Exhibit 10.2
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT, dated as of August 26, 1998 (this
"Agreement"), is made and entered into between Sterling Software, Inc., a
Delaware corporation ("Parent"), and Cayenne Software, Inc., a Massachusetts
corporation ("Company").
RECITALS:
A. Parent, Sterling Software (Southern), Inc., a Georgia corporation and
a wholly owned subsidiary of Parent ("Merger Sub"), and Company propose to enter
into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), pursuant to which Company will merge with and into Merger Sub on
the terms and subject to the conditions set forth in the Merger Agreement.
Except as otherwise defined herein, terms used herein with initial capital
letters have the respective meanings ascribed thereto in the Merger Agreement.
B. As a condition and inducement to Parent's willingness to enter into
the Merger Agreement, Parent has requested that Company agree, and Company has
agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties and covenants contained in this Agreement and the Merger Agreement
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Grant of Option. Company hereby grants to Parent an irrevocable
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option (the "Option") to purchase up to 4,245,346 Common Shares or such other
number of Common Shares (the "Option Shares") as equals 19.9% of the issued and
outstanding Common Shares at the time of exercise of the Option (the "Option
Shares"), on the terms and subject to the conditions set forth herein, at a
purchase price of $0.375 per Option Share; provided, however, that in the event
there shall be outstanding on the applicable Option Closing Date (as hereinafter
defined) any Advances made to Company pursuant to Section 6.11 of the Merger
Agreement, such purchase price per Option Share shall be reduced by an amount
(rounded to the nearest one-tenth of a cent) equal to the quotient obtained by
dividing (A) the aggregate amount of such outstanding Advances by (B)
21,333,398. The type and number of shares, securities or other property subject
to the Option, and the purchase price therefor (the "Purchase Price"), shall be
subject to adjustment as provided in Section 6.
2. Exercise of Option. (a) Parent may exercise the Option, in whole
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or in part, at any time or from time to time during the period (the "Option
Period") from and after the occurrence of any event as a result of which the
Merger Agreement is subject to being terminated pursuant to Section 8.1(a)(iv)
or 8.1(a)(v) thereof, through and including the earliest to occur of (i) the
Effective Time, (ii) the termination of the Merger Agreement pursuant to Section
8.1(a)(i), 8.1(a)(ii), 8.1(a)(iii) or 8.1(a)(vi) thereof, and (iii) the date
that is one year after the termination of the Merger Agreement pursuant to
Section 8.1(a)(iv) or 8.1(a)(v) thereof. Notwithstanding
anything in this Agreement to the contrary, Parent shall be entitled to purchase
all Option Shares in respect of which it shall have exercised the Option in
accordance with the terms hereof prior to the expiration of the Option Period,
and the expiration of the Option Period shall not affect any rights hereunder
which by their terms do not terminate or expire prior to or as of such
expiration.
(b) If Parent wishes to exercise the Option, it shall deliver to
Company a written notice (an "Exercise Notice") to that effect which specifies
(i) the number of Option Shares to be purchased and (ii) a date (an "Option
Closing Date") not earlier than three business days after the date such Exercise
Notice is delivered for the consummation of the purchase and sale of such Option
Shares (an "Option Closing"). If the Option Closing cannot be effected on the
Option Closing Date specified in the Exercise Notice by reason of any applicable
judgment, decree, order, law or regulation, or because any applicable waiting
period under the HSR Act shall not have expired or been terminated, (i) Company
shall promptly take all such actions as may be requested by Parent, and shall
otherwise fully cooperate with Parent, to cause the elimination of all such
impediments to the Option Closing and (ii) the Option Closing Date specified in
the Exercise Notice shall be extended to the third business day following the
elimination of all such impediments. The place of the Option Closing shall be
at the offices of Xxxxx, Day, Xxxxxx & Xxxxx, 2300 Xxxxxxxx Xxxx Center, 0000
Xxxx Xxxxxx, Xxxxxx, Xxxxx, and the time of the Option Closing shall be 10:00
a.m. (Central Time) on the Option Closing Date.
3. Payment and Delivery of Certificates. (a) At any Option Closing,
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Parent shall pay to Company in immediately available funds by wire transfer to a
bank account designated in writing by Company an amount equal to the product of
the Purchase Price and the number of Option Shares to be purchased from Parent
at such Option Closing.
(b) At any Option Closing, simultaneously with the delivery of
immediately available funds as provided in Section 3(a), Company shall deliver
to Parent a certificate or certificates representing the Option Shares to be
purchased at such Option Closing registered in the name of Parent or a designee
of Parent specified in the Exercise Notice. Company shall cause all Option
Shares delivered to Parent at any Option Closing to be so delivered free and
clear of all Liens.
