As filed with the Securities and Exchange Commission on August 26, 1998
Registration No. 333-________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM S-3
Registration Statement Under The Securities Act of 1933
------------------------
CATALYST INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 39-1415889
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8989 North Deerwood Drive
Milwaukee, Wisconsin 53223
(414) 362-6800
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Copies of all communications to:
Sean P. McGowan Mark T. Ehrmann
Catalyst International, Inc. Godfrey & Kahn, S.C.
8989 North Deerwood Drive 780 North Water Street
Milwaukee, Wisconsin 53223 Milwaukee, Wisconsin 53202
(414) 362-6800 (414) 273-3500
(Address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
Proposed Proposed
Title of maximum maximum
each class Amount offering aggregate Amount of
of securities to be price per offering registration
to be registered registered unit (1) price (1) fee
---------------- ---------- --------- --------- ------------
Common Stock 143,342 $6.50 $931,723 $274.86
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933 based on
the reported average of the high and low prices of the Common Stock on
the Nasdaq National Market on August 24, 1998
------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
PROSPECTUS
Subject to Completion
August 26, 1998
143,342 Shares
Catalyst International, Inc.
Common Stock
This Prospectus relates to up to 143,342 shares of common stock, $.10 par
value per share (the "Shares"), of Catalyst International, Inc. (the "Company")
which may be offered from time to time by the selling stockholders named herein
(the "Selling Stockholders"). The Company will not receive any of the proceeds
from the sale of the Shares. The Company will bear the costs relating to the
registration of the Shares, estimated to be approximately $16,175.
The Shares may be offered for sale from time to time by the Selling
Stockholders named herein to or through underwriters or directly to other
purchasers or through agents in one or more transactions on or through the
facilities of the Nasdaq National Market ("Nasdaq"), in the over-the-counter
market, in one or more private transactions, or in a combination of such
methods of sale, at prices and on terms then prevailing, at prices related to
such prices, or at negotiated prices. A Selling Stockholder may pledge all or
a portion of the Shares owned by it as collateral in loan transactions. Upon
default by a Selling Stockholder, the pledgee in such loan transaction would
have the same rights of sale as a Selling Stockholder under this Prospectus. A
Selling Stockholder may also transfer Shares owned by such Selling Stockholder
by gift, and upon any such transfer the donee would have the same rights of
sale as such Selling Stockholder under this Prospectus. The Selling
Stockholders and any brokers and dealers through whom sales of the Shares are
made may be deemed to be "underwriters" within the meaning of the Securities
Act of 1933, as amended (the "Securities Act"), and the commissions or
discounts and other compensation paid to such persons may be regarded as
underwriters' compensation.
The Shares are included for quotation on the Nasdaq under the symbol
"CLYS". On August 24, 1998, the last sale price of the Common Stock as
reported on the Nasdaq was $6.50 per share.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is August ___, 1998.
TABLE OF CONTENTS
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 3
THE COMPANY 4
USE OF PROCEEDS 4
SELLING STOCKHOLDERS 4
PLAN OF DISTRIBUTION 5
LEGAL OPINION 6
EXPERTS 6
AVAILABLE INFORMATION 6
No person has been authorized to give any information or to make on behalf
of the Company any representations, other than those contained in this
Prospectus, in connection with the offer made hereby, and, if given or made,
such other information or representation must not be relied upon as having been
authorized by the Company. This Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, any security other than the
securities offered hereby, or an offer to sell or solicitation of any offer to
buy such securities in any jurisdiction in which such offer or solicitation is
not qualified or to any person to whom such offer or solicitation would be
unlawful. Neither the delivery of this Prospectus nor any sale made hereunder
shall under any circumstances create any implication that there has been no
change in the affairs of the Company since the date hereof or that the
information contained or incorporated by reference herein is correct as of any
date subsequent to the date hereof.
------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission (the "Commission") pursuant to the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), are incorporated in this Prospectus
by reference:
(1) the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997;
(2) the Company's Quarterly Report on Form 10-QSB for the quarters
ended March 31, 1998 and June 30, 1998;
(3) the Company's Current Report on Form 8-K dated August 10, 1998;
and
(4) the description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed with the Commission on
October 4, 1995 pursuant to Section 12 of the Exchange Act, including any
amendment or report filed for the purpose of updating such description.
All reports and other documents subsequently filed by the Company pursuant
to Sections 13, 14 or 15(d) of the Exchange Act and prior to the termination of
the offering of the Common Stock offered hereby shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof. Such
documents, and the documents listed above, are hereinafter referred to as
"Incorporated Documents." Any statement contained herein or in an Incorporated
Document shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed Incorporated Document modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The information relating to the Company contained in this Prospectus
summarizes, is based upon, or refers to, information and financial statements
contained in one or more Incorporated Documents; accordingly, such information
contained herein is qualified in its entirety by reference to Incorporated
Documents and should be read in conjunction therewith.
The Company will provide without charge to each person to whom a copy of
this Prospectus has been delivered, upon the written or oral request of any
such person, a copy of any or all of the Incorporated Documents, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into such documents). Requests for such copies should be directed
to Investor Relations Department, Catalyst International, Inc., 8989 North
Deerwood Drive, Milwaukee, Wisconsin 53223; telephone: (414) 362-6800.
THE COMPANY
The Company developes, markets and supports advanced warehouse management
software solutions. The Company's primary product is the Catalyst (R)
Warehouse Management System, a software application which manages the receiving
putaway, outbound order processes, picking and general warehouse operations.
The Company provides warehouse management software products and support
services to a wide variety of customers, none of which individually comprises
a significant portion of revenues for the Company as a whole.
Additional information regarding the Company, including the audited
financial statements of the Company and a description of the Company' s Common
Stock, is contained in the Incorporated Documents. See "Incorporation of
Certain Documents by Reference."
The principal executive offices of the Company are located at 8989 North
Deerwood Drive, Milwaukee, Wisconsin 53223; its telephone number at such
address is (414) 362-6800.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares by
the Selling Stockholders.
SELLING STOCKHOLDERS
The following information regarding the Common Stock offered hereby has
been provided to the Company by the Selling Stockholders identified below and
reflects information concerning beneficial ownership of Common Stock as of the
date of this Prospectus. All of the shares of Common Stock offered hereby were
acquired by the Selling Stockholders in connection with the Company's
acquisition of Kearney Systems, Inc., a developer of warehouse management
software.
Shares Owned Prior
Name of Selling Stockholder to this Offering(1) Shares Offered Hereby(1)(2)
--------------------------- ------------------- ---------------------------
Robert J. Kearney 66,506 66,506(3)(4)
Ted Noe 39,891 39,891(3)
G. Arthur Herbert, Trustee
of the G. Arthur Herbert
Revocable Trust Dated
12/20/95 13,858 13,858(3)
G.A. Herbert, Trustee,
CEO Advisors Employee
Profit-Sharing Plan 5,540 5,540(3)
John W. Boone, Trustee of
the John W. Boone Inter-
vivos Trust 5,540 5,540(3)
Constantine Pappas 4,986 4,986(3)
Jack A. Kirschenbaum 4,986 4,986(3)
David Bothelho 299 299
P. Thomas Boroughs 220 220
John R. Simpson, Jr. 220 220
Jacqueline R. Griffin 220 220
William A. Grimm 220 220
Thomas F. Kerney 219 219
R. Lee Bennett 219 219
Daniel L. DeCubellis 219 219
Thor MacKenzie 199 199
__________________
(1) Certain of the Shares are subject to the Escrow Agreement dated as of
August 10, 1998 by and among the Company, KSI Acquisition Corp.,
Kearney Systems, Inc., Robert J. Kearney and Godfrey & Kahn, S.C.
(2) Some or all of the Shares covered by this Prospectus may be offered
from time to time on a delayed or continuing basis by a Selling
Stockholder.
