-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, fhKk9dZtr6wlM/l35Hoy2GIdhZB82uwdpRqFxGhLYLzWOvMC6VS3StClqFfNVaul 0v9yTb/ns2BXfJeShXjo5A== 0000912057-94-000408.txt : 19940215 0000912057-94-000408.hdr.sgml : 19940215 ACCESSION NUMBER: 0000912057-94-000408 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STERLING SOFTWARE INC CENTRAL INDEX KEY: 0000716714 STANDARD INDUSTRIAL CLASSIFICATION: 7372 IRS NUMBER: 751873956 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 34 SEC FILE NUMBER: 001-08465 FILM NUMBER: 94507341 BUSINESS ADDRESS: STREET 1: 8080 N CENTRAL EXPWY STE 1100 CITY: DALLAS STATE: TX ZIP: 75206 BUSINESS PHONE: 2148918600 10-Q 1 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) (X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended December 31, 1993 or ( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _______________ to _______________ COMMISSION FILE NO. 1-8465 STERLING SOFTWARE, INC. (Exact name of registrant as specified in its charter) DELAWARE 75-1873956 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 8080 NORTH CENTRAL EXPRESSWAY, SUITE 1100 DALLAS, TEXAS 75206 (Address of principal executive offices) (214) 891-8600 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Title Shares Outstanding as of January 31, 1994 ---------------------------- ----------------------------------------- Common Stock, $.10 par value 19,974,786 - 1 - PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) Index to Financial Statements Page ---- Sterling Software, Inc. Consolidated Balance Sheets at December 31, 1993 and September 30, 1993 . . . . . . . . . . . . . . . . . . . . . . . . 3 Sterling Software, Inc. Consolidated Statements of Operations for the Three Months Ended December 31, 1993 and 1992. . . . . . . . . . . . . 4 Sterling Software, Inc. Consolidated Statements of Stockholders' Equity for the Three Months Ended December 31, 1993 and 1992. . . . . . . . . 5 Sterling Software, Inc. Consolidated Statements of Cash Flows for the Three Months Ended December 31, 1993 and 1992. . . . . . . . . . . . . 6 Sterling Software, Inc. Notes to Consolidated Financial Statements . . . . 7 -2- STERLING SOFTWARE, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share information) A S S E T S
December 31, September 30, 1993 1993 ------------- ------------- (Unaudited) Current assets: Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,564 $ 29,752 Marketable securities. . . . . . . . . . . . . . . . . . . . . . . . . . . 49,288 51,354 Accounts and notes receivable, net . . . . . . . . . . . . . . . . . . . . 114,480 112,174 Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 8,683 8,790 Prepaid expenses and other current assets. . . . . . . . . . . . . . . . . 11,602 12,764 --------- --------- Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 213,617 214,834 Property and equipment, net of accumulated depreciation of $38,176 at December 31, 1993 and $37,930 at September 30, 1993. . . . . . . . . . . . 29,268 27,124 Computer software, net of accumulated amortization of $77,816 at December 31, 1993 and $74,720 at September 30, 1993. . . . . . . . . . . . 58,517 59,539 Excess cost over net assets acquired, net of accumulated amortization of $16,835 at December 31, 1993 and $16,188 at September 30, 1993 . . . . . . 53,626 54,273 Noncurrent deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 14,449 19,958 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,527 21,933 --------- --------- $409,004 $397,661 --------- --------- --------- ---------
L I A B I L I T I E S A N D S T O C K H O L D E R S ' E Q U I T Y
Current liabilities: Current portion of long-term debt. . . . . . . . . . . . . . . . . . . . . $ 2,958 $ 3,980 Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . 83,301 88,847 Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,757 70,709 --------- --------- Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . 154,016 163,536 Long-term notes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . 116,573 116,817 Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . 21,275 20,095 Stockholders' equity: Preferred stock, $.10 par value; 10,000,000 shares authorized; 200,000 shares issued and outstanding. . . . . . . . . . . . . . . . . . . . . . 20 20 Common stock, $.10 par value; 50,000,000 shares authorized; 20,244,000 and 19,610,000 shares issued at December 31, 1993 and September 30, 1993, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,024 1,961 Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 177,771 169,855 Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . (43,266) (55,065) Less treasury stock, at cost: 1,823,000 and 1,837,000 shares at December 31, 1993 and September 30, 1993, respectively . . . . . . . . . (19,409) (19,558) --------- --------- Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . 117,140 97,213 --------- --------- $409,004 $397,661 --------- --------- --------- ---------
See accompanying notes. -3- STERLING SOFTWARE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share information) (Unaudited)
Three Months Ended December 31 ----------------------- 1993 1992 -------- -------- Revenue: Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $39,516 $37,463 Product support. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,420 29,211 Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,959 32,109 -------- -------- 108,895 98,783 Costs and expenses: Costs of sales: Products and product support . . . . . . . . . . . . . . . . . . . . . . 16,065 15,733 Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,309 24,894 -------- -------- 41,374 40,627 Product development and enhancement. . . . . . . . . . . . . . . . . . . . 7,020 5,917 Selling, general and administrative. . . . . . . . . . . . . . . . . . . . 40,926 43,137 -------- -------- 89,320 89,681 -------- -------- Income before other income (expense), income taxes and cumulative effect of a change in accounting principle . . . . . . . . . . . . . . . . . . . . . 19,575 9,102 Other income (expense): Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,655) (1,946) Investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677 458 Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (825) 362 -------- -------- (1,803) (1,126) -------- -------- Income before income taxes and cumulative effect of a change in accounting principle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,772 7,976 Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 6,753 2,951 -------- -------- Income before cumulative effect of a change in accounting principle. . . . . 11,019 5,025 Cumulative effect of a change in accounting principle, net of applicable income tax benefit (Note 4). . . . . . . . . . . . . . . . . . . . . . . . (2,774) -------- -------- Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,019 2,251 Preferred stock dividends. . . . . . . . . . . . . . . . . . . . . . . . . . 49 321 -------- -------- Income applicable to common stockholders . . . . . . . . . . . . . . . . . . $10,970 $ 1,930 -------- -------- -------- -------- Income per common share: Income before cumulative effect of a change in accounting principle: Primary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .49 $ .25 -------- -------- -------- -------- Fully diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .45 $ .25 -------- -------- -------- -------- Net income: Primary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .49 $ .11 -------- -------- -------- -------- Fully diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .45 $ .11 -------- -------- -------- -------- Average common shares outstanding. . . . . . . . . . . . . . . . . . . . . . 18,093 16,559 -------- -------- -------- --------
See accompanying notes -4- STERLING SOFTWARE, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Three Months Ended December 31, 1993 and 1992 (in thousands) (Unaudited)
Preferred Stock Common Stock Treasury Stock ----------------- ----------------- -------------------- Number Number Additional Retained Number Total of Par of Par Paid-in Earnings of Stockholders' Shares Value Shares Value Capital (Deficit) Shares Cost Equity -------- ------- -------- ------- ---------- ---------- -------- ---------- ------------- Balance at September 30, 1992. 200 $20 18,330 $1,833 $149,448 $(13,657) 1,884 $(20,060) $117,584 Net income . . . . . . . . . 2,251 2,251 Preferred stock dividends. . (321) (321) Issuance of common stock pursuant to stock options, warrants and employee benefit plans. . . . . . . 251 25 2,090 2,115 Issuance of common stock to retirement plan . . . . 47 (9) 96 143 Other. . . . . . . . . . . . (488) (488) ----- ----- -------- ------- --------- --------- ------- --------- --------- Balance at December 31, 1992 . 200 $20 18,581 $1,858 $151,585 $(12,215) 1,875 $(19,964) $121,284 ----- ----- -------- ------- --------- --------- ------- --------- --------- ----- ----- -------- ------- --------- --------- ------- --------- --------- Balance at September 30, 1993. 200 $20 19,610 $1,961 $169,855 $(55,065) 1,837 $(19,558) $97,213 Net income . . . . . . . . . 11,019 11,019 Preferred stock dividends. . (49) (49) Issuance of common stock pursuant to stock options and warrants . . . . . . . 634 63 7,799 7,862 Issuance of common stock to retirement plan . . . . 117 (14) 149 266 Other. . . . . . . . . . . . 829 829 ----- ----- -------- ------- --------- --------- ------- --------- --------- Balance at December 31, 1993 . 200 $20 20,244 $2,024 $177,771 $(43,266) 1,823 $(19,409) $117,140 ----- ----- -------- ------- --------- --------- ------- --------- --------- ----- ----- -------- ------- --------- --------- ------- --------- ---------
See accompanying notes. -5- STERLING SOFTWARE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited)
Three Months Ended December 31, ----------------------- 1993 1992 -------- -------- Operating activities: Income before cumulative effect of a change in accounting principle. . . . . $11,019 $ 5,025 Adjustments to reconcile income before cumulative effect of a change in accounting principle to net cash provided by operating activities: Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . 8,093 7,601 Provision for losses on accounts receivable. . . . . . . . . . . . . . . 3,201 205 Provision for deferred income taxes. . . . . . . . . . . . . . . . . . . 5,509 1,398 Foreign currency transaction loss (gain) . . . . . . . . . . . . . . . . 362 (94) Changes in operating assets and liabilities: Increase in accounts and notes receivable. . . . . . . . . . . . . . (8,755) (5,116) Decrease (increase) in prepaids and other assets . . . . . . . . . . (25) 1,845 Decrease in accounts payable and accrued expenses. . . . . . . . . . (5,595) (8,046) Increase (decrease) in deferred revenue. . . . . . . . . . . . . . . (1,349) 870 Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (83) (85) -------- -------- Net cash provided by operating activities. . . . . . . . . . . . . 12,377 3,603 Investing activities: Purchases of property and equipment. . . . . . . . . . . . . . . . . . . . . (4,223) (2,038) Purchases and capitalized cost of development of computer software . . . . . (4,400) (6,214) Purchases of investments . . . . . . . . . . . . . . . . . . . . . . . . . . (20,971) Proceeds from sales of investments . . . . . . . . . . . . . . . . . . . . . 7,603 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 422 210 -------- -------- Net cash used in investing activities. . . . . . . . . . . . . . . (21,569) (8,042) Financing activities: Retirement and redemption of debt and capital lease obligations. . . . . . . (3,255) (1,557) Proceeds from issuance of debt . . . . . . . . . . . . . . . . . . . . . . . 2,961 3,489 Proceeds from issuance of common stock pursuant to stock options, warrants and employee benefit plans . . . . . . . . . . . . . . . . . . . . . . . . 7,862 2,115 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,586 443 -------- -------- Net cash provided by financing activities. . . . . . . . . . . . . 9,154 4,490 Effect of foreign currency exchange rate changes on cash . . . . . . . . . . . (150) (672) -------- -------- Decrease in cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . (188) (621) Cash and equivalents at beginning of period. . . . . . . . . . . . . . . . . . 29,752 41,713 -------- -------- Cash and equivalents at end of period. . . . . . . . . . . . . . . . . . . . . $29,564 $41,092 -------- -------- -------- -------- Supplemental cash flow information: Interest paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 73 $ 1,159 -------- -------- -------- -------- Income taxes paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 578 $ 1,113 -------- -------- -------- -------- Income tax refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 514 $ - -------- -------- -------- --------
