Exhibit 2
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated January 27, 1998 (this "Agreement"), by
and among The Sage Group plc, a company organized under the laws of England
("Parent"), Rose Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Parent (the "Purchaser"), and State of the Art, Inc., a California
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, the Purchaser and the Company are entering into an Agreement
and Plan of Merger (as such agreement may hereafter be amended from time to
time, the "Merger Agreement"; capitalized terms used but not defined in this
Agreement shall have the meanings ascribed to them in the Merger Agreement),
which provides, upon the terms and subject to the conditions thereof, for (i)
the commencement by the Purchaser of a tender offer (the "Offer") to purchase
all of the issued and outstanding shares of the common stock, no par value, of
the Company ("Common Stock") at the applicable Offer Price and (ii) the
subsequent merger of the Purchaser with and into the Company (the "Merger"),
whereby each share of Common Stock, other than shares owned directly or
indirectly by Parent, the Purchaser or the Company and other than dissenting
shares, will be converted into the right to receive in cash the Offer Price
applicable thereto; and
WHEREAS, as a condition to the willingness of Parent and the Purchaser
to enter into the Merger Agreement, Parent and the Purchaser have required that
the Company agree, and in order to induce Parent and the Purchaser to enter into
the Merger Agreement, the Company has agreed, to grant the Purchaser an option
to purchase shares of Common Stock, upon the terms and subject to the conditions
of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement and in the Merger Agreement, the parties hereto agree as follows:
ARTICLE I
THE TOP-UP STOCK OPTION
SECTION 1.1. Grant of Top-Up Stock Option. Subject to the terms and
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conditions set forth herein, the Company hereby grants to the Purchaser an
irrevocable option (the "Top-Up Stock Option") to purchase that number of shares
of Common Stock (the "Top-Up Option Shares") equal to the number of shares of
Common Stock that, when added to the number of shares of Common Stock owned by
the Purchaser and its affiliates immediately following consummation of
the Offer, shall constitute 90% of the shares of Common Stock then outstanding
on a fully diluted basis (assuming the issuance of the Top-Up Option Shares) at
a purchase price per Top-Up Option Share equal to the Offer Price; provided,
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however, that the Top-Up Stock Option shall not be exercisable if the number
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of shares of Common Stock subject thereto exceeds the number of authorized
shares of Common Stock available for issuance. The Company agrees to provide
Parent and the Purchaser with information regarding the number of shares of
Common Stock available for issuance on an ongoing basis.
SECTION 1.2. Exercise of Top-Up Stock Option. (a) Subject to the
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conditions set forth in Section 2.1 and any additional requirements of law, the
Top-Up Stock Option may be exercised by the Purchaser, in whole but not in part,
at any one time after the occurrence of a Top-Up Exercise Event (as defined
below) and prior to the Top-Up Termination Date (as defined below).
(b) A "Top-Up Exercise Event" shall occur for purposes of this
Agreement upon the Purchaser's acceptance for payment pursuant to the Offer of
shares of Common Stock constituting more than 50% but less than 90% of the
shares of Common Stock then outstanding on a fully diluted basis.
(c) Except as provided in the last sentence of this Section 1.2.(c),
the "Top-Up Termination Date" shall occur for purposes of this Agreement upon
the earliest to occur of:
(i) the Effective Time;
(ii) the date which is ten (10) business days after the
occurrence of a Top-Up Exercise Event;
(iii) the termination of the Merger Agreement; and
(iv) the date on which the Purchaser waives the Minimum Condition
and accepts for payment the Revised Minimum Number of
Shares.
Notwithstanding the occurrence of the Top-Up Termination Date, the Purchaser
shall be entitled to purchase the Top-Up Option Shares if it has exercised the
Top-Up Stock Option in accordance with the terms hereof prior to such
occurrence, and the occurrence of the Top-Up Termination Date shall not affect
any rights hereunder which by their terms do not terminate or expire prior to or
as of such date.
(d) In the event the Purchaser wishes to exercise the Top-Up Stock
Option, the Purchaser shall send to the Company a written notice (a "Top-Up
Exercise Notice", the date of which notice is referred to herein as the "Top-Up
Notice Date") specifying the denominations of the certificate or certificates
evidencing the Top-Up Option Shares which the Purchaser wishes to receive, the
place for the closing of the purchase and sale pursuant to the Top-Up Stock
Option (the "Top-Up Closing") and a date not earlier than three (3) business
days nor later than ten (10) business
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days from the Top-Up Notice Date for the Top-Up Closing (the "Top-Up Closing
Date"); provided, however, that (i) if the Top-Up Closing cannot be consummated
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by reason of any applicable laws or orders, 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 (ii) without
limiting the foregoing, if prior notification to or approval of any Governmental
Entity is required in connection with such purchase, the Purchaser and the
Company shall promptly file the required notice or application for approval and
shall cooperate in the expeditious filing of such notice or application, 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, (A) any required
notification period has expired or been terminated or (B) any required approval
has been obtained, and in either event, any requisite waiting period has expired
or been terminated. The Company shall, within two (2) business days after
receipt of the Top-Up Exercise Notice, deliver written notice to the Purchaser
specifying the number of Top-Up Option Shares and the aggregate purchase price
therefor.
