<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 22, 2000
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
COMPUTER ASSOCIATES INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7372 13-2857434
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
COMPUTER ASSOCIATES INTERNATIONAL, INC.
ONE COMPUTER ASSOCIATES PLAZA
ISLANDIA, NEW YORK 11749-7000
(631) 342-5224
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
STEVEN M. WOGHIN, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
COMPUTER ASSOCIATES INTERNATIONAL, INC.
ONE COMPUTER ASSOCIATES PLAZA
ISLANDIA, NEW YORK 11749-7000
(631) 342-5224
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
SCOTT F. SMITH, ESQ.
STEPHEN A. INFANTE, ESQ.
J. D. WEINBERG, ESQ.
COVINGTON & BURLING
1330 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
(212) 841-1000
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this registration statement becomes
effective and upon consummation of the transactions described in the enclosed
prospectus.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) 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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
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. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED (1) REGISTERED (2) PER UNIT (3) OFFERING PRICE (3) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.10 per Share
(including the associated preferred stock
purchase rights)........................... 56,340,000 shares N/A $3,615,625,000 $954,525
</TABLE>
(1) This registration statement relates to securities of the registrant
exchangeable for shares of common stock of Sterling Software, Inc., a
Delaware corporation (Sterling Software), par value $.10 per share (Sterling
Software common stock), and, unless and until redeemed by Sterling Software,
the associated preferred stock purchase rights (Sterling Software rights) in
the exchange offer (the offer) by registrant, through its wholly owned
subsidiary, Silversmith Acquisition Corp., a Delaware corporation
(Silversmith Acquisition Corp.), for all the outstanding shares of Sterling
Software common stock and, unless and until redeemed by Sterling Software,
the associated Sterling Software rights, and in the proposed merger of
Silversmith Acquisition Corp. with and into Sterling Software (the merger).
(2) Based on the maximum number of shares expected to be issued in connection
with the offer and the merger, calculated as the product of (a) 100,000,000,
representing the aggregate number of shares of Sterling Software common
stock outstanding on February 9, 2000 (other than shares owned by Sterling
Software, Silversmith Acquisition Corp. or the registrant) plus the maximum
number of such shares expected to be issued pursuant to outstanding options
prior to the date that the merger is expected to be completed and (b) the
exchange ratio of 0.5634 shares of the registrant's common stock for each
share of Sterling Software common stock.
(3) Estimated solely for the purpose of calculating the registration fee in
accordance with Rules 457(c) and 457(f) under the Securities Act of 1933,
based upon (a) $36.15625, the average of the high and low prices per share
of Sterling Software common stock on February 15, 2000 as reported on the
New York Stock Exchange Composite Transaction Tape, multiplied by
(b) 100,000,000, representing the aggregate number of shares of Sterling
Software common stock outstanding on February 9, 2000 plus the maximum
number of such shares expected to be issued pursuant to outstanding options
prior to the date the merger is expected to be consummated.
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.
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<PAGE>
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 22, 2000
[LOGO]
OFFER TO EXCHANGE EACH OUTSTANDING SHARE OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
STERLING SOFTWARE, INC.
FOR SHARES OF COMMON STOCK OF
COMPUTER ASSOCIATES INTERNATIONAL, INC.
BASED ON THE EXCHANGE RATIO DESCRIBED BELOW
ALONG WITH CASH UNDER THE CIRCUMSTANCES DESCRIBED BELOW
The offer and withdrawal rights will expire at 12:00 midnight, New York City
time, on Monday, March 20, 2000 unless extended. Shares tendered pursuant to
this offer may be withdrawn at any time prior to the expiration of the offer,
but not during any subsequent offering period.
On February 14, 2000, we entered into an Agreement and Plan of Merger with
Sterling Software. The board of directors of Sterling Software has unanimously
approved and declared advisable the merger agreement, determined that the offer
is fair to, and in the best interests of, Sterling Software stockholders and
recommends that Sterling Software stockholders accept the offer and tender their
shares pursuant to the offer.
Through Silversmith Acquisition Corp., our wholly owned subsidiary, we are
offering to exchange 0.5634 shares of Computer Associates common stock
(including the associated preferred stock purchase rights) for each outstanding
share of common stock of Sterling Software that is validly tendered and not
properly withdrawn (the exchange ratio). We will reset the exchange ratio if, at
the time that the waiting periods are cleared under antitrust laws applicable to
the offer and the effectiveness of the registration statement of which this
prospectus is a part has been declared by the SEC, the average of the daily
average of the high and low sales price per share of Computer Associates common
stock on the New York Stock Exchange ("NYSE") Composite Transaction Tape over
the ten trading days immediately preceding the first day on which we have
obtained all those regulatory clearances (which we call the "average Computer
Associates trading price") is greater than $77.12 or less than $63.10.
If at the end of that ten trading day period the average Computer Associates
trading price is greater than $77.12, then the number of shares of Computer
Associates common stock that we are offering to exchange for each share of
Sterling Software common stock will be reset to be $43.45 divided by the average
Computer Associates trading price. If at the end of the ten trading day period
the average Computer Associates trading price is less than $63.10, then the
number of shares of Computer Associates common stock that we are offering to
exchange for each share of Sterling Software common stock will be reset to be
$35.55 divided by the average Computer Associates trading price. If the average
Computer Associates trading price is less than $63.10, we have the option when
we reset the exchange ratio to reduce it by paying some cash in substitute for
Computer Associates shares. The maximum amount of cash for each Sterling
Software share that we may substitute for Computer Associates shares in that
case is the amount by which the average Computer Associates trading price
multiplied by the exchange ratio of 0.5634 falls short of $35.55. If we choose
to elect the cash option, the exchange ratio will be reset to be the portion of
$35.55 that we are not paying in cash, divided by the average Computer
Associates trading price. Following the consummation of the offer, we intend to
cause Silversmith Acquisition Corp. to merge with Sterling Software subject to
the satisfaction or waiver of conditions to the merger. In the merger, each
share of Sterling Software common stock will be converted into the right to
receive the same number of Computer Associates shares (and same amount of cash,
if any) per Sterling Software share as is paid in the offer, subject to any
applicable appraisal rights.
Our obligation to exchange Computer Associates common stock for Sterling
Software common stock is subject to the conditions listed under "The
Offer--Conditions of the Offer." Computer Associates common stock trades on the
NYSE under the symbol "CA". Sterling Software common stock trades on the NYSE
under the symbol "SSW."
SEE "RISK FACTORS" BEGINNING ON PAGE 23 FOR A DISCUSSION OF CERTAIN FACTORS
THAT YOU SHOULD CONSIDER IN CONNECTION WITH THE OFFER.
<PAGE>
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY. Any solicitation of proxies will be made only pursuant to separate proxy
solicitation materials complying with the requirements of Section 14(a) of the
Securities Exchange Act of 1934.
------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is February , 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
QUESTIONS AND ANSWERS ABOUT THE PROPOSED COMBINATION........ 3
WHERE YOU CAN FIND MORE INFORMATION......................... 7
SUMMARY..................................................... 9
The Companies............................................. 9
The Proposed Combination.................................. 10
Reasons for the Proposed Combination...................... 10
Support of Sterling Software's Board of Directors and
Management.............................................. 11
The Offer................................................. 11
Risk Factors.............................................. 16
Market Prices of Computer Associates and Sterling Software
Common Stock............................................ 16
Material Federal Income Tax Consequences.................. 17
Selected Historical Consolidated Financial Data of
Computer Associates and Selected Unaudited Pro Forma
Combined Financial Data of Computer Associates and
Sterling Software....................................... 18
Selected Historical Consolidated Financial Data of
Sterling Software....................................... 19
Comparative Per Share Information......................... 21
Ratio of Earnings to Fixed Charges........................ 22
RISK FACTORS................................................ 23
THE COMPANIES............................................... 26
Computer Associates International, Inc.................... 26
Silversmith Acquisition Corp.............................. 26
Sterling Software, Inc.................................... 27
BACKGROUND OF THE OFFER..................................... 28
THE OFFER................................................... 30
Basic Terms............................................... 30
Timing of the Offer....................................... 32
Extension, Termination and Amendment...................... 33
Exchange of Sterling Software Shares; Delivery of Computer
Associates Common Stock................................. 33
Cash Instead of Fractional Shares of Computer Associates
Common Stock............................................ 34
Withdrawal Rights......................................... 34
Procedure for Tendering................................... 35
Purpose of the Offer; The Merger; Appraisal Rights........ 38
Conditions of the Offer................................... 39
Regulatory Approvals...................................... 42
Certain Effects of Offer.................................. 42
Source and Amount of Funds................................ 43
Relationships with Sterling Software...................... 43
Accounting Treatment...................................... 44
Fees and Expenses......................................... 44
Stock Exchange Listings................................... 44
THE MERGER AGREEMENT AND THE TENDER AGREEMENT............... 45
The Merger Agreement...................................... 45
The Offer............................................... 45
The Merger.............................................. 45
Effective Time of the Merger............................ 46
Additional Effects of the Merger........................ 46
Exchange Agent; Procedures for Exchange of
Certificates........................................... 46
Sterling Software Board of Directors.................... 47
Other Provisions........................................ 47
The Tender Agreement...................................... 56
Parties................................................. 56
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Agreement to Tender..................................... 56
Proxy................................................... 57
No Solicitation......................................... 57
Termination............................................. 57
CHANGE OF CONTROL SEVERANCE AGREEMENTS...................... 58
MATERIAL FEDERAL INCOME TAX CONSEQUENCES.................... 59
MARKET PRICES AND DIVIDENDS................................. 66
FINANCIAL PROJECTIONS....................................... 67
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION............................................... 69
DESCRIPTION OF COMPUTER ASSOCIATES CAPITAL STOCK............ 75
Authorized Capital Stock.................................. 75
Computer Associates Common Stock.......................... 75
Transfer and Dividend Paying Agent and Registrar.......... 75
COMPARISON OF RIGHTS OF HOLDERS OF COMPUTER ASSOCIATES
SHARES AND STERLING SOFTWARE SHARES....................... 76
Comparison of Charter and By-law Provisions............... 76
Summary of Certain Statutory Provisions................... 82
FORWARD-LOOKING STATEMENTS.................................. 84
LEGAL MATTERS............................................... 84
EXPERTS..................................................... 85
ANNEX A DIRECTORS AND EXECUTIVE OFFICERS OF COMPUTER
ASSOCIATES......................................... A-1
DIRECTORS AND OFFICERS OF SILVERSMITH ACQUISITION
CORP............................................. A-3
</TABLE>
THIS PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION
ABOUT COMPUTER ASSOCIATES THAT IS NOT INCLUDED IN OR DELIVERED WITH THIS
PROSPECTUS. THAT INFORMATION IS AVAILABLE WITHOUT CHARGE TO YOU UPON WRITTEN OR
ORAL REQUEST. YOU MUST ADDRESS YOUR REQUEST TO INVESTOR RELATIONS, COMPUTER
ASSOCIATES INTERNATIONAL, INC., ONE COMPUTER ASSOCIATES PLAZA, ISLANDIA, NEW
YORK 11749-7000. TO OBTAIN TIMELY DELIVERY, YOU MUST REQUEST THE INFORMATION NO
LATER THAN MARCH 13, 2000.
THIS PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION
ABOUT STERLING SOFTWARE THAT IS NOT INCLUDED IN OR DELIVERED WITH THIS
PROSPECTUS. THAT INFORMATION IS AVAILABLE WITHOUT CHARGE TO YOU UPON WRITTEN OR
ORAL REQUEST. YOU MUST ADDRESS YOUR REQUEST TO INVESTOR RELATIONS, STERLING
SOFTWARE, INC., 300 CRESCENT COURT, SUITE 1200, DALLAS, TEXAS 75201. TO OBTAIN
TIMELY DELIVERY, YOU MUST REQUEST THE INFORMATION NO LATER THAN MARCH 13, 2000.
2
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE PROPOSED COMBINATION
Q: WHAT ARE COMPUTER ASSOCIATES AND STERLING SOFTWARE PROPOSING?
A: We have entered into a merger agreement with Sterling Software pursuant to
which we are offering, through Silversmith Acquisition Corp., a wholly owned
subsidiary of Computer Associates, to exchange shares of Computer Associates
common stock and the associated preferred stock purchase rights and possibly
some cash at our election under the circumstances described in the next
answered question for each outstanding share of Sterling Software common
stock and associated preferred stock purchase rights. After the offer is
completed, Silversmith Acquisition Corp. will merge with Sterling Software.
As a result of the offer and the merger, Sterling Software will become a
wholly owned subsidiary of Computer Associates.
Q: WHAT WOULD I RECEIVE IN EXCHANGE FOR MY STERLING SOFTWARE SHARES?
A: We are offering to exchange 0.5634 shares of Computer Associates common stock
for each outstanding share of common stock of Sterling Software that is
validly tendered and not properly withdrawn. This exchange ratio will be
reset if, at the time that the waiting periods are cleared under antitrust
laws applicable to the offer and the SEC has declared effective the
registration statement of which this prospectus is a part, the average
Computer Associates trading price is less than $63.10 or greater than
$77.12. We may elect to pay you some cash in exchange for your Sterling
Software shares if the average Computer Associates trading price is below
$63.10 at the time the exchange ratio is reset. The formula for resetting
the exchange ratio and setting the range of the cash amount that we may
choose to pay to you is summarized on the front cover of this prospectus and
is explained in more detail under "The Offer--Basic Terms" beginning on
page 30.
For more information on how the exchange ratio works and certain inherent
risks, it is important for you to read the detailed information contained in
the "Summary" beginning on page 9, "Risk Factors" beginning on page 23 and
"The Offer" beginning on page 30.
Q: HOW CAN I FIND OUT THE FINAL EXCHANGE RATIO?
A: We will notify you by issuing a press release announcing the final exchange
ratio and filing that press release with the SEC. The press release will
state how much cash, if any, we have elected to pay in partial consideration
for your Sterling Software shares under the cash option, if we exercise it.
Sterling Software stockholders can call our information agent, MacKenzie
Partners, Inc., at any time toll free at (800) 322-2885 for the average
Computer Associates trading price for the preceding ten trading days and the
exchange ratio that would be in effect based on that price (assuming we do
not choose the cash option) and for the exchange ratio, as it may be reset,
and any cash payable pursuant to the offer. For more information on the
exchange ratio and for a table setting forth a range of average Computer
Associates trading prices, the resulting exchange ratio and illustrations of
the value you would receive for your Sterling Software shares, please see
"The Offer" beginning on page 30.
Q: HOW LONG WILL IT TAKE TO COMPLETE THE OFFER AND THE MERGER?
A: We hope to complete the offer by March 31, 2000, which is the end of our
fiscal year, or soon thereafter. We expect to complete the merger shortly
after we complete the offer.
Q: WILL I HAVE TO PAY ANY FEES OR COMMISSIONS?
A: If you are the record owner of your shares and you tender your shares in the
offer, you will not have to pay brokerage fees or incur similar expenses. If
you own your shares through a broker or other nominee, and your broker
tenders the shares on your behalf, your broker may charge you a fee for
doing so. You should consult your broker or nominee to determine whether any
charges will apply.
3
<PAGE>
Q: DOES STERLING SOFTWARE SUPPORT THE OFFER AND THE MERGER?
A: Yes. Sterling Software's board of directors has unanimously determined that
the offer is fair to, and in the best interests of, Sterling Software
stockholders, and recommends that Sterling Software stockholders accept the
offer and tender their shares pursuant to the offer. Sterling Software's
board of directors has unanimously approved and declared advisable the
merger agreement and the merger. Information about the recommendation of
Sterling Software's board of directors is more fully set forth in Sterling
Software's Solicitation/Recommendation Statement on Schedule 14D-9, which is
being mailed to Sterling Software stockholders together with this
prospectus.
Q: HAS STERLING SOFTWARE RECEIVED A FAIRNESS OPINION IN CONNECTION WITH THE
OFFER AND THE MERGER?
A: Yes. Sterling Software has received an opinion from Goldman, Sachs & Co.
dated February 14, 2000 substantially to the effect that, as of such date,
the consideration to be received by Sterling Software stockholders pursuant
to the merger agreement is fair from a financial point of view to the
stockholders of Sterling Software. The opinion is attached as an exhibit to
Sterling Software's Schedule 14D-9, which is being mailed to the
stockholders of Sterling Software with this prospectus.
Q: HAVE ANY STERLING SOFTWARE STOCKHOLDERS AGREED TO TENDER THEIR SHARES?
A: Yes. Stockholders of Sterling Software, who we understand consist of all of
its directors and senior executive officers and who collectively own
outstanding shares representing approximately 2.4% of the fully-diluted
common stock of Sterling Software as of February 9, 2000, have agreed to
tender their shares in the offer.
Q: WHAT PERCENTAGE OF COMPUTER ASSOCIATES COMMON STOCK WILL STERLING SOFTWARE
STOCKHOLDERS OWN AFTER THE OFFER AND THE MERGER?
A: If we obtain all of the shares of Sterling Software pursuant to the offer and
the merger, former stockholders of Sterling Software would own approximately
8% of the shares of common stock of Computer Associates, based upon the
number of shares of Computer Associates common stock outstanding on
February 7, 2000 and of Sterling Software common stock outstanding on
February 9, 2000, assuming that the exchange ratio is not reset.
Q: WHAT ARE THE CONDITIONS TO THE OFFER?
A: The offer is subject to several conditions, including:
- a majority of the outstanding Sterling Software shares, on a fully-diluted
basis, having been tendered and not withdrawn
- waiting periods under applicable antitrust laws having expired or been
terminated
- the registration statement of which this prospectus is a part having been
declared effective by the SEC and
- Sterling Software having not breached any covenant, representation or
warranty in a material manner.
These conditions and other conditions to the offer are discussed in this
prospectus under "The Offer--Conditions of the Offer" beginning on page 39.
4
<PAGE>
Q: HOW DO I PARTICIPATE IN THE OFFER?
A: To tender your shares, you should do the following:
- If you hold your shares in your own name, complete and sign the enclosed
letter of transmittal and return it with your share certificates to
ChaseMellon Shareholder Services L.L.C., the depositary for the offer at
one of its addresses on the back cover of this prospectus.
- If you hold your shares in "street name" through a broker, ask your broker
to tender your shares.
- For more information on the timing of the offer, extensions of the offer
period and your rights to withdraw your shares from the offer before the
expiration date, please refer to "The Offer" beginning on page 30.
Q: WILL I BE TAXED ON THE COMPUTER ASSOCIATES SHARES I RECEIVE?
A: If the offer and the merger are consummated pursuant to the current terms of
the merger agreement, and if Sterling Software either continues its software
business or continues to use a significant portion of its software assets in
its business and if Sterling Software stockholders receive from Computer
Associates only Computer Associates shares in exchange for Sterling Software
shares, without regard to any cash received in lieu of a fraction of a
Computer Associates share, then the offer and the merger should be tax free
to you, except to the extent that you receive any cash in lieu of a fraction
of a Computer Associates share. However, the determination of whether the
exchange of Sterling Software shares for Computer Associates shares pursuant
to the offer or the merger, or both, will be tax free depends upon facts and
circumstances that will not be known prior to the consummation of the offer
and the merger, including:
- whether the merger will be consummated
- whether the offer and the merger will be treated as a single integrated
transaction or as two separate transactions for federal income tax
purposes
- whether after the consummation of the offer and merger, Sterling Software
will either continue its software business or continue to use a
significant portion of its software assets in its business
- what percentage of the total number of outstanding Sterling Software
shares will be held by Computer Associates immediately after the
consummation of the offer and
- what percentage of the aggregate amount of consideration received from
Computer Associates in exchange for Sterling Software shares will consist
of Computer Associates shares.
The tax consequences that will apply to you in connection with the offer and
the merger will also depend on your particular circumstances. For a more
detailed discussion of the tax consequences of the offer and the merger, see
"Material Federal Income Tax Consequences" beginning on page 59. You are
urged to consult your tax advisors for a full understanding of these tax
consequences.
Q: DO THE STATEMENTS ON THE COVER PAGE REGARDING THIS PROSPECTUS BEING
INCOMPLETE AND THE REGISTRATION STATEMENT FILED WITH THE SEC NOT YET BEING
EFFECTIVE MEAN THAT THE OFFER HAS NOT COMMENCED?
A: No. The offer has commenced and completion of this prospectus and
effectiveness of the registration statement are not necessary for you to
tender Sterling Software shares. The SEC recently changed its rules to
permit exchange offers to begin before the related registration statement
has become effective, and we are taking advantage of the rule changes with
the goal of combining Computer Associates and Sterling Software faster than
similar combinations could
5
<PAGE>
previously be accomplished. We cannot, however, accept any shares tendered
in the offer until the registration statement is declared effective by the
SEC.
Q: IS COMPUTER ASSOCIATES' FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER
MY SHARES IN THE OFFER?
A: Yes. Shares of Sterling Software accepted in the offer will be exchanged for
shares of Computer Associates and so you should consider our financial
condition before you decide to become one of our stockholders through the
offer. In considering Computer Associates' financial condition, you should
review the documents incorporated by reference in this prospectus, because
they contain detailed business, financial and other information about us.
Q: ARE COMPUTER ASSOCIATES' CASH RESOURCES RELEVANT TO MY DECISION TO TENDER MY
SHARES IN THE OFFER?
A: If our right to exercise the cash election is triggered and we choose to
exercise the election, we do not expect the amount of cash payable to exceed
an amount that we would have in our general corporate funds.
Q: WHERE CAN I FIND MORE INFORMATION ABOUT COMPUTER ASSOCIATES AND STERLING
SOFTWARE?
A: You can find more information about Computer Associates and Sterling Software
as described under "Where You Can Find More Information" on page 7.
Q: WHAT SHOULD I DO IF I HAVE QUESTIONS?
A: If you have any questions about the offer or the proposed combination of
Computer Associates and Sterling Software, please call our information
agent, MacKenzie Partners, Inc., toll-free at (800) 322-2885.
6
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Computer Associates and Sterling Software file annual, quarterly and special
reports, proxy statements and other information with the Securities and Exchange
Commission (the SEC). You may read and copy any reports, statements or other
information we file at the SEC's public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549, or at the SEC's public reference rooms in New
York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public from commercial document retrieval services and at the
Internet world wide web site maintained by the SEC at www.sec.gov. Computer
Associates filed a registration statement on Form S-4 to register with the SEC
the shares of Computer Associates common stock to be issued pursuant to the
offer and the merger. This prospectus is a part of that registration statement.
As allowed by SEC rules, this prospectus does not contain all the information
you can find in the registration statement or the exhibits to the registration
statement.
We also filed with the SEC a statement on Schedule TO pursuant to
rule 14d-3 under the Securities Exchange Act of 1934 furnishing certain
information about the offer. You may read and copy the Schedule TO and any
amendments to it at the SEC's public reference rooms referred to above.
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this prospectus, except for
any information superseded by information contained directly in this prospectus.
This prospectus incorporates by reference the documents set forth below that
Computer Associates or Sterling Software have previously filed with the SEC.
These documents contain important information about Computer Associates and
Sterling Software and their financial condition.
DOCUMENTS INCORPORATED BY REFERENCE ARE AVAILABLE WITHOUT CHARGE UPON
REQUEST TO: INVESTOR RELATIONS, COMPUTER ASSOCIATES INTERNATIONAL, INC., ONE
COMPUTER ASSOCIATES PLAZA, ISLANDIA, NEW YORK 11749-7000. IN ORDER TO ENSURE
TIMELY DELIVERY, ANY REQUEST FOR DOCUMENTS SHOULD BE SUBMITTED NO LATER THAN
MARCH 13, 2000.
The following documents filed by Computer Associates with the SEC are hereby
incorporated by reference:
- Annual Report on Form 10-K for the fiscal year ended March 31, 1999, which
contains consolidated financial statements beginning on page 21 of the
report
- Proxy Statement for the Annual Meeting of Stockholders held on August 25,
1999
- Quarterly Reports on Form 10-Q for the periods ended June 30, 1999,
September 30, 1999 and December 31, 1999, which each contain consolidated
financial statements beginning on page 1 of the report
- Current Reports on Form 8-K or 8-K/A filed June 14, 1999, June 18, 1999,
July 2, 1999 and November 22, 1999
- Forms 8-A filed February 17, 1982 and August 25, 1986, which in turn
incorporate by reference the description of Computer Associates common
stock, par value $.10 per share, in Computer Associates' registration
statement on Form S-1 (Registration No. 2-74618) filed under the
Securities Act and
- Current Report on Form 8-K filed June 18, 1991 and the portion of the
Annual Report on Form 10-K for the fiscal year ended March 31, 1995
amending that Form 8-K, which includes a description of our preferred
stock purchase rights associated with our common stock.
7
<PAGE>
The following documents filed by Sterling Software with the SEC are hereby
incorporated by reference:
- Annual Report on Form 10-K for the fiscal year ended September 30, 1999,
as amended by the Form 10-K/A dated January 28, 2000
- Proxy Statement for the Annual Meeting of Stockholders held on March 31,
1999
- Quarterly Report on Form 10-Q for the period ended December 31, 1999
- Current Report on Form 8-K dated February 18, 2000 and
- Form 8-A/A filed on May 27, 1998, which supersedes in its entirety the
Form 8-A filed on March 7, 1990, with respect to the shares of common
stock, par value $.10 per share, of Sterling Software, and Forms 8-A and
8-A/A filed December 18, 1996, April 3, 1998 and February 17, 2000 with
respect to the preferred stock purchase rights of Sterling Software.
All documents filed by Computer Associates or Sterling Software pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 from
the date of this prospectus to the date that shares are accepted for exchange
pursuant to the offer (or the date that the offer is terminated) and, if later,
until the earlier of the day a meeting of the Sterling Software stockholders to
approve the merger is held and the day on which the merger is consummated shall
also be deemed to be incorporated in this prospectus by reference.
8
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS, AND MAY
NOT CONTAIN ALL THE INFORMATION THAT IS IMPORTANT TO YOU. TO BETTER UNDERSTAND
THE OFFER AND THE PROPOSED MERGER, YOU SHOULD READ THIS ENTIRE DOCUMENT
CAREFULLY, AS WELL AS THOSE ADDITIONAL DOCUMENTS TO WHICH WE REFER YOU. SEE
"WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 7.
THE COMPANIES
COMPUTER ASSOCIATES INTERNATIONAL, INC.
One Computer Associates Plaza
Islandia, New York 11749-7000
(631) 342-5224
Computer Associates is a leading provider of enterprise management,
information management and business applications software products for use on a
variety of hardware platforms. Because of its independence from hardware
manufacturers, Computer Associates has been able to offer products for use on
most of the existing major operating systems and application development
environments. Computer Associates licenses and supports more than 600 integrated
products for both the mainframe and client/server environments. Computer
Associates is currently the third largest independent vendor in the software
industry and services a blue-chip client list of approximately 90% of the
Fortune 500. No single customer represents more than 5% of Computer Associates'
annual revenues. Approximately 40% of Computer Associates' revenues were
generated outside of North America in fiscal year 1999.
In May 1999, Computer Associates acquired Platinum TECHNOLOGY International,
INC. Platinum was engaged in providing software products in the areas of
database management, e-commerce, application infrastructure management, decision
support, data warehousing and knowledge management.
During fiscal year 1999, Computer Associates formed a professional services
organization now known as CA Services to expand its service offerings on behalf
of clients and partners around the world. CA Services offers a broad spectrum of
services ranging from consulting to implementation to comprehensive outsourcing
and custom developing leading-edge information technology (IT) solutions. CA
Services offers services both in support of and independent of Computer
Associates products.
Computer Associates' believes its software applications are among the most
sophisticated software products on the market. Enterprise management,
information management and business applications software are critical to
keeping large computer systems and databases running. As a result, companies do
not routinely switch to another vendor's products. This helps create a stable
base of revenue from software upgrades, expansion of license rights and
maintenance. On average, Computer Associates' customers have been licensing
software from the company for approximately eight years, and the average
mainframe and midrange client of the company licenses 16 separate software
products.
As of December 31, 1999, Computer Associates had approximately 18,000
employees in 195 offices worldwide.
For the fiscal year ended March 31, 1999, Computer Associates reported
revenues of $5.3 billion and net income of $626 million (11.9% of revenues).
9
<PAGE>
SILVERSMITH ACQUISITION CORP.
c/o Computer Associates International, Inc.
One Computer Associates Plaza
Islandia, New York 11749-7000
(631) 342-5224
Silversmith Acquisition Corp. is a wholly owned subsidiary of Computer
Associates. Silversmith Acquisition Corp. was organized on February 11, 2000 for
the purposes of acquiring the Sterling Software shares tendered in the offer and
merging with Sterling Software in the merger. It has not carried on any
activities other than in connection with the merger agreement.
STERLING SOFTWARE, INC.
300 Crescent Court, Suite 1200
Dallas, Texas 75201
(214) 981-1000
Sterling Software is a worldwide developer and provider of systems
management, business intelligence and application development software products
and services, as well as a supplier of specialized IT services for sectors of
the federal government. Founded in 1981, Sterling Software's customers include
approximately 90% of the Fortune 100 and encompass a worldwide installed base of
more than 20,000 customer sites. Sterling Software operates through four
principal business segments: systems management, application development,
business intelligence and federal systems. Worldwide revenue from Sterling
Software's systems management, application development, business intelligence
and federal systems business segments represented 36%, 34%, 10% and 20%,
respectively, of Sterling Software's total fiscal year 1999 revenues.
Approximately 37% of Sterling Software's revenues were generated outside of the
United States in fiscal year 1999.
As of December 31, 1999, Sterling Software employed approximately 3,800
employees in 90 offices worldwide. Sterling Software has direct sales offices in
21 countries and distributors and agents in approximately 40 additional
countries.
Sterling Software reported $807 million in revenues for the fiscal year
ended September 30, 1999.
THE PROPOSED COMBINATION
Computer Associates and Sterling Software have entered into a merger
agreement pursuant to which we are making this offer through Silversmith
Acquisition Corp., our wholly owned subsidiary. After the offer is completed,
Silversmith Acquisition Corp. will be merged with Sterling Software, subject to
satisfaction or waiver of the conditions to the merger. As a result of the offer
and the merger, Sterling Software will become a wholly owned subsidiary of
Computer Associates. The merger agreement is filed as an exhibit to the
registration statement of which this prospectus is a part and is incorporated by
reference in this prospectus. We encourage you to read the merger agreement. It
is the principal document governing the merger. See "The Offer" beginning on
page 30 and "The Merger Agreement and the Tender Agreement" beginning on
page 45.
REASONS FOR THE PROPOSED COMBINATION
We believe that the proposed combination of Computer Associates and Sterling
Software will produce the following benefits:
- ACCESS TO NEW PRODUCT AREAS. Sterling Software's disk storage management
and object oriented application development tools provide Computer
Associates with technology to complement its existing enterprise
management solutions.
10
<PAGE>
- INCREASED DIVERSIFICATION INTO NEW MARKETS. The combination of Computer
Associates and Sterling Software provides the combined entity with the
opportunity for diversification into new markets and access to new
customers.
- INCREASED MARKET PRESENCE AND OPPORTUNITIES. The combination of Computer
Associates and Sterling Software provides the combined entity with
increased market presence and opportunities for growth that will allow it
to be better able to respond to the needs of customers, the increased
competitiveness of the marketplace and opportunities that changes in the
market might bring.
- PRODUCT MIX. The complementary nature of Computer Associates' and Sterling
Software's products will benefit clients of both companies.
- OPERATING EFFICIENCIES. The combination of Computer Associates and
Sterling Software provides the opportunity for potential economies of
scale and cost savings.
The reasons for the Sterling Software board's recommendation are set forth
in Sterling Software's Solicitation/Recommendation Statement on Schedule 14D-9.
SUPPORT OF STERLING SOFTWARE'S BOARD OF DIRECTORS AND MANAGEMENT
Sterling Software's board of directors has unanimously determined that the
offer is fair to, and in the best interests of, Sterling Software stockholders,
and recommends that Sterling Software stockholders accept the offer and tender
their shares pursuant to the offer. Sterling Software's board of directors has
unanimously approved and declared advisable the merger agreement and the merger.
Information about the recommendation of Sterling Software's board of directors
is more fully set forth in Sterling Software's Solicitation/Recommendation
Statement on Schedule 14D-9, which is being mailed to Sterling Software
stockholders together with this prospectus.
The merger requires the affirmative vote of at least a majority of the
shares of Sterling Software common stock outstanding on the record date for the
meeting to approve the merger, unless we have acquired 90% or more of such
outstanding shares in which case the merger can be accomplished without a vote.
If the minimum tender condition is satisfied and we purchase the tendered
Sterling Software shares, approval of the merger by Sterling Software
stockholders will be assured, subject to the other conditions to the merger. As
of February 9, 2000, directors and executive officers of Sterling Software owned
and were entitled to vote 2,490,550 outstanding shares of Sterling Software
common stock, which represented approximately 2.4% of the fully-diluted common
stock of Sterling Software, according to Sterling Software. These directors and
senior executive officers have agreed to tender their shares in the offer. See
"The Merger Agreement and the Tender Agreement--The Tender Agreement."
THE OFFER
SUMMARY OF THE OFFER
EXCHANGE OF SHARES; EXCHANGE RATIO. We are offering to exchange 0.5634
shares of Computer Associates common stock for each outstanding share of
Sterling Software common stock that is validly tendered and not properly
withdrawn. We sometimes refer to this number of Computer Associates shares (as
it may be adjusted) as the "exchange ratio."
ADJUSTMENTS TO EXCHANGE RATIO. We will reset the exchange ratio if, at the
time that the offer has cleared waiting periods under applicable antitrust laws
and the SEC has declared effective the registration statement of which this
prospectus is a part, the average of the daily average of the high and low sales
price per share of Computer Associates common stock on the NYSE Composite
Transaction Tape over the ten trading days immediately preceding the first day
on which we have obtained all those regulatory clearances, which we call the
"average Computer Associates trading price," is greater than $77.12 or less than
$63.10.
11
<PAGE>
If at the end of that ten trading day period the average Computer Associates
trading price is greater than $77.12, then the number of shares of Computer
Associates common stock that we are offering to exchange for each share of
Sterling Software common stock will be reset to be $43.45 divided by the average
Computer Associates trading price. This reset is designed to provide you with a
number of Computer Associates shares having a value of $43.45 on the reset date,
based on the average Computer Associates trading price, for each of your
Sterling Software shares.
If at the end of that ten trading day period the average Computer Associates
trading price is less than $63.10, then the number of shares of Computer
Associates common stock that we are offering to exchange for each share of
Sterling Software common stock will be reset to be $35.55 divided by the average
Computer Associates trading price. This reset is designed to provide you with a
number of Computer Associates shares having a value of $35.55 on the reset date,
based on the average Computer Associates trading price, for each of your
Sterling Software shares.
The market value of the Computer Associates shares you receive in exchange
for each share of Sterling Software, based on actual trading prices at the time
that we reset the exchange ratio, might actually be below $35.55 or above
$43.45.
For more information on the exchange ratio and for a table setting forth a
range of average Computer Associates trading prices, the resulting exchange
ratio and illustrations of the value of your Sterling Software shares, please
see "The Offer" beginning on page 30.
CASH OPTION. If the average Computer Associates trading price is less than
$63.10, we have the option when we reset the exchange ratio to reduce it by
paying some cash in substitute for Computer Associates shares. We sometimes
refer to this option as the "cash option." The maximum amount of cash for each
Sterling Software share that we may substitute for Computer Associates shares in
that case is the amount by which the average Computer Associates trading price
multiplied by the exchange ratio of 0.5634 falls short of $35.55. If we choose
to elect the cash option, the exchange ratio will be reset to be the portion of
$35.55 that we are not paying in cash, divided by the average Computer
Associates trading price.
FLUCTUATIONS IN MARKET PRICE. The average Computer Associates trading price
used to reset the exchange ratio is based on an average calculated over a ten
trading day period prior to the reset date and therefore might be different from
the market value based on actual trading prices of a share of Computer
Associates common stock on the reset date. In addition, from the time the
exchange ratio is reset, or from the date of the merger agreement if no reset
occurs, until the time you receive your Computer Associates shares through the
offer or the merger, the market value based on the trading price at such time of
the consideration you will receive will rise and fall along with the trading
price of Computer Associates common shares. See "Risk Factors" beginning on page
23.
MORE INFORMATION ABOUT EXCHANGE RATIO. We will notify you by issuing a
press release announcing the final exchange ratio and filing that press release
with the SEC. The press release will state how much cash, if any, we have
elected to pay in partial consideration for your Sterling Software shares under
the cash option, if we exercise it. Sterling Software stockholders can call our
information agent, MacKenzie Partners, Inc., at any time toll free at
(800) 322-2885 to request information about the exchange ratio and any reset of
the exchange ratio, including, once determined, the average Computer Associates
trading price and any cash payable pursuant to the offer.
MERGER. We are making this offer in order to acquire control of, and
ultimately the entire common equity interest in, Sterling Software. We intend,
as soon as possible after consummation of the offer, to seek to have Sterling
Software and Silversmith Acquisition Corp. consummate the merger. At the
effective time of the merger, each share of Sterling Software common stock,
except for shares held by Sterling Software, us or any of our or Sterling
Software's subsidiaries, will be converted into the right to receive the same
number of Computer Associates shares (and same amount of cash, if any) per
12
<PAGE>
Sterling Software share as is paid in the offer, subject to appraisal rights
that may be available under Delaware law.
CONDITIONS OF THE OFFER. Our obligation to consummate the offer is subject
to various conditions described below under "The Offer--Conditions of the
Offer," including, among others:
- a majority of the outstanding Sterling Software shares, on a fully-diluted
basis, having been tendered and not withdrawn
- waiting periods under applicable antitrust laws having expired or been
terminated
- the registration statement of which this prospectus is a part having been
declared effective by the SEC and
- Sterling Software having not breached any covenant, representation or
warranty in a material manner.
TIMING OF THE OFFER. The offer is currently scheduled to expire at
midnight, New York City time, on Monday, March 20, 2000.
EXTENSION OF OFFER PERIOD. We have agreed in the merger agreement that:
- we will extend the period of time the offer remains open beyond the
scheduled expiration date for successive periods of up to 15 business days
in order to allow specified conditions to the offer to be met, subject to
some limitations under the merger agreement
- we will only be required to extend the period of time the offer remains
open for a total of 20 business days following the scheduled expiration
date if the only condition to the offer not satisfied at that time is the
minimum tender condition
- we have the right, subject to limits in the merger agreement, to extend at
any time or from time to time in our sole discretion the period of time
during which the offer remains open by giving oral or written notice to
the depositary and
- we are not required by the merger agreement to extend the offer if there
is not any reasonable possibility of all the conditions to the offer being
satisfied by September 30, 2000.
If the offer is extended for any reason, we will make an announcement to
that effect no later than 9:00 A.M., New York City time, on the next business
day after the previously scheduled expiration date. During any extension of the
offer, all Sterling Software shares previously tendered and not withdrawn will
remain subject to the offer, subject to your right to withdraw your Sterling
Software shares. You should read the discussions under the caption "The
Offer--Withdrawal Rights" beginning on page 34 and "The Merger Agreement and the
Tender Agreement--The Merger Agreement--The Offer" beginning on page 45 for more
details.
DELAY; TERMINATION; WAIVER; AMENDMENT. Subject to the SEC's rules and
regulations and the terms of the merger agreement, we also reserve the right, in
our sole discretion, at any time or from time to time
- to delay acceptance for exchange of or, regardless of whether we
previously accepted Sterling Software shares for exchange, exchange any
Sterling Software shares pursuant to the offer upon the failure of any of
the conditions of the offer to be satisfied
- to terminate the offer and not accept or exchange any Sterling Software
Shares not previously accepted or exchanged, upon the failure of any of
the conditions of the offer to be satisfied and
- to waive any condition (other than the minimum tender condition) or
otherwise amend the offer in any respect
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<PAGE>
by giving oral or written notice of the delay, termination or amendment to the
depositary and by making a public announcement. We will follow any extension,
termination, amendment or delay, as promptly as practicable, with a public
announcement. In the case of an extension, any such announcement will be issued
no later than 9:00 A.M., New York City time, on the next business day after the
previously scheduled expiration date. Subject to applicable law (including
Exchange Act rules 14d-4(d) and 14d-6(c), which require that any material change
in the information published, sent or given to stockholders in connection with
the offer be promptly sent to stockholders in a manner reasonably designed to
inform stockholders of such change) and without limiting the manner in which we
may choose to make any public announcement, we assume no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
making a release to the Dow Jones News Service.
WITHDRAWAL RIGHTS. Your tender of Sterling Software shares pursuant to the
offer is irrevocable, except that, other than during a subsequent offering
period, Sterling Software shares tendered pursuant to the offer may be withdrawn
at any time prior to the expiration date of the offer, and, unless we previously
accepted them for exchange pursuant to the offer, may also be withdrawn at any
time after April 22, 2000.
SUBSEQUENT OFFERING PERIOD. We may, although we do not currently intend to,
elect to provide a subsequent offering period of three to 20 business days after
the acceptance of Sterling Software shares in the offer if the requirements
under Exchange Act rule 14d-11 have been met. You will not have the right to
withdraw Sterling Software shares that you tender in the subsequent offering
period, if any.
EXCHANGE OF SHARES; DELIVERY OF COMPUTER ASSOCIATES COMMON STOCK. Upon the
terms and subject to the conditions of the offer, including, if the offer is
extended or amended, the terms and conditions of any such extension or
amendment, we will accept and will exchange Sterling Software shares validly
tendered and not withdrawn as promptly as practicable after the expiration date
and promptly after they are tendered during any subsequent offering period.
APPRAISAL RIGHTS. The offer does not entitle you to appraisal rights with
respect to your Sterling Software shares. Sterling Software stockholders who
have not validly tendered their shares in the offer and do not vote in favor of
the merger will have the right under the Delaware General Corporation Law to
dissent and demand appraisal of their Sterling Software shares in accordance
with Section 262 of the Delaware General Corporation Law:
1. if the merger is consummated pursuant to Section 253 of the Delaware
General Corporation Law--that is, if we own at least 90% of the Sterling
Software shares and the merger is effected as a "short-term" merger
without a vote of Sterling Software stockholders or
2. if the merger is consummated with a vote of the Sterling Software
stockholders and
- the Sterling Software shares are not then listed on a national
securities exchange, quoted through NASDAQ or held of record by more
than 2,000 holders or
- we elect the cash option, if available.
See "The Offer--Purpose of the Offer; The Merger; Appraisal Rights"
beginning on page 38.
PROCEDURE FOR TENDERING SHARES. For you to validly tender Sterling Software
shares pursuant to the offer:
1. you must properly complete and sign a letter of transmittal (or manually
executed facsimile of that document), including (a) any required
signature guarantees or (b) an agent's message, if you tender through a
book-entry transfer and (c) any other required documents AND
14
<PAGE>
2. the depositary must have received all of those documents at one of its
addresses set forth on the back cover of this prospectus AND
3. the depositary must have received your tendered Sterling Software share
certificates at one of its addresses set forth on the back cover of this
prospectus OR your Sterling Software shares must be tendered pursuant to
the procedures for book-entry tender set forth in "The Offer--Procedure
for Tendering" (and a confirmation of receipt of such tender received by
the depositary) OR if you cannot comply with either of the two preceding
delivery procedures described in this paragraph, you must have complied
with the guaranteed delivery procedures set forth in "The
Offer--Procedure for Tendering."
All of these procedures must be completed by the expiration date. For more
information on how to tender your shares in the offer, please refer to "The
Offer--Procedure for Tendering" beginning on page 35. For information on how
exchanges of shares will occur once the merger is consummated, please refer to
"The Merger Agreement and the Tender Agreement--The Merger Agreement--Exchange
Agent; Procedures for Exchange of Certificates" beginning on page 46.
15
<PAGE>
RISK FACTORS
In deciding whether to tender your shares pursuant to the offer, you should
read carefully this prospectus and the documents to which we refer you. You
should also carefully consider the following factors:
- the fixed exchange ratio feature of the offer and the merger, even as it
may be reset, which will work to your disadvantage if Computer Associates
stock decreases in value
- the receipt of Computer Associates shares in exchange for your Sterling
Software shares may be taxable to you
- the risks associated with integrating Sterling Software into our company,
including the risk that the anticipated benefits from the business
combination may not be realized
- the price of Computer Associates common stock could depend upon factors
different than those affecting the price of Sterling Software common stock
- potentially significant increases in depreciation and amortization expense
from preliminary estimates reflected in the pro forma financial
information included in this prospectus may occur once the purchase
consideration is finally allocated to Sterling Software's assets, which
would cause net earnings to decrease
- the need for governmental approvals and possible operating restrictions
imposed by regulators may delay consummation of the offer and the merger
and adversely affect the combined companies
- measures we take to protect our proprietary technologies may not be
sufficient to deter misappropriation and infringement by us of others'
rights could occur
- the degree of competition in our industry
- rapid technological changes which could make it more difficult to compete
effectively
See "Risk Factors" beginning on page 23 for a more complete discussion of
these factors.
MARKET PRICES OF COMPUTER ASSOCIATES AND STERLING SOFTWARE COMMON STOCK
The following table presents:
- the last reported sale price of Computer Associates common stock, as
reported on the NYSE Composite Transaction Tape
- the last reported sale price of Sterling Software common stock, as
reported on the NYSE Composite Transaction Tape and
- the market value based on the last reported sales price on the dates
specified below of the shares of Computer Associates common stock to be
received in exchange for one share of Sterling Software common stock in
the offer
in each case as if the merger had been completed on February 11, 2000, the last
full trading day prior to the public announcement of the proposed merger, and on
February 18, 2000, the last day for which such information could be practicably
calculated prior to the date of this prospectus. The equivalent price per share
data for Sterling Software common stock has been determined by multiplying the
last
16
<PAGE>
reported sale price of one share of Computer Associates common stock on each of
these dates by the exchange ratio of 0.5634.
<TABLE>
<CAPTION>
EQUIVALENT PRICE
COMPUTER OF SHARE OF STERLING
ASSOCIATES STERLING SOFTWARE SOFTWARE
DATE COMMON STOCK COMMON STOCK COMMON STOCK
- ---- --------------- ----------------- --------------------
<S> <C> <C> <C>
February 11, 2000........... $69.75 $34.4375 $39.2972
February 18, 2000........... $71.25 $36.3125 $40.1423
</TABLE>
We urge you to obtain current market quotations before making any decision
with respect to the offer.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
If the offer and the merger are consummated pursuant to the current terms of
the merger agreement, and if Sterling Software either continues its software
business or continues to use a significant portion of its software assets in its
business and if the Sterling Software stockholders receive from Computer
Associates only Computer Associates shares in exchange for Sterling Software
shares, without regard to any cash received in lieu of a fraction of a Computer
Associates share, then Computer Associates intends to treat the offer and the
merger as a tax-free reorganization that should be tax free to you except to the
extent that you receive any cash in lieu of a fraction of a Computer Associates
share. However, the determination of whether your exchange of Sterling Software
shares for Computer Associates shares pursuant to the offer or the merger, or
both, will be tax free depends upon facts and circumstances that will not be
known until the consummation of the offer and the merger, including:
- whether the merger will be consummated
- whether the offer and the merger will be treated as a single integrated
transaction or as two separate transactions for federal income tax
purposes
- whether after the consummation of the offer and merger, Sterling Software
will either continue its software business or continue to use a
significant portion of its software assets in its business
- what percentage of the total number of outstanding Sterling Software
shares will be held by Computer Associates immediately after the
consummation of the offer and
- what percentage of the aggregate amount of consideration received from
Computer Associates in exchange for Sterling Software shares will consist
of Computer Associates shares.
If the receipt of Computer Associates shares is tax free to you, then you
will not recognize loss but, in general, you will recognize gain with respect to
any cash received by you pursuant to the offer or the merger, or both, to the
extent of the lesser of (x) the cash received or (y) the excess of the value of
the Computer Associates shares plus the cash received over your tax basis in the
Sterling Software shares exchanged. If the receipt of Computer Associates shares
is taxable to you, however, you will recognize gain or loss equal to the
difference between the value of the Computer Associates shares plus any cash
received by you over your tax basis in the Sterling Software shares exchanged.
For a more detailed discussion of the tax consequences of the offer and the
merger, see "Material Federal Income Tax Consequences" beginning on page 59. You
are urged to consult your tax advisors for a full understanding of these tax
consequences.
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<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF COMPUTER ASSOCIATES AND
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA OF COMPUTER ASSOCIATES AND
STERLING SOFTWARE
The following is a summary of selected historical consolidated financial
data of Computer Associates for each of the years in the five-year period ended
March 31, 1999 and the nine-month periods ended December 31, 1999 and 1998 and
selected unaudited pro forma combined financial data of Computer Associates and
Sterling Software for the year ended March 31, 1999 and the nine-month period
ended December 31, 1999. The operating results for the nine months ended
December 31, 1999 are not necessarily indicative of results for the full fiscal
year ending March 31, 2000. In addition, on May 28, 1999, Computer Associates
acquired approximately 98% of the issued and outstanding shares of common stock
of Platinum TECHNOLOGY International, INC., and on June 29, 1999, merged one of
its wholly owned subsidiaries into Platinum at which time Platinum became a
wholly owned subsidiary of Computer Associates. The selected unaudited
historical financial data for the nine-month period ended December 31, 1999
reflect the acquisition of Platinum by Computer Associates on May 28, 1999. The
selected unaudited pro forma financial data for the nine months ended
December 31, 1999 and the year ended March 31, 1999 give effect to the
acquisition of Platinum by Computer Associates as if it had occurred on
April 1, 1998. See "Where You Can Find More Information" on page 7. You should
read this summary together with these financial statements and their
accompanying notes and in conjunction with management's discussion and analysis
of operations and financial conditions of Computer Associates contained in such
reports.
The historical consolidated financial data of Computer Associates are
derived from the audited financial statements of Computer Associates contained
in Computer Associates' Annual Report on Form 10-K for the fiscal year ended
March 31, 1999 and from the unaudited financial statements of Computer
Associates contained in Computer Associates' Quarterly Report on Form 10-Q for
the period ended December 31, 1999, which are incorporated by reference in this
prospectus, and from Computer Associates' Quarterly Report on Form 10-Q for the
period ended December 31, 1998 and is qualified in its entirety by such
documents. The selected unaudited pro forma combined financial data of Computer
Associates and Sterling Software have been derived from Computer Associates'
audited consolidated financial statements for the year ended March 31, 1999,
Computer Associates' unaudited consolidated financial statements for the nine
months ended and as of December 31, 1999, Platinum's unaudited consolidated
financial statements for the quarter ended March 31, 1999, Platinum's audited
consolidated financial statements for the year ended December 31, 1998, Sterling
Software's audited consolidated financial statements for the year ended
September 30, 1999 and Sterling Software's unaudited consolidated financial
statements for the quarter ended and as of December 31, 1999. In addition, the
audited financial statements contained in Sterling Software's Annual Report on
Form 10-K for the fiscal year ended September 30, 1998 and the unaudited
financial statements of Sterling Software contained in Sterling Software's
Quarterly Reports on Form 10-Q for the periods ended June 30, 1998,
December 31, 1998, March 31, 1999 and June 30, 1999 have been used to conform
the financial reporting periods of Sterling Software to those of Computer
Associates. The selected unaudited pro forma combined financial data give effect
to the merger and the offer as if they had occurred on the dates referenced
under "Unaudited Pro Forma Condensed Combined Financial Information." The
selected unaudited pro forma combined financial data do not include the
realization of any cost savings from operating efficiencies, synergies or other
restructurings resulting from the merger. The selected unaudited pro forma
combined financial data do not purport to represent what Computer Associates'
results of operations or financial position actually would have been if the
transactions referred to therein had been consummated on the date or for the
periods indicated or what such results will be for any future date or any future
period. You should read this summary together with "Unaudited Pro Forma
Condensed Combined Financial Information" beginning on page 69 and the
accompanying notes.
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<TABLE>
<CAPTION>
NINE MONTHS
ENDED
DECEMBER 31, YEAR ENDED MARCH 31,
--------------------------------- -----------------------------------------------------------------
1999 1999(2)
---------------------- ---------------------
ACTUAL(1) PRO FORMA 1998 ACTUAL PRO FORMA 1998(3) 1997(4) 1996(5) 1995(6)
--------- ---------- -------- -------- ---------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE DATE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenue................. $4,640 $5,397 $3,624 $5,253 $6,961 $4,719 $4,040 $3,505 $2,623
Net income (loss)....... 304 (37) 168 626 (323) 1,169 366 (56) 432
Basic earnings (loss)
per common share(7)... $ .56 $ (.06) $ .31 $ 1.15 $ (.55) $ 2.14 $ .67 $ (.10) $ .80
Diluted earnings (loss)
per common share(7)... .55 (.06) .30 1.11 (.55) 2.06 .64 (.10) .76
Dividends declared per
common share(7)(8).... .080 .080 .080 .080 .080 .073 .065 .061 .059
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1999 MARCH 31,
---------------------- ----------------------------------------------------
ACTUAL(1) PRO FORMA 1998 1999(2) 1998(3) 1997(4) 1996(5) 1995(6)
--------- ---------- -------- -------- -------- -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET AND OTHER DATA
Cash from operations................. $ 834 $ 957 $ 698 $1,267 $1,040 $ 790 $ 619 $ 489
Working capital...................... (362) 30 892 768 379 53 (53) 300
Total assets......................... 12,232 16,477 7,278 8,070 6,706 6,084 5,016 3,269
Long-term debt (less current
maturities)........................ 4,765 4,803 2,030 2,032 1,027 1,663 945 50
Stockholders' equity................. 3,058 6,831 2,558 2,729 2,481 1,503 1,482 1,578
</TABLE>
- ------------------------------
(1) Includes an after-tax charge of $646 million related to the acquisition of
Platinum TECHNOLOGY International, INC. and an asset impairment charge of
$37 million in connection with an other than temporary decline in market
value associated with an investment in CHS Electronics, Inc.
(2) Includes an after-tax charge of $675 million related to the 1995 Key
Employee Stock Ownership Plan.
(3) Includes an after-tax charge of $21 million related to Computer Associates'
unsuccessful tender offer for Computer Sciences Corporation.
(4) Includes an after-tax write-off of $598 million related to the acquisition
of Cheyenne Software, Inc. in November 1996.
(5) Includes an after-tax write off of $808 million related to the acquisition
of Legent Corporation in August 1995.
(6) Includes an after-tax write off of $154 million related to the acquisition
of the ASK Group, Inc. in June 1994.
(7) Adjusted to reflect the three-for-two stock splits effective August 21,
1995, June 19, 1996, and November 5, 1997.
(8) Pro forma dividends declared per common share assumes consistent rate
maintained for additional shares issued in the offer and actual shares.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF STERLING SOFTWARE
The following is a summary of selected consolidated financial data of
Sterling Software for each of the years in the five-year period ended
September 30, 1999 and the three-month periods ended December 31, 1999 and 1998.
The operating results for the three months ended December 31, 1999 are not
necessarily indicative of results for the full fiscal year ending September 30,
2000. This information is derived from the selected audited financial data of
Sterling Software contained in Sterling Software's Annual Report on Form 10-K
for the fiscal year ended September 30, 1999 and from the unaudited financial
statements of Sterling Software contained in Sterling Software's Quarterly
Report on Form 10-Q for the period ended December 31, 1999, which are
incorporated by reference in this prospectus, and from Sterling Software's
Quarterly Report on Form 10-Q for the period ended December 31, 1998, and is
qualified in its entirety by such documents. See "Where You Can Find More
Information" on page 7. You should read this summary together with these
financial statements and their accompanying notes and in conjunction with
management's discussion and analysis of operations and financial conditions of
Sterling Software contained in such reports. No cash dividends were declared or
paid by Sterling Software during these periods.
19
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31, FISCAL YEAR ENDED SEPTEMBER 30,
----------------------- ------------------------------------------------------------
1999 1998 1999(1) 1998(2) 1997(3) 1996(4) 1995(5)
---------- ---------- ---------- ---------- ---------- ---------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA INFORMATION)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenue................................ $ 206,956 $ 174,459 $ 807,004 $ 719,943 $ 569,202 $ 513,761 $467,093
Income (loss) from continuing
operations........................... 31,010 4,206 (10,756) 76,044 (131,897) 62,117 (32,942)
Income (loss) from discontinued
operations, net of taxes(4).......... 51,187 42,930
Gain on the initial public offering of
subsidiary, net of taxes(4)............ 126,103
PER COMMON SHARE DATA:
Income (loss) from continuing
operations:
Basic................................ $ .38 $ .05 $ (.13) $ .94 $ (1.66) $ .92 $ (.66)
Diluted.............................. .36 .05 (.13) .89 (1.66) .86 (.66)
Net income (loss):
Basic................................ .38 .05 (.13) .94 (1.66) 3.56 .20
Diluted.............................. .36 .05 (.13) .89 (1.66) 3.26 .20
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital........................ $ 465,704 $ 661,930 $ 421,836 $ 673,301 $ 556,552 $ 730,107 $214,656
Total assets........................... 1,226,326 1,214,764 1,230,031 1,188,988 1,100,278 1,130,579 689,082
Long-term debt......................... 117,265
Stockholders' equity................... 854,537 868,925 811,732 861,558 757,491 887,336 354,636
</TABLE>
- ------------------------------
(1) Results of operations for 1999 include $83,566,000 of purchased research and
development costs charged to expense in accordance with the purchase method
of accounting in connection with acquisitions completed by Sterling Software
in 1999. Results of operations for 1999 also include reorganization costs of
$99,620,000 primarily related to certain acquisitions completed in 1999,
including the acquisition of Cayenne Software, Inc., the distributed systems
storage software business of Spectra Logic Corporation, Interlink Computer
Sciences, Inc., CoreData, Inc. and Information Advantage, Inc., including
costs associated with the realignment of the application development
business within the former application management business segment. See Item
7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Business Combinations, Reorganizations and Divestitures" and
Note 2 of Notes to the Consolidated Financial Statements of Sterling
Software's Annual Report on Form 10-K for the fiscal year ended
September 30, 1999.
(2) Results of operations for 1998 include reorganization costs of $45,162,000
primarily related to the reorganization of Sterling Software's operations in
connection with the acquisition of Synon Corporation, and to a lesser
extent, to the acquisition of Mystech Associates, Inc. See Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Business Combinations, Reorganizations and Divestitures" and
Note 2 of Notes to Consolidated Financial Statements of Sterling Software's
Annual Report on Form 10-K for the fiscal year ended September 30, 1999.
(3) Results of operations for 1997 include $137,849,000 of purchased research
and development costs charged to expense in accordance with the purchase
method of accounting in connection with Sterling Software's acquisition of
the Software Division of Texas Instruments, Inc. ("TI Software"). Results of
operations for 1997 also include reorganization costs of $106,037,000
primarily related to the reorganization of Sterling Software's operations in
connection with the acquisition of TI Software, and to a lesser extent, the
termination of Sterling Software's international distributor arrangement
with Sterling Commerce, Inc. ("Sterling Commerce"). See Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Business Combinations, Reorganizations and Divestitures" and
Note 2 of Notes to Consolidated Financial Statements of Sterling Software's
Annual Report on Form 10-K for the fiscal year ended September 30, 1999.
(4) On March 13, 1996, Sterling Commerce, a former wholly owned subsidiary of
Sterling Software, completed the initial public offering of 13,800,000
shares of its common stock, par value $0.01 per share. Pursuant to the
offering, Sterling Software sold to the public 12,000,000 of its 73,200,000
shares of Sterling Commerce stock and Sterling Commerce sold 1,800,000
previously unissued shares of Sterling Commerce stock. The offering resulted
in net proceeds to Sterling Software of approximately $265,458,000 after
deducting underwriting discounts and commissions and Sterling Software's pro
rata share of offering expenses. On September 30, 1996, Sterling Software
completed the spin-off of Sterling Commerce with the pro rata distribution
of its remaining 81.6% ownership in Sterling Commerce to Sterling Software's
stockholders by means of a tax-free dividend. The distribution resulted in
the reduction of Sterling Software's stockholders' equity in the amount of
$113,549,000, representing the book value of net assets distributed. The
results of operations of Sterling Commerce for 1995 and 1996 have been
classified as discontinued operations. See Item 7, "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Business
Combinations, Reorganizations and Divestitures" of Sterling Software's
Annual Report on Form 10-K for the fiscal year ended September 30, 1999.
(5) Results of operations for 1995 include $62,000,000 of purchased research and
development costs charged to expense in accordance with the purchase method
of accounting in connection with the merger of Sterling Software with
KnowledgeWare, Inc., as well as $19,512,000 of reorganization costs
primarily related to the reorganization of Sterling Software's operations in
connection with that merger.
20
<PAGE>
COMPARATIVE PER SHARE INFORMATION
The following table summarizes unaudited per share information for Computer
Associates and Sterling Software on a historical, pro forma combined and
equivalent pro forma combined basis. The following information should be read in
conjunction with the audited consolidated financial statements of Computer
Associates and Sterling Software, the unaudited interim consolidated financial
statements of Computer Associates and Sterling Software, the selected historical
condensed consolidated financial data and the unaudited pro forma condensed
combined financial information included elsewhere or incorporated by reference
herein, including the Forms 8-K and 8-K/A filed by Computer Associates relating
to its May 28, 1999 acquisition of Platinum. The pro forma information is
presented for illustrative purposes only and is not necessarily indicative of
the operating results or financial position that would have occurred if the
acquisitions of Platinum and Sterling Software had been consummated as of the
beginning of the respective periods presented, nor is it necessarily indicative
of the future operating results or financial position of the combined companies.
The historical book value per share is computed by dividing total stockholders'
equity by the number of common shares outstanding at the end of the period. The
pro forma per share loss from continuing operations is computed by dividing the
pro forma loss from continuing operations by the pro forma weighted average
number of shares outstanding. The pro forma combined book value per share is
computed by dividing total pro forma stockholders' equity by the pro forma
number of common shares outstanding at the end of the period. The Sterling
Software equivalent pro forma combined per share amounts are calculated by
multiplying the Computer Associates pro forma combined per share amounts by the
exchange ratio of 0.5634 assuming the exchange ratio is not reset.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
MARCH 31, 1999 DECEMBER 31, 1999
-------------- -----------------
<S> <C> <C>
COMPUTER ASSOCIATES
Historical Per Common Share Data:
Basic earnings per share.................................... $ 1.15 $ 0.56
Diluted earnings per share.................................. 1.11 0.55
Book value.................................................. 5.09 5.65
Dividends declared.......................................... .08 .08
Pro Forma Combined Per Common Share Data:
Basic and diluted loss per share............................ $ (0.55) $ (0.06)
Book value.................................................. 11.62
Dividends declared.......................................... .08(1) .08(1)
STERLING SOFTWARE
Historical Per Common Share Data:
Basic earnings (loss) per share............................. $ 0.90 $ (0.23)
Diluted earnings (loss) per share........................... 0.85 (0.23)
Book value.................................................. 10.98 10.41
Equivalent Pro Forma Combined Per Common Share Data:
Basic and diluted loss per share............................ $ (0.31) $ (0.03)
Book value.................................................. 6.55
Dividends declared.......................................... .045 .045
</TABLE>
(1) Pro forma dividends declared per common share assumes consistent rate
maintained for additional shares issued in the offer and actual shares.
21
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratios of earnings to combined fixed
charges of Computer Associates for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED FISCAL YEAR ENDED
DECEMBER 31, MARCH 31,
----------------- ----------------------
1999 1999 1998
----------------- -------- --------
<S> <C> <C> <C>
Ratio of earnings to fixed charges....................... 4.05x(1) 5.98x(1) 10.51x
</TABLE>
- ------------------------------
(1) The ratio of earnings to fixed charges for these periods reflects non-cash
charges against earnings. Had these charges not been taken, the ratio of
earnings to fixed charges for the nine months ended December 31, 1999 and
the fiscal year ended March 31, 1999 would have been 6.30x and 11.26x,
respectively.
For purposes of computing the ratios of earnings to fixed charges, earnings
represent earnings from continuing operations before income taxes and fixed
charges, and fixed charges consist of interest expense and the portion of rents
calculated to be representative of the interest factor. The ratios of earnings
to fixed charges should be read in conjunction with the financial statements and
other financial data included or incorporated by reference in this prospectus.
See "Where You Can Find More Information."
22
<PAGE>
RISK FACTORS
In deciding whether to tender your shares pursuant to the offer, you should
read carefully this prospectus, the accompanying Schedule 14D-9 of Sterling
Software and the documents to which we refer you. You should also carefully
consider the following factors:
FIXED EXCHANGE RATIO COULD WORK TO YOUR DISADVANTAGE
We are offering to exchange shares of Computer Associates common stock for
shares of Sterling Software common stock at a fixed exchange ratio of shares of
Computer Associates common stock for each share of Sterling Software common
stock. We will reset the exchange ratio if the market value based on specified
average trading prices of shares of Computer Associates common stock has
increased or decreased beyond certain levels at the time the waiting periods
under antitrust laws for the offer have expired or been terminated and the
registration statement of which this prospectus is a part has been declared
effective by the SEC. Because the average Computer Associates trading price used
to reset the exchange ratio is based on an average calculated over a ten trading
day period prior to the reset date, the value of the number of Computer
Associates shares you are entitled to receive is likely to be different from
their market value on the reset date, the date on which the offer is
consummated, the date of the merger or the date on which you receive our shares
in exchange for your Sterling Software shares. The market value of the Computer
Associates shares you receive for each share of Sterling Software might actually
be below $35.55 or above $43.45. Once you have tendered your shares and your
withdrawal rights have expired, you will be locked into the applicable exchange
ratio, and you may not be able to capture gains from possible increases in value
of Sterling Software common stock. Also, because of the reset feature of the
exchange ratio, you may not receive the full benefit from possible increases in
value of Computer Associates common stock. Because the exchange ratio is fixed,
you may incur losses from possible decreases in market value of Computer
Associates common stock. The market value of Computer Associates common stock
could fluctuate depending upon any number of reasons, including those specific
to Computer Associates and those that influence the trading prices of equity
securities generally.
THE RECEIPT OF COMPUTER ASSOCIATES SHARES MAY BE TAXABLE TO YOU
Before the consummation of the offer and the merger, it cannot be determined
whether the receipt of Computer Associates shares in exchange for your Sterling
Software shares will be tax free to you for federal income tax purposes. Such
tax-free treatment depends upon facts and circumstances that will not be known
prior to the consummation of the offer and the merger, including:
- whether the merger will be consummated;
- whether the offer and the merger will be treated as a single integrated
transaction or as two separate transactions for federal income tax
purposes;
- whether after the consummation of the offer and merger, Sterling Software
will either continue its software business or continue to use a
significant portion of its software assets in its business
- what percentage of the total number of outstanding Sterling Software
shares will be held by Computer Associates immediately after the
consummation of the offer; and
- what percentage of the aggregate amount of consideration received from
Computer Associates in exchange for Sterling Software shares will consist
of Computer Associates shares.
Neither the offer nor the merger is conditioned on the tax-free nature of
the exchange of Sterling Software shares for Computer Associates shares. As a
result, if and when you tender Sterling Software shares in the offer you will
not know whether the offer or the merger, or both, will be tax free to you. See
"Material Federal Income Tax Consequences" below.
23
<PAGE>
YOU ARE URGED TO CONSULT YOUR TAX ADVISOR TO DETERMINE THE SPECIFIC TAX
CONSEQUENCES TO YOU OF THE OFFER AND THE MERGER, INCLUDING ANY FEDERAL, STATE,
LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES, AND ANY TAX RETURN FILING OR OTHER
REPORTING REQUIREMENTS.
BENEFITS OF THE COMBINATION MAY NOT BE REALIZED
If we complete the proposed merger, we will integrate two companies that
have previously operated independently. We may not be able to integrate the
operations of Sterling Software with our operations without encountering
difficulties. The diversion of the attention of management to the integration
effort and any difficulties encountered in combining operations could adversely
affect the combined company's businesses.
THE TRADING PRICE OF COMPUTER ASSOCIATES COMMON STOCK MAY BE AFFECTED BY FACTORS
DIFFERENT FROM THOSE AFFECTING THE PRICE OF STERLING SOFTWARE COMMON STOCK
Upon completion of the offer and the merger, holders of Sterling Software
common stock will become holders of Computer Associates common stock. Computer
Associates' business differs from that of Sterling Software, and Computer
Associates' results of operations, as well as the trading price of Computer
Associates common stock, may be affected by factors different from those
affecting Sterling Software's results of operations and the price of Sterling
Software common stock. For a discussion of Computer Associates' and Sterling
Software's businesses and information to consider in connection with such
businesses, see Computer Associates' Annual Report on Form 10-K for the fiscal
year ended March 31, 1999, Sterling Software's Annual Report on Form 10-K for
the fiscal year ended September 30, 1999 and their subsequent interim reports,
which are incorporated by reference in this prospectus.
POTENTIALLY SIGNIFICANT INCREASES IN DEPRECIATION AND AMORTIZATION EXPENSE FROM
PRELIMINARY ESTIMATES REFLECTED IN THE PRO FORMA FINANCIAL INFORMATION MAY OCCUR
ONCE THE PURCHASE CONSIDERATION IS FINALLY ALLOCATED TO STERLING SOFTWARE'S
ASSETS WHICH WOULD CAUSE NET EARNINGS TO DECREASE
Pro forma results of operations reflect adjustments, which are based upon
preliminary estimates, to reflect the allocation of purchase consideration to
the acquired assets and liabilities of Sterling Software. The final allocation
of the purchase consideration will be determined after the completion of the
merger and will be based on appraisals and a comprehensive final evaluation of
the fair value of Sterling Software's tangible assets, liabilities, identifiable
intangible assets and goodwill at the time of the merger. Accordingly, the final
determination of tangible and intangible assets may result in depreciation and
amortization expense that is significantly higher than the preliminary estimates
of these amounts, which would cause Computer Associates' net earnings to be
lower. See the Notes contained in "Unaudited Pro Forma Condensed Combined
Financial Information."
NEED FOR GOVERNMENTAL APPROVALS MAY DELAY CONSUMMATION OF THE OFFER AND THE
MERGER
The offer is conditioned upon the expiration or termination of the
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 (the HSR Act). In addition, other filings with, notifications to and
authorizations and approvals of, various governmental agencies with respect to
the offer, the merger and the other transactions contemplated by the merger
agreement and the tender agreement, relating primarily to antitrust issues, must
be made and received prior to the consummation of the offer and the merger.
Computer Associates and Sterling Software are seeking to obtain all required
regulatory approvals prior to the scheduled completion of these transactions.
You should be aware that
- all required regulatory approvals may not be obtained on that timetable
24
<PAGE>
- restrictions on the combined operations of Computer Associates and
Sterling Software may be sought by governmental agencies as a condition to
obtaining such approvals
- operating restrictions imposed could adversely affect the value of the
combined companies
Please refer to "The Offer--Conditions of the Offer" and "--Regulatory
Approvals" for more information.
MEASURES TAKEN TO PROTECT PROPRIETARY INFORMATION MAY NOT BE SUFFICIENT TO DETER
MISAPPROPRIATION AND INFRINGEMENT BY US OF OTHERS' RIGHTS COULD OCCUR
The businesses of Computer Associates and Sterling Software depend in part
on the quality of the companies' technological expertise and proprietary
technologies. In order to protect proprietary information and intellectual
property, both companies:
- enter into license agreements with clients in the ordinary course of
business which contain terms prohibiting unauthorized reproduction or use
of their products and services and those of third parties
- enter into confidentiality agreements with their associates, contractors,
clients, potential clients and suppliers who have access to sensitive
information and
- limit access to, and distribution of, their proprietary information.
We cannot assure you that these steps or other procedures we follow will be
adequate to deter misappropriation or infringement of our proprietary rights or
independent third party development of substantially similar products and
technology. In addition, we cannot assure you that our current and future
products will not infringe the proprietary rights of others. Infringement by us
of others' rights could result in lawsuits against us, liabilities to others and
adverse effect on our business, financial condition and operating results.
OUR INDUSTRY IS HIGHLY COMPETITIVE
The software and professional services industry is highly competitive, and
we face intense competition in all of our client markets. The combined companies
may encounter competition from new competitors, including established software
and professional services companies with substantial resources. Some of our
competitors may have financial, technical, marketing or other capabilities more
extensive than ours and may be able to respond more quickly than we can to new
or emerging technologies and other competitive pressures. We may not be able to
compete successfully against our present or future competitors, and competition
may adversely affect our business, financial condition or operating results.
RAPID TECHNOLOGICAL CHANGE COULD AFFECT OUR ABILITY TO COMPETE
We believe that our future success and the success of the combined companies
will depend among other things on maintaining technological competitiveness in
our products and services. We must continually improve our current processes and
develop and introduce new products and services in order to match our
competitors' new developments and our clients' increasingly sophisticated
demands. We cannot assure you that we can successfully identify, develop and
bring to market new and enhanced products and services in a timely manner, or
that these products or services will be commercially successful. Also, there is
a chance that potential clients will prefer products, services or technologies
developed by others that may make our products or services obsolete or
noncompetitive.
25
<PAGE>
THE COMPANIES
COMPUTER ASSOCIATES INTERNATIONAL, INC.
One Computer Associates Plaza
Islandia, New York 11749-7000
(631) 342-5224
Computer Associates is a leading provider of enterprise management,
information management and business applications software products for use on a
variety of hardware platforms. Because of its independence from hardware
manufacturers, Computer Associates has been able to offer products for use on
most of the existing major operating systems and application development
environments. Computer Associates licenses and supports more than 600 integrated
products for both the mainframe and client/server environments. Computer
Associates is currently the third largest independent vendor in the software
industry and services a blue-chip client list of approximately 90% of the
Fortune 500. No single customer represents more than 5% of Computer Associates'
annual revenues. Approximately 40% of Computer Associates' revenues were
generated outside of North America in fiscal year 1999.
In May 1999, Computer Associates acquired Platinum. Platinum was engaged in
providing software products in the areas of database management, e-commerce,
application infrastructure management, decision support, data warehousing and
knowledge management.
During fiscal year 1999, Computer Associates formed a professional services
organization now known as CA Services to expand its service offerings on behalf
of clients and partners around the world. CA Services offers a broad spectrum of
services ranging from consulting to implementation to comprehensive outsourcing
and custom developing leading-edge information technology (IT) solutions. CA
Services offers services both in support of and independent of Computer
Associates products.
Computer Associates' believes its software applications are among the most
sophisticated software products on the market. Enterprise management,
information management and business applications software are critical to
keeping large computer systems and databases running. As a result, companies do
not routinely switch to another vendor's products. This helps create a stable
base of revenue from software upgrades, expansion of license rights and
maintenance. On average, Computer Associates' customers have been licensing
software from the company for approximately eight years, and the average
mainframe and midrange client of the company licenses 16 separate software
products.
As of December 31, 1999, Computer Associates had approximately 18,000
employees in 195 offices worldwide.