See accompanying notes. -6- STERLING SOFTWARE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1993 (Unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The consolidated financial statements include the accounts of Sterling Software, Inc. and its wholly owned subsidiaries (the "Company") after elimination of all significant intercompany balances and transactions. The Company's quarterly financial data should be read in conjunction with the consolidated financial statements of the Company for the year ended September 30, 1993. REVENUE Revenue from license fees, including leasing transactions, for standard software products is recognized when the software is delivered, provided no significant future vendor obligations exist and collection is probable. Service revenue and revenue from certain products involving installation or other services are recognized as the services are performed. Product support contracts entitle the customer to telephone support, bug fixing and the right to receive software updates as they are released. Revenue from product support contracts, including product support included in initial license fees, is recognized ratably over the annual contract period. All significant costs and expenses associated with product support contracts are expensed ratably over the contract period. If software product transactions include the right to receive future products, a portion of the software product revenue is deferred and recognized as products are delivered. Contract accounting is applied for sales of software products requiring significant modification or customization. When products, product support and services are billed prior to the time the related revenue may be recognized, deferred revenue is recorded and related costs paid in advance are deferred. CASH EQUIVALENTS, MARKETABLE SECURITIES AND OTHER LONG-TERM INVESTMENTS Cash equivalents consist primarily of highly liquid investments in investment-grade commercial paper of various issuers, with maturities of three months or less when purchased. The carrying amount reported in the consolidated balance sheet for cash and cash equivalents approximates its fair value. Marketable securities and other long-term investments, all of which are classified as available-for-sale, consist primarily of medium term notes, U.S. government obligations, commercial paper, bond mutual funds, an investment in an investment fund partnership and certificates of deposit. The fair values for marketable securities are based on quoted market prices. The estimated fair value of the investment in an investment fund partnership is based on quoted market prices of the partnership's underlying securities. -7- 2. UNAUDITED INTERIM FINANCIAL STATEMENTS The interim consolidated financial information contained herein is unaudited but, in the opinion of management, includes all adjustments, which are of a normal recurring nature, necessary for a fair presentation of the financial position and results of operations for the periods presented. Results of operations for the periods presented herein are not necessarily indicative of results of operations for the entire year. 3. SEGMENT INFORMATION The Company acquires, develops, markets and supports a broad range of computer software products and services in three major markets classified as Enterprise Software, Electronic Commerce and Federal Systems. Each major market is represented through decentralized business groups. The Enterprise Software Group provides enterprise-wide systems management and applications management software for large computing environments. The Electronic Commerce Group provides software and services to facilitate electronic commerce, defined by the Company as the worldwide electronic interchange of business information, including electronic data interchange software and services, data communications and electronic payments software for financial institutions. The Federal Systems Group provides highly technical services to the federal government, generally under multi-year, cost-based contracts, primarily in support of National Aeronautics and Space Administration aerospace research projects and secure communications systems for the Department of Defense. A fourth business group, International, is responsible for sales and level one support of the Company's products outside the United States. International Group operating results are included in the Company's Enterprise Software and Electronic Commerce segments in the business segment tables contained herein. International Group revenue of $29,889,000 and $29,245,000 and operating profit of $4,275,000 and $784,000 for the three months ended December 31, 1993 and 1992, respectively, has been allocated to the business segments. Financial information concerning the Company's operations, by business segment, for the three months ended December 31, 1993 and 1992 follows (in thousands):
Three Months Ended December 31 ------------------------- 1993 1992 ---------- ---------- Revenue: Enterprise Software . . . . . . . . . . . . $ 47,885 $47,459 Electronic Commerce . . . . . . . . . . . . 34,179 25,243 Federal Systems . . . . . . . . . . . . . . 24,718 23,747 Corporate and other . . . . . . . . . . . . 2,113 2,334 ---------- ---------- Consolidated totals . . . . . . . . . . . $108,895 $98,783 ---------- ---------- ---------- ---------- Operating Profit (Loss): Enterprise Software . . . . . . . . . . . . $ 15,727 $10,152 Electronic Commerce . . . . . . . . . . . . 6,949 2,860 Federal Systems . . . . . . . . . . . . . . 1,614 1,580 Corporate and other . . . . . . . . . . . . (4,715) (5,490) ---------- ---------- Consolidated totals . . . . . . . . . . . $ 19,575 $ 9,102 ---------- ---------- ---------- ----------
-8- The amounts presented for "Corporate and other" include corporate expense, inter-segment eliminations and the results of operations of the Company's retail software division. 4. CHANGE IN ACCOUNTING FOR POSTRETIREMENT BENEFITS During the fourth quarter of 1993, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" ("FAS No. 106"), which requires that the expected cost of postretirement benefits be charged to expense during the years the employee renders service. The effect of adopting the new standard as of October 1, 1992 was a charge of $2,774,000, representing the accumulated benefit obligation existing at that date, net of related income tax benefit of $1,813,000. This charge is shown as the cumulative effect of a change in accounting principle. The results for the first quarter of 1993 have been restated for the cumulative effect of the adoption of the new standard and the ratable portion of the 1993 effect of the adoption of the new standard. -9- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MERGER WITH SYSTEMS CENTER, INC. On July 1, 1993, Sterling Software Inc. ("Sterling Software") acquired Systems Center, Inc. ("Systems Center"), a Delaware corporation based in Reston, Virginia which developed, marketed and supported systems software products, in a merger (the "Merger") accounted for as a pooling of interests, resulting in the combined company, hereafter defined as the "Company." The merger of the equity interests has been given retroactive effect and the Company's financial statements for periods prior to the Merger represent the combined financial statements of the previously separate entities adjusted to conform Systems Center's fiscal years and accounting policies to those used by Sterling Software. In connection with the Merger, the Company eliminated duplicate facilities and equipment, reduced its workforce and wrote off certain software products which will not be actively marketed by the Company. There were no restructuring charges incurred in the first quarter of 1994 in excess of the restructuring charges accrued in the fourth quarter of 1993. The Company does not expect there to be any material increase in costs and expenses in 1994 as a result of the restructuring of the Company. In addition, future operating results are expected to benefit from the reduction in workforce and elimination of duplicate facilities and equipment. Approximately $8,500,000 of cash was expended in the first quarter of 1994 relating to restructuring charges accrued in the fourth quarter of 1993. Future cash expenditures related to the restructuring are anticipated to be made from cash generated from operations. THREE MONTHS ENDED DECEMBER 31, 1993 AND 1992 Effective with the Merger, Sterling Software changed Systems Center's fiscal year-end from December 31 to September 30, affecting the timing of sales incentives and changing the revenue pattern for products previously marketed by Systems Center. Accordingly, the Company believes that the revenue for the three months ended December 31, 1993, which is the Company's first and traditionally lowest revenue quarter of its fiscal year, is not directly comparable to revenue for the three months ended December 31, 1992, which includes Systems Center's fourth and traditionally strongest revenue quarter of its fiscal year. While the change in revenue patterns did not materially impact revenues for the Electronic Commerce Group ("ECG") or the Federal Systems Group ("FSG"), this change was relevant with respect to Enterprise Software Group ("ESG") revenues because the majority of the products previously marketed by Systems Center are now marketed by ESG. Revenue increased $10,112,000, or 10%, in the first quarter of 1994 over the same period of 1993. Foreign revenue represented approximately 27% and 30% of the Company's total revenue in the first quarter of 1994 and 1993, respectively. All three operating groups contributed to this revenue growth. ESG revenue increased $426,000, or 1%, due to increases in product and product support revenue. ECG revenue increased $8,936,000, or 35%, on the strength of a $3,695,000, or 44%, increase in network services revenue, a $2,630,000, or 27%, increase in product revenue and a $2,611,000, or 36%, increase in product support revenue. The increase in network services revenue was due to an increase in the network service customer base, primarily in the retail, grocery and hardlines vertical markets, and increases in the network processing volume for existing customers. ECG product revenue increased primarily as a result of increased software sales in the Communications Software Division and Interchange Software Division. ECG product support revenue increased primarily as a result of an increase in the installed customer base and price increases for some products. -10- FSG revenue increased $971,000, or 4%, primarily due to higher contract billings in the Information Technology Division and NASA Ames Division. Total costs and expenses decreased $361,000. Total cost of sales increased $747,000, or 2%, primarily due to a slight increase in amortization expense and a $723,000, or 3%, increase in federal contract costs, commensurate with the increase in FSG revenue. Increased amortization expense related to capitalized software additions was offset by declines in the amortization of purchased software due to the full amortization of certain purchased software and the write-off in the fourth quarter of 1993 of certain software products which will not be actively marketed by the Company as a result of the Merger. Product development expense for the first quarter of 1994 was $7,020,000, net of $4,400,000 of costs capitalized pursuant to Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed" ("FAS No. 86"). In the first quarter of 1993, product development expense was $5,917,000, net of $6,214,000 of costs capitalized pursuant to FAS No. 86. Total product development costs continued to grow, reflecting increases in the Company's development activities in ECG and ESG. Selling, general and administrative expense decreased $2,211,000, or 5%, reflecting reduced costs after the Company's fourth quarter 1993 restructuring due to the Merger, which eliminated duplicate corporate overhead functions and streamlined the sales and marketing functions, resulting in a reduced workforce, and eliminated duplicate facilities. Income before cumulative effect of an accounting change increased $5,994,000, or 119%, primarily due to higher operating profits in ECG, up 143%, and ESG, up 55%, coupled with decreased corporate overhead in the first quarter of 1994 