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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) August 31, 1994
Sterling Software, Inc.
(Exact name of registrant as specified in its charter)
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<CAPTION>
<S> <C> <C>
Delaware 1-8465 75-1873956
(State or other jurisdiction (Commission (IRS Employer
of incorporation File Number) Identification No.)
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8080 N. Central Expwy., Suite 1100, Dallas, Texas 75206
(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 August 31, 1994, Sterling Software, Inc., a Delaware corporation
("Sterling"), and SSI Corporation, a Georgia corporation and a wholly-owned
subsidiary of Sterling ("Merger Sub"), entered into an Amended and Restated
Agreement and Plan of Merger (the "Merger Agreement") with KnowledgeWare, Inc.,
a Georgia corporation ("KWI"), which Merger Agreement amended and restated the
Agreement and Plan of Merger entered into on July 31, 1994, among such
companies.
Under the terms of the Merger Agreement, (i) Sterling will acquire KWI
through a merger of Merger Sub with and into KWI (the "Merger") and (ii) each
outstanding share of the common stock, without par value, of KWI will be
converted into the right to receive .1653 of a share of the common stock, par
value $.10 per share, of Sterling; provided that 20% of the number of shares
issuable upon effectiveness of the Merger will be placed in escrow to cover
certain contingencies.
Consummation of the proposed Merger is subject to the approval of the
stockholders of KWI and other conditions set forth in the Merger Agreement.
ITEM 7. EXHIBITS.
Exhibit No. Description
2 Amended and Restated Agreement and Plan of Merger dated as
of August 31, 1994, among Sterling, Merger Sub and KWI.(8)
4.1 Certificate of Incorporation of Sterling.(1)
4.2 Certificate of Amendment of Certificate of Incorporation of
Sterling.(2)
4.3 Certificate of Amendment of Certificate of Incorporation of
Sterling.(3)
4.4 Restated Bylaws of Sterling(4)
4.5 Form of Common Stock Certificate.(5)
4.6 Form of Certificate of Designation, Preferences, Rights and
Limitations with Respect to Series B Junior Preferred
Stock.(2)
4.7 Form of Indenture between Sterling and Bank of America
Texas, National Association, as Trustee, including the form
of 5 3/4% Convertible Subordinated Debenture attached as
Exhibit A thereto.(6)
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4.8 Preferred Stock and Warrant Purchase Agreement dated June
25, 1991 among Systems Center, Inc. and the Investors
named therein.(7)
99.1 Amended and Restated Stock Option Agreement dated as of
August 31, 1994, between Sterling and KWI.(8)
99.2 Press Release dated September 1, 1994.(8)
(1) Previously filed as an exhibit to Sterling's Registration Statement No. 2-
82506 on Form S-1 and incorporated herein by reference.
(2) Previously filed as an exhibit to Sterling's Annual Report on Form 10-K for
the fiscal year ended September 30, 1993 and incorporated herein by
reference.
(3) Previously filed as an exhibit to Sterling's Registration Statement No. 33-
69926 on Form S-8 and incorporated herein by reference.
(4) Previously filed as an exhibit to Sterling's Registration Statement No. 33-
47131 on Form S-8 and incorporated herein by reference.
(5) Previously filed as an exhibit to Sterling's Registration Statement No. 2-
86825 on Form S-1 and incorporated herein by reference.
(6) Previously filed as an exhibit to Sterling's Registration Statement No. 33-
57428 on Form S-3 and incorporated herein by reference.
(7) Previously filed as an exhibit to the Quarterly Report on Form 10-Q of
Systems Center, Inc. for the quarter ended June 30, 1991 and incorporated
herein by reference.
(8) Filed herewith.
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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: September 1, 1994
By: /s/ Jeannette P.Meier
Its: Executive Vice President,
General Counsel and Secretary
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INDEX TO EXHIBITS
Exhibit
Number Exhibit
2 Amended and Restated Agreement and Plan of Merger dated as of
August 31, 1994, among Sterling, Sub and KWI.(8)
4.1 Certificate of Incorporation of Sterling.(1)
4.2 Certificate of Amendment of Certificate of Incorporation of
Sterling.(2)
4.3 Certificate of Amendment of Certificate of Incorporation of
Sterling.(3)
4.4 Restated Bylaws of Sterling.(4)
4.5 Form of Common Stock Certificate.(5)
4.6 Form of Certificate of Designation, Preferences, Rights and
Limitations with Respect to Series B Junior Preferred
Stock.(2)
4.7 Form of Indenture between Sterling and Bank of America Texas,
National Association, as Trustee, including the form of 5
3/4% Convertible Subordinated Debenture attached as Exhibit
A thereto.(6)
4.8 Preferred Stock and Warrant Purchase Agreement dated June 25,
1991 among Systems Center, Inc. and the Investors named
therein.(7)
99.1 Amended and Restated Stock Option Agreement dated as of August
31, 1994, between Sterling and KWI.(8)
99.2 Press Release dated September 1, 1994.(8)
(1) Previously filed as an exhibit to Sterling's Registration Statement No. 2-
82506 on Form S-1 and incorporated herein by reference.