(3) Shares subject to the Stock Sale Agreement dated as of August 10, 1998
between the Company and certain of the Selling Stockholders.
(4) Shares subject to the Robert J. Kearney Indemnification and Stock Sale
Agreement dated as of August 10, 1998 among Robert J. Kearney, the
Company, KSI Acquisition Corp. and Kearney Systems, Inc.
PLAN OF DISTRIBUTION
Any distribution of the Shares by certain of the Selling Stockholders, or
by their respective pledgees, donees, transferees or other successors in
interest must be effected pursuant to the Stock Sale Agreement dated as of
August 10, 1998 between the Company and certain of the Selling Stockholders
(the "Agreement"). The Agreement provides that neither the Selling
Stockholders who are parties to the Agreement, nor their respective pledgees,
donees or transferees may transfer Shares during the period beginning August
11, 1998 and ending August 10, 1999 (the "Term"), except through certain
brokers which currently make a market in the Company's Common Stock (the
"Brokers"). The list of Brokers, which may be amended from time to time by
the Company, includes: Kaufman Bros., L.P.; Robertson, Stephens & Company,
L.P. (nka Bancamerica Robertson Stephens); and Cowen & Company (nka SG Cowen
Securities Corp.). The purpose of the Agreement is to minimize disruptions
in the market for the Company's Common Stock which may be caused by certain
sales of the Shares. The Company and the Selling Stockholders believe that
the Brokers, as market makers in the Company's Common Stock, are in the best
position to execute transfers of the Shares in a manner which minimizes the
potential for any such disruptions.
Any distribution of the Shares owned by Robert J. Kearney ("Kearney"), or
his family members, must also be effected pursuant to the Robert J. Kearney
Indemnification and Stock Sale Agreement dated as of August 10, 1998 among
Kearney, the Company, KSI Acquisition Corp. and Kearney Systems, Inc. (the
"Lock-Up Agreement"). The Lock-Up Agreement provides that Kearney may not
transfer more than (i) 25% of his Shares from August 11, 1998 to August 10,
1999 and (ii) 37.5% of his Shares during each period from August 11, 1999 to
August 10, 2000 and from August 11, 2000 to August 10, 2001. Any transfers by
Kearney must be made through the Brokers.
The Brokers may act as principal or agent in transactions (which may
involve crosses and block transactions) on or through the facilities of the
Nasdaq, other exchanges, in the over-the-counter market, in special offerings,
or otherwise, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices, at negotiated prices or at fixed
prices.
A Selling Stockholder, those who are party to the Agreement and any
Brokers, upon effecting the sale of the Shares, may be deemed "underwriters" as
that term is defined by the Securities Act. Brokers participating in such
transactions may receive brokerage commissions or fees.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed Brokers.
All expenses in connection with the registration of the Shares were paid
by the Company. Commissions and fees, if any, attributable to the sale of the
Shares will be borne by the Selling Stockholders. The Selling Stockholders
and/or the Company may agree to indemnify any Broker that participates in
transactions involving sales of the Shares against certain liabilities,
including liabilities arising under the Securities Act.
During the Term and the term of the Lock-Up Agreement, the Selling
Stockholders and Kearney may make certain transfers to family members, to one
specifically designated individual and pursuant to certain transactions
approved by the Company's shareholders. Following the Term and the term of the
Lock-Up Agreement, the Selling Stockholders and Kearney may sell the Shares in
transactions that do not require registration under the Securities Act,
pursuant to Rule 144 under the Securities Act, or otherwise, in lieu of sales
by means of this Prospectus.
LEGAL OPINION
The validity of the Shares offered hereby has been passed upon by Godfrey
& Kahn, S.C.
EXPERTS
The consolidated financial statements of the Company at December 31, 1997
and 1996, and for each of the three years in the period ended December 31,
1997, incorporated by reference in this Prospectus have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report, and are included
herein in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Exchange
Act, and in accordance therewith files reports, proxy and information
statements and other information with the Commission. The Company has filed
with the Commission a Registration Statement under the Securities Act with
respect to the Common Stock offered hereby. This Prospectus does not contain
all the information set forth in the Registration Statement and exhibits
thereto, or amendments thereto, to which reference is hereby made. Such
reports, proxy and information statements, Registration Statement and exhibits
and other information filed by the Company may be inspected and, upon payment
of prescribed fees, copied at the Public Reference Section of the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C. 20549, and
at the Regional Offices of the Commission at 7 World Trade Center, 7th Floor,
New York, New York 10048, and at Suite 1400, Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60661. In addition, copies of such materials may be
obtained from the web site that the Commission maintains at http://www.sec.gov.
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be incurred by
the Company in connection with the distribution of the securities being
registered hereby:
SEC registration fee . . . . . . . . . . . . $ 275
Accounting fees and expenses . . . . . . . . 4,400
Legal fees and expenses . . . . . . . . . . 10,000
Miscellaneous . . . . . . . . . . . . . . . 1,500
-------
TOTAL . . . . . . . . . . . . . . . . . $16,175
=======
All of the above expenses other than the SEC registration fee are
estimates. All of the expenses listed will be paid by the Company.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article VIII of the Amended and Restated By-laws of the Registrant
provides that the Registrant shall indemnify and reimburse expenses of all
directors, officers, employees and agents of the Registrant to the maximum
extent permitted under Section 145 of the Delaware General Corporation Law (the
"DGCL") or any successor provision thereto. Section 145 of the DGCL provides,
in summary, that directors and officers of Delaware corporations such as the
Registrant are entitled, under certain circumstances, to be indemnified against
all expenses and liabilities (including attorneys' fees) incurred by them as a
result of suits brought against them in their capacity as a director or
officer, if they acted in good faith and in a manner they reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, if they had no reasonable cause
to believe their conduct was unlawful; provided, that no indemnification may be
made against expenses in respect of any claim, issue or matter as to which they
shall have been adjudged to be liable to the corporation, unless and only to
the extent that the court in which such action or suit was brought shall
determine upon application that despite the adjudication of liability but in
view of all the circumstances of the case, they are fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
Any such indemnification may be made by the corporation only as authorized in
each specific case upon a determination by stockholders or disinterested
directors that indemnification is proper because the indemnitee has met the
applicable standard of conduct.
Article VII of the Amended and Restated Certificate of Incorporation of
the Registrant eliminates the personal liability of the directors of the
Registrant to the fullest extent permitted under Section 102(b)(7) of the DGCL,
as the same may be amended or supplemented from time to time. Section
102(b)(7) of the DGCL provides that a corporation may eliminate or limit the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for liabilities
arising under Section 174 of the DGCL, or (iv) for any transaction from which
the director derived an improper personal benefit. No such provision shall
eliminate or limit the liability of a director for any act or omission
occurring prior to the date when such provision becomes effective.
The Company's officers and directors currently are covered by officers'
and directors' liability insurance.
ITEM 16. EXHIBITS.
The following Exhibits are filed as part of this Registration Statement.
Exhibit No.
5.1 Opinion of Counsel
23.1 Consent of Independent Auditors
23.2 Consent of Counsel (included in Exhibit 5.1)
24.1 Powers of Attorney
99.1 Stock Sale Agreement dated as of August 10, 1998 by and among
certain of the shareholders of Kearney Systems, Inc. and Catalyst
International, Inc.
99.2 Robert J. Kearney Indemnification and Stock Sale Agreement dated
as of August 10, 1998 among Robert J. Kearney, Catalyst
International, Inc., KSI Acquisition Corp. and Kearney Systems,
Inc.
99.3 Escrow Agreement dated as of August 10, 1998 by and among
Catalyst International, Inc., KSI Acquisition Corp., Kearney
Systems, Inc., Robert J. Kearney and Godfrey & Kahn, S.C.
ITEM 17. UNDERTAKINGS.
*(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement;
(iii) to include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information
in the Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to
the Commission by the Registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
*(b) The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to section 13(a) or section 15(d) of
the Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
*(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
* Paragraph references correspond to those of Item 512 of Regulation S-K.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Milwaukee, State of Wisconsin, on August 26, 1998.