For the fiscal year ended March 31, 1999, Computer Associates reported
revenues of $5.3 billion and net income of $626 million (11.9% of revenues).
SILVERSMITH ACQUISITION CORP.
c/o Computer Associates International, Inc.
One Computer Associates Plaza
Islandia, New York 11749-7000
(631) 342-5224
Silversmith Acquisition Corp. is a wholly owned subsidiary of Computer
Associates. Silversmith Acquisition Corp. was organized on February 11, 2000 for
the purposes of acquiring the Sterling Software shares tendered in the offer and
merging with and into Sterling Software in the merger. It has not carried on any
activities other than in connection with the merger agreement.
26
<PAGE>
STERLING SOFTWARE, INC.
300 Crescent Court, Suite 1200
Dallas, Texas 75201
(214) 981-1000
Sterling Software is a worldwide developer and provider of systems
management, business intelligence and application development software products
and services, as well as a supplier of specialized IT services for sectors of
the federal government. Founded in 1981, Sterling Software's customers include
approximately 90% of the Fortune 100 and encompass a worldwide installed base of
more than 20,000 customer sites. Sterling Software operates through four
principal business segments: systems management, application development,
business intelligence and federal systems. Worldwide revenue from Sterling
Software's systems management, application development, business intelligence
and federal systems business segments represented 36%, 34%, 10% and 20%,
respectively, of Sterling Software's total fiscal year 1999 revenues.
Approximately 37% of Sterling Software's revenues were generated outside of the
United States in fiscal year 1999.
As of December 31, 1999, Sterling Software employed approximately 3,800
employees in 90 offices worldwide. Sterling Software has direct sales offices in
21 countries and distributors and agents in approximately 40 additional
countries.
Sterling Software reported $807 million in revenues for the fiscal year
ended September 30, 1999.
27
<PAGE>
BACKGROUND OF THE OFFER
In late 1999, in the course of its normal reviews of its business, Computer
Associates' senior management reviewed and analyzed the company's position in
the marketplace and possible new areas into which Computer Associates could
enter to further differentiate the company from its competitors. In that review,
management identified data storage and application development and services as
areas in which Computer Associates could improve its competitive position. One
of the conclusions reached by senior management was the need to further expand
its product and service offerings in these areas.
Computer Associates' senior management identified the OS/390 platform as one
hardware platform in which it did not compete for disk storage management tools
and for which it also desired to extend its object oriented application
development tool offerings. Management also identified Sterling Software as a
company that has products and services in these areas as well as other areas
that are complementary to Computer Associates' product lines, and that could be
a possible acquisition candidate.
Independently from the management reviews, in late 1999 a representative of
Morgan Stanley & Co. Incorporated, contacted Sanjay Kumar, President and Chief
Operating Office of Computer Associates, to inquire as to whether Computer
Associates might be interested in acquiring Sterling Software. At that time,
Mr. Kumar advised Morgan Stanley that Computer Associates was not interested in
acquiring Sterling Software.
On January 14, 2000, Mr. Kumar met with representatives of Morgan Stanley to
hear Morgan Stanley's industry and strategic views. During the course of the
conversation, the possibility was raised again that Computer Associates might be
interested in acquiring Sterling Software. Following the Morgan Stanley meeting,
Mr. Kumar called Sam Wyly, Chairman of Sterling Software, to discuss the
possibility of a business combination between Computer Associates and Sterling
Software.
On January 18, 2000, Mr. Kumar met Mr. Wyly in Dallas to discuss the
potential business combination and valuation issues.
On January 23, 2000, Mr. Kumar, along with Ira Zar, Chief Financial Officer,
and Charles McWade, Senior Vice President of Computer Associates, and
representatives of Morgan Stanley, met with Mr. Wyly, Sterling Williams,
President and Chief Executive Officer, and other members of senior management of
Sterling Software. Sterling Software's management presented an overview of
Sterling Software's business information.
At the quarterly meeting of Computer Associates' Board of Directors on
January 25, 2000, Mr. Kumar raised the possibility of an acquisition of Sterling
Software and outlined the strategic rationale for such an acquisition.
Mr. Kumar and Mr. Williams spoke on a number of occasions between
January 26 and February 3, 2000 to discuss valuation issues and possible
structure and timing considerations. On February 4, 2000, Mr. Kumar met with
Mr. Williams and Logan Wray, Chief Financial Officer of Sterling Software, to
review valuation and financial issues and the possible benefits of a business
combination.
On February 6, 2000, in a call with Mr. Williams, Mr. Kumar indicated that
Computer Associates was interested in pursuing a possible business combination
at a valuation of between $38.25 and $39.25 per share for each share of Sterling
Software's common stock. Computer Associates' interest in such a combination was
subject to its completing to its satisfaction a due diligence review and
mutually satisfactory definitive agreements, as well as the approval of the
Computer Associates' Board of Directors. Mr. Kumar indicated that at that time
he thought the combination would be structured as a stock for stock merger and
would use purchase accounting. Mr. Kumar and Mr. Williams also discussed timing,
structure and logistic issues.
28
<PAGE>
On February 7 and 8, 2000, Mr. Kumar and Mr. Williams continued the
discussion of the terms and timing of a possible transaction. Mr. Kumar
indicated on February 8, 2000 that Computer Associates would be willing to
increase the valuation to $39.50 per share and to agree to other specified
conditions about the terms of the merger, such as a 10% collar and the treatment
of stock options.
On February 9, 2000, Computer Associates and Sterling Software entered into
confidentiality agreements and representatives of Computer Associates and its
counsel, Covington & Burling, met in Dallas with representatives of Sterling
Software and its counsel, Skadden Arps, to continue Computer Associates' due
diligence review and begin negotiating definitive agreements. Due diligence
reviews and document negotiations continued into the early morning of
February 14, 2000. Mr. Kumar left Dallas on the evening of February 10 and
returned early the morning of February 12 with additional members of Computer
Associates senior management to continue due diligence reviews of Sterling
Software's business and operations.
The Computer Associates Board of Directors met by conference call on
February 10, 2000 and again on February 13, 2000. In the February 10 meeting,
Mr. Kumar reviewed the status of the possible business combination with Sterling
Software and the status of the due diligence review. In the February 13 meeting,
Mr. Kumar and Mr. Zar reported on the status of the potential transaction and
the board unanimously approved the acquisition of Sterling Software and
authorized Mr. Kumar and the officers of the company to enter into the merger
agreement.
Before the open of the New York Stock Exchange on February 14, 2000,
Computer Associates and Sterling Software entered into the merger agreement and
announced the transaction.
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THE OFFER
BASIC TERMS
EXCHANGE OF SHARES; EXCHANGE RATIO. We are offering to exchange 0.5634
shares of Computer Associates common stock for each outstanding share of common
stock of Sterling Software that is validly tendered and not properly withdrawn.
We sometimes refer to this number of Computer Associates shares as the "exchange
ratio."
ADJUSTMENTS TO EXCHANGE RATIO. We will reset the exchange ratio if, at the
time that the offer has cleared waiting periods under applicable antitrust laws
and the SEC has declared effective the registration statement of which this
prospectus is a part, the average of the daily average of the high and low sales
price per share of Computer Associates common stock on the NYSE Composite
Transaction Tape over the ten trading days immediately preceding the first day
on which we have obtained all those regulatory clearances, which we call the
"average Computer Associates trading price," is greater than $77.12 or less than
$63.10.
If at the end of that ten trading day period the average Computer Associates
trading price is greater than $77.12, then the number of shares of Computer
Associates common stock that we are offering to exchange for each share of
Sterling Software common stock will be reset to be $43.45 divided by the average
Computer Associates trading price. This reset is designed to provide you with a
number of Computer Associates shares having a value of $43.45 on the reset date,
based on the average Computer Associates trading price, for each of your
Sterling Software shares.
If at the end of that ten trading day period the average Computer Associates
trading price is less than $63.10, then the number of shares of Computer
Associates common stock that we are offering to exchange for each share of
Sterling Software common stock will be reset to be $35.55 divided by the average
Computer Associates trading price. This reset is designed to provide you with a
number of Computer Associates shares having a value of $35.55 on the reset date,
based on the average Computer Associates trading price, for each of your
Sterling Software shares.
The market value of the Computer Associates shares you receive in exchange
for each share of Sterling Software might differ from their market value based
on the trading price at such time on the reset date, the date on which the offer
is consummated, the date of the merger or the date you receive our shares in
exchange for your Sterling Software shares.
CASH OPTION. If the average Computer Associates trading price is less than
$63.10, we have the option when we reset the exchange ratio to reduce it by
paying some cash in substitute for Computer Associates shares. We sometimes
refer to this option as the "cash option." The maximum amount of cash for each
Sterling Software share that we may substitute for Computer Associates shares in
that case is the amount by which the average Computer Associates trading price
multiplied by the exchange ratio of 0.5634 falls short of $35.55. If we choose
to elect the cash option, the exchange ratio will be reset to be the portion of
$35.55 that we are not paying in cash, divided by the average Computer
Associates trading price.
ILLUSTRATIVE TABLE OF EXCHANGE RATIOS AND VALUE OF OFFER/MERGER
CONSIDERATION. The columns in the following table present:
- illustrative values of the average Computer Associates trading price
within a range of $60.00 to $85.00 per share,
- the exchange ratio illustrating the number of Computer Associates common
shares that would be issued for one share of Sterling Software common
stock at each of the average Computer Associates trading prices presented
in the table and
- the illustrative values of the consideration that would be issued in
connection with the offer and the merger for one Sterling Software common
share, which illustrative values are determined by
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multiplying each of the average Computer Associates trading prices
presented in the table by the corresponding exchange ratio and, in some
cases, giving effect to an exercise of the cash option.
<TABLE>
<CAPTION>
VALUE OF OFFER/MERGER
CONSIDERATION
-------------------------------------
AVERAGE COMPUTER ASSOCIATES TRADING PRICE EXCHANGE RATIO VALUE OF SHARES CASH TOTAL
- ----------------------------------------- -------------- --------------- -------- --------
<S> <C> <C> <C> <C>
$60.00(1)............................ 0.5925 $35.55 -- $35.55
$60.00(2)............................ 0.5780 $34.68 $0.87 $35.55
$60.00(3)............................ 0.5634 $33.80 $1.75 $35.55
$63.10............................... 0.5634 $35.55 n/a $35.55
$65.00............................... 0.5634 $36.62 n/a $36.62
$70.00............................... 0.5634 $39.44 n/a $39.44
$75.00............................... 0.5634 $42.26 n/a $42.26
$77.12............................... 0.5634 $43.45 n/a $43.45
$80.00............................... 0.5431 $43.45 n/a $43.45
$85.00............................... 0.5112 $43.45 n/a $43.45
</TABLE>
- ------------------------
(1) Assuming the exchange ratio resets without Computer Associates exercising
the cash option.
(2) Assuming Computer Associates elects to pay 50% of the maximum amount of cash
permitted under the cash option.
(3) Assuming Computer Associates elects to pay the maximum amount of cash
permitted under the cash option.
THE VALUES OF COMPUTER ASSOCIATES SHARES IN THE TABLE ABOVE ARE ILLUSTRATIVE
ONLY AND DO NOT REPRESENT THE ACTUAL AMOUNTS PER STERLING SOFTWARE COMMON SHARE
THAT MIGHT BE REALIZED BY ANY STERLING SOFTWARE STOCKHOLDER ON OR AFTER
CONSUMMATION OF THE OFFER OR THE MERGER. THE AMOUNT ANY STERLING SOFTWARE
STOCKHOLDER MIGHT REALIZE UPON SALE IN THE MARKET OF THE COMPUTER ASSOCIATES
COMMON SHARES RECEIVED BY SUCH STOCKHOLDER IN THE OFFER OR THE MERGER WILL
DEPEND UPON THE MARKET PRICE PER SHARE OF COMPUTER ASSOCIATES COMMON SHARES AT
THE TIME OF SALE, WHICH WILL FLUCTUATE DEPENDING UPON ANY NUMBER OF REASONS,
INCLUDING THOSE SPECIFIC TO COMPUTER ASSOCIATES AND THOSE THAT INFLUENCE THE
TRADING PRICES OF EQUITY SECURITIES GENERALLY.
FLUCTUATIONS IN MARKET PRICE. The average Computer Associates trading price
used to reset the exchange ratio is based on an average calculated over a ten
trading day period prior to the reset date and therefore might be different from
the actual market value of a share of Computer Associates common stock on the
reset date. The market value based on the trading price at such time of the
Computer Associates shares you receive in exchange for each share of Sterling
Software might actually be below $35.55 or above $43.45. In addition, from the
time the exchange ratio is reset, or from the date of the merger agreement if no
reset occurs, until the time you receive your Computer Associates shares through
the offer or the merger, the market value based on the trading price at such
time of the consideration you will receive will rise and fall along with the
trading price of Computer Associates common shares.
MORE INFORMATION ABOUT EXCHANGE RATIO. We will notify you by issuing a
press release announcing the final exchange ratio and filing that press release
with the SEC. The press release will state
how much cash, if any, we have elected to pay in partial consideration for your
Sterling Software shares under the cash option, if we exercise it. Sterling
Software stockholders can call our information agent, MacKenzie Partners, Inc.,
at any time toll free at (800) 322-2885 to request information about the
exchange ratio and any reset of the exchange ratio, including, once determined,
the average Computer Associates trading price for the offer.
PREFERRED STOCK PURCHASE RIGHTS. Our offer to acquire Sterling Software
common stock is also an offer to acquire Sterling Software preferred stock
purchase rights (Sterling Software rights), and, when
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we refer to the shares of Sterling Software common stock, we are also referring
to the associated Sterling Software rights, unless we indicate otherwise. In
addition, all references to the Sterling Software rights include the benefits to
holders of those rights pursuant to the Sterling Software rights agreement,
including the right to receive any payment due upon redemption of those rights.
The number of shares Computer Associates common stock and amount of cash, if we
elect to pay a portion of the consideration in cash, receivable by holders of
Sterling Software common stock in the offer and the merger includes payment for
the associated Sterling Software rights, and under no circumstances will
additional consideration be paid for the Sterling Software rights. Also, the
shares of common stock of Computer Associates to be issued in the offer and the
merger include the associated Computer Associates preferred stock purchase
rights. When we refer to shares of Computer Associates common stock, we are also
referring to these associated rights, unless we indicate otherwise.
TRANSFER CHARGES. If you tender your shares, you will not be obligated to
pay any charges or expenses of the depositary. Except as set forth in the
instructions to the letter of transmittal, transfer taxes on the tender of
Sterling Software common stock pursuant to the offer will be paid by us or on
our behalf. If you are the record owner of your shares and you tender your
shares in the offer, you will not have to pay brokerage fees or incur similar
expenses. If you own your shares through a broker or other nominee, and your
broker exchanges the shares on your behalf, your broker may charge you a fee for
doing so. You should consult your broker or nominee to determine whether any
charges will apply.
INTEREST. We will not pay interest on any cash amount payable for Sterling
Software shares in the offer or the merger regardless of any delay in making
such payment.
MERGER. We are making this offer in order to acquire control of, and
ultimately the entire common equity interest in, Sterling Software. We intend,
as soon as possible after consummation of the offer, to seek to have Sterling
Software and Silversmith Acquisition Corp. consummate the merger. At the
effective time of the merger, each share of Sterling Software common stock,
except for shares held by Sterling Software, us or any of our or Sterling
Software's subsidiaries, will be converted into the right to receive the same
number of Computer Associates shares (and same amount of cash, if any) per
Sterling Software share as is paid in the offer, subject to appraisal rights
that may be available under Delaware law. If we obtain all of the shares of
Sterling Software pursuant to the offer and the merger, former stockholders of
Sterling Software would own approximately 8% of the shares of common stock of
Computer Associates, based upon the number of shares outstanding of Computer
Associates on February 7, 2000 and of Sterling Software on February 9, 2000, and
assuming that the exchange ratio is not reset.
CONDITIONS OF OFFER. Our obligation to exchange shares of Computer
Associates common stock for Sterling Software shares pursuant to the offer is
conditioned upon several conditions referred to below under "Conditions of the
Offer," including the minimum tender condition, the antitrust condition, the
registration statement effectiveness condition and other conditions that are
discussed in that section.
STOCKHOLDERS LIST. We have relied on Sterling Software's stockholders list
and security position listings to communicate with you and to distribute the
offer to you. We may send this prospectus, related letter of transmittal and
other relevant materials to you and to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on Sterling Software's stockholders list or, if applicable, who are
listed as participants in a clearing agency's security position listing.
TIMING OF THE OFFER
The offer is currently scheduled to expire at midnight, New York City time,
on Monday, March 20, 2000.
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<PAGE>
EXTENSION, TERMINATION AND AMENDMENT
Subject to the terms of the merger agreement, we expressly reserve the
right, in our sole discretion, at any time or from time to time, to extend the
period of time during which the offer remains open, and we can do so by giving
oral or written notice of such extension to the depositary. If the offer is
extended for any reason, we will make an announcement to that effect no later
than 9:00 A.M., New York City time, on the next business day after the
previously scheduled expiration date. Subject to the terms of the merger
agreement, we are not giving any assurance that we will exercise our right to
extend the offer, although the merger agreement, subject to exceptions,
currently obligates us to do so until all conditions have been satisfied or
waived. During any such extension, all Sterling Software shares previously
tendered and not withdrawn will remain subject to the offer, subject to your
right to withdraw your Sterling Software shares. You should read the discussion
under the caption "The Offer--Withdrawal Rights" for more details.
Subject to the SEC's applicable rules and regulations and subject to the
terms of the merger agreement, we also reserve the right, in our sole
discretion, at any time or from time to time, (a) to delay acceptance for
exchange of or, regardless of whether we previously accepted Sterling Software
shares for exchange, exchange of any Sterling Software shares pursuant to the
offer or to terminate the offer and not accept or exchange any Sterling Software
Shares not previously accepted, or exchanged, upon the failure of any of the
conditions of the offer to be satisfied and (b) to waive any condition (other
than the minimum tender condition) or, subject to the terms of the merger
agreement, otherwise amend the offer in any respect, by giving oral or written
notice of such delay, termination or amendment to the depositary and by making a
public announcement. We will follow any extension, termination, amendment or
delay, as promptly as practicable, with a public announcement. In the case of an
extension, any such announcement will be issued no later than 9:00 A.M., New
York City time, on the next business day after the previously scheduled
expiration date. Subject to applicable law (including Rules 14d-4(d) and
14d-6(c) under the Exchange Act, which require that any material change in the
information published, sent or given to stockholders in connection with the
offer be promptly sent to stockholders in a manner reasonably designed to inform
stockholders of such change) and without limiting the manner in which we may
choose to make any public announcement, we assume no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
making a release to the Dow Jones News Service.
If we make a material change in the terms of the offer or the information
concerning the offer, or if we waive a material condition of the offer, we will
extend the offer to the extent required under the Exchange Act. If, prior to the
expiration date, we change the percentage of Sterling Software shares being
sought or the consideration offered to you, that change will apply to all
holders whose Sterling Software shares are accepted for exchange pursuant to the
offer. If at the time notice of that change is first published, sent or given to
you, the offer is scheduled to expire at any time earlier than the tenth
business day from and including the date that such notice is first so published,
sent or given, we will extend the offer until the expiration of that ten
business-day period. For purposes of the offer, a "business day" means any day
other than a Saturday, Sunday or federal holiday and consists of the time period
from 12:01 A.M. through 12:00 midnight, New York City time.
We may, although we do not currently intend to, elect to provide a
subsequent offering period of three to 20 business days after the acceptance of
Sterling Software shares in the offer if the requirements under Exchange Act
rule 14d-11 have been met. You will not have the right to withdraw Sterling
Software shares that you tender in the subsequent offering period, if any.
EXCHANGE OF STERLING SOFTWARE SHARES; DELIVERY OF COMPUTER ASSOCIATES COMMON
STOCK
Upon the terms and subject to the conditions of the offer, including, if the
offer is extended or amended, the terms and conditions of any such extension or
amendment, we will accept, and will exchange, Sterling Software shares validly
tendered and not withdrawn as promptly as practicable after
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<PAGE>
the expiration date and promptly after they are tendered during any subsequent
offering period. In addition, subject to applicable rules of the SEC, we
expressly reserve the right to delay acceptance for exchange or exchange of
Sterling Software shares in order to comply with any applicable law. In all
cases, exchange of Sterling Software shares tendered and accepted for exchange
pursuant to the offer will be made only after timely receipt by the depositary
of
- certificates for those Sterling Software shares or a confirmation of a
book-entry transfer of those Sterling Software shares in the depositary's
account at The Depository Trust Company, which we refer to as the "DTC"
- a properly completed and duly executed letter of transmittal (or a
facsimile of that document) or agent's message if applicable
- any other required documents.
For purposes of the offer, we will be deemed to have accepted for exchange
Sterling Software shares validly tendered and not withdrawn as, if and when we
notify the depositary of our acceptance for exchange of the tenders of those
Sterling Software shares pursuant to the offer. The depositary will deliver
Computer Associates common stock and cash, if the cash option is elected, in
exchange for Sterling Software shares pursuant to the offer and cash instead of
fractional shares of Computer Associates common stock as soon as practicable
after receipt of such notice. The depositary will act as agent for tendering
stockholders for the purpose of receiving Computer Associates common stock (and
any cash, if the cash option is chosen) and cash to be paid instead of
fractional shares of Computer Associates common stock from us and transmitting
such stock and cash to you. Under no circumstances will we pay interest on any
cash amount payable for Sterling Software shares in the offer or the merger,
regardless of any delay in making such payment.
If we do not accept any tendered Sterling Software shares pursuant to the
terms and conditions of the offer for any reason, or if certificates are
submitted for more Sterling Software shares than are tendered, we will return
certificates for such tendered Sterling Software shares or untendered Sterling
Software shares, as the case may be, without expense to the tendering
stockholder or, in the case of Sterling Software shares tendered by book-entry
transfer of such Sterling Software shares into the depositary's account at DTC
pursuant to the procedures set forth below under the discussion entitled
"Procedure for Tendering," those Sterling Software shares will be credited to an
account maintained within DTC, as soon as practicable following expiration or
termination of the offer.
If we increase the consideration offered to Sterling Software stockholders
in the offer prior to the expiration date, such increased consideration will be
given to all stockholders whose Sterling Software shares are tendered pursuant
to the offer, whether or not such Sterling Software shares were tendered or
accepted for exchange prior to such increase in consideration.
CASH INSTEAD OF FRACTIONAL SHARES OF COMPUTER ASSOCIATES COMMON STOCK
We will not issue certificates representing fractional shares of our common
stock pursuant to the offer. Instead, each tendering stockholder who would
otherwise be entitled to a fractional share of our common stock will receive
cash in an amount equal to such fraction (expressed as a decimal and rounded to
the nearest 0.01 of a share) multiplied by the closing price for shares of our
common stock on the New York Stock Exchange Composite Transaction Tape, which we
refer to as the "NYSE Composite Transaction Tape," on the date that we accept
those Sterling Software shares. You will not receive any interest on the cash to
be given for fractional shares, even if there is a delay in making the exchange
and payment.
WITHDRAWAL RIGHTS
Your tender of Sterling Software shares pursuant to the offer is
irrevocable, except that, other than during a subsequent offering period,
Sterling Software shares tendered pursuant to the offer may be withdrawn at any
time prior to the expiration date, and, unless we previously accepted them for
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<PAGE>
exchange pursuant to the offer, may also be withdrawn at any time after
April 22, 2000. If we elect to provide a subsequent offering period under
Exchange Act rule 14d-11, you will not have the right to withdraw Sterling
Software shares that you tender in the subsequent offering period.
For your withdrawal to be effective, the depositary must receive from you a
written, telegraphic, telex or facsimile transmission notice of withdrawal at
one of its addresses set forth on the back cover of this prospectus, and your
notice must include your name, the number of Sterling Software shares to be
withdrawn and the name of the registered holder, if it is different from that of
the person who tendered those Sterling Software shares.
A financial institution must guarantee all signatures on the notice of
withdrawal. Most banks, savings and loan associations and brokerage houses are
able to effect these signature guarantees for you. The financial institution
must be a participant in the Securities Transfer Agents Medallion Program, the
New York Stock Exchange Medallion Signature Program or the Stock Exchange
Medallion Program, any of which are an "eligible institution," unless those
Sterling Software shares have been tendered for the account of any eligible
institution. If Sterling Software shares have been tendered pursuant to the
procedures for book-entry exchange discussed under the caption entitled
"Procedure for Tendering," any notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawn Sterling Software
shares and must otherwise comply with DTC's procedures. If certificates have
been delivered or otherwise identified to the depositary, the name of the
registered holder and the serial numbers of the particular certificates
evidencing the Sterling Software shares withdrawn must also be furnished to the
depositary, as stated above, prior to the physical release of such certificates.
We will decide all questions as to the form and validity (including time of
receipt) of any notice of withdrawal, in our sole discretion, and our decision
shall be final and binding. Neither we, the depositary, the information agent
nor any other person will be under any duty to give notification of any defects
or irregularities in any notice of withdrawal or will incur any liability for
failure to give any such notification. Any Sterling Software shares properly
withdrawn will be deemed not to have been validly tendered for purposes of the
offer. However, you may retender withdrawn Sterling Software shares by following
one of the procedures discussed under the caption entitled "Procedure for
Tendering" at any time prior to the expiration date.
If you withdraw any of your Sterling Software shares, you automatically
withdraw the associated Sterling Software rights. You may not withdraw Sterling
Software rights unless you also withdraw the associated Sterling Software
shares.
PROCEDURE FOR TENDERING
For you to validly tender Sterling Software shares pursuant to the offer,
(a) a properly completed and duly executed letter of transmittal (or manually
executed facsimile of that document), along with any required signature
guarantees, or an agent's message in connection with a book-entry transfer, and
any other required documents, must be transmitted to and received by the
depositary at one of its addresses set forth on the back cover of this
prospectus, and certificates for Sterling Software shares tendered must be
received by the depositary at such address or those Sterling Software shares
must be tendered pursuant to the procedures for book-entry exchange set forth
below (and a confirmation of receipt of such tender received (we refer to this
confirmation below as a "book-entry confirmation"), in each case before the
expiration date, or (b) you must comply with the guaranteed delivery procedures
set forth below.
The term "agent's message" means a message, transmitted by DTC to, and
received by, the depositary and forming a part of a book-entry confirmation,
which states that DTC has received an express acknowledgment from the
participant in DTC exchanging the Sterling Software shares which are the subject
of such book-entry confirmation, that such participant has received and agrees
to be bound by the terms of the letter of transmittal and that we may enforce
that agreement against such participant.
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The depositary will establish accounts with respect to the Sterling Software
shares at DTC for purposes of the offer within two business days after the date
of this prospectus, and any financial institution that is a participant in DTC
may make book-entry delivery of the Sterling Software shares by causing DTC to
transfer such Sterling Software shares into the depositary's account in
accordance with DTC's procedure for such transfer. However, although delivery of
Sterling Software shares may be effected through book-entry at DTC, the letter
of transmittal (or facsimile thereof), with any required signature guarantees,
or an agent's message in connection with a book-entry transfer, and any other
required documents, must, in any case, be transmitted to and received by the
depositary at one or more of its addresses set forth on the back cover of this
prospectus prior to the expiration date, or the guaranteed delivery procedures
described below.
Signatures on all Letters of Transmittal must be guaranteed by an eligible
institution, except in cases in which Sterling Software shares are tendered
either by a registered holder of Sterling Software shares who has not completed
either the box entitled "Special Payment Instructions" or the box entitled
"Special Delivery Instructions" on the letter of transmittal or for the account
of an eligible institution.
If the certificates for Sterling Software shares are registered in the name
of a person other than the person who signs the letter of transmittal, or if
certificates for untendered Sterling Software shares are to be issued to a
person other than the registered holder(s), the certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered owner or owners appear on the certificates, with
the signature(s) on the certificates or stock powers guaranteed in the manner we
have described above.
THE METHOD OF DELIVERY OF STERLING SOFTWARE SHARE CERTIFICATES AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH DTC, IS AT YOUR OPTION AND RISK,
AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY. IF DELIVERY IS BY MAIL, WE RECOMMEND REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT
TIME TO ENSURE TIMELY DELIVERY.
TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO CASH, IF
ANY, RECEIVED PURSUANT TO THE OFFER, YOU MUST PROVIDE THE DEPOSITARY WITH YOUR
CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY WHETHER YOU ARE SUBJECT TO
BACKUP WITHHOLDING OF FEDERAL INCOME TAX BY COMPLETING THE SUBSTITUTE FORM W-9
INCLUDED IN THE LETTER OF ELECTION AND TRANSMITTAL. SOME STOCKHOLDERS
(INCLUDING, AMONG OTHERS, ALL CORPORATIONS AND SOME FOREIGN INDIVIDUALS) ARE NOT
SUBJECT TO THESE BACKUP WITHHOLDING AND REPORTING REQUIREMENTS. IN ORDER FOR A
FOREIGN INDIVIDUAL TO QUALIFY AS AN EXEMPT RECIPIENT, THE STOCKHOLDER MUST
SUBMIT A FORM W-8, SIGNED UNDER PENALTIES OF PERJURY, ATTESTING TO THAT
INDIVIDUAL'S EXEMPT STATUS.
If you wish to tender Sterling Software shares pursuant to the offer and
your certificates are not immediately available or you cannot deliver the
certificates and all other required documents to the depositary prior to the
expiration date or cannot complete the procedure for book-entry transfer on a
timely basis, your Sterling Software shares may nevertheless be tendered, so
long as all of the following conditions are satisfied:
(a) you make your tender by or through an eligible institution;
(b) a properly completed and duly executed notice of guaranteed
delivery, substantially in the form made available by us, is received by the
depositary as provided below on or prior to the expiration date; and
(c) the certificates for all Sterling Software shares to be tendered (or
a confirmation of a book-entry transfer of such securities into the
depositary's account at DTC as described above), in proper form for
transfer, together with a properly completed and duly executed letter of
transmittal (or facsimile thereof), with any required signature guarantees
(or, in the case of a book-entry transfer, an agent's message) and all other
documents required by the letter of
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<PAGE>
transmittal are received by the depositary within three NYSE trading days
after the date of execution of such notice of guaranteed delivery.
If your shares are held in the Sterling Software, Inc. Savings and Security
Plan, you must complete and return the enclosed Instruction Card in accordance
with the directions contained therein in order to effect a valid tender of those
Shares.
You may deliver the notice of guaranteed delivery by hand or transmit it by
telegram, telex, facsimile transmission or mail to the depositary and you must
include a guarantee by an eligible institution in the form set forth in that
notice.
In all cases, we will exchange Sterling Software shares tendered and
accepted for exchange pursuant to the offer only after timely receipt by the
depositary of certificates for Sterling Software shares (or timely confirmation
of a book-entry transfer of such securities into the depositary's account at DTC
as described above), properly completed and duly executed letter(s) of
transmittal (or facsimile(s) thereof), or an agent's message in connection with
a book-entry transfer, and any other required documents. Accordingly, you may be
paid at different times depending upon when the depositary actually receives
certificates for Sterling Software shares or confirmations of book-entry
transfers of those shares.
By executing a letter of transmittal as set forth above, you irrevocably
appoint our designees as your attorneys-in-fact and proxies, each with full
power of substitution, to the full extent of your rights with respect to your
Sterling Software shares tendered and accepted for exchange by us and with
respect to any and all other Sterling Software shares and other securities
issued or issuable in respect of the Sterling Software shares on or after
February 14, 2000. That appointment is effective, and voting rights will be
affected, when and only to the extent that we deposit with the depositary the
shares of our common stock for Sterling Software shares that you have tendered.
All such proxies shall be considered coupled with an interest in the tendered
Sterling Software shares and therefore shall not be revocable. Upon the
effectiveness of such appointment, all prior proxies that you have given will be
revoked, and you may not give any subsequent proxies and, if given, they will
not be deemed effective. Our designees will, with respect to the Sterling
Software shares for which the appointment is effective, be empowered, among
other things, to exercise all of your voting and other rights as they, in their
sole discretion, deem proper at any annual, special or adjourned meeting of
Sterling Software's stockholders or otherwise. We reserve the right to require
that, in order for Sterling Software shares to be deemed validly tendered,
immediately upon our acceptance for exchange of those Sterling Software shares,
we must be able to exercise full voting rights with respect to such Sterling
Software shares.
We will determine questions as to the validity, form, eligibility, including
time of receipt, and acceptance for exchange of any tender of Sterling Software
shares, in our sole discretion, and our determination shall be final and
binding. We reserve the absolute right to reject any and all tenders of Sterling
Software shares that we determine are not in proper form or the acceptance for
exchange of or exchange for which may, in the opinion of our counsel, be
unlawful. We also reserve the absolute right to waive any of the conditions of
the offer (other than the minimum tender condition) or any defect or
irregularity in the tender of any Sterling Software shares. No tender of
Sterling Software shares will be deemed to have been validly made until all
defects and irregularities in tenders of Sterling Software shares have been
cured or waived. Neither we, the depositary, the information agent nor any other
person will be under any duty to give notification of any defects or
irregularities in the tender of any Sterling Software shares or will incur any
liability for failure to give any such notification. Our interpretation of the
terms and conditions of the offer, including the letter of transmittal and
instructions thereto will be final and binding.
The tender of Sterling Software shares pursuant to any of the procedures
described above will constitute a binding agreement between us and you upon the
terms and subject to the conditions of the offer.
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PURPOSE OF THE OFFER; THE MERGER; APPRAISAL RIGHTS
We are making the offer in order to acquire control of, and ultimately the
entire common equity interest in, Sterling Software. The offer is the first step
in our acquisition of Sterling Software, and is intended to facilitate the
acquisition of all Sterling Software shares. You will not have appraisal rights
as a result of consummation of the offer. We intend, as soon as practicable
after consummation of the offer, to seek to merge Silversmith Acquisition Corp.,
a wholly owned subsidiary of Computer Associates, with Sterling Software. The
purpose of the merger is to acquire all Sterling Software shares not tendered
and exchanged pursuant to the offer. At the effective time of the merger, each
share of Sterling Software common stock, except for shares held by Sterling
Software, us or any of our or Sterling Software's subsidiaries, will be
converted into the right to receive the same number of Computer Associates
shares (and same amount of cash, if any) per Sterling Software share as is paid
in the offer, subject to appraisal rights that may be available under Delaware
law. Assuming satisfaction or waiver of the conditions to the merger, we are
obligated to use all reasonable efforts to consummate the merger pursuant to
Section 253 of the Delaware General Corporation Law. Under Section 253 of the
Delaware General Corporation Law, a parent corporation owning at least 90% of
the outstanding shares of each class of a subsidiary corporation may merge
itself into the subsidiary corporation without the approval of the stockholders
of the parent corporation or of the board of directors or stockholders of the
subsidiary corporation. Alternatively, assuming the minimum tender condition is
satisfied and we consummate the offer, we would have sufficient voting power to
effect the merger under Section 251 of the Delaware General Corporation Law
without the vote of any other stockholder of Sterling Software.
Although stockholders do not have appraisal rights as a result of the offer,
if the merger is consummated pursuant to Section 253 of the Delaware General
Corporation Law, Sterling Software stockholders at the time of the merger who do
not vote in favor of the merger will have the right under the Delaware General
Corporation Law to dissent and demand appraisal of their Sterling Software
shares in accordance with Section 262 of the Delaware General Corporation Law.
Under Section 262, dissenting stockholders who comply with the applicable
statutory procedures will be entitled to receive a judicial determination of the
fair value of their Sterling Software shares (exclusive of any element of value
arising from the accomplishment or expectation of the merger) and to receive
payment of such fair value in cash, together with a fair rate of interest, if
any. In CEDE & CO. AND CINERAMA, INC. V. TECHNICOLOR, INC., the Supreme Court of
the State of Delaware construed Section 262 of the Delaware General Corporation
Law and held that the "accomplishment or expectation" exclusion from the
calculation of fair value set forth in the preceding sentence is narrow and is
designed to eliminate use of pro forma data and projections of a speculative
variety relating to the completion of a merger. The court held that it is
appropriate to include in the calculation of fair value any known elements of
value, including those elements of value which exist on the date of the merger
because of a majority acquiror's interim action in a two-step cash-out
transaction. We cannot assure you as to the methodology a court would use to
determine fair value or how a court would select which of the elements of value
are to be included in such a determination. Any such judicial determination of
the fair value of Sterling Software shares could be based upon factors other
than, or in addition to, the price per Sterling Software share to be paid in the
merger or the market value of the Sterling Software shares. The value so
determined could be more or less than the price per Sterling Software share to
be paid in the merger.
Assuming the Sterling Software shares remain listed on a national securities
exchange or are then quoted through NASDAQ or held of record by more than 2,000
holders, and assuming we do not elect the cash option, the holders of Sterling
Software shares will not have appraisal rights if the merger is consummated
pursuant to Section 251 of the Delaware General Corporation Law. However, if the
merger is so consummated, and if, on the date fixed to determine stockholders
entitled to vote on the merger, the Sterling Software shares are not listed on a
national securities exchange or quoted through NASDAQ or held of record by more
than 2,000 holders, or if we elect the cash option, you will have
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appraisal rights pursuant to the provisions of Section 262 of the Delaware
General Corporation Law as described above.
Rule 13e-3 of the General Rules and Regulations under the Exchange Act,
which we do not believe would apply to the merger if the merger occurred within
one year of consummation of the offer, would require, among other things, that
some financial information concerning Sterling Software, and some information
relating to the fairness of the proposed transaction and the consideration
offered to stockholders of Sterling Software therein, be filed with the SEC and
disclosed to you prior to consummation of the merger.
In addition, we reserve the right to acquire, following the consummation or
termination of the offer, additional Sterling Software shares through open
market purchases, privately negotiated transactions, a tender offer or exchange
offer, or otherwise, upon such terms and at such prices as we decide, which may
be more or less favorable than those of the offer. We and our affiliates also
reserve the right to dispose of any or all Sterling Software shares acquired by
us pursuant to the offer or otherwise, upon such terms and at such prices as we
shall determine.
Upon consummation of the offer, we intend to take appropriate actions to
optimize and rationalize the combined entities' assets, operations, management,
personnel, general and administrative functions and corporate structure. Except
as we have otherwise discussed elsewhere in this prospectus, we do not have any
plans or proposals right now that would result in an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, or sale of a
material amount of assets, involving Sterling Software or any of its
subsidiaries, or any material changes in Sterling Software's corporate structure
or business, or any change in its management.
Upon consummation of the offer, we may also elect or seek the election of
nominees of our choice to Sterling Software's board of directors. Pursuant to
the merger agreement, until the merger is completed Sterling Software's board of
directors will always have at least two members who were Sterling Software
directors prior to consummation of the offer. See "The Merger Agreement and the
Tender Agreement--The Merger Agreement--Sterling Software Board of Directors."
CONDITIONS OF THE OFFER
The offer is subject to a number of conditions, which are described below:
MINIMUM TENDER CONDITION
There must be validly tendered, prior to the expiration of the offer, and
not withdrawn a number of Sterling Software shares which will constitute at
least a majority of the total number of outstanding Sterling Software shares on
a fully diluted basis (as though all options or other securities convertible
into or exercisable or exchangeable for Sterling Software shares had been so
converted, exercised or exchanged) as of the date that we accept the Sterling
Software shares pursuant to the offer. We call this the "minimum tender
condition." Based on information supplied by Sterling Software, the number of
shares needed to satisfy the minimum tender condition would have been 51,457,769
as of February 9, 2000.
ANTITRUST CONDITION
The waiting period, and any extension thereof, applicable to the offer and
the merger under the HSR Act and any other applicable antitrust law must have
expired or been terminated. We call this the "antitrust condition."
Under the HSR Act, and the rules that have been promulgated thereunder, some
acquisitions may not be consummated unless information has been furnished to the
Antitrust Division of the Department of Justice and the Federal Trade Commission
and some waiting period requirements have been satisfied. The acquisition of
Sterling Software shares pursuant to the offer is subject to the HSR Act. On
February 14, 2000, we filed with the Antitrust Division and the Federal Trade
Commission a Notification and Report Form under the HSR Act with respect to the
offer. Under the applicable
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provisions of the HSR Act, the purchase of Sterling Software shares under the
offer cannot be consummated until the expiration or early termination of a
waiting period that began on February 14, 2000. The initial waiting period under
the HSR Act is 30 days. Either the Federal Trade Commission or the Antitrust
Division may issue a request for additional information or documentary material,
which will extend the waiting period until 20 days after substantial compliance
with such request. Federal, state and foreign antitrust enforcement agencies
frequently scrutinize under the antitrust laws transactions such as our
acquisition of Sterling Software shares pursuant to the offer. At any time
before or after we acquire Sterling Software shares, any such agency could take
such action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the acquisition of Sterling
Software shares pursuant to the offer or otherwise or seeking divestiture of
Sterling Software shares acquired by us or divestiture of assets of Computer
Associates or Sterling Software. Private parties may also bring legal action
under the antitrust laws under some circumstances. Computer Associates and
Sterling Software conduct operations in a number of jurisdictions where other
regulatory filings or approvals may be required or advisable in connection with
the completion of the offer. See "--Other Conditions of the Offer."
Some large Sterling Software stockholders (those that would receive more
than $15 million in Computer Associates shares) may be required to make separate
filings with the Federal Trade Commission and Antitrust Division under the HSR
Act and the Rules in conjunction with the receipt of shares of our common stock.
If you must make such a filing, you will then be required to observe applicable
waiting periods under the HSR Act and the Rules before receiving shares of
Computer Associates common stock. If you are obligated to make such a filing, we
will deposit the shares of our common stock to be exchanged, pursuant to the
Rules, pending expiration or early termination of the waiting period.
Although no assurances can be given, we anticipate that HSR Act clearance
will be obtained on a timely basis.
The acquisition of Sterling Software may also require notification to the
competition authorities of various countries in which both Computer Associates
and Sterling Software conduct business, depending on the filing requirements and
thresholds of merger regulations in such countries. Computer Associates and
Sterling Software currently believe that such filings may be required in
Austria, Brazil, Finland, Germany, the Netherlands, Poland, Portugal, South
Africa, Sweden, Taiwan and Turkey. Although no assurances can be given, we
anticipate receiving all required clearances under foreign competition laws on a
timely basis.
REGISTRATION STATEMENT EFFECTIVENESS CONDITION
The registration statement on Form S-4 of which this prospectus is a part
must have become effective under the Securities Act and not be the subject of
any stop order or proceedings seeking a stop order. We call this the
"registration statement effectiveness condition."
NYSE LISTING CONDITION
The shares of Computer Associates common stock issuable to Sterling Software
stockholders in the offer and the merger must have been approved for listing on
the New York Stock Exchange, subject to official notice of issuance.
OTHER CONDITIONS OF THE OFFER
The offer is also subject to the conditions that, at the time of acceptance
for exchange of Sterling Software shares pursuant to the offer:
- there shall not have been instituted or pending any action or proceeding
by any governmental entity, (1) challenging or seeking to make illegal,
delay materially or otherwise directly or indirectly restrain or prohibit
the making of the offer, the acceptance for exchange of, or the exchange
or delivery of, the Computer Associates shares for some or all the
Sterling Software
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shares by us or the consummation by us of the merger, or seeking to obtain
material damages or otherwise directly or indirectly relating to the
transactions contemplated by the tender agreement, the merger agreement,
the offer or the merger, (2) seeking to restrain or prohibit the ownership
or operation by Computer Associates, Silversmith Acquisition Corp. or any
of their subsidiaries or affiliates of all or any portion of the business
or assets of Sterling Software and its subsidiaries, taken as a whole, or
of Computer Associates and its subsidiaries, taken as a whole, or to
compel Computer Associates or any of its subsidiaries or affiliates to
dispose of or hold separate all or any portion of the business or assets
of Sterling Software and its subsidiaries, taken as a whole, or of
Computer Associates and its subsidiaries, taken as a whole, (3) seeking to
impose limitations on the ability of Computer Associates or any of its
subsidiaries or affiliates effectively to exercise full rights of
ownership of the Sterling Software shares, including, without limitation,
the right to vote any Sterling Software shares acquired or owned by
Computer Associates or any of its subsidiaries or affiliates on all
matters properly presented to Sterling Software's stockholders or
(4) seeking to require divestiture by Computer Associates or any of its
subsidiaries or affiliates of any Sterling Software shares
- there shall not be any action taken, or any statute, rule, regulation,
injunction, order or decree proposed, enacted, enforced, promulgated,
issued or deemed applicable to the merger agreement, the tender agreement,
the offer or the merger, by any governmental entity that, in the judgment
of Computer Associates, is reasonably likely, directly or indirectly, to
result in any of the consequences referred to in the immediately preceding
paragraph
- Sterling Software shall not have breached or failed to perform in any
material respect any of its covenants, obligations or agreements under the
merger agreement, other than the Material Agreement Covenant described
below under "The Merger Agreement and the Tender Agreement--The Merger
Agreement--Conduct of Business Pending the Merger", or Sterling Software
shall not have breached the Material Agreement Covenant such that the
aggregate of all such breaches would materially and adversely affect
Sterling Software and its subsidiaries taken as a whole or us
- Sterling Software's representations and warranties in the merger agreement
that are qualified as to materiality shall be true and correct, and its
representations and warranties that are not qualified as to materiality
shall be true and correct in all material respects, in each case as of the
date of the agreement and as of the expiration of the offer, including any
extension thereof (except to the extent expressly made as an earlier date,
in which case as of such date). Notwithstanding the foregoing, this
condition shall not be deemed to exist unless the failure of such
representations and warranties so to be true and correct, without giving
effect to any limitation as to "materially" or "material adverse effect"
or similar limitations, individually or in the aggregate, has had and
could reasonably be expected to have a material adverse effect, as defined
in the merger agreement, on Sterling Software
- the merger agreement has not been terminated in accordance with its terms
- (1) the board of directors of Sterling Software, or any committee thereof,
has not withdrawn or materially modified or amended in a manner adverse to
Computer Associates or Silversmith Acquisition Corp. its approval or
recommendation of the offer, the merger, the merger agreement or the entry
by Silversmith Acquisition Corp. into the tender agreement or (2) the
board of directors of Sterling Software, or any committee thereof, has not
recommended to the stockholders of Sterling Software any acquisition
proposal (as defined in the merger agreement) or resolved to do so or
publicly announced an intention to do so
- Sterling Software has not entered into, or publicly announced its
intention to enter into, an agreement or agreement in principle, other
than a customary confidentiality agreement, with respect to any
acquisition proposal, as defined in the merger agreement, or
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- no person or group, as defined in Exchange Act Section 13(d)(3), other
than Computer Associates or any of its subsidiaries, has become the
beneficial owner, as defined in Exchange Act rule 13d-3, of 15% or more of
the outstanding shares of common stock of Sterling Software or acquired,
directly or indirectly, 15% or more of the assets of Sterling Software and
its subsidiaries
The conditions of the offer described above are solely for our benefit and
we may assert them regardless of the circumstances giving rise to any such
conditions, including any action or inaction by us. We may waive these
conditions in whole or in part, other than the minimum tender condition. The
determination as to whether any condition has been satisfied shall be in our
good faith judgment and will be final and binding on all parties. The failure by
us at any time to exercise any of the foregoing rights shall not be deemed a
waiver of any such right and each such right shall be deemed a continuing right
which may be asserted at any time and from time to time. Notwithstanding the
fact that we reserve the right to assert the failure of a condition following
acceptance for exchange but prior to exchange in order to delay exchange or
cancel our obligation to exchange properly tendered Sterling Software shares, we
will either promptly exchange such Sterling Software shares or promptly return
such Sterling Software shares.
REGULATORY APPROVALS
Computer Associates and Sterling Software have agreed pursuant to the merger
agreement to use all reasonable efforts to take whatever actions are required to
obtain necessary regulatory approvals with respect to the offer and the merger.
Other than clearance under the antitrust laws applicable to the offer and the
merger which are described above under "--Conditions of the Offer--Antitrust
Condition," the SEC declaring the effectiveness of the registration statement of
which this prospectus is a part and the filing of a certificate of merger under
the Delaware General Corporation Law with respect to the merger, we do not
believe that any additional material governmental filings are required with
respect to the offer and the merger.
CERTAIN EFFECTS OF OFFER
REDUCED LIQUIDITY; POSSIBLE DELISTING
The tender of Sterling Software shares pursuant to the offer will reduce the
number of holders of Sterling Software shares and the number of Sterling
Software shares that might otherwise trade publicly and could adversely affect
the liquidity and market value of the remaining Sterling Software shares held by
the public. Sterling Software shares are listed and principally traded on the
NYSE. Depending on the number of Sterling Software shares acquired pursuant to
the offer, following consummation of the offer, Sterling Software shares may no
longer meet the requirements of the NYSE for continued listing. For example,
published guidelines of the NYSE indicate that the NYSE would consider delisting
the outstanding Sterling Software shares if, among other things, (i) the number
of publicly held Sterling Software shares (exclusive of holdings of officers,
directors and members of their immediate families and other concentrated
holdings of 10 percent or more) should fall below 600,000, (ii) the number of
record holders of 100 or more Sterling Software shares should fall below 1,200
or (iii) the aggregate market value of publicly held shares should fall below
$5 million.
According to Sterling Software, there were, as of February 9, 2000,
approximately 82,511,293 Sterling Software common shares outstanding.
If the NYSE were to delist the Sterling Software shares, including after the
exchange of shares in the offer but prior to the merger, the market for them
could be adversely affected. It is possible that Sterling Software shares would
be traded on other securities exchanges or in the over-the-counter market, and
that price quotations would be reported by such exchanges, or through the
National Association of Securities Dealers, Inc., Automated Quotations System
(which we refer to as "NASDAQ") or by other sources. The extent of the public
market for the Sterling Software shares and the availability of such quotations
would, however, depend upon the number of holders and/or the
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aggregate market value of the Sterling Software shares remaining at such time,
the interest in maintaining a market in the Sterling Software shares on the part
of securities firms, the possible termination of registration of Sterling
Software shares under the Exchange Act, as described below, and other factors.
STATUS AS "MARGIN SECURITIES"
The Sterling Software shares are presently "margin securities" under the
regulations of the Federal Reserve Board, which has the effect, among other
things, of allowing brokers to extend credit on the collateral of Sterling
Software shares. Depending on the factors similar to those described above with
respect to listing and market quotations, following consummations of the offer,
the Sterling Software shares may no longer constitute "margin securities" for
the purposes of the Federal Reserve Board's margin regulations, in which event
the Sterling Software shares would be ineligible as collateral for margin loans
made by brokers. For a description of the treatment of Sterling Software shares
in the merger, you should refer to "--Purpose of the Offer; the Merger;
Appraisal Rights."
REGISTRATION UNDER THE EXCHANGE ACT
Sterling Software shares are currently registered under the Exchange Act.
Sterling Software can terminate that registration upon application to the SEC if
the outstanding shares are not listed on a national securities exchange and if
there are fewer than 300 holders of record of Sterling Software shares.
Termination of registration of the Sterling Software shares under the Exchange
Act would reduce the information that Sterling Software must furnish to its
stockholders and to the SEC and would make certain provisions of the Exchange
Act, such as the short-swing profit recovery provisions of Section 16(b) and the
requirement of furnishing a proxy statement in connection with stockholders
meetings pursuant to Section 14(a) and the related requirement of furnishing an
annual report to stockholders, no longer applicable with respect to Sterling
Software shares. Furthermore, the ability of "affiliates" of Sterling Software
and persons holding "restricted securities" of Sterling Software to dispose of
such securities pursuant to Rule 144 under the Securities Act may be impaired or
eliminated. If registration of the shares under the Exchange Act were
terminated, they would no longer be eligible for NYSE listing or for continued
inclusion on the Federal Reserve Board's list of "margin securities."
SOURCE AND AMOUNT OF FUNDS
The total amount of funds required to purchase Sterling Software shares
pursuant to the offer and the merger, if we were to elect to exercise the cash
option, will depend on the value of Computer Associates shares at the time we
elect the cash option and the extent to which we elect the cash option.
Accordingly, we cannot determine that amount now. We will obtain all funds
needed for this purpose from our general corporate funds. Also, we will pay cash
instead of issuing fractional shares of Computer Associates common stock. Cash
for fractional shares will come from our general corporate funds.
RELATIONSHIPS WITH STERLING SOFTWARE
Except as set forth in this prospectus, neither we nor, to the best of our
knowledge, any of our directors, executive officers or other affiliates has any
contract, arrangement, understanding or relationship with any other person with
respect to any securities of Sterling Software, including, but not limited to,
any contract, arrangement, understanding or relationship concerning the transfer
or the voting of any such securities, joint ventures, loan or option
arrangements, puts or calls, guaranties of loans, guaranties against loss or the
giving or withholding of proxies. Except as described in this prospectus, there
have been no contacts, negotiations or transactions within the last two years,
between us or, to the best of our knowledge, any of our directors, executive
officers or other affiliates on the one hand, and Sterling Software or its
affiliates, on the other hand, concerning a merger, consolidation or
acquisition, a tender offer or other acquisition of securities, an election of
directors, or a sale or
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other transfer of a material amount of assets. Except as set forth in this
prospectus, neither we, nor, to the best of our knowledge, any of our directors,
executive officers or other affiliates has within the last two years had any
transaction with Sterling Software or any of its executive officers, directors
or affiliates that would require disclosure under the rules and regulations of
the SEC applicable to the offer.
ACCOUNTING TREATMENT
The acquisition of Sterling Software by Computer Associates would be
accounted for under the purchase method of accounting under U.S. generally
accepted accounting principles, which means that Sterling Software's results of
operations will be included with ours from the closing date and its consolidated
assets and liabilities will be recorded at their fair values at the same date.
FEES AND EXPENSES
We have retained MacKenzie Partners, Inc. to act as the information agent in
connection with the offer. The information agent may contact holders of Sterling
Software shares by mail, telephone, telex, telegraph and personal interviews and
may request brokers, dealers and other nominee stockholders to forward the offer
materials to beneficial owners of Sterling Software shares. The information
agent will be paid a customary fee for such services, plus reimbursement of
out-of-pocket expenses, and we will indemnify the information agent against
certain liabilities and expenses in connection with the offer, including
liabilities under federal securities laws.
We will not pay any fees or commissions to any broker, dealer or other
persons (other than the information agent) for soliciting tenders of Sterling
Software shares pursuant to the offer.
Broadview International LLC provided certain financial advisory services to
Sterling Software in connection with the offer and the merger. Details
concerning the arrangements between Sterling Software and Broadview
International LLC are disclosed in Sterling Software's Schedule 14D-9, which is
being mailed to stockholders of Sterling Software with this prospectus.
Sterling Software received an opinion from Goldman, Sachs & Co. dated
February 14, 2000 substantially to the effect that, as of such date, the
consideration to be received by Sterling Software stockholders pursuant to the
merger agreement is fair from a financial point of view to the stockholders of
Sterling Software. The opinion is attached as an exhibit to Sterling Software's
Schedule 14D-9, which is being mailed to the stockholders of Sterling Software
with this prospectus. Details concerning the arrangements between Sterling
Software and Goldman, Sachs & Co. are disclosed in Sterling Software's
Schedule 14D-9.
STOCK EXCHANGE LISTINGS
Our common stock is listed on the NYSE. We will make an application as
necessary to list on the NYSE the common stock that we will issue pursuant to
the offer and the merger.
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THE MERGER AGREEMENT AND THE TENDER AGREEMENT
The merger agreement and the tender agreement are filed as exhibits to the
registration statement of which this prospectus is a part and the merger
agreement and the tender agreement are incorporated by reference in this
prospectus. We believe the following summary describes the material terms of the
merger agreement and the tender agreement. However, we recommend that you read
carefully the complete agreements for their precise legal terms and other
information that may be important to you.
THE MERGER AGREEMENT
THE OFFER
CONDITIONS. Our obligation to complete the offer is subject to the
conditions described on pages 40-43 of this prospectus and include the minimum
tender condition, the antitrust condition and the registration statement
effectiveness condition.
We have agreed that, without the prior written consent of Sterling Software,
no change may be made to the offer which
- changes the form or amount of consideration to be paid, other than in
connection with the cash election or by adding consideration,
- imposes conditions to the offer in addition to those set forth in the
merger agreement or which changes or waives the minimum tender condition,
- extends the offer, other than as described below, or
- makes any other change to any condition to the offer which is adverse to
the holders of Sterling Software shares.
CONSIDERATION. The merger agreement provides for the consideration that we
will pay in the offer, including the exchange ratio, the adjustments to the
exchange ratio, if any, and the procedures for the cash election, if any. For a
description of those matters, refer to the discussion under "The Offer,"
including under the caption "--Basic Terms."
EXPIRATION OR TERMINATION OF THE OFFER. We have agreed that if, at the
scheduled expiration date of the offer, the conditions to the offer shall not
have been satisfied or waived, other than several specified conditions, unless
there is no reasonable possibility of all of the conditions to the offer being
satisfied on or before September 30, 2000, we will extend the expiration date of
the offer for an additional period or periods of time, each of which being no
longer than 15 business days, until the date that such conditions are satisfied
or waived and we become obligated to accept for payment and pay for Sterling
Software shares tendered pursuant to the offer. However, if at any scheduled
expiration date of the offer, all of the conditions to the offer have been
satisfied or waived other than the minimum tender condition, we will only be
required to extend the offer for an additional 20 business days following such
scheduled expiration date.
THE MERGER
If the conditions to the merger are satisfied or waived in accordance with
the merger agreement and in accordance with the Delaware General Corporation
Law, at the effective time of the merger, Silversmith Acquisition Corp. will
merge with Sterling Software. Sterling Software will survive the merger as a
wholly owned subsidiary of Computer Associates.
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EFFECTIVE TIME OF THE MERGER
The merger will become effective upon the filing of a certificate of merger
with the Delaware Secretary of State or such later time as is agreed by Computer
Associates and Sterling Software and specified in the certificate of merger. The
filing of the certificate of merger will take place as soon as practicable, but
no later than the second business day, after satisfaction or waiver of the
conditions described below under "--The Merger Agreement--Other
Provisions--Conditions of the Merger" unless the parties agree to another date.
ADDITIONAL EFFECTS OF THE MERGER
Upon completion of the merger:
- each outstanding share of capital stock of Silversmith Acquisition Corp.
will be converted into and become one share of common stock of Sterling
Software as the corporation surviving the merger
- each outstanding share of Sterling Software common stock will be converted
into and become the right to receive the amount and type of consideration
received by Sterling Software stockholders who tendered their shares in
the offer
- the directors and officers of Silversmith Acquisition Corp. at the
effective time of the merger will become the directors and officers of
Sterling Software as the corporation surviving the merger
- the certificate of incorporation of Sterling Software, as in effect
immediately prior to the effective time of the merger, will be amended as
of the effective time of the merger so as to (a) reduce the total number
of authorized shares of capital stock to be 1,000 shares of common stock,
par value $.10 per share, and (b) permit the stockholders of the
corporation to take action without a meeting, and, as so amended, such
certificate of incorporation shall be the certificate of incorporation of
Sterling Software as the corporation surviving the merger and
- the by-laws of Silversmith Acquisition Corp. at the effective time of the
merger will become the by-laws of Sterling Software as the corporation
surviving the merger.
EXCHANGE AGENT; PROCEDURES FOR EXCHANGE OF CERTIFICATES
EXCHANGE AGENT. At the time the merger becomes effective, Computer
Associates shall enter into an agreement with a bank or trust company that is
reasonably acceptable to Sterling Software, with which Computer Associates shall
deposit any required cash and certificates representing the number of whole
shares of Computer Associates common stock issuable pursuant to the merger
agreement in exchange for outstanding shares of Sterling Software common stock.
Soon after the completion of the merger, we will send a letter to each person
who was a Sterling Software stockholder at the time the merger became effective.
The letter will contain instructions on how to surrender Sterling Software stock
certificates to the exchange agent and receive shares of Computer Associates and
cash, if any cash is payable. See "The Offer--Procedure for Tendering."
DIVIDENDS. Holders of Sterling Software shares will not be entitled to
receive any dividends or other distributions payable by Computer Associates
until they exchange their Sterling Software stock certificates for certificates
representing shares of Computer Associates common stock. Once they deliver their
Sterling Software stock certificates to the exchange agent, those stockholders
will receive, subject to applicable laws, accumulated dividends and
distributions, without interest.
FRACTIONAL SHARES. No fractional shares of Computer Associates common stock
will be issued upon the surrender of certificates representing Sterling Software
shares. No dividend or other distribution of Computer Associates will relate to
any such fractional shares and no such fractional shares will entitle
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the owner thereof to any voting or other rights of a stockholder of Computer
Associates. Holders of Sterling Software shares otherwise entitled to fractional
shares of Computer Associates common stock will receive a cash payment instead
of such fractional shares. Following the effective time, the exchange agent will
determine the excess of the number of whole shares of Computer Associates common
stock delivered to the exchange agent by Computer Associates for distribution to
Sterling Software stockholders over the aggregate number of whole Computer
Associates shares to be distributed to Sterling Software stockholders. The
exchange agent will then, on behalf of the former Sterling Software
stockholders, sell the excess shares at then prevailing prices on the NYSE, all
in the manner provided in the merger agreement. Notwithstanding the foregoing,
Computer Associates has the option, exercisable prior to the effective time of
the merger, in lieu of the issuance of such excess shares to pay each former
holder of Sterling Software shares an amount of cash equal to the product of the
fractional share interest to which such holder would otherwise be entitled and
the closing price of Computer Associates common stock on the NYSE on the
effective date of the merger.
As soon as practicable after the determination of the amount of cash to be
paid to holders of Sterling Software shares with respect to any fractional share
interests, the exchange agent will make available such amounts to such Sterling
Software holders subject to and in accordance with the terms of the merger
agreement.
STERLING SOFTWARE BOARD OF DIRECTORS
Upon acceptance for exchange of Sterling Software shares in the offer,
Computer Associates will be entitled to designate a number of Sterling Software
directors (rounded up to the next whole number) that bears the same proportion
to the total number of Sterling Software directors as the proportion of the
total number of shares of Sterling Software then held by Computer Associates
bears to the total number of outstanding Sterling Software shares, provided that
until the merger has been consummated Sterling Software's board of directors
shall always have at least two members who were directors of Sterling Software
prior to consummation of the offer. The merger agreement provides that, prior to
the effective time of the merger, if Computer Associates designees are elected
to the Sterling Software board, the affirmative vote of the continuing Sterling
Software directors will be required to
- amend or terminate the merger agreement
- waive any of Sterling Software's rights, benefits or remedies under the
merger agreement
- extend the time for performance of Computer Associates or Silversmith
Acquisition Corp.'s obligations under the merger agreement or
- approve any other action by Sterling Software which is reasonably likely
to adversely affect the interests of Sterling Software's stockholders,
other than Computer Associates and its affiliates, with respect to the
transactions contemplated by the merger agreement.
OTHER PROVISIONS
STERLING SOFTWARE STOCK OPTIONS. The merger agreement provides that each
outstanding option to purchase shares of Sterling Software common stock which
had been granted to specified management employees, including executive
officers, will become fully vested and immediately exercisable immediately prior
to the consummation of the offer. Alternatively, these management employees may
elect to have their Sterling Software stock options canceled in exchange for a
cash payment for each underlying Sterling Software share equal to the excess of
the cancellation price, which is the option exchange ratio multiplied by the
average Computer Associates trading price, over the exercise price for such
share. The offer and the merger will not affect the vesting schedule of any
Sterling Software stock options other than those held by the specified
management employees.
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Under the merger agreement, each Sterling Software stock option left
unexercised at the time the offer is consummated and not canceled as described
above will become an option to purchase shares of Computer Associates common
stock upon consummation of the offer. In that case,
- the option will become exercisable for a number of shares of Computer
Associates common stock equal to the number of underlying Sterling
Software shares multiplied by the option exchange ratio and
- the exercise price of the option will be divided by the option exchange
ratio.
The option exchange ratio used for purposes of making the calculations
described in this section will correspond to the exchange ratio used for
Sterling Software shares tendered pursuant to the offer, and will be
appropriately adjusted if Computer Associates elects the cash option under the
merger agreement.
For more information on the treatment of Sterling Software stock options in
connection with the offer and the merger, please refer to Item 3 of Sterling
Software's Solicitation/Recommendation Statement on Schedule 14D-9 which is
being mailed to Sterling Software stockholders together with this prospectus.
REPRESENTATIONS AND WARRANTIES. The merger agreement contains customary
representations and warranties relating to, among other things:
- corporate organization and similar corporate matters of each of Computer
Associates and Sterling Software
- authorization, execution, delivery, performance and enforceability of, and
required consents, approvals, orders and authorizations of governmental
authorities relating to, the merger agreement and related matters of each
of Computer Associates and Sterling Software
- the capital structure of each of Computer Associates and Sterling Software
- documents filed by each of Computer Associates and Sterling Software with
the SEC and the accuracy of information contained in such documents
- financial statements included in documents filed by each of Computer
Associates and Sterling Software with the SEC, the accuracy of such
information presented by such financial statements, compliance with
applicable accounting standards and requirements by such financial
statements and, in the case of Sterling Software, the absence of
undisclosed liabilities
- the accuracy of information supplied by each of Computer Associates and
Sterling Software in connection with this prospectus and the registration
statement of which it is a part
- outstanding and pending material litigation of each of Computer Associates
and Sterling Software
- the absence of material changes or events concerning Computer Associates
and Sterling Software through the date of the merger agreement
- compliance with laws and permit requirements by Computer Associates and
Sterling Software
- engagement and payment of fees of brokers, investment bankers, finders and
financial advisors by Computer Associates and Sterling Software
- subsidiaries of Sterling Software
- filing of tax returns and payment of taxes by Sterling Software
- matters relating to benefit plans of Sterling Software
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- matters relating to the Employee Retirement Income Security Act for
Sterling Software
- certain contracts and debt instruments of Sterling Software
- software, intellectual property and infringement matters concerning
Sterling Software
- ownership of properties and assets of Sterling Software
- interests of directors and officers in Sterling Software assets
- Sterling Software board of directors' recommendation of the offer and
merger
- receipt of fairness opinion by Computer Associates and Sterling Software
from their respective financial advisors
- ownership interests of Computer Associates in Sterling Software common
stock and
- interim operations and ownership of Silversmith Acquisition Corp.
All representations and warranties of Computer Associates and Sterling
Software expire at the time the merger becomes effective.
CONDUCT OF BUSINESS PENDING THE MERGER. Sterling Software has agreed that
Sterling Software and its subsidiaries will carry on their respective businesses
in the usual, regular and ordinary course in substantially the same manner as
conducted before the date of the merger agreement and, to the extent consistent
with such previous conduct, use all reasonable efforts to preserve intact their
current business organizations, keep available the services of their current
officers and employees and preserve their relationships with customers,
suppliers, licensors, licensees, distributors and others having business
dealings with them. The merger agreement further provides that, except as
expressly provided in the merger agreement or as set forth in the disclosure
schedule to the merger agreement during the period from the execution and
delivery of the merger agreement to the consummation of the offer, Sterling
Software will not, and will not permit any of its subsidiaries to:
- declare or pay any dividends on or make any other distributions in respect
of, capital stock, other than dividends and distributions by any direct or
indirect wholly owned subsidiary of Sterling Software to its parent, or
split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock, or purchase, redeem or
otherwise acquire any shares of capital stock of Sterling Software or any
of its subsidiaries or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities
- issue, deliver, sell, pledge or otherwise encumber any shares of capital
stock, any other voting securities or any securities convertible into, or
any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities, other than the issuance of Sterling
Software shares upon the exercise of stock options outstanding on the date
of the merger agreement, under the Sterling Software rights plan or under
its employee stock purchase plan
- amend the articles of incorporation, by-laws or other comparable charter
or organizational documents of Sterling Software or any of its significant
subsidiaries
- acquire or agree to acquire any business including through the acquisition
of any interest in any corporation, partnership, joint venture,
association or other business organization or division thereof
- mortgage or otherwise encumber or subject to any lien or sell, lease,
transfer or otherwise dispose of any of Sterling Software's intellectual
property or any other material properties or assets except in the ordinary
course of business consistent with past practice and pursuant to existing
contracts or commitments, or except in the ordinary course of business
consistent with
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past practice or pursuant to existing contracts or commitments, license
any of Sterling Software's intellectual property
- make or agree to make any new capital expenditures in excess of $500,000
in the aggregate
- make any material tax election, unless required by law, or settle or
compromise any material income tax liability
- pay, discharge or satisfy any claims, liabilities or obligations, other
than the payment, discharge or satisfaction in the ordinary course of
business consistent with past practice and in accordance with their terms
of liabilities reflected or reserved against in, or contemplated by, the
most recent consolidated financial statements, or the notes thereto, of
Sterling Software included in documents filed with the SEC, liabilities
incurred in the ordinary course of business consistent with past practice,
or liabilities not to exceed $2,500,000 in the aggregate, or waive the
benefits of, or agree to modify in any manner, any confidentiality,
standstill or similar agreement to which Sterling Software or any of its
subsidiaries is a party
- commence a lawsuit other than for the routine collection of amounts owed
or in such cases where Sterling Software in good faith determines that the
failure to commence suit would result in a material impairment of a
valuable aspect of Sterling Software's business, provided that Sterling
Software consults with Computer Associates prior to filing such suit
- incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of Sterling
Software or any of its subsidiaries, guarantee any debt securities of
another person, enter into any "keep well" or other agreement to maintain
any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, except for
short-term borrowings incurred in the ordinary course of business
consistent with past practice and except for intercompany indebtedness
between Sterling Software and any of its wholly owned subsidiaries or
between such subsidiaries, or make any loans, advances or capital
contributions to, or investments in, any other person
- enter into or amend any employment or severance agreement or similar
arrangements, enter into any agreement pursuant to which Sterling Software
or any of its subsidiaries will provide services for a term of more than
30 days at a fixed or capped price or otherwise pursuant to terms that are
not consistent with agreements entered into by Sterling Software or any of
its subsidiaries in the ordinary course of business, enter into any
customer sale or license agreement on terms outside the ordinary course of
business, pay commissions to sales employees except on the basis of
executed customer contracts with respect to products actually delivered to
customers, other than customer sales contracts or licenses enter into any
contracts or series of related contracts in excess of $500,000, enter into
or amend any agreement or arrangement for obtaining professional services
or advice involving payments of more than $200,000 to any one service
provider (provided that this clause does not apply to legal services or
advice obtained in connection with the transactions contemplated by the
merger agreement), enter into any product swap transactions that would be
in violation of generally accepted accounting principles, make any
determination as to amounts payable under any plan, arrangement or
agreement, providing for discretionary incentive compensation or bonus to
any officer, director, employee or independent contractor of Sterling
Software or any of its subsidiaries, or enter into, adopt, or amend any
agreement, arrangement or benefit plan so as to increase the liability of
Sterling Software or Computer Associates or any of their subsidiaries in
respect of compensation or benefits except as may be required by law (we
call this covenant the "Material Agreement Covenant") or
- authorize any of, or commit or agree to take any of, the foregoing
actions.
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ACCESS TO INFORMATION. Sterling Software agreed, subject to applicable law,
to give Computer Associates and its representatives access, during normal
business hours and upon reasonable notice, to the properties, books, contracts,
commitments, personnel and records of Sterling Software and its subsidiaries,
and to furnish Computer Associates and its representatives with copies of all
securities filings, material tax return documents and such other information
concerning its business, properties and personnel as such persons may reasonably
request.
OTHER OFFERS. The merger agreement provides that, from the date of the
merger agreement until the effective time of the merger or, if earlier, the
termination of the merger agreement, Sterling Software will not, whether
directly or indirectly through advisors, agents or other intermediaries, and
will cause its officers, directors, advisors, representatives and other agents
not to, directly or indirectly:
- solicit, initiate or knowingly encourage, or take any other action to
facilitate, any inquiries or the making of any proposal that constitutes,
or may reasonably be expected to lead to, any acquisition proposal
- participate or engage in substantive discussions or negotiations with, or
disclose or provide any non-public information relating to Sterling
Software or its subsidiaries or afford access to the properties, books or
records of Sterling Software or its subsidiaries to, any person or entity
that has made an acquisition proposal or with or to any person or entity
in contemplation of an acquisition proposal or
- enter into any agreement or agreement in principle providing for or
relating to an acquisition proposal;
PROVIDED, HOWEVER, that if and only if:
- a person has submitted an unsolicited acquisition proposal to Sterling
Software's board of directors under circumstances in which Sterling
Software has complied with its obligations described above
- Sterling Software's board of directors believes in good faith, based on
such matters as it deems relevant, including the advice of its financial
advisor, that the unsolicited acquisition proposal is a superior proposal,
as described below, and
- Sterling Software's board of directors determines in good faith, based on
such matters as it deems relevant, including consultation with outside
counsel, that engaging in negotiations or discussions or providing
information in response to the unsolicited acquisition proposal is
required to satisfy the directors' fiduciary duties under the Delaware
General Corporation Law
then Sterling Software may furnish information concerning Sterling Software and
its subsidiaries under a customary confidentiality agreement to the person
making the superior proposal and participate in negotiations and discussions
regarding the superior proposal.
In response to a superior proposal which was not solicited by Sterling
Software and which did not otherwise result from a breach of the provisions of
the merger agreement described above, Sterling Software may terminate the merger
agreement if its board of directors determines in good faith, based on such
matters as it deems relevant, including consultation with outside counsel, that
the directors' fiduciary duties under the Delaware General Corporation Law
require termination. Termination under this provision of the merger agreement
may only occur after the third business day following Computer Associates'
receipt of written notice from Sterling Software advising that Sterling
Software's board of directors is prepared to accept the superior proposal, and
Sterling Software must pay a termination fee in the amount of $175 million, plus
expenses up to $10 million, to Computer Associates promptly upon such
termination. See "--Termination Fee; Expenses."
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No provision of the merger agreement prohibits Sterling Software's board of
directors from taking and disclosing to Sterling Software's stockholders a
position with respect to a tender offer made pursuant to Exchange Act
rules 14d-9 and 14e-2 or from making any disclosure required by applicable law.
The merger agreement provides that:
- the term "acquisition proposal" means any inquiry, proposal or offer from
any person, other than Computer Associates, Silversmith Acquisition Corp.
or any of their affiliates, relating to any merger, consolidation,
recapitalization, liquidation or other direct or indirect business
combination involving Sterling Software or any of its significant
subsidiaries, any direct or indirect acquisition or purchase of 15% or
more (by voting power) of the outstanding capital stock of Sterling
Software or any of its significant subsidiaries, any tender offer or
exchange offer that if completed would result in any person (together with
its affiliates) owning 15% or more (by voting power) of the outstanding
capital stock of Sterling Software or any of its significant subsidiaries,
or the acquisition, license, purchase or other disposition of a
substantial portion of the technology, business or assets of Sterling
Software or any of its significant subsidiaries outside the ordinary
course of business or inconsistent with past practice
- the term "superior proposal" means any bona fide acquisition proposal
which is on terms that Sterling Software's board of directors determines
in its good faith judgment (after receipt of the advice of a financial
advisor of nationally recognized reputation) provides for consideration
which would exceed the value of the consideration provided for in the
offer and the merger, after taking into account all relevant factors,
including any conditions to such acquisition proposal, the timing of the
closing thereof, the risk of nonconsummation, the ability of the person
making the acquisition proposal to finance the transaction contemplated
thereby and any required governmental or other consents, filings and
approvals.