(2) Previously filed as an exhibit to Sterling's Annual Report on Form 10-K for
the fiscal year ended September 30, 1993 and incorporated herein by
reference.
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(3) Previously filed as an exhibit to Sterling's Registration Statement No. 33-
69926 on Form S-8 and incorporated herein by reference.
(4) Previously filed as an exhibit to Sterling's Registration Statement No. 33-
47131 on Form S-8 and incorporated herein by reference.
(5) Previously filed as an exhibit to Sterling's Registration Statement No. 2-
86825 on Form S-1 and incorporated herein by reference.
(6) Previously filed as an exhibit to Sterling's Registration Statement No. 33-
57428 on Form S-3 and incorporated herein by reference.
(7) Previously filed as an exhibit to the Quarterly Report on Form 10-Q of
Systems Center, Inc. for the quarter ended June 30, 1991 and incorporated
herein by reference.
(8) Filed herewith.
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EXHIBIT 2
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
This AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this "Agreement"),
entered into this 31st day of August 1994, to be effective 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
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. The Corporation, Buyer and Merger Sub on July 31, 1994 entered into an
Agreement and Plan of Merger (the "Original Agreement"), and now desire to amend
and restate the Original Agreement in its entirety as set forth herein.
C. To induce Buyer to enter into the Original Agreement, simultaneously
with the execution and delivery of the Original Agreement, the Corporation and
Buyer entered into a Stock Option Agreement, and the Corporation and Buyer have
entered into an Amended and Restated Stock Option Agreement dated as of the date
hereof (as so amended and restated, 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.
D. To further induce Buyer to enter into the Original Agreement, certain
holders of common stock of the Corporation have entered into Stockholder
Agreements, dated as of July 31, 1994, and such stockholders have entered into
Amended and Restated Stockholder Agreement (as so amended and restated, 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).
E. 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").
F. The Corporation, Buyer and Merger Sub desire to make certain
representations, warranties and agreements in connection with the Merger.
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G. The merger provided for herein may be qualified for federal income tax
purposes as a reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code"), in Buyer's sole discretion and if
such qualification is available.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
1. The Merger.
1.1. The Merger. Subject to the terms and conditions of this
Agreement, 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
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
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").
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ARTICLE 2
2. Articles of Incorporation and Bylaws of the Surviving Corporation.
2.1. Articles of Incorporation. Effective at the Effective Time
and 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.
2.2. Bylaws. Subject to the provisions of Section 7.17, the Bylaws
of 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.
ARTICLE 3
3. Directors and Officers of the Surviving Corporation.
3.1. Directors. The persons who are directors of Merger Sub
immediately 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
officers of the Surviving Corporation until their resignation or removal.
ARTICLE 4
4. Conversion of Shares in the Merger.
4.1. Conversion of Shares. The manner of converting shares of the
Corporation and Merger Sub in the Merger shall be as follows:
(i) Subject to the provisions of Section 4.4, 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")) shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into the right to receive .1653
share of Common Stock, par value $.10 per share (the "Buyer Common Stock") of
Buyer (the "Exchange Ratio").
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(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)
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.
(iii) The warrants (the "Warrants") issued pursuant to that certain
Warrant Agreement (the "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 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" (as such
term is used in the Warrant Agreement) per Share immediately prior to the
Effective Time (i.e., the exercise price of $17.50 per Share as it may be
adjusted pursuant to the terms of the Warrant Agreement) divided by the Exchange
Ratio (the exercise price per share, as so determined, being rounded upward to
the nearest full cent). No payment shall be made for fractional interests.
(iv) 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
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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 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.
4.2. Exchange of Certificates Representing Shares.
(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) 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
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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 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.
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(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 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 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. Escrow. Of the aggregate shares of Buyer Common Stock
issuable upon consummation of the Merger at the Effective Time, Buyer shall
deposit in escrow a number of shares of Buyer Common Stock equal to 20% of the
total number of shares of Buyer Common Stock to be issued in connection with the
Merger (the "Escrowed Shares"), pursuant to the terms of an Escrow Agreement
(the "Escrow Agreement") in the form attached hereto as Exhibit 4.4, to be
entered into among the Corporation, Buyer and an escrow agent to be selected by
Sterling, which may be the Exchange Agent (the "Escrow Agent"). The Escrowed
Shares shall be issued in the name of the Escrow Agent and shall be released if
and as permitted under the terms of the Escrow Agreement to the record holders
of Shares as of the Effective Time pro rata based on the number of Shares held
by such holders at the Effective Time; provided that such holders shall have
complied with Section 4.2 in connection with the surrender of their
Certificates. No fractional shares of Buyer Common Stock will be issued in
connection with any distribution of Escrowed Shares and any person that would
otherwise be entitled under the
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Escrow Agreement to receive a fractional share will receive a cash payment in
lieu thereof, which payment shall represent such holder's proportionate interest
in the net proceeds from the sale by the Escrow Agent, within ten business days
following the date of the final disbursement of the Escrowed Shares, on behalf
of all such persons of the aggregate fractional shares of Buyer Common Stock
that such persons would otherwise be entitled to receive.