CATALYST INTERNATIONAL, INC.
By: /s/ Sean P. McGowan
---------------------------------------
Sean P. McGowan, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities on the dates indicated.
Signature Title Date
/s/ Sean P. McGowan President, Chief Executive August 26, 1998
- -------------------------- Officer and Director
Sean P. McGowan (Principal Executive Officer)
/s/ Thomas G. Hickinbotham Vice President-Finance & August 26, 1998
- -------------------------- Administration and Chief
Thomas G. Hickinbotham Financial Officer (Principal
Financial and Accounting Officer)
Directors: Roy J. Carver, James F. Goughenour, Douglas B. Coder and
Terrence L. Mealy
By: /s/ Sean P. McGowan August 26, 1998
------------------------
Sean P. McGowan, As Attorney-In-Fact*
* Pursuant to authority granted by powers of attorney which are filed herewith.
EXHIBIT INDEX
5.1 Opinion of Counsel
23.1 Consent of Independent Auditors
23.2 Consent of Counsel (included in Exhibit 5.1)
24.1 Powers of Attorney
99.1 Stock Sale Agreement dated as of August 10, 1998 by and among
certain of the shareholders of Kearney Systems, Inc. and Catalyst
International, Inc.
99.2 Robert J. Kearney Indemnification and Stock Sale Agreement dated
as of August 10, 1998 among Robert J. Kearney, Catalyst
International, Inc., KSI Acquisition Corp. and Kearney Systems,
Inc.
99.3 Escrow Agreement dated as of August 10, 1998 by and among
Catalyst International, Inc., KSI Acquisition Corp., Kearney
Systems, Inc., Robert J. Kearney and Godfrey & Kahn, S.C.
EXHIBIT 5.1
G O D F R E Y & K A H N, S. C.
ATTORNEYS AT LAW
780 NORTH WATER STREET
MILWAUKEE, WI 53202-3590
www.gklaw.com
PHONE: 414-273-3500 FAX: 414-273-5198
August 25, 1998
Catalyst International, Inc.
8989 North Deerwood Drive
Milwaukee, WI 53223
Gentlemen:
We have acted as counsel to Catalyst International, Inc., a Delaware
corporation (the "Company"), in connection with the preparation of a
Registration Statement on Form S-3 to be filed with the Securities and
Exchange Commission on or about August 25, 1998 (the "Registration
Statement"). The Registration Statement relates to the sale by certain
selling shareholders of up to 143,342 shares of the Company's common stock,
$.10 par value (the "Shares").
In connection with this opinion, we have examined: (a) the Registration
Statement, (b) copies of the Company's Certificate of Incorporation and By-
Laws, each as amended to date, (c) certain resolutions of the Company's Board
of Directors, and (d) such other proceedings, documents and records as we have
deemed necessary to enable us to render this opinion.
Based on the foregoing, we are of the opinion that the Shares are duly
issued and validly authorized, fully paid and non-assessable, subject to
Section 180.0622(2)(b) of the Wisconsin Statutes. Section 180.0622(2)(b) of
the Wisconsin Statutes provides that shareholders of a corporation may be
assessed up to the par value of their shares to satisfy the obligations of
such corporation to its employees for services rendered, but not exceeding six
months service in the case of any individual employee. Certain Wisconsin
courts have interpreted "par value" to mean the full amount paid by the
purchaser of shares upon the issuance thereof.
We consent to the use of this opinion as an exhibit in the Registration
Statement. In giving this consent, however, we do not admit that we are
"experts" within the meaning of Section 11 of the Securities Act of 1933, as
amended (the "Act"), or within the category of persons whose consent is
required by Section 7 of the Act.
Very truly yours,
/s/ Godfrey & Kahn, S.C.
GODFREY & KAHN, S.C.
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Catalyst
International, Inc. for the registration of 143,342 shares of its common stock
and to the incorporation by reference therein of our report dated January 24,
1998, with respect to the consolidated financial statements of Catalyst
International, Inc. included in its Annual Report (Form 10-KSB) for the year
ended December 31, 1997, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Milwaukee, Wisconsin
August 21, 1998
EXHIBIT 24.1
DIRECTOR'S POWER OF ATTORNEY
The undersigned director of Catalyst International, Inc. (the "Company")
hereby constitutes and appoints Sean P. McGowan and Thomas G. Hickinbotham,
and each of them, the undersigned's true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for the undersigned
and in the undersigned's name, place and stead, in any and all capacities, to
sign for the undersigned and in the undersigned's name in the capacity as a
director of the Company the Registration Statement on Form S-3 to which this
Power of Attorney is attached, including any amendments thereto, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission and any other
regulatory authority, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully and to all intents
and purposes as the undersigned might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or the undersigned's
substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney,
on this 25th day of August, 1998.
/s/ Roy J. Carver
-----------------------------
Roy J. Carver
DIRECTOR'S POWER OF ATTORNEY
The undersigned director of Catalyst International, Inc. (the "Company")
hereby constitutes and appoints Sean P. McGowan and Thomas G. Hickinbotham,
and each of them, the undersigned's true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for the undersigned
and in the undersigned's name, place and stead, in any and all capacities, to
sign for the undersigned and in the undersigned's name in the capacity as a
director of the Company the Registration Statement on Form S-3 to which this
Power of Attorney is attached, including any amendments thereto, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission and any other
regulatory authority, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully and to all intents
and purposes as the undersigned might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or the undersigned's
substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney,
on this 25th day of August, 1998.
/s/ Sean P. McGowan
----------------------------
Sean P. McGowan
DIRECTOR'S POWER OF ATTORNEY
The undersigned director of Catalyst International, Inc. (the "Company")
hereby constitutes and appoints Sean P. McGowan and Thomas G. Hickinbotham,
and each of them, the undersigned's true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for the undersigned
and in the undersigned's name, place and stead, in any and all capacities, to
sign for the undersigned and in the undersigned's name in the capacity as a
director of the Company the Registration Statement on Form S-3 to which this
Power of Attorney is attached, including any amendments thereto, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission and any other
regulatory authority, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully and to all intents
and purposes as the undersigned might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or the undersigned's
substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney,
on this 25th day of August, 1998.
/s/ James F. Goughenour
-------------------------------
James F. Goughenour
DIRECTOR'S POWER OF ATTORNEY
The undersigned director of Catalyst International, Inc. (the "Company")
hereby constitutes and appoints Sean P. McGowan and Thomas G. Hickinbotham,
and each of them, the undersigned's true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for the undersigned
and in the undersigned's name, place and stead, in any and all capacities, to
sign for the undersigned and in the undersigned's name in the capacity as a
director of the Company the Registration Statement on Form S-3 to which this
Power of Attorney is attached, including any amendments thereto, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission and any other
regulatory authority, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully and to all intents
and purposes as the undersigned might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or the undersigned's
substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney,
on this 25th day of August, 1998.
/s/ Douglas B. Coder
--------------------------------
Douglas B. Coder
DIRECTOR'S POWER OF ATTORNEY
The undersigned director of Catalyst International, Inc. (the "Company")
hereby constitutes and appoints Sean P. McGowan and Thomas G. Hickinbotham,
and each of them, the undersigned's true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for the undersigned
and in the undersigned's name, place and stead, in any and all capacities, to
sign for the undersigned and in the undersigned's name in the capacity as a
director of the Company the Registration Statement on Form S-3 to which this
Power of Attorney is attached, including any amendments thereto, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission and any other
regulatory authority, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully and to all intents
and purposes as the undersigned might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or the undersigned's
substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney,
on this 25th day of August, 1998.