Sterling Software has agreed to promptly advise Computer Associates of any
request for information relating to an acquisition proposal or any inquiry
relating to or which could result in an acquisition proposal, including the
material terms and conditions of such request, acquisition proposal or inquiry
and the identity of the person making the same. Sterling Software has agreed to
inform Computer Associates on a prompt basis of the status and content of any
discussions regarding any acquisition proposal with a third party and as
promptly as possible of any change in the price, structure or form of the
consideration or material terms of and conditions regarding the acquisition
proposal.
COMPLIANCE BY SILVERSMITH ACQUISITION CORP. Computer Associates has agreed
that it will take all action necessary, including ensuring that Silversmith
Acquisition Corp. has sufficient funds and shares of Computer Associates Common
Stock, to cause Silversmith Acquisition Corp. to perform its obligations under
the merger agreement and to consummate the offer and the merger on the terms and
conditions set forth in the merger agreement.
EMPLOYEE BENEFITS. Except as otherwise provided in the merger agreement,
Computer Associates has agreed to honor in accordance with their terms all
Sterling Software benefit plans and all severance and employment agreements
disclosed to Computer Associates and all accrued benefits vested thereunder;
provided that Computer Associates is not prevented from terminating any such
benefit plan or other agreement in accordance with its terms. In addition,
Computer Associates has agreed to provide employees of Sterling Software and its
subsidiaries retained by Computer Associates with employee benefits in the
aggregate no less favorable than those benefits provided to similarly situated
employees of Computer Associates.
DIRECTORS AND OFFICERS INSURANCE AND INDEMNIFICATION. The merger agreement
provides that, for six years after the effective time of the merger, Computer
Associates and Sterling Software, as the corporation surviving the merger,
indemnify and hold harmless, including advancement of expenses, the
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current and former directors and officers of Sterling Software in respect of
acts or omissions occurring on or prior to the effective time to the extent
provided in Sterling Software's certificate of incorporation, by-laws and
indemnity agreements in effect on the date of the merger agreement, subject to
any limitation imposed from time to time under applicable law. Computer
Associates has agreed to maintain Sterling Software's current directors and
officers insurance and indemnification policy to the extent that it provides
coverage for events occurring prior to the effective time of the merger or
provide similar coverage for a period of not less than two years from the
effective time of the merger for all persons who are directors and officers of
Sterling Software on the date of the merger agreement, provided that Computer
Associates will not be obligated to pay an annual premium for any such coverage
in excess of the premium paid by Sterling Software for its most recent fiscal
year.
STERLING SOFTWARE STOCKHOLDERS MEETING. If required by applicable law to
effectuate the merger, the merger agreement requires Sterling Software to call a
meeting of its stockholders as soon as reasonably practicable after acceptance
for payment of Sterling Software shares tendered in the offer. Under the merger
agreement, at any such meeting, Computer Associates and Silversmith Acquisition
Corp. have agreed to make a quorum and to vote all Sterling Software shares
acquired in the offer or otherwise beneficially owned by them in favor of
adoption of the merger agreement. If the minimum tender condition is satisfied
pursuant to the offer, Silversmith Acquisition Corp. will hold at least a
majority of the outstanding Sterling Software shares and will be able to assure
that the requisite number of affirmative votes in favor of approval and adoption
of the merger agreement will be received, even if no other stockholder votes in
favor thereof. If Silversmith Acquisition Corp. obtains at least 90% of the
outstanding Sterling Software shares pursuant to the offer, it has agreed to
effect the merger without any notice to and without the authorization of the
stockholders of Sterling Software pursuant to Section 253 of the Delaware
General Corporation Law.
ANTITRUST APPROVALS. Each of Computer Associates and Sterling Software has
agreed to:
(1) promptly make or cause to be made the filings required of such party or
any of its subsidiaries under the HSR Act, the Sherman Act, as amended,
the Clayton Act, as amended, the Federal Trade Commission Act, as
amended, and any other Federal, state or foreign statutes, rules,
regulations, orders or decrees that are designed to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or
restraint of trade (collectively, "antitrust laws") with respect to the
transactions contemplated by the merger agreement and the tender
agreement
(2) comply at the earliest practicable date with any request under the HSR
Act or other antitrust laws for additional information, documents, or
other material received by such party or any of its subsidiaries from any
governmental entity in respect of such filings or such transactions
(3) cooperate with the other party in connection with any such filing and in
connection with resolving any investigation or other inquiry of any such
agency or other governmental entity under any antitrust laws with respect
to any such filing or any such transaction
(4) use all reasonable efforts to take such action as may be required to
cause the expiration of the notice periods under the HSR Act or other
antitrust laws with respect to such transactions as promptly as possible
after the execution of the merger agreement and
(5) use all reasonable efforts to resolve such objections, if any, as may be
asserted by any governmental entity with respect to the transactions
contemplated by the merger agreement or the tender agreement under any
antitrust laws.
If any administrative or judicial action or proceeding is instituted or
threatened to be instituted challenging any transaction contemplated by the
merger agreement or the tender agreement as violative of any antitrust law, and,
if by mutual agreement, Computer Associates and Sterling Software decide that
litigation is in their best interests, each has agreed to cooperate and use all
reasonable efforts
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vigorously to contest and resist any such action or proceeding and to have
vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order, whether temporary, preliminary or permanent, that is in effect and
that prohibits, prevents or restricts consummation of the offer, the merger or
any such other transactions.
The parties' agreements to cooperate in resolving objections or proceedings
raised under any antitrust laws with respect to the offer and the merger are
subject to the following limitations in the merger agreement:
(A) neither Computer Associates nor any of its subsidiaries will be
required to divest any of their respective businesses, product lines
or assets
(B) neither Computer Associates nor any of its subsidiaries will be
required to take or agree to take any other action or agree to any
limitation that could reasonably be expected to have an adverse
effect on the business, assets, condition, results of operations or
prospects of Computer Associates and its subsidiaries taken as a
whole or Computer Associates combined with Sterling Software after
the effective time of the merger
(C) neither Sterling Software nor its subsidiaries shall be required to
divest any of their respective businesses, product lines or assets,
or to take or agree to take any other action or agree to any
limitation that could reasonably be expected to have a material
adverse effect with respect to Sterling Software
(D) no party to the merger agreement will be required to agree to the
imposition of or to comply with, any condition, obligation or
restriction on Computer Associates or any of its subsidiaries or on
Sterling Software (as surviving corporation of the merger) or certain
of its subsidiaries and
(E) neither Computer Associates nor Silversmith Acquisition Corp. will be
required to waive any of the conditions to the offer or the merger
described under "The Offer--Conditions of the Offer" and
"--Conditions to the Completion of the Merger."
FURTHER ASSURANCES. Each of Computer Associates and Sterling Software has
agreed, pursuant to the merger agreement, to use all reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the offer, the merger, and the other transactions contemplated by
the merger agreement and the tender agreement.
CONDITIONS TO THE COMPLETION OF THE MERGER. Each party's obligation to
effect the merger is subject to the satisfaction or waiver of the following
conditions:
- if required by Delaware law, the holders of at least a majority of all
outstanding shares of Sterling Software common stock having approved and
adopted the merger and the merger agreement
- Silversmith Acquisition Corp. having accepted for exchange and exchanged
all shares of Sterling Software common stock tendered pursuant to the
offer unless the failure to consummate the offer is the result of a
willful and material breach of the merger agreement by the party asserting
such condition
- no judgment, order, decree, statute, law, ordinance, rule or regulation
entered, enacted, promulgated, enforced or issued by any court or other
governmental entity of competent jurisdiction or other legal restraint or
prohibition being in effect that prevents or prohibits consummation of the
merger and
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- the registration statement of which this prospectus forms a part or a
post-effective amendment to such registration statement relating to the
shares of Computer Associates common stock issuable in connection with the
merger having become effective under the Securities Act and not being the
subject of any stop order or proceedings seeking a stop order.
TERMINATION EVENTS. The merger agreement may be terminated at any time
prior to the effective time of the merger, notwithstanding any approval of the
merger agreement by the stockholders of Silversmith Acquisition Corp. or
Sterling Software:
(1) by mutual written consent of Sterling Software and Computer Associates
(2) by Computer Associates or Sterling Software if the offer shall have
expired or been terminated in accordance with the terms of the merger
agreement without Computer Associates or Silversmith Acquisition Corp.
having accepted for exchange any Sterling Software shares pursuant to the
offer; provided that Computer Associates shall not be permitted to
terminate the merger agreement if the offer is terminated or expires
without Sterling Software shares being accepted for exchange in violation
of the merger agreement
(3) by Computer Associates or Sterling Software if the offer shall not have
been consummated on or before September 30, 2000, unless the failure to
consummate the offer is the result of a willful and material breach of
the merger agreement by the party seeking to terminate
(4) by Computer Associates or Sterling Software if the merger shall not have
been consummated as a result of any condition described above under
"--Conditions to the Completion of the Merger" being incapable of being
satisfied
(5) if any statute, rule, regulation, injunction or decree having the
effects described in the first or second "bullet points" under the
heading "The Offer--Conditions of the Offer--Other Conditions of the
Offer" shall be in effect and shall have become final and nonappealable
(6) by Computer Associates upon the occurrence of any trigger event
described in clauses (1) through (4) under the heading "--Termination
Fee; Expenses" below or
(7) by Sterling Software under the circumstances described above under
"--Other Offers."
TERMINATION FEE; EXPENSES. Sterling Software has agreed to pay Computer
Associates a fee in immediately available funds equal to $175 million promptly,
but in no event later than one business day, after the termination of the merger
agreement (or such later date as may apply in the case of clause (1) below) as a
result of the occurrence of any of the events set forth below (a "trigger
event"):
(1) Sterling Software shall have received an acquisition proposal, and at
any time prior to, or within one year after the termination of the merger
agreement, unless the merger agreement is terminated pursuant to (1) or
(5) described above under the heading "--Termination Events", Sterling
Software shall have entered into, or shall have publicly announced its
intention to enter into, an agreement or an agreement in principle, other
than a confidentiality agreement permitted by the merger agreement, with
respect to any acquisition proposal
(2) any person or group, as defined in Exchange Act Section 13(d)(3), other
than Computer Associates or any of its subsidiaries, shall have become
the beneficial owner, as defined in Exchange Act rule 13d-3, of at least
15% of the outstanding shares of Sterling Software or shall have
acquired, directly or indirectly, at least 15% of the assets of Sterling
Software and its subsidiaries
(3) Sterling Software shall have breached or failed to perform in any
material respect any of its representations, warranties, covenants or
other agreements contained in the merger agreement, which breach or
failure to perform (A) would give rise to the failure of a
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condition described in the third or fourth "bullet points" of "The
Offer--Conditions of the Offer--Other Conditions of the Offer", and
(B) is incapable of being or has not been cured by Sterling Software
within 10 calendar days after giving written notice to Sterling Software
of such breach or failure to perform or
(4) (A) the board of directors of Sterling Software, or any committee
thereof, shall have withdrawn or materially modified or amended in a
manner adverse to Computer Associates or Silversmith Acquisition Corp.
its approval or recommendation of the offer, the merger or the merger
agreement or its approval of the entry by Silversmith Acquisition Corp.
into the tender agreement, or shall have failed to make such favorable
recommendation, or (B) the board of directors of Sterling Software, or
any committee thereof, shall have recommended to the stockholders of
Sterling Software any acquisition proposal or shall have resolved to, or
publicly announced an intention to, do so.
The merger agreement provides that, except as described in this section, all
fees and expenses incurred in connection with the offer, the merger and the
merger agreement shall be paid by the party incurring such fees or expenses,
except that, if the offer is not consummated, Computer Associates and Sterling
Software will equally share
- expenses incurred in connection with the printing and mailing of the
documents distributed or to be distributed to stockholders of Sterling
Software
- all SEC and other regulatory filing fees with respect to the registration
statement of which this prospectus forms a part, and
- the NYSE listing fee with respect to the listing of Computer Associates
shares to be issued in the offer and the merger
In addition, the merger agreement provides that, if the merger agreement is
terminated as a result of the occurrence of a trigger event described above, in
addition to the termination fee paid or payable by Sterling Software to Computer
Associates as described above, Sterling Software shall assume and pay, or
reimburse Computer Associates for, all reasonably documented out-of-pocket fees
payable and expenses incurred by Computer Associates, including the fees and
expenses of its counsel, in connection with the merger agreement, up to a
maximum of $10 million, which amount shall include the fees and expenses
allocated to or paid by Sterling Software as described in the immediately
preceding paragraph.
THE TENDER AGREEMENT
PARTIES
As an inducement for Computer Associates and Silversmith Acquisition Corp.
to enter into the merger agreement, immediately prior to the signing of the
merger agreement, each of the directors and executive officers of Sterling
Software entered into the tender agreement with Silversmith Acquisition Corp.
These directors and executive officers collectively hold an aggregate of
2,490,550 outstanding shares of Sterling Software common stock and collectively
have the right to acquire an additional nine million shares upon the exercise of
outstanding Sterling Software stock options.
AGREEMENT TO TENDER
Each Sterling Software stockholder who signed the tender agreement agreed to
tender in the offer and not withdraw all of his or her shares of Sterling
Software and any additional shares of Sterling Software acquired by such
stockholder after the date of the tender agreement.
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PROXY
In the tender agreement, each Sterling Software stockholder who signed the
tender agreement granted Silversmith Acquisition Corp., or any nominee of
Silversmith Acquisition Corp., a proxy to vote or consent all of such
stockholder's Sterling Software shares:
- in favor of the adoption of the merger agreement and the tender agreement
and approval of the merger and the other transactions contemplated by the
merger agreement and tender agreement
- against any proposal for any recapitalization, merger, sale of assets or
other business combination between Sterling Software and any person or
entity, other than the merger with Silversmith Acquisition Corp., or any
other action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of
Sterling Software under the merger agreement not being fulfilled
- in favor of any other matter relating to consummation of the transactions
contemplated by the merger agreement and the tender agreement.
In the tender agreement, each Sterling Software stockholder also agreed to
cause such stockholder's Sterling Software shares that are outstanding and owned
by such person beneficially to be voted in accordance with the foregoing. The
tender agreement provides that the proxy will be automatically revoked upon
termination of the merger agreement.
NO SOLICITATION
Each Sterling Software stockholder who signed the tender agreement further
agreed to not, directly or indirectly:
- subject to such stockholder's fiduciary duty as a director of Sterling
Software (if the stockholder is a director), solicit, initiate or
encourage, or authorize any person to solicit, initiate or encourage, any
inquiry, proposal or offer from any person to acquire the business,
property or capital stock of Sterling Software or any direct or indirect
subsidiary of Sterling Software, or any acquisition of a substantial
equity interest in, or a substantial amount of assets of, Sterling
Software or any direct or indirect subsidiary of Sterling Software,
whether by merger, purchase of assets, tender offer or other transaction,
and
- subject to such stockholder's fiduciary duty as a director of Sterling
Software (if the stockholder is a director), participate in any discussion
or negotiations regarding, or furnish to any other person any information
with respect to, or otherwise cooperate in any way with, or participate
in, facilitate or encourage any effort or attempt by any other person to
make or seek any such inquiry, proposal or offer.
TERMINATION
The tender agreement provides that the tender agreement and the proxies
granted under the tender agreement will terminate upon termination of the merger
agreement in accordance with its terms.
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CHANGE OF CONTROL SEVERANCE AGREEMENTS
Each of Sterling Software's executive officers, as well as Mr. Evan A. Wyly,
a director of Sterling Software, and a number of other officers of Sterling
Software, are parties to change in control severance agreements with Sterling
Software. Each change in control severance agreement requires Sterling Software
to provide an officer (including Mr. Wyly for that purpose under this section),
upon a qualifying termination of employment, a lump sum amount equal to a
multiple of the officer's annual cash compensation. Each agreement also requires
Sterling Software to continue to provide an officer, for a specified number of
months, with the benefits and perquisites that were provided to the officer
prior to the qualifying termination of employment. In addition, the agreements
also provide for an officer to receive a gross-up payment if the officer becomes
subject to any excise tax as a result of any payments that the officer receives
under the agreement, or otherwise, being determined to be "excess parachute
payments."
As part of the merger agreement negotiations, we requested that the change
in control severance agreements be amended. In particular, we requested that
each officer waive his or her right to a continuation of benefits and
perquisites, except medical coverages, and that the agreements be amended to add
a non-competition covenant in respect of a number of the officers and
non-solicitation and confidentiality covenants in respect of all the officers.
On February 14, 2000, Sterling Software, Computer Associates and each officer
agreed to amend the change in control severance agreements, effective as of the
consummation of the offer. We required the amendments as a condition to
executing the merger agreement. The amendments become effective upon
consummation of the offer. In general, the amendments confirmed and, in some
respects reduced, the officers' benefits and imposed upon a number of the
officers a non-competition covenant and other covenants to which they were not
previously subject. The amendments provide, among other things, that:
- each officer will be paid a lump sum in cash upon a qualifying termination
of employment in satisfaction of all severance pay and in lieu of the
continuation of certain benefits and perquisites to which he or she would
otherwise have been entitled pursuant to such officer's change in control
severance agreement. As to some of the officers, twenty-five percent of
the payment is in consideration for entering into a non-competition
covenant
- Sterling Software will continue, for a specified period, medical benefits
for each officer
- each officer will have the right, for up to 30 days after a qualifying
termination of employment, to purchase the officer's company-provided car
at its current book value
- a number of the officers will not engage in activities which are
competitive with Sterling Software or solicit Sterling Software employees
for an agreed upon period. An officer may request a waiver of the
non-competition provision after an agreed upon amount of time and such
waiver may not be unreasonably withheld by Sterling Software.
- each officer must keep Sterling Software information confidential
- each officer is entitled to a gross-up on any excise tax under
Section 4999 of the Code, which may be imposed on any payments and
benefits received by the executive in connection with the offer or the
merger
In addition, three of Sterling Software's officers have agreed to elect to
receive cash consideration rather than convert their Sterling Software stock
options into options to acquire Computer Associates shares, to the extent that
failure to so elect would result in an incremental increase of such individual's
excise tax liability.
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In addition:
- Mr. Sterling Williams' change in control severance agreement has been
amended to require Sterling Software to transfer to him, upon a qualifying
termination of employment, the ownership of the life insurance policy
concerning him which has been funded by Sterling Software
- Mr. Sam Wyly's change in control severance agreement has been amended to
require Sterling Software to pay him, upon a qualifying termination of
employment, an amount in cash equal to the value of the split dollar life
insurance policy concerning him which is held by Sterling Software
- Ms. Morton's change in control severance agreement has been amended to
have Sterling Software acknowledge her entitlement to certain retiree
medical benefits.
On February 15, 2000, Sterling Software, Computer Associates and Mr. Tolari
entered into an agreement which modified Mr. Tolari's rights under his
Supplemental Executive Retirement Plan II. Under the agreement, Mr. Tolari
agreed to receive, within five days after the date that his employment with
Sterling Software is terminated for any reason, a lump sum payment of $3,527,640
in satisfaction in full for Sterling Software's obligations to him under the
Supplemental Executive Retirement Plan II.
The amendments to the change in control severance agreements and the
agreement relating to the Supplemental Executive Retirement Plan II are filed as
Exhibits to the registration statement of which this prospectus is a part. For a
further description of the change in control severance agreements and the
amendments to such agreements and the other matters described above in this
section, including the identities of the Sterling Software executives covered by
these arrangements, the payments to be received by the executives upon a
qualifying termination of employment, the applicable period for continuation of
medical benefits and the length of the non-competition and non-solicitation
periods, please refer to Item 3 of Sterling Software's
Solicitation/Recommendation Statement on Schedule 14D-9, which is being mailed
to Sterling Software stockholders together with this prospectus.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following discussion, in the opinion of Covington & Burling, special tax
counsel to Computer Associates, is a summary of the material federal income tax
consequences of the offer and the merger to Sterling Software stockholders that
hold Sterling Software shares as capital assets. The discussion set forth below
is for general information only and may not address all of the federal income
tax consequences that may be relevant to particular stockholders in light of
their individual circumstances or to stockholders subject to special treatment
under the Internal Revenue Code of 1986, as amended (the "Code"), including:
- foreign holders;
- financial institutions;
- tax-exempt organizations;
- insurance companies;
- dealers in securities or currencies;
- persons that hold their shares as part of a straddle, synthetic security,
conversion transaction or other integrated investment;
- traders in securities who elect to apply a mark-to-market method of
accounting;
- employee benefit plans; and
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- holders that acquired their shares pursuant to the exercise of employee
stock options or otherwise as compensation.
The following summary is not binding upon the Internal Revenue Service (the
"IRS"), and we will not seek a ruling from the IRS concerning the tax
consequences of the offer and the merger. The following discussion is based upon
the provisions of the Code, Treasury regulations and administrative and judicial
interpretations thereof, all as of the date of this prospectus, and all of which
are subject to change, retroactively or prospectively, and to possibly differing
interpretations.
PRELIMINARY CONSIDERATIONS
The characterization of the offer and the merger for federal income tax
purposes and, accordingly, the federal income tax consequences to you as a
result of the exchange of your Sterling Software shares in connection with the
offer or the merger, or both, will depend upon facts and circumstances that will
not be known prior to the consummation of the offer and the merger, including:
- whether the merger will be consummated;
- whether the offer and the merger will be treated as a single integrated
transaction or as two separate transactions for federal income tax
purposes;
- whether after the consummation of the offer and merger, Sterling Software
will either continue its software business or continue to use a
significant portion of its software assets in its business
- what percentage of the total number of outstanding Sterling Software
shares will be held by Computer Associates immediately after the
consummation of the offer; and
- what percentage of the aggregate amount of consideration received from
Computer Associates in exchange for Sterling Software shares will consist
of Computer Associates shares.
Because such facts and circumstances will not be known prior to the
consummation of the offer and the merger, you will not know whether the exchange
of your Sterling Software shares in the offer or the merger, or both, will be
tax free until the offer and the merger are consummated. If the offer and the
merger are consummated without significant change to the merger agreement, then
Computer Associates intends to treat the offer and the merger as a single
integrated transaction for federal income tax purposes. If the offer and the
merger are not treated as a single integrated transaction for federal income tax
purposes, then the tax consequences that would apply to you in connection with
the offer and the merger might be different than if the offer and the merger
were treated as a single integrated transaction. Even if Computer Associates
treats the offer and the merger as an integrated transaction for federal income
tax purposes, there can be no assurance that the IRS or a court considering the
issue would agree with such treatment.
(A) TAX CONSEQUENCES TO YOU IF THE MERGER IS CONSUMMATED
If the merger is consummated, the federal income tax consequences to you
from the exchange of your Sterling Software shares in the offer or the merger,
or both, will depend upon which one of the following scenarios occurs:
(1) THE OFFER AND THE MERGER ARE INTEGRATED FOR FEDERAL INCOME TAX
PURPOSES, AND THE CONSIDERATION RECEIVED FROM COMPUTER ASSOCIATES IN
EXCHANGE FOR STERLING SOFTWARE SHARES CONSISTS ONLY OF COMPUTER
ASSOCIATES SHARES (OTHER THAN CASH RECEIVED IN LIEU OF FRACTIONAL
SHARES OF COMPUTER ASSOCIATES)
Provided that the offer and the merger are integrated for federal income tax
purposes, and if Sterling Software either continues its software business or
continues to use a significant portion of its software assets in its business
and if the consideration received from Computer Associates in exchange
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for Sterling Software shares consists only of Computer Associates shares (other
than cash received in lieu of fractional shares of Computer Associates), then
the offer and the merger should qualify as a reorganization under
Section 368(a) of the Code.
If the offer and the merger qualify as a reorganization under
Section 368(a) of the Code, then if you exchange your Sterling Software shares
in the offer or the merger, or both, you will not recognize gain or loss on the
exchange, except to the extent you receive cash in lieu of a fraction of a
Computer Associates share. Your aggregate adjusted tax basis in Computer
Associates shares that you receive (including fractional shares you are deemed
to receive, as described below) will equal your aggregate adjusted tax basis in
the Sterling Software shares that you surrender in the offer or the merger, or
both. Your holding period for the Computer Associates shares you receive will
include your holding period for the Sterling Software shares that you surrender
in the offer or the merger, or both.
If you receive cash in lieu of a fraction of a Computer Associates share,
you will be treated as having first received such fraction of a Computer
Associates share and then immediately exchanging such fraction of a share for
cash. You will recognize gain or loss in an amount equal to the difference
between the amount of cash that you receive for the fractional share and the
portion of your aggregate adjusted tax basis in your Sterling Software shares
that is allocable to the fractional share. The gain or loss will constitute
capital gain or loss and will be long-term capital gain or loss if, as of the
date of the exchange, your holding period for the fractional interest is greater
than one year.
If the IRS were to successfully assert that the offer and the merger should
not be integrated, or that Sterling Software neither continued its software
business nor continued to use a significant portion of its software assets in
its business, however, then the tax consequences to you would be as described in
either (A)(4) or (A)(5) below, depending upon how many Sterling Software shares
Computer Associates held immediately after the consummation of the offer.
(2) THE OFFER AND THE MERGER ARE INTEGRATED FOR FEDERAL INCOME TAX
PURPOSES, AND 80% OR MORE OF THE AGGREGATE AMOUNT OF CONSIDERATION
RECEIVED FROM COMPUTER ASSOCIATES IN EXCHANGE FOR STERLING SOFTWARE
SHARES CONSISTS OF COMPUTER ASSOCIATES SHARES
Provided that the offer and the merger are integrated for federal income tax
purposes and if Sterling Software either continues its software business or
continues to use a significant portion of its software assets in its business,
and if at least 80% of the aggregate amount of consideration received from
Computer Associates in exchange for Sterling Software shares consists of
Computer Associates shares, then the offer and the merger should qualify as a
reorganization under Section 368(a) of the Code.
If the offer and the merger qualify as a reorganization under
Section 368(a) of the Code, then if you exchange your Sterling Software shares
in the offer or the merger, or both, for a combination of Computer Associates
shares and cash, you will not recognize loss on the exchange. You will, however,
recognize gain on the exchange equal to the lesser of:
- the excess, if any, of the sum of the aggregate fair market value of the
Computer Associates shares and the amount of cash you receive in the offer
or the merger, or both, over your adjusted tax basis in the Sterling
Software shares that you surrender, or
- the amount of cash that you receive in the offer or the merger, or both.
The gain will be treated as capital gain unless the receipt of the cash has
the effect of the distribution of a dividend for federal income tax purposes
(see "POSSIBLE TREATMENT OF CASH AS A DIVIDEND" below), in which case you will
recognize ordinary dividend income to the extent of your ratable share of
Sterling Software's current and accumulated earnings and profits.
Your aggregate tax basis in the Computer Associates shares that you receive
will be the same as your aggregate basis in the Sterling Software shares that
you surrender, decreased by the cash that you
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receive and increased by the amount of gain, if any, that you recognize
(including any portion of the gain that is treated as a dividend). Your holding
period for Computer Associates shares that you receive will include your holding
period for the Sterling Software shares that you surrender in the offer or the
merger, or both.
If the IRS were to successfully assert that the offer and the merger should
not be integrated, or that Sterling Software neither continued its software
business nor continued to use a significant portion of its software assets in
its business, however, then the tax consequences to you would be as described in
(A)(3) below.
POSSIBLE TREATMENT OF CASH AS A DIVIDEND.
If you receive a combination of Computer Associates shares and cash in the
offer or the merger, or both, the determination of whether the gain that you
recognize will be treated as capital gain or as a dividend depends on whether
and to what extent the exchange reduces your deemed percentage stock ownership
in Computer Associates. For purposes of this determination, you will be treated
as if you first exchanged all of your Sterling Software shares only for Computer
Associates shares and then Computer Associates immediately redeemed a portion of
those Computer Associates shares in exchange for the cash that you actually
receive.
The gain that you recognize will be treated as capital gain rather than
dividend income if the deemed redemption by Computer Associates is either:
- "substantially disproportionate" with respect to you, or
- "not essentially equivalent to a dividend."
In applying these tests, you must take into account Computer Associates
shares that you actually own and Computer Associates shares that you are deemed
to own under the relevant constructive ownership rules. Pursuant to the
constructive ownership rules, you will be deemed to own any Computer Associates
shares that are actually owned (and, in some cases, constructively owned) by
specified family members and corporations, partnerships, and trusts in which you
have an interest and Computer Associates shares that you or such persons have
the right to acquire by exercise of an option or by conversion of a security.
In general, the deemed redemption of your Computer Associates shares will be
"substantially disproportionate" to you if, among other things, the percentage
of the outstanding Computer Associates shares that you actually and
constructively own immediately after the deemed redemption is less than 80% of
the percentage of the outstanding Computer Associates shares that you actually
and constructively owned immediately before the deemed redemption. The deemed
redemption of your Computer Associates shares will be treated as "not
essentially to a dividend" if the reduction in your percentage ownership of
Computer Associates stock constitutes a "meaningful reduction" given your
particular facts and circumstances. Even a small reduction in your percentage
stock ownership may satisfy this test. For example, a former Sterling Software
shareholder whose relative stock interest in Computer Associates after the
exchange is minimal (for example, an interest of less than 1%) and who exercises
no control with respect to corporate affairs is considered to have a "meaningful
reduction" if such shareholder experiences even a very slight reduction (for
example, a reduction of as little as 3.5%) in the shareholder's percentage stock
ownership.
(3) THE OFFER AND THE MERGER ARE INTEGRATED FOR FEDERAL INCOME TAX
PURPOSES, AND LESS THAN 80% OF THE AGGREGATE AMOUNT OF CONSIDERATION
RECEIVED FROM COMPUTER ASSOCIATES IN EXCHANGE FOR STERLING SOFTWARE
SHARES CONSISTS OF COMPUTER ASSOCIATES SHARES
Even if the offer and the merger are integrated for federal income tax
purposes, if less than 80% of the aggregate amount of consideration received
from Computer Associates in exchange for Sterling
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Software shares consists of Computer Associates shares, then the offer and the
merger will not qualify as a reorganization under Section 368(a) of the Code.
Consequently, your receipt of Computer Associates shares and cash would
constitute a taxable sale or exchange upon which you would recognize gain or
loss. The amount of gain or loss that you will recognize will equal the
difference between the sum of the fair market value of the Computer Associates
shares and the amount of cash that you receive in the offer or the merger, or
both, and your adjusted tax basis in the Sterling Software shares that you
surrender in the offer or the merger, or both. The gain or loss would be
long-term capital gain or loss if, as of the date of the exchange, your holding
period for the Sterling Software shares that you surrender was greater than one
year.
(4) THE OFFER AND THE MERGER ARE NOT INTEGRATED FOR FEDERAL INCOME TAX
PURPOSES, COMPUTER ASSOCIATES HOLDS 80% OR MORE OF THE OUTSTANDING
STERLING SOFTWARE SHARES IMMEDIATELY AFTER THE CONSUMMATION OF THE
OFFER, AND THE CONSIDERATION RECEIVED FROM COMPUTER ASSOCIATES IN
EXCHANGE FOR STERLING SOFTWARE SHARES CONSISTS ONLY OF COMPUTER
ASSOCIATES SHARES (OTHER THAN CASH RECEIVED IN LIEU OF FRACTIONAL
SHARES OF COMPUTER ASSOCIATES)
If for any reason the offer and the merger are not integrated for federal
income tax purposes, then the offer and the merger will be treated as two
separate transactions. In such a case, if Computer Associates holds 80% or more
of the outstanding Sterling Software shares immediately after the consummation
of the offer and the consideration received from Computer Associates in exchange
for Sterling Software shares consists only of Computer Associates shares (other
than cash received in lieu of fractional shares of Computer Associates), and if
Sterling Software either continues its software business or continues to use a
significant portion of its software assets in its business then the offer and
the merger should each separately qualify as a reorganization under
Section 368(a) of the Code. If the offer or the merger, or both, qualify as a
reorganization under Section 368(a) of the Code, then if you exchange Sterling
Software shares in the offer or the merger, or both, the tax consequences to you
will be the same as those described in (A)(1) above. If either the offer or the
merger does not so qualify, or if both the offer and the merger do not so
qualify, then the tax consequences to you with respect to an exchange that does
not so qualify will be the same as those described in (A)(3) above (with
reference being made to the offer or the merger, or both, as appropriate).
(5) THE OFFER AND THE MERGER ARE NOT INTEGRATED FOR FEDERAL INCOME TAX
PURPOSES, COMPUTER ASSOCIATES HOLDS LESS THAN 80% OF THE OUTSTANDING
STERLING SOFTWARE SHARES IMMEDIATELY AFTER THE CONSUMMATION OF THE
OFFER, AND THE CONSIDERATION RECEIVED FROM COMPUTER ASSOCIATES IN
EXCHANGE FOR STERLING SOFTWARE SHARES CONSISTS ONLY OF COMPUTER
ASSOCIATES SHARES (OTHER THAN CASH RECEIVED IN LIEU OF FRACTIONAL
SHARES OF COMPUTER ASSOCIATES)
If for any reason the offer and the merger are not integrated for federal
income tax purposes, then the offer and the merger will be treated as two
separate transactions. In such a case, if Computer Associates holds less than
80% of the outstanding Sterling Software shares immediately after the
consummation of the offer and the consideration received from Computer
Associates in exchange for Sterling Software shares consists only of Computer
Associates shares (other than cash received in lieu of fractional shares of
Computer Associates), and if Sterling Software either continues its software
business or continues to use a significant portion of its software assets in its
business then the merger should nevertheless qualify as a reorganization under
Section 368(a) of the Code, but the offer will not. In that event:
- the tax consequences to you from an exchange of Sterling Software shares
in the merger will be the same as described in (A)(1) above (without
regard to any references to the offer); and
- the tax consequences to you from an exchange of Sterling Software shares
in the offer will be the same as described in (A)(3) above (without regard
to any references to cash or to the merger).
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If the IRS were to successfully challenge the tax-free treatment of the
merger, however, your receipt of Computer Associates shares in the merger would
constitute a taxable sale or exchange upon which you would recognize gain or
loss as described in (A)(3) above (without regard to any references to the
offer).
(6) THE OFFER AND THE MERGER ARE NOT INTEGRATED FOR FEDERAL INCOME TAX
PURPOSES, AND THE CONSIDERATION RECEIVED FROM COMPUTER ASSOCIATES IN
EXCHANGE FOR STERLING SOFTWARE SHARES DOES NOT CONSIST ONLY OF
COMPUTER ASSOCIATES SHARES (OTHER THAN CASH RECEIVED IN LIEU OF
FRACTIONAL SHARES OF COMPUTER ASSOCIATES)
If for any reason the offer and the merger are not integrated for federal
income tax purposes, then the offer and the merger will be treated as two
separate transactions. In such a case, if the consideration received by Sterling
Software stockholders from Computer Associates in exchange for Sterling Software
shares does not consist only of Computer Associates shares (other than cash
received in lieu of fractional shares of Computer Associates), then the offer
will not qualify as a reorganization under Section 368(a) of the Code.
Consequently, if you exchange Sterling Software shares in the offer, the tax
consequences of the exchange will be the same as described in (A)(3) above
(without regard to any references to the merger). The tax consequences of the
merger should also be the same as described in (A)(3) above (without regard to
any references to the offer).
(B) TAX CONSEQUENCES TO YOU IF THE MERGER IS NOT CONSUMMATED
If the merger is not consummated, the federal income tax consequences to you
if you exchange Sterling Software shares in the offer will depend upon which one
of the following scenarios occurs:
(1) COMPUTER ASSOCIATES HOLDS 80% OR MORE OF THE OUTSTANDING STERLING
SOFTWARE SHARES IMMEDIATELY AFTER THE CONSUMMATION OF THE OFFER, AND
THE CONSIDERATION RECEIVED FROM COMPUTER ASSOCIATES IN EXCHANGE FOR
STERLING SOFTWARE SHARES CONSISTS ONLY OF COMPUTER ASSOCIATES SHARES
(OTHER THAN CASH RECEIVED IN LIEU OF FRACTIONAL SHARES OF COMPUTER
ASSOCIATES)
If the merger is not consummated, and if Computer Associates holds 80% or
more of the outstanding Sterling Software shares immediately after the
consummation of the offer, and if Sterling Software either continues its
software business or continues to use a significant portion of its software
assets in its business and if the consideration received from Computer
Associates in exchange for Sterling Software shares consists only of Computer
Associates shares (other than cash received in lieu of fractional shares of
Computer Associates), then the offer should qualify as a reorganization under
Section 368(a) of the Code. In these circumstances, Computer Associates intends
to treat the offer as a reorganization under Section 368(a) of the Code. If the
offer qualifies as a reorganization under Section 368(a) of the Code, then if
you exchange Sterling Software shares in the offer the tax consequences of the
exchange will be the same as described in (A)(1) above (without regard to any
references to the merger).
The IRS, however, is not bound by and may challenge this treatment. If the
IRS were to successfully challenge such treatment, your receipt of Computer
Associates shares would constitute a taxable sale or exchange upon which you
would recognize gain or loss as described in (A)(3) above (without regard to any
references to the merger).
(2) EITHER COMPUTER ASSOCIATES HOLDS LESS THAN 80% OF THE OUTSTANDING
STERLING SOFTWARE SHARES IMMEDIATELY AFTER THE CONSUMMATION OF THE
OFFER OR THE CONSIDERATION RECEIVED FROM COMPUTER ASSOCIATES IN
EXCHANGE FOR STERLING SOFTWARE SHARES DOES NOT CONSIST ONLY OF
COMPUTER ASSOCIATES SHARES (OTHER THAN CASH RECEIVED IN LIEU OF
FRACTIONAL SHARES OF COMPUTER ASSOCIATES)
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If the merger is not consummated, and if either immediately after the
consummation of the offer Computer Associates holds less than 80% of the total
number of outstanding Sterling Software shares, or the consideration received
from Computer Associates in exchange for Sterling Software shares does not
consist only of Computer Associates shares (other than cash received in lieu of
fractional shares of Computer Associates), then:
- if you have received no cash from Computer Associates, the tax
consequences of the exchange will be the same as described in (A)(3) above
(without regard to any references to cash or the merger); and
- if you received cash from Computer Associates, the tax consequences of the
exchange will be the same as described in (A)(3) above (without regard to
any references to the merger).
HOW TO DETERMINE COMPUTER ASSOCIATES' TAX TREATMENT OF THE OFFER AND MERGER
If the offer and the merger are consummated pursuant to the current terms of
the merger agreement and if the exchange ratio has not been reset, then Computer
Associates intends to treat the offer and the merger as described in (A)(1)
above. If the offer and the merger are consummated pursuant to the current terms
of the merger agreement and if the exchange ratio has been reset and if Computer
Associates:
- does not exercise the cash option, then Computer Associates intends to
treat the offer and the merger as described in (A)(1) above;
- exercises the cash option and the cash paid to you because of the exercise
of the cash option does not exceed 20% of the total value of the
consideration that you receive from Computer Associates, then Computer
Associates intends to treat the offer and the merger as described in
(A)(2) above; or
- exercises the cash option and the cash paid to you because of the exercise
of the cash option exceeds 20% of the total value of the consideration
that you receive from Computer Associates, then Computer Associates
intends to treat the offer and the merger as described in (A)(3) above.
You can call our information agent, MacKenzie Partners, Inc., at any time
toll free at (800) 322-2885 to request information about the exchange ratio and
any reset of the exchange ratio, including, once determined, the average
Computer Associates trading price, and any cash payable pursuant to the offer
and the merger.
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY AND DOES NOT PURPORT
TO BE A COMPLETE ANALYSIS OR LISTING OF ALL POTENTIAL TAX EFFECTS OF THE OFFER
AND THE MERGER. YOU ARE URGED TO CONSULT YOUR TAX ADVISOR TO DETERMINE THE
SPECIFIC TAX CONSEQUENCES TO YOU OF THE OFFER AND THE MERGER, INCLUDING ANY
FEDERAL, STATE, LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES, AND ANY TAX RETURN
FILING OR OTHER REPORTING REQUIREMENTS.
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MARKET PRICES AND DIVIDENDS
Computer Associates common shares are listed and principally traded on the
NYSE under the symbol "CA". Sterling Software common shares are listed and
principally traded on the NYSE under the symbol "SSW". The board of directors of
Sterling Software declared a two-for-one stock split in March 1998 payable on
April 3, 1998. All common share and per share amounts have been adjusted to
reflect the stock split for all periods presented.
The following table sets forth, for the calendar quarters ended on the dates
indicated, the high and low last reported prices per Computer Associates share
and Sterling Software share, in each case as reported on the NYSE Composite
Transaction Tape; and the cash dividends declared per Computer Associates share.
No cash dividends were declared or paid by Sterling Software during these
periods.
<TABLE>
<CAPTION>
COMPUTER ASSOCIATES STERLING SOFTWARE
COMMON STOCK COMMON STOCK
------------------------------- -------------------
HIGH LOW DIVIDEND* HIGH LOW
-------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
1998
March 31, 1998................................... $58.0625 $45.4375 -- $28.5938 $18.0000
June 30, 1998.................................... 61.1250 50.9375 $0.04 29.6875 24.5000
September 30, 1998............................... 61.0000 27.0000 -- 31.3125 20.5625
December 31, 1998................................ 45.9375 31.4375 0.04 30.3125 23.6875
1999
March 31, 1999................................... 51.5000 32.8750 -- 26.1250 21.5625
June 30, 1999.................................... 54.7500 34.1875 0.04 26.4375 18.8750
September 30, 1999............................... 61.5000 43.6250 -- 26.3125 19.4375
December 31, 1999................................ 70.3750 52.1250 0.04 31.5625 19.8750
2000
First Quarter (through February 18).............. 75.0000 58.7500 -- 37.2500 27.3125
</TABLE>
- ------------------------
* Dividends paid in the following January or July, as applicable.
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FINANCIAL PROJECTIONS
In connection with our discussions with Sterling Software, we were provided
certain non-public financial projections which were prepared by Sterling
Software's management during December 1999 and January 2000 in connection with
its review of strategic alternatives. The financial projections are "forward
looking statements" and Sterling Software's actual financial results may differ
materially from those set forth in the projections.
Factors which could cause or contribute to such differences and impact
future financial results include, but are not limited to: the probable loss of
key personnel and the difficulty in recruiting additional personnel, the
difficulty of integrating Sterling Software's technology into Computer
Associates' technology, possible market rejection of any combined technology,
delays in customer licensing decisions, the disruption of existing client
relationships, the difficulty of completing ongoing development projects, trends
in mainframe computer growth, difficulties integrating support services, the
ability to retain professional services engagements and to add additional
engagements, the compatibility of Sterling Software's decentralized operations
with Computer Associates' centralized operations, the achievement of
satisfactory levels of both gross and operating margins, unexpected costs
incurred in integrating redundant operations and all other factors or risks
detailed in Sterling Software's SEC filings incorporated into this prospectus by
reference.
The material portions of the financial projections provided to Computer
Associates are set forth below:
<TABLE>
<CAPTION>
STERLING SOFTWARE
FISCAL YEAR ENDED
SEPTEMBER 30, 2000
(PROJECTED)
------------------
<S> <C>
($ IN MILLIONS
EXCEPT PER
SHARE DATA)
Revenues........................................ $ 992
Earnings before interest expense, taxes and
depreciation and amortization................. 329
Pre-tax income.................................. 260
Operating Income................................ 241
Net Income...................................... 171
Earnings per share (diluted).................... 1.94
</TABLE>
For fiscal year 2000, revenue is forecasted by Sterling Software
to increase approximately 23% or $185 million over 1999 revenue to
$992 million. Sterling Software has indicated to us that, of this
increase, the business intelligence segment is expected to grow by
approximately 100% (in part due to the recent acquisition of
Information Advantage, Inc.), the systems management segment is
expected to grow by approximately 30%, the federal systems segment
is expected to grow by approximately 7% and the application
development segment is expected to maintain its revenue level
consistent with the prior year.
Although Sterling Software expects growth beyond fiscal year 2000, due to
the inability to predict the frequent changes that take place in the software
and services market generally, Computer Associates believes that reliance should
not be placed on any projections beyond the year 2000.
Projections of the type set forth above are based on estimates and
assumptions that are inherently subject to significant economic, industry and
competitive uncertainties and contingencies, all of which are difficult to
predict and many of which are beyond Sterling Software's control. These
estimates were
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<PAGE>
not prepared with a view to public disclosure or compliance with published
guidelines established by the SEC or the American Institute of Certified Public
Accountants regarding projections and are included in this prospectus only
because such information was furnished to Computer Associates. The inclusion of
this information should not be regarded as an indication that anyone who
received the information considered it a reliable prediction of future operating
results and this information should not be relied upon as such. None of Sterling
Software, Computer Associates or their respective affiliates or Sterling
Software's or Computer Associates' independent auditors assume any
responsibility for the accuracy or validity of this information. In addition,
because the realization of the underlying assumptions upon which these estimates
are based are to a large extent beyond Sterling Software's control, there can be
no assurances that these estimates will be realized; actual results may be
higher or lower than those estimated. Sterling Software does not generally
publish its business plans and strategies or make external disclosures of its
anticipated financial position or results of operations. Accordingly, Sterling
Software does not intend to, and specifically declines any obligation to, update
or otherwise revise the prospective financial information to reflect
circumstances existing since their preparation or to reflect the occurrence of
unanticipated events, even if any or all the underlying assumptions are shown to
be in error. Also, Sterling Software does not intend to, and specifically
declines any obligation to, update or revise the prospective financial
information to reflect changes in general economic or industry conditions.
Neither Sterling Software's auditors nor any other independent accountants have
compiled, examined or performed any procedures with respect to these estimates,
nor have they expressed any opinion or any other form of assurance on this
information or its achievability, and assume no responsibility for, and disclaim
any association with, this prospective financial information.
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<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The Unaudited Pro Forma Condensed Combined Financial Information of Computer
Associates, Platinum and Sterling Software presented below is derived from the
historical consolidated financial statements of each of Computer Associates,
Platinum and Sterling Software. On May 28, 1999 Computer Associates acquired
Platinum. The Unaudited Pro Forma Condensed Combined Financial Information is
prepared using the purchase method of accounting, with Computer Associates
treated as the acquiror and as if the transactions had been completed as of
April 1, 1998 for statement of operations purposes and on December 31, 1999 for
balance sheet purposes.
For a summary of the proposed business combination, see "The Offer"
beginning on page 30 of this prospectus.
The Unaudited Pro Forma Condensed Combined Financial Information is based
upon the historical financial statements of Computer Associates, Platinum and
Sterling Software adjusted to give effect to the business combination. The pro
forma assumptions and adjustments for each transaction scenario are described in
the accompanying notes presented on the following pages. The assumptions and
related pro forma adjustments have been developed from (1) the audited
consolidated financial statements of Computer Associates contained in Computer
Associates' Annual Report on Form 10-K for the fiscal year ended March 31, 1999
and from the unaudited financial statements of Computer Associates contained in
Computer Associates' Quarterly Report on Form 10-Q for the period ended
December 31, 1999, which are incorporated by reference in this prospectus,
(2) the audited consolidated financial statements of Platinum contained in the
Platinum Annual Report on Form 10-K for the fiscal year ended December 31, 1998
and from the unaudited financial statements of Platinum contained in Platinum's
Quarterly Report on Form 10-Q for the period ended March 31, 1999, which are
incorporated by reference in this prospectus, and (3) the audited financial
statements of Sterling Software contained in Sterling Software's Annual Report
on Form 10-K for the fiscal year ended September 30, 1999 and from the unaudited
financial statements of Sterling Software contained in Sterling Software's
Quarterly Report on Form 10-Q for the period ended December 31, 1999, which are
incorporated by reference in this prospectus. In addition, the audited financial
statements contained in Sterling Software's Annual Report on Form 10-K for the
fiscal year ended September 30, 1998 and the unaudited financial statements of
Sterling Software contained in Sterling Software's Quarterly Reports on
Form 10-Q for the periods ended June 30, 1998, December 31, 1998, March 31, 1999
and June 30, 1999 have been used to conform the financial reporting periods of
Sterling Software to those of Computer Associates.
Furthermore, the ultimate determination of the purchase price paid for the
acquisition of Sterling Software may change significantly from the current
estimate. For the purpose of the Unaudited Pro Forma Condensed Combined
Financial Information presented below, the purchase price has been estimated
based upon the market price of $69.75 for each Computer Associates common share,
that being the last quoted price on the NYSE Composite Transaction Tape on
February 11, 2000. The final purchase price will be based largely upon the
average Computer Associates trading price at the time the antitrust condition
and registration statement effectiveness condition have both been met. As a
result of these uncertainties, the final determination and allocation of
purchase price may differ from the amounts assumed in this Unaudited Pro Forma
Condensed Combined Financial Information and those differences may be material.
The unaudited pro forma results of operations reflect adjustments, which are
based upon preliminary estimates, to reflect the allocation of purchase
consideration to the acquired assets and liabilities of Sterling Software. The
final allocation of the purchase consideration will be determined after the
completion of the offer and the merger and will be based on appraisals and a
comprehensive final evaluation of the fair value of Sterling Software's tangible
assets acquired, liabilities assumed, identifiable intangible assets and
goodwill at the time of the merger. The final determination of
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<PAGE>
tangible and intangible assets may result in depreciation and amortization
expense that is different than the preliminary estimates of these amounts. To
the extent that a portion of the purchase price is allocated to in-process
research and development, a charge would be recognized for the period in which
the merger occurs. That charge may be material to Computer Associates' results
of operations.
The Unaudited Pro Forma Condensed Combined Financial Information is provided
for illustrative purposes only and does not purport to represent what the actual
consolidated results of operations or the consolidated financial position of
Computer Associates would have been had the offer and the merger occurred on the
date assumed, nor is it necessarily indicative of future consolidated results of
operations or financial position.
The Unaudited Pro Forma Condensed Combined Financial Information does not
include the realization of cost savings from operating efficiencies, synergies
or other restructurings resulting from the merger.
The Unaudited Pro Forma Condensed Combined Financial Information should be
read in conjunction with the separate historical consolidated financial
statements and accompanying notes of Computer Associates, Platinum and Sterling
Software that are incorporated by reference in this prospectus.
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<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
OF COMPUTER ASSOCIATES INTERNATIONAL, INC.
FOR THE YEAR ENDED MARCH 31, 1999
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRE-STERLING (A) STERLING
HISTORICAL (A) PLATINUM SOFTWARE HISTORICAL SOFTWARE
COMPUTER HISTORICAL PRO FORMA PRO FORMA STERLING PRO FORMA PRO FORMA
ASSOCIATES PLATINUM ADJUSTMENTS RESULTS SOFTWARE ADJUSTMENTS RESULTS
---------- ---------- ----------- ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Product revenue and other related
income......................... $4,511 $ 784 $5,295 $546 $5,841
Maintenance fees................. 742 184 926 194 1,120
------ ------ ----- ------ ---- ---- ------
Total revenue.................. 5,253 968 6,221 740 6,961
Costs and expenses:
Selling, marketing and
administrative................. 2,038 592 2,630 432 3,062
Product development and
enhancements................... 423 197 620 68 688
Commissions and royalties........ 263 98 361 34 395
Depreciation and amortization.... 325 93 $ 306 (D) 724 47 $299 (J) 1,070
Interest expense, net............ 123 2 230 (E) 355 (35) 320
Purchased research and
development.................... 69 69 10 79
Special charges.................. 1,071 (F) 241 (G) (20)(H) 1,292 65 (G) 1,357
------ ------ ----- ------ ---- ---- ------
Total costs and expenses....... 4,243 1,292 516 6,051 621 299 6,971
Income (loss) before income
taxes.......................... 1,010 (324) (516) 170 119 (299) (10)
Income tax expense (benefit)..... 384 7 (123)(I) 268 45 (I) 313
------ ------ ----- ------ ---- ---- ------
Net income (loss)................ 626 (331) (393) (98) 74 (299) (323)
====== ====== ===== ====== ==== ==== ======
Basic earnings (loss) per
share.......................... $ 1.15 $(0.55)
====== ======
Basic weighted average shares
used in computation............ 545 591 (K)
Diluted earnings (loss) per
share.......................... $ 1.11 $(0.55)
====== ======
Diluted weighted average shares
used in computation............ 562 591 (K)
</TABLE>
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PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
OF COMPUTER ASSOCIATES INTERNATIONAL, INC.
FOR THE NINE MONTHS ENDED DECEMBER 31, 1999
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRE-STERLING (A) STERLING
HISTORICAL (A) PLATINUM SOFTWARE HISTORICAL SOFTWARE
COMPUTER HISTORICAL PRO FORMA PRO FORMA STERLING PRO FORMA PRO FORMA
ASSOCIATES PLATINUM ADJUSTMENTS RESULTS SOFTWARE ADJUSTMENTS RESULTS
---------- ---------- ----------- ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Product revenue and other related
income......................... $4,002 $ 83 $4,085 $485 $4,570
Maintenance fees................. 638 27 665 162 827
------ ---- ---- ------ ---- ----- ------
Total revenue................ 4,640 110 4,750 647 5,397
Costs and expenses:
Selling, marketing and
administrative................. 1,805 130 1,935 354 2,289
Product development and
enhancements................... 412 412 56 468
Commissions and royalties........ 229 12 241 36 277
Depreciation and amortization.... 430 15 $ 51 (D) 496 52 $ 224 (J) 772
Interest expense, net............ 244 1 38 (E) 283 (21) 262
Purchased research and
development.................... 646 646 74 720
Special charges.................. 80 (G) 80
------ ---- ---- ------ ---- ----- ------
Total costs and expenses..... 3,766 158 89 4,013 631 224 4,868
Income (loss) before income
taxes.......................... 874 (48) (89) 737 16 (224) 529
Income tax expense (benefit)..... 570 (18) (21)(I) 531 35 (I) 566
------ ---- ---- ------ ---- ----- ------
Net income (loss)................ 304 (30) (68) 206 (19) (224) (37)
====== ==== ==== ====== ==== ===== ======
Basic earnings (loss) per
share.......................... $ 0.56 $(0.06)
====== ======
Basic weighted average shares
used in computation............ 538 585 (K)
Diluted earnings (loss) per
share.......................... $ .55 $(0.06)
====== ======
Diluted weighted average shares
used in computation............ 555 585 (K)
</TABLE>
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<PAGE>
PRO FORMA CONDENSED COMBINED BALANCE SHEET
OF COMPUTER ASSOCIATES INTERNATIONAL, INC.
AS OF DECEMBER 31, 1999
(UNAUDITED)
(IN MILLIONS)
<TABLE>
<CAPTION>
(A)
HISTORICAL HISTORICAL
COMPUTER STERLING PRO FORMA COMBINED PRO
ASSOCIATES SOFTWARE ADJUSTMENTS FORMA
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents...................... $ 294 $ 377 $ 671
Marketable securities.......................... 96 112 208
Trade and installment accounts receivable...... 2,016 239 2,255
Inventories and other assets................... 88 29 117
------- ------ ------ -------
Total current assets......................... 2,494 757 3,251
Installment accounts receivable, due after one
year........................................... 3,680 18 3,698
Property and equipment........................... 744 73 817
Purchased software products...................... 1,130 88 $ (88)(B) 1,130
Excess of cost over net assets acquired.......... 3,971 226 3,167 (B) 7,364
Investments and other noncurrent assets.......... 213 64 (60)(B) 217
------- ------ ------ -------
Total assets................................. 12,232 1,226 3,019 16,477
======= ====== ====== =======
Liabilities and Stockholders' Equity:
Loans payable and current portion of long-term
debt......................................... 932 932
Other current liabilities...................... 1,924 195 170 (C) 2,289
Long-term debt................................. 4,765 38 4,803
Deferred income taxes.......................... 1,096 1,096
Deferred maintenance revenue................... 457 139 (70)(B) 526
Stockholders' equity........................... 3,058 854 2,919 (B) 6,831
------- ------ ------ -------
Total liabilities and stockholders' equity... 12,232 1,226 3,019 16,477
======= ====== ====== =======
</TABLE>
- ------------------------
(A) Certain reclassifications were made to conform the presentation of Sterling
Software and Platinum to that of Computer Associates.
(B) Estimated valuation adjustments of Sterling Software's assets and
liabilities resulting from the preliminary allocation of the purchase price.
A final allocation and reclassification to in process research and
development expense and purchased software is dependent upon analysis which
has not progressed to a stage at which there is sufficient information to
make such an allocation.
(C) Represents an accrual associated with estimated compensation payments
arising from the change of control ($85 million), estimated termination of
leases ($70 million), and other acquisition related expenses ($15 million).
(D) Represents the applicable period of amortization expense of capitalized
purchased software and excess of cost over net assets acquired. Amortization
of purchased software is expected to be recognized ratably over a seven-year
period. Amortization of the excess of cost over net assets acquired is
expected to be recognized ratably over a fifteen-year period.
(E) Represents the applicable period of interest expense at 6.5% per annum on
borrowings of $3.5 billion. Annual interest expense before taxes would
change by approximately $4.4 million for each 1/8% change in the interest
rate of the debt.
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(F) Represents a $1,071 million one-time charge related to Computer Associates'
1995 Stock Plan.
(G) Represents historical restructuring charges, merger costs and other one time
charges for Platinum and historical reorganization expenses for Sterling
Software.
(H) Represents the elimination of a $20 million fee charged to Platinum by
Computer Associates at the time of entering into the merger agreement
providing for the acquisition. Platinum expensed this fee as incurred.
(I) Represents the estimated tax effect of the pro forma adjustments at an
estimated tax rate of 37.5% and assumes no tax benefit associated with
goodwill amortization.
(J) Represents the applicable period of amortization expense calculated using a
10 year amortization period. This 10 year period is Computer Associates'
best estimate of the overall amortization period until such time the
analysis and independent appraisal is sufficient to allocate the purchase
price and amortization period to the applicable intangibles. Annual
amortization expense would be reduced by approximately $10 million for every
$100 million of purchase price allocated to in-process purchased research
and development.
(K) Represents Computer Associates' outstanding common shares for the period and
an estimated 46.5 million shares to be issued as a result of the merger
(using an exchange ratio of 0.5634). The Sterling Software stock options
were excluded since they would be anti-dilutive.
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<PAGE>
DESCRIPTION OF COMPUTER ASSOCIATES CAPITAL STOCK
The following description of the terms of the capital stock of Computer
Associates is not meant to be complete and is qualified by reference to Computer
Associates' Restated Certificate of Incorporation, which is incorporated in this
prospectus by reference. See "Where You Can Find More Information."
AUTHORIZED CAPITAL STOCK
Under Computer Associates' certificate of incorporation, Computer
Associates' authorized capital stock consists of (i) 1.1 billion shares of
common stock, par value $.10 per share, and (ii) 10,000,000 shares of preferred
stock, without par value, of which 500,000 shares have been designated Series
One Junior Participating Preferred Stock. At the close of business on
February 7, 2000, approximately 541,972,678 shares of Computer Associates common
stock were issued and outstanding and no shares of Computer Associates preferred
stock were issued and outstanding.
The Computer Associates board of directors is authorized to provide for the
issuance from time to time of Computer Associates preferred stock in series and,
as to each series, to fix the designation, the dividend rate and the
preferences, if any, which dividends on such series will have compared to any
other class or series of capital stock of Computer Associates, the voting
rights, if any, the voluntary and involuntary liquidation prices, the conversion
or exchange privileges, if any, applicable to such series and the redemption
price or prices and the other terms of redemption, if any, applicable to such
series. Cumulative dividends, dividend preferences and conversion, exchange and
redemption provisions, to the extent that some or all of these features may be
present when shares of Computer Associates preferred stock are issued, could
have an adverse effect on the availability of earnings for distribution to the
holders of Computer Associates common stock or for other corporate purposes.
COMPUTER ASSOCIATES COMMON STOCK
FULL PAYMENT AND NONASSESSABILITY. The outstanding shares of Computer
Associates common stock are, and the shares of Computer Associates common stock
issued pursuant to the offer and the merger will be, duly authorized, validly
issued, fully paid and nonassessable.
VOTING RIGHTS. Each holder of Computer Associates common stock is entitled
to one vote for each share of Computer Associates common stock held of record on
the applicable record date on all matters submitted to a vote of stockholders.
DIVIDEND RIGHTS; RIGHTS UPON LIQUIDATION. The holders of Computer
Associates common stock are entitled to receive, from funds legally available
for the payment thereof, dividends when and as declared by resolution of the
Computer Associates board of directors, subject to any preferential dividend
rights granted to the holders of any outstanding Computer Associates preferred
stock. In the event of liquidation, each share of Computer Associates common
stock is entitled to share pro rata in any distribution of Computer Associates'
assets after payment or providing for the payment of liabilities and the
liquidation preference of any outstanding Computer Associates preferred stock.
PREEMPTIVE RIGHTS. Holders of Computer Associates common stock have no
preemptive rights to purchase, subscribe for or otherwise acquire any unissued
or treasury shares or other securities.
RIGHTS PLAN. For a description of the rights to acquire Computer Associates
preferred stock that are attached to shares of Computer Associates common stock,
see "Comparison of Rights of Holders of Computer Associates Shares and Sterling
Software Shares--Comparison of Charter and By-law Provisions--Rights Plan."
TRANSFER AND DIVIDEND PAYING AGENT AND REGISTRAR
ChaseMellon Shareholder Services, L.L.C. is the transfer and dividend paying
agent and registrar for the Computer Associates common stock.
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<PAGE>
COMPARISON OF RIGHTS OF HOLDERS OF
COMPUTER ASSOCIATES SHARES AND STERLING SOFTWARE SHARES
Upon completion of the offer and the merger, stockholders of Sterling
Software will become stockholders of Computer Associates, rather than
stockholders of Sterling Software. As Computer Associates stockholders, the
rights of former Sterling Software stockholders will be governed by Computer
Associates' charter and bylaws, which differ in certain material respects from
Sterling Software's charter and bylaws. Delaware is the jurisdiction of
incorporation of both Computer Associates and Sterling Software. As Computer
Associates stockholders, the rights of former Sterling Software stockholders
will continue to be governed by the Delaware General Corporation Law.
The following is a comparison of:
- the current rights of Sterling Software stockholders under the Delaware
General Corporation Law and the Sterling Software charter and bylaws and
- the rights Sterling Software stockholders would have as Computer
Associates stockholders under the Delaware General Corporation Law and the
Computer Associates charter and bylaws upon the consummation of the offer
and the merger.
The comparison summarizes the material differences but is not intended to
list all differences and is qualified by reference to Delaware law, the Computer
Associates charter and bylaws and the Sterling Software charter and bylaws.
COMPARISON OF CHARTER AND BY-LAW PROVISIONS
<TABLE>
<CAPTION>
STERLING SOFTWARE COMPUTER ASSOCIATES
-------------------------------- --------------------------------
<S> <C> <C>
BOARD OF DIRECTORS
CLASSIFIED BOARD Divided into three classes, as Consists of single class serving
nearly equal in number as one- year term.
possible, with each class
serving a staggered three-year
term.
REMOVAL OF DIRECTORS Any director may be removed for Under the Delaware General
cause only, at any special or Corporation Law, any director
annual meeting, by the may be removed, with or without
affirmative vote of a majority cause, by the holders of a
in number of shares of the majority of the shares then
stockholders present in person entitled to vote at an election
or by proxy at such meeting of directors.
entitled to vote for the
election of such director.
FILLING OF BOARD Vacancies on the board of Vacancies on the board of
VACANCIES directors may be filled by the directors may be filled by a
vote of a majority of the majority vote of the remaining
directors then in office. directors or by the plurality of
the votes cast at a meeting of
the stockholders.
SIZE OF BOARD The number of directors may be Board must consist of three or
fixed from time to time by more directors, as fixed from
resolution of the board. Under time to time by resolution of
the Delaware General Corporation the board. The current number of
Law, the board must consist of directors is nine.
one or more directors. The
current number of directors is
nine.
</TABLE>
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<TABLE>
<CAPTION>
STERLING SOFTWARE COMPUTER ASSOCIATES
-------------------------------- --------------------------------
<S> <C> <C>
STOCKHOLDER MEETINGS
ANNUAL MEETING Held on date fixed by board. Held on date fixed by board.
CALLING A SPECIAL Only the President, the board of Only the President or the board
MEETING directors or stockholders of directors may call a special
entitled to cast at least 20% of meeting.
the votes which all stockholders
are entitled to cast may call a
special meeting.
QUORUM REQUIREMENTS The presence in person or by The presence, in person or by
proxy of the holders of a proxy, of the holders of a
majority of the shares entitled majority of the shares entitled
to vote at the meeting to vote at the meeting
constitute a quorum for that constitute a quorum for that
meeting, except as otherwise meeting.
provided by the Delaware General
Corporation Law.
CERTAIN VOTING The vote of a majority of the At all stockholder meetings for
REQUIREMENTS shares having voting power the election of directors, a
present in person or represented plurality of the votes cast is
by proxy at such meeting is sufficient to elect directors to
required for all matters except the board. In all matters other
certain amendments to the bylaws than the election of directors,
(which require a majority vote the affirmative vote of a
of all shares outstanding) and majority of the votes cast at
the election of directors (which the meeting constitutes the act
require a plurality vote). of the stockholders.
Sterling Software's charter
requires the vote of the holders
of at least 75% of the voting
power of all shares of the
corporation entitled to vote
generally in the election of
directors, voting together as a
single class, to alter, amend or
adopt any provision inconsistent
with, or repeal, Article Sixth
of the charter. Article Sixth
provides that the election of
directors need not be by written
ballot, that there will be a
classified board and that
advance notice of nominations
for the election of directors
will be given in a manner
provided in the bylaws.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
STERLING SOFTWARE COMPUTER ASSOCIATES
-------------------------------- --------------------------------
<S> <C> <C>
STOCKHOLDER ACTION BY Stockholder action must be taken Any action required to be taken
WRITTEN CONSENT at an annual or special meeting at a stockholder meeting, or any
and not by written consent. other action which may be taken
at a stockholder meeting, may be
taken without a meeting, without
prior notice and without a vote,
if a written consent or consents
setting forth the action so
taken is signed by the holders
of the outstanding stock having
no less than the minimum number
of votes that would be necessary
to authorize such an action at a
meeting.
Computer Associates must give
prompt notice of the taking of
corporate action without a
meeting by less than a unanimous
written consent to stockholders
who have not consented in
writing and who, if the action
had been taken at a stockholder
meeting, would have been
entitled to notice of the
meeting if the record date for
such meeting had been the date
of such written consent.
ADVANCE NOTICE FOR To bring a matter, including the To bring a matter, including the
STOCKHOLDER NOMINATIONS nomination of directors, before nomination of directors, before
AND OTHER BUSINESS an annual meeting, a stockholder an annual meeting, a
generally must give written stockholder's notice must be
notice of a proposed matter not delivered to or mailed and
less than 90 days prior to the received at the principal
anniversary date of the executive offices of Computer
immediately preceding annual Associates no less than 60 days
meeting, but if the annual nor more than 90 days prior to
meeting is called for a date the first anniversary of the
that is not within 45 days preceding year's annual meeting,
before or after such anniversary provided that, in the event that
date, notice by the stockholder the date of the annual meeting
must be received no later than is changed by more than 30 days
the close of business on the from such anniversary date, the
tenth day following the day on stockholder's notice must be
which notice of the date of the received no later than the close
annual meeting was mailed or of business on the tenth day
public disclosure of the date of following the earlier of the day
the annual meeting was made, on which notice of the date of
whichever first occurs. the meeting was mailed or public
disclosure was made.
</TABLE>
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<TABLE>
<CAPTION>
STERLING SOFTWARE COMPUTER ASSOCIATES
-------------------------------- --------------------------------
<S> <C> <C>
In the case of a special meeting In the case of a special
of stockholders called for the meeting, the stockholder's
purpose of electing directors, notice must be delivered to or
the stockholder's notice must be mailed and received at the
received no later than the close Computer Associates' principal
of business on the tenth day executive offices no later than
following the earlier of the day the close of business on the
on which notice of the date of tenth day following the earlier
the special meeting was mailed of the day on which notice of
or public disclosure was made. the date of the meeting was
Sterling Software's bylaws mailed or public disclosure was
contain requirements as to the made. Computer Associates'
form and content of the notice. bylaws contain requirements as
to the form and content of the
notice.
AMENDMENTS TO
ORGANIZATIONAL DOCUMENTS
CERTIFICATE OF Under the Delaware General Under the Delaware General
INCORPORATION Corporation Law, the board must Corporation Law, the board must
adopt a resolution setting forth adopt a resolution setting forth
any proposed amendment to any proposed amendment to
Sterling Software's charter, Computer Associates' charter,
declare its advisability and declare its advisability and
either call a special meeting of either call a special meeting of
stockholders or direct that the stockholders or direct that the
proposed amendment be considered proposed amendment be considered
at the next annual meeting of at the next annual meeting of
stockholders. At such meeting, stockholders. At such meeting,
the amendment must be approved the amendment must be approved
by vote of a majority of all by vote of a majority of all
outstanding shares entitled to outstanding shares entitled to
vote on the proposed amendment, vote on the proposed amendment,
except that charter provisions except that charter provisions
requiring a greater vote may requiring a greater vote may
only be amended by such vote. only be amended by such vote.
Sterling Software's certificate Computer Associates' certificate
of incorporation provides that of incorporation provides that
the charter may not be amended the aggregate number of
in any manner that would authorized shares of Computer
materially alter or change the Associates' class A preferred
powers, preferences or special stock may be increased by an
rights of the holders of amendment approved solely by the
Sterling Software's series A majority vote of the outstanding
preferred stock so as to affect shares of Computer Associates'
them adversely without the common stock (or solely with a
affirmative vote of the holders lesser vote of the common stock,
of at least 80% of the or solely by action of the
outstanding shares of series A board, if permitted by law at
preferred stock, voting together the time).
as a single class.
</TABLE>
79
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<TABLE>
<CAPTION>
STERLING SOFTWARE COMPUTER ASSOCIATES
-------------------------------- --------------------------------
<S> <C> <C>
Furthermore, the certificate of
incorporation states that,
whenever Computer Associates is
authorized to issue more than
one class of stock, no
outstanding share of any class
of stock which is denied voting
power under the certificate of
incorporation shall entitle the
holder of such share the right
to vote at any stockholder
meeting except as required by
the Delaware General Corporation
Law, provided that no share of
any such class which is
otherwise denied voting power
will entitle the holder of such
share to vote upon the increase
or decrease in the number of
authorized shares of such class.
Under the Delaware General
Corporation Law, the holders of
the outstanding shares of a
class, whether or not entitled
to vote on such matter by the
charter, are entitled to vote as
a class if the proposed
amendment would increase or
decrease the aggregate number of
authorized shares of such class,
the par value of shares of such
class, or alter or change the
powers, preferences, or special
rights of the shares of such
class so as to affect them
adversely.
BYLAWS Generally may be amended by vote Computer Associates' bylaws
of stockholders entitled to at permit an amendment of the
least a majority of the votes bylaws, (1) by the affirmative
which all stockholders are vote of 51 percent of the
entitled to cast at the relevant stockholders at any annual or
meeting, or by the vote of a special meeting, provided that
majority of directors. notice of such meeting is given
which mentions the proposed
amendment as one of the purposes
of the meeting, (2) by written
consent of the stockholders or
(3) by action by the board of
directors.
</TABLE>
80
<PAGE>
<TABLE>
<CAPTION>
STERLING SOFTWARE COMPUTER ASSOCIATES
-------------------------------- --------------------------------
<S> <C> <C>
Computer Associates' charter
provides that the power to make,
alter or repeal the bylaws and
to adopt any new by law, except
a by law classifying directors
for election for staggered
terms, is vested in the board.
CAPITALIZATION
AUTHORIZED STOCK Common Stock: 250 million Common stock: 1.1 billion
shares; preferred stock: 10 shares; preferred stock:
million shares. 10,000,000 shares, of which
500,000 have been designated
Series One Junior Participating
Preferred Stock.
PREFERRED STOCK The board is authorized to issue The board is authorized to issue
preferred stock from time to preferred stock from time to
time in one or more series, with time in one or more series, with
terms to be fixed by the board. terms to be fixed by the board.
RIGHTS PLANS Sterling Software has a rights Computer Associates has a rights
agreement dated as of December agreement dated as of June 18,
18, 1996 and amended on March 1991 and amended on May 17,
12, 1998 and February 14, 2000. 1995. Generally, the rights
The rights agreement is agreement is triggered by (i)
triggered by, among other the acquisition of a third party
things, acquisition by a third of 20% or more of Computer
party of 15% or more of Sterling Associates' total outstanding
Software's total outstanding common stock, (ii) the
common stock. The board may determination by the board of
redeem rights issued under the directors and a majority of the
rights plan at any time. The disinterested directors that a
rights plan has been amended to 15% stockholder is an "Adverse
exempt the transactions Person" (one who is seeking
contemplated by the merger short-term financial gain or
agreement and the tender whose ownership block is likely
agreement. to have a material adverse
effect on Computer Associates'
business), (iii) any
reclassification of securities
or recapitalization of Computer
Associates' securities which has
the effect of increasing by 1%
or more the proportionate share
of the stock of Computer
Associates held by an acquiring
third party or an Adverse
Person, or (iv) the occurrence
of self-dealing transactions by
an acquiring third party or an
Adverse Person. Under certain
circumstances, the board may
redeem the rights issued under
the rights plan.
</TABLE>
81
<PAGE>
<TABLE>
<CAPTION>
STERLING SOFTWARE COMPUTER ASSOCIATES
-------------------------------- --------------------------------
<S> <C> <C>
SHARE REPURCHASES Under the Delaware General Under the Delaware General
Corporation Law, Sterling Corporation Law, Computer
Software may generally Associates may generally
repurchase its own shares unless repurchase its own shares unless
its capital is impaired or such its capital is impaired or such
repurchase would cause any repurchase would cause any
impairment of Sterling impairment of Computer
Software's capital. Associates' capital.