ARTICLE 5
5. Representations and Warranties of the Corporation. Except as set 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. 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
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
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with the GBCC). This Agreement and the Stock Option Agreement constitute, 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 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
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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 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
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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 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, (ii) its
Quarterly Reports on Form 10-Q for the periods ended September 30, 1993,
December 31, 1993 and March 31, 1994 and (iii) its Annual Report on Form 10-K
for the year ended June 30, 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,
except as set forth in the Corporation Disclosure Letter, 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. Except as set forth in the
Corporation Disclosure Letter, 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 or at June 30, 1994, 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 June 30, 1994.
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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 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 on or 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
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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 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
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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 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 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.
5.15 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.
5.16 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:
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(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 5.16, 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
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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. 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, calls, subscriptions,
convertible securities, or other rights or other agreements or commitments
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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, March 31, 1994 and June 30, 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 balance sheets included in or incorporated by reference into the
Buyer Reports
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(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.
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,
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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. 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.
6.13. 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 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
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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 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
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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.
(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, 1994, except as required by changes in generally accepted
accounting
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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 "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 (ix) 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 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. Meeting of Shareholders. The Corporation will take all action
necessary in accordance with applicable law and its 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. The Board of Directors of
the Corporation shall, except to the extent such Board of Directors determines
in good faith is required by fiduciary obligations under applicable law,
recommend such approval and the Corporation shall each take all lawful action to
solicit such approval. 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
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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 Merger, a portion of which
Registration Statement shall also serve as the proxy statement with respect to
the meeting of the shareholders of the Corporation 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
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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 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, the Escrow 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 Escrow 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
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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 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 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(ii).
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.
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(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.
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
current and former 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.
7.18. Indemnification.
(i) Notwithstanding any other provisions of this Agreement, subject to
the provisions of this Section 7.18 and limited in all cases to the Escrowed
Shares and the terms of the Escrow Agreement, the Corporation shall indemnify
and hold harmless Buyer and Merger Sub, and their respective parent and
subsidiary corporations, heirs, assigns, successors, directors, officers,
employees, agents, attorneys, administrators, beneficiaries and executors (each
an "Indemnified Party" and collectively, the "Indemnified Parties"), from and
against all losses, claims, counterclaims, obligations, demands, causes of
action, choses in
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action, suits, assessments, common law and statutory penalties, liabilities,
costs, damages, punitive and exemplary damages, judgments, interest and expenses
(including without limitation fees and disbursements of counsel and expenses
incurred in connection with investigating, preparing for, pursuing or defending
any pending or threatened litigation, action, claim, proceeding, dispute or
investigation (an "Action")) (collectively, "Damages") asserted against or
incurred by the Corporation or such Indemnified Parties from or after the date
of this Agreement by reason of or arising from any Action now pending or
threatened or that may arise following the date hereof, including without
limitation any Action arising out of violations or alleged violations of
securities laws but excluding any Actions arising out of ordinary course of
business transactions, Actions brought by current or former employees with
respect to their employment or termination thereof and those Actions set forth
in Section 5.8 of the Corporation Disclosure Letter; provided, however, the
Corporation or such Indemnified Parties shall be indemnified for Damages arising
with respect to those items set forth in Item IV of Section 5.8 of the
Corporation Disclosure Letter. Notwithstanding the provisions of this Section
7.18, the Indemnified Parties' rights hereunder shall not limit in any respect
any rights the Corporation or any Indemnified Party may have against third
persons with respect to any Action, including without limitation rights under
insurance policies and contractual rights as an indemnitee. Neither the
Corporation, Buyer nor any other Indemnified Party shall have any duty or
obligation to pursue any rights against third persons as a precondition to the
indemnification provided for in this Section 7.18.
(ii) Notwithstanding the provisions of Section 7.18(i), Buyer shall
not be entitled to deliver notice of indemnification for Damages pursuant to
Section 7.18(i) after the second anniversary of the Effective Time except to the
extent provided in the Escrow Agreement.
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.
(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
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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) The Corporation, Buyer and the Escrow Agent
shall have executed and delivered the Escrow Agreement.
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: 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.
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:
(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) If Buyer intends to have the Merger qualify for Federal income
tax purposes as a reorganization within the meaning of Section 368 of the Code,
in its sole discretion, Buyer shall have received the opinion of Jackson &
Walker, L.L.P., counsel to Buyer, and the Corporation shall have received the
opinion of counsel to the Corporation, each 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.
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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,
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, or (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,
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 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, 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.