(c) Certificates for the Option Shares delivered at the Option Closing
shall have typed or printed thereon a restrictive legend which shall read
substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE."
The above legend shall be removed from any certificates representing Option
Shares received by Parent by delivery of substitute certificates upon the second
anniversary of the applicable Option Closing or upon (a) the earlier sale of
such Option Shares (i) pursuant to an effective registration statement under the
Securities Act or (ii) in conformity with the provisions of SEC Rule 144, or
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(b) the receipt by Company of an opinion of counsel in form and substance
reasonably satisfactory to Company to the effect that such legend is no longer
required for purposes of the Securities Act.
4. Representations and Warranties of Company. The representations
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and warranties of Company set forth in the Merger Agreement are incorporated
herein by reference with the same force and effect as if such representations
and warranties were set forth herein in their entirety. No amendment or
termination of the Merger Agreement shall have any effect on the representations
and warranties of Company incorporated herein by reference.
5. Representations and Warranties of Parent. Parent hereby
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represents and warrants to Company that:
(a) Organization, Standing and Corporate Power. Parent is a
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corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware.
(b) Authority; Noncontravention. Parent has the requisite corporate
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power and authority to enter into this Agreement. The execution and delivery of
this Agreement by Parent and the consummation by Parent of the transactions
contemplated hereby have been duly authorized by its Board of Directors, and no
other corporate proceedings on the part of Parent are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Parent and, assuming this
Agreement constitutes a valid and binding agreement of Company, constitutes a
valid and binding obligation of Parent, enforceable against it in accordance
with its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and to general principles of equity. The
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby and compliance with the provisions of this
Agreement will not (i) conflict with any of the provisions of the certificate of
incorporation or bylaws of Parent, as amended to the date of this Agreement,
(ii) subject to the governmental filings and other matters referred to in the
next following sentence, conflict with, result in a breach of or default (with
or without notice or lapse of time, or both) under, or give rise to a material
obligation, a right of termination, cancellation or acceleration of any
obligation or loss of a material benefit under, or require the consent of any
person under, any indenture, or other agreement, permit, concession, franchise,
license or similar instrument or undertaking to which Parent is a party or by
which Parent or any of its assets is bound or affected, or (iii) subject to the
governmental filings and other matters referred to in the next following
sentence, contravene any law, rule or regulation, or any order, writ, judgment,
injunction, decree, determination or award currently in effect, which, in the
case of clauses (ii) and (iii) above, could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent. No
consent, approval or authorization of, or declaration or filing with, or notice
to, any Governmental Entity which has not been received or made is required by
or with respect to Parent in connection with the execution and delivery of this
Agreement by Parent or the consummation by Parent of any of the transactions
contemplated hereby, except for (i) the filing of premerger notification and
report forms under the HSR Act and (ii) any other consents, approvals,
authorizations, filings or notices the failure to make or obtain which could not
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reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent.
(c) Purchase Not for Distribution. The Option and any Option Shares
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or other securities to be acquired by Parent upon exercise of the Option are and
will be acquired by Parent without a view to public distribution thereof
otherwise than in compliance with the Securities Act and applicable state
securities laws and neither the Option nor any Option Shares shall be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the Securities Act and in compliance with
applicable state securities laws.
6. Adjustment upon Changes in Capitalization, Etc. (a) In the event
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of any change in the Common Shares by reason of a stock dividend, split-up,
merger, recapitalization, combination, exchange of shares, extraordinary
distribution or similar transaction, the type and number of shares, securities
or other property subject to the Option, and the Purchase Price, shall be
adjusted appropriately, and proper provision shall be made in the agreements
governing such transaction, so that Parent will receive upon exercise of the
Option the number and class of shares, securities or other property that Parent
would have received and/or retained in respect of Common Shares if the Option
had been exercised immediately prior to such event or the record date therefor,
as applicable. The provisions of this Section 6(a) shall apply in a like manner
to successive stock dividends, split-ups, mergers, recapitalizations,
combinations, exchanges of shares and extraordinary distributions and similar
transactions.
(b) In the event that Company enters into an agreement (i) to
consolidate with or merge into any person, other than Parent or one of its
Subsidiaries, and Company will not be the continuing or surviving corporation in
such consolidation or merger, (ii) to permit any person, other than Parent or
one of its Subsidiaries, to consolidate with or merge into Company and Company
will be the continuing or surviving corporation, but in connection with such
consolidation or merger, the Common Shares outstanding immediately prior to the
consummation of such consolidation or merger will be changed into or exchanged
for stock or other securities of Company or any other person or cash or any
other property, or the Common Shares outstanding immediately prior to the
consummation of such consolidation or merger will, after such consolidation or
merger, represent less than 50% of the outstanding voting securities of the
continuing or surviving corporation, or (iii) to sell or otherwise transfer all
or substantially all of its assets to any person, other than Parent 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
herein, be converted into, or exchanged for, an option (a "Substitute Option")
with identical terms appropriately adjusted to acquire the number and class of
shares, securities or other property that Parent would have received and/or
retained in respect of Common Shares if the Option had been exercised
immediately prior to such consolidation, merger, sale or transfer or the record
date therefor, as applicable. The provisions of this Section 6(b) shall apply
in a like manner to successive agreements entered into by Company of the types
described in the immediately preceding sentence.