EXCULPATION AND Sterling Software's certificate Computer Associates' certificate
INDEMNIFICATION OF of incorporation provides that of incorporation provides that
DIRECTORS, OFFICERS AND to the fullest extent permitted no director will be personally
EMPLOYEES by the Delaware General liable for monetary damages for
Corporation Law no director of any breach of fiduciary duty,
the corporation will be liable except for a breach of the
to the corporation or its director's duty of loyalty to
stockholders for monetary the corporation or its
damages for breach of fiduciary stockholders, any acts or
duty as a director. omissions not in good faith or
Sterling Software's bylaws which involve intentional
provide that Sterling Software misconduct or a knowing
will indemnify its directors and violation of the law, a
officers to the fullest extent violation of a Delaware General
permitted by the Delaware Corporation Law provision
General Corporation Law, and may relating to the unlawful payment
if and to the extent authorized of dividends or unlawful stock
by the board of directors so purchase or redemption, or in
indemnify any other person whom connection with any transaction
the board has the power to from which the director derived
indemnify against any liability, an improper personal benefit.
expense or other matter. Computer Associates' bylaws
provide that the corporation
will indemnify any director or
officer to the fullest extent
permitted by law if such
director or officer is involved
in litigation or other legal
action by reason of the fact
that he is or was a director or
officer.
</TABLE>
SUMMARY OF CERTAIN STATUTORY PROVISIONS
APPRAISAL RIGHTS
Under Delaware law, appraisal rights, or rights of a stockholder to receive
the fair value of his stock in connection with a merger or consolidation, may be
available in connection with a statutory merger or consolidation in certain
specific situations. Appraisal rights are not available under the Delaware
General Corporation Law when a corporation is to be the surviving corporation
and no vote of its stockholders is required to approve the merger or
consolidation. In addition, no appraisal rights are available to holders of
shares of any class of stock which is either:
- listed on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc., or
82
<PAGE>
- held of record by more than 2,000 stockholders, unless such stockholders
are required by the terms of the merger or consolidation to accept
anything other than:
-- shares of the surviving corporation,
-- shares of stock that are listed on a national securities exchange or
designated as a national market system security on an interdealer
quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 stockholders,
-- cash in lieu of fractional shares, or
-- any combination of the foregoing.
Stockholders who perfect their appraisal rights are entitled to receive cash
from the corporation equal to the value of their shares as established by
judicial appraisal. Corporations may enlarge these statutory rights by including
in their certificate of incorporation a provision allowing the appraisal rights
in any merger or consolidation in which the corporation is a constituent
corporation. Neither Computer Associates' nor Sterling Software's charter
contains a provision enlarging such appraisal rights.
In addition, appraisal rights are not available under Delaware law in the
event of the sale of all or substantially all of a corporation's assets or the
adoption of an amendment to its certificate of incorporation, unless such rights
are granted in the corporate charter. Neither Computer Associates' nor Sterling
Software's charter grants such rights.
CERTAIN BUSINESS COMBINATIONS
Delaware law restricts the ability of certain persons to acquire control of
a Delaware corporation.
Section 203 of the Delaware General Corporation Law limits specified
business combinations of Delaware corporations with interested stockholders.
Under the Delaware General Corporation Law, if a person acquires beneficial
ownership of 15% or more of the stock of a Delaware corporation, thereby
becoming an interested stockholder, that person generally may not engage in
specified transactions with the corporation for a period of three years
following the time that such stockholder became an interested stockholder
unless:
- the corporation's board of directors approved the acquisition of stock or
the transaction prior to the time that the person became an interested
stockholder,
- upon consummation of the transaction in which the person became an
interested stockholder, the interested stockholder owned at least 85% of
the voting stock of the corporation outstanding at the time the
transaction commenced, excluding voting stock owned by directors who are
also officers and certain employee stock ownership plans, or
- at or subsequent to such time, the transaction is approved by the board of
directors and at an annual or special meeting by the affirmative vote of
66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder.
Sterling Software has represented to us in the merger agreement that all
actions necessary to ensure that Section 203 of the Delaware General Corporation
Law does not apply to us in connection with the offer, the merger and the other
transactions contemplated by the merger agreement and the tender agreement have
been taken.
83
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements, including statements
concerning the business, future financial position, results of operations,
business strategy and anticipated benefits of our proposed business combination
and plans and objectives of management for future operations of Computer
Associates and Sterling Software. Forward-looking statements can be found, among
other places, under "Summary," "The Proposed Combination," "Background of the
Offer" and "Unaudited Pro Forma Condensed Combined Financial Information."
Generally, the words "will," "may," "should," "continue," "believes," "expects,"
"anticipates" or similar expressions identify forward-looking statements.
Forward-looking statements involve risks and uncertainties that could cause
actual results to differ materially from those projected.
Statements regarding the expected benefits of our proposed business
combination with Sterling Software are based on expectations that Computer
Associates believes are reasonable, but we can give no assurance that such
expectations will prove to have been correct. Factors that could cause actual
results to differ materially include, among others:
- risks, uncertainties and assumptions relating to global economic
conditions
- market acceptance of competing technologies
- the availability and cost of new computer software products
- our ability to maintain or increase market share in our core business
while expanding our product base into other markets
- increasing dependency on large dollar enterprise transactions with
individual clients
- our ability to maintain existing relationships with customers
- our ability to recruit and retain qualified personnel
- the strength of our distribution channels
- our ability to effectively manage fixed and variable expense growth
relative to revenue growth
- possible disruptions resulting from organizational changes
- our ability to effectively integrate acquired products and operations,
including those of Sterling Software and
- increasing dependency on lower profit margin businesses, such as
professional services.
These and other risk factors are discussed in more detail in this
prospectus. See "Risk Factors" beginning on page 24. Many such factors are
beyond our ability to control or predict. Readers are cautioned not to put undue
reliance on forward-looking statements. We disclaim any intent or obligation to
update these forward-looking statements, whether as a result of new information,
future events or otherwise.
LEGAL MATTERS
The legality of Computer Associates common stock offered by this prospectus
will be passed upon by Steven M. Woghin, Senior Vice President and General
Counsel of Computer Associates. Mr. Woghin is paid a salary by Computer
Associates, is a participant in various employee benefit plans offered to
employees of Computer Associates generally and owns and has options to purchase
shares of Computer Associates common stock.
Covington & Burling, New York, New York, acted as counsel to Computer
Associates in connection with the merger agreement.
84
<PAGE>
EXPERTS
The consolidated financial statements of Computer Associates International,
Inc. appearing in Computer Associates International, Inc.'s Annual Report
(Form 10-K) for the year ended March 31, 1999, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference in reliance upon such report given
on the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Sterling Software, Inc. appearing
in Sterling Software's Annual Report (Form 10-K) for the year ended September
30, 1999, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements of Platinum as of December 31, 1998
and 1997, and for each of the years in the three-year period ended December 31,
1998, have been incorporated herein by reference in reliance on the reports of
KPMG LLP, Arthur Andersen LLP, Ernst & Young LLP and Luboshitz, Kasierer & Co.,
independent certified public accounts, incorporated by reference herein, and
upon the authority of said firms as experts in accounting and auditing.
85
<PAGE>
ANNEX A
DIRECTORS AND EXECUTIVE OFFICERS OF
COMPUTER ASSOCIATES
The name, age, business address, present principal occupation or employment
and five-year employment history of each of the directors and executive officers
of Computer Associates are set forth below. Unless otherwise indicated, each
occupation set forth opposite an individual's name refers to employment with
Computer Associates and each individual has held such occupation for at least
the last five years. Each director and executive officer listed below is a
citizen of the United States of America, except for Willem F.P. de Vogel and
Roel Pieper who are citizens of The Netherlands. Unless otherwise indicated
below, the business address of each person is c/o Computer Associates, One
Computer Associates Plaza, Islandia, New York 11749-7000.
DIRECTORS (INCLUDING EXECUTIVE OFFICERS WHO ARE DIRECTORS)
<TABLE>
<CAPTION>
NAME AND PRESENT PRINCIPAL OCCUPATION OR
BUSINESS ADDRESS AGE EMPLOYMENT; FIVE-YEAR EMPLOYMENT HISTORY
- --------------------------------------- -------- -----------------------------------------------------
<S> <C> <C>
Russell M. Artzt....................... 53 Director of Computer Associates since 1980. Executive
Vice President-Research and Development since April
1987 and the Senior Development Officer since 1976.
Alfonse M. D'Amato..................... 61 Director of Computer Associates since 1999, Partner
Park Strategies LLC in Park Strategies LLC, a business consulting firm,
101 Park Avenue, Suite 2507 since January 1999. United States Senator from
New York, New York 10178 January 1981 until January 1999. During his tenure,
he served as Chairman of the Senate Committee on
Banking, Housing and Urban Affairs, and Chairman of
the Commission on Security and Cooperation in Europe.
He is also a director of Avis Rent-A-Car, Inc., and
NRT Incorporated.
Willem F.P. de Vogel................... 49 Director of Computer Associates since 1991. President
Three Cities Research, Inc. of Three Cities Research, Inc., a private investment
650 Madison Avenue, 24th Floor management firm in New York City, since 1981. From
New York, New York 10022 August 1981 to August 1990, Mr. de Vogel served as a
director of Computer Associates. He is also a
director of Morton Industrial Group.
Irving Goldstein....................... 61 Director of Computer Associates since 1990. Former
Director General and Chief Executive Officer of
INTELSAT, an international satellite
telecommunications company from February 1992 to
October 1998. He was Chairman and Chief Executive
Officer of COMSAT (formerly known as Communications
Satellite Corporation) from October 1985 to February
1992 and President from May 1983 to October 1985, and
was a director from May 1983 to February 1992.
Richard A. Grasso...................... 53 Director of Computer Associates since January 1994.
New York Stock Exchange Chairman and Chief Executive Officer of the New York
11 Wall Street Stock Exchange since June 1995. He was Executive Vice
New York, New York 10005 Chairman of the New York Stock Exchange from 1991 to
1995 and President and Chief Operating Officer of the
New York Stock Exchange from 1988 to 1995.
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRESENT PRINCIPAL OCCUPATION OR
BUSINESS ADDRESS AGE EMPLOYMENT; FIVE-YEAR EMPLOYMENT HISTORY
- --------------------------------------- -------- -----------------------------------------------------
<S> <C> <C>
Shirley Strum Kenny.................... 65 Director of Computer Associates since July 1994.
President's Office President of State University of New York at Stony
State University of Brook since 1994. She was President of Queens College
New York at Stony Brook of the City University of New York from 1989 to 1994.
Stony Brook, New York 11794 She is also a director of Toys "R" Us, Inc.
Sanjay Kumar........................... 37 Director of Computer Associates since January 1994.
President and Chief Operating Officer since January
1994. He was Senior Vice President Planning from
April 1989 to December 1992 and Executive Vice
President Operations from January 1993 to December
1993.
Roel Pieper............................ 44 Director of Computer Associates since March 1999.
Executive Vice President of Royal Philips
Electronics, an electronics company, from 1998 until
May 1999. From 1997 to 1998, he was Senior Vice
President, Worldwide Sales and Marketing, of Compaq
Computer Corporation. He was President and Chief
Executive Officer of Tandem Computers from 1996 until
its merger with Compaq Computer Corporation in 1997.
From 1993 to 1996, he was President and Chief
Executive Officer of AT&T's Unix System Laboratories.
Charles B. Wang........................ 55 Director of Computer Associates since 1976. Chief
Executive Officer since 1976 and Chairman of the
Board since April 1980. He is also a director of
Symbol Technologies, Inc.
</TABLE>
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
<TABLE>
<CAPTION>
NAME AND PRESENT PRINCIPAL OCCUPATION OR
BUSINESS ADDRESS AGE EMPLOYMENT; FIVE-YEAR EMPLOYMENT HISTORY
- --------------------------------------- -------- -----------------------------------------------------
<S> <C> <C>
Michael A. McElroy..................... 55 Vice President and Secretary. He was elected
Secretary effective January 1997 and has been a Vice
President since 1989.
Lisa Savino............................ 34 Vice President and Treasurer since November 1997. She
was Vice President and Assistant Treasurer April 1996
to November 1997. She was Assistant Vice President
and Assistant Treasurer from April 1995 to April
1996. From 1990 to March 1995, she held various
positions at Computer Associates.
Ira H. Zar............................. 38 Senior Vice President Finance and Chief Financial
Officer since July 1998. He was Senior Vice President
Finance of Computer Associates since November 1997.
He was Senior Vice President and Treasurer of
Computer Associates from April 1994 to October 1997
and Vice President Finance from April 1990 to April
1994.
</TABLE>
A-2
<PAGE>
DIRECTORS AND OFFICERS OF SILVERSMITH ACQUISITION CORP.
The present directors and officers of Silversmith Acquisition Corp. are set
forth below, along with their respective positions with Silversmith Acquisition
Corp.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH MERGER SUBSIDIARY
- ---- -------- -----------------------------------------------------
<S> <C> <C>
Michael A. McElroy..................... 55 Director, Vice President and Assistant Secretary of
Silversmith Acquisition Corp. since its incorporation
on February 11, 2000.
Steven M. Woghin....................... 53 Director, Vice President, Secretary and Treasurer of
Silversmith Acquisition Corp. since its incorporation
on February 11, 2000. Senior Vice President and
General Counsel of Computer Associates since April
1995. He was Vice President, Legal of Computer
Associates from April 1992 to March 1995.
Ira H. Zar............................. 38 Director, President and Assistant Treasurer of
Silversmith Acquisition Corp. since its incorporation
on February 11, 2000.
</TABLE>
None of the executive officers and directors of Computer Associates or
Silversmith Acquisition Corp. currently is a director of, or holds any position
with, Sterling Software or any of its subsidiaries. We believe that none of our
directors, executive officers, affiliates or associates beneficially owns any
equity securities, or rights to acquire any equity securities, of Sterling
Software. We believe no such person has been involved in any transaction with
Sterling Software or any of Sterling Software's directors, executive officers,
affiliates or associates which is required to be disclosed pursuant to the rules
and regulations of the SEC.
A-3
<PAGE>
The letter of transmittal, certificates for Sterling Software shares and any
other required documents should be sent or delivered by each Sterling Software
stockholder or his or her broker, dealer, commercial bank, trust company or
other nominee to the depositary at one of its addresses set forth below.
The Depositary for the offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
BY MAIL: BY HAND DELIVERY: BY OVERNIGHT DELIVERY:
Reorganization Department Reorganization Department Reorganization Department
PO Box 3301 120 Broadway, 13th Floor 85 Challenger Road
South Hackensack, NJ 07606 New York, NY 10271 Mail Drop-Reorg Dept.
Ridgefield Park, NJ 07660
BY FACSIMILE TRANSMISSION:
(for Eligible Institutions
only)
Fax: (201) 296-4293
Confirm by Telephone:
(201) 296-4860
</TABLE>
Any questions or requests for assistance or additional copies of the
prospectus, the letter of transmittal and the notice of guaranteed delivery and
related exchange offer materials may be directed to the information agent at its
telephone number and location listed below. You may also contact your local
broker, commercial bank, trust company or nominee for assistance concerning the
offer.
The Information Agent for the offer and the merger is:
[LOGO]
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 929-5500 (CALL COLLECT)
OR
CALL TOLL FREE (800) 322-2885
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify directors and officers as well as other employees and
individuals against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement in connection with specified actions, suits or
proceedings, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation--a "derivative action"), 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 proceedings, had no reasonable cause to believe their conduct
was unlawful.
A similar standard is applicable in the case of derivative actions, except
that indemnification only extends to expenses (including attorneys' fees)
actually and reasonably incurred in connection with the defense or settlement of
such action, and the statute requires court approval before there can be any
indemnification where the person seeking indemnification has been found liable
to the corporation. The statute provides that it is not exclusive of other
indemnification that may be granted by a corporation's charter, by-laws,
disinterested director vote, stockholder vote, agreement or otherwise.
As permitted by Section of 145 of the Delaware General Corporation Law,
Article EIGHTH of Computer Associates' Restated Certificate of Incorporation, as
amended, provides:
"The corporation shall to the fullest extent permitted by Section 145 of the
General Corporation Law of Delaware, as the same may be amended and
supplemented, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and the
indemnification provided for herein, shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any By Law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person."
Computer Associates' Restated Certificate of Incorporation, as amended, also
limits the personal liability of directors for monetary damages in certain
instances and eliminates director liability for monetary damages arising from
any breach of the director's duty of care.
Computer Associates maintains insurance on behalf of any person who is or
was a director, officer, employee or agent of Computer Associates, or is or was
serving at the request of Computer Associates as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not Computer
Associates would have the power to indemnify him against such liability under
the provisions of Computer Associates' Restated Certificate of Incorporation, as
amended.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- --------------------- ------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Merger dated as of February 14, 2000,
among Computer Associates, Silversmith Acquisition Corp. and
Sterling Software.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- --------------------- ------------------------------------------------------------
<C> <S>
4.1* Provisions of the Restated Certificate of Incorporation of
Computer Associates dated February 3, 1999, that define the
rights of security holders of Computer Associates
(incorporated by reference to Exhibit 3.(I) to Computer
Associates' Form 10-Q for the quarter ended December 31,
1998).
4.2* Provisions of the Bylaws of Computer Associates, as amended
effective January 19, 1999, that define the rights of
security holders of Computer Associates (incorporated by
reference to Exhibit 3.(II) to Computer Associates' Form
10-Q for the quarter ended December 31, 1998).
4.3* Rights Agreement dated as of June 18, 1991 between Computer
Associates and Manufacturers Hanover Trust Company
(incorporated by reference to Exhibit 4 to Computer
Associates' Form 8-K dated June 18, 1991).
4.4* Amendment No. 1 dated May 17, 1995 to Rights Agreement dated
as of June 18, 1991 (incorporated by reference to Exhibit C
to Computer Associates' Form 10-K for the fiscal year ended
March 31, 1995).
5.1 Opinion of Steven M. Woghin, Senior Vice President and
General Counsel of Computer Associates, regarding the
legality of the securities being issued.
8.1 Opinion of Covington & Burling.
10.1 Agreement dated as of February 14, 2000, between Silversmith
Acquisition Corp. and certain stockholders of Sterling
Software.
10.2 Amendment to Change in Control Severance Agreement, dated as
of February 14, 2000, by and among Sterling Software,
Computer Associates and Sam Wyly.
10.3 Amendment to Change in Control Severance Agreement, dated as
of February 14, 2000, by and among Sterling Software,
Computer Associates and Charles J. Wyly, Jr.
10.4 Amendment to Change in Control Severance Agreement, dated as
of February 14, 2000, by and among Sterling Software,
Computer Associates and Sterling L. Williams.
10.5 Amendment to Change in Control Severance Agreement, dated as
of February 14, 2000, by and among Sterling Software,
Computer Associates and Geno P. Tolari.
10.6 Amendment to Change in Control Severance Agreement, dated as
of February 14, 2000, by and among Sterling Software,
Computer Associates and F.L. "Mike" Harvey.
10.7 Amendment to Change in Control Severance Agreement, dated as
of February 14, 2000, by and among Sterling Software,
Computer Associates and Don J. McDermett, Jr.
10.8 Amendment to Change in Control Severance Agreement, dated as
of February 14, 2000, by and among Sterling Software,
Computer Associates and B. Carole Morton.
10.9 Amendment to Change in Control Severance Agreement, dated as
of February 14, 2000, by and among Sterling Software,
Computer Associates and Mark A. Theel.
10.10 Amendment to Change in Control Severance Agreement, dated as
of February 14, 2000, by and among Sterling Software,
Computer Associates and R. Logan Wray.
10.11 Amendment to Change in Control Severance Agreement, dated as
of February 14, 2000, by and among Sterling Software,
Computer Associates and Evan A. Wyly.
10.12 Form of Amendment to Change in Control Severance Agreement,
dated as of February 14, 2000, by and among Sterling
Software, Computer Associates and certain non-executive
officers of Sterling Software.
10.13 Agreement (SERP Agreement), dated as of February 15, 2000,
by and among Sterling Software, Computer Associates and Geno
P. Tolari.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- --------------------- ------------------------------------------------------------
<C> <S>
12.1 Statements regarding computation of ratios of earnings to
fixed charges.
23.1 Consent of KPMG LLP.
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Ernst & Young LLP.
23.4 Consent of Ernst & Young LLP.
23.5 Consent of Arthur Andersen LLP.
23.6 Consent of Luboshitz, Kasierer & Co.
23.7 Consent of Steven M. Woghin, Senior Vice President and
General Counsel of Computer Associates (included in Exhibit
5.1).
23.8 Consent of Covington & Burling (included in Exhibit 8.1).
24.1 Power of Attorney (included on the signature page of this
Registration Statement).
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Brokers, Dealers, etc.
99.4 Form of Letter to Clients.
99.5 Form of Letter to Participants in Sterling Software's 401(k)
plan.
99.6 Form of Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.
</TABLE>
- ------------------------
* Incorporated by reference.
(b) Not applicable.
(c) Not applicable.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being make,
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. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
II-3
<PAGE>
(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;
(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; and
(4) If the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any
financial statements required by Rule 3-19 of this chapter at the start of
any delayed offering or throughout a continuous offering. Financial
statements and information otherwise required by Section 10(a)(3) of the Act
need not be furnished, PROVIDED, that the registrant includes in the
prospectus, by means of a post-effective amendment, financial statements
required pursuant to this paragraph (a)(4) and other information necessary
to ensure that all other information in the prospectus is at least as
current as the date of those financial statements. Notwithstanding the
foregoing, with respect to registration statements on Form F-3, a
post-effective amendment need not be filed to include financial statements
and information required by Section 10(a)(3) of the Act or Rule 3-19 of this
chapter if such financial statements and information are 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 Form F-3.
(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 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to 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 be deemed to be the
initial BONA FIDE offering thereof.
(c) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by a person or party
who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(d) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (a) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a) (3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes 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.
(e) Insofar as indemnification for liabilities arising under the Securities
Act 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 SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event
II-4
<PAGE>
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
Securities Act and will be governed by the final adjudication of such issue.
(f) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(g) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not subject of and included in
the registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Islandia, State of New
York, on February 22, 2000.
<TABLE>
<S> <C> <C>
COMPUTER ASSOCIATES INTERNATIONAL, INC.
By: /s/ STEVEN M. WOGHIN
----------------------------------------------
Name: Steven M. Woghin
Title: Senior Vice President and General
Counsel
</TABLE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Charles B. Wang, Steven M. Woghin and Ira
H. Zar, with full power to act alone, as his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this registration statement and any subsequent registration
statement filed by the registrant pursuant to Rule 462(b) of the Securities Act,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the SEC, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, or their or his or her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ CHARLES B. WANG
------------------------------------------- Chairman of the Board and February 22, 2000
Charles B. Wang Chief Executive Officer
Senior Vice President
/s/ IRA H. ZAR Finance, Principal
------------------------------------------- Financial and Accounting February 22, 2000
Ira H. Zar Officer
/s/ RUSSELL M. ARTZT
------------------------------------------- Director February 22, 2000
Russell M. Artzt
/s/ ALFONSE M. D'AMATO
------------------------------------------- Director February 22, 2000
Alfonse M. D'Amato
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ WILLEM F.P. DE VOGEL
------------------------------------------- Director February 22, 2000
Willem F.P. de Vogel
/s/ IRVING GOLDSTEIN
------------------------------------------- Director February 22, 2000
Irving Goldstein
/s/ RICHARD A. GRASSO
------------------------------------------- Director February 22, 2000
Richard A. Grasso
/s/ SHIRLEY STRUM KENNY
------------------------------------------- Director February 22, 2000
Shirley Strum Kenny
/s/ SANJAY KUMAR
------------------------------------------- Director February 22, 2000
Sanjay Kumar
/s/ ROEL PIEPER
------------------------------------------- Director February 22, 2000
Roel Pieper
</TABLE>
II-7
<PAGE>
================================================================================
AGREEMENT AND PLAN OF MERGER
Dated as of February 14, 2000
Among
COMPUTER ASSOCIATES INTERNATIONAL, INC.,
SILVERSMITH ACQUISITION CORP.
And
STERLING SOFTWARE, INC.
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
INTRODUCTION...................................................................1
ARTICLE I
THE OFFER
SECTION 1.1. The Offer......................................................1
SECTION 1.2. Company Action.................................................4
SECTION 1.3. Directors......................................................5
ARTICLE II
THE MERGER
SECTION 2.1. The Merger.....................................................6
SECTION 2.2. Closing........................................................6
SECTION 2.3. Effective Time.................................................6
SECTION 2.4. Effects of the Merger..........................................6
SECTION 2.5. Certificate of Incorporation and By-Laws.......................6
SECTION 2.6. Directors......................................................7
SECTION 2.7. Officers.......................................................7
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 3.1. Effect on Capital Stock.........................................7
(a) Capital Stock of Merger Subsidiary...................................7
(b) Cancellation of Treasury Stock and Parent-Owned Stock................7
(c) Conversion of Company Common Stock...................................7
(d) Adjustment of Exchange Ratio.........................................7
<PAGE>
Page
----
SECTION 3.2. Exchange of Certificates........................................8
(a) Exchange Agent.......................................................8
(b) Exchange Procedure...................................................8
(c) Distributions with Respect to Unexchanged Shares.....................9
(d) No Further Ownership Rights in Company Common Stock..................9
(e) Termination of Exchange Fund; No Liability...........................9
(f) No Fractional Shares................................................10
(g) Investment of Exchange Fund.........................................11
(h) Lost Certificates...................................................11
SECTION 3.3. Dissenting Shares.............................................11
SECTION 3.4. Company Options...............................................11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Representations and Warranties of the Company..................14
(a) Organization, Standing and Corporate Power..........................14
(b) Subsidiaries........................................................14
(c) Capital Structure...................................................15
(d) Authority; Noncontravention.........................................15
(e) SEC Documents; Financial Statements; No Undisclosed Liabilities.....17
(f) Information Supplied................................................17
(g) Absence of Certain Changes or Events................................18
(h) Litigation..........................................................19
(i) Absence of Changes in Stock and Benefit Plans.......................19
(j) Participation and Coverage in Benefit Plan..........................20
(k) ERISA Compliance....................................................20
(l) Taxes...............................................................21
(m) Voting Requirements.................................................22
(n) State Takeover Statutes; Rights Agreement...........................22
(o) Brokers; Schedule of Fees and Expenses..............................23
(p) Permits; Compliance with Laws; Environmental Matters................23
(q) Contracts; Debt Instruments.........................................24
(r) Title to Properties.................................................26
(s) Opinion of Financial Advisor........................................26
(t) Interests of Officers and Directors.................................26
(u) Software............................................................26
(v) Intellectual Property...............................................28
-ii-
<PAGE>
Page
----
(w) No Infringement.....................................................29
(x) Change of Control...................................................30
SECTION 4.2. Representations and Warranties of Parent and Merger
Subsidiary.....................................................30
(a) Organization, Standing and Corporate Power..........................30
(b) Capital Structure...................................................30
(c) Authority; Noncontravention.........................................31
(d) SEC Documents; Financial Statements; No Undisclosed Liabilities.....32
(e) Information Supplied................................................32
(f) Absence of Certain Changes or Events................................32
(g) Litigation..........................................................32
(h) Compliance with Applicable Laws.....................................33
(i) Brokers.............................................................33
(j) No Prior Activities; Assets of Merger Subsidiary....................33
(k) Opinion of Financial Advisor........................................33
(l) Share Ownership.....................................................33
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.1. Conduct of Business...........................................34
SECTION 5.2. State Takeover Statutes.......................................36
SECTION 5.3. Access to Information.........................................36
SECTION 5.4. Affiliates....................................................36
SECTION 5.5. No Solicitation by the Company................................37
SECTION 5.6. Litigation....................................................38
SECTION 5.7. Rights Agreement..............................................38
ARTICLE VI
COVENANTS OF PARENT AND MERGER SUBSIDIARY
SECTION 6.1. Listing.......................................................39
SECTION 6.2. Indemnification...............................................39
SECTION 6.3. Obligations of Merger Subsidiary..............................40
SECTION 6.4. Voting of Shares..............................................40
SECTION 6.5. Employees.....................................................40
-iii-
<PAGE>
Page
----
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1. Shareholder Approval; Preparation of S-4 and Proxy
Statement/Prospectus..........................................41
SECTION 7.2. HSR Act Filings; Reasonable Efforts; Notification.............42
SECTION 7.3. Public Announcements..........................................44
SECTION 7.4. Confidentiality...............................................45
ARTICLE VIII
CONDITIONS PRECEDENT
SECTION 8.1. Conditions to Each Party's Obligation To Effect the Merger.....45
(a) Shareholder Approval................................................45
(b) Purchase of Shares in the Offer.....................................45
(c) No Injunctions or Restraints........................................45
(d) Form S-4............................................................45
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER, FEES AND EXPENSES
SECTION 9.1. Termination...................................................45
SECTION 9.2. Effect of Termination.........................................46
SECTION 9.3. Amendment.....................................................46
SECTION 9.4. Extension; Waiver.............................................46
SECTION 9.5. Fees and Expenses.............................................47
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1. Nonsurvival of Representations and Warranties.................48
SECTION 10.2. Notices.......................................................48
SECTION 10.3. Interpretation................................................49
SECTION 10.4. Counterparts..................................................49
SECTION 10.5. Entire Agreement; No Third-Party Beneficiaries................50
SECTION 10.6. GOVERNING LAW.................................................50
SECTION 10.7. Assignment....................................................50
-iv-
<PAGE>
SECTION 10.8. Enforcement...................................................50
SECTION 10.9. Severability..................................................50
Annex I Conditions to the Offer
-v-
<PAGE>
AGREEMENT AND PLAN OF MERGER, DATED AS OF FEBRUARY 14, 2000,
AMONG COMPUTER ASSOCIATES INTERNATIONAL, INC., A DELAWARE
CORPORATION ("PARENT"), SILVERSMITH ACQUISITION CORP., A
DELAWARE CORPORATION AND A WHOLLY OWNED SUBSIDIARY OF PARENT
("MERGER SUBSIDIARY"), AND STERLING SOFTWARE, INC., A DELAWARE
CORPORATION (THE "COMPANY").
--------------------------------------------------------------
INTRODUCTION
The Board of Directors of each of Parent, Merger Subsidiary
and the Company have unanimously approved the acquisition of the Company by
Parent and Merger Subsidiary.
In furtherance of such acquisition, it is proposed that Merger
Subsidiary shall make an exchange offer (the "OFFER") to exchange shares of
common stock, par value $.10 per share ("PARENT COMMON STOCK"), of Parent for
all of the issued and outstanding shares of common stock, par value $.10 per
share (the "COMPANY COMMON STOCK"), of the Company (the "SHARES"), including the
associated Rights (defined in Section 4.1(c)), in accordance with the terms
provided in this Agreement.
The parties to this Agreement intend that, to the extent that
the Offer and the Merger qualify as a "REORGANIZATION" within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "CODE"),
and the rules and regulations promulgated thereunder, this Agreement constitutes
a plan of reorganization.
Simultaneously with the execution and delivery of this
Agreement and as a condition and inducement to the willingness of Parent and
Merger Subsidiary to enter into this Agreement, Parent and certain stockholders
of the Company (collectively, the "STOCKHOLDERS") are entering into an agreement
(the "TENDER AGREEMENT") pursuant to which the Stockholders will agree to tender
for exchange all of their Shares in the Offer, to vote to adopt and approve this
Agreement and to take certain other actions in furtherance of the transactions
contemplated by this Agreement upon the terms and subject to the conditions set
forth in the Tender Agreement.
Parent, Merger Subsidiary and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Offer and the other transactions contemplated by this Agreement and also to
prescribe various conditions to the Offer and the other transactions
contemplated by this Agreement.
The parties agree as follows:
ARTICLE I
THE OFFER
SECTION 1.1. THE OFFER. (a) Provided that (i) this Agreement
shall not have been terminated in accordance with Section 9.1 and (ii) none of
the events set forth in Annex I
<PAGE>
hereto shall have occurred or be existing, Merger Subsidiary shall, as promptly
as practicable after the date hereof, commence the Offer. Each Share (including
the associated Right) accepted by Merger Subsidiary in accordance with the Offer
shall be exchanged for the right to receive from Merger Subsidiary that number
of fully paid and nonassessable shares of Parent Common Stock equal to the
Exchange Ratio. For purposes of this Agreement, "EXCHANGE RATIO" shall mean
0.5634; provided that if the Average Parent Trading Price (x) is less than
$63.10, then, unless Parent makes the Cash Election (defined below), the
Exchange Ratio shall equal the quotient of (A) $35.55 divided by (B) the Average
Parent Trading Price, or (y) is greater than $77.12, then the Exchange Ratio
shall equal the quotient of (A) $43.45 divided by (B) the Average Parent Trading
Price, calculated in each case to the nearest ten thousandth (i.e., four decimal
places (.xxxx)). If the Average Parent Trading Price is less than $63.10, Parent
(in its sole discretion by giving the Company notice thereof by no later than
the close of business on the business day immediately succeeding the day on
which the Average Parent Trading Price is determined) may elect (the "CASH
ELECTION") to reduce the Exchange Ratio that would otherwise be in effect by
paying in cash (such amount of cash per Share, the "CASH ELECTION AMOUNT") all
or any portion of the excess of (x) $35.55 over (y) the product of (A) 0.5634
and (B) the Average Parent Trading Price. If Parent makes the Cash Election, the
Exchange Ratio shall be adjusted to equal the quotient of (x) the excess of (A)
$35.55 over (B) the Cash Election Amount divided by (y) the Average Parent
Trading Price. As used in this Agreement, the term "AVERAGE PARENT TRADING
PRICE" shall mean the ten trading day average of the daily average of the high
and low sales price per share of Parent Common Stock on the New York Stock
Exchange, Inc. (the "NYSE") composite tape (as reported in The Wall Street
Journal, or, if not reported therein, any other authoritative source) ending on
the trading day immediately preceding the day on which the later to occur of (x)
the waiting period under the HSR Act (defined below in Section 4.1(d)) and any
other applicable Antitrust Laws (defined below in Section 7.2(b)) the expiration
or termination of which is a condition to the Offer applicable to the Offer
expires or terminates and (y) the Form S-4 (defined below in Section 1.1(b))
becomes effective under the Securities Act (defined below in Section 4.1(e)).
The initial expiration date of the Offer shall be the twentieth business day
following commencement of the Offer. The Offer shall be subject to the condition
that there shall be validly tendered in accordance with the terms of the Offer
prior to the expiration date of the Offer and not withdrawn a number of Shares
which, together with the Shares then owned by Parent and Merger Subsidiary,
represents at least a majority of the total number of outstanding Shares,
assuming the exercise of all outstanding options, rights and convertible
securities (if any) and the issuance of all Shares that the Company is obligated
to issue (such total number of outstanding Shares being hereinafter referred to
as the "FULLY DILUTED SHARES") (the "MINIMUM CONDITION") and to the other
conditions set forth in Annex I hereto. Parent and Merger Subsidiary expressly
reserve the right to waive the conditions to the Offer and to make any change in
the terms or conditions of the Offer; provided that, without the written consent
of the Company, no change may be made which changes the form or amount of
consideration to be paid (other than in connection with the Cash Election
described above or by adding consideration), imposes conditions to the Offer in
addition to those set forth in Annex I, changes or waives the Minimum Condition,
extends the Offer (except as set forth in the following two sentences), or makes
any other change to any condition to the Offer set forth in Annex I which is
adverse to the holders of Shares. Subject to the terms of the Offer and this
Agreement and the satisfaction (or waiver to the extent permitted by this
Agreement) of the conditions to the Offer, Merger Subsidiary shall accept for
payment all Shares validly tendered
2
<PAGE>
and not withdrawn pursuant to the Offer as soon as practicable after the
applicable expiration date of the Offer and shall pay for all such Shares
promptly after acceptance; provided that (x) Merger Subsidiary may (or, if the
conditions set forth in clause (1), (2), (3) or (4), or subclause (a), (b), (c)
or (d) of clause (5), of Annex I exist, shall) extend the Offer for extension
periods not in excess of 15 business days if, at the scheduled expiration date
of the Offer or any extension thereof, any of the conditions to the Offer shall
not have been satisfied, until such time as such conditions are satisfied or
waived (provided that, if at any scheduled expiration date, all of the
conditions to the Offer have been satisfied or waived other than the Minimum
Condition, Merger Subsidiary shall only be required to extend the Offer for an
additional 20 business days following such scheduled expiration date; provided
further that Merger Subsidiary shall not be required to extend the Offer if
there is no reasonable possibility of all of the conditions to the Offer being
satisfied on or before September 30, 2000), and (y) Merger Subsidiary may extend
the Offer if and to the extent required by the applicable rules and regulations
of the Securities and Exchange Commission (the "SEC"). In addition, Merger
Subsidiary may extend the Offer after the acceptance of Shares thereunder for a
further period of time by means of a subsequent offering period under Rule
14d-11 promulgated under the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), of not more than 20 business days to meet the objective (which
is not a condition to the Offer) that there be validly tendered, in accordance
with the terms of the Offer, prior to the expiration date of the Offer (as so
extended) and not withdrawn a number of Shares, which together with Shares then
owned by Parent and Merger Subsidiary, represents at least 90% of the Fully
Diluted Shares. Notwithstanding anything to the contrary set forth herein, no
certificates or scrip representing fractional shares of Parent Common Stock
shall be issued in connection with the exchange of Parent Common Stock for
Shares upon consummation of the Offer, and in lieu thereof each tendering
stockholder who would otherwise be entitled to a fractional share of Parent
Common Stock in the Offer will be paid an amount in cash equal to the product
obtained by multiplying (A) the fractional share interest such holder (after
taking into account all shares of Company Common Stock held at the Effective
Time by such holder) would otherwise be entitled by (B) the closing price for a
share of Parent Common Stock as reported on the NYSE Composite Transaction Tape
(as reported in The Wall Street Journal, or, if not reported thereby, any other
authoritative source) on the date Merger Subsidiary accepts Shares for exchange
in the Offer.
(b) As soon as practicable after the date of this Agreement,
Parent shall prepare and file with the SEC a registration statement on Form S-4
to register the offer and sale of Parent Common Stock pursuant to the Offer (the
"FORM S-4"). The Form S-4 will include a preliminary prospectus containing the
information required under Rule 14d-4(b) promulgated under the Exchange Act (the
"PRELIMINARY PROSPECTUS"). As soon as practicable on the date of commencement of
the Offer, Parent and Merger Subsidiary shall (i) file with the SEC a Tender
Offer Statement on Schedule TO with respect to the Offer which will contain or
incorporate by reference all or part of the Preliminary Prospectus and form of
the related letter of transmittal (together with any supplements or amendments
thereto, collectively the "OFFER DOCUMENTS") and (ii) cause the Offer Documents
to be disseminated to holders of Shares. Parent, Merger Subsidiary and the
Company each agree promptly to correct any information provided by it for use in
the Form S-4 or the Offer Documents if and to the extent that it shall have
become false or misleading in any material respect. Parent and Merger Subsidiary
agree to take all steps
3
<PAGE>
necessary to cause the Offer Documents as so corrected to be filed with the SEC
and to be disseminated to holders of Shares, in each case as and to the extent
required by applicable federal securities laws. The Company and its counsel
shall be given a reasonable opportunity to review and comment on the Schedule
TO, the Form S-4 and the Offer Documents prior to its being filed with the SEC.
SECTION 1.2. COMPANY ACTION. (a) The Company hereby consents
to the Offer and represents that its Board of Directors, at a meeting duly
called and held, has unanimously (i) determined that this Agreement and the
transactions contemplated hereby, including the Offer and the Merger (defined
below in Section 2.1), are advisable and are fair to and in the best interest of
the Company's stockholders, (ii) approved this Agreement and the transactions
contemplated hereby, including the Offer and the Merger, and the Tender
Agreement and the transactions contemplated thereby, which approval constitutes
approval under Section 203 of the General Corporation Law of the State of
Delaware (the "DELAWARE LAW") such that the Offer, the Merger, this Agreement
and the Tender Agreement and the other transactions contemplated hereby and
thereby are not and shall not be subject to any restriction of Section 203 of
Delaware Law, and (iii) resolved to recommend acceptance of the Offer and
approval and adoption of this Agreement and the Merger by the Company's
stockholders (the recommendations referred to in this clause (iii) are
collectively referred to in this Agreement as the "RECOMMENDATIONS"). The
Company further represents that Goldman Sachs & Co. ("GOLDMAN SACHS") has
rendered to the Company's Board of Directors its opinion that the consideration
to be received by the Company's stockholders pursuant to this Agreement is fair
to such stockholders from a financial point of view. The Company has been
advised that all of its directors and executive officers presently intend to
tender their Shares pursuant to the Offer. The Company will promptly furnish
Parent and Merger Subsidiary pursuant to the terms of their Confidentiality
Agreements with a list of its stockholders, mailing labels and any available
listing or computer file containing the names and addresses of all record
holders of Shares and lists of securities positions of Shares held in stock
depositories, in each case as of the most recent practicable date, and will
provide to Parent and Merger Subsidiary such additional information (including,
without limitation, updated lists of stockholders, mailing labels and lists of
securities positions) and such other assistance as Parent or Merger Subsidiary
may reasonably request in connection with the Offer.
(b) As soon as practicable on the day that the Offer is
commenced, the Company will file with the SEC and disseminate to holders of
Shares a Solicitation/Recommendation Statement on Schedule 14D-9 (the "SCHEDULE
14D-9") which shall reflect the Recommendations; provided that the Board of
Directors of the Company may withdraw, modify or change such Recommendations if
but only if (i) it believes in good faith, based on such matters as it deems
relevant, including the advice of the Company's financial advisors, that a
Superior Proposal (defined in Section 5.5(b) hereof) has been made and (ii) it
has determined in good faith, after consultation with outside legal counsel that
the withdrawal, modification or change of such Recommendation is, in the good
faith judgment of the Board of Directors, required by the Board to comply with
its fiduciary duties imposed by Delaware Law. The Company, Parent and Merger
Subsidiary each agree promptly to correct any information provided by it for use
in the Schedule 14D-9 if and to the extent that it shall have become false or
misleading in any material
4
<PAGE>
respect. The Company agrees to take all steps necessary to cause the Schedule
14D-9 as so corrected to be filed with the SEC and to be disseminated to holders
of Shares, in each case as and to the extent required by applicable federal
securities laws. Parent and its counsel shall be given a reasonable opportunity
to review and comment on the Schedule 14D-9 prior to its being filed with the
SEC.
SECTION 1.3. DIRECTORS. (a) Effective upon the acceptance for
payment by Merger Subsidiary of a majority of the Shares pursuant to the Offer
(the "APPOINTMENT TIME"), Parent shall be entitled to designate the number of
directors, rounded up to the next whole number, on the Company's Board of
Directors that equals the product of (i) the total number of directors on the
Company's Board of Directors (giving effect to the election of any additional
directors pursuant to this Section) and (ii) the percentage that the number of
Shares owned by Parent or Merger Subsidiary (including Shares accepted for
payment) bears to the total number of Shares outstanding, and the Company shall
take all action necessary to cause Parent's designees to be elected or appointed
to the Company's Board of Directors, including, without limitation, increasing
the number of directors, or seeking and accepting resignations of incumbent
directors, or both; provided that, prior to the Effective Time (defined below in
Section 2.3), the Company's Board of Directors shall always have at least two
members who were directors of the Company prior to consummation of the Offer
(each, a "CONTINUING DIRECTOR"). If the number of Continuing Directors is
reduced to less than two for any reason prior to the Effective Time, the
remaining and departing Continuing Directors shall be entitled to designate a
person to fill the vacancy. At such times, the Company will use its best efforts
to cause individuals designated by Parent to constitute the same percentage as
such individuals represent on the Company's Board of Directors of (x) each
committee of the Board, (y) each board of directors of each subsidiary (defined
below in Section 4.1(a)) and (z) each committee of each such board.
Notwithstanding anything in this Agreement to the contrary, in the event that
Parent's designees are elected to the Company's Board of Directors prior to the
Effective Time, the affirmative vote of the Continuing Directors shall be
required for the Company to (a) amend or terminate this Agreement or agree or
consent to any amendment or termination of this Agreement, (b) waive any of the
Company's rights, benefits or remedies hereunder, (c) extend the time for
performance of Parent's and Merger Subsidiary's respective obligations
hereunder, or (d) approve any other action by the Company which is reasonably
likely to adversely affect the interests of the stockholders of the Company
(other than Parent, Merger Subsidiary and their affiliates (other than the
Company and its subsidiaries)), with respect to the transactions contemplated by
this Agreement.
(b) The Company's obligations to appoint designees to the
Board of Directors shall be subject to Section 14(f) of the Exchange Act and
Rule 14f-l promulgated thereunder. The Company shall promptly take all actions
required pursuant to Section 14(f) and Rule 14f-l in order to fulfill its
obligations under this Section 1.3 and shall include in the Schedule 14D-9 such
information with respect to the Company and its officers and directors as is
required under Section 14(f) and Rule 14f-l to fulfill its obligations under
this Section 1.3. Parent will supply to the Company in writing and be solely
responsible for any information with respect to itself and its nominees,
officers, directors and affiliates required by Section 14(f) and Rule 14f-1.
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ARTICLE II
THE MERGER
SECTION 2.1. THE MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the relevant
provisions of Delaware Law, Merger Subsidiary shall be merged with and into the
Company (the "MERGER") at the Effective Time. Following the Merger, the separate
corporate existence of Merger Subsidiary shall cease and the Company shall
continue as the surviving corporation (the "SURVIVING CORPORATION") and shall
succeed to and assume all the rights and obligations of Merger Subsidiary in
accordance with Delaware Law.
SECTION 2.2. CLOSING. The closing of the Merger (the
"CLOSING") will take place at 10:00 a.m. on a date to be specified by the
parties, which shall be no later than the second business day after satisfaction
or waiver of the conditions set forth in Section 8.1, at the offices of
Covington & Burling, 1330 Avenue of the Americas, New York, New York 10019,
unless another date or place is agreed to in writing by the parties hereto (such
date upon which the Closing occurs, the "CLOSING DATE").
SECTION 2.3. EFFECTIVE TIME. Subject to the provisions of this
Agreement, as soon as practicable following the satisfaction or waiver of the
conditions set forth in Article VIII, the parties shall file a certificate of
merger or other appropriate documents (the "CERTIFICATE OF MERGER") executed in
accordance with the relevant provisions of Delaware Law and shall make all other
filings or recordings required under Delaware Law. The Merger shall become
effective at such time as the Certificate of Merger is duly filed with the
Delaware Secretary of State, or at such other time as Parent and the Company
shall agree and specify in the Certificate of Merger (the time the Merger
becomes effective, the "EFFECTIVE TIME").
SECTION 2.4. EFFECTS OF THE MERGER. The Merger shall have the
effects set forth in Section 259 of the Delaware Law.
SECTION 2.5. CERTIFICATE OF INCORPORATION AND BY-LAWS. (a) The
certificate of incorporation of the Company, as in effect immediately prior to
the Effective Time, shall be amended as of the Effective Time so that the Fourth
Article of such certificate of incorporation reads in its entirety as follows:
"The total number of shares of all classes of stock which the corporation shall
have authority to issue is 1,000 shares of common stock, par value $.10 per
share.", and that the Ninth Article of such certificate of incorporation is
deleted in its entirety, and, as so amended, such certificate of incorporation
shall be the certificate of incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
(b) Subject to Section 6.2, the By-Laws of Merger Subsidiary
as in effect at the Effective Time shall be the By-Laws of the Surviving
Corporation, until changed or amended.
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SECTION 2.6. DIRECTORS. The directors of Merger Subsidiary at
the Effective Time shall be the directors of the Surviving Corporation, until
the earlier of their resignation or removal or until their successors are duly
elected and qualified.
SECTION 2.7. OFFICERS. The officers of Merger Subsidiary at
the Effective Time shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their successors are duly
elected and qualified.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 3.1. EFFECT ON CAPITAL STOCK. As of the Effective
Time, by virtue of the Merger and without any action on the part of the holder
of any shares of Company Common Stock or any shares of capital stock of Merger
Subsidiary:
(a) CAPITAL STOCK OF MERGER SUBSIDIARY. Each issued and
outstanding share of the capital stock of Merger Subsidiary shall be converted
into and become one fully paid and nonassessable share of common stock, par
value $.10 per share, of the Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK.
Each share of Company Common Stock that is owned by the Company or by any
subsidiary of the Company and each share of Company Common Stock that is owned
by Parent, Merger Subsidiary or any other subsidiary of Parent shall
automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(c) CONVERSION OF COMPANY COMMON STOCK. Subject to Section
3.2(f), each issued and outstanding share of Company Common Stock (other than
shares to be canceled in accordance with Section 3.1(b) or shares as to which
appraisal rights, if any, have been exercised in accordance with Section 3.3)
shall be converted into the right to receive (the "MERGER CONSIDERATION") such
number of fully paid and nonassessable shares of Parent Common Stock as is equal
to the Exchange Ratio and, if Parent has made the Cash Election in connection
with the Offer, an amount in cash equal to the Cash Election Amount. As of the
Effective Time, all such shares of Company Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such shares of Company
Common Stock shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration and any cash in lieu of fractional
shares of Parent Common Stock to be issued in exchange therefor upon surrender
of such certificate in accordance with Section 3.2(f) and any dividends or other
distributions to which such holder is entitled pursuant to Section 3.2(c), in
each case, without interest.
(d) ADJUSTMENT OF EXCHANGE RATIO. In the event Parent changes
(or establishes a record date for changing) the number of shares of Parent
Common Stock issued and outstanding prior to the Effective Time as a result of a
stock split, stock dividend, recapitalization, subdivision,
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reclassification, combination, exchange of shares or similar transaction with
respect to the outstanding Parent Common Stock and the record date therefor
shall be prior to the Effective Time, the Exchange Ratio and the Parent stock
prices for determining any adjustments thereto and calculations thereof shall be
proportionately adjusted to reflect such stock split, stock dividend,
recapitalization, subdivision, reclassification, combination, exchange of shares
of similar transaction.
SECTION 3.2. EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. As of the Effective Time, Parent shall
enter into an agreement with such bank or trust company as may be designated by
Parent, and reasonably acceptable to the Company (the "EXCHANGE AGENT"), which
shall provide that Parent shall deposit with the Exchange Agent as of the
Effective Time, for the benefit of the holders of shares of Company Common
Stock, for exchange in accordance with this Article III, through the Exchange
Agent, as well as any cash payable in connection with the Merger pursuant to the
Cash Election (if Parent has made such Cash Election) certificates representing
the shares of Parent Common Stock (such shares of Parent Common Stock, together
with any dividends or distributions with respect thereto with a record date
after the Effective Time, any Excess Shares (defined in Section 3.2(f)) and any
cash (including cash proceeds from the sale of the Excess Shares) payable in
lieu of any fractional shares of Parent Common Stock being hereinafter referred
to as the "EXCHANGE FUND") issuable or payable pursuant to Section 3.1 in
exchange for outstanding shares of Company Common Stock, as well as any cash
payable in connection with the Merger pursuant to the Cash Election (if Parent
has made such Cash Election). For purposes of determining the number of shares
of Parent Common Stock and amount of cash, if applicable, to be deposited by
Parent in the Exchange Fund, Parent shall assume that no holder of Shares will
perfect such holder's right to appraisal of such holders Shares, if any.
(b) EXCHANGE PROCEDURE. As soon as practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "CERTIFICATES")
whose shares were converted into the right to receive the Merger Consideration
pursuant to Section 3.1, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in a form and have such other provisions as Parent may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with such letter of transmittal,
duly executed, and such other documents as may reasonably be required by the
Exchange Agent, the holder of such Certificate shall be entitled to receive in
exchange therefor the Merger Consideration into which the shares of Company
Common Stock shall have been converted pursuant to Section 3.1, cash in lieu of
fractional shares of Parent Common Stock to which such holder is entitled
pursuant to Section 3.2(f) and any dividends or other distributions to which
such holder is entitled pursuant to Section 3.2(c), and the Certificate so
surrendered shall be canceled. In the event of a transfer of ownership of
Company Common Stock which is not registered in the transfer records of the
Company, payment may be made to a person other than the person in whose name the
Certificate so
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surrendered is registered, if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the person requesting such payment
shall pay any transfer or other taxes required by reason of the payment to a
person other than the registered holder of such Certificate or establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is not
applicable. At any time after the Effective Time, each Certificate shall be
deemed to represent only the right to receive upon surrender the Merger
Consideration into which the shares of Company Common Stock shall have been
converted pursuant to Section 3.1, cash in lieu of any fractional shares of
Parent Common Stock as contemplated by Section 3.2(f) and any dividends or other
distributions to which such holder is entitled pursuant to Section 3.2(c), in
each case, without interest thereon.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends or other distributions with respect to Parent Common Stock with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent Common Stock
represented thereby, and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 3.2(f), in each case until the
surrender of such Certificate in accordance with this Article III. Subject to
the effect of applicable escheat laws, following surrender of any such
Certificate, there shall be paid to the holder of the certificate representing
whole shares of Parent Common Stock issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of any cash payable in
lieu of a fractional share of Parent Common Stock to which such holder is
entitled pursuant to Section 3.2(f) and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Parent Common Stock and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and with a payment date
subsequent to such surrender payable with respect to such whole shares of Parent
Common Stock.
(d) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All
Merger Consideration paid upon the surrender of Certificates in accordance with
the terms of this Article III (including any cash paid pursuant to Section
3.2(f)) shall be deemed to have been paid in full satisfaction of all rights
pertaining to the shares of Company Common Stock represented by such
Certificates, and there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the shares of Company
Common Stock which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article III.
(e) TERMINATION OF EXCHANGE FUND; NO LIABILITY. Any portion of
the Exchange Fund which remains undistributed to the holders of the Certificates
for twelve months after the Effective Time shall be delivered to Parent, upon
demand, and any holders of the Certificates who have not theretofore complied
with this Article III shall thereafter look only to Parent for payment of their
claim for Merger Consideration, any dividends or distributions with respect to
Parent Common Stock and any cash in lieu of fractional shares of Parent Common
Stock. None of Parent, Merger Subsidiary, the Company or the Exchange Agent
shall be liable to any person in respect of any shares of Parent Common Stock,
any dividends or distributions with respect thereto, any cash
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in lieu of fractional shares of Parent Common Stock or any cash from the
Exchange Fund, in each case delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any Certificate shall
not have been surrendered prior to one year after the Effective Time (or
immediately prior to such date on which any amounts payable pursuant to this
Article III would otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 4.1(d)), any such amounts shall, to
the extent permitted by applicable escheat law, become the property of the
Surviving Corporation, free and clear of all claims or interest of any person
previously entitled thereto. Any portion of the Merger Consideration deposited
in the Exchange Fund pursuant to this Section 3.2 in consideration of Shares for
which appraisal rights, if any, have been perfected shall be returned to Parent,
upon demand.
(f) NO FRACTIONAL SHARES. (i) No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates pursuant to this Article III, no dividend
or distribution of Parent shall relate to such fractional share interests and
such fractional share interests will not entitle the owner thereof to vote or to
any rights of a stockholder of Parent.
(ii) As promptly as practicable following the Effective Time,
the Exchange Agent shall determine the excess of (A) the number of whole shares
of Parent Common Stock delivered to the Exchange Agent by Parent pursuant to
Section 3.2(a) over (B) the aggregate number of whole shares of Parent Common
Stock to be distributed to former holders of Company Common Stock pursuant to
Section 3.2(b) (such excess being herein called the "EXCESS SHARES"). Following
the Effective Time, the Exchange Agent shall, on behalf of former stockholders
of the Company, sell the Excess Shares at then-prevailing prices on the NYSE,
and in round lots to the extent practicable. The Exchange Agent shall use
reasonable efforts to complete the sale of the Excess Shares as promptly
following the Effective Time as, in the Exchange Agent's sole judgment, is
practicable consistent with obtaining the best execution of such sales in light
of prevailing market conditions. Until the net proceeds of such sale or sales
have been distributed to the holders of Certificates formerly representing
Company Common Stock, the Exchange Agent shall hold such proceeds in trust for
such holders (the "COMMON SHARES TRUST"). The Surviving Corporation shall pay
all commissions, transfer taxes and other out-of-pocket transaction costs,
including the expenses and compensation of the Exchange Agent, incurred in
connection with such sale of the Excess Shares. The Exchange Agent shall
determine the portion of the Common Shares Trust to which each former holder of
Company Common Stock is entitled, if any, by multiplying the amount of the
aggregate net proceeds comprising the Common Shares Trust by a fraction, the
numerator of which is the amount of the fractional share interest to which such
former holder of Company Common Stock is entitled (after taking into account all
shares of Company Common Stock held at the Effective Time by such holder) and
the denominator of which is the aggregate amount of fractional share interests
to which all former holders of Company Common Stock are entitled.
(iii) Notwithstanding the provisions of Section 3.2(f)(ii),
Parent may elect at its option, exercised prior to the Effective Time, in lieu
of the issuance and sale of Excess Shares and the making of the payments
hereinabove contemplated, to pay each former holder of Company Common Stock an
amount in cash equal to the product obtained by multiplying (A) the fractional
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share interest to which such former holder (after taking into account all shares
of Company Common Stock held at the Effective Time by such holder) would
otherwise be entitled by (B) the closing price for a share of Parent Common
Stock as reported on the NYSE Composite Transaction Tape (as reported in The
Wall Street Journal, or, if not reported thereby, any other authoritative
source) on the Closing Date, and, in such case, all references herein to the
cash proceeds of the sale of the Excess Shares and similar references shall be
deemed to mean and refer to the payments calculated as set forth in this Section
3.2(f)(iii).
(iv) As soon as practicable after the determination of the
amount of cash, if any, to be paid to holders of Certificates formerly
representing Company Common Stock with respect to any fractional share
interests, the Exchange Agent shall make available such amounts to such holders
of Certificates formerly representing Company Common Stock subject to and in
accordance with the terms of Section 3.2(c).
(g) INVESTMENT OF EXCHANGE FUND. The Exchange Agent shall
invest any cash included in the Exchange Fund, as directed by Parent, on a daily
basis in reasonably prudent investments. Any interest and other income resulting
from such investments shall be paid to Parent.
(h) LOST CERTIFICATES. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent, the posting by such person of a bond in such reasonable
amount as Parent may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificate the applicable Merger
Consideration with respect thereto and, if applicable, any unpaid dividends and
distributions on shares of Parent Common Stock deliverable in respect thereof
and any cash in lieu of fractional shares, in each case pursuant to this
Agreement.
SECTION 3.3. DISSENTING SHARES. Notwithstanding Section
3.1(c), if Parent has made the Cash Election or if the Merger is effectuated
persuant to Section 253 of the Delaware Law, Shares outstanding immediately
prior to the Effective Time and held by a holder who has demanded appraisal
for such Shares in accordance with Delaware Law shall not be converted into a
right to receive the Merger Consideration, unless such holder fails to
perfect or withdraws or otherwise loses his right to appraisal. If after the
Effective Time such holder fails to perfect or withdraws or loses his right
to appraisal, such Shares shall be treated as if they had been converted as
of the Effective Time into a right to receive the Merger Consideration. The
Company shall give Parent prompt notice of any demands received by the
Company for appraisal of Shares, and Parent shall have the right to
participate in all negotiations and proceedings with respect to such demands.
The Company shall not, except with the prior written consent of Parent, make
any payment with respect to, or settle or offer to settle, any such demands.
SECTION 3.4. COMPANY OPTIONS. (a) Parent and the Company shall
take all actions necessary to provide that each outstanding option to purchase
shares of Company Common Stock granted under any stock option plan, program or
agreement to which the Company or any of its subsidiaries is a party
(collectively, the "STOCK PLANS") to an individual listed in Section 3.4 of the
Company Disclosure Schedule (defined in Section 4.1(b)) ("MANAGEMENT OPTIONS")
shall
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become fully vested and exercisable as of immediately prior to the consummation
of the Offer and shall become and represent, effective as of the consummation of
the Offer, an option to acquire the number of shares of Parent Common Stock (a
"PARENT MANAGEMENT OPTION"), rounded up to the nearest whole share, determined
by multiplying (i) the number of shares of Company Common Stock subject to such
Management Option immediately prior to the consummation of the Offer by (ii) the
Option Exchange Ratio (as hereinafter defined), at an exercise price per share
of Parent Common Stock (increased to the nearest whole cent) equal to the
exercise price per share of such Management Option divided by the Option
Exchange Ratio; provided, however, that in the case of any Management Option to
which Section 421 of the Code applies by reason of its qualification as an
incentive stock option under Section 422 of the Code, the conversion formula
shall be adjusted if necessary to comply with Section 424(a) of the Code.
Following the consummation of the Offer, each Parent Management Option shall be
exercisable upon the same terms and conditions as were applicable to the related
Management Option immediately prior to the consummation of the Offer. The Option
Exchange Ratio shall be the sum of the Exchange Ratio plus, in the event of a
Cash Election, the number determined by dividing the amount of cash
consideration per share of Company Common Stock that would be included in the
Merger Consideration by the Average Parent Trading Price.
(b) Notwithstanding Section 3.4(a), upon an election by the
holder of a Management Option (made pursuant to a written notice to the Company
not less than two days prior to the consummation of the Offer), such holder's
Management Option shall be canceled upon the consummation of the Offer and the
holder shall receive, in consideration of such cancellation, an amount in cash
payable as soon as practicable following the cancellation of such Management
Option equal to the product of (A) the excess, if any, of (x) the Cancellation
Price (as hereinafter defined) over (y) the per share exercise price of such
Management Option multiplied by (B) the number of shares of Company Common Stock
subject to such Management Option. Any such payment shall be further reduced by
any income tax or employment tax withholding required under the Internal Revenue
Code of 1986, as amended (the "CODE"). The Cancellation Price shall be (x) the
Option Exchange Ratio multiplied by (y) the Average Parent Trading Price.
(c) Parent and the Company shall take all actions necessary to
provide that each outstanding option, other than a Management Option, to
purchase shares of Company Common Stock ("COMPANY Options") granted under a
Company Option Plan shall become and represent, effective as of the consummation
of the Offer, an option to acquire the number of shares of Parent Common Stock
(a "PARENT OPTION"), rounded up to the nearest whole share, determined by
multiplying (i) the number of shares of Company Common Stock subject to such
Company Option immediately prior to the consummation of the Offer by (ii) the
Option Exchange Ratio, at an exercise price per share of Parent Common Stock
(increased to the nearest whole cent) equal to the exercise price per share of
such Company Option divided by the Option Exchange Ratio; provided, however,
that in the case of any Company Option to which Section 421 of the Code applies
by reason of its qualification as an incentive stock option under Section 422 of
the Code, the conversion formula shall be adjusted if necessary to comply with
Section 424(a) of the Code. After the consummation of the Offer, each Parent
Option shall be exercisable upon the same terms and conditions as were
applicable to the related Company Option immediately prior to the consummation
of the Offer.
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(d) The Company and Parent agree that each of the Stock Plans
and the stock option plans of Parent ("PARENT STOCK PLANS") shall be amended, to
the extent necessary, to reflect the transactions contemplated by this
Agreement, including, but not limited to the conversion of shares of Company
Common Stock held or to be awarded or paid pursuant to such benefit plans,
programs or arrangements into shares of Parent Common Stock on a basis
consistent with the transactions contemplated by this Agreement.
(e) Parent shall (i) reserve for issuance the number of shares
of Parent Common Stock that will become subject to the benefit plans, programs
and arrangements referred to in this Section 3.4, (ii) issue or cause to be
issued the appropriate number of shares of Parent Common Stock pursuant to
applicable plans, programs and arrangements, upon the exercise or maturation of
rights existing thereunder on the Effective Time or thereafter granted or
awarded, and (iii) as soon as practicable following the date of this Agreement
(and in any event no later than the date of the consummation of the Offer),
prepare and file with the SEC and use its reasonable best efforts to have
declared effective prior to consummation of the Offer a registration statement
on Form S-8 (in respect of the Company's Amended and Restated 1996 Stock Option
Plan and 1999 Employee Stock Option Plan) registering a number of shares of
Parent Common Stock necessary to fulfill Parent's obligations under this Section
3.4 and covering the exercise of the Parent Options and Parent Management
Options and the sale or other transfer of the shares of Parent Common Stock
issued upon exercise of such options. Such registration statements shall be kept
effective (and the current status of the prospectus required thereby shall be
maintained) for at least as long as any Parent Option or Parent Management
Option remains outstanding.
(f) As soon as practicable after the consummation of the
Offer, Parent shall deliver to the holders of Parent Options or Parent
Management Options appropriate notices setting forth such holders' rights
pursuant to the respective Stock Plans and the agreements evidencing the grants
of such options and that such options and the related agreements shall be
assumed by Parent and shall continue in effect on the same terms and conditions
(subject to the adjustments required by this Section 3.4).
(g) Notwithstanding the foregoing provisions of this Section
3.4, the Company's Amended and Restated Employee Stock Purchase Plan (the
"ESPP") shall operate in accordance with its terms in connection with the Offer
and the Merger.
(h) Parent and the Company shall take all such steps as may be
required to cause the transactions contemplated by this Section 3.4 and any
other dispositions of equity securities of the Company (including derivative
securities) or acquisitions of Parent equity securities (including derivative
securities) in connection with this Agreement by each individual who is a
director or officer of the Company to be exempt under Rule 16b-3 promulgated
under the Exchange Act, such steps to be taken in accordance with the No-Action
Letter dated January 12, 1999, issued by the SEC to Skadden, Arps, Slate,
Meagher & Flom LLP.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Each exception set forth in the Company Disclosure Schedule (defined below in
Section 4.1(b)) to the representations and warranties in this Section 4.1 and
each other response to this Agreement set forth in the Company Disclosure
Schedule is identified by reference to, or has been grouped under a heading
referring to, a specific individual Section of this Agreement and relates only
to such Section, except to the extent that one section of the Company Disclosure
Schedule specifically refers to another section thereof. Except as set forth in
the Company Disclosure Schedule, the Company represents and warrants to Parent
and Merger Subsidiary as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Each of the
Company and each of its Significant Subsidiaries is a corporation or other legal
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction in which it is organized and has the requisite corporate or
other power and authority, as the case may be, to carry on its business as now
being conducted. Each of the Company and each of its subsidiaries is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) could not reasonably be expected to have a
material adverse effect on the condition (financial or otherwise), business,
assets or results of operations of the Company and its subsidiaries taken as a
whole except that occurrences due solely to a disruption of the Company's or its
subsidiaries' businesses solely as a result of the announcement of the execution
of this Agreement and the transactions proposed to be consummated by this
Agreement shall be excluded from consideration for purposes of the effect of an
action or inaction on the Company and its subsidiaries taken as a whole (a
"COMPANY MATERIAL ADVERSE EFFECT"). The Company has delivered or made available
to Parent complete and correct copies of its certificate of incorporation and
by-laws and the certificates of incorporation and by-laws of its Significant
Subsidiaries, in each case as amended to the date of this Agreement. For
purposes of this Agreement, a "SUBSIDIARY" of any person means another person,
an amount of the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its Board of
Directors or other governing body (or, if there are no such voting interests,
50% or more of the equity interests of which) is owned directly or indirectly by
such first person; a "PERSON" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity; and a "SIGNIFICANT SUBSIDIARY" means any direct or
indirect subsidiary of the Company that has annual revenues or total assets of
at least $10 million.
(b) SUBSIDIARIES. Section 4.1(b) of the disclosure schedule
delivered by the Company to Parent and Merger Subsidiary prior to the execution
of this Agreement (the "COMPANY DISCLOSURE SCHEDULE") lists each subsidiary of
the Company and its respective jurisdiction of incorporation and indicates
whether such subsidiary is a Significant Subsidiary. All the outstanding shares
of capital stock of each such subsidiary have been validly issued and are fully
paid and nonassessable and are owned by the Company, by another subsidiary of
the Company or by the
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Company and another such subsidiary, free and clear of all pledges, claims,
liens, charges, encumbrances and security interests of any kind or nature
whatsoever (collectively, "LIENS") and free of any other limitation or
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock). Except for the capital stock of its
subsidiaries, the Company does not own, directly or indirectly, any capital
stock or other ownership interest in any person.
(c) CAPITAL STRUCTURE. The authorized capital stock of the
Company consists of 250,000,000 shares of Company Common Stock and 10,000,000
shares of preferred stock, par value $.10 per share (the "COMPANY PREFERRED
STOCK"). As of February 9, 2000, (i) 82,499,131 shares of Company Common Stock
were issued and outstanding (which number could be understated by up to 12,162
Shares issuable upon Company Options which were recently exercised), including
associated Preferred Share Purchase Rights (the "RIGHTS") issued pursuant to the
Rights Agreement, dated as of December 16, 1996 (the "RIGHTS AGREEMENT"),
between the Company and The First National Bank of Boston, as Rights Agent, (ii)
no shares of Company Preferred Stock were issued and outstanding, (iii)
5,885,115 shares of Company Common Stock were held by the Company in its
treasury or by any of the Company's subsidiaries, (iv) 22,353,364 shares of
Company Common Stock were reserved for issuance pursuant to the Stock Plans (of
which 20,416,405 are subject to outstanding Company Options) and (v) 2,343,973
shares of Company Common Stock were reserved for issuance pursuant to the ESPP.
Except as set forth above and except for the Company Preferred Stock issuable
upon exercise of the Rights, at the time of execution of this Agreement, no
shares of capital stock or other voting securities of the Company are issued,
reserved for issuance or outstanding. All outstanding shares of capital stock of
the Company are, and all shares which may be issued pursuant to the Stock Plans
will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. There are no outstanding
bonds, debentures, notes or other indebtedness or securities of the Company
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which shareholders of the Company
may vote. Except as set forth above, there are no outstanding securities,
options, warrants, calls, rights, commitments, agreements or undertakings of any
kind to which the Company or any of its subsidiaries is a party or by which any
of them is bound obligating the Company or any of its subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of the Company or of any of its
subsidiaries or obligating the Company or any of its subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, or undertaking. There are no outstanding rights,
commitments, agreements, or undertakings of any kind obligating the Company or
any of its subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock or other voting securities of the Company or any of its
subsidiaries or any securities of the type described in the two immediately
preceding sentences. The Company has delivered or made available to Parent
complete and correct copies of the Stock Plans and all forms of Company Options.
Section 4.1(c) of the Company Disclosure Schedule sets forth a complete and
accurate list of all Company Options outstanding as of the date of this
Agreement and the exercise price of each outstanding Company Option.
(d) AUTHORITY; NONCONTRAVENTION. The Company has the requisite
corporate power and authority to enter into this Agreement and, subject to the
approval of this Agreement by
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the affirmative votes of holders of a majority of the outstanding shares of
Company Common Stock (unless such approval is not required to effectuate the
Merger pursuant to Section 253 of the Delaware Law) (the "COMPANY SHAREHOLDER
VOTE") with respect to the Merger, to consummate the transactions contemplated
by this Agreement. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on the
part of the Company, subject, in the case of the Merger if required under
Delaware Law, to approval of this Agreement by the Company Shareholder Vote.
This Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated by this
Agreement and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or result in the creation of any Lien upon any of the properties or
assets of the Company or any of its subsidiaries under, (i) the certificate of
incorporation or by-laws of the Company or the comparable charter or
organizational documents of any of its Significant Subsidiaries, (ii) any loan
or credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to the Company
or any of its subsidiaries or their respective properties or assets or (iii)
subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to the Company or any of its subsidiaries or their
respective properties or assets, other than, in the case of clauses (ii) and
(iii), any such conflicts, violations, defaults, rights, losses or Liens that
individually or in the aggregate could not reasonably be expected to (x) have a
Company Material Adverse Effect, (y) impair the Company's ability to perform its
obligations under this Agreement or (z) prevent or materially delay the
consummation of the transactions contemplated by this Agreement. No consent,
approval, order or authorization of, or registration, declaration or filing with
or exemption by (collectively, "CONSENTS") any Federal, state or local
government or any court, administrative or regulatory agency or commission or
other governmental authority or agency, domestic or foreign (a "GOVERNMENTAL
ENTITY"), is required by or with respect to the Company or any of its
subsidiaries in connection with the execution and delivery of this Agreement by
the Company or the consummation by the Company of the transactions contemplated
by this Agreement, except for (i) the filing of a premerger notification and
report form by the Company under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR ACT"), and any applicable filings under
similar foreign antitrust or competition laws and regulations, (ii) the filing
with the SEC of (A) the Schedule 14D-9, (B) a proxy statement relating to the
Company Stockholders Meeting (defined below in Section 7.1(b)) (as amended or
supplemented from time to time, the "COMPANY PROXY STATEMENT"), and (C) such
reports under the Exchange Act and the Securities Act, as may be required in
connection with this Agreement and the Tender Agreement and the transactions
contemplated hereby and thereby, (iii) such filings as may be required under
state securities or "blue sky" laws, (iv) the filing of the Certificate of
Merger with the Delaware Secretary of State and appropriate documents with the
relevant authorities of other states in which the Company is qualified to do
business, and (v) such other consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to be made or
obtained individually or in the aggregate could not reasonably be expected to
(x) have a Company Material Adverse Effect, (y)
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impair the Company's ability to perform its obligations under this Agreement or
(z) prevent or materially delay the consummation of the transactions
contemplated by this Agreement.
(e) SEC DOCUMENTS; FINANCIAL STATEMENTS; NO UNDISCLOSED
LIABILITIES. The Company has filed all required reports, schedules, forms,
statements and other documents with the SEC since October 1, 1996 (the "COMPANY
SEC DOCUMENTS"). As of their respective dates, the Company SEC Documents
complied in all material respects with the requirements of the Securities Act of
1933, as amended (the "SECURITIES ACT"), or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder applicable
to such Company SEC Documents, and none of the Company SEC Documents when filed
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the Company SEC
Documents as of their respective dates comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and fairly present in all material respects the consolidated financial position
of the Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal and recurring
year-end audit adjustments not material in amount). Except as reflected in the
financial statements of the Company included in the Company Filed SEC Documents,
neither the Company nor any of its subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
which are required by generally accepted accounting principles to be set forth
on a consolidated balance sheet of the Company and its consolidated subsidiaries
or in the notes thereto other than any liabilities and obligations incurred
since September 30, 1999 in the ordinary course of business or which,
individually or in the aggregate, are not expected to have a Company Material
Adverse Effect.
(f) INFORMATION SUPPLIED. Neither the Schedule 14D-9, nor any
of the information supplied or to be supplied by the Company or its subsidiaries
or representatives for inclusion or incorporation by reference in the Form S-4,
the Post-Effective Amendment (defined below in Section 7.1(a)) or the Offer
Documents will, at the respective times any such documents or any amendments or
supplements thereto are filed with the SEC, are first published, sent or given
to shareholders or become effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading. The
Company Proxy Statement will not, at the time the Company Proxy Statement is
first mailed to the Company's shareholders or, at the time of the Company
Stockholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Schedule 14D-9 and the Company Proxy Statement will
comply as to form in all material respects with the requirements of all
applicable laws, including the Exchange Act and the rules and regulations
thereunder. No representation or warranty is made by the Company with respect to
statements made or
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incorporated by reference therein based on information supplied by Parent or
Merger Subsidiary specifically for inclusion or incorporation by reference
therein.