over the same period of 1993 due to the Merger, partially offset by an increase in federal income tax expense due to higher pretax profit. Also contributing to this increase was an increase of $219,000 in investment income earned on higher average balances of cash equivalents and marketable securities during the first quarter of 1994 resulting from the net cash generated from the issuance in February 1993 of $115,000,000 principal amount of 5 3/4% Convertible Subordinated Debentures Due 2003, net of $40,165,000 paid for the redemption of the Company's 8% Convertible Senior Subordinated Debentures. Interest expense also decreased $291,000 primarily due to interest accrued in the first quarter of 1993 on the unpaid Systems Center Series A 9% Convertible Preferred Stock ("Systems Center Preferred Stock") dividends. The Systems Center Preferred Stock dividends and accrued interest were paid on July 1, 1993 in connection with the Merger. Other income and expense includes foreign currency exchange losses in the first quarter of 1994 versus foreign currency exchange gains in the first quarter of 1993. The Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" ("FAS No. 106") as of October 1, 1992 and recorded a charge of $2,774,000, net of related income tax benefit of $1,813,000. This charge is shown as the cumulative effect of a change in accounting principle. See Note 4 to the Consolidated Financial Statements. LIQUIDITY AND CAPITAL RESOURCES The Company maintained a strong liquidity and financial position with $59,601,000 of working capital at December 31, 1993, which includes $29,564,000 of cash and equivalents and -11- $49,288,000 of marketable securities. Net cash flows from operations increased $8,774,000 in the first quarter of 1994 as compared to the first quarter of 1993 primarily due to higher operating profits before noncash charges. Cash flows from operations and available cash balances were used to fund operations, marketable securities purchases and capital expenditures, including software additions. Included in "Other Assets" in the Consolidated Balance Sheet at December 31, 1993 is a $10 million investment in an investment fund partnership managed by Maverick Capital, Ltd., an investment fund management company ("Maverick"). The objective of the partnership is to achieve high total returns through aggressive investments in debt and/or equity securities in the United States and other world markets. The estimated fair value of the Company's investment in this partnership is based on quoted market prices of the partnership's underlying securities. Maverick, the fund manager, is owned by three directors of the Company and various of their family trusts, including a trust for the benefit of the wife of a fourth director. A fifth director serves as a managing director of, and has an income interest in, Maverick. The Company believes that the terms of its agreement with the partnership, which provide for a 1% management fee to Maverick plus a special allocation of 20% of any net investment gains, are fair to the Company and are typical of the terms of other, comparable investment partnerships sponsored by unaffiliated investment managers. Additionally, the Company has the right to withdraw all or part of its investment at the end of any calendar quarter. In January 1994, the Company made an additional investment of $5 million in the partnership. As of December 13, 1993, the Company entered into an agreement with Maverick pursuant to which Maverick is to provide investment management services for a portion of the Company's available cash. The Company will pay a quarterly fee equal to .125% of the average net assets being managed (approximately $65 million of net assets was being managed as of December 31, 1993). The Company believes the fees under this agreement are comparable to those that would be charged to the Company by unaffiliated third parties for comparable investment management services. During the first quarter of 1994, the Company capitalized software development costs of $4,400,000 compared to $6,214,000 in the first quarter of 1993. ECG accounted for $2,644,000 of the first quarter of 1994 expenditures, primarily for enhancements of products based on UNIX operating systems as well as enhancements of other products in the Communications Software Division and Interchange Software Division. ESG accounted for the remaining $1,756,000 first quarter of 1994 expenditures which related to the development of new products and product enhancements principally in the Systems Management, Storage Management and Applications Management divisions. Property and equipment purchases of $4,223,000 in the first quarter of 1994 include purchases made in ECG for equipment upgrades for network processing systems and computer equipment purchases to support the continuing growth in ECG. ESG's property and equipment additions were made to expand customer support facilities and computer operations in development laboratories and for computer purchases for international facilities. Property and equipment purchases were $2,038,000 in the first quarter of 1993. Net purchases of $13,368,000 in marketable securities and other investments in the first quarter of 1994 were generally from the net cash provided by operating activities and proceeds from issuances of common stock pursuant to the exercise of stock options and warrants. -12- The Company has a $35 million revolving credit and term loan agreement, of which no amounts were borrowed or outstanding during the quarter. Borrowings, if any, outstanding on December 31, 1994 will be payable in eight equal quarterly payments. The Company's international operations borrowed $2,961,000 during the first quarter of 1994 on separate lines of credit, primarily for foreign exchange exposure management and working capital requirements. Payments of $2,965,000 were made during the first quarter of 1994 on these lines of credit. Other debt payments related to capital leases. Proceeds from the exercise of stock options and warrants were $7,862,000 during the first quarter of 1994, compared to $2,115,000 during the first quarter of 1993. In January 1994, approximately 1,482,000 shares were issued pursuant to the exercise of stock options and warrants, generating proceeds of approximately $9,000,000. At September 30, 1993, the Company's capital resource commitments consisted of commitments under lease arrangements for office space and equipment. The Company intends to meet such obligations primarily from internally generated funds. No significant commitments exist for future capital expenditures. The Company believes available balances of cash, cash equivalents and marketable securities combined with cash flows from operations and amounts available under credit and term loan agreements are sufficient to meet the Company's cash requirements for the foreseeable future. OTHER MATTERS Demand for many of the Company's products tends to improve with increased inflation as customers strive to increase employee productivity and reduce costs. However, the effect of inflation on the Company's relatively labor intensive cost structure could adversely affect its results of operations to the extent the Company might not be able to recover increased operating costs through increased product licensing and prices. The assets and liabilities of non-U.S. operations are translated into U.S. dollars at exchange rates in effect as of the respective balance sheet dates, and revenue and expense accounts of these operations are translated at average exchange rates during the month the transactions occur. Unrealized translation gains and losses are included as an adjustment to the accumulated deficit. The Company has mitigated a portion of its currency exposure through decentralized sales, marketing and support operations and through international development facilities, in which all costs are local currency based. In November 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" ("FAS No. 112"), which requires employers to recognize the cost of postemployment benefits on an accrual basis, if certain defined conditions are met. Postemployment benefits are all types of benefits provided to former or inactive employees, their beneficiaries, and covered dependents. The Company will be subject to the provisions of FAS No. 112 beginning in the fiscal year ending September 30, 1995. However, the Company does not believe the provisions of FAS No. 112 will have significant impact on the Company's financial position and results of operations in the year of adoption, as the majority of the postemployment benefits are a result of certain -13- employment contracts. Payments under these contracts are contingent upon future events, the occurrence of which is not presently contemplated. -14- PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are filed as part of this Quarterly Report on Form 10-Q: 2(a) -- Agreement and Plan of Merger dated as of March 31, 1993 among the Company, Systems Center, Inc. and SSI Acquisition Corporation ("Agreement and Plan of Merger") (1) 2(b) -- First Amendment to Agreement and Plan of Merger (10) 4(a) -- Certificate of Incorporation of the Company (2) 4(b) -- Certificate of Amendment of Certificate of Incorporation of the Company (10) 4(c) -- Certificate of Amendment of Certificate of Incorporation of the Company (3) 4(d) -- Restated Bylaws of the Company (4) 4(e) -- Form of Common Stock Certificate (5) 4(f) -- Form of Certificate of Designation, Preferences, Rights and Limitations with respect to Series B Junior Preferred Stock (10) 4(g) -- Form of Indenture between the Company and Bank of America Texas, National Association, as Trustee, including the form of 5 3/4% Convertible Subordinated Debenture attached as Exhibit A thereto (6) 4(h) -- Preferred Stock and Warrant Purchase Agreement dated June 25, 1991 among Systems Center, Inc. and the Investors named therein (7) 10(a) -- Stock Option Agreement dated as of March 31, 1993 between the Company and Systems Center, Inc. (1) 10(b) -- Form of Stockholder Agreement dated as of March 31, 1993 between the Company and certain stockholders of Systems Center, Inc. (1) 10(c) -- Form of Sterling Software, Inc. Stockholder Agreement between Systems Center, Inc. and certain directors and/or stockholders of the Company (1) 10(d) -- Amended Incentive Stock Option Plan of the Company (10) 10(e) -- Amended Form of Incentive Stock Option Agreement (10) 10(f) -- Amended Non-Statutory Stock Option Plan of the Company (10) 10(g) -- Amended Form of Non-Statutory Stock Option Agreement (10) 10(h) -- Supplemental Executive Retirement Plan II of Informatics General Corporation (10) 10(i) -- Form of Supplemental Executive Retirement Plan II Agreement (the "SERP II Agreement") (10) 10(j) -- Amendment to SERP II Agreement (10) 10(k) -- Form of Employment Agreement with Jeannette P. Meier, George H. Ellis and Phillip A. Moore (10) 10(l) -- Form of Amendment No. 1 to Employment Agreement with Jeannette P. Meier, George H. Ellis and Phillip A. Moore (10) 10(m) -- Employment Agreement with Sam Wyly (10) 10(n) -- Employment Agreement with Charles J. Wyly, Jr. (10) -15- 10(o) -- Employment Agreement with Sterling L. Williams (10) 10(p) -- Form of Amendment No. 1 to Employment Agreement with Charles J. Wyly, Jr. and Sterling L. Williams (10) 10(q) -- Amendment No. 1 to Employment Agreement with Sam Wyly (10) 10(r) -- Amendment No. 2 to Employment Agreement with Sam Wyly (10) 10(s) -- Consultation Agreement with REC Enterprises, Inc. (10) 10(t) -- Employment Agreement with William D. Plumb (10) 10(u) -- Employment Agreement with William D. Plumb (10) 10(v) -- Form of Employment Agreement with Edward J. Lott, Warner C. Blow, Werner L. Frank and Geno P. Tolari (10) 10(w) -- Employment Agreement with Sterling L. Williams (1) 10(x) -- Form of Employment Agreement with Jeannette P. Meier, George H. Ellis, Phillip A. Moore, Warner C. Blow and Geno P. Tolari (1) 10(y) -- Employment Agreement with Werner L. Frank (1) 10(z) -- Form of Series B Warrant Agreement (10) 10(aa) -- Form of Amendment to Series B Warrant Agreement (January 1988) (10) 10(bb) -- Form of Amendment to Series B Warrant Agreement (May 1989) (10) 10(cc) -- Form of Series E Warrant Agreement (10) 10(dd) -- Form of Amendment to Series E Warrant Agreement (May 1989) (10) 10(ee) -- Form of Series F Warrant Agreement (10) 10(ff) -- Form of Amendment to Series F Warrant Agreement (May 1989) (10) 10(gg) -- Amended and Restated Revolving Credit and Term Loan Agreement dated June 8, 1990 between the Company and