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7. Registration Rights. Company shall, if requested by Parent at
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any time and from time to time within two years following any Option Closing, as
expeditiously as possible prepare and file up to two registration statements
under the Securities Act in order to permit the sale or other disposition of any
or all Common Shares or other securities that have been acquired by or are
issuable to Parent upon exercise of the Option in accordance with the intended
method of sale or other disposition stated by Parent (including, if requested by
Parent, a "shelf" registration statement under SEC Rule 415 or any successor
provision), and Company shall use its best efforts to qualify such Common Shares
or other securities under any applicable state securities laws. Company shall
use its best efforts to cause each such registration statement to become
effective, to obtain all consents or waivers of other parties which are required
therefor and to keep such registration statement effective for such period, as
may be reasonably necessary to effect such sale or other disposition (or, in the
case of a shelf registration, until the second anniversary of the latest Option
Closing). The obligations of Company hereunder to file a registration statement
and to maintain its effectiveness may be suspended for one or more periods of
time not exceeding 60 calendar days in the aggregate if the Board of Directors
of Company 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 Company. Any
registration statement prepared and filed under this Section 7, and any sale
covered thereby, shall be at Company's expense, except for underwriting
discounts or commissions, brokers' fees and the fees and disbursements of
Parent's counsel related thereto, and, in the case of an underwritten offering,
Company shall provide to the underwriters such documentation (including
certificates, opinions of counsel and "comfort" letters from auditors) as are
customary in connection with underwritten offerings or as such underwriters may
reasonably require. Parent shall provide all information reasonably requested
by Company for inclusion in any registration statement to be filed hereunder.
If, during the time periods referred to in the first sentence of this Section 7,
Company effects a registration under the Securities Act of Common Shares or
other securities for its own account or for any other stockholders of Company
(other than on Form S-4 or Form S-8, or any successor form), it shall allow
Parent the right to participate in such registration; provided, however, that
such participation shall not affect the obligation of Company to effect demand
registration statements for Parent under this Section 7; and provided further,
that, if the managing underwriters of such offering advise Company in writing
that in their opinion the number of Common Shares or other securities requested
to be included in such registration exceeds the number which can be sold in such
offering, Company shall include the Common Shares or other securities requested
to be included therein by Parent pro rata with the Common Shares or other
securities intended to be included therein by Company and/or any other
stockholders of Company. In connection with any registration pursuant to this
Section 7, Company and Parent shall provide each other and any underwriter of
the offering with customary representations, warranties, covenants,
indemnification and contribution in connection with such registration.
8. Listing. At any time after the date hereof, if Common Shares or
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other securities issuable upon exercise of the Option are then authorized to be
quoted on The Nasdaq National Market of The Nasdaq Stock Market ("NASDAQ
National Market") (or any other national securities quotation system or any
national securities exchange), Company, upon the request of Parent, shall
promptly file an application to authorize to be quoted, subject to official
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notice of issuance, the Common Shares or other securities issuable upon exercise
of the Option on the NASDAQ National Market (and any other such national
securities quotation system or other such national securities exchange) and
shall use reasonable efforts to obtain approval of such authorization for
quotation as promptly as practicable.
9. Notification of Record Dates. Company shall give Parent at least
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10 days' prior written notice before setting the record date for determining the
holders of record of Common Shares entitled to notice of, or to vote on, any
matter, to receive any dividend or distribution or to participate in any rights
offering or other transaction, or to receive any other benefit or right, with
respect to Common Shares.
10. Further Assurances; Remedies. Company shall execute and deliver
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such other documents and instruments and take such further actions as may be
necessary or appropriate or as Parent may reasonably request in order to ensure
that Parent receives the full benefits of this Agreement. Company shall refrain
from taking any action which would have the effect of preventing or disabling
Company from delivering the Common Shares to Parent upon any exercise of the
Option, or from otherwise performing its obligations under this Agreement.