(g) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the SEC Documents filed and publicly available prior to the date of this
Agreement (the "COMPANY FILED SEC DOCUMENTS") or in Section 4.1(g) of the
Company Disclosure Schedule and except as expressly contemplated by this
Agreement, since September 30, 1999, the Company and its subsidiaries have
conducted their business only in the ordinary course consistent with past
practice, and there has not been (i) as of the date of this Agreement, any
event, occurrence or development which has had or could reasonably be expected
to have a Company Material Adverse Effect, (ii) any declaration, setting aside
or payment of any dividend or other distribution (whether in cash, stock or
property) with respect to any of the Company's capital stock or any repurchase,
redemption or other acquisition by the Company or any of its subsidiaries of any
outstanding shares of capital stock or other securities of the Company or any of
its subsidiaries, (iii) any split, combination or reclassification of any of its
capital stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, (iv) (A) any granting by the Company or any of its subsidiaries
to any current or former director, officer or employee of the Company or any of
its subsidiaries of any increase in compensation or benefits (including the
acceleration in the exercisability of options to purchase, or in the vesting of,
Company Common Stock (or other property)), except in the ordinary course of
business consistent with past practice or as was required under employment
agreements in effect as of September 30, 1999, (B) any granting by the Company
or any of its subsidiaries to any such director, officer or employee of any
increase in severance or termination pay (including the acceleration in the
exercisability of options to purchase, or in the vesting of, Company Common
Stock (or other property)), except as was required under employment, severance
or termination agreements or plans in effect as of September 30, 1999, or (C)
any entry by the Company or any of its subsidiaries into any employment,
deferred compensation, severance or termination agreement with any such current
or former director, officer or employee, (v) any damage, destruction or loss,
whether or not covered by insurance, that has had or could reasonably be
expected to have a Company Material Adverse Effect, (vi) any change in
accounting methods, principles or practices by the Company or any of its
subsidiaries, (vii) any amendment of any material term of any outstanding
security of the Company or any of its subsidiaries, (viii) any incurrence,
assumption or guarantee by the Company or any of its subsidiaries of any
indebtedness for borrowed money other than in the ordinary course of business
consistent with past practice, but in no event in the amount of more than
$1,000,000 in the aggregate, (ix) any creation or assumption by the Company or
any of its subsidiaries of any Lien on any asset other than in the ordinary
course of business consistent with past practice, but in no event in the amount
of more than $500,000 for any one transaction or $1,000,000 in the aggregate,
(x) any making of any loan, advance or capital contributions to or investment in
any person other than (A) loans, advances or capital contributions to or
investments in wholly-owned subsidiaries or entities that became wholly-owned
subsidiaries made in the ordinary course of business consistent with past
practice and (B) investments made in accordance with the Company's investment
guidelines, a copy of which has been made available to Parent, and in the
ordinary course of business consistent with past practice, (xi) any transaction
or commitment made, or any contract or agreement entered into, by the Company or
any of its subsidiaries relating to its assets or business (including the
acquisition or disposition of any assets or the merger or consolidation with any
person) or any
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relinquishment by the Company or any of its subsidiaries of any contract or
other right, in either case, material to the Company and its subsidiaries taken
as a whole, other than transactions and commitments in the ordinary course of
business consistent with past practice and those contemplated by this Agreement,
but in the case of transactions or commitments outside of the ordinary course of
business in no event representing commitments on behalf of the Company or any of
its subsidiaries of more than $500,000 for any transaction and $1,000,000 for
any series of transactions, (xii) except as set forth in Section 4.1(g) of the
Company Disclosure Schedule, as of the date hereof, any change in policy or
practice for licensing Company software to third parties, through discounts or
similar practices, lengthening the term of licenses or changing the basis of
pricing, (xiii) any labor dispute, other than routine individual grievances, or
any activity or proceeding by a labor union or representative thereof to
organize any employees of the Company or any of its subsidiaries, which
employees were not subject to a collective bargaining agreement at September 30,
1999, or any lockouts, strikes, slowdowns, work stoppages or threats thereof by
or with respect to such employees or (xiv) any agreement, commitment,
arrangement or undertaking by the Company or any of its subsidiaries to perform
any action described in clauses (i) through (xiii) above.
(h) LITIGATION. Except as disclosed in the Company Filed SEC
Documents or in Section 4.1(h) of the Company Disclosure Schedule, there is no
suit, action or proceeding pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its subsidiaries (and the
Company is not aware of any basis for any such suit, action or proceeding) that,
individually or in the aggregate, could reasonably be expected to (i) have a
Company Material Adverse Effect, (ii) impair the ability of the Company to
perform its obligations under this Agreement or (iii) prevent or materially
delay the consummation of any of the transactions contemplated by this
Agreement, nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against the Company or any of its
subsidiaries having, or which, insofar as reasonably can be foreseen, in the
future would have, any such effect. Section 3.1(h) of the Company Disclosure
Schedule sets forth, with respect to any pending suit, action or proceeding to
which the Company or any its subsidiaries is a party and which involves claims
which if adversely determined would exceed $2,000,000, the forum, the parties
thereto, the subject matter thereof and the amount of damages claimed.
(i) ABSENCE OF CHANGES IN STOCK AND BENEFIT PLANS. Except as
disclosed in Section 4.1(g) and (i) of the Company Disclosure Schedule or as
expressly permitted by this Agreement, since September 30, 1999, there has not
been (i) any acceleration, amendment or change of the period of exercisability
or vesting of any Company Options or restricted stock, stock bonus or other
awards under the Stock Plans (including any discretionary acceleration of the
exercise periods or vesting by the Company's Board of Directors or any committee
thereof or any other persons administering a Stock Plan) or authorization of
cash payments in exchange for any Company Options, restricted stock, stock bonus
or other awards granted under any of such Stock Plans or (ii) any adoption or
amendment by the Company or any of its subsidiaries of any collective bargaining
agreement or any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, stock appreciation right, retirement, vacation, severance, disability,
death benefit, hospitalization, medical, workers' compensation, supplementary
unemployment benefits or other plan, arrangement or understanding
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(whether or not legally binding) providing benefits to any current or former
employee, officer or director of the Company or any of its subsidiaries or any
beneficiary thereof entered into, maintained or contributed to, as the case may
be, by the Company or any of its subsidiaries (collectively, "BENEFIT PLANS").
(j) PARTICIPATION AND COVERAGE IN BENEFIT PLAN. Except with
respect to changes required by law, there has been no adoption of, amendment to,
written interpretation or announcement (whether or not written) by the Company
or any of its subsidiaries relating to, or change in employee participation or
coverage under, any Benefit Plan which would increase materially the expense of
maintaining such Benefit Plan above the level of the expense incurred in respect
thereof for the fiscal year ended on September 30, 1999.
(k) ERISA COMPLIANCE. (i) Section 4.1(k) of the Company
Disclosure Schedule contains a list of all "EMPLOYEE PENSION BENEFIT PLANS"
(defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), "EMPLOYEE WELFARE BENEFIT PLANS" (defined in Section 3(l)
of ERISA) and all other material Benefit Plans maintained, or contributed to, by
the Company or any of its subsidiaries or ERISA affiliates (defined below) for
the benefit of any current or former employees, officers or directors of the
Company or any of its subsidiaries or ERISA affiliates or under which the
Company or any of its subsidiaries or ERISA affiliates has any material
liability. The Company has delivered or made available to Parent complete and
correct copies of (A) each material Benefit Plan (or, in the case of any
unwritten Benefit Plans, descriptions thereof) and all amendments thereto and
written interpretations thereof, (B) the most recent summary plan description
for each material Benefit Plan for which such summary plan description is
required and (C) each trust agreement and group annuity or insurance contract
relating to any Benefit Plan. For purposes of this Agreement, "ERISA AFFILIATE"
of the Company means any person which, together with the Company or any of its
subsidiaries, would be treated as a single employer under Section 414 of the
Code. The only Benefit Plans which individually or collectively would constitute
an "EMPLOYEE PENSION BENEFIT PLAN" defined in Section 3(2) of ERISA (the
"PENSION PLANS") are identified as such in Section 4.1(k) of the Company
Disclosure Schedule.
(ii) Each Benefit Plan has been maintained and administered in
compliance with its terms in all material respects and with the requirements
prescribed by any and all applicable statutes, orders, rules and regulations,
and is, to the extent required by applicable law or contract, fully funded
without having any deficit or unfunded actuarial liability. Any Benefit Plan
intended to be qualified under Section 401(a) of the Code has been determined by
the Internal Revenue Service to be so qualified and nothing has occurred that
could reasonably be expected to cause the loss of such qualified status.
(iii) No Benefit Plan is covered by Title IV of ERISA and no
contributions to any Benefit Plan are required under Section 412 of the Code.
Neither the Company nor any of its subsidiaries has incurred or reasonably
expects to incur any liability under Title IV of ERISA or Section 4975 of the
Code or any material liability or penalty under Section 4980B of the Code or
Section 502(i) of ERISA.
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(iv) To the knowledge of the Company, there are no pending or
anticipated material claims against or otherwise involving any of the Benefit
Plans and no suit, action or other litigation (excluding claims for benefits
incurred in the ordinary course of Benefit Plan activities) has been brought
against or with respect to any Benefit Plan.
(v) All material contributions, reserves or premium payments,
required to be made as of the date hereof to or with respect to the Benefit
Plans have been made or provided for.
(vi) Except as required by law, neither the Company nor any of
its subsidiaries has any obligations for post-retirement or post-termination
health and life benefits under any Benefit Plan.
(l) TAXES. As used in this Agreement, "TAX" or "TAXES" shall
include all Federal, state, local and foreign income, property, sales, excise
and other taxes, tariffs or governmental charges or assessments of any nature
whatsoever as well as any interest, penalties and additions thereto. Except as
set forth in Section 4.1(l) of the Company Disclosure Schedule:
(i) The Company and each of its subsidiaries have timely filed
all tax returns, statements, reports and forms required to be filed with any tax
authority (collectively, the "TAX RETURNS") and in accordance with all
applicable laws. All such tax returns are correct and complete in all respects.
All taxes shown as due and payable on the Tax Returns have been paid and all
other taxes of the Company or any of its subsidiaries have been adequately
reserved for in the financial statements included in the Company Filed SEC
Documents. There are no Liens on any of the assets of the Company or any of its
subsidiaries that arose in connection with any failure (or alleged failure) to
pay any tax.
(ii) The Company and each of its subsidiaries has withheld and
timely paid all taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(iii) No dispute or claim concerning any tax liability of the
Company or any of its subsidiaries has been proposed or claimed in writing or,
to the knowledge of the Company, threatened by any authority. The Company has
provided Parent with correct and complete copies of its Federal income tax
returns for taxable years ending September 30, 1994 through September 30, 1998,
and examination reports, and statements of deficiencies with respect to Federal
income taxes, if any, assessed against or agreed to by the Company and any of
its subsidiaries with respect to Federal income taxes for taxable years ending
September 30, 1994 through September 30, 1998.
(iv) Neither the Company nor any of its subsidiaries has
waived any statute of limitations in respect of taxes or agreed to any extension
of time with respect to a tax assessment or deficiency.
(v) Neither the Company nor any of its subsidiaries has filed
a consent pursuant to Section 341(f) of the Code concerning collapsible
corporations. Neither the Company nor any of its subsidiaries is a party to any
tax allocation or sharing agreement. Neither the Company nor any
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of its subsidiaries has any liability for the taxes of any person (other than
the Company and any of its subsidiaries that is currently a member of the
Company's affiliated group filing a consolidated federal income tax return)
under Treas. Reg. ss.1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
(vi) As of the date of the most recent financial statements
included in the Company Filed SEC Documents, the unpaid taxes of the Company and
its subsidiaries did not exceed the liability for taxes (rather than any reserve
for deferred taxes established to reflect timing differences between book and
tax income) set forth on the face of such financial statements.
(vii) Neither the Company nor any of its subsidiaries is
required to include in income any adjustment pursuant to Section 481(a) of the
Code (or similar provisions of other law or regulations) in its current or in
any future taxable period by reason of a change in accounting method nor does
the Company or any of its subsidiaries have any knowledge that the Internal
Revenue Service (or other taxing authority) has proposed or is considering
proposing, any such change in accounting method.
(viii) Neither the Company nor any of its subsidiaries is a
party to any agreement, contract, or arrangement that, individually or
collectively, could give rise to the payment of any amount (whether in cash or
property, including Company Common Stock) that would not be deductible pursuant
to the terms of Section 162(m), 280G or, to the knowledge of the Company,
162(a)(i) of the Code.
(ix) Neither the Company nor any of its subsidiaries has
constituted either a "DISTRIBUTING CORPORATION" or a "CONTROLLED CORPORATION"
(within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (A) in the
two years prior to the date of this Agreement, or (B) in a distribution that
could otherwise constitute part of a "PLAN" or "SERIES OF RELATED TRANSACTIONS"
(within the meaning of Section 355(e) of the Code) in conjunction with the Offer
or the Merger, or both.
(m) VOTING REQUIREMENTS. In the event that Section 253 of the
Delaware Law is inapplicable and unavailable to effectuate the Merger, the
Company Shareholder Vote is the only vote of the holders of the Company's
capital stock necessary to approve and adopt this Agreement and the transactions
contemplated hereby.
(n) STATE TAKEOVER STATUTES; RIGHTS AGREEMENT. (i) The Board
of Directors of the Company has approved this Agreement and the Tender Agreement
and the consummation of the Offer, the Merger and the other transactions
contemplated by this Agreement and the Tender Agreement, and such approval
constitutes approval of this Agreement and the Tender Agreement and the
consummation of the Offer, the Merger and the other transactions contemplated by
this Agreement and the Tender Agreement by the Board of Directors of the Company
under the provisions of Section 203 of Delaware Law and represents all the
action necessary to ensure that such Section 203 does not apply to Parent in
connection with the Offer, the Merger and the other transactions contemplated by
this Agreement and the Tender Agreement. To the knowledge of the Company, no
other "FAIR PRICE", "MORATORIUM", "CONTROL SHARE ACQUISITION", or other
anti-takeover
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<PAGE>
statute or similar statute or regulation, applies or purports to apply this
Agreement or the Tender Agreement, or the Offer, the Merger or the other
transactions contemplated by this Agreement and the Tender Agreement.
(ii) The Company has amended, or will amend within two
business days of the date of this Agreement, the Rights Agreement to provide
that neither Parent nor any of its affiliates will become an Acquiring Person
(defined in the Rights Agreement), that no Distribution Date or Shares
Acquisition Date (each defined in the Rights Agreement) will occur, and that the
Rights will not separate from the underlying shares of Company Common Stock or
give the holders thereof the right to acquire securities of any party hereto, in
each case as a result of the execution, delivery or performance of this
Agreement or the Tender Agreement or the consummation of the Offer, the Merger
or the other transactions contemplated by this Agreement or the Tender
Agreement.
(o) BROKERS; SCHEDULE OF FEES AND EXPENSES. No broker,
investment banker, financial advisor or other person, other than Goldman Sachs
and Broadview International L.L.C., the fees and expenses of which will be paid
by the Company (and a copy of whose engagement letter and a calculation of the
fees that would be due thereunder has been provided to Parent), is entitled to
any broker's, finder's, financial advisor's or other similar fee or commission
in connection with the transactions contemplated by this Agreement or the Tender
Agreement based upon arrangements made by or on behalf of the Company or any of
its subsidiaries. No such engagement letter obligates the Company to continue to
use the services or pay fees or expenses in connection with any future
transaction.
(p) PERMITS; COMPLIANCE WITH LAWS; ENVIRONMENTAL MATTERS. (i)
Each of the Company and its subsidiaries has in effect all Federal, state, local
and foreign governmental approvals, authorizations, certificates, filings,
franchises, licenses, notices, permits and rights ("PERMITS") necessary for it
to own, lease or operate its properties and assets and to carry on its business
as now conducted, and there has occurred no default under any such Permit,
except for the absence of Permits and for defaults under Permits which absence
or defaults, individually or in the aggregate, could not reasonably be expected
to have a Company Material Adverse Effect. The Company and its subsidiaries have
been, and are, in compliance with all applicable statutes, laws, ordinances,
regulations, rules, judgments, decrees or orders of any Governmental Entity, and
neither the Company nor any of its subsidiaries has received any notice from any
Governmental Entity or any other person that either the Company or any of its
subsidiaries is in violation of, or has violated, any applicable statutes, laws,
ordinances, regulations, rules, judgments, decrees or orders, except such
failures to comply or violations as, individually or in the aggregate, could not
reasonably be expected to have a Company Material Adverse Effect.
(ii) Neither the Company nor any of its subsidiaries has (i)
placed, held, located, released, transported or disposed of any Hazardous
Substance (defined below) on, under, from or at any of the Company's or any of
its subsidiaries' properties or any other properties, other than in a manner
that could not, in all such cases taken individually or in the aggregate,
reasonably be expected to have or result in a Company Material Adverse Effect,
(ii) any knowledge of the presence of any Hazardous Substances that have been
released into the environment on, under or at any of the Company's or any of its
subsidiaries' properties other than that which could not
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reasonably be expected to have or result in a Company Material Adverse Effect,
or (iii) received any written notice (A) of any violation of any applicable
statute, law, ordinance, regulation, rule, judgment, decree or order of any
Governmental Entity relating to any matter of pollution, protection of the
environment or environmental regulation or control or regarding Hazardous
Substances (collectively, "ENVIRONMENTAL LAWS") that has not been resolved or
settled with the relevant Governmental Entity, (B) of the institution or
pendency of any suit, action, claim, proceeding or investigation by any
Governmental Entity or any third party in connection with any such violation,
(C) requiring the response to or remediation of Hazardous Substances at or
arising from any of the Company's or any of its subsidiaries' properties or any
other properties, (D) alleging non-compliance by the Company or any of its
subsidiaries with the terms of any permit required under any Environmental Law
in any manner reasonably likely to require material expenditures or to result in
material liability or (E) demanding payment of a material amount for response to
or remediation of Hazardous Substances at or arising from any of the Company's
or any of its subsidiaries' properties or any other properties. For purposes of
this Agreement, the term "HAZARDOUS SUBSTANCE" shall mean any material defined
as toxic or hazardous, including any petroleum and petroleum products, under any
applicable Environmental Law.
(q) CONTRACTS; DEBT INSTRUMENTS. (i) Except as otherwise
disclosed in Section 4.1(q)(i)(A)-(E) of the Company Disclosure Schedule,
neither the Company nor any of its subsidiaries is a party to or subject to:
(A) any union contract, or any employment, consulting,
severance, termination, or indemnification agreement, contract or
arrangement providing for future payments, written or oral, with any
current or former officer or director which (1) exceeds $200,000 per
annum or (2) requires aggregate annual payments or total payments over
the life of such agreement, contract or arrangement to such current or
former officer, consultant, director or employee in excess of $200,000
or $500,000, respectively, and is not terminable by it or its
subsidiary on 30 days' notice or less without penalty or obligation to
make payments related to such termination;
(B) any joint venture contract or similar arrangement or any
other agreement not in the ordinary course of business which has
involved or is expected to involve a sharing of revenues of $1,000,000
per annum or more with other persons;
(C) any lease for real or personal property in which the
amount of payments which the Company is required to make on an annual
basis exceeds $1,000,000;
(D) to the knowledge of the Company, any material agreement,
contract, policy, license, Permit, document, instrument, arrangement or
commitment involving revenues to the Company in excess of $2,000,000
which has not been terminated or performed in its entirety and not
renewed which may be, by its terms, terminated by reason of the
execution of this Agreement or the Tender Agreement or the consummation
of the Offer, the Merger or the other transactions contemplated by this
Agreement or the Tender Agreement; or
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(E) any agreement, contract, policy, license, Permit,
document, instrument, arrangement or commitment that provides for an
express non-competition covenant with any person or in any geographic
area and which limits in any material respect the ability of the
Company to compete in its current business lines.
(ii) All contracts, policies, agreements, leases, licenses,
Permits, documents, instruments, arrangements and other commitments listed in
Section 4.1(q)(i)(A)-(E) and Section 4.1(q)(iv) of the Company Disclosure
Schedule or otherwise disclosed in the Company Filed SEC Documents are valid and
binding agreements of the Company or a subsidiary of the Company and are in full
force and effect, and neither the Company, any of its subsidiaries nor, to the
knowledge of the Company, any other party thereto, is in default in any material
respect under the terms of any such contract, plan, arrangement, agreement,
lease, license, Permit, instrument or other commitment.
(iii) Neither the Company nor any subsidiary of the Company is
in default in any material respect under the terms of any exclusive license or
distribution agreement or arrangement that, by its terms, provides for payments
to the Company or any of its subsidiaries of $1,000,000 or more per annum, or
any other material license or distribution agreement or arrangement. To the
knowledge of the Company, none of the parties to any of the contracts identified
in Section 4.1(q)(i)(A)-(E) of the Company Disclosure Schedule or otherwise
disclosed in the Company Filed SEC Documents has terminated, or materially
reduced the amount of its business with the Company or any of its subsidiaries
in the future.
(iv) Set forth in Section 4.1(q)(iv) of the Company Disclosure
Schedule is (A) a list of all loan or credit agreements, notes, bonds,
mortgages, indentures and other agreements and instruments pursuant to which any
indebtedness of the Company or any of its subsidiaries in an aggregate principal
amount in excess of $5,000,000 is outstanding or may be incurred and (B) the
respective principal amounts currently outstanding thereunder. For purposes of
this Section 4.1(q)(iv), "INDEBTEDNESS" shall mean, with respect to any person,
without duplication, (A) all obligations of such person for borrowed money, or
with respect to deposits or advances of any kind to such person, (B) all
obligations of such person evidenced by bonds, debentures, notes or similar
instruments, (C) all obligations of such person upon which interest charges are
customarily paid, (D) all obligations of such person under conditional sale or
other title retention agreements relating to property purchased by such person,
(E) all obligations of such person issued or assumed as the deferred purchase
price of property or services (excluding obligations of such person to creditors
for raw materials, inventory, services and supplies incurred in the ordinary
course of such person's business), (F) all capitalized lease obligations of such
person, (G) all obligations of others secured by any Lien on property or assets
owned or acquired by such person, whether or not the obligations secured thereby
have been assumed, (H) all obligations of such person under interest rate or
currency swap transactions (valued at the termination value thereof), (I) all
letters of credit issued for the account of such person (excluding letters of
credit issued for the benefit of suppliers to support accounts payable to
suppliers incurred in the ordinary course of business), (J) all obligations of
such person to purchase securities (or other property) which arises out of or in
connection with the sale of the same or substantially similar securities or
property, and (K) all guarantees and
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arrangements having the economic effect of a guarantee of such person of any
indebtedness of any other person.
(r) TITLE TO PROPERTIES. (i) Each of the Company and its
subsidiaries has good and marketable title to, or valid leasehold interests in,
all its properties and assets, free and clear of all Liens, except for defects
in title, easements, restrictive covenants and similar encumbrances or
impediments that, in the aggregate, do not and could not reasonably be expected
to have a Company Material Adverse Effect.
(ii) Each of the Company and its subsidiaries has complied in
all material respects with the terms of all leases to which it is a party and
under which it is in occupancy, and all such leases are in full force and
effect. Each of the Company and each of its subsidiaries enjoys peaceful and
undisturbed possession under all such leases.
(s) OPINION OF FINANCIAL ADVISOR. The Company has received the
opinion of Goldman Sachs dated the date hereof, a copy of which has been or
promptly will be provided to Parent, to the effect that, as of such date, the
consideration to be received by the Company's stockholders pursuant to this
Agreement is fair to the Company's stockholders from a financial point of view.
(t) INTERESTS OF OFFICERS AND DIRECTORS. Except as described
in the Company Filed SEC Documents and except for agreements or transactions
between or among the Company and its subsidiaries on the one hand and Sterling
Commerce, Inc. and its subsidiaries on the other hand and except as set forth in
Section 4.1(t) of the Company Disclosure Schedule, none of the Company's
officers or directors has any material direct or indirect interest in any
material property, real or personal, tangible or intangible, including
inventions, patents, copyrights, trademarks, trade names, trade secrets or
know-how, used in or pertaining to the business of the Company or that of its
subsidiaries, or any supplier, distributor or customer of the Company or any of
its subsidiaries, except for the normal rights of a stockholder and rights under
existing employee benefit plans.
(u) SOFTWARE. (i) "OWNED SOFTWARE" shall mean all computer
programs (source code or object code) owned by the Company or any subsidiary of
the Company, including without limitation any computer programs in the
development or testing phase. "LICENSED SOFTWARE" shall mean all computer
programs (source code or object code) licensed to the Company or any subsidiary
of the Company by any third party (other than any off-the-shelf computer program
that is so licensed under a shrink wrap license) (the Licensed Software and the
Owned Software, the "SOFTWARE").
(ii) Except as specified in Section 4.1(u)(ii) of the Company
Disclosure Schedule, Company, directly or through its subsidiaries, has good,
marketable and exclusive title to, and the valid power and right to sell,
license, lease, transfer, use or otherwise exploit, all of the Owned Software
and all copyrights thereof, free and clear of all Liens. The Company, directly
or through its subsidiaries, is in actual possession of or has necessary control
over (A) the source code and object code for each computer program included in
the Owned Software and (B) the object code and, to the extent required for the
use of the Software as currently used in the Company's
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business or as offered to the Company's customers or potential customers, the
source code, for each computer program included in the Licensed Software. The
Company, directly or through its subsidiaries, is in possession of or has
necessary control over all documentation (including without limitation all
related engineering specifications, program flow charts, installation and user
manuals) and know-how required for the use of the Software as currently used in
the Company's business or as offered to the Company's customers or potential
customers. The Software constitutes all of the computer programs necessary to
conduct the Company's business as now conducted. Except as specified in Section
4.1(u)(ii) of the Company Disclosure Schedule or pursuant to agreements entered
into in the ordinary course of business or made available to Merger Subsidiary
or its representatives, no person other than the Company and its subsidiaries
has any material right or interest of any kind or nature in or with respect to
the Owned Software or any portion thereof or any rights to sell, license, lease,
transfer, use or otherwise exploit the Owned Software or any portion thereof.
(iii) Since the Company and its subsidiaries have owned the
Owned Software, the Company and its subsidiaries have disclosed source code to
the Owned Software only pursuant to confidentiality terms that reasonably
protect the Company's rights in such Owned Software. Except as disclosed in
accordance with such confidentiality agreements or valid source code escrow
agreements, no person (other than Company and its subsidiaries) is in possession
of any source code for any computer program included in the Owned Software.
(iv) There are no material defects in (a) any Licensed
Software included in the Owned Software, or (b) in the Owned Software, in each
case of the currently Company supported versions thereof, that would
substantially adversely affect the functioning thereof in accordance with any
published specifications therefor or which would cause the foregoing Software to
fail to be Year 2000 compliant. For the purposes of this Section, "YEAR 2000
COMPLIANT" shall mean: (A) the capability to correctly recognize and accurately
process dates expressed as a four-digit number (or the binary equivalent or
other machine readable iteration thereof) (collectively, the "FOUR-DIGIT
DATES"); (B) the capability to accurately execute calculations using Four-Digit
Dates; (C) the functionality (both on-line and batch), including entry, inquiry,
maintenance and update, to support processing involving Four-Digit Dates; (D)
the capability to generate interfaces and reports that support processing
involving Four-Digit Dates; (E) the capability to generate and successfully
transition, without human intervention, into the year 2000 using the correct
system date and to thereafter continue processing with Four-Digit Dates; and (F)
the capability to provide correct results in forward and backward data
calculations spanning century boundaries, including the conversion of pre-2000
dates currently stored as two-digit dates; provided, however, that no
representation or warranty is made as to the effect that defects in computer
programs, hardware or systems provided by third parties (or the inability of
such programs, hardware or systems, other than those contemplated by the
documentation for the Software to be used in conjunction with the Software, to
properly exchange date data with the Software) may, when used in conjunction
with the Software, have on the foregoing capabilities. Other than in the
ordinary course of business, the Company has made no representation, warranties
or disclosures of any sort regarding the Company's, any subsidiary's, or any of
the Software's Year 2000 Compliance. The Company and its subsidiaries have not
received notices from its material providers of products and services of non
Year 2000 Compliance.
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(v) Except as set forth in Section 4.1(u) of the Company
Disclosure Schedule, none of the sale, license, lease, transfer, use,
reproduction, distribution, modification or other exploitation by the Company,
any subsidiary of the Company or any of their respective successors or assigns
of any version or release of any computer program included in the Software
obligates or will obligate the Company, any subsidiary of the Company or any of
their respective successors or assigns to pay any royalty, fee or other
compensation to any other person other than in amounts that are not material in
the aggregate.
(vi) Except as specified in Section 4.1(u)(vi) of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries markets and
none of them is obligated to the licensor of the Licensed Software to support
(other than Level One), any Licensed Software.
(vii) Except as specified in Section 4.1(u)(vii) of the
Company Disclosure Schedule, no material agreement, license or other arrangement
pertaining to any of the Software (including without limitation any development,
distribution, marketing, user or maintenance agreement, license or arrangement)
to which the Company or any subsidiary of the Company is a party will terminate
or become terminable by any party thereto as a result of the execution, delivery
or performance of this Agreement or the consummation of the transactions
contemplated hereby. Section 4.1(u)(vii) of the Company Disclosure Schedule sets
forth the general licensing policies of the Company and its subsidiaries by
category of Software.
(v) INTELLECTUAL PROPERTY. (i) For purposes of this Section
4.1(v), "INTELLECTUAL PROPERTY" shall mean all patents, trademarks, trade names,
service marks, and domain names and registered copyrights and material
non-registered copyrights used by the Company or any subsidiary of the Company
in connection with the conduct of the Company's business, and all registrations
of or applications for registration of any of the foregoing, including any
additions thereto or extensions, continuations, renewals or divisions thereof,
together with all trade dress, trade secrets, processes, formulae, designs,
know-how and other intellectual property rights that are so used. Parent has
heretofore been furnished with a true and correct summary of each U.S. and
foreign registration or application for U.S. and foreign registration of
patents, trademarks and tradenames which is registered with, or in respect of
which any application for registration has been filed with, any Governmental
entity, dated January 31, 2000, entitled Client Status Report and Status of
Patent Applications Authorized by Sterling Software, Inc. dated January 31,
2000. All such registrations and applications are valid and subsisting, in full
force and effect, and have not been cancelled, expired or abandoned (except as
otherwise noted in such reports). The Company is listed in the records of the
appropriate Governmental Entity or foreign government equivalent entity as the
sole owner of record for each such application and registration.
(ii) The Intellectual Property includes all of the
intellectual property rights owned or licensed by the Company and its
subsidiaries that are reasonably necessary to conduct the Company's business as
it is now conducted, and includes all of the intellectual property rights owned
by or licensed to the Company and its subsidiaries that are used in the
development, marketing, licensing or support of the Software. Except as
specified in Section 4.1(v)(ii) of the Company Disclosure Schedule, (A) the
Company, directly or through its subsidiaries, has good,
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marketable and exclusive title to, and the valid power and right to use, the
Intellectual Property owned by the Company or its subsidiaries free and clear of
all Liens and (B) no person or entity other than the Company and its
subsidiaries has any right or interest of any kind or nature in or with respect
to the Intellectual Property or any portion thereof or any rights to use, market
or exploit the Intellectual Property or any portion thereof other than pursuant
to agreements entered into in the ordinary course of business.
(iii) The Company and its subsidiaries take reasonable
measures to protect the confidentiality of its material trade secrets, know-how
or other confidential information, including by generally requiring employees,
independent contractors and licensees having access thereto to execute written
non-disclosure agreements that adequately protect the Company's and its
subsidiaries' proprietary interests in and to such trade secrets, know-how and
other confidential information.
(w) NO INFRINGEMENT. (i) Except as specified in Section
4.1(w)(i) of the Company Disclosure Schedule, neither the existence nor the
sale, license, lease, transfer, use, reproduction, distribution, modification or
other exploitation by the Company, any subsidiary of the Company of any Software
or Intellectual Property, as such Software or Intellectual Property, as the case
may be, is or was, or is currently contemplated to be, sold, licensed, leased,
transferred, used or otherwise exploited by such persons, does, did or will (i)
infringe on any patent, trademark, copyright or other right of any person, (ii)
constitute a misuse or misappropriation of any trade secret, know-how, process,
proprietary information or other right of any other person, or (iii) entitle any
other person to any interest therein, or right to compensation from the Company,
any subsidiary of the Company or any of their respective successors or assigns,
by reason thereof (it being understood and agreed that, insofar as the foregoing
representation and warranty relates to Software and Intellectual Property that
is licensed to the Company or any subsidiary of the Company by any third party,
or as it relates to patents and trademarks, such representation and warranty is
made only to the Company's knowledge). Except as specified in Section 4.1(w)(i)
of the Company Disclosure Schedule, neither the Company nor any of its
subsidiaries has received any complaint, assertion, threat or allegation or
otherwise has notice of any lawsuit, claim, demand, proceeding or investigation
involving matters of the type contemplated by the immediately preceding sentence
or is aware of any facts or circumstances that could reasonably be expected to
give rise to any lawsuit, claim, demand, proceeding or investigation. Except as
specified in Section 4.1(w)(i) of the Company Disclosure Schedule, there are no
material restrictions on the ability of the Company, any subsidiary of the
Company or any of their respective successors or assigns to sell, license,
lease, transfer, use, reproduce, distribute, modify or otherwise exploit any
Software or Intellectual Property.
(ii) Except as specified in Schedule 4.1(w)(ii) of the Company
Disclosure Schedule, the Company and its subsidiaries are not aware of any
material infringement, misappropriation or other violation of any Software or
Intellectual Property, and no lawsuit, claim, demand, proceeding or
investigation brought by the Company or any of its subsidiaries with respect to
Owned Software is pending against any third party.
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(x) CHANGE OF CONTROL. Except as described in Section 4.1(x)
of the Company Disclosure Schedule, the execution and delivery of this Agreement
and the Tender Agreement and the consummation of the transactions contemplated
hereby and thereby will not (i) result in any payment (including severance,
unemployment compensation, tax gross-up, bonus or otherwise) becoming due to any
current or former director, employee or independent contractor of the Company or
any of its subsidiaries, from the Company or any of its subsidiaries under any
Stock Plan, Benefit Plan, agreement or otherwise, (ii) materially increase any
benefits otherwise payable under any Stock Plan, Benefit Plan, agreement or
otherwise or (iii) result in the acceleration of the time of payment, exercise
or vesting of any such benefits.
SECTION 4.2. REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER SUBSIDIARY. Parent and Merger Subsidiary jointly and severally represent
and warrant to the Company as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Each of Parent
and Merger Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the requisite
corporate power and authority to carry on its business as now being conducted.
Each of Parent and Merger Subsidiary is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
or licensing necessary, other than in such jurisdictions where the failure to be
so qualified or licensed (individually or in the aggregate) could not reasonably
be expected to have a material adverse effect on the condition (financial or
otherwise), business, assets or results of operations of Parent and its
subsidiaries taken as a whole (a "PARENT MATERIAL ADVERSE EFFECT"). Parent has
provided the Company with complete and correct copies of its and Merger
Subsidiary's certificate of incorporation and by-laws.
(b) CAPITAL STRUCTURE. As of the date of this Agreement, the
authorized capital stock of Parent consists of 1,100,000,000 shares of Parent
Common Stock and 500,000 shares of preferred stock, par value $.10 per share
("PARENT PREFERRED STOCK"). At the close of business on February 7, 2000, (i)
541,972,678 shares of Parent Common Stock were issued and outstanding including
associated Preferred Share Purchase Rights issued pursuant to the Rights
Agreement, dated June 18, 1991 and amended as of May 17, 1995, between the
Company and The Chase Manhattan Bank (as successor to Manufacturers Hanover
Trust Company), as Rights Agent, (ii) no shares of Parent Preferred Stock were
issued and outstanding, (iii) 89,008,601 shares of Parent Common Stock were held
by Parent in its treasury, and (iv) approximately 87,179,000 shares of Parent
Common Stock were reserved for future issuance pursuant to Parent's various
stock option and stock purchase plans described in, or incorporated by reference
in, the Parent SEC Documents (defined below in Section 4.2(d)). Except as set
forth above, at the close of business on February 7, 2000 and except for the
Parent Preferred Stock issuable upon exercise of the Preferred Share Purchase
Rights described above, no shares of capital stock or other voting securities of
Parent were issued, reserved for issuance or outstanding. All outstanding shares
of capital stock of Parent are, and all shares which may be issued pursuant to
this Agreement will be, when issued, duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights. As of the date of this
Agreement, there are outstanding no bonds, debentures, notes or other
indebtedness of Parent having the right to vote (or convertible into, or
exchangeable for, securities having the
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right to vote) on any matters on which stockholders of Parent may vote. As of
the date of this Agreement, the authorized capital stock of Merger Subsidiary
consists of 1,000 shares of common stock, par value $.01 per share, all of which
have been validly issued, are fully paid and nonassessable and are owned by
Parent free and clear of any Liens.
(c) AUTHORITY; NONCONTRAVENTION. Parent and Merger Subsidiary
have the requisite corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated by this Agreement. The execution
and delivery of this Agreement by Parent and Merger Subsidiary and the
consummation by Parent and Merger Subsidiary of the transactions contemplated by
this Agreement have been duly authorized by all necessary corporate action on
the part of Parent and Merger Subsidiary. This Agreement has been duly executed
and delivered by Parent and Merger Subsidiary and constitutes a valid and
binding obligation of Parent and Merger Subsidiary, enforceable against each of
them in accordance with its terms. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated by this
Agreement and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or result in the creation of any Lien upon any of the properties or
assets of Parent or any of its subsidiaries under, (i) the certificate of
incorporation or by-laws of Parent or Merger Subsidiary, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to Parent or any
of its subsidiaries or their respective properties or assets or (iii) subject to
the governmental filings and other matters referred to in the following
sentence, any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent, Merger Subsidiary or any other subsidiary of
Parent or their respective properties or assets, other than, in the case of
clause (ii) or (iii), any such conflicts, violations, defaults, rights, losses
or Liens that individually or in the aggregate could not reasonably be expected
to (x) have a Parent Material Adverse Effect, (y) impair the ability of Parent
and Merger Subsidiary to perform their respective obligations under this
Agreement or (z) prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement. No Consent is required by or with
respect to Parent or Merger Subsidiary in connection with the execution and
delivery by Parent and Merger Subsidiary of this Agreement or the consummation
by Parent or Merger Subsidiary of the transactions contemplated by this
Agreement, except for (i) the filing of a premerger notification and report form
by Parent under the HSR Act and any applicable filings under similar foreign
antitrust or competition laws and regulations, (ii) the filing with the SEC of
(A) the Form S-4, (B) the Offer Documents, and (C) such reports under the
Exchange Act as may be required in connection with this Agreement, the Tender
Agreement and the transactions contemplated hereby and thereby, (iii) such
filings as may be required under state securities or "blue sky" laws, (iv) the
filing of the Certificate of Merger with the Delaware Secretary of State and
appropriate documents with the relevant authorities of other states in which the
Company is qualified to do business, (v) such filings with and approvals of the
NYSE to permit the shares of Parent Common Stock that are to be issued upon
consummation of the Offer and in the Merger to be listed on the NYSE, and (vi)
such other consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to be made or obtained
individually or in the aggregate could not reasonably be expected to (x) have a
Parent Material Adverse Effect, (y) impair the
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Parent's or Merger Subsidiary's ability to perform its obligations under this
Agreement or (z) prevent or materially delay the consummation of the
transactions contemplated by this Agreement.
(d) SEC DOCUMENTS; FINANCIAL STATEMENTS; NO UNDISCLOSED
LIABILITIES. Parent has filed all required reports, forms and other documents
with the SEC since April 1, 1996 (the "PARENT SEC DOCUMENTS"). As of their
respective dates, the Parent SEC Documents complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder applicable
to such Parent SEC Documents, and none of the Parent SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of Parent included in the Parent SEC Documents as of their
respective dates comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles (except, in the case of unaudited statements, as permitted
by Form 10-Q of the SEC) applied on a consistent basis during the periods
involved and fairly present in all material respects the consolidated financial
position of Parent and its consolidated subsidiaries as of the dates thereof and
the consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal and recurring
year-end audit adjustments not material in amount).
(e) INFORMATION SUPPLIED. Neither the Offer Documents or the
Form S-4 or the Post-Effective Amendment, nor any of the information supplied or
to be supplied by Parent or its subsidiaries or representatives for inclusion or
incorporation by reference in the Schedule 14D-9 or the Company Proxy Statement
will, at the respective times any such documents or any amendments or
supplements thereto are filed with the SEC, are first published, sent or given
to shareholders or become effective under the Securities Act or, in the case of
the Company Proxy Statement, at the time of the Company Stockholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading. The Offer Documents and the Form S-4 and the Post-Effective
Amendment will comply as to form in all material respects with the requirements
of all applicable laws, including the Securities Act and the Exchange Act, as
applicable, and the rules and regulations thereunder. No representation or
warranty is made by Parent or Merger Subsidiary with respect to statements made
or incorporated by reference therein based on information supplied by the
Company for inclusion or incorporation by reference therein.
(f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the Parent SEC Documents filed and publicly available prior to the date of
this Agreement (the "PARENT FILED SEC DOCUMENTS"), from September 30, 1999 to
the date of this Agreement, there has not been any event, occurrence or
development of a state of circumstances that has had or could reasonably be
expected to have a Parent Material Adverse Effect.
(g) LITIGATION. Except as disclosed in the Parent Filed SEC
Documents, as of the date of this Agreement, there is no suit, action or
proceeding pending or, to the knowledge of Parent, threatened against or
affecting Parent or any of its subsidiaries that, individually or in the
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aggregate, could reasonably be expected to (i) have a Parent Material Adverse
Effect, (ii) impair the ability of Parent to perform its obligations under this
Agreement or (iii) prevent or materially delay the consummation of the
transactions contemplated by this Agreement, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against Parent or any of its subsidiaries having, or which is reasonably likely
to have, any such effect.
(h) COMPLIANCE WITH APPLICABLE LAWS. As of the date of this
Agreement, each of Parent and its subsidiaries has in effect all Permits
necessary for it to own, lease or operate its properties and assets and to carry
on its business as now conducted, and there has occurred no default under any
such Permit, except for the absence of Permits and for defaults under Permits
which absence or default, individually or in the aggregate, could not reasonably
be expected to have a Parent Material Adverse Effect. As of the date of this
Agreement, Parent and its subsidiaries have been, and are, in compliance with
all applicable statutes, laws, ordinances, rules, orders and regulations of any
Governmental Entity, except for such failures to comply or violations as,
individually or in the aggregate, could not reasonably be expected to have a
Parent Material Adverse Effect.
(i) BROKERS. No broker, investment banker, financial advisor
or other person, other than Morgan Stanley & Co. Incorporated ("MORGAN
STANLEY"), the fees and expenses of which will be paid by Parent, is entitled to
any broker's, finder's, financial advisor's or other similar fee or commission
in connection with the transactions contemplated by this Agreement or the Tender
Agreement based upon arrangements made by or on behalf of Parent or Merger
Subsidiary.
(j) NO PRIOR ACTIVITIES; ASSETS OF MERGER SUBSIDIARY. Merger
Subsidiary was formed solely for the purpose of the Merger and engaging in the
transactions contemplated hereby. As of the date hereof and the Effective Time,
except for obligations or liabilities incurred in connection with its
incorporation or organization and the transactions contemplated hereby and
activities, agreements or arrangements in connection with the transactions
contemplated hereby, Merger Subsidiary has not and will not have (i) incurred,
directly or indirectly through any of its subsidiaries or affiliates, any
obligations or liabilities, (ii) engaged in any business or activities of any
type or kind whatsoever or (iii) entered into any agreements or arrangements
with any person.
(k) OPINION OF FINANCIAL ADVISOR. Parent has received the
opinion of Morgan Stanley dated the date hereof, a copy of which has been or
promptly will be provided to the Company, to the effect that, as of such date,
the Exchange Ratio is fair to Parent from a financial point of view.
(l) SHARE OWNERSHIP. As of the date of this Agreement, none of
Parent, Merger Subsidiary nor any of their direct or indirect subsidiaries owns
any shares of Common Stock of the Company.
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ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.1. CONDUCT OF BUSINESS. Except as expressly provided
in this Agreement or as set forth in Section 5.1 of the Company Disclosure
Schedule or with the prior written consent of Parent, during the period from the
date of this Agreement to the Appointment Time, the Company shall, and shall
cause its subsidiaries to, carry on their respective businesses in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and, to the extent consistent therewith, use all reasonable efforts to
preserve intact their current business organizations, keep available the
services of their current officers and employees and preserve their
relationships with customers, suppliers, licensors, licensees, distributors and
others having business dealings with them to the end that their goodwill and
ongoing businesses shall be unimpaired at the Effective Time. Except as
expressly provided in this Agreement or as set forth in Section 5.1 of the
Company Disclosure Schedule, without limiting the generality of the foregoing,
during the period from the execution and delivery of this Agreement to the
Appointment Time, the Company shall not, and shall not permit any of its
subsidiaries to:
(a) (i) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital stock, other than
dividends and distributions by any direct or indirect wholly owned subsidiary of
the Company to its parent, (ii) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock or (iii) purchase,
redeem or otherwise acquire any shares of capital stock of the Company or any of
its subsidiaries (other than internal restructuring of wholly owned subsidiaries
consistent with past practice) or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities;
(b) issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities (other than the issuance of
Company Common Stock (1) upon the exercise of Company Options outstanding on the
date of this Agreement, (2) pursuant to the ESPP in accordance with its present
terms and not in violation of this Agreement, or (3) pursuant to the Rights
Agreement);
(c) amend the Company's or any Significant Subsidiary's
certificate of incorporation, by-laws or other comparable charter or
organizational documents;
(d) acquire or agree to acquire (including by merger,
consolidation or acquisition of stock or assets) any business, including through
the acquisition of any interest in any corporation, partnership, joint venture,
association or other business organization or division thereof;
(e) (i) mortgage or otherwise encumber or subject to any Lien
or, except in the ordinary course of business consistent with past practice or
pursuant to existing contracts or commitments, sell, lease, transfer or
otherwise dispose of any of the Company Intellectual Property
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Rights or any other material properties or assets or (ii) except in the ordinary
course of business consistent with past practice or pursuant to existing
contracts or commitments, license any of the Company Intellectual Property
Rights;
(f) make or agree to make any new capital expenditures which
in the aggregate are in excess of $500,000;
(g) make any material tax election (unless required by law) or
settle or compromise any material income tax liability;
(h) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice and in accordance with their
terms, of (i) liabilities reflected or reserved against in, or contemplated by,
the most recent consolidated financial statements (or the notes thereto) of the
Company included in the Company Filed SEC Documents, (ii) liabilities incurred
in the ordinary course of business consistent with past practice, or (iii) other
liabilities or obligations not to exceed in the aggregate $2,500,000 or waive
the benefits of, or agree to modify in any manner, any confidentiality,
standstill or similar agreement to which the Company or any of its subsidiaries
is a party;
(i) commence a lawsuit other than (i) for the routine
collection of amounts owed or (ii) in such cases where the Company in good faith
determines that the failure to commence suit would result in a material
impairment of a valuable aspect of the Company's business, provided that the
Company consults with Parent prior to filing such suit;
(j) (i) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or any of
its subsidiaries, guarantee any debt securities of another person, enter into
any "KEEP WELL" or other agreement to maintain any financial statement condition
of another person or enter into any arrangement having the economic effect of
any of the foregoing, except for short-term borrowings incurred in the ordinary
course of business (or to refund existing or maturing indebtedness) consistent
with past practice and except for intercompany indebtedness between the Company
and any of its wholly owned subsidiaries or between such subsidiaries, or (ii)
make any loans, advances or capital contributions to, or investments in, any
other person;
(k) (i) enter into or amend any employment agreement with any
executive or , other than in the ordinary course of business, any other
employee, (ii) enter into any agreement pursuant to which the Company or any of
its subsidiaries will provide services for a term of more than 30 days at a
fixed or capped price or otherwise pursuant to terms that are not consistent
with agreements entered into by the Company or any of its subsidiaries in the
ordinary course of business, (iii) enter into any customer sale or license
agreement on terms outside the ordinary course of business as disclosed in
Section 5.1(k)(iii) of the Company Disclosure Schedule, (iv) pay commissions to
sales employees except on the basis of executed customer contracts with respect
to products actually delivered to customers, (v) other than customer licenses
and sales contracts, enter
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into any contract or series of related contracts in excess of $500,000, (vi)
enter into or amend any agreement or arrangement for obtaining professional
services or advice involving payments of more than $200,000 to any one service
provider (provided that this clause (vi) does not apply to legal services or
advice obtained in connection with the transactions contemplated by this
Agreement), (vii) enter into any product swap transactions that would be in
violation of generally accepted accounting principles, (viii) make any
determination as to amounts payable under any plan, arrangement, or agreement,
providing for discretionary incentive compensation or bonus to any officer,
director, employee or independent contractor of the Company or any of its
subsidiaries, or (ix) enter into or adopt, or amend any agreement, arrangement,
or Benefit Plan so as to increase the liability (whether or not contingent) of
the Company or Parent or any of their subsidiaries in respect of compensation or
benefits except as may be required by applicable law; or
(l) authorize any of, or commit or agree to take any of, the
foregoing actions.
SECTION 5.2. STATE TAKEOVER STATUTES. The Company and its
Board of Directors shall (i) take all reasonable actions necessary to ensure
that no "FAIR PRICE", "CONTROL SHARE ACQUISITION", "MORATORIUM" or other
anti-takeover statute, or similar statute or regulation, is or becomes
applicable to this Agreement or the Tender Agreement, or the Offer, the Merger
or any of the other transactions contemplated hereby or thereby and (ii) if any
"FAIR PRICE", "CONTROL SHARE ACQUISITION", "MORATORIUM" or other anti-takeover
statute, or similar statute or regulation, becomes applicable to this Agreement
or the Tender Agreement, or the Offer, the Merger or any other transaction
contemplated hereby or thereby, take all action necessary to ensure that the
Offer, the Merger and the other transactions contemplated hereby and thereby,
may be consummated as promptly as practicable on the terms contemplated hereby
and otherwise to minimize the effect of such statute or regulation on the Offer,
the Merger and the other transactions contemplated hereby and thereby.
SECTION 5.3. ACCESS TO INFORMATION. Subject to applicable law,
the Company shall, and shall cause each of its subsidiaries to, afford to
Parent, and to Parent's officers, employees, accountants, counsel, financial
advisers and other representatives, full access during normal business hours
during the period prior to the Effective Time to all their respective
properties, books, contracts, commitments, personnel (including for the purpose
of interviewing such personnel in connection with the integration process) and
records and their accounts' work papers and, during such period, the Company
shall, and shall cause each of its subsidiaries to, furnish promptly to Parent
(i) a copy of each report, schedule, registration statement and other document
filed by it during such period pursuant to the requirements of Federal or state
securities laws, (ii) a copy of each material tax return, report and information
statement filed by it during such period, and (iii) all other information
concerning its business, assets, properties and personnel as Parent may
reasonably request; provided that no investigation pursuant to this Section 5.3
shall affect any representation or warranty given by the Company to Parent
hereunder.
SECTION 5.4. AFFILIATES. Within 10 days after the date of this
Agreement, the Company shall deliver to Parent a letter identifying all persons
who are to the Company's knowledge "AFFILIATES" of the Company for purposes of
Rule 145 under the Securities Act. The Company shall use reasonable efforts to
cause each such person to deliver to Parent at least five
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business days prior to the initial expiration of the Offer, a written agreement
covering Rule 145 matters in customary form and reasonably acceptable to Parent
and the Company (an "AFFILIATES AGREEMENT") from each such person.
SECTION 5.5. NO SOLICITATION BY THE COMPANY. (a) From the date
of this Agreement until the Effective Time or, if earlier, the termination of
this Agreement in accordance with its terms, the Company shall not (whether
directly or indirectly through advisors, agents or other intermediaries), and
the Company shall cause its and its subsidiaries' respective officers,
directors, advisors, representatives and other agents not to, directly or
indirectly, (i) solicit, initiate or knowingly encourage, or take any other
action to facilitate, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal
or (ii) participate or engage in substantive discussions or negotiations with,
or disclose or provide any non-public information relating to the Company or its
subsidiaries or afford access to the properties, books or records of the Company
or its subsidiaries to, any person (including any "PERSON" as defined in Section
13(d)(3) of the Exchange Act) that has made an Acquisition Proposal or with or
to any Person in contemplation of an Acquisition Proposal or (iii) enter into
any agreement or agreement in principle providing for or relating to an
Acquisition Proposal; provided, however, that if and only if (A) a person has
submitted an unsolicited written Acquisition Proposal (under circumstances in
which the Company has complied with its obligations under this Section 5.5(a))
to the Company's Board of Directors, (B) the Company's Board of Directors
believes in good faith, based on such matters as it deems relevant, including
the advice of the Company's financial advisor, that such Acquisition Proposal is
a Superior Proposal and (C) the Company's Board of Directors determines in good
faith, based on such matters as it deems relevant, including consultation with
the Company's outside legal counsel, that engaging in such negotiations or
discussions or providing such information is required to satisfy the fiduciary
duties of the Board of Directors of the Company under Delaware Law, then the
Company may furnish information to such person with respect to the Company and
its subsidiaries (so long as the Company has entered into a customary
confidentiality agreement with such party) and participate in negotiations and
discussions with such person regarding such Acquisition Proposal; provided
further that, after the third business day following Parent's receipt of written
notice advising Parent that the Company's Board of Directors is prepared to
accept such Superior Proposal, which notice specifies the material terms and
conditions of such Superior Proposal and identifies the person making such
Superior Proposal, the Board of Directors of the Company may, in response to a
Superior Proposal which was not solicited by the Company and which did not
otherwise result from a breach of this Section 5.5(a), terminate this Agreement,
if the Board of Directors of the Company determines in good faith, based on such
matters as it deems relevant, including consultation with the Company's outside
legal counsel, that it is required to do so in order to comply with its
fiduciary duties to the Company's stockholders under Delaware Law, and,
concurrently with such termination, causes the Company to pay the fee payable
pursuant to Section 9.5(a) hereof by reason thereof. Nothing contained in this
Agreement shall prohibit the Company or the Company's Board of Directors from
taking and disclosing to the Company's stockholders a position with respect to a
tender or exchange offer by a third party pursuant to Rules 14d-9 and 14e-2(a)
promulgated under the Exchange Act or from making any disclosure required by
applicable law or, in the case of the Company's Board of Directors, making any
other disclosure to the Company's stockholders that the Company's Board of
Directors determines in good faith is required to be made to satisfy the
fiduciary duties of the
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Company's Board of Directors under Delaware Law. The Company shall immediately
cease and cause to be terminated and shall cause its affiliates and subsidiaries
and its or their respective officers, directors, employees, representatives or
agents, to terminate all existing discussions or negotiations, if any, with any
persons conducted heretofore with respect to, or that could reasonably be
expected to lead to, an Acquisition Proposal.
(b) For purposes of this Agreement, "ACQUISITION PROPOSAL"
shall mean any inquiry, proposal or offer from any person (other than Parent,
Merger Subsidiary or any of their affiliates) relating to any merger,
consolidation, recapitalization, liquidation or other direct or indirect
business combination, involving the Company or any Significant Subsidiary or the
issuance or acquisition of shares of capital stock or other equity securities of
the Company or any Significant Subsidiary representing 15% or more (by voting
power) of the outstanding capital stock of the Company or such Significant
Subsidiary or any tender or exchange offer that if consummated would result in
any person, together with all affiliates thereof, beneficially owning shares of
capital stock or other equity securities of the Company or any Significant
Subsidiary representing 15% or more (by voting power) of the outstanding capital
stock of the Company or such Significant Subsidiary, or the acquisition,
license, purchase or other disposition of a substantial portion of the
technology, business or assets of the Company or any Significant Subsidiary
outside the ordinary course of business or inconsistent with past practice and
the term "SUPERIOR PROPOSAL" means any bona fide Acquisition Proposal which is
on terms that the Board of Directors of the Company determines in its good faith
judgment (after receipt of the advice of a financial advisor of nationally
recognized reputation) provides for consideration which would exceed the value
of the consideration provided for in the Offer and the Merger, after taking into
account all relevant factors, including any conditions to such Acquisition
Proposal, the timing of the closing thereof, the risk of nonconsummation, the
ability of the person making the Acquisition Proposal to finance the transaction
contemplated thereby and any required governmental or other consents, filings
and approvals.
(c) In addition to the other obligations of the Company set
forth in this Section 5.5, the Company shall promptly advise Parent orally and
in writing of any request for information with respect to any Acquisition
Proposal, or any inquiry with respect to or which is reasonably likely to result
in an Acquisition Proposal, the material terms and conditions of such request,
Acquisition Proposal or inquiry, and the identity of the person making the same.
The Company shall inform Parent on a prompt basis of the status and content of
any discussions regarding any Acquisition Proposal with a third party and as
promptly as practicable of any change in the price, structure or form of the
consideration or material terms of and conditions regarding the Acquisition
Proposal.
SECTION 5.6. LITIGATION. The Company shall give Parent the
opportunity to participate in the defense of any litigation against the Company
and/or its directors relating to the transactions contemplated by this Agreement
and the Tender Agreement.
SECTION 5.7. RIGHTS AGREEMENT. Except as expressly required by
this Agreement, the Company shall not, without the prior consent of Parent,
amend the Rights
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Agreement or take any other action with respect to, or make any determination
under, the Rights Agreement, including a redemption of the Rights or any action
to facilitate an Acquisition Proposal.
ARTICLE VI
COVENANTS OF PARENT AND MERGER SUBSIDIARY
SECTION 6.1. LISTING. Parent shall use its reasonable best
efforts to cause the Parent Common Stock to be issued upon the consummation of
the Offer and in the Merger and to be issuable upon exercise of Parent Options
and Parent Management Options to be approved for listing on the NYSE, subject to
official notice of issuance, as promptly as practicable after the date hereof,
and in any event prior to the Appointment Time.
SECTION 6.2. INDEMNIFICATION. (a) For six years after the
Effective Time, Parent and the Surviving Corporation will indemnify and hold
harmless (including advancement of expenses) the current and former directors
and officers of the Company in respect of acts or omissions occurring on or
prior to the Effective Time to the extent provided in the Company's certificate
of incorporation, by-laws and indemnity agreements in effect on the date hereof;
provided that such indemnification shall be subject to any limitation imposed
from time to time under applicable law. Parent will cause to be maintained for a
period of not less than two years from the Effective Time the Company's current
directors' and officers' insurance and indemnification policy to the extent that
it provides coverage for events occurring prior to the Effective Time (the "D&O
INSURANCE") for all persons who are directors and officers of the Company on the
date of this Agreement, so long as the annual premium therefor would not be in
excess of the amount per annum the Company paid in its last full fiscal year,
which amount has been disclosed to Parent, on terms and conditions substantially
similar to the existing D&O Insurance. If the existing D&O Insurance cannot be
maintained, expires or is terminated or canceled during such two-year period,
Parent will use reasonable efforts to cause to be obtained as much D&O Insurance
as can be obtained for the remainder of such period for an annualized premium
not in excess of the amount per annum the Company paid in its last full fiscal
year, on terms and conditions substantially similar to the existing D&O
Insurance. It is understood that, unless made by a court, any determination as
to whether a person seeking indemnification pursuant to this Section 6.2 has met
any applicable legal standard for indemnification shall be made by a committee
consisting of at least two of Parent's independent directors.
(b) In the event Parent or the Surviving Corporation or any of
their successors or assigns (i) consolidates with or merges into any other
Person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger, or (ii) transfers or conveys all or substantially
all its properties and assets to any person, then, and in each such case, to the
extent necessary to effectuate the purposes of this Section 6.2, proper
provision shall be made so that the successors and assigns of Parent and the
Surviving Corporation assume the obligations set forth in this Section 6.2;
provided that, in the case of any such assignment by Parent or the Surviving
Corporation, Parent and the Surviving Corporation shall remain liable for all of
their respective obligations under this Agreement.
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SECTION 6.3. OBLIGATIONS OF MERGER SUBSIDIARY. Parent will
take all action necessary to cause Merger Subsidiary to perform its obligations
under this Agreement (including ensuring that Merger Subsidiary will at the
appropriate times have sufficient shares of Parent Common Stock and funds to
consummate the Offer and the Merger in accordance with the terms hereof) and to
consummate the Offer and the Merger on the terms and conditions set forth in
this Agreement.
SECTION 6.4. VOTING OF SHARES. Parent and Merger Subsidiary
agree to make a quorum and vote all Shares acquired in the Offer or otherwise
beneficially owned by them in favor of approval and adoption of this Agreement
and the Merger at the Company Stockholders Meeting.
SECTION 6.5. EMPLOYEES. (a) Parent agrees to honor in
accordance with their terms all Benefit Plans and all employment and severance
agreements in each case listed in Section 6.5 of the Company Disclosure Schedule
(or filed as exhibits to the Company Filed SEC Documents), and all accrued
benefits vested thereunder; it being understood and agreed that nothing in this
Section 6.5(a) shall prevent Parent from terminating any Benefit Plan or other
agreement in accordance with its terms.
(b) Parent agrees to provide employees of the Company and its
subsidiaries retained by Parent with employee benefits in the aggregate no less
favorable than those benefits provided to Parent's similarly situated employees;
provided that Parent shall be under no obligation to retain any employee or
group of employees of the Company or its subsidiaries.
(c) For purposes of all employee benefit plans, programs and
arrangements maintained by or contributed to by Parent and its subsidiaries
(including, after the Closing, the Surviving Corporation), Parent shall, or
shall cause its subsidiaries to, cause each such plan, program or arrangement to
treat the prior service with the Company and its affiliates of each person who
is an employee or former employee of the Company or its subsidiaries immediately
prior to the Closing (a "COMPANY EMPLOYEE") (to the same extent such service is
recognized under analogous plans, programs or arrangements of the Company or its
affiliates prior to the Closing) as service rendered to Parent or its
subsidiaries, as the case may be, for purposes of eligibility to participate in
and vesting thereunder (but not benefit accrual); provided, however, that such
crediting of service shall not operate to duplicate any benefit or the funding
of such benefit. Company Employees shall also be given credit for any deductible
or co-payment amounts paid in respect of the plan year in which the Closing
occurs, to the extent that, following the Closing, they participate in any other
plan for which deductibles or co-payments are required. Parent shall also cause
each Parent benefit plan to waive any preexisting condition which was waived
under the terms of any Benefit Plan immediately prior to the Closing or waiting
period limitation which would otherwise be applicable to a Company Employee on
or after the Closing. Parent shall recognize any accrued but unused vacation and
sabbatical time of the Company Employees as of the Closing Date, in accordance
with the terms of such Company policies and Parent shall cause the Company and
its subsidiaries to provide such vacation and sabbatical time in accordance with
the terms of such Company policies but in no event will Parent be obligated to
extend or enlarge the benefits available under such Company policies.
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ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1. SHAREHOLDER APPROVAL; PREPARATION OF S-4 AND
PROXY STATEMENT/PROSPECTUS. (a) If approval of the Company's stockholders is
required by applicable law in order to consummate the Merger other than pursuant
to Section 253 of Delaware Law, following the acceptance for exchange of Shares
pursuant to the Offer, Parent and the Company shall, as soon as practicable
following the acceptance of Shares pursuant to the Offer, prepare and the
Company shall file with the SEC the Company Proxy Statement and Parent and the
Company shall prepare and Parent shall file with the SEC a post-effective
amendment to the Form S-4 (the "POST-EFFECTIVE AMENDMENT") for the offer and
sale of the Parent Common Stock pursuant to the Merger and in which the Company
Proxy Statement will be included as a prospectus. Each of the Company and Parent
shall use all reasonable efforts to have the Post-Effective Amendment declared
effective under the Securities Act as promptly as practicable after such filing.
The Company will use all reasonable efforts to cause the Company Proxy Statement
to be mailed to the Company's stockholders as promptly as practicable after the
Post-Effective Amendment is declared effective under the Securities Act. Parent
shall also take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified or to file a general consent to
service of process) required to be taken under any applicable state securities
laws in connection with the issuance of Parent Common Stock in the Offer and the
Merger and the Company shall furnish all information concerning the Company and
the holders of capital stock of the Company as may be reasonably requested in
connection with any such action and the preparation, filing and distribution of
the Company Proxy Statement. No filing of, or amendment or supplement to, or
correspondence to the SEC or its staff with respect to, the Post-Effective
Amendment will be made by Parent, or the Company Proxy Statement will be made by
the Company, without providing the other party a reasonable opportunity to
review and comment thereon. Parent will advise the Company, promptly after it
receives notice thereof, of the time when the Post-Effective Amendment has
become effective or any supplement or amendment has been filed, the issuance of
any stop order, the suspension of the qualification of the Parent Common Stock
issuable in connection with the Merger for offering or sale in any jurisdiction,
or any request by the SEC for amendment of the Post-Effective Amendment or
comments thereon and responses thereto or requests by the SEC for additional
information. The Company will advise Parent, promptly after it receives notice
thereof, of any request by the SEC for the amendment of the Company Proxy
Statement or comments thereon and responses thereto or requests by the SEC for
additional information. If at any time prior to the Effective Time any
information relating to the Company or Parent, or any of their respective
affiliates, officers or directors, should be discovered by the Company or Parent
which should be set forth in an amendment or supplement to either of the
Post-Effective Amendment or the Company Proxy Statement, so that any of such
documents would not include any misstatement of a material fact or omit to state
any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other parties hereto and an
appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law, disseminated to
the stockholders of the Company.
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(b) If approval of the Company's stockholders is required by
applicable law in order to consummate the Merger, the Company shall establish,
prior to or as soon as practicable following the date upon which the
Post-Effective Amendment becomes effective, a record date (which shall be prior
to or as soon as practicable following the date upon which the Post-Effective
Amendment becomes effective) for, duly call, give notice of, convene and hold a
meeting of its stockholders (the "COMPANY STOCKHOLDERS MEETING") for the purpose
of considering and taking action upon this Agreement and the Merger and (with
the consent of Parent) such other matters as may in the reasonable judgment of
the Company be appropriate for consideration at the Company Stockholders
Meeting. Once the Company Stockholders Meeting has been called and noticed, the
Company shall not postpone or adjourn the Company Stockholders Meeting (other
than for the absence of a quorum) without the consent of Parent. Subject to the
Company's right, pursuant to Section 1.2(b) hereof, to withdraw or modify the
Recommendations, the Board of Directors of the Company shall include in the
Post-Effective Amendment and the Company Proxy Statement a copy of the
Recommendations as such Recommendations pertain to the Merger and this
Agreement. Notwithstanding the foregoing, if approval of the Company's
stockholders is required by applicable law in order to consummate the Merger,
the Board of Directors of the Company shall submit this Agreement and the Merger
for approval to the Company's stockholders whether or not the Board of Directors
of the Company determines in accordance with Section 1.2(b) after the date
hereof that this Agreement and the Merger are no longer advisable and recommends
that the stockholders of the Company reject it. Unless the Board of Directors of
the Company has withdrawn its recommendation of this Agreement and the Merger in
compliance with this Section 1.2(b), the Company shall use its reasonable best
efforts to solicit from stockholders of the Company proxies in favor of this
Agreement and the Merger and shall take all other actions necessary or advisable
to secure the vote or consent of stockholders required by Delaware Law to effect
the Merger.
(c) Notwithstanding the foregoing clauses (a) and (b) above,
in the event that Merger Subsidiary shall acquire at least 90% of the
outstanding Shares in the Offer, the parties hereto shall take all necessary
actions to cause the Merger to become effective, as soon as practicable after
the expiration of the Offer, without a meeting of stockholders of the Company,
in accordance with Section 253 of Delaware Law.
SECTION 7.2. HSR ACT FILINGS; REASONABLE EFFORTS;
NOTIFICATION. (a) Each of Parent and the Company shall (i) promptly make or
cause to be made the filings required of such party or any of its subsidiaries
under the HSR Act and any other Antitrust Laws with respect to the Offer, the
Merger and the other transactions contemplated by this Agreement and the Tender
Agreement, (ii) comply at the earliest practicable date with any request under
the HSR Act or such other Antitrust Laws for additional information, documents,
or other material received by such party or any of its subsidiaries from the
Federal Trade Commission or the Department of Justice or any other Governmental
Entity in respect of such filings, the Offer, the Merger or such other
transactions, and (iii) cooperate with the other party in connection with any
such filing and in connection with resolving any investigation or other inquiry
of any such agency or other Governmental Entity under any Antitrust Laws with
respect to any such filing, the Offer, the Merger or such other transactions.
Each party shall promptly inform the other party of any communication with, and
any proposed understanding, undertaking, or agreement with, any Governmental
Entity regarding any such filings, the Offer, the Merger or such other
transactions.
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Neither party shall participate in any meeting with any Governmental Entity in
respect of any such filings, investigation, or other inquiry without giving the
other party notice of the meeting and, to the extent permitted by such
Governmental Entity, the opportunity to attend and participate.
(b) Each of Parent and the Company shall use all reasonable
efforts to resolve such objections, if any, as may be asserted by any
Governmental Entity with respect to the Offer, the Merger or any other
transactions provided for in this Agreement or the Tender Agreement under the
HSR Act, the Sherman Act, as amended, the Clayton Act, as amended, the Federal
Trade Commission Act, as amended, and any other federal, state or foreign
statutes, rules, regulations, orders or decrees that are designed to prohibit,
restrict or regulate actions having the purpose or effect of monopolization or
restraint of trade (collectively, "ANTITRUST LAWS"). In connection therewith, if
any administrative or judicial action or proceeding is instituted (or threatened
to be instituted) challenging the Offer, the Merger or any other transactions
provided for in this Agreement or the Tender Agreement as violative of any
Antitrust Law, and, if by mutual agreement, Parent and the Company decide that
litigation is in their best interests, each of Parent and the Company shall
cooperate and use all reasonable efforts vigorously to contest and resist any
such action or proceeding and to have vacated, lifted, reversed, or overturned
any decree, judgment, injunction or other order, whether temporary, preliminary
or permanent (each an "ORDER"), that is in effect and that prohibits, prevents,
or restricts consummation of the Offer, the Merger or any such other
transactions. Each of Parent and the Company shall use all reasonable efforts to
take such action as may be required to cause the expiration of the notice
periods under the HSR Act or other Antitrust Laws with respect to the Offer, the
Merger and such other transactions as promptly as possible after the execution
of this Agreement.
(c) Each of the parties agrees to use all reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, and
to assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Offer, the Merger, and the other transactions
contemplated by this Agreement and the Tender Agreement, including (i) the
obtaining of all other necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all other necessary
registrations and filings (including other filings with Governmental Entities,
if any), (ii) the obtaining of all necessary consents, approvals or waivers from
third parties, (iii) the preparation of the Form S-4, the Offer Documents, the
Schedule 14D-9 and, if necessary, the Merger S-4 and the Company Proxy
Statement, and (iv) the execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by, and to fully carry out
the purposes of, this Agreement and the Tender Agreement.
(d) Notwithstanding anything to the contrary in Section
7.2(a), (b) or (c), (i) neither Parent nor any of its subsidiaries shall be
required to divest any of their respective businesses, product lines or assets,
(ii) neither Parent nor any of its subsidiaries shall be required to take or
agree to take any other action or agree to any limitation that could reasonably
be expected to have an adverse effect on the business, assets, condition
(financial or otherwise), results of operations or prospects of Parent and its
subsidiaries taken as a whole or of Parent combined with the Surviving
Corporation after the Effective Time, (iii) neither the Company nor its
subsidiaries shall be required to divest any of their respective businesses,
product lines or assets, or to take or
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agree to take any other action or agree to any limitation that could reasonably
be expected to have a Company Material Adverse Effect, (iv) no party shall be
required to agree to the imposition of or to comply with, any condition,
obligation or restriction on Parent or any of its subsidiaries or on the
Surviving Corporation or any of its subsidiaries of the type referred to in
subclause (a) or (b) of clause (5) of Annex I or Section 8.1(c) and (v) neither
Parent nor Merger Subsidiary shall be required to waive any of the conditions to
the Offer set forth in Annex I or any of the conditions of to the Merger set
forth in Article VIII.
(e) The Company shall give prompt notice to Parent, and Parent
or Merger Subsidiary shall give prompt notice to the Company, of (i) any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate in any material respect or (ii) the failure by it to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement; provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
(f) The Company shall give prompt notice to Parent, and Parent
or Merger Subsidiary shall give prompt notice to the Company, of:
(i) any notice or other communication from any person
alleging that the consent of such person is or may be required in
connection with the transactions contemplated by this Agreement or the
Tender Agreement;
(ii) any notice or other communication from any
Governmental Entity in connection with the transactions contemplated by
this Agreement or the Tender Agreement; and
(iii) any actions, suits, claims, investigations or
proceedings commenced or, to the best of its knowledge threatened
against, relating to or involving or otherwise affecting it or any of
its subsidiaries which, if pending on the date of this Agreement would
have been required to have been disclosed pursuant to Section 4.1 or
4.2 or which relate to the consummation of the transactions
contemplated by this Agreement or the Tender Agreement.
SECTION 7.3. PUBLIC ANNOUNCEMENTS. Parent and Merger
Subsidiary, on the one hand, and the Company, on the other hand, will consult
with each other before issuing, and provide each other the opportunity to review
and comment upon, any press release or other public statements with respect to
the transactions contemplated by this Agreement, including the Offer and the
Merger, and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by applicable
law, court process or by obligations pursuant to any listing agreement with any
national securities exchange. The parties agree that the initial press release
to be issued with respect to the transactions contemplated by this Agreement
will be in the form previously agreed to by the parties.
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SECTION 7.4. CONFIDENTIALITY. Each of Parent and the Company
will hold, and will cause its Representatives (defined in the Confidentiality
Agreements, each dated February 8, 2000 (the "CONFIDENTIALITY AGREEMENTS"), each
between Parent and the Company) to hold, any Evaluation Material (defined in the
Confidentiality Agreements) in confidence in accordance with the terms of the
relevant Confidentiality Agreement.
ARTICLE VIII
CONDITIONS PRECEDENT
SECTION 8.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER. The respective obligations of each party to effect the Merger are
subject to the satisfaction or, to the extent permitted by applicable law,
waiver on or prior to the Closing Date of each of the following conditions:
(a) SHAREHOLDER APPROVAL. If required by Delaware Law, this
Agreement and the Merger shall have been approved and adopted by the Company
Shareholder Vote.
(b) PURCHASE OF SHARES IN THE OFFER. Merger Subsidiary shall
have accepted for exchange and exchanged all of the Shares tendered pursuant to
the Offer unless the failure to consummate the Offer is the result of a willful
and material breach of this Agreement by the party asserting such condition.
(c) NO INJUNCTIONS OR RESTRAINTS. No judgment, order, decree,
statute, law, ordinance, rule or regulation, entered, enacted, promulgated,
enforced or issued by any court or other Governmental Entity of competent
jurisdiction or other legal restraint or prohibition shall be in effect
preventing or prohibiting consummation of the Merger.