The First National Bank of Boston and BankOne Texas N.A. ("Loan Agreement") (10) 10(hh) -- First Amendment to Loan Agreement dated as of October 16, 1990 (10) 10(ii) -- Second Amendment to Loan Agreement dated as of September 19, 1991 (10) 10(jj) -- Third Amendment to Loan Agreement dated as of December 31, 1991 (10) 10(kk) -- Fourth Amendment to Loan Agreement dated as of June 15, 1992 (10) 10(ll) -- Fifth Amendment to Loan Agreement dated as of July 31, 1992 (10) 10(mm) -- Sixth Amendment to Loan Agreement dated as of August 31, 1992 (10) 10(nn) -- Seventh Amendment to Loan Agreement dated as of September 9, 1992 (10) 10(oo) -- Eighth Amendment to Loan Agreement dated as of September 30, 1992 (10) 10(pp) -- Ninth Amendment to Loan Agreement dated as of October 13, 1992 (10) 10(qq) -- Tenth Amendment to Loan Agreement dated as of December 17, 1992 (1) 10(rr) -- Form of Eleventh Amendment to Loan Agreement dated as of March 29, 1993 (10) 10(ss) -- Twelfth Amendment to Loan Agreement dated as of June 30, 1993 (10) 10(tt) -- Form of Thirteenth Amendment to Loan Agreement dated as of November 10, 1993 (10) 10(uu) -- Form of Fourteenth Amendment to Loan Agreement dated as of November 22, 1993 (10) -16- 10(vv) -- Fifteenth Amendment to Loan Agreement dated as of December 21, 1993 (11) 10(ww) -- Sixteenth Amendment to Loan Agreement dated as of December 30, 1993 (11) 10(xx) -- Seventeenth Amendment to Loan Agreement dated as of January 31, 1994 (11) 10(yy) -- 1992 Executive Compensation Plan for Group Presidents (10) 10(zz) -- 1993 Executive Compensation Plan for Group Presidents (1) 10(aaa) -- 1994 Executive Compensation Plan for Group Presidents (10) 10(bbb) -- Form of Series G Warrant Agreement (10) 10(ccc) -- Amended 1992 Non-Statutory Stock Option Plan (3) 10(ddd) -- Form of Stock Option Agreement - 1992 Non-Statutory Stock Option Plan (10) 10(eee) -- Form of Indemnity Agreement between the Company and each of its directors and officers (10) 10(fff) -- Systems Center, Inc. Restated and Amended Restricted Stock Plan (8) 10(ggg) -- Systems Center, Inc. Amended and Restated Nondiscretionary Restricted Stock Plan (8) 10(hhh) -- Systems Center, Inc. 1982 Stock Option Plan (8) 10(iii) -- Systems Center, Inc. 1992 Stock Incentive Plan (8) 10(jjj) -- Systems Center, Inc. 1983 Stock Plan (8) 10(kkk) -- Systems Center, Inc. Share Option Scheme (8) 10(lll) -- Registration Rights Agreement dated as of July 1, 1993 among the Company and the Selling Stockholders (9) 11(a) -- Computation of Earnings Per Share, Three Months Ended December 31, 1993 (11) 11(b) -- Computation of Earnings Per Share, Three Months Ended December 31, 1992 (11) 15 -- None 18 -- None 19 -- None 22 -- None 23 -- None 24 -- None 27 -- None 99 -- None (b) Reports on Form 8-K. On November 16, 1993, the Company filed a Current Report on Form 8-K dated November 15, 1993, with respect to Item 5 of said form, which report related to Sterling Software, Inc.'s acquisition of Systems Center, Inc. The Company included in such report consolidated balance sheets of Sterling Software, Inc. as of September 30, 1993 and 1992, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended September 30, 1993. -17- ______________ (1) Previously filed as an exhibit to the Company's Registration Statement No. 33-62028 on Form S-4 and incorporated herein by reference. (2) Previously filed as an exhibit to the Company's Registration Statement No. 2-82506 on Form S-1 and incorporated herein by reference. (3) Previously filed as an exhibit to the Company's Registration Statement No. 33-69926 on Form S-8 and incorporated herein by reference. (4) Previously filed as an exhibit to the Company's Registration Statement No. 33-47131 on Form S-8 and incorporated herein by reference. (5) Previously filed as an exhibit to the Company's Registration Statement No. 2-86825 on Form S-1 and incorporated herein by reference. (6) Previously filed as an exhibit to the Company's Registration Statement No. 33-57428 on Form S-3 and incorporated herein by reference. (7) Previously filed as an exhibit to the Quarterly Report on Form 10-Q of Systems Center, Inc. for the quarter ended June 30, 1991 and incorporated herein by reference. (8) Previously filed as an exhibit to the Company's Registration Statement No. 33-65402 on Form S-8 and incorporated herein by reference. (9) Previously filed as an exhibit to the Company's Registration Statement No. 33-71706 on Form S-3 and incorporated herein by reference. (10) Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1993 and incorporated herein by reference. (11) Filed herewith. -18- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. STERLING SOFTWARE, INC. Date: February 14, 1994 /s/ Sterling L. Williams ------------------------------------ Sterling L. Williams President, Chief Executive Officer and Director (Principal Executive Officer) Date: February 14, 1994 /s/ George H. Ellis ------------------------------------ George H. Ellis Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) -19- EXHIBIT INDEX Sequentially Exhibit Numbered No. Description Page - ------- ------------------------------------------------- ------------ 2(a) -- Agreement and Plan of Merger dated as of March 31, 1993 among the Company, Systems Center, Inc. and SSI Acquisition Corporation ("Agreement and Plan of Merger") (1) 2(b) -- First Amendment to Agreement and Plan of Merger (10) 4(a) -- Certificate of Incorporation of the Company (2) 4(b) -- Certificate of Amendment of Certificate of Incorporation of the Company (10) 4(c) -- Certificate of Amendment of Certificate of Incorporation of the Company (3) 4(d) -- Restated Bylaws of the Company (4) 4(e) -- Form of Common Stock Certificate (5) 4(f) -- Form of Certificate of Designation, Preferences, Rights and Limitations with respect to Series B Junior Preferred Stock (10) 4(g) -- Form of Indenture between the Company and Bank of America Texas, National Association, as Trustee, including the form of 5 3/4% Convertible Subordinated Debenture attached as Exhibit A thereto (6) 4(h) -- Preferred Stock and Warrant Purchase Agreement dated June 25, 1991 among Systems Center, Inc. and the Investors named therein (7) 10(a) -- Stock Option Agreement dated as of March 31, 1993 between the Company and Systems Center, Inc. (1) 10(b) -- Form of Stockholder Agreement dated as of March 31, 1993 between the Company and certain stockholders of Systems Center, Inc. (1) 10(c) -- Form of Sterling Software, Inc. Stockholder Agreement between Systems Center, Inc. and certain directors and/or stockholders of the Company (1) 10(d) -- Amended Incentive Stock Option Plan of the Company (10) 10(e) -- Amended Form of Incentive Stock Option Agreement (10) 10(f) -- Amended Non-Statutory Stock Option Plan of the Company (10) 10(g) -- Amended Form of Non-Statutory Stock Option Agreement (10) 10(h) -- Supplemental Executive Retirement Plan II of Informatics General Corporation (10) 10(i) -- Form of Supplemental Executive Retirement Plan II Agreement (the "SERP II Agreement") (10) 10(j) -- Amendment to SERP II Agreement (10) 10(k) -- Form of Employment Agreement with Jeannette P. Meier, George H. Ellis and Phillip A. Moore (10) -20- 10(l) -- Form of Amendment No. 1 to Employment Agreement with Jeannette P. Meier, George H. Ellis and Phillip A. Moore (10) 10(m) -- Employment Agreement with Sam Wyly (10) 10(n) -- Employment Agreement with Charles J. Wyly, Jr. (10) 10(o) -- Employment Agreement with Sterling L. Williams (10) 10(p) -- Form of Amendment No. 1 to Employment Agreement with Charles J. Wyly, Jr. and Sterling L. Williams (10) 10(q) -- Amendment No. 1 to Employment Agreement with Sam Wyly (10) 10(r) -- Amendment No. 2 to Employment Agreement with Sam Wyly (10) 10(s) -- Consultation Agreement with REC Enterprises, Inc. (10) 10(t) -- Employment Agreement with William D. Plumb (10) 10(u) -- Employment Agreement with William D. Plumb (10) 10(v) -- Form of Employment Agreement with Edward J. Lott, Warner C. Blow, Werner L. Frank and Geno P. Tolari (10) 10(w) -- Employment Agreement with Sterling L. Williams (1) 10(x) -- Form of Employment Agreement with Jeannette P. Meier, George H. Ellis, Phillip A. Moore, Warner C. Blow and Geno P. Tolari (1) 10(y) -- Employment Agreement with Werner L. Frank (1) 10(z) -- Form of Series B Warrant Agreement (10) 10(aa) -- Form of Amendment to Series B Warrant Agreement (January 1988) (10) 10(bb) -- Form of Amendment to Series B Warrant Agreement (May 1989) (10) 10(cc) -- Form of Series E Warrant Agreement (10) 10(dd) -- Form of Amendment to Series E Warrant Agreement (May 1989) (10) 10(ee) -- Form of Series F Warrant Agreement (10) 10(ff) -- Form of Amendment to Series F Warrant Agreement (May 1989) (10) 10(gg) -- Amended and Restated Revolving Credit and Term Loan Agreement dated June 8, 1990 between the Company and The First National Bank of Boston and BankOne Texas N.A. ("Loan Agreement") (10) 10(hh) -- First Amendment to Loan Agreement dated as of October 16, 1990 (10) 10(ii) -- Second Amendment to Loan Agreement dated as of September 19, 1991 (10) 10(jj) -- Third Amendment to Loan Agreement dated as of December 31, 1991 (10) 10(kk) -- Fourth Amendment to Loan Agreement dated as of June 15, 1992 (10) 10(ll) -- Fifth Amendment to Loan Agreement dated as of July 31, 1992 (10) 10(mm) -- Sixth Amendment to Loan Agreement dated as of August 31, 1992 (10) -21- 10(nn) -- Seventh Amendment to Loan Agreement dated as of September 9, 1992 (10) 10(oo) -- Eighth Amendment to Loan Agreement dated as of September 30, 1992 (10) 10(pp) -- Ninth Amendment to Loan Agreement dated as of October 13, 1992 (10) 10(qq) -- Tenth Amendment to Loan Agreement dated as of December 17, 1992 (1) 10(rr) -- Form of Eleventh Amendment to Loan Agreement dated as of March 29, 1993 (10) 10(ss) -- Twelfth Amendment to Loan Agreement dated as of June 30, 1993 (10) 10(tt) -- Form of Thirteenth Amendment to Loan Agreement dated as of November 10, 1993 (10) 10(uu) -- Form of Fourteenth Amendment to Loan Agreement dated as of November 22, 1993 (10) 10(vv) -- Fifteenth Amendment to Loan Agreement dated as of December 21, 1993 (11) 10(ww) -- Sixteenth Amendment to Loan Agreement dated as of December 30, 1993 (11) 10(xx) -- Seventeenth Amendment to Loan Agreement dated as of January 31, 1994 (11) 10(yy) -- 1992 Executive Compensation Plan for Group Presidents (10) 10(zz) -- 1993 Executive Compensation Plan for Group Presidents (1) 10(aaa) -- 1994 Executive Compensation Plan for Group Presidents (10) 10(bbb) -- Form of Series G Warrant Agreement (10) 10(ccc) -- Amended 1992 Non-Statutory Stock Option Plan (3) 10(ddd) -- Form of Stock Option Agreement - 1992 Non-Statutory Stock Option Plan (10) 10(eee) -- Form of Indemnity Agreement between the Company and each of its directors and officers (10) 10(fff) -- Systems Center, Inc. Restated and Amended Restricted Stock Plan (8) 10(ggg) -- Systems Center, Inc. Amended and Restated Nondiscretionary Restricted Stock Plan (8) 10(hhh) -- Systems Center, Inc. 1982 Stock Option Plan (8) 10(iii) -- Systems Center, Inc. 1992 Stock Incentive Plan (8) 10(jjj) -- Systems Center, Inc. 1983 Stock Plan (8) 10(kkk) -- Systems Center, Inc. Share Option Scheme (8) 10(lll) -- Registration Rights Agreement dated as of July 1, 1993 among the Company and the Selling Stockholders (9) 11(a) -- Computation of Earnings Per Share, Three Months Ended December 31, 1993 (11) 11(b) -- Computation of Earnings Per Share, Three Months Ended December 31, 1992 (11) -22- 15 -- None 18 -- None 19 -- None 22 -- None 23 -- None 24 -- None 27 -- None 99 -- None ______________ (1) Previously filed as an exhibit to the Company's Registration Statement No. 33-62028 on Form S-4 and incorporated herein by reference. (2) Previously filed as an exhibit to the Company's Registration Statement No. 2-82506 on Form S-1 and incorporated herein by reference. (3) Previously filed as an exhibit to the Company's Registration Statement No. 33-69926 on Form S-8 and incorporated herein by reference. (4) Previously filed as an exhibit to the Company's Registration Statement No. 33-47131 on Form S-8 and incorporated herein by reference. (5) Previously filed as an exhibit to the Company's Registration Statement No. 2-86825 on Form S-1 and incorporated herein by reference. (6) Previously filed as an exhibit to the Company's Registration Statement No. 33-57428 on Form S-3 and incorporated herein by reference. (7) Previously filed as an exhibit to the Quarterly Report on Form 10-Q of Systems Center, Inc. for the quarter ended June 30, 1991 and incorporated herein by reference. (8) Previously