/s/ Terrence L. Mealy
--------------------------------
Terrence L. Mealy
EXHIBIT 99.1
STOCK SALE AGREEMENT
THIS STOCK SALE AGREEMENT (this "Agreement") is made as of this 10th day
of August, 1998, by and among the undersigned shareholders (each a
Shareholder" and collectively, the "Shareholders") and CATALYST INTERNATIONAL,
INC., a Delaware corporation (the "Parent"). Any transferee of a Shareholder
that is a "family member" (as defined below) of such Shareholder shall be
deemed a Shareholder for all purposes of this Agreement.
R E C I T A L S:
A. The Parent, KEARNEY SYSTEMS, INC. (the "Company") and KSI
ACQUISITION CORP. ("Buyer") have entered into an Agreement and Plan
of Merger dated as of the date hereof (the "Merger Agreement") pursuant to
which Buyer, a wholly owned subsidiary of the Parent, is being merged into the
Company (the "Merger").
B. In connection with the closing of the transactions contemplated by
the Merger Agreement, the Shareholders are receiving shares of the Parent's
Common Stock, $.10 par value (collectively, the "Shares") as set forth
opposite their signatures on the signature page hereof.
C. The Shareholders have agreed to limit the transfer of the Shares in
the manner set forth in this Agreement.
In consideration of the mutual promises contained in this Agreement, and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. GENERAL RESTRICTION ON TRANSFER. Except as provided in Sections 2,
3 and 4 below, from the date of this Agreement to, and including, one (1)
calendar year from the date hereof (the "Term"), except as expressly provided
in this Agreement, no Shareholder may Transfer any of the Shares or any
interest in the Shares. For purposes of this Agreement, a "Transfer" by any
Shareholder means any sale, gift, pledge, or other disposition, by voluntary
act of a Shareholder or by operation of law, as a result of which any person
or entity other than such Shareholder acquires or obtains a right to acquire
any interest in or rights in respect of the Shares, except a Transfer shall
not include an issuance of the certificates for the Shares in a street name,
provided that the Shareholder who causes such certificates to be so issued
shall retain beneficial ownership of the Shares. The foregoing restriction is
expressly agreed to preclude the Shareholders from engaging in any hedging or
other transaction designed to or reasonably expected to lead to or result in a
disposition of the Shares during the Term, even if such Shares would be
disposed of by someone other than the Shareholder. Such prohibited hedging or
other transactions include, without limitation, any short sale (whether or not
against the box) or any purchase, sale or grant of any right including,
without limitation, any put or call option, with respect to any Shares or with
respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from the
Shares. Each of the Shareholders further agrees and consents to entry of stop
transfer instructions with the Parent's transfer agent against the Transfer of
the Shares held by such Shareholder except in compliance with this Agreement.
2. PERMITTED TRANSFERS THROUGH CERTAIN BROKERS. During the Term, any
Shareholder may Transfer any or all of such Shareholder's Shares through and
by the services exclusively of one of those certain licensed brokers
identified on the attached Exhibit A hereto, as such list may be amended from
time to time by the Company, effective upon written notice to the
Shareholders, but so long as such lists include at least two brokers. During
the Term, any shareholder may Transfer certain Shares pursuant to the terms of
the Agreement with William Grimm attached hereto as Exhibit C to this
Agreement.
3. TRANSFERS TO FAMILY MEMBERS. During the Term, any Shareholder may
Transfer any or all of such Shareholder's Shares to a Family Member. For
purposes of this Agreement, "Family Member" means such Shareholder's spouse,
ancestor, or descendant (whether by blood or adoption), a spouse of any such
descendant, or any trust for the sole benefit of any one or more of such
individuals. Any Family Member may Transfer any or all of such Shareholder's
Shares to another Family Member of the Shareholder who owned such Shares as of
the date of this Agreement. A Transfer to a Family Member is not effective
until such Family Member executes a document in the form of Exhibit B to this
Agreement by which such Family Member agrees to be bound by the terms of this
Agreement.
4. TRANSFERS IN CONNECTION WITH SHAREHOLDER APPROVED TRANSACTIONS.
During the Term, a Shareholder may Transfer any or all of such Shareholder's
Shares in connection with a transaction approved by a vote of the shareholders
of the Parent. In addition, if a majority of shareholders of the Parent
tender their shares in connection with a tender offer accepted by the Parent,
the Shareholders may tender their Shares in connection with such tender offer.
5. DISPUTE RESOLUTION. All disputes and differences of any kind
arising hereunder which cannot be settled amicably by the parties hereto shall
be settled finally in an arbitration to be conducted in the State of Delaware,
under the then prevailing Commercial Arbitration Rules of the American
Arbitration Association (the "Arbitration Rules"). The arbitration shall be
before one or more neutral arbitrators selected in accordance with the
Arbitration Rules. A decision of any such arbitrator(s) shall be final and
binding on the parties and may be enforced in any court of competent
jurisdiction. No party may seek redress against the other party in any court
or tribunal except solely for the purposes of obtaining execution of any
arbitral award or obtaining a judgment consistent therewith.
6. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter of this Agreement and
supersedes all other prior agreements and understandings, both written and
oral, among the parties with respect to the subject matter of this
Agreement. This Agreement may be amended at any time and from time to time
by a written instrument signed by all of the parties to this Agreement.
7. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties, their personal representatives, successors and
assigns.
8. GOVERNING LAW. The laws of the State of Delaware shall govern this
Agreement and the construction of any of its terms.
9. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
SHAREHOLDERS:
Number of Shares Shareholder Name and Signature
- ---------------- ------------------------------
666,875 /s/ Robert J. Kearney
----------------------------------
Name: Robert J. Kearney
Title: (if applicable)
400,000 /s/ Theodore H. Noe/Ted Noe
----------------------------------
Name: Ted Noe
Title: (if applicable)
138,960 /s/ G. Arthur Herbert
----------------------------------
Name: G. Arthur Herbert, Trustee
Title: (if applicable) Trustee, G. Arthur
Herbert Revocable Trust Dated 12/20/95
SHAREHOLDERS:
Number of Shares Shareholder Name and Signature
- ---------------- ------------------------------
55,560 /s/ G. A. Herbert
------------------------------------
Name: G. A. Herbert
Title: (if applicable) Trustee, G. A.
Herbert, Trustee, CEO Advisors Employee
Profit Sharing Plan
55,560 /s/ John W. Boone Inter-vivos Trust
------------------------------------
Name: John W. Boone
Title: (if applicable) Trustee
50,000 /s/ Constantine Pappas
------------------------------------
Name: Constantine Pappas
Title: (if applicable)
50,000 /s/ Jack A. Kirschenbaum
------------------------------------
Name: Jack A. Kirschenbaum
Title: (if applicable)
PARENT:
CATALYST INTERNATIONAL, INC.
By: /s/ Sean P. McGowan
-------------------------
Sean P. McGowan, President
& Chief Executive Officer
Exhibit A
LIST OF LICENSED BROKERS
Kaufman Bros., L. P.
Robertson, Stephens & Company, L. P.
Cowen & Company
Exhibit B
DOCUMENT TO BE SIGNED BY TRANSFEREE
The undersigned, being a transferee of shares of the common stock of
Catalyst International, Inc. (the "Parent"), hereby agrees to be bound by all
of the terms of a Stock Sale Agreement (the "Agreement") dated August _____,
1998, among the Parent and the Shareholders (as defined in the Agreement).
The undersigned acknowledges that he or she will for all purposes be deemed a
"Shareholder" (as defined in the Agreement) and that the Agreement shall apply
to all Shares of the Company now owned or hereafter acquired by the undersigned.