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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 $2,900,000, 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" (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.
30
<PAGE>
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, 7.14, 7.15, 7.16, 7.17, 7.18 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:
If to the Corporation:
KnowledgeWare, Inc.
3340 Peachtree Road, N.E.
Suite No. 1100
Atlanta, Georgia 30326
Attention: Francis A. Tarkenton, Chairman of the Board
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: Sterling L. Williams, President
FAX: (214) 750-0905
31
<PAGE>
Copy to:
8080 N. Central Expressway
Dallas, Texas 75206
Attention: Jeannette P. Meier, Executive Vice President
and 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. Notwithstanding anything contained in this Agreement to
the contrary, except for the provisions of Article 4 and Sections 7.12, 7.14,
7.15, 7.16, 7.17, 7.18 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 Escrow 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, including without limitation any oral or written
understandings or commitments with respect to loans, advances or guaranties from
or by Buyer or severance or other employment arrangements with respect to
employees of the Corporation. 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
32
<PAGE>
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 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]
33
<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:_____________________________________
Francis A. Tarkenton, Chairman of the Board
and Chief Executive Officer
BUYER:
STERLING SOFTWARE, INC., a
Delaware corporation
By:_____________________________________
Sterling L. Williams,
President
MERGER SUB:
SSI CORPORATION, a Georgia corporation
By:_____________________________________
Sterling L. Williams,
President
34
<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 4.4
ESCROW AGREEMENT
This Escrow Agreement ("Agreement"), dated as of , 1994, among Sterling
Software, Inc., a Delaware corporation ("Sterling"), KnowledgeWare, Inc., a
Georgia corporation ("KnowledgeWare"), The First National Bank of Boston (the
"Agent") and as representative (the "Representative"),
W I T N E S S E T H:
WHEREAS, Sterling, SSI Corporation, a Georgia corporation and wholly owned
subsidiary of Sterling ("Newco"), and KnowledgeWare are parties to that certain
Amended and Restated Agreement and Plan of Merger dated as of August 31, 1994
to be effective as of July 31, 1994 (the "Merger Agreement") pursuant to which
Newco will merge with and into KnowledgeWare; and
WHEREAS, pursuant to the Merger Agreement, Sterling is entitled to
indemnification under certain circumstances as set forth in the Merger
Agreement; and
WHEREAS, the purpose of this Agreement is to provide for the deposit of
shares of common stock, par value $0.10 per share, of Sterling ("Buyer Common
Stock") pursuant to the Merger Agreement to satisfy the rights of Sterling to
be indemnified under Section 7.18 of the Merger Agreement and to provide for
the distribution, if applicable, of any shares of Buyer Common Stock to persons
who as of the Effective Time (as defined in the Merger Agreement) were holders
of record ("Record Holders") of issued and outstanding Shares (as defined in
the Merger Agreement);
NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
1. Definitions. As used in this Agreement, all capitalized terms not defined
herein shall have the meanings attributed to such terms in the Merger
Agreement.
2. Appointment of Agent and Representative.
(a) Sterling and KnowledgeWare hereby appoint the Agent as escrow agent for
the purposes set forth herein and the Agent hereby accepts such appointment on
the terms herein provided.
(b) The Representative is hereby appointed as agent and representative of the
Record Holders for the purposes set forth herein and the Representative accepts
such appointment on the terms herein provided.
3. Escrowed Shares.
(a) For the purposes herein set forth, Sterling has caused to be deposited
with the Agent shares of Buyer Common Stock (the "Escrowed Shares"). If
during the term of this Agreement there is declared a stock dividend or stock
split, all securities thereby issuable with respect to the Escrowed Shares
shall be deposited hereunder and shall be deemed "Escrowed Shares" for the
purposes of this Agreement. If during the term of this Agreement there is paid
any dividends (within the meaning of Section 301(c)(1) of the Code) in cash or
other property in respect of the Escrowed Shares, such dividends shall be paid
by the Agent to the Record Holders, pro rata, except that any such dividends
paid in respect of Escrowed Shares as to which a claim exists pursuant to a
Sterling Notice shall constitute and be deemed part of such Escrowed Shares for
purposes of this Agreement. If during the term of this Agreement there is any
other distribution which does not constitute a dividend (within the meaning of
Section 301(c)(1) of the Code) in cash or other property in respect of the
Escrowed Shares, such distribution shall be retained by the Agent and shall
constitute part of
<PAGE>
the "Escrowed Shares" for purposes of this Agreement. The Escrowed Shares shall
be held and disbursed by the Agent in accordance with the terms of this
Agreement.
(b) The Escrowed Shares held by the Agent pursuant to this Agreement shall be
deemed issued and outstanding. With respect to any matter on which stockholders
of Sterling have a right to vote, the Agent, on behalf of the Record Holders,
shall have the right to vote, or not vote, all Escrowed Shares (or any portion
thereof) in such manner as it deems appropriate as agent for the Record
Holders; provided that, at Sterling's expense, the Agent shall promptly
forward, or cause to be forwarded, copies of any proxies, proxy statements and
other soliciting materials to the Record Holders, and shall vote the applicable
portion of the Escrowed Shares in accordance with any written instructions
timely received by the Agent from any Record Holder.