filed as an exhibit to the Company's Registration Statement No. 33-65402 on Form S-8 and incorporated herein by reference. (9) Previously filed as an exhibit to the Company's Registration Statement No. 33-71706 on Form S-3 and incorporated herein by reference. (10) Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1993 and incorporated herein by reference. (11) Filed herewith. -23- EX-10 2 EXHIBIT 10(VV) Exhibit 10 (VV) FIFTEENTH AMENDMENT AGREEMENT FIFTEENTH AMENDMENT AGREEMENT dated as of December 21, 1993 (this "Amendment"), by and among STERLING SOFTWARE, INC., a Delaware corporation (the "Company"), the direct and indirect subsidiaries of the Company listed on the signature pages hereto (collectively, the "Sterling Subsidiaries"), THE FIRST NATIONAL BANK OF BOSTON and BANK ONE, TEXAS, NATIONAL ASSOCIATION (collectively, the "Banks") and THE FIRST NATIONAL BANK OF BOSTON, as agent (the "Agent") for the Banks, amending certain provisions of an Amended and Restated Revolving Credit and Term Loan Agreement dated as of June 8, 1990 (as heretofore amended, the "Loan Agreement") by and among the Company, the Banks and the Agent and of certain of the other Loan Documents (as defined in the Loan Agreement). Terms not otherwise defined herein which are defined in the Loan Agreement shall have the respective meanings herein assigned to such terms in the Loan Agreement. WHEREAS, Sterling Software (Australia) Pty. Ltd. ("Sterling Australia") desires to sell its rights to license fees and amounts receivable under certain monthly license agreements (collectively, the "Australian Receivables") pursuant to a Master Offer for Assignment dated on or about December 22, 1993 (the "Australian Receivables Agreement") between Sterling Australia and Sanwa Australia Finance Limited ("Sanwa Australia"); WHEREAS, the Company wishes to guarantee the obligations of Sterling Australia under the Australian Receivables Agreement pursuant to a Guarantee and Indemnity dated on or about December 22, 1993 (the "Australian Receivables Guaranty") between the Company and Sanwa Australia; WHEREAS, under the terms of the Loan Agreement, the foregoing transactions may not be completed without the consent of the Banks and the amendment of the Loan Agreement; WHEREAS, the Company has requested that the Banks agree to amend the Loan Agreement to provide for the transactions contemplated by the Australian Receivables Agreement and the Australian Receivables Guaranty; WHEREAS, the Banks are willing to amend the terms of the Loan Agreement and provide such consents, upon the terms and subject to the conditions herein; NOW, THEREFORE, in consideration of the mutual agreements contained in the Loan Agreement, herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: -2- SECTION 1. AMENDMENTS TO SECTION 1.1 OF THE LOAN AGREEMENT. Section 1.1 of the Loan Agreement is hereby amended by inserting, in the places required by alphabetical order, the following new definitions with the following text: "Australian Receivables. License fees and amounts receivable under license agreements entered into by Sterling Australia, as licensor," "Australian Receivables Agreement. The Master Offer For Assignment dated on or about December 22, 1993 between Sterling Australia and Sanwa Australia." "Australian Receivables Guaranty. The Guarantee and Indemnity dated on or about December 22, 1993 between the Company, as guarantor, and Sanwa Australia." "Australian Receivables Purchase Price. The aggregate amount paid by Sanwa Australia to Sterling Australia for Australian Receivables, calculated by using the Discount Rate (as defined in the Australian Receivables Agreement)." "Sanwa Australia. Sanwa Australia Finance Limited." "Sterling Australia. Sterling Software (Australia) Pty. Ltd." SECTION 2. AMENDMENTS TO SECTION 8.4 OF THE LOAN AGREEMENT. Section 8.4 of the Loan Agreement is hereby amended by: (a) deleting the word "and" at the end of subparagraph (i) thereof; (b) deleting the period (".") at the end of subparagraph (j) thereof and substituting in lieu thereof the text "; and"; and (c) inserting a new subparagraph (k) at the end thereof with the following text: "(k) as soon as practicable but, in any event, within forty-five (45) Business Days after the end of each of the Company's fiscal quarters, a report, in form and substance satisfactory to the Agent and the Banks and certified by an officer of the Company, setting forth (i) the aggregate Australian Receivables Purchase Price of Australian Receivables purchased by Sanwa Australia from Sterling Australia under the Australian Receivables Agreement during the immediately preceding fiscal quarter and cumulatively since December 22, 1993; (ii) the amounts of all payments made or required to be made by Sterling Australia or the Company to Sanwa Australia under the terms of the Australian Receivables Agreement or the Australian Receivables Guaranty in order to repay any amounts paid by Sanwa Australia to Sterling Australia in respect of Australian Receivables during the immediately preceding fiscal quarter, -3- and (iii) such other information with respect to the Australian Receivables Agreement as the Agent or either of the Banks may from time to time request." SECTION 3. AMENDMENT TO SECTION 9.1 OF THE LOAN AGREEMENT. Section 9.1 of the Loan Agreement is hereby amended by: (a) deleting the word "and" at the end of subsection (s) thereof; (b) deleting the period (".") at the end of subsection (t) thereof and substituting in lieu thereof the text "; and"; and (c) inserting at the end thereof the following new subsection (u): "(u) Indebtedness incurred by Sterling Australia pursuant to the Australian Receivables Agreement and by the Company pursuant to the Australian Receivables Guaranty in connection with the purchase by Sanwa Australia of Australian Accounts Receivable; provided, however, that the aggregate Australian Receivables Purchase Price of such Australian Accounts Receivable so purchased by Sanwa Australia shall not exceed $3,000,000." SECTION 4. AMENDMENTS TO SECTION 9.5 OF THE LOAN AGREEMENT. Section 9.5 of the Loan Agreement is hereby amended by: (a) deleting the word "and" at the end of subparagraph (a)(iv) thereof; (b) deleting the period (".") at the end of subparagraph (a)(v) thereof and substituting in lieu thereof the text "; and"; and (c) inserting a new subparagraph (a)(vi) with the following text: "(a)(vi) Sterling Australia may acquire Australian Receivables previously purchased by Sanwa Australia to the extent required or permitted by the Australian Receivables Agreement." SECTION 5. AMENDMENTS TO SECTION 9.9 OF THE LOAN AGREEMENT. Section 9.9 of the Loan Agreement is hereby amended by: (a) deleting the word "and" from the end of subparagraph (f) thereto; (b) deleting the period (".") at the end of subparagraph (g) thereof; and substituting in lieu thereof the text "; and"; and (c) inserting, after subparagraph (g) thereof, a new subparagraph (h) with the following text: -4- "(h) Sales of up to an aggregate Australian Receivables Purchase Price of $3,000,000 of Australian Accounts Receivable pursuant to the Australian Receivables Agreement." SECTION 6. AMENDMENT OF SECTION 9.16 OF THE LOAN AGREEMENT. Section 9.16 of the Loan Agreement is hereby amended by inserting, after the words "the UK Receivables Programme, the UK Receivables Guaranty," and before the words "the US Receivables Agreement, US Receivables Guaranty or any of the Originator Agreements without the prior written consent of the Banks;" the words: "the Australian Receivables Agreement, the Australian Receivables Guaranty". SECTION 7. LIMITED CONSENT TO AMENDMENT TO US RECEIVABLES AGREEMENT. The Company has informed the Agent and the Banks that it wishes to cause Sterling Software Leasing to amend the US Receivables Agreement to amend the pricing provisions and eliminate certain documentation requirements thereof. The Company has further informed the Agent and the Banks that, pursuant to SECTION 9.16 of the Loan Agreement, any amendment of the US Receivables Agreement requires the prior written consent of the Banks. The Company has requested that the Agent and the Banks consent to the proposed amendment to the US Receivables Agreement. Each of the Agent and the Banks hereby consents to the amendment of the US Receivables Agreement but solely pursuant to an amendment in the form attached hereto as Exhibit A (the "Sanwa Amendment"). The consent granted herein is limited strictly to its terms, shall apply only to the specific amendment described herein, shall not extend to or affect any of the Company's other obligations contained in the Loan Agreement and the other Loan Documents and shall not impair any rights consequent thereon. None of the Banks or the Agent shall have any obligation to issue any other or further consent or waiver with respect to the subject matter of this SECTION 7 or of any other matter. SECTION 8. CONDITIONS TO EFFECTIVENESS. This Amendment shall be deemed to be effective as of December 22, 1993 (the "Effective Date") upon the receipt by the Agent of each of the following, each in form and substance satisfactory to the Agent and the Banks: (a) facsimile copies of original counterparts (to be followed promptly by original counterparts) or original counterparts of this Amendment, duly executed by each of the Company, the Sterling Subsidiaries, the Agent and the Banks; (b) by January 31, 1994, fully executed copies of the Australian Receivables Agreement and the Australian Receivables Guaranty, in the forms attached hereto as Exhibit B-1 and Exhibit B-2 respectively; and (c) by January 31, 1994, fully executed copies of the Sanwa Amendment, in the form attached hereto as Exhibit A. SECTION 9. REPRESENTATIONS AND WARRANTIES; NO DEFAULT; AUTHORIZATION. The Company hereby represents and warrants to each of the Agent and the Banks as follows: -5- (a) Each of the representations and warranties of the Company and the Sterling Subsidiaries contained in the Loan Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in connection with the Loan Agreement, the other Loan Documents or this Amendment was true as of the date as of which it was made and is true as and at the date of this Amendment, and no Default or Event of Default has occurred and is continuing as of the date of this Amendment; and (b) This Amendment has been duly authorized, executed and delivered by the Company and each of the Sterling Subsidiaries and shall be in full force and effect upon the satisfaction of the conditions set forth in SECTION 7 hereof, and the agreements of the Company and each of the Sterling Subsidiaries party hereto contained herein, in the Loan Agreement, and in the other Loan Documents, as amended, respectively constitute the legal, valid and binding obligations of the Company and each of the Sterling Subsidiaries party hereto, enforceable against the Company or such Sterling Subsidiaries in accordance with their respective terms. SECTION 10. RATIFICATION, ETC. Except as expressly amended hereby, the Loan Agreement, the other Loan Documents and all documents, instruments and agreements related thereto are hereby ratified and confirmed in all respects and shall continue in full force and effect. All references in the Loan Agreement or such other Loan Documents or in any related agreement or instrument to the Loan Agreement or such other Loan Documents shall hereafter refer to such agreements as amended hereby and as previously amended, if previously amended, pursuant to the provisions of SECTION 23 of the Loan Agreement. SECTION 11. NO IMPLIED WAIVER. Except as expressly provided herein, nothing contained herein shall constitute a waiver of, impair or otherwise affect any Obligations, any other obligations of the Company or any right of the Agent or the Banks consequent thereon. SECTION 12. COUNTERPARTS. