pursuant to this Section 7, the Corporation and the Buyer shall
provide each other and any underwriter of the offering with customary
representations, warranties, covenants, indemnification and contribution in
connection with such registration. In the event of a Business Combination
proper provision shall be made in the definitive acquisition agreement executed
in connection therewith to provide that the acquiring party or successor party
thereto shall be bound by the provisions of this Section 7 as if such party was
a signatory hereto.
5
<PAGE>
8. Division of Option. This Agreement and the Option granted hereby are
exchangeable, without expense, at the option of the Buyer upon partial exercise
of the Option or partial assignment of the Option, in both instances as provided
herein, upon presentation and surrender of this Agreement at the principal
office of the Corporation, for other Agreements providing for Options of
different denominations entitling the holder thereof to acquire in the aggregate
the same number of shares of Corporation Common Stock which may be acquired
hereunder. The terms "Agreement" and "Option" as used herein include any other
Agreements and related Options for which this Agreement and the Option granted
hereby may be exchanged.
9. Miscellaneous: (a) Expenses. Except as otherwise provided in the
Merger Agreement, each of the parties hereto shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be waived in
writing at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary; Severability. Except as
otherwise set forth in the Merger Agreement, this Agreement (including other
documents and instruments referred to herein or therein) (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof
and (ii) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or a
Governmental Entity to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
(d) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained herein are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be in
writing and shall be given by overnight courier, by delivering the same in
person, by telecopy (with confirmation) or by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
6
<PAGE>
If to the Buyer to:
Sterling Software, Inc.
8080 N. Central Expressway, Suite 1100
Dallas, Texas 75206
Telecopier No.: (214) 750-0905
Attention: President
with a copy to:
Jackson & Walker, L.L.P.
901 Main Street, Suite 6000
Dallas, Texas 75202
Telecopier No.: (214) 953-5822
Attention: Charles D. Maguire, Jr.
If to the Corporation to:
KnowledgeWare, Inc.
3340 Peachtree Road, N.E.
Suite No. 1100
Atlanta, GA 30326
Telecopier No.: (404) 364-0883
Attention: President
with a copy to:
Hicks, Maloof & Campbell
Suite No. 2200, Two Marquis Two Tower
285 Peachtree Center Ave., N.E.
Atlanta, GA 30303
Telecopier No.: (404) 420-7474
Attention: Maurice N. Maloof
Such notice shall be deemed delivered and received on the date on which it is
received if sent by overnight courier, hand-delivery or telecopy, or on the
fifth business day following the date on which it is so mailed.
(g) Counterparts. This Agreement and any amendments hereto may be executed
in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed by
each of the parties and delivered to the other party, it being understood that
both parties need not sign the same counterpart.
(h) Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder or under the Option shall be assigned by the Corporation
(whether by operation of law
7
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or otherwise) without the prior written consent of the Buyer. The Buyer may
assign its rights, interests or obligations under this Agreement or the Option
to any person, including without limitation an assignment of its rights under
Section 7 of this Agreement in connection with the sale of Corporation Common
Stock to any purchaser thereof. Subject to the first sentence of this
Agreement, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
(i) Mutual Drafting. Each party hereto has participated in the drafting of
this Agreement, which each party acknowledges is the result of extensive
negotiations between the parties.
(j) Further Assurances. In the event of any exercise of the Option by the
Buyer, the Corporation and the Buyer shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such exercise.
(k) Specific Performance. The parties hereto agree that this Agreement may
be enforced by either party through specific performance, injunctive relief and
other equitable relief. Both parties further agree to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
equitable relief and that this provision is without prejudice to any other
rights that the parties hereto may have for any failure to perform this
Agreement.
IN WITNESS WHEREOF, the Corporation and the Buyer have caused this Stock
Option Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
KNOWLEDGEWARE, INC.