--------------------------------------
(Signature)
--------------------------------------
(Type or Print Name)
--------------------------------------
(Date)
Exhibit C
AGREEMENT IN SETTLEMENT OF NOTE OBLIGATIONS
This Agreement is made and entered into as of the 6th day of August, 1998,
by and among William A. Grimm ("Mr. Grimm"), Kearney Systems, Inc. ("Kearney
Systems") and Robert J. Kearney ("Mr. Kearney"), Ted Noe ("Mr. Noe"), G. Arthur
Herbert, as Trustee of the G. Arthur Herbert Revocable Trust Dated 12/20/95
(the "Herbert Trust"), G. A. Herbert, as Trustee of the CEO Advisors Employee
Profit-Sharing Plan (the "Herbert Plan"), John W. Boone, as Trustee of the
John W. Boone Inter-vivos Trust (the "Boone Trust"), Constantine Pappas
("Mr. Pappas") and Jack A. Kirschenbaum ("Mr. Kirschenbaum") (Mr. Kearney, Mr.
Noe, the Herbert Trust, the Herbert Plan, the Boone Trust, Mr. Pappas and Mr.
Kirschenbaum are collectively referred to herein as the "Significant Kearney
Systems Shareholders").
W I T N E S S E T H:
WHEREAS, Kearney Systems and the Significant Kearney Systems Shareholders
desire for Kearney Systems to enter into a merger transaction with an
acquisition subsidiary of Catalyst International, Inc. (the "Merger
Transaction"); and
WHEREAS, the parties hereto desire, prior to the consummation of the
Merger Transaction, to enter into this Agreement to satisfy all obligations
owed Mr. Grimm under that certain Series A Convertible Note dated October 12,
1990, made by Kearney Systems in favor of Mr. Grimm in the original principal
amount of $5,000 (the "Note"), on the terms and for the consideration
described herein;
NOW, THEREFORE, in consideration of the mutual promises contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. EFFECTIVE DATE OF THIS AGREEMENT. This Agreement shall become
effective and enforceable only upon the execution of this Agreement by all of
the parties hereto.
2. SATISFACTION OF THE NOTE; AMENDMENT OF CERTAIN DOCUMENTS; CANCELLATION
OF THE NOTE. Immediately upon execution of this Agreement by all of the
parties hereto, the Note shall be deemed satisfied in full and Kearney
Systems shall have no obligations to Mr. Grimm under the Note. Mr. Grimm
hereby amends paragraph 5 of that certain Affidavit of Lost or Misplaced
Series A Convertible Note dated July 31, 1998 (the "Affidavit") by eliminating
the words "Upon conversion of the Note as requested on July 31, 1998" and
substituting in place of such words all of the following: "Upon execution of
that certain Agreement In Settlement of Note Obligations by all of the
parties thereto". Mr. Grimm also amends that certain Assignment of Series A
Convertible Preferred Note dated July 31, 1998 (the "Assignment") by
eliminating the words "upon conversion of the Note" and substituting in place
of such words all of the following: "upon execution of that certain Agreement
In Settlement of Note Obligations by all of the parties thereto". Mr. Grimm
acknowledges that he has delivered to Kearney Systems the executed originals
of the Affidavit and Assignment for the purpose of allowing Kearney Systems
to cancel the Note.
3. DELIVERY OF CATALYST SHARES. Immediately upon receipt of shares of
common stock, par value $.10 per share, of Catalyst International, Inc.
("Catalyst") as a result of consummation of the Merger Transaction, the
Significant Kearney Systems Shareholders agree to transfer to Mr. Grimm, the
following number of shares from each (collectively referred to as the "Catalyst
Shares"):
Significant Kearney Number of Shares of Catalyst
Systems Shareholder to be Transferred to Mr. Grimm
------------------- ------------------------------
Mr. Kearney 469
Mr. Noe 282
Herbert Trust 98
Herbert Plan 39
Boone Trust 39
Mr. Pappas 35
Mr. Kirschenbaum 35
---
TOTAL 997
The Catalyst Shares to be delivered pursuant to the Merger Transaction
will constitute restricted securities and will bear a restrictive legend;
however, Catalyst has agreed to register the Catalyst Shares within 60 days
from the closing date of the Merger Transaction and to maintain a registration
statement covering the Catalyst Shares for a period of one year from the
closing date.
4. REMEDY FOR NON-DELIVERY OF CATALYST SHARES. In the event any
Significant Kearney Systems Shareholder fails to deliver shares to Mr. Grimm
pursuant to this Agreement, and Mr. Grimm takes legal action to enforce said
delivery, such Significant Kearney Systems Shareholder shall reimburse Mr.
Grimm for reasonable attorneys' fees and costs incurred by Mr. Grimm as a
result of such legal action.
5. CLOSING OF THE MERGER TRANSACTION. The obligations of the parties
under this Agreement are contingent upon the closing of the Merger Transaction
before midnight, August 31, 1998. In the event the Merger Transaction has not
closed by said time and date, all obligations of the parties hereunder shall be
null and void as if this Agreement had never been executed by any of them and
the parties are restored to their former positions.
6. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter of this Agreement.
7. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties, their personal representatives, successors and assigns.
8. GOVERNING LAW. The laws of the State of Florida shall govern this
Agreement and the construction of any of its terms.
9. COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. A party hereto
shall be deemed to have executed this Agreement if such party executes a
counterpart copy hereof and then sends same, via telefax, to Winderweedle,
Haines, Ward & Woodman, P.A., Attn: Thomas A. Simser, Jr., telefax number
(407) 423-7014.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
----------------------------------------
WILLIAM A. GRIMM
KEARNEY SYSTEMS, INC.
By:
-------------------------------------
Robert J. Kearney, President
----------------------------------------
ROBERT J. KEARNEY
----------------------------------------
TED NOE
----------------------------------------
G. ARTHUR HERBERT, as Trustee of the
G. Arthur Herbert Revocable Trust Dated
12/20/95
----------------------------------------
G. A. HERBERT, as Trustee of the CEO
Advisors Employee Profit-Sharing Plan
----------------------------------------
JOHN W. BOONE, as Trustee of the John W.
Boone Inter-vivos Trust
----------------------------------------
CONTANTINE PAPPAS
----------------------------------------
JACK A. KIRSCHENBAUM
EXHIBIT 99.2
ROBERT J. KEARNEY INDEMNIFICATION
AND STOCK SALE AGREEMENT
THIS INDEMNIFICATION AND STOCK SALE AGREEMENT (this "Agreement") is made
as of August 10, 1998, by and among ROBERT J. KEARNEY ("Shareholder") (any
transferee of Shareholder that is a "family member" (as defined below) of
Shareholder, shall for all purposes of this Agreement be deemed a Shareholder),
CATALYST INTERNATIONAL, INC., a Delaware corporation (the "Parent"), KSI
ACQUISITION CORP., a Florida corporation and a wholly-owned subsidiary of
Catalyst (the "Buyer") and KEARNEY SYSTEMS, INC., a Florida corporation (the
"Company").
R E C I T A L S:
A. The Company, the Shareholder, the Parent and the Buyer have entered
into an Agreement and Plan of Merger dated as of the date hereof (the "Merger
Agreement") pursuant to which the Buyer, a wholly-owned subsidiary of the
Parent, is being merged into the Company (the "Merger").
B. In connection with the closing of the transactions contemplated by the
Merger Agreement, the Shareholder is receiving Sixty-Six Thousand Five Hundred
and Six (66,506) shares of the Parent's Common Stock, $.01 par value (the
"Kearney Shares")
C. As a condition to the agreement of the Parent to effect the
transactions contemplated by the Merger Agreement, the Shareholder has agreed
to limit the transfer of the Kearney Shares in the manner set forth in this
Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements contained
herein, and the Merger contemplated by the Merger Agreement, the parties hereto
promise and agree as follows.
1. General Restriction on Transfer. Except as provided in Sections 2
and 3, below, during the term (the "Term") commencing on the date of this
Agreement and continuing until the later of (i) three (3) calendar years from
the date hereof, or (ii) the date when any Claim made by the Parent as referred
to in Section 2(b), below, has been resolved or satisfied, the Shareholder may
not Transfer any Kearney Shares or any interest in the Kearney Shares, except
as expressly provided in this Agreement. For purposes of this Agreement, a
"Transfer" by the Shareholder means any sale, gift, pledge, or other
disposition, by voluntary act of the Shareholder or by operation of law, as a
result of which any person or entity other than the Shareholder acquires or
obtains a right to acquire any interest in or rights in respect of the Kearney
Shares, except a Transfer shall not include an issuance of the certificates for
the Shares in a street name, provided that the Shareholder who causes such
certificates to be so issued shall retain beneficial ownership of the Shares.