(c) The Record Holders' interest in this Agreement and the Escrowed Shares
(prior to the disbursement thereof) may not be transferred except by operation
of law.
4. Application of Escrow Deposit. The Escrowed Shares shall be held in escrow
under the terms of this Agreement and released by the Agent upon the following
terms:
(a) Upon joint written notice and instruction from Sterling and the
Representative that the Escrowed Shares, or any portion thereof, should be
disbursed, the Agent shall make such disbursement in accordance with the
directions set forth in such joint written notice and instruction.
(b) If at any time, or from time to time, before the second anniversary
of the Effective Time, Sterling delivers to the Agent written notice (a
"Sterling Notice") asserting that Sterling is entitled to indemnification
as set forth in Section 7.18 of the Merger Agreement, which Sterling Notice
shall state the basis and amount of such claim, then the Agent shall
disburse, on the twentieth business day following receipt of the Sterling
Notice, all or such portion of the Escrowed Shares to Sterling as specified
in the Sterling Notice; provided that if the Agent receives written notice
from the Representative prior to such twentieth business day that a dispute
exists with respect to the claims made in the Sterling Notice (a "Dispute
Notice"), which Dispute Notice shall state the basis of such dispute, the
Agent shall continue to hold the Escrowed Shares (but shall disburse to
Sterling any portion of such Escrowed Shares as to which no dispute exists)
until directed otherwise pursuant to paragraph (a) above or (c) below.
(c) If the Agent timely receives a Dispute Notice, the Agent shall retain
the Escrowed Shares subject of the Sterling Notice until the first to occur
of the following:
(i) receipt by the Agent of a joint written instructions from
Sterling and the Representative, in which case the Agent shall disburse
the Escrowed Shares (or applicable portions thereof) as set forth in
such joint written instructions; or
(ii) receipt by the Agent of a written notice from either Sterling or
the Representative (a "Litigation Certificate") to the effect that such
person(s) has received a final non-appealable judgment or order from a
court of competent jurisdiction (and attaching a copy of such judgment
or order) resolving the dispute as to the disbursement of the subject
Escrowed Shares setting forth in reasonable detail the substance of
such judgment and instructions as to the resulting disbursement of the
Escrowed Shares (or applicable portions thereof), in which case the
Agent shall make such disbursement (or portions thereof) on the
twentieth business day following receipt of the Litigation Certificate;
provided that if Sterling or the Representative delivers to the Agent a
certificate prior to such twentieth business day disputing the contents
of the Litigation Certificate (the "Countervailing Certificate"), then
the Agent, on the twentieth business day following receipt of the
Countervailing Certificate, shall interplead the subject Escrowed
Shares into, or file a declaratory judgment action with, a court of
competent jurisdiction to determine the rights of the parties to the
Escrowed Shares, unless prior to such twentieth business day the Agent
receives a joint written instruction pursuant to paragraph (c)(i)
above.
(d) If, on the second anniversary of the Effective Time, there are
Escrowed Shares remaining undisbursed and not the subject of a Sterling
Notice or a Contingent Claim Notice (defined below), the
<PAGE>
Agent shall disburse such Escrowed Shares to the Record Holders pro rata in
accordance with their relative record ownership of Shares issued and
outstanding as of the Effective Time.
(e) If, within 30 days prior to the second anniversary of the Effective
Time, Sterling, in its reasonable good faith judgment, believes that there
exist one or more Actions with respect to which Sterling would be entitled
to indemnification for Damages incurred subsequent to the second
anniversary of the Effective Time (each a "Contingent Claim" and
collectively, "Contingent Claims"), Sterling may give the Agent written
notice (a "Contingent Claim Notice") of such Contingent Claims, which
Contingent Claim Notice shall state the basis of the Contingent Claims and
Sterling's reasonable good faith estimate of the maximum amount of Damages
for which it would be entitled to indemnification with respect thereto. In
the event a Contingent Claim Notice is delivered, a number of Escrowed
Shares equal to the aggregate amount of such estimated Damages divided by
the most recently reported closing sales price of Buyer Common Stock shall
remain subject to this Agreement, and this Agreement shall remain in
effect; provided that, with respect to any Contingent Claim which has not
been resolved on or prior to the fourth anniversary of the Effective Time,
any Escrowed Shares attributable to such Contingent Claim and not disbursed
shall be disbursed to the Record Holders pro rata in accordance with their
relative record ownership of Shares issued and outstanding as of the
Effective Time unless, as of the fourth anniversary of the Effective Time,
such Contingent Claim is then subject to litigation or binding arbitration
proceedings, in which case such Escrowed Shares shall remain subject to
this Agreement, and this Agreement shall remain in effect, until the final,
nonappealable resolution of such proceedings.