(d) FORM S-4. The Form S-4 or the Post-Effective Amendment, as
the case may be, shall have become effective under the Securities Act and shall
not be the subject of any stop order or proceedings seeking a stop order, if
any.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER, FEES AND EXPENSES
SECTION 9.1. TERMINATION. This Agreement may be terminated at
any time prior to the Effective Time, whether before or after approval of this
Agreement and the Merger by the shareholders of the Company or Merger
Subsidiary:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
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(i) if the Offer shall have expired or been
terminated in accordance with the terms of this Agreement
without Parent or Merger Subsidiary having accepted for
exchange any Shares pursuant to the Offer (provided that
Parent and Merger Subsidiary shall not be permitted to
terminate this Agreement if the Offer is terminated or expires
without Shares being accepted for exchange in violation of
this Agreement);
(ii) if the Offer shall not have been
consummated on or before September 30, 2000, unless the
failure to consummate the Offer is the result of a willful and
material breach of this Agreement by the party seeking to
terminate this Agreement;
(iii) if the Merger shall not have been
consummated as a result of any condition thereto in Article
VIII being incapable of being satisfied; or
(iv) if any statute, rule, regulation,
injunction or decree having the effects set forth in subclause
(a) or (b) of clause (5) of Annex A shall be in effect and
shall have become final and nonappealable;
(c) by Parent, upon the occurrence of any Trigger Event
described in clauses (i) through (iv) of Section 9.5(a); or
(d) by the Company, in accordance with Section 5.5(a);
provided that, in order for the termination of this Agreement pursuant to this
clause (d) to be deemed effective, the Company shall have complied with all
provisions of Section 5.5.
SECTION 9.2. EFFECT OF TERMINATION. Except for any willful and
material breach of this Agreement by any party hereto (which breach and
liability therefor shall not be affected by the termination of this Agreement),
if this Agreement is terminated by either the Company or Parent as provided in
Section 9.1, this Agreement shall become void and have no further effect,
without any liability or obligation on the part of Parent, Merger Subsidiary or
the Company, other than the provisions of Section 4.1(o), Section 4.2(i),
Section 7.4, this Section 9.2, Section 9.5 and Sections 10.5 and 10.6.
SECTION 9.3. AMENDMENT. Subject to Section 1.3(a), this
Agreement may be amended by the parties at any time before or after any required
approval of the transactions contemplated by this Agreement by the shareholders
of the Company; provided, however, that, after any such approval, there shall
not be made any amendment that by law requires further approval by such
shareholders without the further approval of such shareholders. This Agreement
may not be amended except by an instrument in writing signed by each of the
parties hereto.
SECTION 9.4. EXTENSION; WAIVER. Subject to Section 1.3(a), at
any time prior to the Effective Time, the parties may (a) extend the time for
the performance of any of the obligations or other acts of the other parties,
(b) waive any inaccuracies in the representations and warranties contained in
this Agreement or in any document delivered pursuant to this Agreement or
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(c) subject to the proviso of Section 9.3, waive compliance with any of the
agreements or conditions contained in this Agreement. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed by
each of the parties hereto. No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 9.5. FEES AND EXPENSES.
(a) The Company agrees to pay Parent a fee in immediately
available funds equal to $175,000,000.00 promptly, but in no event later than
one business day, after the termination of this Agreement (or such later date as
may apply in the case of clause (i) below) as a result of the occurrence of any
of the events set forth below (a "TRIGGER EVENT"):
(i) the Company shall have received an Acquisition
Proposal, and at any time prior to, or within one year after (unless
this Agreement is terminated pursuant to Section 9.1(a) or Section
9.1(b)(iv)), the termination of this Agreement, the Company shall have
entered into, or shall have publicly announced its intention to enter
into, an agreement or an agreement in principle (other than a
confidentiality agreement permitted by Section 5.5) with respect to any
Acquisition Proposal;
(ii) any person or group (defined in Section 13(d)(3)
of the Exchange Act) (other than Parent or any of its subsidiaries)
shall have become the beneficial owner (defined in Rule 13d-3
promulgated under the Exchange Act) of at least 15% of the outstanding
Company Common Stock or shall have acquired, directly or indirectly, at
least 15% of the assets of the Company and its subsidiaries;
(iii) the Company shall have breached or failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement, which breach
or failure to perform (A) would give rise to the failure of a condition
set forth in subclause (c) or (d) of clause (5) of Annex I, and (B) is
incapable of being or has not been cured by the Company within 10
calendar days after giving written notice to the Company of such breach
or failure to perform; or
(iv) (1) the Board of Directors of the Company (or
any committee thereof) shall have withdrawn or materially modified or
amended in a manner adverse to Parent or Merger Subsidiary its approval
or recommendation of the Offer, the Merger or this Agreement or its
approval of the entry by Parent or Merger Subsidiary into the Tender
Agreement, or shall have failed to make such favorable recommendation,
or (2) the Board of Directors of the Company (or any committee thereof)
shall have recommended to the shareholders of the Company any
Acquisition Proposal or shall have resolved to, or publicly announced
an intention to, do so.
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(b) Except as set forth in this Section 9.5, all fees and
expenses incurred in connection with the Offer and the Merger, this Agreement
and the transactions contemplated by this Agreement shall be paid by the party
incurring such fees or expenses, whether or not the Offer or the Merger is
consummated; provided, that if the Offer is not consummated, expenses incurred
in connection with the printing and mailing of the documents distributed or to
be distributed to stockholders of the Company, all SEC and other regulatory
filing fees with respect to the Form S-4 and the NYSE listing fee with respect
to the listing of Parent Company Stock to be issued in the Offer and the Merger
shall be shared equally by Parent and the Company; provided, further, that if
this Agreement is terminated as a result of the occurrence of a Trigger Event,
in addition to any amounts paid or payable by the Company to Parent pursuant to
Section 9.5(a), the Company shall assume and pay, or reimburse Parent for, all
reasonably documented out-of-pocket fees payable and expenses incurred by Parent
(including the fees and expenses of its counsel) in connection with this
Agreement and the transactions contemplated hereby, up to a maximum of
$10,000,000.00 (which amount shall include the fees and expenses allocated to or
paid by the Company pursuant to the proviso of the immediately preceding
sentence).
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 10.1 shall not limit any covenant or agreement of the parties
which by its terms contemplates performance after the Effective Time.
SECTION 10.2. NOTICES. All notices, requests and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) or by telecopy (with copies by overnight courier) to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to Parent or Merger Subsidiary, to
Computer Associates International, Inc.
One Computer Associates Plaza
Islandia, New York 11788
Attention: Sanjay Kumar
Fax: 516-342-3300
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with a copy to (which shall not constitute notice):
Covington & Burling
1330 Avenue of the Americas
New York, New York 10019
Attention: Scott F. Smith, Esq.
Fax: 212-841-1010
(b) if to the Company, to
Sterling Software, Inc.
300 Crescent Court, Suite 1200
Dallas, Texas 75201
Attention: Sterling Williams
Fax: 214-981-1205
with a copy to (which shall not constitute notice):
Sterling Software, Inc.
300 Crescent Court, Suite 1200
Dallas, Texas 75201
Attention: Don J. McDermett, Jr.
Fax: 214-981-1265
Skadden, Arps, Slate, Meagher & Flom LLP
4 Times Square
New York, New York 10036
Attention: Blaine V. Fogg, Esq.
Richard J. Grossman, Esq.
Fax: 212-735-2000
SECTION 10.3. INTERPRETATION. When a reference is made in this
Agreement to a Section, such reference shall be to a Section of this Agreement
unless otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "INCLUDE",
"INCLUDES" or "INCLUDING" are used in this Agreement, they shall be deemed to be
followed by the words "WITHOUT LIMITATION". References herein to the "KNOWLEDGE
OF THE COMPANY" shall mean the knowledge of the executive officers of the
Company after reasonable inquiry.
SECTION 10.4. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become
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effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
SECTION 10.5. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES.
This Agreement and the Confidentiality Agreement (a) constitute the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter of this Agreement
and (b) except for the provisions of Articles I, II and III and Section 6.2 is
not intended to confer upon any person other than the parties any rights or
remedies hereunder.
SECTION 10.6. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT
THAT THE CONSUMMATION AND EFFECTIVENESS OF THE MERGER AND THE PROVISIONS OF THIS
AGREEMENT WHICH ARE MANDITORILY GOVERNED BY DELAWARE LAW SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, DELAWARE LAW.
SECTION 10.7. ASSIGNMENT. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties; any instrument purporting to
make such assignment shall be void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
SECTION 10.8. ENFORCEMENT. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
SECTION 10.9. SEVERABILITY. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect. Upon such determination that
any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible to the
fullest extent permitted by applicable law in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
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Parent, Merger Subsidiary and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
COMPUTER ASSOCIATES INTERNATIONAL, INC.
By: /s/ STEVEN M. WOGHIN
------------------------------------
Name: Steven M. Woghin
Title: Senior Vice President and
General Counsel
SILVERSMITH ACQUISITION CORP.
By: /s/ STEVEN M. WOGHIN
------------------------------------
Name: Steven M. Woghin
Title: Vice President
STERLING SOFTWARE, INC.
By: /s/ STERLING L. WILLIAMS
------------------------------------
Name: Sterling L. Williams
Title: President and Chief
Executive Officer
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ANNEX I
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, subject to
the terms of this Agreement, Merger Subsidiary shall not be required to accept
for exchange or exchange or deliver any shares of Parent Common Stock for,
(subject to any applicable rules and regulations of the SEC, including Rule
14e-1(c) under the Exchange Act (relating to Merger Subsidiary's obligation to
pay for or return tendered Shares after the termination or withdrawal of the
Offer)) any Shares tendered, if by the expiration of the Offer (as it may be
extended in accordance with the requirements of Section 1.1), (1) the Minimum
Condition shall not have been satisfied, (2) the applicable waiting period under
the HSR Act and any other applicable Antitrust Laws shall not have expired or
been terminated, (3) the Form S-4 shall not have become effective under the
Securities Act or shall be the subject of any stop order or proceedings seeking
a stop order, (4) the shares of Parent Common Stock to be issued in the Offer
and the Merger shall not have been approved for listing on the NYSE, subject to
official notice of issuance, or (5) at any time on or after the date of this
Agreement and prior to the acceptance for exchange of Shares pursuant to the
Offer, any of the following conditions exist:
(a) there shall be instituted or pending any action or
proceeding by any Governmental Entity, (i) challenging or seeking to
make illegal, to delay materially or otherwise directly or indirectly
to restrain or prohibit the making of the Offer, the acceptance for
exchange of, or the exchange or delivery of shares of Parent Common
Stock for, some of or all the Shares by Parent or Merger Subsidiary or
the consummation by Parent or Merger Subsidiary of the Merger, seeking
to obtain material damages or otherwise directly or indirectly relating
to the transactions contemplated by the Tender Agreement, this
Agreement, the Offer or the Merger, (ii) seeking to restrain or
prohibit Parent's or Merger Subsidiary's ownership or operation (or
that of their respective subsidiaries or affiliates) of all or any
portion of the business or assets of the Company and its subsidiaries,
taken as a whole, or of Parent and its subsidiaries, taken as a whole,
or to compel Parent or any of its subsidiaries or affiliates to dispose
of or hold separate all or any portion of the business or assets of the
Company and its subsidiaries, taken as a whole, or of Parent and its
subsidiaries, taken as a whole, (iii) seeking to impose limitations on
the ability of Parent or any of its subsidiaries or affiliates
effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote any Shares acquired or
owned by Parent or any of its subsidiaries or affiliates on all matters
properly presented to the Company's stockholders or (iv) seeking to
require divestiture by Parent or any of its subsidiaries or affiliates
of any Shares; or
(b) there shall be any action taken, or any statute, rule,
regulation, injunction, order or decree proposed, enacted, enforced,
promulgated, issued or deemed applicable to the Tender Agreement, this
Agreement, the Offer or the
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Merger, by any Governmental Entity that, in the judgment of Parent, is
reasonably likely, directly or indirectly, to result in any of the
consequences referred to in clauses (i) through (iv) of paragraph (a)
above, subject as aforesaid; or
(c) the Company shall have breached or failed to perform in
any material respect any of its covenants, obligations or agreements
under this Agreement (other than Section 5.1(k)), or the Company shall
have breached Section 5.1(k) such that the aggregate of all such
breaches would materially and adversely affect the Company and its
subsidiaries taken as a whole or Parent; or
(d) the representations and warranties of the Company set
forth in this Agreement that are qualified as to materiality shall not
be true and correct as of the date of this Agreement and as of the
expiration of the Offer (including any extension thereof) (except to
the extent expressly made as of an earlier date, in which case as of
such date), or any of the representations and warranties set forth in
this Agreement that are not so qualified shall not be true and correct
in any material respect as of the date of this Agreement and as of the
expiration of the Offer (except to the extent expressly made as of an
earlier date, in which case as of such date); provided that this
condition shall not be deemed to exist unless any such breaches of
representation or warranty (without regard to any "MATERIALITY" or
"COMPANY MATERIAL ADVERSE EFFECT" or similar qualifier or threshold),
individually or in the aggregate, has had or could reasonably be
expected to have, a Company Material Adverse Effect; or
(e) this Agreement shall have been terminated in accordance
with its terms; or
(f) (1) the Board of Directors of the Company (or any
committee thereof) shall have withdrawn or materially modified or
amended in a manner adverse to Parent or Merger Subsidiary its approval
or recommendation of the Offer, the Merger or this Agreement, or its
approval of the entry by Merger Subsidiary into the Tender Agreement,
or shall have failed to make such favorable recommendation or (2) the
Board of Directors of the Company (or any committee thereof) shall have
recommended to the shareholders of the Company any Acquisition Proposal
or shall have resolved to, or publicly announced an intention to, do
so; or
(g) the Company shall have entered into, or shall have
publicly announced its intention to enter into, an agreement or
agreement in principle (other than a confidentiality agreement
permitted by Section 5.5 of this Agreement) with respect to any
Acquisition Proposal; or
(h) any person or group (defined in Section 13(d)(3) of the
Exchange Act) (other than Parent or any of its subsidiaries) shall have
become the beneficial owner (defined in Rule 13d-3 promulgated under
the Exchange Act) of at least 15% of the outstanding Shares or shall
have acquired, directly or indirectly, at least 15%
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of the assets of the Company and its subsidiaries;
which, in the good faith judgment of Parent in any such case, and regardless of
the circumstances (including any action or omission by Parent or Merger
Subsidiary) giving rise to any such condition, makes it inadvisable to proceed
with such acceptance for exchange or exchange.
The foregoing conditions are for the sole benefit of Parent
and Merger Subsidiary and may be asserted by Parent regardless of the
circumstances (including any action or omission by Parent or Merger Subsidiary)
giving rise to any such condition or (other than the Minimum Condition) may,
subject to the terms of this Agreement, be waived by Parent and Merger
Subsidiary in their reasonable discretion in whole at any time or in part from
time to time. The failure by Parent or Merger Subsidiary at any time to exercise
its rights under any of the foregoing conditions shall not be deemed a waiver of
any such right; the waiver of any such right with respect to particular facts
and circumstances shall not be deemed a waiver with respect to any other facts
and circumstances, and each such right shall be deemed an ongoing right which
may be asserted at any time or from time to time.
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EXHIBIT 5.1
[LETTERHEAD OF COMPUTER ASSOCIATES INTERNATIONAL, INC.]
February 22, 2000
Computer Associates International, Inc.
One Computer Associates Plaza
Islandia, New York 11749-7000
Ladies and Gentlemen:
I am Senior Vice President and General Counsel of Computer Associates
International, Inc., a Delaware corporation (the "Company"), and I am
familiar with the Registration Statement on Form S-4 (the "Registration
Statement") being filed by the Company with the Securities and Exchange
Commission under the Securities Act of 1933, as amended relating to (i)
the Company's offer (the "Offer") to issue shares of the Company's Common
Stock, par value $.10 per share ("Common Stock"), in exchange for the
outstanding shares of common stock, par value $.10 per share, of Sterling
Software, Inc., a Delaware corporation ("Sterling Software"), and (ii)
the proposed issuance of shares of Common Stock in connection with the merger
(the "Merger") of Silversmith Acquisition Corp., a Delaware corporation and
a wholly owned subsidiary of the Company ("Merger Sub"), into Sterling
Software, pursuant to the terms of the Agreement and Plan of Merger dated as
of February 14, 2000, among the Company, Merger Sub and Sterling Software.
I have reviewed the Company's Restated Certificate of Incorporation and
By-laws and such other corporate records of the Company and documents and
certificates of public officials and others as I have deemed necessary as a
basis for the opinion hereinafter expressed.
Based on the foregoing and having regard for such legal considerations
as I deem relevant, I am of the opinion that the shares of Common Stock
covered by the Registration Statement when delivered in exchange for shares
of Sterling Software common stock pursuant to the Offer and the Merger will
be duly authorized, validly issued, fully paid and nonassessable.
I hereby consent to the use of my name under the caption "Legal Matter"
in the Prospectus constituting a part of the Registration Statement and to
the use of this opinion as an Exhibit to the Registration Statement.
Very truly yours,
/s/ Steven M. Woghin
-----------------------------------
Name: Steven M. Woghin
Title: Senior Vice President
and General Counsel
<PAGE>
EXHIBIT 8.1
[LETTERHEAD OF COVINGTON & BURLING APPEARS HERE]
February 22, 2000
Computer Associates International, Inc.
One Computer Associates Plaza
Islandia, New York 11749-7000
Re: Computer Associates International, Inc.
Registration Statement on Form S-4
Ladies and Gentlemen:
We are acting as special tax counsel to Computer Associates
International, Inc., a Delaware corporation ("Computer Associates"), in
connection with the tender offer (the "Offer") by Computer Associates,
through its wholly owned subsidiary, Silversmith Acquisition Corp., a
Delaware corporation ("Merger Sub"), for shares of common stock of Sterling
Software, Inc., a Delaware corporation ("Sterling Software"), and the
proposed merger (the "Merger") of Merger Sub with and into Sterling Software
pursuant to the Agreement and Plan of Merger dated as of February 14, 2000,
among Computer Associates, Merger Sub, and Sterling Software (the "Merger
Agreement"). You have requested our opinion regarding the accuracy of the
discussion set forth under the heading "Material Federal Income Tax
Consequences" in the Prospectus (the "Prospectus"), which is included in the
Registration Statement on Form S-4 (the "Registration Statement"), filed on
February 22, 2000 with the Securities and Exchange Commission (the
"Commission") in connection with the Offer.
In rendering the opinion expressed in this letter, we have
examined the Merger Agreement, the Registration Statement (including the
Prospectus and all exhibits thereto) and such other documents as we have
deemed necessary or advisable. In our examination of the documents and in our
reliance upon them in issuing this opinion, we have assumed, with your
consent, that all documents submitted to us are authentic originals or, if
submitted as photocopies or telecopies, that they faithfully reproduce the
originals thereof; that all such documents submitted to us have been or will
be duly executed and validly signed (and filed, where applicable) to the
extent required in substantially the same form as they have been provided to
us; that each executed document will constitute the legal, valid, binding,
and enforceable agreement of the signatory parties; that all representations
and statements set forth in such documents, which we have not attempted to
verify independently, are and will remain true, accurate, and complete in all
material respects; that the Offer and the Merger and all related transactions
will be carried out in accordance with the terms and conditions of such
documents without the waiver or modification of any such terms and
conditions; and that all obligations imposed on, or covenants agreed to by,
the parties pursuant to any of such documents have been
<PAGE>
Computer Associates International, Inc.
February 22, 2000
Page 2
or will be performed or satisfied in accordance with their terms in all material
respects. We also have assumed that the Merger qualifies as a statutory merger
under applicable state law. Furthermore, we have assumed that you have disclosed
to us all of the documents that are relevant to the transactions that are the
subject of this opinion.
Based upon and subject to the foregoing, it is our opinion
that, although the discussion set forth under the heading "Material Federal
Income Tax Consequences" in the Prospectus does not discuss all possible United
States federal income tax consequences of the Offer and the Merger to Sterling
Software shareholders who surrender shares of Sterling Software common stock
pursuant to either the Offer or the Merger, or both, such discussion
constitutes, in all material respects, a fair and accurate summary of the United
States federal income tax consequences of the Offer and the Merger that are
likely to be material to such shareholders who hold shares of Sterling Software
common stock as capital assets and who are not subject to special rules under
the Internal Revenue Code of 1986, as amended, or do not otherwise have special
individual circumstances.
Our opinion is expressed as of the date hereof and is based
upon existing statutory, regulatory, administrative, and judicial authority and
guidance in effect as of the date hereof, any of which may be changed at any
time, possibly with retroactive effect. A change in any of the authorities or
guidance upon which our opinion is based could affect our conclusions. In
addition, our opinion is based solely on the documents that we have examined,
the additional information that we have obtained, and the statements,
assumptions, and representations referred to herein that we have assumed with
your consent to be true, accurate, and complete on the date hereof and at the
consummation of the Offer and at the time the Merger becomes effective. Our
opinion cannot be relied upon if any of the material facts contained in such
documents or such additional information, statements, assumptions or
representations referred to herein is, or later becomes, inaccurate. We disclaim
any undertaking to advise you of any subsequent change in the facts stated,
referenced, or assumed herein or any subsequent change in the authorities or
guidance upon which our opinion is based. Our opinion represents our legal
judgment and has no official status of any kind. Accordingly, we cannot assure
you that the Internal Revenue Service or a court having jurisdiction over the
issue will agree with our opinion.
Finally, our opinion is limited to the tax matters
specifically addressed herein, and no other opinions should be inferred beyond
the matters expressly stated. We have not been asked to address, nor have we
addressed, any other tax consequences of the Offer or the Merger, including, but
not limited to, any other federal, state, local, foreign, transfer, sales, or
use tax consequences, or any tax consequences of any other transactions or
events contemplated by or referred to in the Merger Agreement or the
Registration Statement.
We hereby consent to the filing of this letter with the
Commission as an exhibit to the Registration Statement, and we consent to the
reference to us under the heading "Material Federal Income Tax Consequences" in
the Prospectus. In giving our consent, we do not thereby admit that we are in
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Commission thereunder. Except as set forth above, this opinion is not to be
used, circulated, quoted from, or otherwise
<PAGE>
Computer Associates International, Inc.
February 22, 2000
Page 3
referred to for any purpose without our prior written consent.
Very truly yours,
/s/ Covington & Burling
<PAGE>
Exhibit 10.1
AGREEMENT dated as of February 14, 2000 among Silversmith
Acquisition Corp., a Delaware corporation ("BUYER"), and the
holders (the "STOCKHOLDERS") of the shares of common stock,
$0.10 par value (the "SHARES"), of Sterling Software, Inc., a
Delaware CORPORATION (THE "COMPANY"), LISTED ON THE SIGNATURE
PAGES HEREOF.
In order to induce Buyer and Computer Associates
International, Inc., a Delaware corporation ("PARENT"), to enter into an
Agreement and Plan of Merger (the "MERGER AGREEMENT") with the Company, Buyer
has requested that the Stockholders, and the Stockholders have agreed, to enter
into this Agreement.
The parties hereto agree as follows:
ARTICLE I
TENDER OFFER
SECTION 1.1. TENDER OF SHARES. (a) Each Stockholder hereby
agrees, pursuant to the terms and subject to the conditions set forth herein, to
tender for exchange in the Offer (defined in the Merger Agreement) all Shares
currently owned by such Stockholder as set forth on the signature page hereto
and any additional Shares acquired by such Stockholder (whether by purchase or
otherwise) after the date of this Agreement (such "STOCKHOLDER'S SHARES" and,
collectively, the "STOCKHOLDER SHARES").
(b) Not later than two days prior to the expiration of the
Offer (and within five business days of any acquisition by each Stockholder of
any additional Shares), each Stockholder shall, as appropriate, (x) deliver to
the Exchange Agent (the "EXCHANGE AGENT") designated in the Offer (i) a letter
of transmittal with respect to such Stockholder's Shares complying with the
terms of the Offer together with instructions directing the Exchange Agent to
make payment for such Shares directly to the Stockholder, (ii) a certificate or
certificates representing such Stockholder's Shares and (iii) all other
documents or instruments required to be delivered pursuant to the terms of the
Offer (such documents in clauses (i) through (iii) collectively being
hereinafter referred to as the "TENDER DOCUMENTS"), and/or (y) instruct its
broker or such other person who is the holder of record of any Shares
Beneficially Owned (as defined herein) by such Stockholder to tender such Shares
for exchange in the Offer pursuant to the terms and conditions of the Offer.
(c) No Stockholder shall withdraw any tender effected in
accordance with Section 1.1(b).
ARTICLE II
GRANT OF PROXY
SECTION 2.1. PROXY. Each Stockholder hereby revokes any and
all previous proxies granted with respect to such Stockholder's Shares. Each
Stockholder, by this
<PAGE>
Agreement, with respect to such Stockholder's Shares, does hereby constitute and
appoint Buyer, or any nominee of Buyer, with full power of substitution, as its
true and lawful attorney and proxy, for and in its name, place and stead, to
vote each of such Stockholder's Shares as its proxy, at every annual, special or
adjourned meeting, or solicitation of consents, of the stockholders of the
Company (including the right to sign its name (as stockholder) to any consent,
certificate or other document relating to the Company that the law of the State
of Delaware may permit or require) (i) in favor of the adoption of the Merger
Agreement and this Agreement and approval of the Merger (defined in the Merger
Agreement) and the other transactions contemplated hereby and by the Merger
Agreement, (ii) against any proposal for any recapitalization, merger, sale of
assets or other business combination between the Company and any person or
entity (other than the Merger) or any other action or agreement that would
result in a breach of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement not being
fulfilled and (iii) in favor of any other matter necessary for the consummation
of the transactions contemplated by the Merger Agreement and this Agreement.
Each Stockholder further agrees to cause such Stockholder's Shares that are
outstanding and owned by it beneficially to be voted in accordance with the
foregoing. The proxy granted by each Stockholder pursuant to this Article II is
irrevocable, is coupled with an interest and is granted in consideration of
Buyer's entering into this Agreement and the Merger Agreement; provided,
however, that such proxy shall be revoked upon termination of the Merger
Agreement in accordance with its terms.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each of the Stockholders severally represents and warrants to
the Buyer that:
SECTION 3.1. VALID TITLE. Such Stockholder is the sole, true,
lawful and beneficial owner of such Stockholder's Shares with no restrictions on
such Stockholder's voting rights or rights of disposition pertaining thereto,
except for any such restrictions contemplated herein. Except as may be the case
under the arrangements referenced in the footnotes at the end of this Agreement,
none of such Stockholder's Shares is subject to any voting trust or other
agreement or arrangement with respect to the voting of such Shares.
SECTION 3.2. NON-CONTRAVENTION. The execution, delivery and
performance by such Stockholder of this Agreement and, subject to compliance
with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR ACT"), and securities laws, as applicable, the consummation of the
transactions contemplated hereby (i) are within such Stockholder's powers, have
been duly authorized by all necessary action (including any consultation,
approval or other action by or with any other person), (ii) require no action by
or in respect of, or filing with, any governmental body, agency, official or
authority and (iii) do not and will not contravene or constitute a default
under, or give rise to a right of termination, cancellation or acceleration of
any right or obligation of such Stockholder or to a loss of any material benefit
of such Stockholder under, any provision of applicable law or regulation or of
any agreement, judgment, injunction, order, decree, or other instrument binding
on such Stockholder or result in the imposition of any lien on any asset of such
Stockholder other than
-2-
<PAGE>
any such conflicts, breaches, violations, defaults, obligations, rights or
losses that individually or in the aggregate would not (a) materially impair the
ability of Stockholder to perform such Stockholder's obligations under this
Agreement or (b) prevent or delay the consummation of any of the transactions
contemplated hereby. No consent, approval, order or authorization of, or
registration, declaration or filing with or exemption by any Federal, state or
local government or any court, administrative or regulatory agency or commission
or other governmental authority or agency, domestic or foreign, is required by
or with respect to such Stockholder in connection with the execution and
delivery of this Agreement by such Stockholder or the consummation by such
Stockholder of the transactions contemplated by this Agreement, except for
applicable requirements, if any, of Sections 13 and 16 of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and the rules and
regulations thereunder. If this Agreement is being executed in a representative
or fiduciary capacity, the person signing this Agreement has full power and
authority to enter into and perform such Agreement.
SECTION 3.3. BINDING EFFECT. This Agreement has been duly
executed and delivered by such Stockholder and, assuming that this Agreement
constitutes the valid and binding obligations of the other parties hereto, is
the valid and binding agreement of such Stockholder, enforceable against such
Stockholder in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and to general principles of
equity.
SECTION 3.4. TOTAL SHARES. Each Stockholder is the record and
Beneficial Owner of the number of Shares set forth next to such Stockholder's
name on the signature pages hereto. Such Shares constitute all of the Shares
owned of record or Beneficially Owned by such Stockholder as of the date hereof.
Except as set forth on such signature pages, neither such Stockholder nor any
beneficial owner or owners of such Stockholder's Shares own any options to
purchase or rights to subscribe for or otherwise acquire any securities of the
Company. Each Stockholder has sole voting power and sole power to issue
instructions with respect to the matters set forth in Article II of this
Agreement, sole power of disposition, sole power of conversion and sole power to
agree to all of the matters set forth in this Agreement, in each case with
respect to all of the Shares beneficially owned by such Stockholder with no
limitations, qualifications or restrictions on such rights, subject to
applicable securities laws and the terms of this Agreement. The terms
"BENEFICIALLY OWN" or "BENEFICIAL OWNERSHIP" with respect to any securities
shall mean having "BENEFICIAL OWNERSHIP" of such securities as determined
pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT").
SECTION 3.5. FINDER'S FEES. No investment banker, broker or
finder is entitled to a commission or fee from Buyer in respect of this
Agreement based upon any arrangement or agreement made by or on behalf of such
Stockholder.
-3-
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer represents and warrants to each of the Stockholders:
SECTION 4.1. CORPORATE POWER AND AUTHORITY. Buyer has all
requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution, delivery and performance by
Buyer of this Agreement and the consummation by Buyer of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Buyer. This Agreement has been duly executed and delivered by
Buyer and is a valid and binding agreement of Buyer, enforceable against it in
accordance with its terms.
SECTION 4.2. NON-CONTRAVENTION. The execution, delivery and
performance by Buyer of this Agreement and, subject to compliance with the HSR
Act and securities laws, as applicable, the consummation of the transactions
contemplated hereby (i) require no action by or in respect of, or filing with,
any governmental body, agency, official or authority and (ii) do not and will
not contravene or constitute a default under, or give rise to a right of
termination, cancellation or acceleration of any right or obligation of Buyer or
to a loss of any material benefit of Buyer under, any provision of applicable
law or regulation or of any agreement, judgment, injunction, order, decree, or
other instrument binding on Buyer or result in the imposition of any lien on any
asset of Buyer other than any such conflicts, breaches, violations, defaults,
obligations, rights or losses that individually or in the aggregate would not
(a) materially impair the ability of Buyer to perform Buyer's obligations under
this Agreement or (b) prevent or delay the consummation of any of the
transactions contemplated hereby. No consent, approval, order or authorization
of, or registration, declaration or filing with or exemption by any Federal,
state or local government or any court, administrative or regulatory agency or
commission or other governmental authority or agency, domestic or foreign, is
required by or with respect to Buyer in connection with the execution and
delivery of this Agreement by Buyer or the consummation by Buyer of the
transactions contemplated by this Agreement, except for applicable requirements,
if any, of the HSR Act, the Securities Act of 1933, Sections 13 and 16 of the
Exchange Act and the rules and regulations thereunder.
ARTICLE V
COVENANTS OF THE STOCKHOLDERS
Each of the Stockholders hereby covenants and agrees that:
SECTION 5.1. NO PROXIES FOR OR ENCUMBRANCES ON STOCKHOLDER
SHARES. Except pursuant to the terms of this Agreement or the Tender Documents,
such Stockholder shall not, without the prior written consent of Buyer, directly
or indirectly, (i) grant any proxies (other than proxies relating to the
election of management's slate of directors at an annual meeting of the
Company's stockholders, and other routine matters which would not require the
filing of a preliminary proxy statement under Rule 14a-6(a) of the Exchange Act)
or enter into any voting
-4-
<PAGE>
trust or other agreement or arrangement with respect to the voting of any such
Stockholder's Shares or (ii) sell, assign, transfer, encumber or otherwise
dispose of, or enter into any contract, option or other arrangement or
understanding with respect to the direct or indirect sale, assignment, transfer,
encumbrance or other disposition of, any such Stockholder's Shares during the
term of this Agreement. Except as permitted by the preceding sentences, such
Stockholder shall not seek or solicit any such sale, assignment, transfer,
encumbrance or other disposition or any such contract, option or other
arrangement or assignment or understanding and agrees to notify Buyer promptly
and to provide all details requested by Buyer if such Stockholder shall be
approached or solicited, directly or indirectly, by any person with respect to
any of the foregoing.
SECTION 5.2. NO SHOPPING. Such Stockholder, in the capacity as
a stockholder, shall not directly or indirectly (i) subject to the fiduciary
duty under applicable law of such Stockholder as a director of the Company (if
such Stockholder is such a director) as further provided in the Merger
Agreement, solicit, initiate or encourage (or authorize any person to solicit,
initiate or encourage) any inquiry, proposal or offer from any person to acquire
the business, property or capital stock of the Company or any direct or indirect
subsidiary thereof, or any acquisition of a substantial equity interest in, or a
substantial amount of the assets of, the Company or any direct or indirect
subsidiary thereof, whether by merger, purchase of assets, tender offer or other
transaction or (ii) subject to the fiduciary duty under applicable law of such
Stockholder as a director of the Company (if such Stockholder is such a
director) as further provided in the Merger Agreement, participate in any
discussion or negotiations regarding, or furnish to any other person any
information with respect to, or otherwise cooperate in any way with, or
participate in, facilitate or encourage any effort or attempt by any other
person to do or seek any of the foregoing. Such Stockholder shall promptly
advise Buyer of the terms of any communications it may receive in the capacity
as a stockholder relating to any of the foregoing.
SECTION 5.3. CONDUCT OF STOCKHOLDERS. Such Stockholder will
not (i) take, agree or commit to take any action that would make any
representation and warranty of such Stockholder hereunder inaccurate in any
respect as of any time prior to the termination of this Agreement or (ii) omit,
or agree or commit to omit, to take any action necessary to prevent any such
representation or warranty from being inaccurate in any respect at any such
time.
SECTION 5.4. DISCLOSURE. Each Stockholder hereby permits Buyer
to publish and disclose in the offer documents and, if approval of the Company's
stockholders is required under applicable law, a proxy statement (including all
documents and schedules filed with the SEC) their identity and ownership of the
Shares and the nature of their commitments, arrangements and understandings
under this Agreement.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. EXPENSES. All costs and expenses incurred in
connection with this Agreement shall be paid by the party incurring such cost or
expense.
-5-
<PAGE>
SECTION 6.2. ADDITIONAL AGREEMENTS. Subject to the terms and
conditions of this Agreement, each of the Buyer and each Stockholder, in the
capacity as a Stockholder, agrees to use all reasonable efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations and which
may be required under any agreements, contracts, commitments, instruments,
understandings, arrangements or restrictions of any kind to which such party is
a party or by which such party is governed or bound, to consummate and make
effective the transactions contemplated by this Agreement.
SECTION 6.3. TERMINATION. This Agreement and the proxies
granted pursuant to Section 2.1 will terminate immediately upon the termination
of the Merger Agreement in accordance with its terms.
SECTION 6.4. SPECIFIC PERFORMANCE. The parties hereto agree
that the Buyer may be irreparably damaged if for any reason any Stockholder
failed to tender in the Offer, and to not withdraw, such Stockholder's Shares
(or other securities covered by this Agreement) in accordance with the terms of
this Agreement or to perform any of its other obligations under this Agreement,
and that the Buyer would not have an adequate remedy at law for money damages in
such event. Accordingly, the Buyer shall be entitled to specific performance and
injunctive and other equitable relief to enforce the performance of this
Agreement by each Stockholder. This provision is without prejudice to any other
rights that the Buyer may have against any Stockholder for any failure to
perform its obligations under this Agreement.
SECTION 6.5. NOTICES. All notices, requests, claims, demands
and other communications hereunder shall be deemed to have been duly given when
delivered in person, by telecopy, or by registered or certified mail (postage
prepaid, return receipt requested) to such party at its address set forth on the
signature page hereto.
SECTION 6.6. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained in this Agreement shall not survive
delivery of and payment for the Stockholder Shares or the termination of this
Agreement.
SECTION 6.7. AMENDMENTS. This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of a
written agreement executed by all the parties hereto.
SECTION 6.8. SUCCESSORS AND ASSIGNS. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, PROVIDED that Buyer may assign its
rights and obligations to any affiliate of Buyer and PROVIDED, FURTHER, that no
Stockholder may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the consent of the Buyer.
SECTION 6.9. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO THE PRINCIPLES OF
-6-
<PAGE>
CONFLICTS OF LAWS THEREOF, EXCEPT TO THE EXTENT DELAWARE OR FEDERAL LAW
MANDATORILY GOVERNS.
SECTION 6.10. JURISDICTION. Each of the parties hereto (a)
consents to submit itself to the exclusive personal jurisdiction of any court of
the United States located in the State of Delaware or of any Delaware state
court in the event any dispute arises out of this Agreement or the transactions
contemplated by this Agreement, and (b) agrees that it will not attempt to deny
or defeat such personal jurisdiction by motion or other request for leave from
any such court.
SECTION 6.11. COUNTERPARTS; EFFECTIVENESS. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
SILVERSMITH ACQUISITION CORP.
By: /s/ Steven M. Woghin
---------------------------
Steven M. Woghin
Vice President
Computer Associates
International, Inc.
One Computer Associates Plaza
Islandia, New York 11788
Fax: (516) 342-3300
SHARES OPTIONS
-0- 100,000 @ $27.625
/s/ Paul V. Barber
---------------------------
Paul V. Barber
c/o JMI Services
12680 High Bluff Drive
Suite 200
San Diego, CA 92130
Fax:
SHARES OPTIONS
15,700 75,000 @ $14.125
/s/ Robert J. Donachie
---------------------------
Robert J. Donachie
c/o The Donachie Company
4925 Greenville Avenue
Suite 730
Dallas, Texas 75206
Fax: (214) 369-2190
SHARES OPTIONS
1,600 10,000 @ $14.125
/s/ Michael C. French
---------------------------
Michael C. French
3840 Greenbrier
Dallas, Texas 75225
Fax: (214) 368-1116
-8-
<PAGE>
SHARES OPTIONS
2,130 (ESPP) 50,000 @ $13.625
284 (401(k)) 125,000 @ $15.625 /s/ F.L. "Mike" Harvey
---------------------------
F.L. "Mike" Harvey
6302 Windcrest Drive
Apt. 727
Plano, Texas 75024
Fax: (972) 801-6067
SHARES OPTIONS
1,489 (ESPP) 73,600 @ $14.125
479 (401(k)) 72,400 @ $13.625 /s/ Don J. McDermett, Jr.
84,000 @ $25.9375 ---------------------------
60,000 @ $20.1875 Don J. McDermett, Jr.
4543 Rheims Place
Dallas, Texas 75205
Fax: (214) 520-3307
SHARES OPTIONS
5,000 (Ptshp.) 100,000 @ $14.125
/s/ Donald R. Miller, Jr.
---------------------------
Donald R. Miller, Jr.
6800 Hunters Glen
Dallas, Texas 75205
Fax: (214)
SHARES OPTIONS
95 (ESPP) 200,000 @ $14.125
11,536 (401(k)) 50,000 @ $13.625 /s/ B. Carole Morton
57,750 50,000 @ $25.9375 ---------------------------
B. Carole Morton
17233 Orozco Street
Granada Hills, CA 91344
Fax: (818)
SHARES OPTIONS
-0- 75,000 @ $14.1875
/s/ Alan W. Steelman
(Does not include ---------------------------
Shares held by Alan W. Steelman
family members) 7112 Round Hill Road
McKinney, Texas 75070
Fax: (972) 569-9314
-9-
<PAGE>
SHARES OPTIONS
2,080 (ESPP) 51,000 @ $14.125
6,232 (401(k)) 109,000 @ $15.625 /s/ Mark A. Theel
1,404 (IRA) 90,000 @ $25.9375 ---------------------------
(Does not include shares Mark A. Theel
held by family members) Three St. Andrews Court
Frisco, Texas 75034
Fax: (972) 624-0719
SHARES OPTIONS
2,251 (ESPP) 775,000 @ $14.125
9,964 (401(k)) 50,000 @ $13.625 /s/ Geno P. Tolari
---------------------------
Geno P. Tolari
5300 Deloache Avenue
Dallas, Texas 75220
Fax: (214) 691-0671
SHARES OPTIONS
7,000 (Family Trusts) 3,200,000 @ $14.125
520 (401(k)) 400,000 @ $13.625 /s/ Sterling L. Williams
(Does not include shares ---------------------------
held by family members) Sterling L. Williams
3618 N. Versailles
Dallas, Texas 75220
Fax: (214) 520-6454
SHARES OPTIONS
1,273 (ESPP) 197,400 @ $15.625
231 (401(k)) 100,000 @ $25.9375 /s/ R. Logan Wray
77,600 @ $20.1875 ---------------------------
R. Logan Wray
5212 Farquhar
Dallas, Texas 75209
Fax: (214) 358-3261
SHARES OPTIONS
883,398 (Family Trusts) 800,000 @ $14.125 (Ptshp.)
513,148 (Ptshp.) 100,000 @ $13.625 (Ptshp.) /s/ Charles J. Wyly, Jr.
4,200 (401(k)) ---------------------------
Charles J. Wyly, Jr.
5906 Deloache Avenue
Dallas, Texas 75225
Fax: (214)
-10-
<PAGE>
SHARES OPTIONS
158,880 (Ptshp.) 200,000 @ $14.125 (Ptshp.)
425 (401(k)) /s/ Evan A. Wyly
---------------------------
Evan A. Wyly
6107 St. Andrews
Dallas, Texas 75205
Fax: (214)
SHARES OPTIONS
521,458 (Family Trusts) 1,525,000 @ $14.125
227,224 (Ptshp.) 200,000 @ $13.625 /s/ Sam Wyly
4,799 (401(k)) ---------------------------
(Does not include Sam Wyly
shares/options held 3905 Beverly Drive
by family members) Dallas, Texas 75205
Fax: (214) 880-4092
-11-
<PAGE>
AMENDMENT TO
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS AMENDMENT TO CHANGE IN CONTROL SEVERANCE AGREEMENT (this "Amendment"),
dated as of February 14, 2000, by and among Sterling Software, Inc., a
Delaware corporation (the "Company"), Computer Associates International,
Inc., a Delaware corporation (the "Parent") and Sam Wyly (the "Executive").
WITNESSETH:
WHEREAS, the Company and the Executive are parties to a Change in
Control Severance Agreement, dated as of November 15, 1999 (the "Agreement");
and
WHEREAS, the Company, the Parent and the Executive desire to amend
the Agreement as set forth in this Amendment;
NOW THEREFORE, the Company, the Parent and the Executive agree as
follows:
1. This Amendment shall be of no force and effect if the Offer
(as defined in the Agreement and Plan of Merger, dated as of
February 14, 2000, by and among the Parent, Silversmith
Acquisition Corp. and the Company) is not consummated.
2. The Agreement is hereby amended by replacing every occurrence
of the term "Employee Benefits" with the term "Medical
Benefits" and by the addition of a definition of Medical
Benefits as follows:
(c) "Medical Benefits" means the medical, dental, health,
hospital, disability and vision benefits provided under any
and all benefit policies, plans, programs or arrangements of
the Company that may now exist or any successor policies,
plans, programs or arrangements that may be adopted hereafter
by the Company in which the Executive is entitled to
participate or in which the Executive becomes entitled to
participate.
1
<PAGE>
3. Section 4(a)(i) is hereby amended to read as follows:
(i) pay to the Executive, within five (5) business days after the
Termination Date, a lump sum payment in an amount equal to
$15,899,901 as satisfaction in full for Executive's severance
pay and loss of certain perquisites and benefits that would
otherwise have been enjoyed by the Executive and for the
execution of the Executive's non-competition covenant in
Section 10 hereof. The parties agree that twenty-five (25)
percent of the lump sum payment shall be allocable to, and
deemed as consideration for, the Executive's non-competition
covenant in Section 10 hereof.
4. Section 4(a)(ii) is hereby amended in its entirety to read as
follows:
(ii) for 84 months following the Termination Date, arrange at its
sole expense, to provide the Executive with Medical Benefits
that are substantially similar to the better of (when
considered in the aggregate) (x) those Medical Benefits which
the Executive was receiving or entitled to receive immediately
prior to the Change in Control, or (y) those Medical Benefits
which the Executive was receiving or entitled to receive
immediately prior to the Termination Date. If and to the
extent that any Medical Benefit described above in this
Section 4(a)(ii) cannot be provided under any applicable law
or regulation or under any policy, plan, program or
arrangement of the Company, then the Company will take all
action necessary to ensure that such Medical Benefit is
provided through other means to the Executive, his dependents
and beneficiaries, as applicable.
5. Section 4(a)(iv) of the Agreement is hereby amended to read in
its entirety as follows:
(iv) pay to the Executive, within five (5) business days of the
Termination Date, a lump sum in cash in an amount equal to the
amount accrued on the books of the Company in respect of the
Split Dollar Life Insurance policy applicable to the
Executive.
2
<PAGE>
6. The Company shall give the Executive the right to purchase
(such right to remain open until the expiration of thirty (30)
days from the Termination Date) at current book value, the
Company vehicle which was customarily provided to the
Executive as of immediately prior to the Executive's Date of
Termination.
7. The Agreement is hereby amended by the addition of a new
Section 10 (and amended as necessary in respect of required
renumbering):
10. NON-COMPETITION; CONFIDENTIALITY: (a) Executive agrees and acknowledges
that reasonable limits on his ability to engage in activities which are
competitive with the Company are warranted in order to protect the Company's
trade secrets and proprietary information and are warranted in order to
protect the Company in developing and maintaining its reputation, good will
and status in the marketplace. In that regard, during the 60 months following
the Termination Date (the "Continuation Period"), the Executive will not
directly or indirectly, on Executive's own behalf or in the service of or on
behalf of any other individual or entity, either as a proprietor, employee,
agent, independent contractor, consultant, director, officer, partner or
stockholder (other than a stockholder of a corporation listed on a national
securities exchange or whose stock is regularly traded in the
over-the-counter market, provided that the Executive at no time owns,
directly or indirectly, in excess of 5% of the outstanding stock of any class
of any such corporation):
(i) participate or engage in any activities or business developing,
manufacturing, marketing or distributing any products or services offered by
the Company as of the Effective Time (as defined in the Agreement and Plan of
Merger, dated as of February 14, 2000, by and among the Parent, Silversmith
Acquisition Corp. and the Company), or any products or services offered by
the Company subsequent to the Effective Time and in which the Executive
actively participated, recognizing that the Company offers products and
services globally ("Competitive Activities"), including, without limitation,
(A) selling goods or rendering services of the type (or similar to the type)
sold or rendered by the Company, whether by means of electronic, traditional
or other form of commerce; (B) soliciting any person or entity that is a
current or prospective customer or has been a customer, in each case, of the
Company, while the Executive has been employed by the Company (provided that
it shall not be deemed a breach of this Agreement if the Executive solicits
such customers for goods or services unrelated to the Competitive Activities)
and (C) assisting any person in any way to do, or attempt to do, anything
prohibited by clauses (A) or (B) above; or
3
<PAGE>
(ii) solicit (other than pursuant to general, non-targeted
advertisements) any employee of the Company, who was an employee at or prior
to the Effective Time, to leave the employment of the Company.
(b) Notwithstanding anything to the contrary herein, Executive may
remain a director at those companies for which Executive is a director as of
the Effective Time, and may engage in any activities or businesses for which
the Company has given permission in writing, which shall not be unreasonably
withheld (or delayed) following the expiration of three years from the date
the Offer is consummated, provided Executive's engaging in such activities or
business would not have a material adverse impact on any of the Company's
lines of businesses.
(c) (i) The Executive shall not, without the written consent of the
Company, disclose to any other person or use, whether directly or indirectly,
any Confidential Information (as hereinafter defined) relating to or used by
the Company, whether in written, oral or other form. "Confidential
Information" shall mean information about the Company, and its clients and
customers that is not disclosed by the Company for financial reporting
purposes and that was learned by the Executive in the course of employment
with the Company, including (without limitation) any proprietary knowledge,
product and service designs, trade secrets, manuals, technical information
and plans, contracts, systems, procedures, databases, electronic files, disks
and printouts, correspondence, internal reports, personnel files, information
about Company employees relating to their education, experience, skills,
abilities, compensation and benefits, and inter-personal relationships with
suppliers to and customers of Company, sales and advertising material,
business plans, marketing plans, financial data (including without limitation
the revenues, costs or profits associated with services), customer and
industry lists, customer information, customer lists coupled with product or
service pricing, customer contracts, supplier contacts and other contact
information, pricing policies, supplies, agents, risk analyses, engineering
information and computer screen designs and computer input and output
specifications, inclusive of any pertinent documentation, techniques,
processes, technical information and know how. The Executive acknowledges
that such Confidential Information is specialized, unique in nature and of
great value to the Company, and that such information gives the Company a
competitive advantage. The Executive's obligations under this Section 10(c)
shall survive the termination of the Continuation Period.
4
<PAGE>
(ii) Confidential Information does not include information
which (A) is or becomes part of the public domain other than as a result of
the Executive's disclosure; or (B) becomes available to the Executive on a
non-confidential basis from a source other than the Company, provided that
source is not bound with respect to that information by a confidentiality
agreement with the Company or otherwise prohibited from transmitting that
information by a contractual, legal or other obligation.
(iii) If the Executive is requested or (in the opinion of
Executive's counsel) required by law or judicial order to disclose any
Confidential Information, the Executive shall provide the Company with prompt
notice of any such request or requirement so that the Company may seek an
appropriate protective order or waiver of the Executive's compliance with the
provisions of this Section 10(c). The Executive will not oppose any
reasonable action by, and will cooperate with, the Company to obtain an
appropriate protective order or other reliable assurance that confidential
treatment will be accorded the Confidential Information. If, failing the
entry of a protective order or the receipt of a waiver hereunder, the
Executive is, in the opinion of Executive's counsel, compelled by law to
disclose a portion of the Confidential Information, the Executive may
disclose to the relevant tribunal without liability hereunder that portion of
the Confidential Information which counsel advises the Executive he is
legally required to disclose, and each of the parties hereto agrees to
exercise such party's best efforts to obtain assurance that confidential
treatment will be accorded such Confidential Information.
(d) If an award by a court or arbitration panel declares that any
term or provision of this Section 10 is excessive in duration or scope or is
unreasonable or unenforceable, the parties agree that the court or
arbitration panel making such determination shall have the power to reduce
the scope, duration or area or the term or provision, to delete specific
words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is a valid and enforceable term or
provision, and this Section 10 shall be enforceable as so modified.
5
<PAGE>
(e) In the event of a breach or threatened breach by the Executive
of the provisions of this Section 10, the Company's remedies in respect of
such breach or threatened breach shall be limited to injunctive relief (and
the Executive acknowledges that the Company may not have an adequate remedy
at law and may seek injunctive relief without the requirement of posting
security) and the recovery of actual damages suffered by the Company as a
result of a breach of this Section 10 by the Executive. Notwithstanding the
foregoing, in no case shall any portion of the lump sum payment set forth in
Section 4(a)(i) or any Gross Up Payment hereunder (or any other payments made
hereunder) be recoverable by the Parent or the Company (or subject to any
set-off, counterclaim or recoupment) in respect of damages resulting from a
breach of this Section 10.
(f) For the purposes of this Section 10, the term "Company" includes
not only Sterling Software, Inc., but also any subsidiary or affiliated
corporation of Sterling Software, Inc.
8. Parent shall guarantee the Company's obligations pursuant to
the Agreement, including without limitation, Sections 5 and 7
thereof. The Parent and the Company hereby acknowledge that
the obligations set forth in such Sections will survive any
termination or expiration of this Agreement or termination of
Executive's employment for any reason. Each party will notify
the other in writing of any claim by the Internal Revenue
Service or any other taxing authority that, if successful,
would require the payment by the Company of a Gross-Up
Payment. Such notification shall be given as soon as
practicable but no later than ten (10) business days after
such party is informed in writing of such a claim and such
party shall apprise the other party of the nature of such
claim and the date on which such claim is requested to be
paid. The Parent and the Company shall bear and pay directly
all costs and expenses (including legal fees and any interest
and penalties) incurred in connection with any such claim or
proceeding, and shall indemnify and hold the Executive
harmless, on an after-tax basis, as provided in Section 5(a),
for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. The Company
and the Parent also shall pay to the Executive all legal fees
and expenses incurred by the Executive in connection with any
tax audit or proceeding to the extent attributable to the
application of
6
<PAGE>
section 4999 of the Code to any payment or benefit provided
hereunder. Such payments shall be made within five (5)
business days after delivery of the Executive's written
requests for payment accompanied with evidence of fees and
expenses incurred. The Company's and Parent's obligation
with respect to the Gross Up Payment and reimbursement of
related legal fees and expenses shall be absolute and
unconditional and shall not be affected by any circumstances,
including, without limitation, any setoff, counterclaim,
recoupment, defense or other right which the Company or the
Parent may have against the Executive or anyone else. Except
where provided herein to the contrary, all amounts payable by
the Company or the Parent hereunder shall be paid without
notice or demand. Each and every payment made hereunder by the
Company or the Parent shall be final, and the Company and the
Parent will not seek to recover all or any part of such
payment from the Executive, or from whomsoever may be entitled
thereto, for any reason whatsoever.
9. Except as amended hereby, all other provisions of the
Agreement shall remain in full force and effect.
10. The validity, interpretation, construction and performance of
this Amendment will be governed by and construed in accordance
with the substantive laws of Delaware, without giving effect
to the conflict of laws principles of such State.
11. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of
which together will constitute one and the same agreement.
7
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be
duly executed and delivered as of the first date first written above.
STERLING SOFTWARE, INC.
By /s/ Don J. McDermett, Jr.
-----------------------------------
Name: Don J. McDermett, Jr.
Title: Senior Vice President &
General Counsel
COMPUTER ASSOCIATES
INTERNATIONAL, INC.
By /s/ Steven M. Woghin
-----------------------------------
Name: Steven M. Woghin
Title: Senior Vice President &
General Counsel
/s/ Sam Wyly
--------------------------------------
Sam Wyly
8
<PAGE>
AMENDMENT TO
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS AMENDMENT TO CHANGE IN CONTROL SEVERANCE AGREEMENT (this "Amendment"),
dated as of February 14, 2000, by and among Sterling Software, Inc., a Delaware
corporation (the "Company"), Computer Associates International, Inc., a Delaware
corporation (the "Parent") and Charles J. Wyly (the "Executive").
WITNESSETH:
WHEREAS, the Company and the Executive are parties to a Change in
Control Severance Agreement, dated as of November 15, 1999 (the "Agreement");
and
WHEREAS, the Company, the Parent and the Executive desire to amend the
Agreement as set forth in this Amendment;
NOW THEREFORE, the Company, the Parent and the Executive agree as
follows:
1. This Amendment shall be of no force and effect if the Offer (as
defined in the Agreement and Plan of Merger, dated as of February
14, 2000, by and among the Parent, Silversmith Acquisition Corp.
and the Company) is not consummated.
2. The Agreement is hereby amended by replacing every occurrence of
the term "Employee Benefits" with the term "Medical Benefits" and
by the addition of a definition of Medical Benefits as follows:
(c) "Medical Benefits" means the medical, dental, health, hospital,
disability and vision benefits provided under any and all benefit
policies, plans, programs or arrangements of the Company that may
now exist or any successor policies, plans, programs or
arrangements that may be adopted hereafter by the Company in
which the Executive is entitled to participate or in which the
Executive becomes entitled to participate.
<PAGE>
3. Section 4(a)(i) is hereby amended to read as follows:
(i) pay to the Executive, within five (5) business days after the
Termination Date, a lump sum payment in an amount equal to
$7,967,093 as satisfaction in full for Executive's severance pay
and loss of certain perquisites and benefits that would otherwise
have been enjoyed by the Executive and for the execution of the
Executive's non-competition covenant in Section 10 hereof. The
parties agree that twenty-five (25) percent of the lump sum
payment shall be allocable to, and deemed as consideration for,
the Executive's non-competition covenant in Section 10 hereof.
4. Section 4(a)(ii) is hereby amended in its entirety to read as
follows:
(ii) for 84 months following the Termination Date, arrange at its sole
expense, to provide the Executive with Medical Benefits that are
substantially similar to the better of (when considered in the
aggregate) (x) those Medical Benefits which the Executive was
receiving or entitled to receive immediately prior to the Change
in Control, or (y) those Medical Benefits which the Executive was
receiving or entitled to receive immediately prior to the
Termination Date. If and to the extent that any Medical Benefit
described above in this Section 4(a)(ii) cannot be provided under
any applicable law or regulation or under any policy, plan,
program or arrangement of the Company, then the Company will take
all action necessary to ensure that such Medical Benefit is
provided through other means to the Executive, his dependents and
beneficiaries, as applicable.
5. Section 4(a)(iv) of the Agreement is hereby deleted in its
entirety.
6. The Company shall give the Executive the right to purchase (such
right to remain open until the expiration of thirty (30) days
from the Termination Date) at current book value, the Company
vehicle which was customarily provided to the Executive as of
immediately prior to the Executive's Date of Termination.
7. The Agreement is hereby amended by the addition of a new Section
10 (and amended as necessary in respect of required renumbering):
2
<PAGE>
10. NON-COMPETITION; CONFIDENTIALITY: (a) Executive agrees and acknowledges that
reasonable limits on his ability to engage in activities which are competitive
with the Company are warranted in order to protect the Company's trade secrets
and proprietary information and are warranted in order to protect the Company in
developing and maintaining its reputation, good will and status in the
marketplace. In that regard, during the 60 months following the Termination Date
(the "Continuation Period"), the Executive will not directly or indirectly, on
Executive's own behalf or in the service of or on behalf of any other individual
or entity, either as a proprietor, employee, agent, independent contractor,
consultant, director, officer, partner or stockholder (other than a stockholder
of a corporation listed on a national securities exchange or whose stock is
regularly traded in the over-the-counter market, provided that the Executive at
no time owns, directly or indirectly, in excess of 5% of the outstanding stock
of any class of any such corporation):
(i) participate or engage in any activities or business developing,
manufacturing, marketing or distributing any products or services offered by the
Company as of the Effective Time (as defined in the Agreement and Plan of
Merger, dated as of February 14, 2000, by and among the Parent, Silversmith
Acquisition Corp. and the Company), or any products or services offered by the
Company subsequent to the Effective Time and in which the Executive actively
participated, recognizing that the Company offers products and services globally
("Competitive Activities"), including, without limitation, (A) selling goods or
rendering services of the type (or similar to the type) sold or rendered by the
Company, whether by means of electronic, traditional or other form of commerce;
(B) soliciting any person or entity that is a current or prospective customer or
has been a customer, in each case, of the Company, while the Executive has been
employed by the Company (provided that it shall not be deemed a breach of this
Agreement if the Executive solicits such customers for goods or services
unrelated to the Competitive Activities) and (C) assisting any person in any way
to do, or attempt to do, anything prohibited by clauses (A) or (B) above; or
(ii) solicit (other than pursuant to general, non-targeted
advertisements) any employee of the Company, who was an employee at or prior to
the Effective Time, to leave the employment of the Company.
(b) Notwithstanding anything to the contrary herein, Executive may
remain a director at those companies for which Executive is a director as of the
Effective Time, and may engage in any activities or businesses for which the
Company has given permission in writing, which shall not be unreasonably
withheld
3
<PAGE>
(or delayed) following the expiration of three years from the date the Offer is
consummated, provided Executive's engaging in such activities or business would
not have a material adverse impact on any of the Company's lines of businesses.
(c) (i) The Executive shall not, without the written consent of the
Company, disclose to any other person or use, whether directly or indirectly,
any Confidential Information (as hereinafter defined) relating to or used by the
Company, whether in written, oral or other form. "Confidential Information"
shall mean information about the Company, and its clients and customers that is
not disclosed by the Company for financial reporting purposes and that was
learned by the Executive in the course of employment with the Company, including
(without limitation) any proprietary knowledge, product and service designs,
trade secrets, manuals, technical information and plans, contracts, systems,
procedures, databases, electronic files, disks and printouts, correspondence,
internal reports, personnel files, information about Company employees relating
to their education, experience, skills, abilities, compensation and benefits,
and inter-personal relationships with suppliers to and customers of Company,
sales and advertising material, business plans, marketing plans, financial data
(including without limitation the revenues, costs or profits associated with
services), customer and industry lists, customer information, customer lists
coupled with product or service pricing, customer contracts, supplier contacts
and other contact information, pricing policies, supplies, agents, risk
analyses, engineering information and computer screen designs and computer input
and output specifications, inclusive of any pertinent documentation, techniques,
processes, technical information and know how. The Executive acknowledges that
such Confidential Information is specialized, unique in nature and of great
value to the Company, and that such information gives the Company a competitive
advantage. The Executive's obligations under this Section 10(c) shall survive
the termination of the Continuation Period.
(ii) Confidential Information does not include information which (A) is
or becomes part of the public domain other than as a result of the Executive's
disclosure; or (B) becomes available to the Executive on a non-confidential
basis from a source other than the Company, provided that source is not bound
with respect to that information by a confidentiality agreement with the Company
or otherwise prohibited from transmitting that information by a contractual,
legal or other obligation.
(iii) If the Executive is requested or (in the opinion of Executive's
counsel) required by law or judicial order to disclose any Confidential
Information,
4
<PAGE>
the Executive shall provide the Company with prompt notice of any such
request or requirement so that the Company may seek an appropriate protective
order or waiver of the Executive's compliance with the provisions of this
Section 10(c). The Executive will not oppose any reasonable action by, and
will cooperate with, the Company to obtain an appropriate protective order or
other reliable assurance that confidential treatment will be accorded the
Confidential Information. If, failing the entry of a protective order or the
receipt of a waiver hereunder, the Executive is, in the opinion of
Executive's counsel, compelled by law to disclose a portion of the
Confidential Information, the Executive may disclose to the relevant tribunal
without liability hereunder that portion of the Confidential Information
which counsel advises the Executive he is legally required to disclose, and
each of the parties hereto agrees to exercise such party's best efforts to
obtain assurance that confidential treatment will be accorded such
Confidential Information.
(d) If an award by a court or arbitration panel declares that any term
or provision of this Section 10 is excessive in duration or scope or is
unreasonable or unenforceable, the parties agree that the court or arbitration
panel making such determination shall have the power to reduce the scope,
duration or area or the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is a valid and enforceable term or provision, and this Section 10
shall be enforceable as so modified.
(e) In the event of a breach or threatened breach by the Executive of
the provisions of this Section 10, the Company's remedies in respect of such
breach or threatened breach shall be limited to injunctive relief (and the
Executive acknowledges that the Company may not have an adequate remedy at law
and may seek injunctive relief without the requirement of posting security) and
the recovery of actual damages suffered by the Company as a result of a breach
of this Section 10 by the Executive. Notwithstanding the foregoing, in no case
shall any portion of the lump sum payment set forth in Section 4(a)(i) or any
Gross-Up Payment hereunder (or any other payments made hereunder) be recoverable
by the Parent or the Company (or subject to any set-off, counterclaim or
recoupment) in respect of damages resulting from a breach of this Section 10.
(f) For the purposes of this Section 10, the term "Company" includes
not only Sterling Software, Inc., but also any subsidiary or affiliated
corporation of Sterling Software, Inc.
5
<PAGE>
8. Parent shall guarantee the Company's obligations pursuant to the
Agreement, including without limitation, Sections 5 and 7
thereof. The Parent and the Company hereby acknowledge that
the obligations set forth in such Sections will survive any
termination or expiration of this Agreement or termination of
Executive's employment for any reason. Each party will notify
the other in writing of any claim by the Internal Revenue
Service or any other taxing authority that, if successful,
would require the payment by the Company of a Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten (10) business days after such party is informed
in writing of such a claim and such party shall apprise the
other party of the nature of such claim and the date on which
such claim is requested to be paid. The Parent and the Company
shall bear and pay directly all costs and expenses (including
legal fees and any interest and penalties) incurred in
connection with any such claim or proceeding, and shall
indemnify and hold the Executive harmless, on an after-tax
basis, as provided in Section 5(a), for any Excise Tax or
income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment
of costs and expenses. The Company and the Parent also shall
pay to the Executive all legal fees and expenses incurred by
the Executive in connection with any tax audit or proceeding to
the extent attributable to the application of section 4999 of
the Code to any payment or benefit provided hereunder. Such
payments shall be made within five (5) business days after
delivery of the Executive's written requests for payment
accompanied with evidence of fees and expenses incurred. The
Company's and Parent's obligation with respect to a Gross-Up
Payment and reimbursement of related legal fees and expenses
shall be absolute and unconditional and shall not be affected
by any circumstances, including, without limitation, any
setoff, counterclaim, recoupment, defense or other right which
the Company or the Parent may have against the Executive or
anyone else. Except where provided herein to the contrary, all
amounts payable by the Company or the Parent hereunder shall be
paid without notice or demand. Each and every payment made
hereunder by the Company or the Parent shall be final, and the
Company and the Parent will not seek to recover all or any part
of such payment from the Executive, or from whomsoever may be
entitled thereto, for any reason whatsoever.
6
<PAGE>
9. Except as amended hereby, all other provisions of the
Agreement shall remain in full force and effect.
10. The validity, interpretation, construction and performance of
this Amendment will be governed by and construed in accordance
with the substantive laws of Delaware, without giving effect
to the conflict of laws principles of such State.
11. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of
which together will constitute one and the same Agreement.
7
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and delivered as of the first date first written above.
STERLING SOFTWARE, INC.
By /s/ Don J. McDermett, Jr.
-----------------------------------
Name: Don J. McDermett, Jr.
Title: Senior Vice President &
General Counsel
COMPUTER ASSOCIATES
INTERNATIONAL, INC.
By /s/ Steven M. Woghin
-----------------------------------
Name: Steven M. Woghin
Title: Senior Vice President &
General Counsel
/s/ Charles J. Wyly
--------------------------------------
Charles J. Wyly
8
<PAGE>
AMENDMENT TO
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS AMENDMENT TO CHANGE IN CONTROL SEVERANCE AGREEMENT (this "Amendment"),
dated as of February 14, 2000, by and among Sterling Software, Inc., a Delaware
corporation (the "Company"), Computer Associates International, Inc., a Delaware
corporation (the "Parent") and Sterling L. Williams (the "Executive").
WITNESSETH:
WHEREAS, the Company and the Executive are parties to a Change in
Control Severance Agreement, dated as of November 15, 1999 (the "Agreement");
and
WHEREAS, the Company, the Parent and the Executive desire to amend the
Agreement as set forth in this Amendment;
NOW THEREFORE, the Company, the Parent and the Executive agree as
follows:
1. This Amendment shall be of no force and effect if the Offer
(as defined in the Agreement and Plan of Merger, dated as of
February 14, 2000, by and among the Parent, Silversmith
Acquisition Corp. and the Company) is not consummated.
2. The Agreement is hereby amended by replacing every occurrence
of the term "Employee Benefits" with the term "Medical
Benefits" and by the addition of a definition of Medical
Benefits as follows:
(c) "Medical Benefits" means the medical, dental, health,
hospital, disability and vision benefits provided under any
and all benefit policies, plans, programs or arrangements of
the Company that may now exist or any successor policies,
plans, programs or arrangements that may be adopted hereafter
by the Company in which the Executive is entitled to
participate or in which the Executive becomes entitled to
participate.
<PAGE>
3. Section 4(a)(i) is hereby amended to read as follows:
(i) pay to the Executive, within five (5) business days after the
Termination Date, a lump sum payment in an amount equal to
$12,638,596 as satisfaction in full for Executive's severance
pay and loss of certain perquisites and benefits that would
otherwise have been enjoyed by the Executive.
4. Section 4(a)(ii) is hereby amended in its entirety to read as
follows:
(ii) for 84 months following the Termination Date (the
"Continuation Period"), arrange at its sole expense, to
provide the Executive with Medical Benefits that are
substantially similar to the better of (when considered in the
aggregate) (x) those Medical Benefits which the Executive was
receiving or entitled to receive immediately prior to the
Change in Control, or (y) those Medical Benefits which the
Executive was receiving or entitled to receive immediately
prior to the Termination Date. If and to the extent that any
Medical Benefit described above in this Section 4(a)(ii)
cannot be provided under any applicable law or regulation or
under any policy, plan, program or arrangement of the Company,
then the Company will take all action necessary to ensure that
such Medical Benefit is provided through other means to the
Executive, his dependents and beneficiaries, as applicable.
5. Section 4(a)(iv) of the Agreement is hereby amended in its
entirety to read as follows:
(iv) immediately following the Termination Date, the Company shall
immediately transfer to the Executive, at no cost to the
Executive, all ownership, right and title to the whole life
insurance policy on the Executive's life funded by the
Company.
6. The Company shall give the Executive the right to purchase
(such right to remain open until the expiration of thirty (30)
days from the Termination Date) at current book value, the
Company vehicle which was customarily provided to the
Executive as of immediately prior to the Executive's Date of
Termination.
2
<PAGE>
7. The Agreement is hereby amended by the addition of a new
Section 10 (and amended as necessary in respect of required
renumbering):
10. NON-COMPETITION; CONFIDENTIALITY: (a) Executive agrees and acknowledges that
reasonable limits on his ability to engage in activities which are competitive
with the Company are warranted in order to protect the Company's trade secrets
and proprietary information and are warranted in order to protect the Company in
developing and maintaining its reputation, good will and status in the
marketplace. In that regard, during the Continuation Period, the Executive will
not directly or indirectly, on Executive's own behalf or in the service of or on
behalf of any other individual or entity, either as a proprietor, employee,
agent, independent contractor, consultant, director, officer, partner or
stockholder (other than a stockholder of a corporation listed on a national
securities exchange or whose stock is regularly traded in the over-the-counter
market, provided that the Executive at no time owns, directly or indirectly, in
excess of 5% of the outstanding stock of any class of any such corporation):
(i) participate or engage in any activities or business developing,
manufacturing, marketing or distributing any products or services offered by the
Company as of the Effective Time (as defined in the Agreement and Plan of
Merger, dated as of February 14, 2000, by and among the Parent, Silversmith
Acquisition Corp. and the Company), or any products or services offered by the
Company subsequent to the Effective Time and in which the Executive actively
participated, recognizing that the Company offers products and services globally
("Competitive Activities"), including, without limitation, (A) selling goods or
rendering services of the type (or similar to the type) sold or rendered by the
Company, whether by means of electronic, traditional or other form of commerce;
(B) soliciting any person or entity that is a current or prospective customer or
has been a customer, in each case, of the Company, while the Executive has been
employed by the Company (provided that it shall not be deemed a breach of this
Agreement if the Executive solicits such customers for goods or services
unrelated to the Competitive Activities) and (C) assisting any person in any way
to do, or attempt to do, anything prohibited by clauses (A) or (B) above; or
3
<PAGE>
(ii) solicit (other than pursuant to general, non-targeted
advertisements) any employee of the Company, who was an employee at or prior to
the Effective Time, to leave the employment of the Company.
(b) Notwithstanding anything to the contrary herein, Executive may
remain a director at those companies for which Executive is a director as of the
Effective Time, and may engage in any activities or businesses for which the
Company has given permission in writing, which shall not be unreasonably
withheld (or delayed) following the expiration of three years from the date the
Offer is consummated, provided Executive's engaging in such activities or
business would not have a material adverse impact on any of the Company's lines
of businesses.
(c) (i) The Executive shall not, without the written consent of the
Company, disclose to any other person or use, whether directly or indirectly,
any Confidential Information (as hereinafter defined) relating to or used by the
Company, whether in written, oral or other form. "Confidential Information"
shall mean information about the Company, and its clients and customers that is
not disclosed by the Company for financial reporting purposes and that was
learned by the Executive in the course of employment with the Company, including
(without limitation) any proprietary knowledge, product and service designs,
trade secrets, manuals, technical information and plans, contracts, systems,
procedures, databases, electronic files, disks and printouts, correspondence,
internal reports, personnel files, information about Company employees relating
to their education, experience, skills, abilities, compensation and benefits,
and inter-personal relationships with suppliers to and customers of Company,
sales and advertising material, business plans, marketing plans, financial data
(including without limitation the revenues, costs or profits associated with
services), customer and industry lists, customer information, customer lists
coupled with product or service pricing, customer contracts, supplier contacts
and other contact information, pricing policies, supplies, agents, risk
analyses, engineering information and computer screen designs and computer input
and output specifications, inclusive of any pertinent documentation, techniques,
processes, technical information and know how. The Executive acknowledges that
such Confidential Information is specialized, unique in nature and of great
value to the Company, and that such information gives the Company a competitive
advantage. The Executive's obligations under this Section 10(c) shall survive
the termination of the Continuation Period.
(ii) Confidential Information does not include information
which (A) is or becomes part of the public domain other than as a result of the
Executive's
4
<PAGE>
disclosure; or (B) becomes available to the Executive on a non-confidential
basis from a source other than the Company, provided that source is not bound
with respect to that information by a confidentiality agreement with the
Company or otherwise prohibited from transmitting that information by a
contractual, legal or other obligation.
(iii) If the Executive is requested or (in the opinion of
Executive's counsel) required by law or judicial order to disclose any
Confidential Information, the Executive shall provide the Company with prompt
notice of any such request or requirement so that the Company may seek an
appropriate protective order or waiver of the Executive's compliance with the
provisions of this Section 10(c). The Executive will not oppose any reasonable
action by, and will cooperate with, the Company to obtain an appropriate
protective order or other reliable assurance that confidential treatment will be
accorded the Confidential Information. If, failing the entry of a protective
order or the receipt of a waiver hereunder, the Executive is, in the opinion of
Executive's counsel, compelled by law to disclose a portion of the Confidential
Information, the Executive may disclose to the relevant tribunal without
liability hereunder that portion of the Confidential Information which counsel
advises the Executive he is legally required to disclose, and each of the
parties hereto agrees to exercise such party's best efforts to obtain assurance
that confidential treatment will be accorded such Confidential Information.
(d) If an award by a court or arbitration panel declares that any term
or provision of this Section 10 is excessive in duration or scope or is
unreasonable or unenforceable, the parties agree that the court or arbitration
panel making such determination shall have the power to reduce the scope,
duration or area or the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is a valid and enforceable term or provision, and this Section 10
shall be enforceable as so modified.