The foregoing restriction is expressly agreed to preclude the Shareholder from
engaging in any hedging or other transaction designed to or reasonably expected
to lead to or result in a disposition of the Kearney Shares during the Term,
even if the Kearney Shares would be disposed of by someone other than the
Shareholder. Such prohibited hedging or other transactions include, without
limitation, any short sale (whether or not against the box) or any purchase,
sale or grant of any right including, without limitation, any put or call
option, with respect to any Kearney Shares or with respect to any security
(other than a broad based market basket or index) that includes, relates to or
derives any significant part of its value from the Kearney Shares. The
Shareholder further agrees and consents to entry of stop transfer instructions
with the Company's transfer agent against the transfer of the Kearney Shares
held by the Shareholder except in compliance with this Agreement.
2. Permitted Transfers Through Certain Brokers and to Family Members.
(a) During the first year of the Term, the Shareholder may
Transfer up to twenty five percent (25%) of the Kearney Shares either (i)
through and by the services exclusively of one of those certain licensed
brokers identified on the attached Exhibit A hereto (the "Brokers") as
such list may be amended from time to time by the Company or (ii) to a
Family Member, effective upon written notice to the Shareholders, but so
long as such lists include at least two brokers. During the Term, the
Shareholder may Transfer certain of the Kearney Shares pursuant to the
terms of the Agreement with William Grimm attached hereto as Exhibit B
to this Agreement.
(b) During each of the second and third years of the Term, the
Shareholder may Transfer up to thirty seven and one-half percent (37.5%)
of the Kearney Shares either (i) through and by the services exclusively
of one of the Brokers, or (ii) to a Family Member; provided, however,
that to the extent the Parent has notified the Shareholder during the six
(6) month period following the date hereof that the Parent or the Company
is entitled to be indemnified for Losses under the Merger Agreement (for
purposes hereof, such notice shall be deemed a "Claim"), then the
Shareholder shall be prohibited from effecting a Transfer of twenty five
percent (25%) of the Kearney Shares until either (a) the Claim is
resolved or (b) the Claim is satisfied in accordance with the terms of the
Merger Agreement.
(c) For purposes of this Agreement, a "Family Member" means the
Shareholder's spouse, ancestor or descendant (whether by blood or
adoption), a spouse of any such descendant, or any trust for the sole
benefit of any one or more of such individuals. Any Family Member may
Transfer any or all of the Kearney Shares received by such Family Member
to another Family Member of the Shareholder. A Transfer to a Family
Member is not effective until such Family Member executes a document in
the form of Exhibit C to this Agreement by which such Family Member
agrees to be bound by the terms of this Agreement.
3. Transfers in Connection with Shareholder Approved Transactions.
During the Term, the Shareholder may Transfer any or all of the Kearney Shares
in connection with a transaction approved by a vote of the shareholders of the
Parent. In addition, if a majority of shareholders of the Parent tender their
shares in connection with a tender offer accepted by the Parent, the
Shareholder may tender the Kearney Shares in connection with such tender offer.
4. Dispute Resolution. All disputes and differences of any kind
arising hereunder which cannot be settled amicably by the parties hereto shall
be settled finally in an arbitration to be conducted in Orange County in the
State of Florida, under the then prevailing Commercial Arbitration Rules of the
American Arbitration Association (the "Arbitration Rules"). The arbitration
shall be before one or more neutral arbitrators selected in accordance with the
Arbitration Rules. A decision of any such arbitrator(s) shall be final and
binding on the parties and may be enforced in any court of competent
jurisdiction. No party may seek redress against the other party in any court
or tribunal except solely for the purposes of obtaining execution of any
arbitral award or obtaining a judgment consistent therewith.
5. General Provisions.
(a) Entire Agreement. This Agreement, and the provisions of the
Merger Agreement referred to herein, constitute the entire agreement among
the parties with respect to the subject matter of this Agreement and
supersede all other prior agreements and understandings, both written and
oral, among the parties with respect to the subject matter of this
Agreement.
(b) Benefit. This Agreement will be binding upon and inure to the
benefit of the parties, their personal representatives, successors and
assigns.
(c) Amendment. This Agreement may be amended at any time and from
time to time by a written instrument signed by all of the parties to this
Agreement.
(d) Choice of Law, Venue and Jurisdiction. This Agreement shall be
construed, interpreted and the rights of the parties determined in
accordance with the laws of the State of Florida (without reference to the
choice of law provisions of Florida). The parties agree that the sole and
exclusive venue for any lawsuit arising out of or relating to this
Agreement shall be in the Circuit Court of the Ninth Judicial Circuit, in
and for Orange County, Florida. The parties hereby agree to submit to the
jurisdiction of the Circuit Court of the Ninth Judicial Circuit, in and
for Orange County, Florida.
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) Binding Effect. This Agreement shall be binding upon the
parties hereto and their respective successors, assigns and legal
representatives.
(g) Defined Terms. All capitalized terms used in this Agreement,
unless otherwise defined herein, shall be deemed to have the same meanings
assigned to them in the Merger Agreement.
(h) Notices. All notices to be given hereunder shall be deemed to
be given and received if given and received in accordance with Paragraph
9.2 of the Merger Agreement.
IN WITNESS WHEREOF, this Agreement has been executed as of the day, month
and year first above written.
CATALYST:
CATALYST INTERNATIONAL, INC.
By: /s/ Sean P. McGowan
------------------------------
Sean P. McGowan, President
& Chief Executive Officer
BUYER:
KSI ACQUISITION CORP.
By: /s/ Sean P. McGowan
------------------------------
Sean P. McGowan, President
THE COMPANY:
KEARNEY SYSTEMS, INC.
By: /s/ Robert J. Kearney
------------------------------
Robert J. Kearney, President
SHAREHOLDER:
/s/ Robert J. Kearney
-----------------------------------
Robert J. Kearney
Exhibit A
LIST OF LICENSED BROKERS
Kaufman Bros., L. P.
Robertson, Stephens & Company, L. P.
Cowen & Company
Exhibit B
AGREEMENT IN SETTLEMENT OF NOTE OBLIGATIONS
This Agreement is made and entered into as of the 6th day of August, 1998,
by and among William A. Grimm ("Mr. Grimm"), Kearney Systems, Inc. ("Kearney
Systems") and Robert J. Kearney ("Mr. Kearney"), Ted Noe ("Mr. Noe"), G. Arthur
Herbert, as Trustee of the G. Arthur Herbert Revocable Trust Dated 12/20/95
(the "Herbert Trust"), G. A. Herbert, as Trustee of the CEO Advisors Employee
Profit-Sharing Plan (the "Herbert Plan"), John W. Boone, as Trustee of the
John W. Boone Inter-vivos Trust (the "Boone Trust"), Constantine Pappas ("Mr.
Pappas") and Jack A. Kirschenbaum ("Mr. Kirschenbaum") (Mr. Kearney, Mr. Noe,
the Herbert Trust, the Herbert Plan, the Boone Trust, Mr. Pappas and Mr.
Kirschenbaum are collectively referred to herein as the "Significant Kearney
Systems Shareholders").