(f) Notwithstanding any other provision of this Agreement, no fractional
shares of Buyer Common Stock will be issued and any person who would
otherwise be entitled to receive a fractional share will be entitled to
receive a cash payment in lieu thereof, which payment shall represent such
holder's proportionate interest in the net proceeds from the sale by the
Agent, within ten business days following the date the disbursement of such
fractional share would have been made, on behalf of all such persons of the
aggregate fractional shares of Buyer Common Stock that such persons would
be entitled to receive but for this paragraph (f).
(g) In determining the number of shares to be disbursed in respect of
Damages, the number of shares of Buyer Common Stock to be disbursed shall
be determined by dividing the amount of Damages with respect to which
Sterling is entitled to be indemnified by the most recently reported
closing sale price of the Buyer Common Stock.
5. Communications with Representative.
(a) Within a reasonable time following receipt of notice of an Action for
which Sterling believes it is entitled to indemnification, Sterling shall give
the Representative written notice of such Action.
(b) Within a reasonable time following the end of each calendar quarter while
this Agreement is in effect, Sterling shall deliver to the Representative a
written summary of the status of each Action with respect to which Sterling is
seeking indemnification.
(c) At least ten (10) days prior to settling any Action with respect to which
Sterling is seeking indemnification, Sterling shall give the Representative
written notice thereof, which notice shall describe the material terms of such
settlement.
6. Liability of the Agent. The duties of the Agent hereunder shall be limited
to the observance of the express provisions of this Agreement. The Agent shall
not be subject to, or be obliged to recognize, any other agreement between the
parties hereto or directions or instructions not specifically set forth or
provided for herein. The Agent shall not make any disposition of Escrowed
Shares which is not expressly authorized by this Agreement. The Agent may rely
upon and act upon any instrument received by it pursuant to the provisions of
this Agreement which it in good faith believes to be genuine and in conformity
with the
<PAGE>
requirements of this Agreement. Except as expressly provided in this Agreement,
the Agent shall have no duty to determine or inquire into the happening or
occurrence of any event. Anything in this Agreement to the contrary
notwithstanding, the Agent shall not be liable to any person for anything which
it may do or refrain from doing in connection with this Agreement, unless the
Agent is guilty of gross negligence or willful misconduct.
7. Duties of the Agent.
(a) The Agent shall hold the Escrowed Shares, or portions thereof, as set
forth herein.
(b) The Agent shall have no authority or obligation to invest funds except as
herein provided.
(c) Promptly following receipt by the Agent of any certificate or notice (i)
from Sterling or the Representative pursuant to Section 4, the Agent shall
promptly provide a copy thereof to the other and (ii) from any Record Holder
pursuant to Section 13, the Agent shall promptly provide a copy thereof to
Sterling and the Representative.
8. Indemnification of the Agent.
(a) Sterling and KnowledgeWare (solely to the extent of the Escrowed Shares)
each shall severally indemnify and hold the Agent, its employees, officers,
agents, successors and assigns harmless from and against any and all loss,
cost, damages or expenses (including reasonable attorneys' fees) it or they may
sustain by reason of the Agent's service as escrow agent hereunder, except such
a loss, cost, damage or expense (including reasonable attorneys' fees) incurred
by reason of such acts or omissions for which the Agent is liable or
responsible under the provisions of Section 6 hereof.
(b) The Agent is hereby given a prior lien on all rights, titles and
interests of Sterling and the Record Holders in the Escrowed Shares, including
any property or cash (or cash equivalent) arising therefrom, in order to
protect, indemnify and reimburse the Agent for the costs, expenses, fees and
liabilities to which it is entitled pursuant to Section 8(a) above.
9. Fees of the Agent. The Agent's compensation for services hereunder shall
be in accordance with Exhibit A. In the event extraordinary services are
required of the Agent beyond the services described herein, compensation shall
be an amount that is fair and equitable based upon the services and
responsibility involved. Sterling shall pay the fees and expenses of the Agent
for serving as escrow agent.
10. Resignation of the Agent. The Agent may resign as escrow agent by giving
each of Sterling and the Representative not less than 30 days' written notice
of the effective date of such resignation. Sterling shall have the right to
designate a substitute escrow agent, provided it is reasonably acceptable to
the Representative. If on or prior to the effective date of such resignation,
the Agent has not received written instructions from Sterling of a substitute
escrow agent, it shall thereupon deposit the Escrowed Shares into the registry
of a court of competent jurisdiction. The parties hereto intend that a
substitute escrow agent shall be appointed to fulfill the duties of the Agent
hereunder for the remaining term of this Agreement in the event of the Agent's
resignation.