(e) In the event of a breach or threatened breach by the Executive of
the provisions of this Section 10, the Company's remedies in respect of such
breach or threatened breach shall be limited to injunctive relief (and the
Executive acknowledges that the Company may not have an adequate remedy at law
and may seek injunctive relief without the requirement of posting security) and
the recovery of actual damages suffered by the Company as a result of a breach
of this Section 10 by the Executive. Notwithstanding the foregoing, in no case
shall any portion of the lump sum payment set forth in Section 4(a)(i) or any
Gross Up Payment hereunder
5
<PAGE>
(or any other payments made hereunder) be recoverable by the Parent or the
Company (or subject to any set-off, counterclaim or recoupment) in respect of
damages resulting from a breach of this Section 10.
(f) For the purposes of this Section 10, the term "Company" includes
not only Sterling Software, Inc., but also any subsidiary or affiliated
corporation of Sterling Software, Inc.
8. Parent shall guarantee the Company's obligations pursuant to
the Agreement, including without limitation, Sections 5 and 7
thereof. The Parent and the Company hereby acknowledge that
the obligations set forth in such Sections will survive any
termination or expiration of this Agreement or termination of
Executive's employment for any reason. Each party will notify
the other in writing of any claim by the Internal Revenue
Service or any other taxing authority that, if successful,
would require the payment by the Company of a Gross-Up
Payment. Such notification shall be given as soon as
practicable but no later than ten (10) business days after
such party is informed in writing of such a claim and such
party shall apprise the other party of the nature of such
claim and the date on which such claim is requested to be
paid. The Parent and the Company shall bear and pay directly
all costs and expenses (including legal fees and any interest
and penalties) incurred in connection with any such claim or
proceeding, and shall indemnify and hold the Executive
harmless, on an after-tax basis, as provided in Section 5(a),
for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. The Company
and the Parent also shall pay to the Executive all legal fees
and expenses incurred by the Executive in connection with any
tax audit or proceeding to the extent attributable to the
application of section 4999 of the Code to any payment or
benefit provided hereunder. Such payments shall be made within
five (5) business days after delivery of the Executive's
written requests for payment accompanied with evidence of fees
and expenses incurred. The Company's and Parent's obligation
with respect to a Gross-Up Payment and reimbursement of
related legal fees and expenses shall be absolute and
unconditional and shall not be affected by any circumstances,
including, without limitation, any setoff, counterclaim,
recoupment, defense or other right which the Company or the
Parent
6
<PAGE>
may have against the Executive or anyone else. Except
where provided herein to the contrary, all amounts payable by
the Company or the Parent hereunder shall be paid without
notice or demand. Each and every payment made hereunder by the
Company or the Parent shall be final, and the Company and the
Parent will not seek to recover all or any part of such
payment from the Executive, or from whomsoever may be entitled
thereto, for any reason whatsoever.
9. The Executive agrees as consideration for the Company's and
the Parent's entry into this Amendment that, effective upon
consummation of the Offer, the Executive shall be deemed to
have waived all rights the Executive may have pursuant to the
CEO Agreement with the Company dated November 15, 1999 and
that such agreement shall be terminated as of the date of the
consummation of the Offer.
10. Except as amended hereby, all other provisions of the
Agreement shall remain in full force and effect.
11. The validity, interpretation, construction and performance of
this Amendment will be governed by and construed in accordance
with the substantive laws of Delaware, without giving effect
to the conflict of laws principles of such State.
12. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of
which together will constitute one and the same Agreement.
7
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and delivered as of the first date first written above.
STERLING SOFTWARE, INC.
By /s/ Don J. McDermett, Jr.
-----------------------------------
Name: Don J. McDermett, Jr.
Title: Senior Vice President &
General Counsel
COMPUTER ASSOCIATES
INTERNATIONAL, INC.
By /s/ Steven M. Woghin
-----------------------------------
Name: Steven M. Woghin
Title: Senior Vice President &
General Counsel
/s/ Sterling L. Williams
--------------------------------------
Sterling L. Williams
8
<PAGE>
AMENDMENT TO
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS AMENDMENT TO CHANGE IN CONTROL SEVERANCE AGREEMENT (this "Amendment"),
dated as of February 14, 2000, by and among Sterling Software, Inc., a Delaware
corporation (the "Company"), Computer Associates International, Inc., a Delaware
corporation (the "Parent") and Geno P. Tolari (the "Executive").
WITNESSETH:
WHEREAS, the Company and the Executive are parties to a Change in
Control Severance Agreement, dated as of November 15, 1999 (the "Agreement");
and
WHEREAS, the Company, the Parent and the Executive desire to amend the
Agreement as set forth in this Amendment;
NOW THEREFORE, the Company, the Parent and the Executive agree as
follows:
1. This Amendment shall be of no force and effect if the Offer
(as defined in the Agreement and Plan of Merger, dated as of
February 14, 2000, by and among the Parent, Silversmith
Acquisition Corp. and the Company) is not consummated.
2. The Agreement is hereby amended by replacing every occurrence
of the term "Employee Benefits" with the term "Medical
Benefits" and by the addition of a definition of Medical
Benefits as follows:
(c) "Medical Benefits" means the medical, dental, health,
hospital, disability and vision benefits provided under any
and all benefit policies, plans, programs or arrangements of
the Company that may now exist or any successor policies,
plans, programs or arrangements that may be adopted hereafter
by the Company in which the Executive is entitled to
participate or in which the Executive becomes entitled to
participate.
1
<PAGE>
3. Section 4(a)(i) is hereby amended to read as follows:
(i) pay to the Executive, within five (5) business days after the
Termination Date, a lump sum payment in an amount equal to
$5,820,091 as satisfaction in full for Executive's severance
pay and loss of certain perquisites and benefits that would
otherwise have been enjoyed by the Executive.
4. Section 4(a)(ii) is hereby amended in its entirety to read as
follows:
(ii) for 60 months following the Termination Date (the
"Continuation Period"), arrange at its sole expense, to
provide the Executive with Medical Benefits that are
substantially similar to the better of (when considered in the
aggregate) (x) those Medical Benefits which the Executive was
receiving or entitled to receive immediately prior to the
Change in Control, or (y) those Medical Benefits which the
Executive was receiving or entitled to receive immediately
prior to the Termination Date. If and to the extent that any
Medical Benefit described above in this Section 4(a)(ii)
cannot be provided under any applicable law or regulation or
under any policy, plan, program or arrangement of the Company,
then the Company will take all action necessary to ensure that
such Medical Benefit is provided through other means to the
Executive, his dependents and beneficiaries, as applicable.
5. Section 4(a)(iv) of the Agreement is hereby deleted in its
entirety.
6. The Company shall give the Executive the right to purchase
(such right to remain open until the expiration of thirty (30)
days from the Termination Date) at current book value, the
Company vehicle which was customarily provided to the
Executive as of immediately prior to the Executive's Date of
Termination.
7. The Agreement is hereby amended by the addition of a new
Section 10 (and amended as necessary in respect of required
renumbering):
10. NON-COMPETITION; CONFIDENTIALITY: (a) Executive agrees and acknowledges that
reasonable limits on his ability to engage in activities which are competitive
with the Company are warranted in order to protect the Company's trade secrets
and proprietary information and are warranted in order to protect the Company in
2
<PAGE>
developing and maintaining its reputation, good will and status in the
marketplace. In that regard, during the Continuation Period, the Executive will
not directly or indirectly, on Executive's own behalf or in the service of or on
behalf of any other individual or entity, either as a proprietor, employee,
agent, independent contractor, consultant, director, officer, partner or
stockholder (other than a stockholder of a corporation listed on a national
securities exchange or whose stock is regularly traded in the over-the-counter
market, provided that the Executive at no time owns, directly or indirectly, in
excess of 5% of the outstanding stock of any class of any such corporation):
(i) participate or engage in any activities or business developing,
manufacturing, marketing or distributing any products or services offered by the
Company as of the Effective Time (as defined in the Agreement and Plan of
Merger, dated as of February 14, 2000, by and among the Parent, Silversmith
Acquisition Corp. and the Company), or any products or services offered by the
Company subsequent to the Effective Time and in which the Executive actively
participated, recognizing that the Company offers products and services globally
("Competitive Activities"), including, without limitation, (A) selling goods or
rendering services of the type (or similar to the type) sold or rendered by the
Company, whether by means of electronic, traditional or other form of commerce;
(B) soliciting any person or entity that is a current or prospective customer or
has been a customer, in each case, of the Company, while the Executive has been
employed by the Company (provided that it shall not be deemed a breach of this
Agreement if the Executive solicits such customers for goods or services
unrelated to the Competitive Activities) and (C) assisting any person in any way
to do, or attempt to do, anything prohibited by clauses (A) or (B) above; or
(ii) solicit (other than pursuant to general, non-targeted
advertisements) any employee of the Company, who was an employee at or prior to
the Effective Time, to leave the employment of the Company.
(b) Notwithstanding anything to the contrary herein, Executive may
remain a director at those companies for which Executive is a director as of the
Effective Time, and may engage in any activities or businesses for which the
Company has given permission in writing, which shall not be unreasonably
withheld (or delayed) following the expiration of three years from the date the
Offer is consummated, provided Executive's engaging in such activities or
business would not have a material adverse impact on any of the Company's lines
of businesses.
3
<PAGE>
(c) (i) The Executive shall not, without the written consent of the
Company, disclose to any other person or use, whether directly or indirectly,
any Confidential Information (as hereinafter defined) relating to or used by the
Company, whether in written, oral or other form. "Confidential Information"
shall mean information about the Company, and its clients and customers that is
not disclosed by the Company for financial reporting purposes and that was
learned by the Executive in the course of employment with the Company, including
(without limitation) any proprietary knowledge, product and service designs,
trade secrets, manuals, technical information and plans, contracts, systems,
procedures, databases, electronic files, disks and printouts, correspondence,
internal reports, personnel files, information about Company employees relating
to their education, experience, skills, abilities, compensation and benefits,
and inter-personal relationships with suppliers to and customers of Company,
sales and advertising material, business plans, marketing plans, financial data
(including without limitation the revenues, costs or profits associated with
services), customer and industry lists, customer information, customer lists
coupled with product or service pricing, customer contracts, supplier contacts
and other contact information, pricing policies, supplies, agents, risk
analyses, engineering information and computer screen designs and computer input
and output specifications, inclusive of any pertinent documentation, techniques,
processes, technical information and know how. The Executive acknowledges that
such Confidential Information is specialized, unique in nature and of great
value to the Company, and that such information gives the Company a competitive
advantage. The Executive's obligations under this Section 10(c) shall survive
the termination of the Continuation Period.
(ii) Confidential Information does not include information
which (A) is or becomes part of the public domain other than as a result of the
Executive's disclosure; or (B) becomes available to the Executive on a
non-confidential basis from a source other than the Company, provided that
source is not bound with respect to that information by a confidentiality
agreement with the Company or otherwise prohibited from transmitting that
information by a contractual, legal or other obligation.
(iii) If the Executive is requested or (in the opinion of
Executive's counsel) required by law or judicial order to disclose any
Confidential Information, the Executive shall provide the Company with prompt
notice of any such request or requirement so that the Company may seek an
appropriate protective order or waiver of the Executive's compliance with the
provisions of this Section 10(c). The Executive will not oppose any reasonable
action by, and will cooperate with, the
4
<PAGE>
Company to obtain an appropriate protective order or other reliable assurance
that confidential treatment will be accorded the Confidential Information. If,
failing the entry of a protective order or the receipt of a waiver hereunder,
the Executive is, in the opinion of Executive's counsel, compelled by law to
disclose a portion of the Confidential Information, the Executive may disclose
to the relevant tribunal without liability hereunder that portion of the
Confidential Information which counsel advises the Executive he is legally
required to disclose, and each of the parties hereto agrees to exercise such
party's best efforts to obtain assurance that confidential treatment will be
accorded such Confidential Information.
(d) If an award by a court or arbitration panel declares that any term
or provision of this Section 10 is excessive in duration or scope or is
unreasonable or unenforceable, the parties agree that the court or arbitration
panel making such determination shall have the power to reduce the scope,
duration or area or the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is a valid and enforceable term or provision, and this Section 10
shall be enforceable as so modified.
(e) In the event of a breach or threatened breach by the Executive of
the provisions of this Section 10, the Company's remedies in respect of such
breach or threatened breach shall be limited to injunctive relief (and the
Executive acknowledges that the Company may not have an adequate remedy at law
and may seek injunctive relief without the requirement of posting security) and
the recovery of actual damages suffered by the Company as a result of a breach
of this Section 10 by the Executive. Notwithstanding the foregoing, in no case
shall any portion of the lump sum payment set forth in Section 4(a)(i) or any
Gross Up Payment hereunder (or any other payments made hereunder) be recoverable
by the Parent or the Company (or subject to any set-off, counterclaim or
recoupment) in respect of damages resulting from a breach of this Section 10.
(f) For the purposes of this Section 10, the term "Company"
includes not only Sterling Software, Inc., but also any subsidiary or
affiliated corporation of Sterling Software, Inc.
8. Parent shall guarantee the Company's obligations pursuant to
the Agreement, including without limitation, Sections 5 and 7
thereof. The Parent and the Company hereby acknowledge that
the obligations set forth in such Sections will survive any
termination or expiration of
5
<PAGE>
this Agreement or termination of Executive's employment for
any reason. Each party will notify the other in writing of any
claim by the Internal Revenue Service or any other taxing
authority that, if successful, would require the payment by
the Company of a Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten (10)
business days after such party is informed in writing of such
a claim and such party shall apprise the other party of the
nature of such claim and the date on which such claim is
requested to be paid. The Parent and the Company shall bear
and pay directly all costs and expenses (including legal fees
and any interest and penalties) incurred in connection with
any such claim or proceeding, and shall indemnify and hold the
Executive harmless, on an after-tax basis, as provided in
Section 5(a), for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and
expenses. The Company and the Parent also shall pay to the
Executive all legal fees and expenses incurred by the
Executive in connection with any tax audit or proceeding to
the extent attributable to the application of section 4999 of
the Code to any payment or benefit provided hereunder. Such
payments shall be made within five (5) business days after
delivery of the Executive's written requests for payment
accompanied with evidence of fees and expenses incurred. The
Company's and Parent's obligation with respect to a Gross Up
Payment and reimbursement of related legal fees and expenses
shall be absolute and unconditional and shall not be affected
by any circumstances, including, without limitation, any
setoff, counterclaim, recoupment, defense or other right which
the Company or the Parent may have against the Executive or
anyone else. Except where provided herein to the contrary, all
amounts payable by the Company or the Parent hereunder shall
be paid without notice or demand. Each and every payment made
hereunder by the Company or the Parent shall be final, and the
Company and the Parent will not seek to recover all or any
part of such payment from the Executive, or from whomsoever
may be entitled thereto, for any reason whatsoever.
9. The Executive agrees as consideration for the Company's and
the Parent's entry into this Amendment that, effective upon
consummation of the Offer, the Executive shall be deemed to
have waived all rights the Executive may have pursuant to the
Executive's
6
<PAGE>
Severance Agreement with the Company dated November 15, 1999
and that such agreement shall be terminated as of the date of
the consummation of the Offer.
10. Except as amended hereby, all other provisions of the
Agreement shall remain in full force and effect.
11. The validity, interpretation, construction and performance of
this Amendment will be governed by and construed in accordance
with the substantive laws of Delaware, without giving effect
to the conflict of laws principles of such State.
12. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of
which together will constitute one and the same agreement.
7
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and delivered as of the first date first written above.
STERLING SOFTWARE, INC.
By /s/ Don J. McDermett, Jr.
-----------------------------------
Name: Don J. McDermett, Jr.
Title: Senior Vice President &
General Counsel
COMPUTER ASSOCIATES
INTERNATIONAL, INC.
By /s/ Steven M. Woghin
-----------------------------------
Name: Steven M. Woghin
Title: Senior Vice President &
General Counsel
/s/ Geno P. Tolari
--------------------------------------
Geno P. Tolari
8
<PAGE>
AMENDMENT TO
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS AMENDMENT TO CHANGE IN CONTROL SEVERANCE AGREEMENT (this "Amendment"),
dated as of February 14, 2000, by and among Sterling Software, Inc., a Delaware
corporation (the "Company"), Computer Associates International, Inc., a Delaware
corporation (the "Parent") and F.L. "Mike" Harvey (the "Executive").
WITNESSETH:
WHEREAS, the Company and the Executive are parties to a Change in
Control Severance Agreement, dated as of October 22, 1999 (the "Agreement"); and
WHEREAS, the Company, the Parent and the Executive desire to amend the
Agreement as set forth in this Amendment;
NOW THEREFORE, the Company, the Parent and the Executive agree as
follows:
1. This Amendment shall be of no force and effect if the Offer
(as defined in the Agreement and Plan of Merger, dated as of
February 14, 2000, by and among the Parent, Silversmith
Acquisition Corp. and the Company) is not consummated.
2. The Agreement is hereby amended by replacing every occurrence
of the term "Employee Benefits" with the term "Medical
Benefits" and by the addition of a definition of Medical
Benefits as follows:
(c) "Medical Benefits" means the medical, dental, health,
hospital, disability and vision benefits provided under any
and all benefit policies, plans, programs or arrangements of
the Company that may now exist or any successor policies,
plans, programs or arrangements that may be adopted hereafter
by the Company in which the Executive is entitled to
participate or in which the Executive becomes entitled to
participate.
3. Section 4(a)(i) is hereby amended to read as follows:
(i) pay to the Executive, within five (5) business days after the
Termination Date, a lump sum payment in an amount equal to
$1,054,708 as
<PAGE>
satisfaction in full for Executive's severance pay and loss
of certain perquisites and benefits that would otherwise have
been enjoyed by the Executive.
4. Section 4(a)(ii) is hereby amended in its entirety to read as
follows:
(ii) for 24 months following the Termination Date (the
"Continuation Period"), arrange at its sole expense, to
provide the Executive with Medical Benefits that are
substantially similar to the better of (when considered in the
aggregate) (x) those Medical Benefits which the Executive was
receiving or entitled to receive immediately prior to the
Change in Control, or (y) those Medical Benefits which the
Executive was receiving or entitled to receive immediately
prior to the Termination Date. If and to the extent that any
Medical Benefit described above in this Section 4(a)(ii)
cannot be provided under any applicable law or regulation or
under any policy, plan, program or arrangement of the Company,
then the Company will take all action necessary to ensure that
such Medical Benefit is provided through other means to the
Executive, his dependents and beneficiaries, as applicable.
5. The Company shall give the Executive the right to purchase
(such right to remain open until the expiration of thirty (30)
days from the Termination Date) at current book value, the
Company vehicle which was customarily provided to the
Executive as of immediately prior to the Executive's Date of
Termination.
6. The Agreement is hereby amended by the addition of a new
Section 10 (and amended as necessary in respect of required
renumbering):
2
<PAGE>
10. NON-COMPETITION; CONFIDENTIALITY: (a) Executive agrees and acknowledges that
reasonable limits on his ability to engage in activities which are competitive
with the Company are warranted in order to protect the Company's trade secrets
and proprietary information and are warranted in order to protect the Company in
developing and maintaining its reputation, good will and status in the
marketplace. In that regard, during the Continuation Period, the Executive will
not directly or indirectly, on Executive's own behalf or in the service of or on
behalf of any other individual or entity, either as a proprietor, employee,
agent, independent contractor, consultant, director, officer, partner or
stockholder (other than a stockholder of a corporation listed on a national
securities exchange or whose stock is regularly traded in the over-the-counter
market, provided that the Executive at no time owns, directly or indirectly, in
excess of 5% of the outstanding stock of any class of any such corporation):
(i) participate or engage in any activities or business developing,
manufacturing, marketing or distributing any products or services offered by the
Company as of the Effective Time (as defined in the Agreement and Plan of
Merger, dated as of February 14, 2000, by and among the Parent, Silversmith
Acquisition Corp. and the Company), or any products or services offered by the
Company subsequent to the Effective Time and in which the Executive actively
participated, recognizing that the Company offers products and services globally
("Competitive Activities"), including, without limitation, (A) selling goods or
rendering services of the type (or similar to the type) sold or rendered by the
Company, whether by means of electronic, traditional or other form of commerce;
(B) soliciting any person or entity that is a current or prospective customer or
has been a customer, in each case, of the Company, while the Executive has been
employed by the Company (provided that it shall not be deemed a breach of this
Agreement if the Executive solicits such customers for goods or services
unrelated to the Competitive Activities) and (C) assisting any person in any way
to do, or attempt to do, anything prohibited by clauses (A) or (B) above; or
(ii) solicit (other than pursuant to general, non-targeted
advertisements) any employee of the Company, who was an employee at or prior to
the Effective Time, to leave the employment of the Company.
(b) Notwithstanding anything to the contrary herein, Executive may
remain a director at those companies for which Executive is a director as of the
Effective Time, and may engage in any activities or businesses for which the
3
<PAGE>
Company has given permission in writing, which shall not be unreasonably
withheld (or delayed) following the expiration of one year from the date the
Offer is consummated, provided Executive's engaging in such activities or
business would not have a material adverse impact on any of the Company's lines
of businesses.
(c) (i) The Executive shall not, without the written consent of the
Company, disclose to any other person or use, whether directly or indirectly,
any Confidential Information (as hereinafter defined) relating to or used by the
Company, whether in written, oral or other form. "Confidential Information"
shall mean information about the Company, and its clients and customers that is
not disclosed by the Company for financial reporting purposes and that was
learned by the Executive in the course of employment with the Company, including
(without limitation) any proprietary knowledge, product and service designs,
trade secrets, manuals, technical information and plans, contracts, systems,
procedures, databases, electronic files, disks and printouts, correspondence,
internal reports, personnel files, information about Company employees relating
to their education, experience, skills, abilities, compensation and benefits,
and inter-personal relationships with suppliers to and customers of Company,
sales and advertising material, business plans, marketing plans, financial data
(including without limitation the revenues, costs or profits associated with
services), customer and industry lists, customer information, customer lists
coupled with product or service pricing, customer contracts, supplier contacts
and other contact information, pricing policies, supplies, agents, risk
analyses, engineering information and computer screen designs and computer input
and output specifications, inclusive of any pertinent documentation, techniques,
processes, technical information and know how. The Executive acknowledges that
such Confidential Information is specialized, unique in nature and of great
value to the Company, and that such information gives the Company a competitive
advantage. The Executive's obligations under this Section 10(c) shall survive
the termination of the Continuation Period.
(ii) Confidential Information does not include information
which (A) is or becomes part of the public domain other than as a result of the
Executive's disclosure; or (B) becomes available to the Executive on a
non-confidential basis from a source other than the Company, provided that
source is not bound with respect to that information by a confidentiality
agreement with the Company or otherwise prohibited from transmitting that
information by a contractual, legal or other obligation.
4
<PAGE>
(iii) If the Executive is requested or (in the opinion of
Executive's counsel) required by law or judicial order to disclose any
Confidential Information, the Executive shall provide the Company with prompt
notice of any such request or requirement so that the Company may seek an
appropriate protective order or waiver of the Executive's compliance with the
provisions of this Section 10(c). The Executive will not oppose any reasonable
action by, and will cooperate with, the Company to obtain an appropriate
protective order or other reliable assurance that confidential treatment will be
accorded the Confidential Information. If, failing the entry of a protective
order or the receipt of a waiver hereunder, the Executive is, in the opinion of
Executive's counsel, compelled by law to disclose a portion of the Confidential
Information, the Executive may disclose to the relevant tribunal without
liability hereunder that portion of the Confidential Information which counsel
advises the Executive he is legally required to disclose, and each of the
parties hereto agrees to exercise such party's best efforts to obtain assurance
that confidential treatment will be accorded such Confidential Information.
(d) If an award by a court or arbitration panel declares that any term
or provision of this Section 10 is excessive in duration or scope or is
unreasonable or unenforceable, the parties agree that the court or arbitration
panel making such determination shall have the power to reduce the scope,
duration or area or the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is a valid and enforceable term or provision, and this Section 10
shall be enforceable as so modified.
(e) In the event of a breach or threatened breach by the Executive of
the provisions of this Section 10, the Company's remedies in respect of such
breach or threatened breach shall be limited to injunctive relief (and the
Executive acknowledges that the Company may not have an adequate remedy at law
and may seek injunctive relief without the requirement of posting security) and
the recovery of actual damages suffered by the Company as a result of a breach
of this Section 10 by the Executive. Notwithstanding the foregoing, in no case
shall any portion of the lump sum payment set forth in Section 4(a)(i) or any
Gross Up Payment hereunder (or any other payments made hereunder) be recoverable
by the Parent or the Company (or subject to any set-off, counterclaim or
recoupment) in respect of damages resulting from a breach of this Section 10.
5
<PAGE>
(f) For the purposes of this Section 10, the term "Company" includes
not only Sterling Software, Inc., but also any subsidiary or affiliated
corporation of Sterling Software, Inc.
7. Parent shall guarantee the Company's obligations pursuant to
the Agreement, including without limitation, Sections 5 and 7
thereof. The Parent and the Company hereby acknowledge that
the obligations set forth in such Sections will survive any
termination or expiration of this Agreement or termination of
Executive's employment for any reason. Each party will notify
the other in writing of any claim by the Internal Revenue
Service or any other taxing authority that, if successful,
would require the payment by the Company of a Gross-Up
Payment. Such notification shall be given as soon as
practicable but no later than ten (10) business days after
such party is informed in writing of such a claim and such
party shall apprise the other party of the nature of such
claim and the date on which such claim is requested to be
paid. The Parent and the Company shall bear and pay directly
all costs and expenses (including legal fees and any interest
and penalties) incurred in connection with any such claim or
proceeding, and shall indemnify and hold the Executive
harmless, on an after-tax basis, as provided in Section 5(a),
for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. The Company
and the Parent also shall pay to the Executive all legal fees
and expenses incurred by the Executive in connection with any
tax audit or proceeding to the extent attributable to the
application of section 4999 of the Code to any payment or
benefit provided hereunder. Such payments shall be made within
five (5) business days after delivery of the Executive's
written requests for payment accompanied with evidence of fees
and expenses incurred. The Company's and Parent's obligation
with respect to a Gross-Up Payment and reimbursement of
related legal fees and expenses shall be absolute and
unconditional and shall not be affected by any circumstances,
including, without limitation, any setoff, counterclaim,
recoupment, defense or other right which the Company or the
Parent may have against the Executive or anyone else. Except
where provided herein to the contrary, all amounts payable by
the Company or the Parent hereunder shall be paid without
notice or demand. Each and every payment made hereunder by the
Company or the Parent
6
<PAGE>
shall be final, and the Company and the Parent will not seek
to recover all or any part of such payment from the Executive,
or from whomsoever may be entitled thereto, for any reason
whatsoever.
8. The Executive agrees as consideration for the Company's and
the Parent's entry into this Amendment that, effective upon
consummation of the Offer, the Executive shall be deemed to
have waived all rights the Executive may have pursuant to the
Executive's Severance Agreement with the Company dated August
15, 1997 and that such agreement shall be terminated as of the
date of the consummation of the Offer.
9. Except as amended hereby, all other provisions of the
Agreement shall remain in full force and effect.
10. The validity, interpretation, construction and performance of
this Amendment will be governed by and construed in accordance
with the substantive laws of Delaware, without giving effect
to the conflict of laws principles of such State.
11. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of
which together will constitute one and the same Agreement.
7
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and delivered as of the first date first written above.
STERLING SOFTWARE, INC.
By /s/ Don J. McDermett, Jr.
-----------------------------------
Name: Don J. McDermett, Jr.
Title: Senior Vice President &
General Counsel
COMPUTER ASSOCIATES
INTERNATIONAL, INC.
By /s/ Steven M. Woghin
-----------------------------------
Name: Steven M. Woghin
Title: Senior Vice President &
General Counsel
/s/ F.L. "Mike" Harvey
--------------------------------------
F.L. "Mike" Harvey
8
<PAGE>
AMENDMENT TO
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS AMENDMENT TO CHANGE IN CONTROL SEVERANCE AGREEMENT (this "Amendment"),
dated as of February 14, 2000, by and among Sterling Software, Inc., a
Delaware corporation (the "Company"), Computer Associates International,
Inc., a Delaware corporation (the "Parent") and Don J. McDermett, Jr. (the
"Executive").
WITNESSETH:
WHEREAS, the Company and the Executive are parties to a Change in
Control Severance Agreement, dated as of November 15, 1999 (the "Agreement");
and
WHEREAS, the Company, the Parent and the Executive desire to amend the
Agreement as set forth in this Amendment;
NOW THEREFORE, the Company, the Parent and the Executive agree as
follows:
1. This Amendment shall be of no force and effect if the Offer
(as defined in the Agreement and Plan of Merger, dated as of
February 14, 2000, by and among the Parent, Silversmith
Acquisition Corp. and the Company) is not consummated.
2. The Agreement is hereby amended by replacing every occurrence
of the term "Employee Benefits" with the term "Medical
Benefits" and by the addition of a definition of Medical
Benefits as follows:
(c) "Medical Benefits" means the medical, dental, health,
hospital, disability and vision benefits provided under any
and all benefit policies, plans, programs or arrangements of
the Company that may now exist or any successor policies,
plans, programs or arrangements that may be adopted hereafter
by the Company in which the Executive is entitled to
participate or in which the Executive becomes entitled to
participate.
<PAGE>
3. Section 4(a)(i) is hereby amended to read as follows:
(i) pay to the Executive, within five (5) business days after the
Termination Date, a lump sum payment in an amount equal to
$2,142,053 as satisfaction in full for Executive's severance
pay and loss of certain perquisites and benefits that would
otherwise have been enjoyed by the Executive and for the
execution of the Executive's non-competition covenant in
Section 10 hereof. The parties agree that twenty-five (25)
percent of the lump sum payment shall be allocable to, and
deemed as consideration for, the Executive's non-competition
covenant in Section 10 hereof.
4. Section 4(a)(ii) is hereby amended in its entirety to read as
follows:
(ii) for 48 months following the Termination Date, arrange at its
sole expense, to provide the Executive with Medical Benefits
that are substantially similar to the better of (when
considered in the aggregate) (x) those Medical Benefits which
the Executive was receiving or entitled to receive immediately
prior to the Change in Control, or (y) those Medical Benefits
which the Executive was receiving or entitled to receive
immediately prior to the Termination Date. If and to the
extent that any Medical Benefit described above in this
Section 4(a)(ii) cannot be provided under any applicable law
or regulation or under any policy, plan, program or
arrangement of the Company, then the Company will take all
action necessary to ensure that such Medical Benefit is
provided through other means to the Executive, his dependents
and beneficiaries, as applicable.
5. The Company shall give the Executive the right to purchase
(such right to remain open until the expiration of thirty (30)
days from the Termination Date) at current book value, the
Company vehicle which was customarily provided to the
Executive as of immediately prior to the Executive's Date of
Termination.
6. The Agreement is hereby amended by the addition of a new
Section 10 (and amended as necessary in respect of required
renumbering):
2
<PAGE>
10. NON-COMPETITION; CONFIDENTIALITY: (a) Executive agrees and acknowledges that
reasonable limits on his ability to engage in activities which are competitive
with the Company are warranted in order to protect the Company's trade secrets
and proprietary information and are warranted in order to protect the Company in
developing and maintaining its reputation, good will and status in the
marketplace. In that regard, during the 24 months following the Termination Date
(the "Continuation Period"), the Executive will not directly or indirectly, on
Executive's own behalf or in the service of or on behalf of any other individual
or entity, either as a proprietor, employee, agent, independent contractor,
consultant, director, officer, partner or stockholder (other than a stockholder
of a corporation listed on a national securities exchange or whose stock is
regularly traded in the over-the-counter market, provided that the Executive at
no time owns, directly or indirectly, in excess of 5% of the outstanding stock
of any class of any such corporation):
(i) participate or engage in any activities or business developing,
manufacturing, marketing or distributing any products or services offered by the
Company as of the Effective Time (as defined in the Agreement and Plan of
Merger, dated as of February 14, 2000, by and among the Parent, Silversmith
Acquisition Corp. and the Company), or any products or services offered by the
Company subsequent to the Effective Time and in which the Executive actively
participated, recognizing that the Company offers products and services globally
("Competitive Activities"), including, without limitation, (A) selling goods or
rendering services of the type (or similar to the type) sold or rendered by the
Company, whether by means of electronic, traditional or other form of commerce;
(B) soliciting any person or entity that is a current or prospective customer or
has been a customer, in each case, of the Company, while the Executive has been
employed by the Company (provided that it shall not be deemed a breach of this
Agreement if the Executive solicits such customers for goods or services
unrelated to the Competitive Activities) and (C) assisting any person in any way
to do, or attempt to do, anything prohibited by clauses (A) or (B) above; or
(ii) solicit (other than pursuant to general, non-targeted
advertisements) any employee of the Company, who was an employee at or prior to
the Effective Time, to leave the employment of the Company.
(b) Notwithstanding anything to the contrary herein, Executive may
remain a director at those companies for which Executive is a director as of the
Effective Time, and may engage in any activities or businesses for which the
Company has given permission in writing, which shall not be unreasonably
withheld
3
<PAGE>
(or delayed) following the expiration of one year from the date the
Offer is consummated, provided Executive's engaging in such activities or
business would not have a material adverse impact on any of the Company's lines
of businesses. The Company and Parent expressly agree that the Executive shall
not be in breach of Section 10(a) hereof if the Executive renders legal services
as outside counsel to any business, individual or entity.
(c) (i) The Executive shall not, without the written consent of the
Company, disclose to any other person or use, whether directly or indirectly,
any Confidential Information (as hereinafter defined) relating to or used by the
Company, whether in written, oral or other form. "Confidential Information"
shall mean information about the Company, and its clients and customers that is
not disclosed by the Company for financial reporting purposes and that was
learned by the Executive in the course of employment with the Company, including
(without limitation) any proprietary knowledge, product and service designs,
trade secrets, manuals, technical information and plans, contracts, systems,
procedures, databases, electronic files, disks and printouts, correspondence,
internal reports, personnel files, information about Company employees relating
to their education, experience, skills, abilities, compensation and benefits,
and inter-personal relationships with suppliers to and customers of Company,
sales and advertising material, business plans, marketing plans, financial data
(including without limitation the revenues, costs or profits associated with
services), customer and industry lists, customer information, customer lists
coupled with product or service pricing, customer contracts, supplier contacts
and other contact information, pricing policies, supplies, agents, risk
analyses, engineering information and computer screen designs and computer input
and output specifications, inclusive of any pertinent documentation, techniques,
processes, technical information and know how. The Executive acknowledges that
such Confidential Information is specialized, unique in nature and of great
value to the Company, and that such information gives the Company a competitive
advantage. The Executive's obligations under this Section 10(c) shall survive
the termination of the Continuation Period.
(ii) Confidential Information does not include information
which (A) is or becomes part of the public domain other than as a result of the
Executive's disclosure; or (B) becomes available to the Executive on a
non-confidential basis from a source other than the Company, provided that
source is not bound with respect to that information by a confidentiality
agreement with the Company or otherwise prohibited from transmitting that
information by a contractual, legal or other obligation.
4
<PAGE>
(iii) If the Executive is requested or (in the opinion of
Executive's counsel) required by law or judicial order to disclose any
Confidential Information, the Executive shall provide the Company with prompt
notice of any such request or requirement so that the Company may seek an
appropriate protective order or waiver of the Executive's compliance with the
provisions of this Section 10(c). The Executive will not oppose any reasonable
action by, and will cooperate with, the Company to obtain an appropriate
protective order or other reliable assurance that confidential treatment will be
accorded the Confidential Information. If, failing the entry of a protective
order or the receipt of a waiver hereunder, the Executive is, in the opinion of
Executive's counsel, compelled by law to disclose a portion of the Confidential
Information, the Executive may disclose to the relevant tribunal without
liability hereunder that portion of the Confidential Information which counsel
advises the Executive he is legally required to disclose, and each of the
parties hereto agrees to exercise such party's best efforts to obtain assurance
that confidential treatment will be accorded such Confidential Information.
(d) If an award by a court or arbitration panel declares that any term
or provision of this Section 10 is excessive in duration or scope or is
unreasonable or unenforceable, the parties agree that the court or arbitration
panel making such determination shall have the power to reduce the scope,
duration or area or the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is a valid and enforceable term or provision, and this Section 10
shall be enforceable as so modified.
(e) In the event of a breach or threatened breach by the Executive of
the provisions of this Section 10, the Company's remedies in respect of such
breach or threatened breach shall be limited to injunctive relief (and the
Executive acknowledges that the Company may not have an adequate remedy at law
and may seek injunctive relief without the requirement of posting security) and
the recovery of actual damages suffered by the Company as a result of a breach
of this Section 10 by the Executive. Notwithstanding the foregoing, in no case
shall any portion of the lump sum payment set forth in Section 4(a)(i) or any
Gross Up Payment hereunder (or any other payments made hereunder) be recoverable
by the Parent or the Company (or subject to any set-off, counterclaim or
recoupment) in respect of damages resulting from a breach of this Section 10.
5
<PAGE>
(f) For the purposes of this Section 10, the term "Company" includes
not only Sterling Software, Inc., but also any subsidiary or affiliated
corporation of Sterling Software, Inc.
7. Parent shall guarantee the Company's obligations pursuant to
the Agreement, including without limitation, Sections 5 and 7
thereof. The Parent and the Company hereby acknowledge that
the obligations set forth in such Sections will survive any
termination or expiration of this Agreement or termination of
Executive's employment for any reason. Each party will notify
the other in writing of any claim by the Internal Revenue
Service or any other taxing authority that, if successful,
would require the payment by the Company of a Gross-Up
Payment. Such notification shall be given as soon as
practicable but no later than ten (10) business days after
such party is informed in writing of such a claim and such
party shall apprise the other party of the nature of such
claim and the date on which such claim is requested to be
paid. The Parent and the Company shall bear and pay directly
all costs and expenses (including legal fees and any interest
and penalties) incurred in connection with any such claim or
proceeding, and shall indemnify and hold the Executive
harmless, on an after-tax basis, as provided in Section 5(a),
for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. The Company
and the Parent also shall pay to the Executive all legal fees
and expenses incurred by the Executive in connection with any
tax audit or proceeding to the extent attributable to the
application of section 4999 of the Code to any payment or
benefit provided hereunder. Such payments shall be made within
five (5) business days after delivery of the Executive's
written requests for payment accompanied with evidence of fees
and expenses incurred. The Company's and Parent's obligation
with respect to a Gross-Up Payment and reimbursement of
related legal fees and expenses shall be absolute and
unconditional and shall not be affected by any circumstances,
including, without limitation, any setoff, counterclaim,
recoupment, defense or other right which the Company or the
Parent may have against the Executive or anyone else. Except
where provided herein to the contrary, all amounts payable by
the Company or the Parent hereunder shall be paid without
notice or demand. Each and every payment made hereunder by the
Company or the Parent
6
<PAGE>
shall be final, and the Company and the Parent will not
seek to recover all or any part of such payment from the
Executive, or from whomsoever may be entitled thereto, for any
reason whatsoever.
8. The Executive agrees as consideration for the Company's and
the Parent's entry into this Amendment that, effective upon
consummation of the Offer, the Executive shall be deemed to
have waived all rights the Executive may have pursuant to the
Executive's Severance Agreement with the Company dated
November 15, 1999 and that such agreement shall be terminated
as of the date of the consummation of the Offer.
9. Except as amended hereby, all other provisions of the
Agreement shall remain in full force and effect.
10. The validity, interpretation, construction and performance of
this Amendment will be governed by and construed in accordance
with the substantive laws of Delaware, without giving effect
to the conflict of laws principles of such State.
11. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of
which together will constitute one and the same Agreement.
7
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and delivered as of the first date first written above.
STERLING SOFTWARE, INC.
By /s/ R. Logan Wray
-----------------------------------
Name: R. Logan Wray
Title: Senior Vice President and
Chief Financial Officer
COMPUTER ASSOCIATES
INTERNATIONAL, INC.
By /s/ Steven M. Woghin
-----------------------------------
Name: Steven M. Woghin
Title: Senior Vice President &
General Counsel
/s/ Don J. McDermett, Jr.
--------------------------------------
Don J. McDermett, Jr.
8
<PAGE>
AMENDMENT TO
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS AMENDMENT TO CHANGE IN CONTROL SEVERANCE AGREEMENT (this "Amendment"),
dated as of February 14, 2000, by and among Sterling Software, Inc., a Delaware
corporation (the "Company"), Computer Associates International, Inc., a Delaware
corporation (the "Parent") and B. Carole Morton (the "Executive").
WITNESSETH:
WHEREAS, the Company and the Executive are parties to a Change in Control
Severance Agreement, dated as of October 22, 1999 (the "Agreement"); and
WHEREAS, the Company, the Parent and the Executive desire to amend the
Agreement as set forth in this Amendment;
NOW THEREFORE, the Company, the Parent and the Executive agree as follows:
1. This Amendment shall be of no force and effect if the Offer (as
defined in the Agreement and Plan of Merger, dated as of February 14,
2000, by and among the Parent, Silversmith Acquisition Corp. and the
Company) is not consummated.
2. The Agreement is hereby amended by replacing every occurrence of the
term "Employee Benefits" with the term "Medical Benefits" and by the
addition of a definition of Medical Benefits as follows:
(c) "Medical Benefits" means the medical, dental, health, hospital,
disability and vision benefits provided under any and all benefit
policies, plans, programs or arrangements of the Company that may now
exist or any successor policies, plans, programs or arrangements that
may be adopted hereafter by the Company in which the Executive is
entitled to participate or in which the Executive becomes entitled to
participate.
3. Section 4(a)(i) is hereby amended to read as follows:
(i) pay to the Executive, within five (5) business days after the
Termination Date, a lump sum payment in an amount equal to
<PAGE>
$1,306,365 as satisfaction in full for Executive's severance pay and
loss of certain perquisites and benefits that would otherwise have
been enjoyed by the Executive.
4. Section 4(a)(ii) is hereby amended in its entirety to read as follows:
(ii) for 24 months following the Termination Date (the "Continuation
Period"), arrange at its sole expense, to provide the Executive with
Medical Benefits that are substantially similar to the better of (when
considered in the aggregate) (x) those Medical Benefits which the
Executive was receiving or entitled to receive immediately prior to
the Change in Control, or (y) those Medical Benefits which the
Executive was receiving or entitled to receive immediately prior to
the Termination Date. If and to the extent that any Medical Benefit
described above in this Section 4(a)(ii) cannot be provided under any
applicable law or regulation or under any policy, plan, program or
arrangement of the Company, then the Company will take all action
necessary to ensure that such Medical Benefit is provided through
other means to the Executive, his dependents and beneficiaries, as
applicable.
5. The Agreement is hereby amended by the addition of a new Section
4(a)(iv) to read as follows:
(iv) The Company hereby ratifies, confirms and acknowledges the Executive's
right and entitlement to retiree health benefits under the Company's
Employee Health Benefit Plan, as amended on December 31, 1999.
6. The Company shall give the Executive the right to purchase (such right
to remain open until the expiration of thirty (30) days from the
Termination Date) at current book value, the Company vehicle which was
customarily provided to the Executive as of immediately prior to the
Executive's Date of Termination.
7. The Agreement is hereby amended by the addition of a new Section 10
(and amended as necessary in respect of required renumbering):
10. NON-COMPETITION; CONFIDENTIALITY: (a) Executive agrees and acknowledges that
reasonable limits on his ability to engage in activities which are competitive
with
2
<PAGE>
the Company are warranted in order to protect the Company's trade secrets
and proprietary information and are warranted in order to protect the Company in
developing and maintaining its reputation, good will and status in the
marketplace. In that regard, during the Continuation Period, the Executive will
not directly or indirectly, on Executive's own behalf or in the service of or on
behalf of any other individual or entity, either as a proprietor, employee,
agent, independent contractor, consultant, director, officer, partner or
stockholder (other than a stockholder of a corporation listed on a national
securities exchange or whose stock is regularly traded in the over-the-counter
market, provided that the Executive at no time owns, directly or indirectly, in
excess of 5% of the outstanding stock of any class of any such corporation):
(i) participate or engage in any activities or business developing,
manufacturing, marketing or distributing any products or services offered by the
Company as of the Effective Time (as defined in the Agreement and Plan of
Merger, dated as of February 14, 2000, by and among the Parent, Silversmith
Acquisition Corp. and the Company), or any products or services offered by the
Company subsequent to the Effective Time and in which the Executive actively
participated, recognizing that the Company offers products and services globally
("Competitive Activities"), including, without limitation, (A) selling goods or
rendering services of the type (or similar to the type) sold or rendered by the
Company, whether by means of electronic, traditional or other form of commerce;
(B) soliciting any person or entity that is a current or prospective customer or
has been a customer, in each case, of the Company, while the Executive has been
employed by the Company (provided that it shall not be deemed a breach of this
Agreement if the Executive solicits such customers for goods or services
unrelated to the Competitive Activities) and (C) assisting any person in any way
to do, or attempt to do, anything prohibited by clauses (A) or (B) above; or
(ii) solicit (other than pursuant to general, non-targeted advertisements)
any employee of the Company, who was an employee at or prior to the Effective
Time, to leave the employment of the Company.
(b) Notwithstanding anything to the contrary herein, Executive may remain a
director at those companies for which Executive is a director as of the
Effective Time, and may engage in any activities or businesses for which the
Company has given permission in writing, which shall not be unreasonably
withheld (or delayed) following the expiration of one year from the date the
Offer is
3
<PAGE>
consummated, provided Executive's engaging in such activities or business would
not have a material adverse impact on any of the Company's lines of businesses.
(c) (i) The Executive shall not, without the written consent of the
Company, disclose to any other person or use, whether directly or indirectly,
any Confidential Information (as hereinafter defined) relating to or used by the
Company, whether in written, oral or other form. "Confidential Information"
shall mean information about the Company, and its clients and customers that is
not disclosed by the Company for financial reporting purposes and that was
learned by the Executive in the course of employment with the Company, including
(without limitation) any proprietary knowledge, product and service designs,
trade secrets, manuals, technical information and plans, contracts, systems,
procedures, databases, electronic files, disks and printouts, correspondence,
internal reports, personnel files, information about Company employees relating
to their education, experience, skills, abilities, compensation and benefits,
and inter-personal relationships with suppliers to and customers of Company,
sales and advertising material, business plans, marketing plans, financial data
(including without limitation the revenues, costs or profits associated with
services), customer and industry lists, customer information, customer lists
coupled with product or service pricing, customer contracts, supplier contacts
and other contact information, pricing policies, supplies, agents, risk
analyses, engineering information and computer screen designs and computer input
and output specifications, inclusive of any pertinent documentation, techniques,
processes, technical information and know how. The Executive acknowledges that
such Confidential Information is specialized, unique in nature and of great
value to the Company, and that such information gives the Company a competitive
advantage. The Executive's obligations under this Section 10(c) shall survive
the termination of the Continuation Period.
(ii) Confidential Information does not include information which (A) is
or becomes part of the public domain other than as a result of the Executive's
disclosure; or (B) becomes available to the Executive on a non-confidential
basis from a source other than the Company, provided that source is not bound
with respect to that information by a confidentiality agreement with the Company
or otherwise prohibited from transmitting that information by a contractual,
legal or other obligation.
(iii) If the Executive is requested or (in the opinion of Executive's
counsel) required by law or judicial order to disclose any Confidential
Information, the Executive shall provide the Company with prompt notice of any
such request or
4
<PAGE>
requirement so that the Company may seek an appropriate protective order or
waiver of the Executive's compliance with the provisions of this Section 10(c).
The Executive will not oppose any reasonable action by, and will cooperate with,
the Company to obtain an appropriate protective order or other reliable
assurance that confidential treatment will be accorded the Confidential
Information. If, failing the entry of a protective order or the receipt of a
waiver hereunder, the Executive is, in the opinion of Executive's counsel,
compelled by law to disclose a portion of the Confidential Information, the
Executive may disclose to the relevant tribunal without liability hereunder that
portion of the Confidential Information which counsel advises the Executive he
is legally required to disclose, and each of the parties hereto agrees to
exercise such party's best efforts to obtain assurance that confidential
treatment will be accorded such Confidential Information.
(d) If an award by a court or arbitration panel declares that any term or
provision of this Section 10 is excessive in duration or scope or is
unreasonable or unenforceable, the parties agree that the court or arbitration
panel making such determination shall have the power to reduce the scope,
duration or area or the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is a valid and enforceable term or provision, and this Section 10
shall be enforceable as so modified.
(e) In the event of a breach or threatened breach by the Executive of the
provisions of this Section 10, the Company's remedies in respect of such breach
or threatened breach shall be limited to injunctive relief (and the Executive
acknowledges that the Company may not have an adequate remedy at law and may
seek injunctive relief without the requirement of posting security) and the
recovery of actual damages suffered by the Company as a result of a breach of
this Section 10 by the Executive. Notwithstanding the foregoing, in no case
shall any portion of the lump sum payment set forth in Section 4(a)(i) or any
Gross Up Payment hereunder (or any other payments made hereunder) be recoverable
by the Parent or the Company (or subject to any set-off, counterclaim or
recoupment) in respect of damages resulting from a breach of this Section 10.
(f) For the purposes of this Section 10, the term "Company" includes not
only Sterling Software, Inc., but also any subsidiary or affiliated corporation
of Sterling Software, Inc.
5
<PAGE>
8. Parent shall guarantee the Company's obligations pursuant to the
Agreement, including without limitation, Sections 5 and 7 thereof. The
Parent and the Company hereby acknowledge that the obligations set
forth in such Sections will survive any termination or expiration of
this Agreement or termination of Executive's employment for any
reason. Each party will notify the other in writing of any claim by
the Internal Revenue Service or any other taxing authority that, if
successful, would require the payment by the Company of a Gross-Up
Payment. Such notification shall be given as soon as practicable but
no later than ten (10) business days after such party is informed in
writing of such a claim and such party shall apprise the other party
of the nature of such claim and the date on which such claim is
requested to be paid. The Parent and the Company shall bear and pay
directly all costs and expenses (including legal fees and any interest
and penalties) incurred in connection with any such claim or
proceeding, and shall indemnify and hold the Executive harmless, on an
after-tax basis, as provided in Section 5(a), for any Excise Tax or
income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and
expenses. The Company and the Parent also shall pay to the Executive
all legal fees and expenses incurred by the Executive in connection
with any tax audit or proceeding to the extent attributable to the
application of section 4999 of the Code to any payment or benefit
provided hereunder. Such payments shall be made within five (5)
business days after delivery of the Executive's written requests for
payment accompanied with evidence of fees and expenses incurred. The
Company's and Parent's obligation with respect to a Gross-Up Payment
and reimbursement of related legal fees and expenses shall be absolute
and unconditional and shall not be affected by any circumstances,
including, without limitation, any setoff, counterclaim, recoupment,
defense or other right which the Company or the Parent may have
against the Executive or anyone else. Except where provided herein to
the contrary, all amounts payable by the Company or the Parent
hereunder shall be paid without notice or demand. Each and every
payment made hereunder by the Company or the Parent shall be final,
and the Company and the Parent will not seek to recover all or any
part of such payment from the Executive, or from whomsoever may be
entitled thereto, for any reason whatsoever.
6
<PAGE>
9. The Executive agrees as consideration for the Company's and the
Parent's entry into this Amendment that, effective upon consummation
of the Offer, the Executive shall be deemed to have waived all rights
the Executive may have pursuant to the Executive's Severance Agreement
with the Company dated August 15, 1997 and that such agreement shall
be terminated as of the date of the consummation of the Offer.
10. Except as amended hereby, all other provisions of the Agreement shall
remain in full force and effect.
11. The validity, interpretation, construction and performance of this
Amendment will be governed by and construed in accordance with the
substantive laws of Delaware, without giving effect to the conflict of
laws principles of such State.
12. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same agreement.
7
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and delivered as of the first date first written above.
STERLING SOFTWARE, INC.
By /s/ Don J. McDermett, Jr.
-----------------------------------
Name: Don J. McDermett, Jr.
Title: Senior Vice President &
General Counsel
COMPUTER ASSOCIATES
INTERNATIONAL, INC.
By /s/ Steven M. Woghin
-----------------------------------
Name: Steven M. Woghin
Title: Senior Vice President &
General Counsel
/s/ B. Carole Morton
--------------------------------------
B. Carole Morton
8
<PAGE>
AMENDMENT TO
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS AMENDMENT TO CHANGE IN CONTROL SEVERANCE AGREEMENT (this "Amendment"),
dated as of February 14, 2000, by and among Sterling Software, Inc., a
Delaware corporation (the "Company"), Computer Associates International,
Inc., a Delaware corporation (the "Parent") and Mark A. Theel (the
"Executive").
WITNESSETH:
WHEREAS, the Company and the Executive are parties to a Change in
Control Severance Agreement, dated as of October 22, 1999 (the "Agreement");
and
WHEREAS, the Company, the Parent and the Executive desire to amend
the Agreement as set forth in this Amendment;
NOW THEREFORE, the Company, the Parent and the Executive agree as
follows:
1. This Amendment shall be of no force and effect if the Offer
(as defined in the Agreement and Plan of Merger, dated as of
February 14, 2000, by and among the Parent, Silversmith
Acquisition Corp. and the Company) is not consummated.
2. The Agreement is hereby amended by replacing every occurrence
of the term "Employee Benefits" with the term "Medical
Benefits" and by the addition of a definition of Medical
Benefits as follows:
(c) "Medical Benefits" means the medical, dental, health,
hospital, disability and vision benefits provided under any
and all benefit policies, plans, programs or arrangements of
the Company that may now exist or any successor policies,
plans, programs or arrangements that may be adopted hereafter
by the Company in which the Executive is entitled to
participate or in which the Executive becomes entitled to
participate.
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<PAGE>
3. Section 4(a)(i) is hereby amended to read as follows:
(i) pay to the Executive, within five (5) business days after the
Termination Date, a lump sum payment in an amount equal to
$921,118 as satisfaction in full for Executive's severance pay
and loss of certain perquisites and benefits that would
otherwise have been enjoyed by the Executive and for the
execution of the Executive's non-competition covenant in
Section 10 hereof. The parties agree that twenty-five (25)
percent of the lump sum payment shall be allocable to, and
deemed as consideration for, the Executive's non-competition
covenant in Section 10 hereof.
4. Section 4(a)(ii) is hereby amended in its entirety to read as
follows:
(ii) for 24 months following the Termination Date (the
"Continuation Period"), arrange at its sole expense, to
provide the Executive with Medical Benefits that are
substantially similar to the better of (when considered in the
aggregate) (x) those Medical Benefits which the Executive was
receiving or entitled to receive immediately prior to the
Change in Control, or (y) those Medical Benefits which the
Executive was receiving or entitled to receive immediately
prior to the Termination Date. If and to the extent that any
Medical Benefit described above in this Section 4(a)(ii)
cannot be provided under any applicable law or regulation or
under any policy, plan, program or arrangement of the Company,
then the Company will take all action necessary to ensure that
such Medical Benefit is provided through other means to the
Executive, his dependents and beneficiaries, as applicable.
5. The Company shall give the Executive the right to purchase
(such right to remain open until the expiration of thirty (30)
days from the Termination Date) at current book value, the
Company vehicle which was customarily provided to the
Executive as of immediately prior to the Executive's Date of
Termination.
6. The Agreement is hereby amended by the addition of a new
Section 10 (and amended as necessary in respect of required
renumbering):
10. NON-COMPETITION; CONFIDENTIALITY: (a) Executive agrees and acknowledges
that reasonable limits on his ability to engage in activities which are
competitive with
2
<PAGE>
the Company are warranted in order to protect the Company's trade secrets and
proprietary information and are warranted in order to protect the Company in
developing and maintaining its reputation, good will and status in the
marketplace. In that regard, during the Continuation Period, the Executive
will not directly or indirectly, on Executive's own behalf or in the service
of or on behalf of any other individual or entity, either as a proprietor,
employee, agent, independent contractor, consultant, director, officer,
partner or stockholder (other than a stockholder of a corporation listed on a
national securities exchange or whose stock is regularly traded in the
over-the-counter market, provided that the Executive at no time owns,
directly or indirectly, in excess of 5% of the outstanding stock of any class
of any such corporation):
(i) participate or engage in any activities or business developing,
manufacturing, marketing or distributing any products or services offered by
the Company as of the Effective Time (as defined in the Agreement and Plan of
Merger, dated as of February 14, 2000, by and among the Parent, Silversmith
Acquisition Corp. and the Company), or any products or services offered by
the Company subsequent to the Effective Time and in which the Executive
actively participated, recognizing that the Company offers products and
services globally ("Competitive Activities"), including, without limitation,
(A) selling goods or rendering services of the type (or similar to the type)
sold or rendered by the Company, whether by means of electronic, traditional
or other form of commerce; (B) soliciting any person or entity that is a
current or prospective customer or has been a customer, in each case, of the
Company, while the Executive has been employed by the Company (provided that
it shall not be deemed a breach of this Agreement if the Executive solicits
such customers for goods or services unrelated to the Competitive Activities)
and (C) assisting any person in any way to do, or attempt to do, anything
prohibited by clauses (A) or (B) above; or
(ii) solicit (other than pursuant to general, non-targeted
advertisements) any employee of the Company, who was an employee at or prior
to the Effective Time, to leave the employment of the Company.
(b) Notwithstanding anything to the contrary herein, Executive may
remain a director at those companies for which Executive is a director as of
the Effective Time, and may engage in any activities or businesses for which
the
3
<PAGE>
Company has given permission in writing, which shall not be unreasonably
withheld (or delayed) following the expiration of one year from the date the
Offer is consummated, provided Executive's engaging in such activities or
business would not have a material adverse impact on any of the Company's
lines of businesses.
(c) (i) The Executive shall not, without the written consent of the
Company, disclose to any other person or use, whether directly or indirectly,
any Confidential Information (as hereinafter defined) relating to or used by
the Company, whether in written, oral or other form. "Confidential
Information" shall mean information about the Company, and its clients and
customers that is not disclosed by the Company for financial reporting
purposes and that was learned by the Executive in the course of employment
with the Company, including (without limitation) any proprietary knowledge,
product and service designs, trade secrets, manuals, technical information
and plans, contracts, systems, procedures, databases, electronic files, disks
and printouts, correspondence, internal reports, personnel files, information
about Company employees relating to their education, experience, skills,
abilities, compensation and benefits, and inter-personal relationships with
suppliers to and customers of Company, sales and advertising material,
business plans, marketing plans, financial data (including without limitation
the revenues, costs or profits associated with services), customer and
industry lists, customer information, customer lists coupled with product or
service pricing, customer contracts, supplier contacts and other contact
information, pricing policies, supplies, agents, risk analyses, engineering
information and computer screen designs and computer input and output
specifications, inclusive of any pertinent documentation, techniques,
processes, technical information and know how. The Executive acknowledges
that such Confidential Information is specialized, unique in nature and of
great value to the Company, and that such information gives the Company a
competitive advantage. The Executive's obligations under this Section 10(c)
shall survive the termination of the Continuation Period.
(ii) Confidential Information does not include information
which (A) is or becomes part of the public domain other than as a result of
the Executive's disclosure; or (B) becomes available to the Executive on a
non-confidential basis from a source other than the Company, provided that
source is not bound with respect to that information by a confidentiality
agreement with the Company or otherwise prohibited from transmitting that
information by a contractual, legal or other obligation.
4
<PAGE>
(iii) If the Executive is requested or (in the opinion of
Executive's counsel) required by law or judicial order to disclose any
Confidential Information, the Executive shall provide the Company with prompt
notice of any such request or requirement so that the Company may seek an
appropriate protective order or waiver of the Executive's compliance with the
provisions of this Section 10(c). The Executive will not oppose any
reasonable action by, and will cooperate with, the Company to obtain an
appropriate protective order or other reliable assurance that confidential
treatment will be accorded the Confidential Information. If, failing the
entry of a protective order or the receipt of a waiver hereunder, the
Executive is, in the opinion of Executive's counsel, compelled by law to
disclose a portion of the Confidential Information, the Executive may
disclose to the relevant tribunal without liability hereunder that portion of
the Confidential Information which counsel advises the Executive he is
legally required to disclose, and each of the parties hereto agrees to
exercise such party's best efforts to obtain assurance that confidential
treatment will be accorded such Confidential Information.
(d) If an award by a court or arbitration panel declares that any
term or provision of this Section 10 is excessive in duration or scope or is
unreasonable or unenforceable, the parties agree that the court or
arbitration panel making such determination shall have the power to reduce
the scope, duration or area or the term or provision, to delete specific
words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is a valid and enforceable term or
provision, and this Section 10 shall be enforceable as so modified.
(e) In the event of a breach or threatened breach by the Executive
of the provisions of this Section 10, the Company's remedies in respect of
such breach or threatened breach shall be limited to injunctive relief (and
the Executive acknowledges that the Company may not have an adequate remedy
at law and may seek injunctive relief without the requirement of posting
security) and the recovery of actual damages suffered by the Company as a
result of a breach of this Section 10 by the Executive. Notwithstanding the
foregoing, in no case shall any portion of the lump sum payment set forth in
Section 4(a)(i) or any Gross-Up Payment hereunder (or any other payments made
hereunder) be recoverable by the Parent or the Company (or subject to any
set-off, counterclaim or recoupment) in respect of damages resulting from a
breach of this Section 10.
5
<PAGE>
(f) For the purposes of this Section 10, the term "Company" includes
not only Sterling Software, Inc., but also any subsidiary or affiliated
corporation of Sterling Software, Inc.
7. Parent shall guarantee the Company's obligations pursuant to
the Agreement, including without limitation, Sections 5 and 7
thereof. The Parent and the Company hereby acknowledge that
the obligations set forth in such Sections will survive any
termination or expiration of this Agreement or termination of
Executive's employment for any reason. Each party will notify
the other in writing of any claim by the Internal Revenue
Service or any other taxing authority that, if successful,
would require the payment by the Company of a Gross-Up
Payment. Such notification shall be given as soon as
practicable but no later than ten (10) business days after
such party is informed in writing of such a claim and such
party shall apprise the other party of the nature of such
claim and the date on which such claim is requested to be
paid. The Parent and the Company shall bear and pay directly
all costs and expenses (including legal fees and any interest
and penalties) incurred in connection with any such claim or
proceeding, and shall indemnify and hold the Executive
harmless, on an after-tax basis, as provided in Section 5(a),
for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. The Company
and the Parent also shall pay to the Executive all legal fees
and expenses incurred by the Executive in connection with any
tax audit or proceeding to the extent attributable to the
application of section 4999 of the Code to any payment or
benefit provided hereunder. Such payments shall be made within
five (5) business days after delivery of the Executive's
written requests for payment accompanied with evidence of fees
and expenses incurred. The Company's and Parent's obligation
with respect to a Gross-Up Payment and reimbursement of
related legal fees and expenses shall be absolute and
unconditional and shall not be affected by any circumstances,
including, without limitation, any setoff, counterclaim,
recoupment, defense or other right which the Company or the
Parent may have against the Executive or anyone else. Except
where provided herein to the contrary, all amounts payable by
the Company or the Parent hereunder shall be paid without
notice or demand. Each and every payment made hereunder by the
Company or the Parent
6
<PAGE>
shall be final, and the Company and the Parent will not seek
to recover all or any part of such payment from the Executive,
or from whomsoever may be entitled thereto, for any reason
whatsoever.
8. The Executive agrees as consideration for the Company's and
the Parent's entry into this Amendment that, effective upon
consummation of the Offer, the Executive shall be deemed to
have waived all rights the Executive may have pursuant to the
Executive's Severance Agreement with the Company dated
November 1, 1998 and that such agreement shall be terminated
as of the date of the consummation of the Offer.
9. Except as amended hereby, all other provisions of the
Agreement shall remain in full force and effect.
10. The validity, interpretation, construction and performance of
this Amendment will be governed by and construed in accordance
with the substantive laws of Delaware, without giving effect
to the conflict of laws principles of such State.
11. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of
which together will constitute one and the same agreement.
7
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be
duly executed and delivered as of the first date first written above.
STERLING SOFTWARE, INC.
By /s/ Don J. McDermett, Jr.
-----------------------------------
Name: Don J. McDermett, Jr.
Title: Senior Vice President &
General Counsel
COMPUTER ASSOCIATES
INTERNATIONAL, INC.
By /s/ Steven M. Woghin
-----------------------------------
Name: Steven M. Woghin
Title: Senior Vice President &
General Counsel
/s/ Mark A. Theel
--------------------------------------
Mark A. Theel
8
<PAGE>
AMENDMENT TO
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS AMENDMENT TO CHANGE IN CONTROL SEVERANCE AGREEMENT (this "Amendment"),
dated as of February 14, 2000, by and among Sterling Software, Inc., a Delaware
corporation (the "Company"), Computer Associates International, Inc., a Delaware
corporation (the "Parent") and R. Logan Wray (the "Executive").
WITNESSETH:
WHEREAS, the Company and the Executive are parties to a Change in
Control Severance Agreement, dated as of November 15, 1999 (the "Agreement");
and
WHEREAS, the Company, the Parent and the Executive desire to amend the
Agreement as set forth in this Amendment;
NOW THEREFORE, the Company, the Parent and the Executive agree as
follows:
1. This Amendment shall be of no force and effect if the Offer
(as defined in the Agreement and Plan of Merger, dated as of
February 14, 2000, by and among the Parent, Silversmith
Acquisition Corp. and the Company) is not consummated.
2. The Agreement is hereby amended by replacing every occurrence
of the term "Employee Benefits" with the term "Medical
Benefits" and by the addition of a definition of Medical
Benefits as follows:
(c) "Medical Benefits" means the medical, dental, health,
hospital, disability and vision benefits provided under any
and all benefit policies, plans, programs or arrangements of
the Company that may now exist or any successor policies,
plans, programs or arrangements that may be adopted hereafter
by the Company in which the Executive is entitled to
participate or in which the Executive becomes entitled to
participate.
<PAGE>
3. Section 4(a)(i) is hereby amended to read as follows:
(i) pay to the Executive, within five (5) business days after the
Termination Date, a lump sum payment in an amount equal to
$2,599,418 as satisfaction in full for Executive's severance
pay and loss of certain perquisites and benefits that would
otherwise have been enjoyed by the Executive and for the
execution of the Executive's non-competition covenant in
Section 10 hereof. The parties agree that twenty-five (25)
percent of the lump sum payment shall be allocable to, and
deemed as consideration for, the Executive's non-competition
covenant in Section 10 hereof.
4. Section 4(a)(ii) is hereby amended in its entirety to read as
follows:
(ii) for 48 months following the Termination, arrange at its sole
expense, to provide the Executive with Medical Benefits that
are substantially similar to the better of (when considered in
the aggregate) (x) those Medical Benefits which the Executive
was receiving or entitled to receive immediately prior to the
Change in Control, or (y) those Medical Benefits which the
Executive was receiving or entitled to receive immediately
prior to the Termination Date. If and to the extent that any
Medical Benefit described above in this Section 4(a)(ii)
cannot be provided under any applicable law or regulation or
under any policy, plan, program or arrangement of the Company,
then the Company will take all action necessary to ensure that
such Medical Benefit is provided through other means to the
Executive, his dependents and beneficiaries, as applicable.
5. The Company shall give the Executive the right to purchase
(such right to remain open until the expiration of thirty (30)
days from the Termination Date) at current book value, the
Company vehicle which was customarily provided to the
Executive as of immediately prior to the Executive's Date of
Termination.
6. The Agreement is hereby amended by the addition of a new
Section 10 (and amended as necessary in respect of required
renumbering):
2
<PAGE>
10. NON-COMPETITION; CONFIDENTIALITY: (a) Executive agrees and acknowledges that
reasonable limits on his ability to engage in activities which are competitive
with the Company are warranted in order to protect the Company's trade secrets
and proprietary information and are warranted in order to protect the Company in
developing and maintaining its reputation, good will and status in the
marketplace. In that regard, during the 24 months following the Termination Date
(the "Continuation Period"), the Executive will not directly or indirectly, on
Executive's own behalf or in the service of or on behalf of any other individual
or entity, either as a proprietor, employee, agent, independent contractor,
consultant, director, officer, partner or stockholder (other than a stockholder
of a corporation listed on a national securities exchange or whose stock is
regularly traded in the over-the-counter market, provided that the Executive at
no time owns, directly or indirectly, in excess of 5% of the outstanding stock
of any class of any such corporation):
(i) participate or engage in any activities or business developing,
manufacturing, marketing or distributing any products or services offered by the
Company as of the Effective Time (as defined in the Agreement and Plan of
Merger, dated as of February 14, 2000, by and among the Parent, Silversmith
Acquisition Corp. and the Company), or any products or services offered by the
Company subsequent to the Effective Time and in which the Executive actively
participated, recognizing that the Company offers products and services globally
("Competitive Activities"), including, without limitation, (A) selling goods or
rendering services of the type (or similar to the type) sold or rendered by the
Company, whether by means of electronic, traditional or other form of commerce;
(B) soliciting any person or entity that is a current or prospective customer or
has been a customer, in each case, of the Company, while the Executive has been
employed by the Company (provided that it shall not be deemed a breach of this
Agreement if the Executive solicits such customers for goods or services
unrelated to the Competitive Activities) and (C) assisting any person in any way
to do, or attempt to do, anything prohibited by clauses (A) or (B) above; or
(ii) solicit (other than pursuant to general, non-targeted
advertisements) any employee of the Company, who was an employee at or prior to
the Effective Time, to leave the employment of the Company.
(b) Notwithstanding anything to the contrary herein, Executive may
remain a director at those companies for which Executive is a director as of the
Effective Time, and may engage in any activities or businesses for which the
3
<PAGE>
Company has given permission in writing, which shall not be unreasonably
withheld (or delayed) following the expiration of one year from the date the
Offer is consummated, provided Executive's engaging in such activities or
business would not have a material adverse impact on any of the Company's lines
of businesses.
(c) (i) The Executive shall not, without the written consent of the
Company, disclose to any other person or use, whether directly or indirectly,
any Confidential Information (as hereinafter defined) relating to or used by the
Company, whether in written, oral or other form. "Confidential Information"
shall mean information about the Company, and its clients and customers that is
not disclosed by the Company for financial reporting purposes and that was
learned by the Executive in the course of employment with the Company, including
(without limitation) any proprietary knowledge, product and service designs,
trade secrets, manuals, technical information and plans, contracts, systems,
procedures, databases, electronic files, disks and printouts, correspondence,
internal reports, personnel files, information about Company employees relating
to their education, experience, skills, abilities, compensation and benefits,
and inter-personal relationships with suppliers to and customers of Company,
sales and advertising material, business plans, marketing plans, financial data
(including without limitation the revenues, costs or profits associated with
services), customer and industry lists, customer information, customer lists
coupled with product or service pricing, customer contracts, supplier contacts
and other contact information, pricing policies, supplies, agents, risk
analyses, engineering information and computer screen designs and computer input
and output specifications, inclusive of any pertinent documentation, techniques,
processes, technical information and know how. The Executive acknowledges that
such Confidential Information is specialized, unique in nature and of great
value to the Company, and that such information gives the Company a competitive
advantage. The Executive's obligations under this Section 10(c) shall survive
the termination of the Continuation Period.
(ii) Confidential Information does not include information
which (A) is or becomes part of the public domain other than as a result of the
Executive's disclosure; or (B) becomes available to the Executive on a
non-confidential basis from a source other than the Company, provided that
source is not bound with respect to that information by a confidentiality
agreement with the Company or otherwise prohibited from transmitting that
information by a contractual, legal or other obligation.
4
<PAGE>
(iii) If the Executive is requested or (in the opinion of
Executive's counsel) required by law or judicial order to disclose any
Confidential Information, the Executive shall provide the Company with prompt
notice of any such request or requirement so that the Company may seek an
appropriate protective order or waiver of the Executive's compliance with the
provisions of this Section 10(c). The Executive will not oppose any reasonable
action by, and will cooperate with, the Company to obtain an appropriate
protective order or other reliable assurance that confidential treatment will be
accorded the Confidential Information. If, failing the entry of a protective
order or the receipt of a waiver hereunder, the Executive is, in the opinion of
Executive's counsel, compelled by law to disclose a portion of the Confidential
Information, the Executive may disclose to the relevant tribunal without
liability hereunder that portion of the Confidential Information which counsel
advises the Executive he is legally required to disclose, and each of the
parties hereto agrees to exercise such party's best efforts to obtain assurance
that confidential treatment will be accorded such Confidential Information.
(d) If an award by a court or arbitration panel declares that any term
or provision of this Section 10 is excessive in duration or scope or is
unreasonable or unenforceable, the parties agree that the court or arbitration
panel making such determination shall have the power to reduce the scope,
duration or area or the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is a valid and enforceable term or provision, and this Section 10
shall be enforceable as so modified.
(e) In the event of a breach or threatened breach by the Executive of
the provisions of this Section 10, the Company's remedies in respect of such
breach or threatened breach shall be limited to injunctive relief (and the
Executive acknowledges that the Company may not have an adequate remedy at law
and may seek injunctive relief without the requirement of posting security) and
the recovery of actual damages suffered by the Company as a result of a breach
of this Section 10 by the Executive. Notwithstanding the foregoing, in no case
shall any portion of the lump sum payment set forth in Section 4(a)(i) or any
Gross Up Payment hereunder (or any other payments made hereunder) be recoverable
by the Parent or the Company (or subject to any set-off, counterclaim or
recoupment) in respect of damages resulting from a breach of this Section 10.
5
<PAGE>
(f) For the purposes of this Section 10, the term "Company" includes
not only Sterling Software, Inc., but also any subsidiary or affiliated
corporation of Sterling Software, Inc.
7. Parent shall guarantee the Company's obligations pursuant to
the Agreement, including without limitation, Sections 5 and 7
thereof. The Parent and the Company hereby acknowledge that
the obligations set forth in such Sections will survive any
termination or expiration of this Agreement or termination of
Executive's employment for any reason. Each party will notify
the other in writing of any claim by the Internal Revenue
Service or any other taxing authority that, if successful,
would require the payment by the Company of a Gross-Up
Payment. Such notification shall be given as soon as
practicable but no later than ten (10) business days after
such party is informed in writing of such a claim and such
party shall apprise the other party of the nature of such
claim and the date on which such claim is requested to be
paid. The Parent and the Company shall bear and pay directly
all costs and expenses (including legal fees and any interest
and penalties) incurred in connection with any such claim or
proceeding, and shall indemnify and hold the Executive
harmless, on an after-tax basis, as provided in Section 5(a),
for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. The Company
and the Parent also shall pay to the Executive all legal fees
and expenses incurred by the Executive in connection with any
tax audit or proceeding to the extent attributable to the
application of section 4999 of the Code to any payment or
benefit provided hereunder. Such payments shall be made within
five (5) business days after delivery of the Executive's
written requests for payment accompanied with evidence of fees
and expenses incurred. The Company's and Parent's obligation
with respect to a Gross-Up Payment and reimbursement of
related legal fees and expenses shall be absolute and
unconditional and shall not be affected by any circumstances,
including, without limitation, any setoff, counterclaim,
recoupment, defense or other right which the Company or the
Parent may have against the Executive or anyone else. Except
where provided herein to the contrary, all amounts payable by
the Company or the Parent hereunder shall be paid without
notice or demand. Each and every payment made hereunder by the
Company or the Parent
6
<PAGE>
shall be final, and the Company and the Parent will not seek
to recover all or any part of such payment from the Executive,
or from whomsoever may be entitled thereto, for any reason
whatsoever.