W I T N E S S E T H:
WHEREAS, Kearney Systems and the Significant Kearney Systems Shareholders
desire for Kearney Systems to enter into a merger transaction with an
acquisition subsidiary of Catalyst International, Inc. (the "Merger
Transaction"); and
WHEREAS, the parties hereto desire, prior to the consummation of the
Merger Transaction, to enter into this Agreement to satisfy all obligations
owed Mr. Grimm under that certain Series A Convertible Note dated October 12,
1990, made by Kearney Systems in favor of Mr. Grimm in the original principal
amount of $5,000 (the "Note"), on the terms and for the consideration described
herein;
NOW, THEREFORE, in consideration of the mutual promises contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. EFFECTIVE DATE OF THIS AGREEMENT. This Agreement shall become
effective and enforceable only upon the execution of this Agreement by all of
the parties hereto.
2. SATISFACTION OF THE NOTE; AMENDMENT OF CERTAIN DOCUMENTS; CANCELLATION
OF THE NOTE. Immediately upon execution of this Agreement by all of the
parties hereto, the Note shall be deemed satisfied in full and Kearney Systems
shall have no obligations to Mr. Grimm under the Note. Mr. Grimm hereby amends
paragraph 5 of that certain Affidavit of Lost or Misplaced Series A Convertible
Note dated July 31, 1998 (the "Affidavit") by eliminating the words "Upon
conversion of the Note as requested on July 31, 1998" and substituting in place
of such words all of the following: "Upon execution of that certain Agreement
In Settlement of Note Obligations by all of the parties thereto". Mr. Grimm
also amends that certain Assignment of Series A Convertible Preferred Note
dated July 31, 1998 (the "Assignment") by eliminating the words "upon
conversion of the Note" and substituting in place of such words all of the
following: "upon execution of that certain Agreement In Settlement of Note
Obligations by all of the parties thereto". Mr. Grimm acknowledges that he
has delivered to Kearney Systems the executed originals of the Affidavit and
Assignment for the purpose of allowing Kearney Systems to cancel the Note.
3. DELIVERY OF CATALYST SHARES. Immediately upon receipt of shares of
common stock, par value $.10 per share, of Catalyst International, Inc.
("Catalyst") as a result of consummation of the Merger Transaction, the
Significant Kearney Systems Shareholders agree to transfer to Mr. Grimm, the
following number of shares from each (collectively referred to as the "Catalyst
Shares"):
Significant Kearney Number of Shares of Catalyst
Systems Shareholder to be Transferred to Mr. Grimm
------------------- ------------------------------
Mr. Kearney 469
Mr. Noe 282
Herbert Trust 98
Herbert Plan 39
Boone Trust 39
Mr. Pappas 35
Mr. Kirschenbaum 35
---
TOTAL 997
The Catalyst Shares to be delivered pursuant to the Merger Transaction will
constitute restricted securities and will bear a restrictive legend; however,
Catalyst has agreed to register the Catalyst Shares within 60 days from the
closing date of the Merger Transaction and to maintain a registration statement
covering the Catalyst Shares for a period of one year from the closing date.
4. REMEDY FOR NON-DELIVERY OF CATALYST SHARES. In the event any
Significant Kearney Systems Shareholder fails to deliver shares to Mr. Grimm
pursuant to this Agreement, and Mr. Grimm takes legal action to enforce said
delivery, such Significant Kearney Systems Shareholder shall reimburse Mr.
Grimm for reasonable attorneys' fees and costs incurred by Mr. Grimm as a
result of such legal action.
5. CLOSING OF THE MERGER TRANSACTION. The obligations of the parties
under this Agreement are contingent upon the closing of the Merger
Transaction before midnight, August 31, 1998. In the event the Merger
Transaction has not closed by said time and date, all obligations of the
parties hereunder shall be null and void as if this Agreement had never been
executed by any of them and the parties are restored to their former positions.
6. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter of this Agreement.
7. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties, their personal representatives, successors and assigns.
8. GOVERNING LAW. The laws of the State of Florida shall govern this
Agreement and the construction of any of its terms.
9. COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. A party hereto
shall be deemed to have executed this Agreement if such party executes a
counterpart copy hereof and then sends same, via telefax, to Winderweedle,
Haines, Ward & Woodman, P.A., Attn: Thomas A. Simser, Jr., telefax number
(407) 423-7014.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
----------------------------------------
WILLIAM A. GRIMM
KEARNEY SYSTEMS, INC.
By:
-------------------------------------
Robert J. Kearney, President
----------------------------------------
ROBERT J. KEARNEY
----------------------------------------
TED NOE
----------------------------------------
G. ARTHUR HERBERT, as Trustee of the
G. Arthur Herbert Revocable Trust Dated
12/20/95
----------------------------------------
G. A. HERBERT, as Trustee of the CEO
Advisors Employee Profit-Sharing Plan
----------------------------------------
JOHN W. BOONE, as Trustee of the John W.
Boone Inter-vivos Trust
----------------------------------------
CONTANTINE PAPPAS
----------------------------------------
JACK A. KIRSCHENBAUM
Exhibit C
DOCUMENT TO BE SIGNED BY TRANSFEREE
The undersigned, being a transferee of shares of the common stock of
Catalyst International, Inc. (the "Parent"), hereby agrees to be bound by
all of the terms of an Indemnification and Stock Sale Agreement (the
"Agreement") dated August _____, 1998, among the Parent, the Shareholder
(as defined in the Agreement) and certain other parties. The undersigned
acknowledges that he or she will for all purposes be deemed a "Shareholder"
(as defined in the Agreement) and that the Agreement will apply to all Kearney
Shares (as defined in the Agreement) now owned or hereafter acquired by the
undersigned.
---------------------------------
(Signature)
---------------------------------
(Type or Print Name)
---------------------------------
(Date)
EXHIBIT 99.3
ESCROW AGREEMENT
THIS AGREEMENT is made and entered into as of the 10th day of August,
1998, by and among CATALYST INTERNATIONAL, INC., a Delaware corporation (the
"Parent"), KSI ACQUISITION CORP., a Florida corporation and a wholly-owned
subsidiary of the Parent ("Buyer"), KEARNEY SYSTEMS, INC., a Florida
corporation (the "Company"), ROBERT J. KEARNEY, individually and as agent of
the former shareholders of the Company, ("Kearney"), and GODFREY & KAHN, S. C.
(the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Parent, Buyer, the Company and Kearney are parties to an
Agreement and Plan of Merger dated as of the date hereof (the "Merger
Agreement"), pursuant to which the Buyer will merge (the "Merger") with and
into the Company, and the Shareholders will receive shares of the Parent's
Common Stock, $.01 par value, ("Common Stock:);
WHEREAS, in connection with the Merger, the parties have agreed that a
portion of the shares of Common Stock will be deposited into escrow with the
Escrow Agent hereunder in order to ensure that the Company performs the
installation and obtains the acceptance by one of the Company's customers of
the Company's Windows NT version of EWARE LS Merger (the "Condition");
WHEREAS, the parties have agreed to execute the agreements, certificates
and other documents required for the Closing on the understanding that the
Escrow Agent will hold and distribute the Escrowed Shares (as hereinafter
defined) in accordance with the terms of this Agreement;
NOW, THEREFORE, in consideration of the covenants and agreements contained
herein, and the Merger contemplated by the Merger Agreement, the parties hereto
promise and agree as follows.
1. DEFINED TERMS. All capitalized terms used in this Agreement, unless
otherwise defined herein, shall be deemed to have the same meanings assigned to
them in the Merger Agreement.
2. CLOSING DATE. The Parent, Buyer, the Shareholder's Agent, and the
Company hereby agree that, regardless of the date on which the Condition is
satisfied, the Closing under the Merger Agreement shall be deemed to have
occurred on the date hereof.
3. ESCROWED PROPERTY. On the date hereof, the Parent and the Company
shall deposit with the Escrow Agent in an account or other depository
designated by the Escrow Agent, stock certificates representing twenty-eight
thousand six hundred sixty-eight (28,668) shares of Common Stock (the
"Certificates'). For purposes hereof, the shares of Common Stock deposited
hereunder shall be referred to as the "Escrowed Shares". The certificate for
the Escrowed Shares shall be in the name of "Godfrey & Kahn, S. C., as Escrow
Agent." The Escrow Agent agrees to hold and disburse the Escrowed Shares in
accordance with the terms and conditions hereinafter set forth.