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original but which together shall constitute one and the same instrument. SECTION 13. GOVERNING LAW. THIS AMENDMENT SHALL FOR ALL PURPOSES BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT REFERENCE TO CONFLICTS OF LAW). IN WITNESS WHEREOF, the parties hereto have executed this Amendment as a document under seal as of the date first above written. THE FIRST NATIONAL BANK OF BOSTON, Individually and as Agent By:_____________________________________ Vice President -6- BANK ONE, TEXAS, NATIONAL ASSOCIATION By:_____________________________________ Michael Silverman Vice President STERLING SOFTWARE, INC. By:_____________________________________ Vicki L. Hill Vice President, Treasurer Each of the undersigned hereby acknowledges the foregoing Amendment as of the Effective Date and agrees that its obligations under the Guaranty will extend to the Loan Agreement, as so amended. STERLING SOFTWARE (MIDWEST), INC. (formerly Creative Data Systems, Inc.) By:____________________________ Vicki L. Hill Assistant Treasurer STERLING SOFTWARE (NORTHERN AMERICA), INC. (formerly Directions, Inc.) By:____________________________ Vicki L. Hill Assistant Treasurer -7- STERLING SOFTWARE (UNITED STATES), INC. (formerly Zanthe, Inc. Dylakor, Inc. and Answer Systems, Inc.) By:____________________________ Vicki L. Hill Assistant Treasurer STERLING SOFTWARE (AMERICA), INC. (formerly Ordernet Services, Inc.) By:____________________________ Vicki L. Hill Assistant Treasurer STERLING CHECK LIQUIDATION, INC. By:____________________________ Vicki L. Hill Treasurer STERLING SOFTWARE (U.S.A.), INC. (formerly Systems Software Marketing, Inc. and Software Laboratories, Inc.) By:____________________________ Vicki L. Hill Assistant Treasurer STERLING DISTRIBUTION SERVICES, INC. By:____________________________ Vicki L. Hill Assistant Treasurer -8- STERLING SOFTWARE (US), INC. (formerly known as Sterling Federal Systems, Inc. and Sterling IMD, Inc.) By:____________________________ Vicki L. Hill Assistant Treasurer SYSTEMS CENTER, INC. (formerly Sterling Software, Inc., a Wyoming corporation) By:____________________________ Vicki L. Hill Assistant Treasurer STERLING SOFTWARE LEASING COMPANY By:____________________________ Vicki L. Hill President STERLING SOFTWARE INTERNATIONAL, INC. By:____________________________ Vicki L. Hill Assistant Treasurer STERLING ZEROONE, INC. By:____________________________ Vicki L. Hill Assistant Treasurer -9- ZEROONE SYSTEMS, INC. By:____________________________ Vicki L. Hill Treasurer STERLING SOFTWARE (UNITED STATES OF AMERICA), INC. By:_____________________________________ Vicki L. Hill Assistant Treasurer STERLING SOFTWARE (NORTH AMERICA), INC. By:_____________________________________ Vicki L. Hill Assistant Treasurer STERLING SOFTWARE (U.S. OF AMERICA), INC. By:_____________________________________ Vicki L. Hill Assistant Treasurer EX-10 3 EXHIBIT 10(WW) Exhibit 10 (WW) SIXTEENTH AMENDMENT AGREEMENT SIXTEENTH AMENDMENT AGREEMENT dated as of December 30, 1993 (this "Amendment"), by and among STERLING SOFTWARE, INC., a Delaware corporation (the "Company"), the direct and indirect subsidiaries of the Company listed on the signature pages hereto (collectively, the "Sterling Subsidiaries"), THE FIRST NATIONAL BANK OF BOSTON and BANK ONE, TEXAS, NATIONAL ASSOCIATION (collectively, the "Banks") and THE FIRST NATIONAL BANK OF BOSTON, as agent (the "Agent") for the Banks, amending certain provisions of an Amended and Restated Revolving Credit and Term Loan Agreement dated as of June 8, 1990 (as heretofore amended, the "Loan Agreement") by and among the Company, the Banks and the Agent and of certain of the other Loan Documents (as defined in the Loan Agreement). Terms not otherwise defined herein which are defined in the Loan Agreement shall have the respective meanings herein assigned to such terms in the Loan Agreement. WHEREAS, the Company, the Agent and the Banks wish to amend the terms of the Loan Agreement, upon the terms and subject to the conditions herein; NOW, THEREFORE, in consideration of the mutual agreements contained in the Loan Agreement, herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. AMENDMENT TO SECTION 1.1 OF THE LOAN AGREEMENT. Section 1.1 of the Loan Agreement is hereby amended by deleting, from the definition of "Conversion Date", the date "December 31, 1993" and inserting in lieu thereof the date "January 31, 1994". SECTION 2. CONDITIONS TO EFFECTIVENESS. This Amendment shall be deemed to be effective as of December 30, 1993 (the "Effective Date") upon the receipt by the Agent of facsimile copies of original counterparts (to be followed promptly by original counterparts) or original counterparts of this Amendment, duly executed by each of the Company, the Sterling Subsidiaries, the Agent and the Banks. SECTION 3. REPRESENTATIONS AND WARRANTIES; NO DEFAULT; AUTHORIZATION. The Company hereby represents and warrants to each of the Agent and the Banks as follows: (a) Each of the representations and warranties of the Company and the Sterling Subsidiaries contained in the Loan Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in connection with the Loan Agreement, the other Loan Documents or this Amendment was true as of the date as of which it was made and is true as and -2- at the date of this Amendment, and no Default or Event of Default has occurred and is continuing as of the date of this Amendment; and (b) This Amendment has been duly authorized, executed and delivered by the Company and each of the Sterling Subsidiaries and shall be in full force and effect upon the satisfaction of the conditions set forth in SECTION 2 hereof, and the agreements of the Company and each of the Sterling Subsidiaries party hereto contained herein, in the Loan Agreement, and in the other Loan Documents, as amended, respectively constitute the legal, valid and binding obligations of the Company and each of the Sterling Subsidiaries party hereto, enforceable against the Company or such Sterling Subsidiaries in accordance with their respective terms. SECTION 4. RATIFICATION, ETC. Except as expressly amended hereby, the Loan Agreement, the other Loan Documents and all documents, instruments and agreements related thereto are hereby ratified and confirmed in all respects and shall continue in full force and effect. All references in the Loan Agreement or such other Loan Documents or in any related agreement or instrument to the Loan Agreement or such other Loan Documents shall hereafter refer to such agreements as amended hereby and as previously amended, if previously amended, pursuant to the provisions of SECTION 23 of the Loan Agreement. SECTION 5. NO IMPLIED WAIVER. Except as expressly provided herein, nothing contained herein shall constitute a waiver of, impair or otherwise affect any Obligations, any other obligations of the Company or any right of the Agent or the Banks consequent thereon. SECTION 6. COUNTERPARTS. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original but which together shall constitute one and the same instrument. SECTION 7. GOVERNING LAW. THIS AMENDMENT SHALL FOR ALL PURPOSES BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT REFERENCE TO CONFLICTS OF LAW). IN WITNESS WHEREOF, the parties hereto have executed this Amendment as a document under seal as of the date first above written. THE FIRST NATIONAL BANK OF BOSTON, Individually and as Agent By:_____________________________________ Title: -3- BANK ONE, TEXAS, NATIONAL ASSOCIATION By:_____________________________________ Michael Silverman Vice President STERLING SOFTWARE, INC. By:_____________________________________ Vicki L. Hill Vice President, Treasurer Each of the undersigned hereby acknowledges the foregoing Amendment as of the Effective Date and agrees that its obligations under the Guaranty will extend to the Loan Agreement, as so amended. STERLING SOFTWARE (MIDWEST), INC. (formerly Creative Data Systems, Inc.) By:____________________________ Vicki L. Hill Assistant Treasurer STERLING SOFTWARE (NORTHERN AMERICA), INC. (formerly Directions, Inc.) By:____________________________ Vicki L. Hill Assistant Treasurer -4- STERLING SOFTWARE (UNITED STATES), INC. (formerly Zanthe, Inc. Dylakor, Inc. and Answer Systems, Inc.) By:____________________________ Vicki L. Hill Assistant Treasurer STERLING SOFTWARE (AMERICA), INC. (formerly Ordernet Services, Inc.) By:____________________________ Vicki L. Hill Assistant Treasurer STERLING CHECK LIQUIDATION, INC. By:____________________________ Vicki L. Hill Treasurer STERLING SOFTWARE (U.S.A.), INC. (formerly Systems Software Marketing, Inc. and Software Laboratories, Inc.) By:____________________________ Vicki L. Hill Assistant Treasurer STERLING DISTRIBUTION SERVICES, INC. By:____________________________ Vicki L. Hill Assistant Treasurer -5- STERLING SOFTWARE (US), INC. (formerly known as Sterling Federal Systems, Inc. and Sterling IMD, Inc.) By:____________________________ Vicki L. Hill Assistant Treasurer SYSTEMS CENTER, INC. (formerly Sterling Software, Inc., a Wyoming corporation) By:____________________________ Vicki L. Hill Assistant Treasurer STERLING SOFTWARE LEASING COMPANY By:____________________________ Vicki L. Hill President STERLING SOFTWARE INTERNATIONAL, INC. By:____________________________ Vicki L. Hill Assistant Treasurer STERLING ZEROONE, INC. By:____________________________ Vicki L. Hill Assistant Treasurer -6- ZEROONE SYSTEMS, INC. By:____________________________ Vicki L. Hill Treasurer STERLING SOFTWARE (UNITED STATES OF AMERICA), INC. By:_____________________________________ Vicki L. Hill Assistant Treasurer STERLING SOFTWARE (NORTH AMERICA), INC. By:_____________________________________ Vicki L. Hill Assistant Treasurer STERLING SOFTWARE (U.S. OF AMERICA), INC. By:_____________________________________ Vicki L. Hill Assistant Treasurer EX-10 4 EXHIBIT 10(XX) Exhibit 10 (XX) SEVENTEENTH AMENDMENT AGREEMENT SEVENTEENTH AMENDMENT AGREEMENT dated as of January 31, 1994 (this "Amendment"), by and among STERLING SOFTWARE, INC., a Delaware corporation (the "Company"), the direct and indirect subsidiaries of the Company listed on the signature pages hereto (collectively, the "Sterling Subsidiaries"), THE FIRST NATIONAL BANK OF BOSTON and BANK ONE, TEXAS, NATIONAL ASSOCIATION (collectively, the "Banks") and THE FIRST NATIONAL BANK OF BOSTON, as agent (the "Agent") for the Banks, amending certain provisions of an Amended and Restated Revolving Credit and Term Loan Agreement dated as of June 8, 1990 (as heretofore amended, the "Loan Agreement") by and among the Company, the Banks and the Agent and of certain of the other Loan Documents (as defined in the Loan Agreement). Terms not otherwise defined herein which are defined in the Loan Agreement shall have the respective meanings herein assigned to such terms in the Loan Agreement. WHEREAS, upon the terms and subject to the conditions contained herein, the Company, the Agent and the Banks wish to amend the terms of the Loan Agreement, to, among other things, extend the Conversion Date and the Final Maturity; NOW, THEREFORE, in consideration of the mutual agreements contained in the Loan Agreement, herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. AMENDMENTS TO SECTION 1.1 OF THE LOAN AGREEMENT. Section 1.1 of the Loan Agreement is hereby amended by: (a) inserting, in the place required by alphabetical order, the following new definitions: "ADDITIONAL ACCOUNTS RECEIVABLE. Amounts receivable by any Subsidiary of the Company for goods sold or leased or services rendered by such Subsidiary other than US Accounts Receivable, UK Accounts Receivable and Australian Accounts Receivable." "ADDITIONAL RECEIVABLES AGREEMENT. Any agreement between a Subsidiary of the Company and an affiliate of Sanwa US or another entity pursuant to which such affiliate of Sanwa US or such other entity agrees to purchase Additional Accounts Receivable of such Subsidiary." "ADDITIONAL RECEIVABLES GUARANTY. Any guaranty issued by the Company in favor of an affiliate of Sanwa US or another entity party to an Additional Receivables -2- Agreement pursuant to which the Company guaranties the obligations of any of its Subsidiaries pursuant to an Additional Receivables Agreement." (b) deleting, from the definition of "Conversion Date", the date "January 31, 1994" and inserting in lieu thereof the date "December 31, 1994"; (c) deleting, from the definition of "Final Maturity", the date "June 15, 1995" and substituting in lieu thereof the date "December 31, 1996"; (d) inserting, in the place required by alphabetical order, the following new definition: "FOREIGN OBLIGATIONS. All Indebtedness, obligations and liabilities of the Company to The First National Bank of Boston or any of its affiliates in respect of guaranties by, and other contingent obligations of, the Company, existing on the Closing Date or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, in respect of Indebtedness of any Subsidiary of the Company which is not organized under the laws of any jurisdiction of the United States of America and which does not have its principal place of business in the United States of America." (e) deleting the definition of Sterling France in its entirety and substituting in lieu thereof the following new