ARTICLE II
CLOSING
SECTION 2.1. Conditions to Closing. The obligation of the Company
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to deliver Top-Up Option Shares upon the exercise of the Top-Up Stock Option is
subject to the following conditions:
(a) All waiting periods, if any, under the HSR Act applicable to the
issuance of the Top-Up Option Shares hereunder shall have expired or have
been terminated; and
(b) There shall be no preliminary or permanent injunction or other
final, non-appealable judgment by a court of competent jurisdiction
preventing or prohibiting the exercise of the Top-Up Stock Option or the
delivery of the Top-Up Option Shares in respect of such exercise.
SECTION 2.2. Closing. (a) At the Top-Up Closing, (i) the Company
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shall deliver to the Purchaser a certificate or certificates evidencing the
applicable number of Top-Up Option Shares (in the denominations specified in the
Top-Up Exercise Notice), and (ii) the Purchaser shall purchase each Top-Up
Option Share from the Company at the Offer Price. Payment by the Purchaser of
the Offer Price for the Top-Up Option Shares shall be made by delivery of a
promissory note, (adequately secured by collateral other than the Shares
acquired), in form and substance reasonably satisfactory to the Company and in a
principal face amount equal to the aggregate amount of the purchase price, as
determined in accordance with Section 1.1., which promissory note shall bear
interest at a rate equal to 6% per annum (or such level of interest rate that is
adequate to prevent imputed income under applicable regulations) and shall be
payable in full with accrued interest upon the earlier to occur of (i) five (5)
business days after the Closing hereunder, and (ii) two (2) business
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days following written demand given by the Company to the Purchaser at any time
following the Effective Time.
(b) The Company shall pay all expenses, and any and all Federal, state
and local taxes and other charges, that may be payable in connection with the
preparation, issuance and delivery of stock certificates under this Section 2.2.
(c) Certificates evidencing Top-Up Option Shares delivered hereunder
may include legends legally required including the legend in substantially the
following form:
THE SECURITIES 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.
It is understood and agreed that the foregoing legend shall be removed by
delivery of substitute certificate(s) without such legend upon the sale of the
Top-Up Option Shares pursuant to a registered public offering or Rule 144 under
the Securities Act of 1933, as amended (the "Securities Act"), or any other sale
as a result of which such legend is no longer required.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and the Purchaser
(except as otherwise may be prohibited, restricted or limited by law or any rule
or regulation of a regulatory entity) as follows:
SECTION 3.1. Organization; Authority Relative to this Agreement.
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The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of California. The Company has all
requisite corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
on the part of the Company. This Agreement has been duly and validly executed
and delivered by the Company and, assuming the due and valid authorization,
execution and delivery by Parent and the Purchaser, constitutes a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally, and by general equitable principles.
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SECTION 3.2. Authority to Issue Shares. The Company has taken all
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necessary corporate action to authorize and reserve and permit it to issue, and
at all times from the date hereof through the Top-Up Termination Date shall have
reserved, all the Top-Up Option Shares issuable pursuant to this Agreement. All
of the shares of Common Stock issuable under the Top-Up Stock Option, upon their
issuance and delivery in accordance with the terms of this Agreement, will be
duly authorized, validly issued, fully paid and nonassessable, will be delivered
free and clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreements, limitations on the Purchaser's voting
rights, charges, adverse rights and other encumbrances of any nature whatsoever
(other than this Agreement) and will not be subject to any preemptive rights.
SECTION 3.3. No Conflict; Required Filings and Consents. (a) The
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execution and delivery of this Agreement by the Company does not, and the
performance by the Company of its obligations hereunder and the consummation of
the transactions contemplated hereby will not, (i) conflict with or violate the
articles of incorporation or bylaws of the Company, (ii) assuming that all
consents and filings described in Section 3.3(b) have been obtained or made,
conflict with or violate any law applicable to the Company or by which any
property or asset of the Company is bound or affected or (iii) result in any
violation pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Company is a party or by which the Company or any of its properties may be bound
or affected.
(b) No consent of, or filing with, any Governmental Entity is required
by the Company in connection with the execution and delivery of this Agreement,
the performance by the Company of its obligations hereunder or the consummation
by the Company of the transactions contemplated hereby, except for (i)
compliance with the HSR Act and (ii) consents or filings the failure of which to
be obtained or made would not, individually or in the aggregate, prevent or
materially delay the consummation of the transactions contemplated hereby or the
performance by the Company of any of its obligations hereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
Parent and the Purchaser hereby represent and warrant to the Company
as follows:
SECTION 4.1. Organization; Authority Relative to this Agreement.