4. RELEASE OF ESCROWED PROPERTY. On or prior to the second business
day immediately following receipt by the Parent of written notice from one of
the Company's customers of a letter in substantially the form of Exhibit A
attached hereto which confirms that the Condition has been satisfied (the
"Customer Letter"), the Parent and Kearney shall issue a joint direction to the
Escrow Agent to disburse the Escrowed Shares to the former shareholders of the
Company (the "Former Shareholders") as set forth on Schedule 1 of the Letter of
Transmittal. Upon receipt by the Escrow Agent of such joint direction, the
Escrow Agent shall deliver the certificate for the Escrowed Shares to the
Parent's transfer agent and direct such transfer agent to cancel such
certificate and reissue new certificates in the names of the Former
Shareholders and in the amount of shares as specified in Schedule 1 of the
Letter of Transmittal. In the event of a Dispute between the parties as to
satisfaction of the Condition, the Escrow Agent may deposit the Escrowed
Shares with the Circuit Court for Milwaukee County and interplead the Former
Shareholders, the Company, the Buyer and the Parent at any time. Upon deposit
and the filing of such complaint in interpleader, the Escrow Agent shall be
released from all liability under the terms hereof as to the Escrow Shares so
deposited. A Dispute shall be deemed to have occurred if any party to this
Escrow Agreement shall provide written notice of objection to the Escrow Agent
to the release of the Escrowed Shares. The parties hereto do hereby submit
themselves to the jurisdiction of the Milwaukee County Circuit Court.
5. RELEASE OF ESCROWED SHARES IF CONDITION NOT SATISFIED. In the
event the Parent has not received the Customer Letter on or before December
15, 1998, on the first or prior to the second business day following such date,
the Escrow Agent shall deliver the certificate for the Escrowed Shares to the
Parent's transfer agent and direct such transfer to cancel such certificate and
reissue a new certificate in the name of the Company. Upon such reissuance the
Former Shareholder shall have no further right in or to any of the Escrowed
Shares.
6. TERMINATION OF AGREEMENT. This Agreement shall terminate upon
release of the Escrowed Shares in the manner described herein.
7. LIABILITY OF ESCROW AGENT. The Escrow Agent shall be obligated
only to perform the duties described in this Agreement. The Escrow Agent may
rely on any instrument or signature believed by it to be genuine and to have
been signed or presented by the proper party or parties duly authorized to do
so. The Escrow Agent shall not be liable for any action taken or omitted by it
in good faith and believed by it to be authorized, and shall not be liable for
any mistake of fact or error of judgment or for any acts or omissions of any
kind unless caused by the willful misconduct or gross negligence of such Escrow
Agent. The Parent, Buyer, the Company and Kearney each agree to indemnify each
Escrow Agent and to hold each of them harmless from and against any and all
liabilities, losses or expenses incurred by them hereunder or arising out of or
in connection with this Agreement, except in the case of an Escrow Agent's own
willful misconduct or gross negligence (including the reasonable compensation
of and disbursements to its counsel and other advisors and assistants).
8. RESIGNATION OF ESCROW AGENT. The Escrow Agent or any replacement
Escrow Agent hereunder may resign at any time during the term hereof by giving
ten (10) days' written notice of such resignation to the other parties hereto.
Thereafter, the Escrow Agent shall deliver the Escrowed Shares held hereunder
and all dividends or earnings thereon, in the manner set forth in a written
order signed by the Parent, Buyer and the Company, which notice shall be
delivered within ten (10) days after the date of notice of resignation by such
Escrow Agent. If the Escrow Agent does not receive a jointly-executed written
notice within ten (10) days after the date of giving of its notice of
resignation, such Escrow Agent is unconditionally and irrevocably authorized
and empowered to either (i) deliver the Escrowed Shares, to such bank or trust
company which shall consent thereto and which has escrow powers within the City
of Milwaukee, Wisconsin, as the Escrow Agent shall determine in its sole
discretion, and such bank or trust company shall thereafter be the applicable
Escrow Agent hereunder with all powers, rights and duties of the original
resigning Escrow Agent, or (ii) deliver the Escrowed Shares to a court of
competent jurisdiction for disposition by a final order of such court. In
either event, the resigning Escrow Agent shall be relieved from all liabilities
subsequent to its resignation and the occurrence of an event described in
clauses (i) or (ii) of the preceding sentence.
9. NOTICES. All notices under this Agreement shall be in writing and
shall be considered to be sufficiently given and received in all respects when
hand delivered, when sent by prepaid express or courier delivery service, when
sent by facsimile transmission actually received by the receiving equipment or
three (3) days after deposited in the United States mail, certified mail,
postage prepaid, return receipt requested, in each case addressed to the
Parent, Buyer, Kearney and the Company as specified in Section 9.2 of the
Merger Agreement or, if to the Escrow Agent, at the address set forth below, or
to such other address as shall be designated by notice duly given:
Escrow Agent: Godfrey & Kahn, S. C.
780 North Water Street
Milwaukee, Wisconsin 53202
Facsimile: (414) 273-5198
Attention: Mark T. Ehrmann
Whenever a written notice or request is delivered to the Escrow Agent, a copy
thereof shall simultaneously be delivered to all of the parties hereto by the
party giving such notice.
10. CONTINUING REPRESENTATION. The parties acknowledge and agree that
Godfrey & Kahn, S. C. acts and will continue to act as counsel to Buyer and the
Parent. The parties acknowledge and agree that Godfrey & Kahn, S. C. is acting
as Escrow Agent hereunder at the mutual request of the parties and that such
engagement shall not preclude Godfrey & Kahn, S. C. from continuing to
represent Buyer or the Parent in connection with the Merger Agreement or any
other matter, so long as no Dispute has arisen hereunder, and if a Dispute has
arisen, so long as the Escrow Agent releases the Escrowed Shares in
accordance with Section 4 or Section 5 hereof.
11. BINDING EFFECT. This Agreement shall be binding upon the parties
hereto and their respective successors, assigns and legal representatives.
12. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding among the parties relating to the subject matter herein. All
other prior agreements or understandings of the parties are merged herein and
made a part hereof. No amendment, waiver or modification hereto shall be valid
unless in writing and signed by the parties.
13. APPLICABLE LAW. This Agreement and the rights and remedies of the
parties hereto shall be governed by and construed in accordance with the
internal laws of the State of Delaware.
IN WITNESS WHEREOF, this Agreement has been executed as of the day, month
and year first above written.
THE COMPANY: PARENT:
KEARNEY SYSTEMS INC. CATALYST INTERNATIONAL, INC.
By: /s/ Robert J. Kearney, President By: /s/ Sean P. McGowan, President/CEO
---------------------------------- ------------------------------------
(Title) (Title)
KEARNEY: BUYER:
KSI ACQUISITION CORP.
By: /s/ Robert J. Kearney, President By: /s/ Sean P. McGowan, President
--------------------------------- ------------------------------------
Robert J. Kearney (Title) (Title)
ESCROW AGENT:
GODFREY & KAHN, S. C.
By: /s/ Richard J. Bliss, President
-----------------------------------
(Title)
Exhibit A
CUSTOMER LETTER FORM (DRAFT)
Date: _________________________
CATALYST INTERNATIONAL, INC.
Attention: Sean P. McGowan
President and Chief Executive Officer
8789 North Deerwood Drive
Milwaukee, Wisconsin 53223
RE: Our installation of Windows NT version of EWARE LS software
Dear Mr. McGowan:
I am writing you on behalf of ____________________ Customer regarding the
recent successful installation of the Windows NT version of Kearney Systems'
EWARE LS software at our facility in ________________________________________.
We hereby confirm that the software has been successfully installed and is
acceptable to us.
Very truly yours,
_______________________________________
Customer Name
By: ___________________________________