definition: "Sterling France. Sterling Software International (France) SARL, a company incorporated under the laws of France, and Sterling Software (France), S.A., a company incorporated under the laws of France and assignee of substantially all of the assets of Sterling Software International (France) SARL."; and (f) inserting, in the place required by alphabetical order, the following new definition: "TOTAL DEBT. At any time of determination, the sum of (a) any Indebtedness of the Company or any of its Subsidiaries under the UK Receivables Programme, the Australian Receivables Agreement, the US Receivables Agreement, any Additional Receivables Agreement or, to the extent not included in any of the foregoing, the UK Receivables Guaranty, the Australian Receivables Guaranty, the US Receivables Guaranty or any Additional Receivables Guaranty (but solely to the extent that any of the foregoing Indebtedness is on a full or partial recourse basis or, in the case of non-recourse Indebtedness, exceeds $10,000,000 in the aggregate) PLUS (b) the sum of (i) all Loans Outstanding PLUS (ii) the Maximum Drawing Amount PLUS (iii) all Unpaid Reimbursement Obligations, plus (c) the amount of any Foreign Obligations then outstanding." -3- SECTION 2. AMENDMENT TO SECTION 2.4 OF THE LOAN AGREEMENT. Section 2.4 of the Loan Agreement is hereby amended by (a) deleting subparagraph (a) thereof in its entirety and substituting in lieu thereof the following new subparagraph (a): "(a) For Base Rate Loans, the applicable interest rate shall be equal to the Base Rate in effect from time to time"; (b) deleting subparagraph (b) thereof in its entirety and substituting in lieu thereof the following new subparagraph (b): "(b) For Eurodollar Rate Loans, the applicable interest rate shall be 2 - 3/4% above the Eurodollar Rate."; and (c) deleting subparagraph (c) thereof in its entirety. SECTION 3. AMENDMENT TO SECTION 3.1 OF THE LOAN AGREEMENT. Section 3.1 of the Loan Agreement is hereby amended by deleting the first sentence thereof in its entirety and substituting in lieu thereof the following sentence: "All Loans Outstanding at the close of business on the Conversion Date shall be payable in eight equal (as nearly as may be) consecutive quarterly installments due on the last day of each calendar quarter, with a final payment at Final Maturity (each such date being called, hereinafter, a "Repayment Date"), which final payment shall in any event be in an amount sufficient to repay in full the remaining principal balance of the Loans then Outstanding." SECTION 4. AMENDMENT TO SECTION 8.4 OF THE LOAN AGREEMENT. Section 8.4 of the Loan Agreement is hereby amended by: (a) adding the word "and" at the end of subparagraph (g) thereof; (b) deleting the semicolon (";") and the word "and" at the end of subparagraph (h) thereof and substituting in lieu thereof a period ("."); and (c) deleting subparagraphs i, j and k thereof in their entirety. SECTION 5. AMENDMENT TO SECTION 9.1 OF THE LOAN AGREEMENT. Section 9.1 of the Loan Agreement is hereby amended by deleting subsections (p), (q), (r), (s), (s), (t) and (u) thereof in their entirety and substituting in lieu thereof the following new subsections (p), (q), (r) and (s): "(p) Indebtedness consisting of contingent liabilities to which reference is or should be made by a footnote to the consolidated balance sheets of the Company and its Subsidiaries in accordance with generally accepted accounting principles, which -4- contingent liabilities are incurred by Sterling France pursuant to certain licensing and/or leasing arrangements to be entered into between Sterling France and Promodata, a French company; PROVIDED, HOWEVER, that (i) any such contingent liabilities arise solely with respect to failures of product performance in accordance with warranties or contractual requirements, (ii) the aggregate amount of contingent liabilities permitted by this subsection (p) shall not exceed at any time $5,000,000, and (iii) such contingent liabilities are not guaranteed by the Company; (q) Indebtedness in respect of the Letter of Credit Guaranty and of the reimbursement obligations of Sterling Software (United States of America) in respect of the SCI Letter of Credit; (r) Indebtedness of Sterling Software (United States of America) or any of its Subsidiaries existing on the date hereof and listed on SCHEDULE 9.1(T) hereto; and (s) So long as no Default or Event of Default has occurred and is continuing or would occur after giving effect thereto, Indebtedness incurred by the Company or any of its Subsidiaries in connection with the purchase by Sanwa US, Sanwa UK, Sanwa Australia, any other affiliate of Sanwa US or any other entity party to an Additional Receivables Agreement of US Accounts Receivable, UK Accounts Receivable, Australian Accounts Receivable or Additional Accounts Receivable; PROVIDED, HOWEVER, that nothing contained in this subparagraph (s) shall be deemed to permit, in connection with the sale or transfer of Additional Accounts Receivable, the release of any lien of the Agent, for the benefit of the Agent and the Banks, on such Additional Accounts Receivable." SECTION 6. AMENDMENTS TO SECTION 9.5 OF THE LOAN AGREEMENT. Section 9.5 of the Loan Agreement is hereby amended by: (a) deleting from the end of subparagraph (a)(i) thereof the text "during the period from the Closing Date through Final Maturity, $20,000,000;" and substituting in lieu thereof the following text: "during the period from January 1, 1993 through Final Maturity, $10,000,000;"; and (b) deleting from subparagraph (ii) thereof the text "during the period commencing on the Closing Date through Final Maturity," and substituting in lieu thereof the text "during the period commencing on January 1, 1993 through Final Maturity,"; (c) deleting subparagraphs (a)(iii), (iv), (v) and (vi) thereof in their entirety and substituting in lieu thereof the following new subparagraphs (a)(iii) and (iv): "(iii) the Company may acquire Systems Center, Inc. pursuant to the terms of the Merger Agreement; and -5- (iv) the Company or any of its Subsidiaries may acquire US Accounts Receivable, UK Accounts Receivable, Australian Accounts Receivable or Additional Accounts Receivable to the extent required or permitted by the US Receivables Agreement, any of the Originator Agreements, the UK Receivables Programme, the Australian Receivables Agreement or any Additional Receivables Agreement." SECTION 7. AMENDMENT TO SECTION 9.7 OF THE LOAN AGREEMENT. Section 9.7. of the Loan Agreement is hereby deleted in its entirety, and the following new Section 9.7 is substituted in lieu thereof: "SECTION 9.7 SUBORDINATED DEBT REPURCHASE. The Company will not, and will not permit any of the Sterling Subsidiaries to, make any payment (other than a regularly scheduled payment in accordance with the terms of the relevant Subordinated Debt Documents) in respect of, redeem or repurchase any Subordinated Debt." SECTION 8. AMENDMENT TO SECTION 9.8 OF THE LOAN AGREEMENT. Section 9.8 of the Loan Agreement is hereby amended by deleting the first paragraph thereof and table therein in their entirety and substituting in lieu thereof the following text: "Net capital expenditures unrelated to acquisitions permitted under Section 9.5 hereof shall not exceed, during any fiscal period set forth in the table below, the amount set forth opposite such period in the table below:
MAXIMUM PERIOD PERMISSIBLE AMOUNT ------ ------------------ October 1, 1993--September 30, 1994 $17,000,000 October 1, 1994--September 30, 1995 $14,000,000 October 1, 1995--December 31, 1996 $14,000,000"
SECTION 9. ELIMINATION OF SECTIONS 9.10 AND 9.16 OF THE LOAN AGREEMENT. Sections 9.10 and 9.16 of the Loan Agreement are hereby deleted in their entirety. SECTION 10. RENUMBERING OF SECTIONS 9.11, 9.12, 9.13, 9.14, 9.15 AND 9.17 OF THE LOAN AGREEMENT. The section number references to Sections 9.11, 9.12, 9.13, 9.14, 9.15 and 9.17 of the Loan Agreement are hereby deleted and the following new section number references are respectively substituted in lieu thereof: "9.10, 9.11, 9.12, 9.13, 9.14, and 9.15." SECTION 11. AMENDMENT TO SECTION 10.1 OF THE LOAN AGREEMENT. Section 10.1 of the Loan Agreement is hereby deleted in its entirety, and the following new Section 10.1 is hereby substituted in lieu thereof: -6- "SECTION 10.1 PROFITABILITY. The Company shall not (a) cause or permit Consolidated Net Income or Consolidated Net Operating Income (i) at the end of any two consecutive fiscal quarters (other than the two consecutive fiscal quarters ending December 31, 1993) or (ii) at the end of the fiscal quarter ending December 31, 1993 to be less than $1.00 and (b) shall not incur any loss on Consolidated Net Income or Consolidated Net Operating Income in any fiscal quarter of the Company (other than the fiscal quarter ending December 31, 1993) in excess of $1,000,000." SECTION 12. AMENDMENT TO SECTION 10.2. Section 10.2 of the Loan Agreement is hereby deleted in its entirety and the following new Section 10.2 is substituted in lieu thereof: "SECTION 10.2. OPERATING CASH FLOW TO INTEREST CHARGES. The Company's ratio of Operating Cash Flow to Interest Charges (a) for any period of two consecutive fiscal quarters (other than the two consecutive fiscal quarter period ended December 31, 1993) shall be greater than 3.50:l.00, and (b) for the fiscal quarter of the Company ended December 31, 1993 shall be greater than 3.50:1.00." SECTION 13. AMENDMENT TO SECTION 10.3 OF THE LOAN AGREEMENT. Section 10.3 of the Loan Agreement is hereby deleted in its entirety, and the following new Section 10.3 is hereby substituted in lieu thereof: "SECTION 10.3. QUICK RATIO. The Company's ratio of Quick Assets to the sum of Current Liabilities plus Loans Outstanding at the end of any fiscal quarter shall not be less than 1.00:1.00." SECTION 14. AMENDMENT TO SECTION 10.4 OF THE LOAN AGREEMENT. Section 10.4 of the Loan Agreement is hereby deleted in its entirety, and the following new Section 10.4 is substituted in lieu thereof: "SECTION 10.4. NET WORTH. The Company shall not cause or permit its Consolidated New Worth at the end of any fiscal quarter of the Company to be less than (a) $85,000,000, plus (b) on a cumulative basis, commencing with the fiscal quarter ending September 30, 1993, 75% of the excess of Consolidated Net Income for each fiscal quarter (calculated without deduction for any net losses) after preferred stock dividends actually paid by the Company since September 30, 1993, as adjusted from time to time to reflect stock splits, distributions, or together recapitalizations or reclassifications, plus (c) 100% of the net proceeds received by the Company of any new equity issued by the Company since September 30, 1993." SECTION 15. AMENDMENT TO SECTION 10.5 OF THE LOAN AGREEMENT. Section 10.5 of the Loan Agreement is hereby deleted in its entirety, and the following new Section 10.5 is substituted in lieu thereof: "SECTION 10.5. LIABILITIES TO NEW WORTH RATIO. The Company shall not cause or permit its ratio of Consolidated Total Liabilities to Consolidated Net Worth at the end -7- of any fiscal quarter set forth in the table below to be equal to or greater than the ratio set forth opposite such fiscal quarter in the table below:
FISCAL QUARTER ENDING RATIO -------------- ----- December 31, 1993 3.25:1.00 March 31, 1994 3.25:1.00 June 30, 1994 3.00:1.00 September 30, 1994 and thereafter 2.50:1.00"