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Each of Parent and the Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. Each of Parent and the Purchaser has all requisite corporate
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Parent and the Purchaser and the
consummation by Parent and the Purchaser of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action on the
part of Parent and the Purchaser. This Agreement has been duly and validly
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executed and delivered by Parent and the Purchaser and, assuming the due and
valid authorization, execution and delivery by the Company, constitutes a valid
and binding obligation of Parent and the Purchaser, enforceable against each of
Parent and the Purchaser in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally, and by general equitable principles.
SECTION 4.2. No Conflict; Required Filings and Consents. (a) The
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execution and delivery of this Agreement by Parent and the Purchaser do not, and
the performance by Parent and the Purchaser of their obligations hereunder and
the consummation of the transactions contemplated hereby will not, (i) conflict
with or violate the articles of incorporation or bylaws or equivalent
organizational documents of Parent or the Purchaser, (ii) assuming that all
consents and filings described in Section 4.2(b) have been obtained or made,
conflict with or violate any law applicable to Parent or the Purchaser or by
which any property or asset of Parent or the Purchaser is bound or affected or
(iii) result in any violation pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Parent or the Purchaser is a party or by which Parent or the
Purchaser or any of their respective properties may be bound or affected.
(b) No consent of, or filing with, any Governmental Entity is required
by Parent or the Purchaser in connection with the execution and delivery of this
Agreement, the performance by Parent or the Purchaser of any of its obligations
hereunder or the consummation by Parent or the Purchaser of the transactions
contemplated hereby, except for (i) compliance with the HSR Act and (ii)
consents or filings the failure of which to be obtained or made would not,
individually or in the aggregate, prevent or materially delay the consummation
of the transactions contemplated hereby or the performance by Parent or the
Purchaser of any of their respective obligations hereunder.
ARTICLE V
COVENANTS OF THE PURCHASER
SECTION 5.1. Distribution. The Purchaser shall acquire the Top-Up
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Option Shares for investment purposes only (and, only for the purpose of
effecting a short-form merger with the Company) and not with a view to any
distribution thereof in violation of the Securities Act.
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ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Amendment. This Agreement may not be amended except by
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an instrument in writing signed by the parties hereto.
SECTION 6.2. Waiver. Any party hereto may (a) extend the time for
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or waive compliance with the performance of any obligation or other act of any
other party hereto or (b) waive any inaccuracy in the representations and
warranties contained herein or in any document delivered pursuant hereto. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
SECTION 6.3. Fees and Expenses. All costs, fees and expenses
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incurred in connection with this Agreement shall be paid by the party incurring
such expenses.
SECTION 6.4. Notices. All notices, requests, claims, demands and
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other communications hereunder shall be in writing and shall be deemed given if
delivered personally or sent by telecopy or by overnight courier (providing
proof of delivery) to the respective parties at their addresses as specified in
Section 9.4 of the Merger Agreement.
SECTION 6.5. Severability. If any term or other provision of this
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Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner to the fullest extent permitted by applicable law in order that the
transactions contemplated hereby may be consummated as originally contemplated
to the fullest extent possible.
SECTION 6.6. Assignment; Binding Effect; Benefit. Neither this
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Agreement nor any of the rights, interests or obligations hereunder shall be
assigned, in whole or in part, by operation of law or otherwise, by any of the
parties hereto without the prior written consent of the other parties, except
that the Purchaser may assign, in its discretion, any or all of its rights,
interests and obligations hereunder to Parent or any direct or indirect
subsidiary of Parent, but no such assignment shall relieve the Purchaser of any
of its obligations hereunder. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of, and be enforceable by, the
parties hereto and their respective successors and permitted assigns.
Notwithstanding anything contained in this Agreement to the contrary, nothing in
this Agreement, express or implied, is intended to confer on any person other
than the parties hereto or their respective successors and
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permitted assigns any rights, remedies, obligations or liabilities under or by
reason of this Agreement.
SECTION 6.7. Governing Law. This Agreement shall be governed by and
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construed in accordance with the laws of the State of California, without giving
effect to the principles of conflicts of laws thereof.
SECTION 6.8. Headings. The descriptive headings contained in this
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Agreement are included for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
SECTION 6.9. Counterparts. This Agreement may be executed and
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delivered (including by facsimile transmission) in one or more counterparts, all
of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties, it being understood that all parties need
not sign the same counterpart.
SECTION 6.10. Entire Agreement. This Agreement constitutes the
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entire agreement, and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, all as of
the date first written above.
THE SAGE GROUP PLC
By: /s/ Xxxx Xxxxxx
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Name: Xxxx Xxxxxx
Title: Chief Executive Officer
ROSE ACQUISITION CORP.
By: /s/ Xxxx Xxxxxx
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Name: Xxxx Xxxxxx
Title: Vice President and Secretary
STATE OF THE ART, INC.
By: /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
Title: President, Chief Executive Officer
and Chairman of the Board
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