By: /s/ Francis A. Tarkenton
----------------------------------------------
Francis A. Tarkenton, Chairman of the Board
and Chief Executive Officer
STERLING SOFTWARE, INC.
By: /s/ Sterling L. Williams
----------------------------------------------
Sterling L. Williams, President
8
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Exhibit 99.2
------------
NEWS RELEASE
STERLING SOFTWARE ANNOUNCES
ACQUISITION OF KNOWLEDGEWARE INC.
DALLAS and ATLANTA, August 1, 1994 -- Sterling Software Inc. (SSW-NYSE) and
KnowledgeWare Inc. (KNOW-NASDAQ) today announced that they have signed a
definitive agreement providing for the acquisition by Sterling of KnowledgeWare
in a stock transaction valued at approximately $143 million. Under the terms of
the merger, Sterling will issue .2893 of a share of its common stock for each
outstanding share of KnowledgeWare common stock. The result will be the
issuance of approximately 4,213,000 shares of Sterling Software common stock.
Approximately 24,488,000 shares of Sterling Software common stock will be
outstanding after such issuance.
The proposed merger is subject to the approval of each company's
shareholders and certain regulatory authorities, but has received unanimous
approval from the respective boards of directors. For accounting purposes, the
merger will be structured as a pooling of interests and for federal income tax
purposes, as a tax-free exchange to KnowledgeWare's shareholders. The companies
anticipate a closing by November 1, 1994. The combined company will operate as
Sterling Software. Following the merger, Francis A. Tarkenton, chairman of the
board and chief executive officer of KnowledgeWare, will join the Sterling board
of directors.
Sterling L. Williams, president and chief executive officer of Sterling
Software, said, "This merger is a quantum leap for Sterling Software in the
application development arena and instantly makes us a market leader. The
combination of KnowledgeWare's client/server development and legacy migration
tools and our tools for enterprise systems completes a powerful picture for our
customers. Following the merger, we will provide our customers with the
broadest suite of application development products and services in the
industry."
Fran Tarkenton, chairman and chief executive officer of KnowledgeWare, said
"We believe our decision to merge with Sterling was an excellent one that will
benefit our shareholders, customers and employees. Sterling has completed a
number of highly successful acquisitions and its decentralized operating style
will allow KnowledgeWare's people and products to thrive as part of a larger,
financially strong technology leader."
For its fiscal year ended September 30, 1993, Sterling Software reported
revenue of $411.8 million. For its fiscal year ended June 30, 1993,
KnowledgeWare reported revenue of $128.8 million.
In connection with the merger agreement, KnowledgeWare granted to Sterling
an option to purchase 1,200,000 shares of its common stock. The option is
exercisable only following the
<PAGE>
occurrence of certain events and will expire upon the closing. Certain
KnowledgeWare shareholders holding approximately 16 percent of the voting power
of KnowledgeWare's outstanding shares have agreed to vote their shares in favor
of the merger.
A registration statement relating to the shares of Sterling common stock to
be issued in the merger will be filed with the Securities and Exchange
Commission. The sterling shares will be offered only by means of a prospectus
included in the registration statement. No proxies will be solicited and no
Sterling shares will be offered until the registration statement becomes
effective.
KnowledgeWare Inc., headquartered in Atlanta, is a worldwide provider of
client/server application development tools, business process reengineering
products, data access and warehousing software, and services for rapidly
responding to business needs and requirements. KnowledgeWare employs
approximately 700 people in more than 35 offices worldwide.
Sterling Software Inc., headquartered in Dallas, is a worldwide leader in
electronic commerce, systems software and government-related professional
services. Sterling employs approximately 2,900 people in more than 50 offices
worldwide organized into four groups and sixteen divisions to focus on its three
key markets and the international marketplace.
Contacts:
Anna Vahala Denese Van Dyne
Vice President, Investor Relations Director of Communications
Sterling Software Inc. KnowledgeWare Inc.
(214) 891-8600 (404) 231-3510, ext. 2345