SECTION 16. AMENDMENT TO SECTION 10.6 OF THE LOAN AGREEMENT. Section 10.6 of the Loan Agreement is hereby deleted in its entirety, and the following new Section 10.6 is substituted in lieu thereof: "SECTION 10.6. TOTAL DEBT TO OPERATING CASH FLOW RATIO. The Company shall not permit the ratio of Total Debt to Operating Cash Flow at any time to exceed 2.00:1.00." SECTION 17. AMENDMENT TO SECTION 18 OF THE LOAN AGREEMENT. Section 18 of the Loan Agreement is hereby amended by deleting the text: "Jackson & Walker 6000 First Republic Bank Plaza 901 Main Street Dallas, Texas 75202 Attention: Eileen S. Price, Esq." from subparagraph (a) thereof and substituting in lieu thereof the following text: "Jackson & Walker 300 Convent Street Suite 2450 San Antonio, Texas 78205 Attention: Eileen S. Scherlen, Esq." SECTION 18. AMENDMENT OF SCHEDULE 5.6 TO THE LOAN AGREEMENT. SCHEDULE 5.6 to the Loan Agreement is hereby deleted in its entirety, and SCHEDULE 5.6 attached hereto is hereby substituted in lieu thereof. SECTION 19. AGREEMENT AS TO THE ASSIGNMENT AGREEMENT. Each of the Company, the Sterling Subsidiaries, the Agent and the Banks hereby confirms that, for purposes of the Assignment Agreement, the term "Loan Agreement" shall mean the Amended and Restated Revolving Credit and Term Loan Agreement dated as of June 8, 1990 among the Company, the -8- Agent and the Banks, as the same may be amended, modified, supplemented or amended and restated from time to time. SECTION 20. CONDITIONS TO EFFECTIVENESS. This Amendment shall be deemed to be effective as of January 31, 1994 (the "Effective Date") upon the receipt by the Agent, on or before January 31, 1994, of each of the following, each in form and substance satisfactory to the Agent and the Banks: (a) facsimile copies of original counterparts (to be followed promptly by original counterparts) or original counterparts of this Amendment, duly executed by each of the Company, the Sterling Subsidiaries, the Agent and the Banks; (b) from the Company and each of the Sterling Subsidiaries, copies, certified by a duly authorized officer of each such entity, of the charter documents and by-laws of each such entity as in effect on the date hereof or, if applicable, a certificate from a duly authorized officer of each of the Company and the Sterling Subsidiaries to the effect that the charter documents and by-laws of each such entity previously delivered to the Agent and the Banks are still in full force and effect; (c) from the Company and each of the Sterling Subsidiaries, copies, certified by the secretary or assistant secretary of each such entity, of the records of the actions taken by each such entity to authorize (i) the execution and delivery of this Amendment and the other documents, agreements and instruments executed in connection herewith, and (ii) the performance of each such entity's obligations under the Loan Agreement, as amended by this Amendment, and the other Loan Documents, as applicable; (d) from the Company and each of the Sterling Subsidiaries other than Sterling Software (United States of America), Sterling Software (Northern America) and Sterling Software (U.S. of America), a legal existence and good standing certificate, certified by an authorized official of each such entity's jurisdiction of incorporation; (e) results of UCC lien searches requested by the Agent, together with supplemental perfection certificates for the Company and each of the Sterling Subsidiaries; (f) an opinion of counsel to the Company and each of the Sterling Subsidiaries, in form and substance satisfactory to the Agent; and (g) payment to the Agent, for the pro rata accounts of each of the Banks, an amendment fee of $25,000 in immediately available funds (the Company hereby authorizing the Agent to debit its account with the Agent for purposes of making such payment). SECTION 21. REPRESENTATIONS AND WARRANTIES; NO DEFAULT; AUTHORIZATION. The Company hereby represents and warrants to each of the Agent and the Banks as follows: -9- (a) each of the following, each in form and substance satisfactory to the Agent and the Banks: (b) Each of the representations and warranties of the Company and the Sterling Subsidiaries contained in the Loan Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in connection with the Loan Agreement, the other Loan Documents or this Amendment was true as of the date as of which it was made and is true as and at the date of this Amendment, and no Default or Event of Default has occurred and is continuing as of the date of this Amendment; and (c) This Amendment has been duly authorized, executed and delivered by the Company and each of the Sterling Subsidiaries and shall be in full force and effect upon the satisfaction of the conditions set forth in Section 20 hereof, and the agreements of the Company and each of the Sterling Subsidiaries party hereto contained herein, in the Loan Agreement, and in the other Loan Documents, as amended, respectively constitute the legal, valid and binding obligations of the Company and each of the Sterling Subsidiaries party hereto, enforceable against the Company or such Sterling Subsidiaries in accordance with their respective terms. SECTION 22. RATIFICATION, ETC. Except as expressly amended hereby, the Loan Agreement, the other Loan Documents and all documents, instruments and agreements related thereto are hereby ratified and confirmed in all respects and shall continue in full force and effect. All references in the Loan Agreement or such other Loan Documents or in any related agreement or instrument to the Loan Agreement or such other Loan Documents shall hereafter refer to such agreements as amended hereby and as previously amended, if previously amended, pursuant to the provisions of Section 23 of the Loan Agreement. SECTION 23. NO IMPLIED WAIVER. Except as expressly provided herein, nothing contained herein shall constitute a waiver of, impair or otherwise affect any Obligations, any other obligations of the Company or any right of the Agent or the Banks consequent thereon. SECTION 24. COUNTERPARTS. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original but which together shall constitute one and the same instrument. SECTION 25. GOVERNING LAW. THIS AMENDMENT SHALL FOR ALL PURPOSES BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT REFERENCE TO CONFLICTS OF LAW). -10- IN WITNESS WHEREOF, the parties hereto have executed this Amendment as a document under seal as of the date first above written. THE FIRST NATIONAL BANK OF BOSTON, Individually and as Agent By:_____________________________________ Title: BANK ONE, TEXAS, NATIONAL ASSOCIATION By:_____________________________________ Michael Silverman Vice President STERLING SOFTWARE, INC. By:_____________________________________ Vicki L. Hill Vice President, Treasurer Each of the undersigned hereby (1) executes this Amendment for purposes of Section 18 hereof and (2) acknowledges the foregoing Amendment as of the Effective Date and agrees that its obligations under the Guaranty will extend to the Loan Agreement, as so amended. STERLING SOFTWARE (MIDWEST), INC. (formerly Creative Data Systems, Inc.) By:____________________________ Vicki L. Hill Assistant Treasurer -11- STERLING SOFTWARE (NORTHERN AMERICA), INC. (formerly Directions, Inc.) By:____________________________ Vicki L. Hill Assistant Treasurer STERLING SOFTWARE (UNITED STATES), INC. (formerly Zanthe, Inc. Dylakor, Inc. and Answer Systems, Inc.) By:____________________________ Vicki L. Hill Assistant Treasurer STERLING SOFTWARE (AMERICA), INC. (formerly Ordernet Services, Inc.) By:____________________________ Vicki L. Hill Assistant Treasurer STERLING CHECK LIQUIDATION, INC. By:____________________________ Vicki L. Hill Treasurer STERLING SOFTWARE (U.S.A.), INC. (formerly Systems Software Marketing, Inc. and Software Laboratories, Inc.) By:____________________________ Vicki L. Hill Assistant Treasurer -12- STERLING DISTRIBUTION SERVICES, INC. By:____________________________ Vicki L. Hill Assistant Treasurer STERLING SOFTWARE (US), INC. (formerly known as Sterling Federal Systems, Inc. and Sterling IMD, Inc.) By:____________________________ Vicki L. Hill Assistant Treasurer SYSTEMS CENTER, INC. (formerly Sterling Software, Inc., a Wyoming corporation) By:____________________________ Vicki L. Hill Assistant Treasurer STERLING SOFTWARE LEASING COMPANY By:____________________________ Vicki L. Hill President -13- STERLING SOFTWARE INTERNATIONAL, INC. By:____________________________ Vicki L. Hill Assistant Treasurer STERLING ZEROONE, INC. By:____________________________ Vicki L. Hill Assistant Treasurer ZEROONE SYSTEMS, INC. By:____________________________ Vicki L. Hill Treasurer STERLING SOFTWARE (UNITED STATES OF AMERICA), INC. By:_____________________________________ Vicki L. Hill Assistant Treasurer STERLING SOFTWARE (NORTH AMERICA), INC. By:_____________________________________ Vicki L. Hill Assistant Treasurer -14- STERLING SOFTWARE (U.S. OF AMERICA), INC. By:_____________________________________ Vicki L. Hill Assistant Treasurer SCHEDULE 5.6 Sterling Software (Midwest), Inc. (formerly Creative Data Systems, Inc.) 3659 South Green Road Beachwood, OH 44122 Sterling Software (Northern America), Inc. (formerly Directions, Inc.) 15301 Dallas Parkway Suite 400, LB 23 Dallas, TX 75248 Sterling Software (United States), Inc. (formerly Zanthe, Inc., Dylakor, Inc. and Answer Systems, Inc.) 5900 Canoga Avenue Woodland Hills, CA 91367-4237 Sterling Software (America), Inc. (formerly Ordernet Services, Inc.) 4600 Lakehurst Court Dublin, OH 43220 Sterling Distribution Services, Inc. 4600 Lakehurst Court Dublin, OH 43220 Sterling Check Liquidation, Inc. 15301 Dallas Parkway Suite 400, LB 23 Dallas, TX 75248 Sterling Software (US), Inc. (formerly Sterling Federal Systems, Inc. and Sterling IMD, Inc.) 950 Tower Lane Suite 870 Foster City, CA 94404 -2- Systems Center, Inc. (formerly Sterling Software, Inc., a Wyoming corporation) 8080 N. Central Expy Suite 1100 Dallas, TX 75206 Sterling Software International, Inc. 8080 N. Central Expressway Suite 1100 Dallas, TX 75206 Sterling Software Leasing Company 8080 N. Central Expressway Suite 1100 Dallas, TX 75206 Sterling ZeroOne, Inc. 950 Tower Lane Suite 870 Foster City, CA 94404 Sterling Software (U.S.A.), Inc. (California) (formerly Systems Software Marketing, Inc. and Software Laboratories, Inc.) 11050 White Rock Road Suite 100 Rancho Cordova, CA 95670 ZeroOne Systems, Inc. 8080 N. Central Expy Suite 1100 Dallas, TX 75206 Sterling Software (United States of America), Inc. 1800 Alexander Bell Drive Reston, Virginia 22091 Sterling Software (U.S. of America), Inc. 1800 Alexander Bell Drive Reston, Virginia 22091 -3- Sterling Software (North America), Inc. 2477 Gateway Irving, Texas 75063 Net/Master, Inc. 1800 Alexander Bell Drive Reston, VA 22091 Data Management Information, Inc. 1800 Alexander Bell Drive Reston, VA 22091 EX-11 5 EXHIBIT 11-A STERLING SOFTWARE, INC. EXHIBIT 11(a) COMPUTATION OF EARNINGS PER SHARE THREE MONTHS ENDED DECEMBER 31, 1993 (in thousands, except per share information)
Fully Primary Diluted --------- --------- Earnings: Earnings applicable to common stockholders . . . . . . . . . . . . . . . . $10,970 $10,970 Add: Interest expense on amounts outstanding for the 5 3/4% Convertible Subordinated Debentures (net of applicable income taxes) . . . . . 219 1,064 Interest income on investment of proceeds from assumed conversion of options and warrants (net of applicable income taxes) . . . . . 143 -------- -------- $11,189 $12,177 -------- -------- -------- -------- Shares: Weighted average of shares outstanding . . . . . . . . . . . . . . . . . . 18,093 18,093 Add common shares issued on assumed exercise of options and warrants . . . 8,400 8,400 Less common shares assumed repurchased . . . . . . . . . . . . . . . . . . (3,684) (3,684) -------- -------- 22,809 22,809 -------- -------- Common shares issued on assumed conversion of 5 3/4% Convertible Subordinated Debentures. . . . . . . . . . . . . . . . . . . . . . . . . . 4,056 -------- 26,865 -------- -------- Earnings per common share: Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .49 -------- -------- Fully diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .45 -------- --------
EX-11 6 EXHIBIT 11-B STERLING SOFTWARE, INC. EXHIBIT 11(b) COMPUTATION OF EARNINGS PER SHARE THREE MONTHS ENDED DECEMBER 31, 1992 (in thousands, except per share information)
Fully Primary Diluted --------- --------- Earnings: Earnings applicable to common stockholders . . . . . . . . . . . . . . . . $ 1,930 $ 1,930 Add: Interest expense on amounts outstanding for the 8% Convertible Senior Subordinated Debentures (net of applicable income taxes). . 284 633 Interest expense on use of proceeds from assumed conversion of options and warrants to pay off amounts outstanding on Systems Center, Inc. line of credit (net of applicable income taxes) . . . 187 -------- -------- $ 2,214 $ 2,750 -------- -------- -------- -------- Shares: Weighted average of shares outstanding . . . . . . . . . . . . . . . . . . 16,559 16,559 Add common shares issued on assumed exercise of options and warrants . . . 6,360 6,360 Less common shares assumed repurchased . . . . . . . . . . . . . . . . . . (3,341) (3,341) -------- -------- 19,578 -------- -------- Common shares issued on assumed conversion of 8% Convertible Senior Subordinated Debentures. . . . . . . . . . . . . . . . . . . . . . . . . . 2,437 -------- 22,015 -------- -------- Earnings per common share: Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .11 -------- -------- Fully diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .11 -------- --------
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