11. Remedies of the Agent.
(a) In the event of any dispute hereunder, or if conflicting demands or
notices are made upon the Agent, or in the event the Agent in good faith is in
doubt as to what action it should take hereunder, the Agent shall have the
right to (i) stop all further proceedings in, and performance of, this
Agreement and instructions received hereunder, and/or (ii) file a suit in
interpleader and obtain an order from a court of competent jurisdiction
requiring all persons involved to interplead and litigate in such court their
several claims and rights with respect to the Escrowed Shares.
(b) While any legal proceeding arising out of this Agreement is pending, the
Agent shall have the right to stop all further proceedings in, and performance
of, this Agreement and instructions received hereunder until all differences
shall have been resolved by agreement or a final order.
<PAGE>
(c) The Agent may from time to time consult with legal counsel of its own
choosing in the event of any disagreement, controversy, question or doubt
as to the construction of any of the provisions hereof or its duties
hereunder, and it shall incur no liability and shall be fully protected in
acting in good faith in accordance with the opinion and instructions of
such counsel. Any such fees and expenses of such legal counsel shall be
considered part of the fees and expenses of the Agent for the purposes of
Section 9 of this Agreement.
12. Responsibilities of the Representative.
(a) The Representative is an attorney who has been designated by the
Board of Directors of KnowledgeWare with the consent of Sterling in its
reasonable discretion. The duties of the Representative hereunder shall be
limited to the observance of the express provisions of this Agreement. The
Representative shall not be subject to, or be obliged to recognize, any
other agreement between the parties hereto or directions or instructions
not specifically set forth or provided for herein. Anything in this
Agreement to the contrary notwithstanding, the Representative shall not be
liable to any Record Holder or any other person for anything which it may
do or refrain from doing in connection with this Agreement, unless the
Representative is guilty of willful misconduct.
(b) The Representative and its successors and assigns shall be
indemnified and held harmless, out of the Escrowed Shares, from and against
any and all loss, cost, damages or expenses (including reasonable
attorneys' fees) it or they may sustain by reason of the Representative's
services as representative hereunder, except such loss, cost, damage or
expense (including reasonable attorneys' fees) incurred by reason of such
acts or omissions for which the Representative is responsible pursuant to
paragraph (a) above.
(c) The Representative's compensation for services hereunder shall be at
his normal hourly rate. The fees and reasonable expenses of the
Representative shall be paid out of the Escrowed Shares on a timely basis
upon presentation of invoices to the Agent.
13. Resignation or Removal of the Representative. The Representative may
resign as representative by giving Sterling, the Agent and each of the Record
Holders not less than 30 days' written notice of the effective date of such
resignation. Record Holders who as of the Effective Time owned of record at
least 51% of the issued and outstanding Shares may, by delivering written
notice to Sterling, the Agent and the Representative, remove the Representative
with or without cause. Prior to the effective date of such resignation or
removal, Record Holders who as of the Effective Time owned of record at least
51% of the issued and outstanding Shares may deliver to Sterling and the Agent
a written designation of a substitute representative who shall be acceptable to
Sterling in its reasonable discretion. If no designation is made, the
Representative shall appoint a substitute representative, provided such
substitute representative is reasonably acceptable to Sterling.
14. Miscellaneous.
(a) Any notice or communication hereunder to Sterling, the Representative
or the Agent must be in writing and given by overnight courier, depositing
the same in the United States mail, addressed to the person to be notified,
postage prepaid and registered or certified with return receipt requested,
or by delivering the same in person. Such notice shall be deemed received
on the date on which it is received if sent by overnight courier or hand-
delivered or on the third business day following the date on which it is so
mailed. For purposes of notice, the addresses shall be:
If to Sterling: Sterling Software, Inc.
8080 North Central Expressway
Suite 1100
Dallas, Texas 75206
Attn: General Counsel
<PAGE>
with a copy to: Jackson & Walker, L.L.P.
901 Main Street, Suite 6000
Dallas, Texas 75202
Attn: Charles D. Maguire, Jr.
If to the Representative:
If to the Agent: The First National Bank of Boston
Blue Hills Office Park
150 Royal Street
Canton, MA 02021
Attention:
Any notice or communication hereunder to a Record Holder must be in writing and
given by depositing the same in the United States mail, addressed to the Record
Holder as reflected on the records of the transfer agent for the Shares as of
the Effective Time, which notice shall be deemed received on the fifth business
day following the date on which it is so mailed. Any party or Record Holder may
change its address for notice by written notice given to the other parties in
accordance with this Section. In cases where Sterling and the Representative
may give joint written notice or instructions to the Agent, such notice may be
given by separate instruments of similar tenor.
(b) This Agreement may be amended, modified or supplemented only by an
instrument in writing executed by Sterling, the Representative and the Agent;
provided that this Agreement may not be amended in a manner that would
materially and adversely affect the rights or benefits of the Record Holders
without the written consent of Record Holders who as of the Effective Time
owned of record at least 51% of the issued and outstanding Shares.
(c) This Agreement and the agreements contemplated hereby constitute the
entire agreement of the parties regarding the subject matter hereof, and
supersede all prior agreements and understandings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof.