11. Certain Repurchases. (a) At the request of Parent at any time
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during the Option Period, Company (or any successor entity thereof) shall
repurchase from Parent the Option, or any portion thereof, for a price equal to
the amount by which the Market/Tender Offer Price for Common Shares as of the
date Parent gives notice of its intent to exercise its rights under this Section
11 exceeds the Purchase Price, multiplied by the number of Common Shares
purchasable pursuant to the Option (or the portion thereof with respect to which
Parent is exercising its rights under this Section 11). For purposes of this
Agreement, the term "Market/Tender Offer Price" means the greater of (i) the
highest price per Common Share paid as of the date Parent gives notice of its
intent to exercise its rights under this Section 11 pursuant to any tender or
exchange offer or other Acquisition Proposal and (ii) the average of the closing
sale prices per Common Share on the principal securities exchange or quotation
system for Common Shares for the ten trading days immediately preceding such
date.
(b) In the event Parent exercises its rights under this Section 11,
Company shall, within 10 business days thereafter, pay the required amount to
Parent in immediately available funds.
12. Miscellaneous.
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(a) Fees and Expenses. Except to the extent otherwise provided in
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Section 7, each party hereto shall pay its own expenses incident to preparing
for, entering into and carrying out this Agreement and the consummation of the
transactions contemplated hereby.
(b) Amendment. This Agreement may not be amended except by an
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instrument in writing signed on behalf of each of the parties hereto.
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(c) Extension; Waiver. Any agreement on the part of a party to waive
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any provision of this Agreement, or to extend the time for any performance
hereunder, shall be valid only if set forth in an instrument in writing signed
on behalf of such party. The failure of any party to this Agreement to assert
any of its rights under this Agreement or otherwise shall not constitute a
waiver of such rights.
(d) Entire Agreement; No Third-Party Beneficiaries. This Agreement
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constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter of this Agreement and is not intended to confer upon any person
other than the parties any rights or remedies.
(e) Governing Law. This Agreement shall be governed by, and construed
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in accordance with, the laws of The Commonwealth of Massachusetts, regardless of
the laws that might otherwise govern under applicable principles of conflict of
laws thereof.
(f) Notices. All notices, requests, claims, demands and other
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communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
If to Company to:
Cayenne Software, Inc.
00 Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxxxx X. Xxxxxxxx
Telecopy: (000) 000-0000
with a copy (which shall not constitute notice) to:
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000
If to Parent to:
Sterling Software, Inc.
000 Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxx X. XxXxxxxxx, Xx.
Telecopy: (000) 000-0000
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with a copy (which shall not constitute notice) to:
Xxxxx, Day, Xxxxxx & Xxxxx
2300 Xxxxxxxx Xxxx Center
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000
(g) Assignment. Neither this Agreement nor any of the rights,
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interests, or obligations under this Agreement may be assigned or delegated, in
whole or in part, by operation of law or otherwise, by Company without the prior
written consent of Parent, and any such assignment or delegation that is not
consented to shall be null and void. This Agreement, together with any rights,
interests, or obligations of Parent hereunder, may be assigned or delegated in
whole or in part by Parent without the consent of or any action by Company upon
notice by Parent to Company as herein provided. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
(h) Further Assurances. In the event of any exercise of the Option by
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Parent, Company and Parent 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 herein in relation to such exercise.
(i) Enforcement. Irreparable damage would occur in the event that any
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of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. Accordingly, the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement in any
appropriate state court in The Commonwealth of Massachusetts or federal court in
Suffolk County in The Commonwealth of Massachusetts, this being in addition to
any other remedy to which they are entitled at law or in equity. Each of the
parties hereto (i) shall submit itself to the personal jurisdiction of any
appropriate state court in The Commonwealth of Massachusetts or federal court in
Suffolk County in The Commonwealth of Massachusetts in the event any dispute
arises out of this Agreement or any of the transactions contemplated hereby,
(ii) shall not attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court, and (iii) shall not bring any
action relating to this Agreement or any of the transactions contemplated hereby
in any court other than any appropriate state court in The Commonwealth of
Massachusetts or federal court in Suffolk County in The Commonwealth of
Massachusetts.
(j) Severability. Whenever possible, each provision or portion of any
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provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
or portion of any
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provision in such jurisdiction, and this Agreement shall be reformed, construed
and enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision or portion of any provision had never been contained herein.
(k) Counterparts. This Agreement may be executed in one or more
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counterparts, all of which shall be considered one and the same instrument and
shall become effective when one or more counterparts have been signed by each
party and delivered to the other party.
[signature page follows]
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IN WITNESS WHEREOF, Parent and Company have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the day and
year first written above.
STERLING SOFTWARE, INC.
By: /s/ Xxx X. XxXxxxxxx, Xx.
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Xxx X. XxXxxxxxx, Xx.
Senior Vice President and General Counsel
CAYENNE SOFTWARE, INC.
By: /s/ Xxxx X. Xxxxxxxxx
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Xxxx X. Xxxxxxxxx
President and Chief Executive Officer
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