(d) This Agreement and the rights and obligations of the parties hereto shall
be governed by and construed and enforced in accordance with the substantive
laws (but not the rules governing conflicts of laws) of the State of Texas.
(e) This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original, and all of which together shall constitute one and
the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto caused this Agreement to
be executed as of the day and year first above written.
STERLING:
STERLING SOFTWARE, INC.
By: _________________________________
Its: ________________________________
AGENT:
THE FIRST NATIONAL BANK OF BOSTON
By: _________________________________
Its: ________________________________
REPRESENTATIVE:
_____________________________________
<PAGE>
EXHIBIT A
SCHEDULE OF FEES
- - --------------------------------------------------------------------------------
<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 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"). Pursuant to the terms
of the Amended and Restated Agreement and Plan of Merger dated as of August 31,
1994 to be effective 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, 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
<PAGE>
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.
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)
<PAGE>
EXHIBIT 7.13(II)
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
Amended and Restated Agreement and Plan of Merger dated as of August 31, 1994
to be effective 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, certain of the Stockholders executed Amended and Restated
Stockholders Agreements (the "Stockholder Agreements") dated as of August 31,
1994 providing that such Stockholders would vote in favor of the transactions
contemplated by the Merger Agreement, and to induce such Stockholders to enter
into the Stockholders Agreement, the Buyer has agreed to grant such
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 filing thereof, 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 audited financial 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 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.
<PAGE>
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 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.
<PAGE>
(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 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.
(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.
<PAGE>
(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.
(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.
<PAGE>
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:
<PAGE>
EXHIBIT 99.1
AMENDED AND RESTATED STOCK OPTION AGREEMENT
This AMENDED AND RESTATED STOCK OPTION AGREEMENT (this "Agreement") is
entered into as of August 31, 1994 to be effective 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 have entered
into an Agreement and Plan of Merger dated as of July 31, 1994 and propose to
enter into an Amended and Restated 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 $5.00 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);
<PAGE>
(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 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
2
<PAGE>
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 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").
3
<PAGE>
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 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
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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 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
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successor party thereto shall be bound by the provisions of this Section 7 as if
such party was a signatory hereto.
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):
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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, 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
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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:_________________________
Francis A. Tarkenton, Chairman of the Board
and Chief Executive Officer
STERLING SOFTWARE, INC.
By:__________________________
Sterling L. Williams, President
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EXHIBIT 99.2
[LOGO OF STERLING SOFTWARE APPEARS HERE] NEWS RELEASE
STERLING SOFTWARE ANNOUNCES
REVISED KNOWLEDGEWARE ACQUISITION AGREEMENT
DALLAS, September 1, 1994 - Sterling Software Inc. (SSW-NYSE) today
announced that the company and KnowledgeWare Inc. (KNOW-NASDAQ) have amended the
definitive agreement, previously announced on August 1, 1994, to provide for the
acquisition by Sterling of KnowledgeWare. The amendment was made following
KnowledgeWare's announcement stating that it would report a substantial loss for
its fiscal year ended June 30, 1994 and would restate results for the first
three quarters. KnowledgeWare today reported a loss of $19 million or $1.34 per
share for its fiscal year 1994.
Under the terms of the revised agreement, Sterling will issue .1653 of a
share of its common stock for each outstanding share of KnowledgeWare common
stock. This compares to .2893 of a share of Sterling common stock for each
KnowledgeWare share under the original agreement. Approximately 2,409,000 shares
of Sterling Software common stock will be issued in connection with the merger
of which 20 percent or approximately 482,000 shares will be held in escrow
pursuant to terms of the agreement. Approximately 23,350,000 shares of Sterling
Software common stock will be outstanding after such issuance.
Also in connection with the revised agreement, KnowledgeWare granted to
Sterling an option to purchase 1,200,000 shares of its common stock. The option
is exercisable only following the occurrence of certain events and will expire
upon the closing.
In a separate agreement, Sterling purchased $15 million of secured
indebtedness of KnowledgeWare from IBM Credit Corporation and agreed to
loan KnowledgeWare up to an additional $7 million. Pursuant to terms of the
agreement, KnowledgeWare agreed to grant to Sterling warrants to purchase up to
1,545,500 shares of its common stock.
The proposed merger is subject to the approval of KnowledgeWare'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 purchase and for federal income tax purposes, as
a tax-free exchange to KnowledgeWare's shareholders. The merger is
8080 North Central Expressway . Suite 1100 . Dallas, TX 75206-1895
214/891-8600 FAX . 214/739-0535
<PAGE>
expected to close by November 15, 1994 whereupon the combined company will
operate as Sterling Software.
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 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. Revenue in fiscal
1994 was $132.5 million.
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. Revenue in fiscal 1993 was $411.8
million.
Contact:
Anne Vahala
Vice President, Investor Relations
Sterling Software Inc.
(214) 891-8600