8. The Executive agrees as consideration for the Company's and
the Parent's entry into this Amendment that, effective upon
consummation of the Offer, the Executive shall be deemed to
have waived all rights the Executive may have pursuant to the
Executive's Severance Agreement with the Company dated
November 15, 1999 and that such agreement shall be terminated
as of the date of the consummation of the Offer.
9. Except as amended hereby, all other provisions of the
Agreement shall remain in full force and effect.
10. The validity, interpretation, construction and performance of
this Amendment will be governed by and construed in accordance
with the substantive laws of Delaware, without giving effect
to the conflict of laws principles of such State.
11. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of
which together will constitute one and the same Agreement.
7
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and delivered as of the first date first written above.
STERLING SOFTWARE, INC.
By /s/ Don J. McDermett, Jr.
-----------------------------------
Name: Don J. McDermett, Jr.
Title: Senior Vice President &
General Counsel
COMPUTER ASSOCIATES
INTERNATIONAL, INC.
By /s/ Steven M. Woghin
-----------------------------------
Name: Steven M. Woghin
Title: Senior Vice President &
General Counsel
/s/ R. Logan Wray
--------------------------------------
R. Logan Wray
8
<PAGE>
AMENDMENT TO
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS AMENDMENT TO CHANGE IN CONTROL SEVERANCE AGREEMENT (this "Amendment"),
dated as of February 14, 2000, by and among Sterling Software, Inc., a
Delaware corporation (the "Company"), Computer Associates International,
Inc., a Delaware corporation (the "Parent") and Evan A. Wyly (the
"Executive").
WITNESSETH:
WHEREAS, the Company and the Executive are parties to a Change in
Control Severance Agreement, dated as of October 22, 1999 (the "Agreement"); and
WHEREAS, the Company, the Parent and the Executive desire to amend the
Agreement as set forth in this Amendment;
NOW THEREFORE, the Company, the Parent and the Executive agree as
follows:
1. This Amendment shall be of no force and effect if the Offer
(as defined in the Agreement and Plan of Merger, dated as of
February 14, 2000, by and among the Parent, Silversmith
Acquisition Corp. and the Company) is not consummated.
2. The Agreement is hereby amended by replacing every occurrence
of the term "Employee Benefits" with the term "Medical
Benefits" and by the addition of a definition of Medical
Benefits as follows:
(c) "Medical Benefits" means the medical, dental, health,
hospital, disability and vision benefits provided under any
and all benefit policies, plans, programs or arrangements of
the Company that may now exist or any successor policies,
plans, programs or arrangements that may be adopted hereafter
by the Company in which the Executive is entitled to
participate or in which the Executive becomes entitled to
participate.
<PAGE>
3. Section 4(a)(i) is hereby amended to read as follows:
(i) pay to the Executive, within five (5) business days after the
Termination Date, a lump sum payment in an amount equal to
$233,544 as satisfaction in full for Executive's severance pay
and loss of certain perquisites and benefits that would
otherwise have been enjoyed by the Executive.
4. Section 4(a)(ii) is hereby amended in its entirety to read as
follows:
(ii) for 12 months following the Termination Date (the
"Continuation Period"), arrange at its sole expense, to
provide the Executive with Medical Benefits that are
substantially similar to the better of (when considered in the
aggregate) (x) those Medical Benefits which the Executive was
receiving or entitled to receive immediately prior to the
Change in Control, or (y) those Medical Benefits which the
Executive was receiving or entitled to receive immediately
prior to the Termination Date. If and to the extent that any
Medical Benefit described above in this Section 4(a)(ii)
cannot be provided under any applicable law or regulation or
under any policy, plan, program or arrangement of the Company,
then the Company will take all action necessary to ensure that
such Medical Benefit is provided through other means to the
Executive, his dependents and beneficiaries, as applicable.
5. The Company shall give the Executive the right to purchase
(such right to remain open until the expiration of thirty (30)
days from the Termination Date) at current book value, the
Company vehicle which was customarily provided to the
Executive as of immediately prior to the Executive's Date of
Termination.
6. The Agreement is hereby amended by the addition of a new
Section 10 (and amended as necessary in respect of required
renumbering):
2
<PAGE>
10. NON-COMPETITION; CONFIDENTIALITY: (a) Executive agrees and acknowledges that
reasonable limits on his ability to engage in activities which are competitive
with the Company are warranted in order to protect the Company's trade secrets
and proprietary information and are warranted in order to protect the Company in
developing and maintaining its reputation, good will and status in the
marketplace. In that regard, during the Continuation Period, the Executive will
not directly or indirectly, on Executive's own behalf or in the service of or on
behalf of any other individual or entity, either as a proprietor, employee,
agent, independent contractor, consultant, director, officer, partner or
stockholder (other than a stockholder of a corporation listed on a national
securities exchange or whose stock is regularly traded in the over-the-counter
market, provided that the Executive at no time owns, directly or indirectly, in
excess of 5% of the outstanding stock of any class of any such corporation):
(i) participate or engage in any activities or business developing,
manu facturing, marketing or distributing any products or services offered by
the Company as of the Effective Time (as defined in the Agreement and Plan of
Merger, dated as of February 14, 2000, by and among the Parent, Silversmith
Acquisition Corp. and the Company), or any products or services offered by the
Company subsequent to the Effective Time and in which the Executive actively
participated, recognizing that the Company offers products and services globally
("Competitive Activities"), including, without limitation, (A) selling goods or
rendering services of the type (or similar to the type) sold or rendered by the
Company, whether by means of electronic, traditional or other form of commerce;
(B) soliciting any person or entity that is a current or prospective customer or
has been a customer, in each case, of the Company, while the Executive has been
employed by the Company (provided that it shall not be deemed a breach of this
Agreement if the Executive solicits such customers for goods or services
unrelated to the Competitive Activities) and (C) assisting any person in any way
to do, or attempt to do, anything prohibited by clauses (A) or (B) above; or
(ii) solicit (other than pursuant to general, non-targeted
advertisements) any employee of the Company, who was an employee at or prior to
the Effective Time, to leave the employment of the Company.
(b) Notwithstanding anything to the contrary herein, Executive may
remain a director at those companies for which Executive is a director as of the
Effective Time, and may engage in any activities or businesses for which the
Company has given permission in writing, which shall not be unreasonably
withheld (or delayed) following the expiration of
3
<PAGE>
six (6) months from the date the Offer is consummated, provided Executive's
engaging in such activities or business would not have a material adverse impact
on any of the Company's lines of businesses.
(c) (i) The Executive shall not, without the written consent of the Com
pany, disclose to any other person or use, whether directly or indirectly, any
Confi dential Information (as hereinafter defined) relating to or used by the
Company, whether in written, oral or other form. "Confidential Information"
shall mean information about the Company, and its clients and customers that is
not disclosed by the Company for financial reporting purposes and that was
learned by the Executive in the course of employment with the Company,
including (without limitation) any proprietary knowledge, product and service
designs, trade secrets, manuals, technical information and plans, contracts,
systems, procedures, databases, electronic files, disks and printouts,
correspondence, internal reports, personnel files, information about Company
employees relating to their education, experience, skills, abilities,
compensation and benefits, and inter-personal relationships with suppliers to
and customers of Company, sales and advertising material, business plans,
marketing plans, financial data (including without limitation the revenues,
costs or profits associated with services), customer and industry lists,
customer information, customer lists coupled with product or service pricing,
customer contracts, supplier contacts and other contact information, pricing
policies, supplies, agents, risk analyses, engineering information and computer
screen designs and computer input and output specifications, inclusive of any
pertinent documentation, techniques, processes, technical information and know
how. The Executive acknowledges that such Confidential Information is
specialized, unique in nature and of great value to the Company, and that such
information gives the Company a competitive advantage. The Executive's
obligations under this Section 10(c) shall survive the termina tion of the
Continuation Period.
(ii) Confidential Information does not include information
which (A) is or becomes part of the public domain other than as a result of the
Executive's disclosure; or (B) becomes available to the Executive on a
non-confidential basis from a source other than the Company, provided that
source is not bound with respect to that information by a confidentiality
agreement with the Company or otherwise prohibited from transmitting that
information by a contractual, legal or other obligation.
(iii) If the Executive is requested or (in the opinion of
Executive's counsel) required by law or judicial order to disclose any
Confidential Information, the Executive shall provide the Company with prompt
notice of any such request or requirement so that
4
<PAGE>
the Company may seek an appropriate protective order or waiver of the
Executive's compliance with the provisions of this Section 10(c). The Executive
will not oppose any reasonable action by, and will cooperate with, the Company
to obtain an appropriate protective order or other reliable assurance that
confidential treatment will be accorded the Confidential Information. If,
failing the entry of a protective order or the receipt of a waiver hereunder,
the Executive is, in the opinion of Executive's counsel, compelled by law to
disclose a portion of the Confidential Information, the Executive may disclose
to the relevant tribunal without liability hereunder that portion of the
Confidential Information which counsel advises the Executive he is legally
required to disclose, and each of the parties hereto agrees to exercise such
party's best efforts to obtain assurance that confidential treatment will be
accorded such Confidential Information.
(d) If an award by a court or arbitration panel declares that any term
or provision of this Section 10 is excessive in duration or scope or is
unreasonable or unenforceable, the parties agree that the court or arbitration
panel making such determination shall have the power to reduce the scope,
duration or area or the term or provision, to delete specific words or phrases,
or to replace any invalid or unen forceable term or provision with a term or
provision that is a valid and enforceable term or provision, and this Section 10
shall be enforceable as so modified.
(e) In the event of a breach or threatened breach by the Executive of
the provisions of this Section 10, the Company's remedies in respect of such
breach or threatened breach shall be limited to injunctive relief (and the
Executive acknowl edges that the Company may not have an adequate remedy at law
and may seek injunctive relief without the requirement of posting security) and
the recovery of actual damages suffered by the Company as a result of a breach
of this Section 10 by the Executive. Notwithstanding the foregoing, in no case
shall any portion of the lump sum payment set forth in Section 4(a)(i) or any
Gross Up Payment hereunder (or any other payments made hereunder) be recoverable
by the Parent or the Company (or subject to any set-off, counterclaim or
recoupment) in respect of damages resulting from a breach of this Section 10.
(f) For the purposes of this Section 10, the term "Company" includes
not only Sterling Software, Inc., but also any subsidiary or affiliated
corporation of Sterling Software, Inc.
5
<PAGE>
7. Parent shall guarantee the Company's obligations pursuant to
the Agreement, including without limitation, Sections 5 and 7
thereof. The Parent and the Company hereby acknowledge that
the obligations set forth in such Sections will survive any
termination or expiration of this Agreement or termination of
Executive's employment for any reason. Each party will notify
the other in writing of any claim by the Internal Revenue
Service or any other taxing authority that, if successful,
would require the payment by the Company of a Gross-Up Pay
ment. Such notification shall be given as soon as practicable
but no later than ten (10) business days after such party is
informed in writing of such a claim and such party shall
apprise the other party of the nature of such claim and the
date on which such claim is requested to be paid. The Parent
and the Company shall bear and pay directly all costs and
expenses (including legal fees and any interest and penal
ties) incurred in connection with any such claim or
proceeding, and shall indemnify and hold the Executive
harmless, on an after-tax basis, as provided in Section 5(a),
for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. The Company
and the Parent also shall pay to the Executive all legal fees
and expenses incurred by the Executive in connection with any
tax audit or proceeding to the extent attributable to the
application of section 4999 of the Code to any payment or
benefit provided hereunder. Such payments shall be made
within five (5) business days after delivery of the
Executive's written requests for payment accompanied with
evidence of fees and expenses incurred. The Company's and
Parent's obligation with respect to a Gross-Up Payment and
reimbursement of related legal fees and expenses shall be
absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any setoff,
counterclaim, recoupment, defense or other right which the
Company or the Parent may have against the Executive or anyone
else. Except where provided herein to the contrary, all
amounts payable by the Company or the Parent hereunder shall
be paid without notice or demand. Each and every payment made
hereunder by the Company or the Parent shall be final, and the
Company and the Parent will not seek to recover all or any
part of such payment from the Executive, or from whomsoever
may be entitled thereto, for any reason whatsoever.
6
<PAGE>
8. The Executive agrees as consideration for the Company's and
the Parent's entry into this Amendment that, effective upon
consummation of the Offer, the Executive shall be deemed to
have waived all rights the Executive may have pursuant to the
Executive's Severance Agreement with the Company dated August
15, 1997 and that such agreement shall be terminated as of the
date of the consummation of the Offer.
9. Except as amended hereby, all other provisions of the
Agreement shall remain in full force and effect.
10. The validity, interpretation, construction and performance of
this Amendment will be governed by and construed in accordance
with the substantive laws of Delaware, without giving effect
to the conflict of laws principles of such State.
11. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of
which together will constitute one and the same Agreement.
7
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and delivered as of the first date first written above.
STERLING SOFTWARE, INC.
By /s/ Don J. McDermett, Jr.
----------------------------------
Name: Don J. McDermett, Jr.
Title: Senior Vice President &
General Counsel
COMPUTER ASSOCIATES
INTERNATIONAL, INC.
By /s/ Steven M. Woghin
----------------------------------
Name: Steven M. Woghin
Title: Senior Vice President &
General Counsel
/s/ Evan A. Wyly
----------------------------------
Evan A. Wyly
8
<PAGE>
FORM OF
AMENDMENT TO
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS AMENDMENT TO CHANGE IN CONTROL SEVERANCE AGREEMENT (this "Amendment"),
dated as of February 14, 2000, by and among Sterling Software, Inc., a
Delaware corporation (the "Company"), Computer Associates International,
Inc., a Delaware corporation (the "Parent") and [ ] (the
"Executive").
WITNESSETH:
WHEREAS, the Company and the Executive are parties to a Change in
Control Severance Agreement, dated as of [ ] (the "Agreement");
and
WHEREAS, the Company, the Parent and the Executive desire to amend
the Agreement as set forth in this Amendment;
NOW THEREFORE, the Company, the Parent and the Executive agree as
follows:
1. This Amendment shall be of no force and effect if the Offer
(as defined in the Agreement and Plan of Merger, dated as of
February 14, 2000, by and among the Parent, Silversmith
Acquisition Corp. and the Company) is not consummated.
2. The Agreement is hereby amended by replacing every occurrence
of the term "Employee Benefits" with the term "Medical
Benefits" and by the addition of a definition of Medical
Benefits as follows:
(c) "Medical Benefits" means the medical, dental, health,
hospital, disability and vision benefits provided under any
and all benefit policies, plans, programs or arrangements of
the Company that may now exist or any successor policies,
plans, programs or arrangements that may be adopted hereafter
by the Company in which the Executive is entitled to
participate or in which the Executive becomes entitled to
participate.
<PAGE>
3. Section 4(a)(i) is hereby amended to read as follows:
(i) pay to the Executive, within five (5) business days after the
Termination Date, a lump sum payment in an amount equal to
$[ ] as satisfaction in full for Executive's severance
pay and loss of certain perquisites and benefits that would
otherwise have been enjoyed by the Executive and for the
execution of the Executive's non-competition covenant in
Section 10 hereof. The parties agree that twenty-five (25)
percent of the lump sum payment shall be allocable to, and
deemed as consideration for, the Executive's non-competition
covenant in Section 10 hereof.(1)
4. Section 4(a)(ii) is hereby amended in its entirety to read as
follows:
(ii) for [ ] months following the Termination Date, arrange at its
sole expense, to provide the Executive with Medical Benefits
that are substantially similar to the better of (when
considered in the aggregate) (x) those Medical Benefits which
the Executive was receiving or entitled to receive immediately
prior to the Change in Control, or (y) those Medical Benefits
which the Executive was receiving or entitled to receive
immediately prior to the Termination Date. If and to the
extent that any Medical Benefit described above in this
Section 4(a)(ii) cannot be provided under any applicable law
or regulation or under any policy, plan, program or
arrangement of the Company, then the Company will take all
action necessary to ensure that such Medical Benefit is
provided through other means to the Executive, his dependents
and beneficiaries, as applicable.
5. The Company shall give the Executive the right to purchase
(such right to remain open until the expiration of thirty (30)
days from the Termination Date) at current book value, the
Company vehicle which was customarily provided to the
Executive as of immediately prior to the Executive's Date of
Termination.
6. The Agreement is hereby amended by the addition of a new
Section 10 (and amended as necessary in respect of required
renumbering):
- -------------------
(1) This sentence is not contained in certain agreements which do not contain
a non-competition covenant.
2
<PAGE>
10. NON-COMPETITION; CONFIDENTIALITY(2): (a) Executive agrees and acknowledges
that reasonable limits on his ability to engage in activities which are
competitive with the Company are warranted in order to protect the Company's
trade secrets and proprietary information and are warranted in order to
protect the Company in developing and maintaining its reputation, good will
and status in the marketplace. In that regard, for twenty-four months
following the Termination Date (the "Continuation Period"), the Executive
will not directly or indirectly, on Executive's own behalf or in the service
of or on behalf of any other individual or entity, either as a proprietor,
employee, agent, independent contractor, consultant, director, officer,
partner or stockholder (other than a stockholder of a corporation listed on a
national securities exchange or whose stock is regularly traded in the
over-the-counter market, provided that the Executive at no time owns,
directly or indirectly, in excess of 5% of the outstanding stock of any class
of any such corporation):
(i) participate or engage in any activities or business developing,
manufacturing, marketing or distributing any products or services offered by
the Company as of the Effective Time (as defined in the Agreement and Plan of
Merger, dated as of February 14, 2000, by and among the Parent, Silversmith
Acquisition Corp. and the Company), or any products or services offered by
the Company subsequent to the Effective Time and in which the Executive
actively participated, recognizing that the Company offers products and
services globally ("Competitive Activities"), including, without limitation,
(A) selling goods or rendering services of the type (or similar to the type)
sold or rendered by the Company, whether by means of electronic, traditional
or other form of commerce; (B) soliciting any person or entity that is a
current or prospective customer or has been a customer, in each case, of the
Company, while the Executive has been employed by the Company (provided that
it shall not be deemed a breach of this Agreement if the Executive solicits
such customers for goods or services unrelated to the Competitive Activities)
and (C) assisting any person in any way to do, or attempt to do, anything
prohibited by clauses (A) or (B) above; or
(ii) solicit (other than pursuant to general, non-targeted
advertisements) any employee of the Company, who was an employee at or prior
to the Effective Time, to leave the employment of the Company.
(b) Notwithstanding anything to the contrary herein, Executive may
remain a director at those companies for which Executive is a director as of
the Effective Time, and may engage in any activities or businesses for which
the
- -------------------
(2) Not all agreements contain a non-competition covenant.
3
<PAGE>
Company has given permission in writing, which shall not be unreasonably
withheld (or delayed) following the expiration of [ ] from the date the
Offer is consummated, provided Executive's engaging in such activities or
business would not have a material adverse impact on any of the Company's
lines of businesses.(3)
(c) (i) The Executive shall not, without the written consent of the
Company, disclose to any other person or use, whether directly or indirectly,
any Confidential Information (as hereinafter defined) relating to or used by
the Company, whether in written, oral or other form. "Confidential
Information" shall mean information about the Company, and its clients and
customers that is not disclosed by the Company for financial reporting
purposes and that was learned by the Executive in the course of employment
with the Company, including (without limitation) any proprietary knowledge,
product and service designs, trade secrets, manuals, technical information
and plans, contracts, systems, procedures, databases, electronic files, disks
and printouts, correspondence, internal reports, personnel files, information
about Company employees relating to their education, experience, skills,
abilities, compensation and benefits, and inter-personal relationships with
suppliers to and customers of Company, sales and advertising material,
business plans, marketing plans, financial data (including without limitation
the revenues, costs or profits associated with services), customer and
industry lists, customer information, customer lists coupled with product or
service pricing, customer contracts, supplier contacts and other contact
information, pricing policies, supplies, agents, risk analyses, engineering
information and computer screen designs and computer input and output
specifications, inclusive of any pertinent documentation, techniques,
processes, technical information and know how. The Executive acknowledges
that such Confidential Information is specialized, unique in nature and of
great value to the Company, and that such information gives the Company a
competitive advantage. The Executive's obligations under this Section 10(c)
shall survive the termination of the Continuation Period.
(ii) Confidential Information does not include information
which (A) is or becomes part of the public domain other than as a result of
the Executive's disclosure; or (B) becomes available to the Executive on a
non-confidential basis from a source other than the Company, provided that
source is not bound with respect to that information by a confidentiality
agreement with the Company or otherwise prohibited from transmitting that
information by a contractual, legal or other obligation.
- -------------------
(3) The Assistant General Counsel's amendment provides that the Assistant
General Counsel will not be in breach of the non-competition covenant
if the Assistant General Counsel renders legal services as outside
counsel.
4
<PAGE>
(iii) If the Executive is requested or (in the opinion of
Executive's counsel) required by law or judicial order to disclose any
Confidential Information, the Executive shall provide the Company with prompt
notice of any such request or requirement so that the Company may seek an
appropriate protective order or waiver of the Executive's compliance with the
provisions of this Section 10(c). The Executive will not oppose any
reasonable action by, and will cooperate with, the Company to obtain an
appropriate protective order or other reliable assurance that confidential
treatment will be accorded the Confidential Information. If, failing the
entry of a protective order or the receipt of a waiver hereunder, the
Executive is, in the opinion of Executive's counsel, compelled by law to
disclose a portion of the Confidential Information, the Executive may
disclose to the relevant tribunal without liability hereunder that portion of
the Confidential Information which counsel advises the Executive he is
legally required to disclose, and each of the parties hereto agrees to
exercise such party's best efforts to obtain assurance that confidential
treatment will be accorded such Confidential Information.
(d) If an award by a court or arbitration panel declares that any
term or provision of this Section 10 is excessive in duration or scope or is
unreasonable or unenforceable, the parties agree that the court or
arbitration panel making such determination shall have the power to reduce
the scope, duration or area or the term or provision, to delete specific
words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is a valid and enforceable term or
provision, and this Section 10 shall be enforceable as so modified.
(e) In the event of a breach or threatened breach by the Executive
of the provisions of this Section 10, the Company's remedies in respect of
such breach or threatened breach shall be limited to injunctive relief (and
the Executive acknowledges that the Company may not have an adequate remedy
at law and may seek injunctive relief without the requirement of posting
security) and the recovery of actual damages suffered by the Company as a
result of a breach of this Section 10 by the Executive. Notwithstanding the
foregoing, in no case shall any portion of the lump sum payment set forth in
Section 4(a)(i) or any Gross Up Payment hereunder (or any other payments made
hereunder) be recoverable by the Parent or the Company (or subject to any
set-off, counterclaim or recoupment) in respect of damages resulting from a
breach of this Section 10.
5
<PAGE>
(f) For the purposes of this Section 10, the term "Company"
includes not only Sterling Software, Inc., but also any
subsidiary or affiliated corporation of Sterling Software,
Inc.
7. Parent shall guarantee the Company's obligations pursuant to
the Agreement, including without limitation, Sections 5 and 7
thereof. The Parent and the Company hereby acknowledge that
the obligations set forth in such Sections will survive any
termination or expiration of this Agreement or termination of
Executive's employment for any reason. Each party will notify
the other in writing of any claim by the Internal Revenue
Service or any other taxing authority that, if successful,
would require the payment by the Company of a Gross-Up
Payment. Such notification shall be given as soon as
practicable but no later than ten (10) business days after
such party is informed in writing of such a claim and such
party shall apprise the other party of the nature of such
claim and the date on which such claim is requested to be
paid. The Parent and the Company shall bear and pay directly
all costs and expenses (including legal fees and any interest
and penalties) incurred in connection with any such claim or
proceeding, and shall indemnify and hold the Executive
harmless, on an after-tax basis, as provided in Section 5(a),
for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. The Company
and the Parent also shall pay to the Executive all legal fees
and expenses incurred by the Executive in connection with any
tax audit or proceeding to the extent attributable to the
application of section 4999 of the Code to any payment or
benefit provided hereunder. Such payments shall be made within
five (5) business days after delivery of the Executive's
written requests for payment accompanied with evidence of fees
and expenses incurred. The Company's and Parent's obligation
with respect to a Gross-Up Payment and reimbursement of
related legal fees and expenses shall be absolute and
unconditional and shall not be affected by any circumstances,
including, without limitation, any setoff, counterclaim,
recoupment, defense or other right which the Company or the
Parent may have against the Executive or anyone else. Except
where provided herein to the contrary, all amounts payable by
the Company or the Parent hereunder shall be paid without
notice or demand. Each and every payment made hereunder by the
Company or the Parent
6
<PAGE>
shall be final, and the Company and the Parent will not seek
to recover all or any part of such payment from the Executive,
or from whomsoever may be entitled thereto, for any reason
whatsoever.
8. The Executive agrees as consideration for the Company's and
the Parent's entry into this Amendment that, effective upon
consummation of the Offer, the Executive shall be deemed to
have waived all rights the Executive may have pursuant to the
Executive's Severance Agreement with the Company dated
[ ] and that such agreement shall be terminated
as of the date of the consummation of the Offer.
9. Except as amended hereby, all other provisions of the
Agreement shall remain in full force and effect.
10. The validity, interpretation, construction and performance of
this Amendment will be governed by and construed in accordance
with the substantive laws of Delaware, without giving effect
to the conflict of laws principles of such State.
11. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of
which together will constitute one and the same agreement.
7
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be
duly executed and delivered as of the first date first written above.
STERLING SOFTWARE, INC.
/s/ Don J. McDermett, Jr.
By ................................
Name: Don J. McDermett, Jr.
Title: Senior Vice President &
General Counsel
COMPUTER ASSOCIATES
INTERNATIONAL, INC.
/s/ Steven M. Woghin
By ................................
Name: Steven M. Woghin
Title: Senior Vice President &
General Counsel
...................................
[ ]
8
<PAGE>
SERP AGREEMENT
THIS AGREEMENT (this "SERP Agreement"), dated as of February 15, 2000, by and
among Sterling Software, Inc., a Delaware corporation (the "Company"), Computer
Associates International, Inc., a Delaware corporation (the "Parent"), and Geno
P. Tolari, and individual (the "Executive").
WITNESSETH:
WHEREAS, the Executive is a participant in the Amended and Restated
Supplemental Executive Retirement Plan II (the "SERP");
NOW THEREFORE, the Company, the Parent and the Executive agree as
follows:
1. This SERP Agreement shall be of no force and effect if the
Offer (as defined in the Agreement and Plan of Merger, dated
as of February 14, 2000, among the Parent, Silversmith
Acquisition Corp. and the Company) is not consummated.
2. The Company shall pay to the Executive, within five (5) days
after the date of termination of the Executive's employment
for any reason, a lump sum payment in cash equal to
$3,527,640. Such amount shall be satisfaction in full for the
Company's obligations to the Executive pursuant to the SERP.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this SERP
Agreement to be duly executed and delivered as of the first date first written
above.
STERLING SOFTWARE, INC.
By: /s/ Don J. McDermett, Jr.
-----------------------------------
Don J. McDermett, Jr.
Senior Vice President &
General Counsel
COMPUTER ASSOCIATES
INTERNATIONAL, INC.
By: /s/ Steven M. Woghin
-----------------------------------
Steven M. Woghin
Senior Vice President &
General Counsel
/s/ Geno P. Tolari
--------------------------------------
Geno P. Tolari
2
<PAGE>
EXHIBIT 12.1
COMPUTER ASSOCIATES INTERNATIONAL INC.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
NINE MONTHS
ENDED FISCAL YEAR ENDED MARCH 31,
DECEMBER 31, ----------------------------
1999 1999 1998
------------- ----------- -----------
<S> <C> <C> <C>
EARNINGS:
Net income (loss) before income taxes................. $ 874,000 $1,010,000 $1,874,000
Interest expense...................................... 248,977 154,001 147,149
Amortization of debt expense.......................... 2,816 3,755 3,755
Portion of rents representative of an interest
factor.............................................. 34,880 45,000 46,200
---------- ---------- ----------
Total earnings...................................... $1,160,673 $1,212,756 $2,071,104
========== ========== ==========
FIXED CHARGES:
Interest expense...................................... $ 248,977 $ 154,001 $ 147,149
Amortization of debt expense.......................... 2,816 3,755 3,755
Portion of rents representative of an interest
factor.............................................. 34,880 45,000 46,200
---------- ---------- ----------
Total fixed charges................................. $ 286,673 $ 202,756 $ 197,104
========== ========== ==========
RATIO OF EARNINGS TO FIXED CHARGES...................... 4.05 5.98 10.51
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Platinum TECHNOLOGY International, INC.
We consent to the incorporation by reference in the registration statement on
Form S-4 of Computer Associates International, Inc. of our report dated
March 29, 1999, with respect to the consolidated balance sheets of Platinum
TECHNOLOGY International, INC. and subsidiaries as of December 31, 1998 and
1997, and the related consolidated statements of operations, stockholders'
equity, comprehensive loss, and cash flows for each of the years in the
three-year period ended December 31, 1998, which report appears in the Form 8-K
of Computer Associates International, Inc. dated May 28, 1999 and to the
reference to our firm under the headings "Experts" in the Registration
Statement.
/s/ KPMG LLP
Chicago, Illinois
February 18, 2000
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of Computer Associates
International, Inc. for the registration of shares of its common stock and to
the incorporation by reference therein of our report dated February 10, 1998
except for Note 14, as to which the date is March 14, 1998, with respect to the
consolidated financial statements and schedule of Logic Works, Inc. as of
December 31, 1997 and for each of the three years in the period ended
December 31, 1997, included in the Annual Report (Form 10-K) of Platinum
Technology International, Inc. for the year ended December 31, 1998 filed with
the Securities and Exchange Commisson.
/s/ Ernst & Young LLP
Metro Park, New Jersey
February 21, 2000
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of Computer Associates
International, Inc. for the registration of shares of its common stock and to
the incorporation by reference therein of our report dated May 26, 1999 with
respect to the consolidated financial statements and schedule of Computer
Associates International, Inc. as of March 31, 1999 and for each of the three
years in the period ended March 31, 1999, included in its Annual Report
(Form 10-K) for the year ended March 31, 1999 filed with the Securities and
Exchange Commission.
/s/ Ernst & Young LLP
New York, New York
February 21, 2000
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of Computer Associates
International, Inc. for the registration of shares of its common stock and to
the incorporation by reference therein of our report dated October 29, 1999,
with respect to the consolidated financial statements and schedule of Sterling
Software, Inc. included in its Annual Report (Form 10-K) for the year ended
September 30, 1999, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Dallas, Texas
February 21, 2000
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4 (expected to be filed by
Computer Associates International, Inc. on February 21, 2000) of our report
dated January 19, 1998, for Mastering, Inc. included in PLATINUM technology
International, inc.'s 1998 Form 10-K and to all references to our Firm included
in this registration statement.
/s/ Arthur Andersen LLP
Denver, Colorado
February 21, 2000
<PAGE>
EXHIBIT 23.6
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants of Memco Software Ltd., we hereby consent
to the incorporation by reference of our report dated March 25, 1999 included or
made part of this Computer Associates International, Inc. Registration Statement
filed on Form S-4, and to all references to our Firm included in this
Registration Statement on Form S-4.
/s/ Luboshitz & Kasierer
LUBOSHITZ & KASIERER
MEMBER FIRM OF ARTHUR ANDERSEN
Tel Aviv, Israel
February 21, 2000
<PAGE>
LETTER OF TRANSMITTAL
TO EXCHANGE EACH OUTSTANDING SHARE OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
STERLING SOFTWARE, INC.
FOR
SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
COMPUTER ASSOCIATES INTERNATIONAL, INC.
BASED ON THE EXCHANGE RATIO DESCRIBED IN THE PROSPECTUS
ALONG WITH CASH UNDER THE CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME,
ON MONDAY, MARCH 20, 2000, UNLESS THE OFFER IS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
BY MAIL: BY HAND DELIVERY: BY OVERNIGHT DELIVERY:
Reorganization Department Reorganization Department Reorganization Department
PO Box 3301 120 Broadway, 13th Floor 85 Challenger Road
South Hackensack, NJ 07606 New York, NY 10271 Mail Drop-Reorg Dept.
Ridgefield Park, NJ 07660
BY FACSIMILE TRANSMISSION:
(for Eligible Institutions only)
Fax: (201) 296-4293
CONFIRM BY TELEPHONE:
(201) 296-4860
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS
SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER
OF TRANSMITTAL WHERE INDICATED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9
PROVIDED BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders if
certificates for Sterling Software Shares (as defined herein) are to be
forwarded herewith or, unless an Agent's Message is utilized, if delivery of
Sterling Software Shares is to be made by book-entry transfer to the account
maintained by the Depositary at The Depository Trust Company (the "Book-Entry
Transfer Facility"), pursuant to the procedures set forth under "The
Offer--Procedure for Tendering" in the Prospectus. Stockholders who tender
Sterling Software Shares by book-entry transfer are referred to herein as
"Book-Entry Stockholders" and other stockholders are referred to herein as
"Certificate Stockholders." Stockholders whose certificates are not immediately
available or who cannot deliver their certificates and all other documents
required hereby to the Depositary on or prior to the Expiration Date (as defined
in the Prospectus), or who cannot comply with the book-entry transfer procedures
on a timely basis, may nevertheless tender their Sterling Software Shares
according to the guaranteed delivery procedures set forth under "The Offer--
Procedure for Tendering" in the Prospectus. See Instruction 2.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY FOR THIS OFFER (AS DEFINED HEREIN).
<PAGE>
/ / CHECK HERE IF STERLING SOFTWARE SHARES ARE BEING TENDERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Holder(s) ____________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution which Guaranteed Delivery ______________________________
/ / CHECK HERE IF STERLING SOFTWARE SHARES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
DTC Account Number _________________________________________________________
Transaction Code Number ____________________________________________________
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF STERLING SOFTWARE SHARES TENDERED
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) STERLING SOFTWARE SHARES TENDERED
(PLEASE FILL IN EXACTLY AS NAME(S) APPEAR(S) ON (ATTACH ADDITIONAL LIST IF NECESSARY)
CERTIFICATE(S))
NUMBER OF STERLING SOFTWARE
CERTIFICATE STERLING SOFTWARE SHARES TENDERED**
NUMBER(S)* SHARES EVIDENCED
BY
CERTIFICATE(S)*
TOTAL STERLING
SOFTWARE SHARES
</TABLE>
* Need not be completed by stockholders delivering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Sterling Software
Shares evidenced by a certificate(s) delivered to the Depositary are being
tendered. See Instruction 4.
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby delivers to Silversmith Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Computer Associates
International, Inc., a Delaware corporation ("Computer Associates"), the above-
described shares of common stock, par value $.10 per share (together with the
associated preferred stock purchase rights, each, a "Sterling Software Share"
and, collectively, the "Sterling Software Shares"), of Sterling Software, Inc.,
a Delaware corporation ("Sterling Software"), pursuant to Computer Associates'
offer to exchange shares of common stock of Computer Associates, par value $.10
per share (together with the associated preferred stock purchase rights, each, a
"Computer Associates Share" and, collectively, the "Computer Associates
Shares"), for all outstanding Sterling Software Shares based on the exchange
ratio (and along with cash under specified circumstances) described in, and
otherwise upon the terms and subject to the conditions set forth in, the
Prospectus dated February 22, 2000 (the "Prospectus"), receipt of which is
hereby acknowledged, and in this Letter of Transmittal (which, together with the
Prospectus and any amendments on supplements hereto or thereto, collectively
constitute the "Offer").
Upon the terms and subject to the conditions of the Offer, subject to, and
effective upon, acceptance of the Sterling Software Shares tendered herewith in
accordance with the terms of the Offer, the undersigned hereby sells, assigns
and transfers to, or upon the order of, Computer Associates, all right, title
and interest in and to all of the Sterling Software Shares that are being
tendered hereby and any and all Sterling Software Shares and other securities
issued or issuable in respect thereof on or after February 14, 2000
(collectively, "Distributions"), and appoints the Depositary the true and lawful
agent and attorney-in-fact of the undersigned with respect to such Sterling
Software Shares (and any Distributions) (such power of attorney being deemed to
be an irrevocable power coupled with an interest), to (a) deliver such Sterling
Software Share Certificates (as defined herein) (and any Distributions) or
transfer ownership of such Sterling Software Shares (and any Distributions) on
the account books maintained by a Book-Entry Transfer Facility, together in
either such case with all accompanying evidences of transfer and authenticity,
to or upon the order of Computer Associates, (b) present such Sterling Software
Shares (and any Distributions) for transfer on the books of Sterling Software
and (c) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Sterling Software Shares (and any Distributions), all in
accordance with the terms and the conditions of the Offer.
The undersigned hereby irrevocably appoints Steven M. Woghin, Ira H. Zar and
Michael A. McElroy, and each of them, the attorneys-in-fact and proxies of the
undersigned, each with full power of substitution, to vote in such manner as
each such attorney and proxy or any substitute thereof shall deem proper in the
sole discretion of such attorney-in-fact and proxy or such substitute, and
otherwise act (including pursuant to written consent) with respect to all of the
Sterling Software Shares tendered hereby (and any Distributions) which have been
accepted by Computer Associates prior to the time of such vote or action, which
the undersigned is entitled to vote at any meeting of stockholders (whether
annual or special and whether or not an adjourned meeting), of Sterling Software
or otherwise. This proxy and power of attorney is coupled with an interest in
the Sterling Software Shares and is irrevocable and is granted in consideration
of, and is effective upon, the acceptance of such Sterling Software Shares (and
any Distributions) by Computer Associates in accordance with the terms of the
Offer. Such acceptance for exchange shall revoke any other proxy granted by the
undersigned at any time with respect to such Sterling Software Shares (and any
Distributions) and no subsequent proxies will be given (or, if given, will not
be deemed effective) with respect thereto by the undersigned. The undersigned
understands that, in order for Sterling Software Shares to be deemed validly
tendered immediately upon Computer Associates acceptance of such Sterling
Software Shares (and any Distributions) for exchange, Computer Associates or its
designee must be able to exercise full voting rights with respect to such
Sterling Software Shares (and any Distributions).
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Sterling Software
Shares (and any Distributions) tendered hereby and that when the same are
accepted for exchange by Computer Associates, Computer Associates will acquire
good, marketable and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances, and the same will not be subject to any
adverse claim. The undersigned will, upon request, execute and deliver any
additional documents deemed by the Depositary or Computer Associates to be
necessary or desirable to complete the sale, assignment and transfer of the
Sterling Software Shares (and any Distributions) tendered hereby. In addition,
the undersigned shall promptly remit and transfer to the Depositary for the
account of Computer Associates any and all Distributions in respect of the
Sterling Software Shares tendered hereby, accompanied by appropriate
documentation of transfer.
All authority herein conferred or agreed to be conferred shall not be
affected by and shall survive the death or incapacity of the undersigned, and
any obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the undersigned. Subject to
the withdrawal rights set forth under "The Offer--Withdrawal Rights" in the
Prospectus, the tender of Sterling Software Shares hereby made is irrevocable.
<PAGE>
The undersigned understands that tenders of Sterling Software Shares
pursuant to any one of the procedures described under "The Offer--Procedure for
Tendering" in the Prospectus and in the instructions hereto and acceptance of
such Sterling Software Shares will constitute a binding agreement between the
undersigned and Computer Associates upon the terms and subject to the conditions
set forth in the Offer.
Unless otherwise indicated herein under "Special Issuance Instructions,"
please issue the Computer Associates Shares and the check for cash in lieu of
fractional Computer Associates Shares and, if applicable, for any cash payment
made pursuant to the election by Computer Associates of the cash option (as
described in the Prospectus) and/or return any certificates for Sterling
Software Shares not tendered or not accepted for exchange in the name(s) of the
registered holder(s) appearing under "Description of Sterling Software Shares
Tendered." Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the Computer Associates Shares and the check for cash
in lieu of Computer Associates Shares and, if applicable, for any cash payment
made pursuant to the election by Computer Associates of the cash option (as
described in the Prospectus) and/or return any certificates for Sterling
Software Shares not tendered or not accepted for exchange (and accompanying
documents, as appropriate) to the address(es) of the registered holder(s)
appearing under "Description of Sterling Software Shares Tendered." In the event
that both the Special Delivery Instructions and the Special Issuance
Instructions are completed, please issue the Computer Associates Shares and/or
issue any certificates for Sterling Software Shares not so tendered or accepted
in the name of, and deliver said certificates and/or return such certificates
to, the person or persons so indicated. The undersigned recognizes that Computer
Associates has no obligation to transfer any Sterling Software Shares from the
name of the registered holder thereof if Computer Associates does not accept any
of the Sterling Software Shares so tendered.
<PAGE>
- ------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificate(s) for Sterling Software Shares are
not tendered or not accepted and/or the Computer Associates Shares and the
check for cash in lieu of fractional Computer Associates Shares and, if
applicable, for any cash payments made pursuant to the election by Computer
Associates of the cash option are to be issued in the name of someone other
than the undersigned.
Issue Computer Associates Shares and/or certificate(s) to:
Name _______________________________________________________________________
(PLEASE TYPE OR PRINT)
Address ____________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(INCLUDE ZIP CODE)
__________________________________________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 HEREIN)
- ------------------------------------------------------------
- ------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificate(s) for Sterling Software Shares are
not tendered or not accepted and/or the Computer Associates Shares and the
check for cash in lieu of fractional Computer Associates Shares and, if
applicable, for any cash payments made pursuant to the election by Computer
Associates of the cash option are to be sent to someone other than the
undersigned, or to the undersigned at an address other than that shown
above.
Mail Computer Associates Shares and/or certificate(s) to:
Name _______________________________________________________________________
(PLEASE TYPE OR PRINT)
Address ____________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(INCLUDE ZIP CODE)
__________________________________________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 HEREIN)
- ------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
IMPORTANT
STOCKHOLDERS SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
X __________________________________________________________________________
X __________________________________________________________________________
SIGNATURE(S) OF STOCKHOLDER(S)
Dated: __________, 2000
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificate(s) and documents
transmitted herewith. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, please set forth
full title and see Instruction 5.)
Name _______________________________________________________________________
____________________________________________________________________________
(PLEASE PRINT)
Capacity (full title): _____________________________________________________
Address ____________________________________________________________________
____________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No.: _______________________________________________
Tax Identification or Social Security No.: _________________________________
----------------------------------------------------------------------------
----------------------------------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
FOR USE BY ELIGIBLE INSTITUTIONS ONLY,
PLACE MEDALLION GUARANTEE IN SPACE BELOW
Authorized Signature:_______________________________________________________
Name:_______________________________________________________________________
____________________________________________________________________________
(PLEASE TYPE OR PRINT)
Address ____________________________________________________________________
____________________________________________________________________________
(INCLUDE ZIP CODE)
Name of Firm: ______________________________________________________________
Area Code and Telephone No.: _______________________________________________
Dated: __________, 2000
- --------------------------------------------------------------------------------
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a financial
institution (including most banks, savings and loan associations and brokerage
houses) which is a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Program or the Stock
Exchange Medallion Program (an "Eligible Institution"). Signatures on this
Letter of Transmittal need not be guaranteed (i) if this Letter of Transmittal
is signed by the registered holder(s) of the Sterling Software Shares (which
term, for purposes of this document, shall include any participant in the
Book-Entry Transfer Facility whose name appears on a security position listing
as the owner of Sterling Software Shares) tendered herewith and such holder(s)
have not completed the instruction entitled "Special Issuance Instructions" on
this Letter of Transmittal or (ii) if such Sterling Software Shares are tendered
for the account of an Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES OR BOOK-ENTRY
CONFIRMATIONS. This Letter of Transmittal is to be used either if certificates
are to be forwarded herewith or, unless an Agent's Message is utilized, if
tenders are to be made pursuant to the procedures for tender by book-entry
transfer set forth in "The Offer--Procedure for Tendering" in the Prospectus.
Certificates for all physically tendered Sterling Software Shares ("Sterling
Software Share Certificates"), or confirmation of any book-entry transfer into
the Depositary's account at the Book-Entry Transfer Facility ("Book-Entry
Confirmation") of Sterling Software Shares tendered by book-entry transfer, as
well as this Letter of Transmittal or facsimile thereof, properly completed and
duly executed with any required signature guarantees, and any other documents
required by this Letter of Transmittal, must be received by the Depositary at
one of its addresses set forth herein on or prior to the Expiration Date (as
defined in the Prospectus).
Stockholders whose certificates are not immediately available or who cannot
deliver their certificates and all other required documents to the Depositary on
or prior to the Expiration Date or who cannot complete the procedures for
book-entry transfer on a timely basis may nevertheless tender their Sterling
Software Shares by properly completing and duly executing a Notice of Guaranteed
Delivery pursuant to the guaranteed delivery procedures set forth under "The
Offer--Procedure for Tendering" in the Prospectus. Pursuant to such procedures:
(i) such tender must be made by or through an Eligible Institution; (ii) a
properly completed and duly executed Notice of Guaranteed Delivery substantially
in the form made available by Computer Associates must be received by the
Depositary on or prior to the Expiration Date; and (iii) the Sterling Software
Share Certificates for all tendered Sterling Software Shares (or a confirmation
of a book-entry transfer of such securities into the Depositary's account at the
Book-Entry Transfer Facility of Sterling Software Shares tendered by book-entry
transfer), in proper form for transfer, together with a properly completed and
duly executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantees (or, in the case of a book-entry delivery, an Agent's
Message) and all other documents required by this Letter of Transmittal, must be
received by the Depositary within three New York Stock Exchange, Inc. trading
days after the date of execution of such Notice of Guaranteed Delivery.
IF STERLING SOFTWARE SHARE CERTIFICATES ARE FORWARDED SEPARATELY TO THE
DEPOSITARY, A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL MUST
ACCOMPANY EACH SUCH DELIVERY.
THE METHOD OF DELIVERY OF STERLING SOFTWARE SHARE CERTIFICATES AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY,
IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
No alternative, condition or contingent tenders will be accepted and no
fractional Sterling Software Shares will be accepted. All tendering
stockholders, by execution of this Letter of Transmittal (or facsimile thereof),
waive any right to receive any notice of the acceptance of their Sterling
Software Shares for exchange.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Sterling Software Shares should be
listed on a separate schedule attached hereto.
<PAGE>
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all the Sterling Software Shares evidenced by any
certificate submitted are to be tendered, fill in the number of Sterling
Software Shares which are to be tendered in the box entitled "Number of Sterling
Software Shares Tendered." In such cases, new certificate(s) for the remainder
of the Sterling Software Shares that were evidenced by your old certificate(s)
will be sent to you, unless otherwise provided in the appropriate box on this
Letter of Transmittal, as soon as practicable after the Expiration Date. All
Sterling Software Shares represented by certificates delivered to the Depositary
will be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Sterling
Software Shares tendered hereby, the signature(s) must correspond with the
name(s) as written on the face of the certificates without alteration,
enlargement or any change whatsoever.
If any of the Sterling Software Shares tendered hereby are owned of record
by two or more joint owners, all such owners must sign this Letter of
Transmittal.
If any of the tendered Sterling Software Shares are registered in different
names on several certificates, it will be necessary to complete, sign and submit
as many separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by trustees, executors, administrators, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and proper evidence satisfactory to
Computer Associates of their authority so to act must be submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Sterling Software Shares listed and transmitted hereby, no endorsements of
certificates or separate stock powers are required unless Computer Associates
Common Share Certificates or certificates for Sterling Software Shares not
tendered or accepted are to be issued in the name of a person other than the
registered holder(s). Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder of the certificate(s) listed, the certificate(s) must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered holder or holders appear on the
certificate(s). Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
6. STOCK TRANSFER TAXES. Computer Associates will pay or cause to be paid
any stock transfer taxes with respect to the transfer and sale of Sterling
Software Shares to it or its order pursuant to the Offer. If, however, delivery
of the consideration in respect of the Offer is to be made to, or (in the
circumstances permitted hereby) if certificates for Sterling Software Shares not
tendered or accepted are to be registered in the name of, any person other than
the registered holder, or if tendered certificates are registered in the name of
any person other than the person(s) signing this Letter of Transmittal, the
tendering holder must provide satisfactory evidence of the payment of any
applicable transfer taxes (whether imposed on the registered holder or such
person) payable on account of the transfer to such person prior to the delivery
of the consideration pursuant to the Offer. Except as provided in this
Instruction 6, it will not be necessary for transfer tax stamps to be affixed to
the certificates listed in this Letter of Transmittal.
7. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If certificates for Computer
Associates Shares and/or certificates for Sterling Software Shares not tendered
or not accepted for exchange and check for cash in lieu of fractional Computer
Associates Shares and, if applicable, for any cash payments made pursuant to the
election by Computer Associates of the cash option (as described in the
Prospectus) are to be issued in the name of a person other than the person(s)
signing this Letter of Transmittal or if certificates for Computer Associates
Shares and cash in lieu of fractional Computer Associates Shares and, if
applicable, any cash payment made pursuant to the election by Computer
Associates of the cash option and/or certificates for Sterling Software Shares
not tendered or not accepted for exchange are to be mailed to someone other than
the person(s) signing of this Letter of Transmittal or to an address other than
that shown above, the appropriate boxes on this Letter of Transmittal should be
completed. Stockholders tendering Sterling Software Shares by book-entry
transfer may request that Sterling Software Shares not accepted pursuant to the
Offer be credited to such account maintained at a Book-Entry Transfer Facility
as such stockholder may designate hereon. If no such instructions are given,
such Sterling Software Shares not accepted will be returned by crediting the
account at the Book-Entry Transfer Facility designated herein.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests for
assistance may be directed to, or additional copies of the Prospectus, this
Letter of Transmittal, the Notice of Guaranteed Delivery and other tender offer
materials may be obtained from the Information Agent at its address and
telephone number set forth below or from your broker, dealer, commercial bank or
trust company.
<PAGE>
9. SUBSTITUTE FORM W-9. Each tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN"), generally
the stockholder's social security or federal employer identification number, on
Substitute Form W-9 below. In addition, payments of cash in lieu of fractional
shares of Computer Associates Shares and, if applicable, any cash payment made
pursuant to the election by Computer Associates of the cash option (as described
in the Prospectus) that are made to such stockholder with respect to Sterling
Software Shares accepted pursuant to the Offer may be subject to backup
withholding of 31%. The box in Part 3 of the form may be checked if the
tendering stockholder has not been issued a TIN and has applied for a number or
intends to apply for a number in the near future. If the box in Part 3 is
checked and the Depositary is not provided with a TIN within 60 days, the
Depositary must withhold 31% of all payments of cash thereafter until a TIN is
provided to the Depositary. In addition, the Depositary may backup withhold
during the 60 day period under certain circumstances. The stockholder is
required to give the Depositary the social security number or employer
identification number of the record owner of the Sterling Software Shares or of
the last transferee appearing on the stock powers attached to, or endorsed on,
the Sterling Software Shares. If the Sterling Software Shares are in more than
one name or are not in the name of the actual owner, consult the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional guidance on which number to report.
10. LOST OR DESTROYED CERTIFICATES. If any Sterling Software Share
certificate(s) representing Sterling Software Shares has been lost or destroyed,
the holders should promptly notify Sterling Software's Transfer Agent. The
holders will then be instructed as to the procedure to be followed in order to
replace the Sterling Software Share certificates. This Letter of Transmittal and
related documents cannot be processed until the procedures for replacing lost or
destroyed Sterling Software Share certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE COPY HEREOF (TOGETHER
WITH STERLING SOFTWARE SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER
AND ALL OTHER REQUIRED DOCUMENTS) OR THE NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Certain stockholders (including, among others, corporations and certain
foreign individuals) are not subject to backup withholding. In order for a
foreign individual to qualify as an exempt recipient, that stockholder must
submit a Form W-8 or successor form, signed under penalties of perjury,
attesting to that individual's exempt status. A Form W-8 can be obtained from
the Depositary. See the enclosed Guidelines for Certificate of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.
Backup withholding is not an additional tax. Rather, the tax liability of
person subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS
(SEE INSTRUCTION 9)
<PAGE>
<TABLE>
<C> <S> <C>
- -------------------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
- -------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE Part 1--PLEASE PROVIDE YOUR TIN -------------------------
FORM W-9 IN THE BOX AT RIGHT AND CERTIFY SOCIAL SECURITY NUMBER(S)
BY SIGNING AND DATING BELOW OR
-------------------------
EMPLOYER IDENTIFICATION NUMBER(S):
----------------------------------------------------------------------------
PART 2--CERTIFICATION--UNDER
PENALTIES OF PERJURY, I CERTIFY
DEPARTMENT OF THAT:
THE TREASURY (1) The number shown on this
INTERNAL REVENUE form is my correct Taxpayer
SERVICE Identification Number (or I
PAYER'S REQUEST am waiting for a number to
FOR TAXPAYER be issued to me); and
IDENTIFICATION (2) I am not subject to backup
NUMBER ("TIN") withholding either because (i)
I am exempt from backup
withholding, (ii) I have
not been notified by the
Internal Revenue Service
(the "IRS") that I am
subject to backup
withholding as a result of
a failure to report all
interest or dividends, or
(iii) the IRS has notified
me that I am no longer
subject to backup
withholding.
- -------------------------------------------------------------------------------------------------------------------------
CERTIFICATE INSTRUCTIONS--You must cross out item (2) in Part 2 if you have been notified by the IRS that you are
currently subject to backup withholding because of under-reporting interest or dividends on your tax return. However, if
after being notified by the IRS that you were subject to backup withholding you received another notification from the
IRS stating that you are no longer subject to backup withholding, do not cross out item (2).
- -------------------------------------------------------------------------------------------------------------------------
SIGNATURE
------------------------------------------------------------------------------------------------------------------------ DATE
-----------------------------------------------------------------------------------------------------------------------------------
NAME (PLEASE PRINT):
------------------------------------------------------------------------------------------------------------------------
ADDRESS:
------------------------------------------------------------------------------------------------------------------------
CITY, STATE AND ZIP CODE:
------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A PENALTY IMPOSED
BY THE INTERNAL REVENUE SERVICE AND IN BACKUP WITHHOLDING OF 31% OF ANY
PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED
GUIDELINES FOR CERTIFICATIONS OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9
CERTIFICATION OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me, and either (i) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (ii)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a Taxpayer Identification Number within 60 days, 31% of all
reportable payments made to me thereafter will be withheld until I provide a
Taxpayer Identification Number.
________________________________________________________________________________
Signature Date
________________________________________________________________________________
Name (Please Print)
Questions and requests for assistance or additional copies of the
Prospectus, this Letter of Transmittal and other tender offer materials may be
directed to the Information Agent at its address and telephone number as set
forth below:
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 929-5500 (CALL COLLECT)
OR
CALL TOLL FREE (800) 322-2885
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
STERLING SOFTWARE, INC.
TO
COMPUTER ASSOCIATES INTERNATIONAL, INC.
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
As set forth under "The Offer--Procedure for Tendering" in the Prospectus,
dated February 22, 2000 (the "Prospectus"), this form or one substantially
equivalent hereto must be used to accept the Offer (as defined herein) if
certificates for shares of common stock, par value $.10 per share (together with
the associated preferred stock purchase rights, each, a "Sterling Software
Share" and, collectively, the "Sterling Software Shares"), of Sterling
Software, Inc., a Delaware corporation ("Sterling Software"), are not
immediately available, if the certificates and all other required documents
cannot be delivered to the Depositary prior to the Expiration Date (as defined
in the Prospectus), or if the procedure for book-entry transfer cannot be
completed on a timely basis. Such form may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary, and must include
a guarantee by an Eligible Institution (as defined in the Prospectus). See "The
Offer--Procedure for Tendering" in the Prospectus.
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
BY MAIL: BY HAND DELIVERY: BY OVERNIGHT DELIVERY:
Reorganization Department Reorganization Department Reorganization Department
PO Box 3301 120 Broadway, 13th Floor 85 Challenger Road
South Hackensack, NJ 07606 New York, NY 10271 Mail Drop-Reorg. Dept.
BY FACSIMILE TRANSMISSION: Ridgefield Park, NJ 07660
(for Eligible Institutions
only)
Fax: (201) 296-4293
CONFIRM BY TELEPHONE:
(201) 296-4860
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE>
LADIES AND GENTLEMEN:
The undersigned hereby tenders to Silversmith Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Computer Associates
International, Inc., upon the terms and subject to the conditions set forth in
the Prospectus dated February 22, 2000 and in the related Letter of Transmittal
(which, together with any amendments or supplements thereto, collectively
constitute the "Offer"), receipt of which is hereby acknowledged, the number of
Sterling Software Shares shown below pursuant to the guaranteed delivery
procedures set forth under "The Offer--Procedure for Tendering" in the
Prospectus.
Number of Sterling Software Shares
____________________________________________________________________________
Account No.:
____________________________________________________________________________
Certificate No(s). (if available):
____________________________________________________________________________
____________________________________________________________________________
If Sterling Software Share(s) will be
tendered by book-entry transfer:
Name of Tendering Institution
____________________________________________________________________________
Account Number: ____________________________________________________________
at The Depository Trust Company
Date: ______________________________________________________________________
-----------------------------------------------
Name(s) of Record Holder(s):
____________________________________________________________________________
____________________________________________________________________________
Address(es):
____________________________________________________________________________
____________________________________________________________________________
Area Code and Telephone Number(s):
____________________________________________________________________________
Signature(s):
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
2
<PAGE>
THE GUARANTEE BELOW MUST BE COMPLETED
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a financial institution that is a participant in the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchange Medallion Program,
guarantees (a) that the above-named person(s) "own(s)" the Sterling Software
Shares tendered hereby within the meaning of Rule 14e-4 under the Securities
Exchange Act of 1934, as amended, (b) represents that such tender complies
with Rule 14e-4 and (c) guarantees to deliver to the Depositary, at one of
its addresses set forth above, certificates representing the Sterling
Software Shares tendered hereby, in proper form for transfer, or
confirmation of book-entry transfer of such Sterling Software Shares into
the Depositary's accounts at The Depository Trust Company, in each case with
delivery of a properly completed and duly executed Letter of Transmittal (or
a facsimile copy thereof), or an Agent's Message (as defined in the
Prospectus) in the case of book-entry transfer, and any other documents
required by the Letter of Transmittal, within three New York Stock Exchange,
Inc. trading days of the date hereof.
Name of Firm: __________________________________________________________________
Address: _______________________________________________________________________
________________________________________________________________________________
ZIP CODE
Area Code and Tel. No.: ________________________________________________________
________________________________________________________________________________
AUTHORIZED SIGNATURE
Title: _________________________________________________________________________
Name: __________________________________________________________________________
PLEASE PRINT OR TYPE
Dated: ___________________________________________________________________, 2000
NOTE: DO NOT SEND CERTIFICATES FOR STERLING SOFTWARE SHARES WITH THIS
NOTICE. STERLING SOFTWARE SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER
OF TRANSMITTAL.
3
<PAGE>
OFFER TO EXCHANGE EACH OUTSTANDING SHARE OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
STERLING SOFTWARE, INC.
FOR
SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
COMPUTER ASSOCIATES INTERNATIONAL, INC.
BASED ON THE EXCHANGE RATIO DESCRIBED IN THE PROSPECTUS
ALONG WITH CASH UNDER THE CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, MARCH 20, 2000, UNLESS THE OFFER IS EXTENDED.
February 22, 2000
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
This letter relates to the Offer by Computer Associates
International, Inc., a Delaware corporation ("Computer Associates"), through its
wholly owned subsidiary, Silversmith Acquisition Corp., a Delaware corporation,
to exchange shares of Common Stock of Computer Associates, par value $.10 per
share (together with the associated preferred stock purchase rights, each, a
"Computer Associates Share" and, collectively, the "Computer Associates Shares")
for each outstanding share of common stock, par value $.10 per share (together
with the associated preferred stock purchase rights, each, a "Sterling Software
Share" and, collectively, the "Sterling Software Shares"), of Sterling
Software, Inc., a Delaware corporation ("Sterling Software"), based on the
exchange ratio (and along with cash under specified circumstances) described in,
and otherwise upon the terms and subject to the conditions set forth in, the
Prospectus dated February 22, 2000 (the "Prospectus"), and the related Letter of
Transmittal (which, together with any amendments or supplements thereto,
collectively constitute the "Offer"), enclosed herewith.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE MINIMUM TENDER
CONDITION, AS DEFINED IN THE PROSPECTUS. SEE "THE OFFER--CONDITIONS OF THE
OFFER" IN THE PROSPECTUS.
Computer Associates expressly reserves the right, subject to the terms of
the related merger agreement, to (i) extend, amend or modify the terms of the
Offer in any manner and (ii) withdraw or terminate the Offer and not accept for
exchange any Sterling Software Shares if any of the conditions to the Offer are
not satisfied.
For your information and for forwarding to your clients for whom you hold
Sterling Software Shares registered in your name or in the name of your
nominee(s), or who hold Sterling Software Shares registered in their own names,
we are enclosing the following documents:
1. Prospectus dated February 22, 2000;
2. A Schedule 14D-9 Solicitation/Recommendation Statement;
3. Letter of Transmittal (together with accompanying Substitute
Form W-9) to be used by holders of Sterling Software Shares in accepting the
Offer and tendering Sterling Software Shares;
4. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Sterling Software Shares are not immediately available, if
time will not permit all required documents to reach
<PAGE>
the Depositary prior to the Expiration Date (as defined in the Prospectus)
or if the procedure for book-entry transfer cannot be completed on a timely
basis;
5. A letter that may be sent to your clients for whose accounts you hold
Sterling Software Shares registered in your name or in the name of your
nominee(s), with space provided for obtaining such clients' instructions
with regard to the Offer; and
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
Computer Associates will not pay any fees or commissions to any broker or
dealer or any other person (other than the fees of the Information Agent as
described in the Prospectus) in connection with the solicitation of tenders of
Sterling Software Shares pursuant to the Offer. Computer Associates will,
however, upon request, reimburse you for customary mailing and handling expenses
incurred by you in forwarding the enclosed materials to your clients. Computer
Associates will pay or cause to be paid any stock transfer taxes with respect to
the transfer and sale of Sterling Software Shares to it or its order pursuant to
the Offer, except as otherwise provided in Instruction 6 of the Letter of
Transmittal.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, MARCH 20, 2000, UNLESS THE OFFER IS
EXTENDED.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or an Agent's Message (as defined in the Prospectus) in
connection with a book-entry transfer, and any other required documents, should
be sent to the Depositary, and certificates evidencing the tendered Sterling
Software Shares should be delivered or such Sterling Software Shares should be
tendered by book-entry transfer to the account maintained by the Depositary at
The Depository Trust Company, all in accordance with the instructions set forth
in the Letter of Transmittal and the Prospectus. If holders of Sterling Software
Shares wish to tender Sterling Software Shares, but it is impracticable for them
to forward their certificates or other required documents prior to the
Expiration Date, a tender may be effected by following the guaranteed delivery
procedures specified under "The Offer--Procedure for Tendering" in the
Prospectus.
Any inquiries you may have with respect to the Offer should be addressed to
the Information Agent at its address and telephone number set forth on the back
cover page of the Prospectus.
Additional copies of the enclosed materials may be obtained from the
Information Agent, MacKenzie Partners, Inc. by calling collect to
(212) 929-5500.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON AS AN AGENT OF COMPUTER ASSOCIATES, STERLING SOFTWARE, THE
DEPOSITARY OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THE FOREGOING,
OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR USE ANY DOCUMENT
OR MAKE ANY STATEMENT ON BEHALF OF THEM IN CONNECTION WITH THE OFFER OTHER THAN
THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
<PAGE>
OFFER TO EXCHANGE EACH OUTSTANDING SHARE OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
STERLING SOFTWARE, INC.
FOR
SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
COMPUTER ASSOCIATES INTERNATIONAL, INC.
BASED ON THE EXCHANGE RATIO DESCRIBED IN THE PROSPECTUS
ALONG WITH CASH UNDER THE CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, MARCH 20, 2000, UNLESS THE OFFER IS EXTENDED.
February 22, 2000
To Our Clients:
Enclosed for your consideration are the Prospectus dated February 22, 2000
(the "Prospectus") and the related Letter of Transmittal (which, together with
any amendments or supplements thereto, collectively constitute the "Offer") in
connection with the Offer by Computer Associates International, Inc., a Delaware
corporation ("Computer Associates"), through its wholly owned subsidiary,
Silversmith Acquisition Corp., a Delaware corporation, to exchange shares of
common stock of Computer Associates, par value $.10 per share (together with the
associated preferred stock purchase rights, each, a "Computer Associates Share"
and, collectively, the "Computer Associates Shares"), for each outstanding share
of common stock, par value $.10 per share (together with the associated
preferred stock purchase rights, each, a "Sterling Software Share" and,
collectively, the "Sterling Software Shares"), of Sterling Software, Inc., a
Delaware corporation ("Sterling Software"), based on the exchange ratio (and
along with cash under specified circumstances) described in the Prospectus and
otherwise upon the terms and subject to the conditions set forth in the Offer.
Stockholders whose certificates evidencing Sterling Software Shares
("Sterling Software Share Certificates") are not immediately available or who
cannot deliver their Sterling Software Share Certificates and all other
documents required by the Letter of Transmittal to the Depositary prior to the
Expiration Date (as defined in the Prospectus) or who cannot complete the
procedure for delivery by book-entry transfer to the Depositary's account at a
Book-Entry Transfer Facility (as defined in "The Offer--Exchange of Sterling
Software Shares; Delivery of Computer Associates Common Stock" in the
Prospectus) on a timely basis and who wish to tender their Sterling Software
Shares must do so pursuant to the guaranteed delivery procedure described in
"The Offer--Procedure for Tendering" in the Prospectus. See Instruction 2 of the
Letter of Transmittal. Delivery of documents to a Book-Entry Transfer Facility
in accordance with the Book-Entry Transfer Facility's procedures does not
constitute delivery to the Depositary.
THESE MATERIALS ARE BEING FORWARDED TO YOU AS THE BENEFICIAL OWNER OF
STERLING SOFTWARE SHARES HELD BY US FOR YOUR ACCOUNT BUT NOT REGISTERED IN YOUR
NAME. WE ARE THE HOLDER OF RECORD OF STERLING SOFTWARE SHARES HELD BY US FOR
YOUR ACCOUNT. A TENDER OF SUCH STERLING SOFTWARE SHARES CAN BE MADE ONLY BY US
AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF
TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATION ONLY AND CANNOT BE USED BY YOU
TO TENDER STERLING SOFTWARE SHARES HELD BY US FOR YOUR ACCOUNT.
<PAGE>
Accordingly, we request instructions as to whether you wish to have us
tender on your behalf any or all of the Sterling Software Shares held by us for
your account, upon the terms and subject to the conditions set forth in the
Offer.
Please note the following:
1. COMPUTER ASSOCIATES IS OFFERING TO ACQUIRE EACH OUTSTANDING STERLING
SOFTWARE SHARE IN EXCHANGE FOR 0.5634 COMPUTER ASSOCIATES COMMON SHARES (AND
ALONG WITH CASH UNDER SPECIFIED CIRCUMSTANCES), SUBJECT TO ADJUSTMENT AS
DESCRIBED IN THE PROSPECTUS.
2. The Offer is being made for all of the outstanding Sterling Software
Shares.
3. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Monday, March 20, 2000, unless the Offer is extended. If
Computer Associates elects to provide a subsequent offering period as
described in the Prospectus, you will not have the right to withdraw
Sterling Software Shares that you tender in the subsequent offering period.
4. The Offer is conditioned upon, among other things, the Minimum
Tender Condition, as defined in the Prospectus. See "The Offer--Conditions
of the Offer" in the Prospectus.
5. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the transfer of Sterling Software
Shares pursuant to the Offer.
The Offer is made solely by the Prospectus dated February 22, 2000 and the
related Letter of Transmittal and any amendments or supplements thereto and is
being made to all holders of Sterling Software Shares. The Offer is not being
made to, nor will tenders be accepted from or on behalf of, holders of Sterling
Software Shares in any jurisdiction in which the making or acceptance thereof
would not be in compliance with the laws of such jurisdiction. However, Computer
Associates may, in its sole discretion, take such action as it may deem
necessary to make the Offer in any such jurisdiction and extend the Offer to
holders of Sterling Software Shares in such jurisdiction.
If you wish to have us tender any or all of your Sterling Software Shares,
please so instruct us by completing, executing, detaching and returning to us
the instruction form contained in this letter. An envelope in which to return
your instructions to us is enclosed. If you authorize the tender of your
Sterling Software Shares, all such Sterling Software Shares will be tendered
unless otherwise indicated in such instruction form. PLEASE FORWARD YOUR
INSTRUCTIONS TO US AS SOON AS POSSIBLE TO ALLOW US AMPLE TIME TO TENDER STERLING
SOFTWARE SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO EXCHANGE EACH OUTSTANDING SHARE OF
COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF
STERLING SOFTWARE, INC.
FOR SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF
COMPUTER ASSOCIATES INTERNATIONAL, INC.
BASED ON THE EXCHANGE RATIO DESCRIBED IN THE PROSPECTUS
ALONG WITH CASH UNDER THE CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS
The undersigned acknowledge(s) receipt of your letter and the enclosed
Prospectus dated February 22, 2000 (the "Prospectus"), and the related Letter of
Transmittal (which, together with any amendments or supplements thereto,
collectively constitute the "Offer") relating to the Offer by Computer
Associates International, Inc., a Delaware corporation ("Computer Associates"),
through its wholly owned subsidiary, Silversmith Acquisition Corp., a Delaware
corporation, to exchange shares of common stock of Computer Associates, par
value $.10 per share (together with the associated preferred stock purchase
rights, each, a "Computer Associates Share" and, collectively, the "Computer
Associates Shares") for each outstanding share of common stock, par value $.10
per share (together with the associated preferred stock purchase rights, each, a
"Sterling Software Share" and, collectively, the "Sterling Software Shares"), of
Sterling Software, Inc., a Delaware corporation ("Sterling Software"), based on
the exchange ratio (and along with cash under specified circumstances) described
in the Prospectus and otherwise upon the terms and subject to the conditions set
forth in the Offer.
You are instructed to tender for exchange in the Offer the number of
Sterling Software Shares indicated below (or, if no number is indicated below,
all Sterling Software Shares) that are held by you for the account of the
undersigned, upon the terms and subject to the conditions set forth in the
Offer.
Number of Sterling Software Shares to be Tendered: ___________________________
Date: ________________________________________________________________________
SIGN HERE
Signature(s): ________________________________________________________________
Name(s) (PLEASE PRINT): ______________________________________________________
Address: _____________________________________________________________________
_____________________________________________________________________________
Telephone Number: ____________________________________________________________
Taxpayer Identification or Social Security Number: ___________________________
Unless otherwise indicated, it will be assumed that all of your Shares held by
us for your account are to be tendered.
3
<PAGE>
CHASEMELLON SHAREHOLDER SERVICES, LLC
REORGANIZATION DEPARTMENT
P.O. BOX 3301
SOUTH HACKENSACK, N.J. 07606
CONFIDENTIAL INSTRUCTIONS
FOR
EXCHANGE OFFER FOR OUTSTANDING SHARES OF COMMON STOCK
HELD IN THE STERLING SOFTWARE, INC. SAVINGS AND SECURITY PLAN
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, MARCH 20, 2000, UNLESS THE OFFER IS EXTENDED.
TO PARTICIPANTS IN THE
STERLING SOFTWARE, INC. SAVINGS AND SECURITY PLAN
Enclosed is a copy of the Prospectus, dated February 22, 2000 and the
related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"), and an Instruction
Card relating to the Offer by Computer Associates International, Inc., through
its wholly owned subsidiary, Silversmith Acquisition Corp., to exchange shares
of common stock (together with the associates preferred stock purchase rights,
the "Shares") of Sterling Software, Inc. for a certain number (as described in
the Offer) of shares (and in specified circumstances, as described in the Offer,
cash) of common stock of Computer Associates International, Inc. This material
is being forwarded to you as the beneficial owner of Shares held by us for your
account under the Sterling Software, Inc. Savings and Security Plan (the "401(k)
Plan"). A tender of such Shares into the exchange can be made only by us, acting
in our capacity as trustee of the 401(k) Plan, pursuant to your instructions.
We request confidential instructions as to whether you wish to have us
tender on your behalf any or all of such Shares held by us for your account,
upon the terms and subject to the conditions set forth in the Offer. To tender
shares held by us for you under the 401(k) Plan, we must receive from you the
enclosed Instruction Card by 5:00 P.M. New York City time on Thursday,
March 16, 2000, unless extended.
If you wish to have us tender any or all of your Shares held in your account
under the 401(k) Plan, please sign and send to us the enclosed Instruction Card.
If you do not return the enclosed Instruction Card we will not tender any of the
Shares held in your account under the 401(k) Plan.
IF WE DO NOT RECEIVE A PROPERLY EXECUTED INSTRUCTION CARD FROM YOU, WE WILL
NOT TENDER YOUR SHARES INTO THE EXCHANGE OFFER.
<PAGE>
INSTRUCTION CARD
RE: STERLING SOFTWARE, INC.
SAVINGS AND SECURITY PLAN (THE "401(K) PLAN")
To ChaseMellon Shareholder Services, LLC:
I am a participant in the 401(k) Plan and, as such, I received a copy of the
Prospectus dated February 22, 2000 and the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer") relating to the Offer by Computer Associates International, Inc.,
through its wholly owned subsidiary, Silversmith Acquisition Corp., to exchange
each share of common stock of Sterling Software, Inc. for a certain number (as
described in the Offer) of shares (and in specified circumstances, cash, as
described in the Offer) of common stock of Computer Associates International,
Inc.
I hereby direct you to:
/ / Tender all shares held in my account.
/ / Tender ______ (insert number) of such shares only.
/ / Do not tender any such shares.
<TABLE>
<S> <C>
-----------------------------------------------------
(Signature of Participant)
-----------------------------------------------------
(Signature of Participant)
-----------------------------------------------------
(Date)
If shares are held in joint names, each co-owner must
sign.
</TABLE>
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- ---------------------------------------------------
<S> <C> <C>
GIVE THE SOCIAL
SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ---------------------------------------------------
1. An individual's The individual
account
2. Two or more The actual owner of
individuals (joint the account or, if
account) combined funds, any
one of the
individuals(1)
3. Husband and wife The actual owner of
(joint account) the account or, if
joint funds, either
person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor or
guardian or committee incompetent person(3)
for a designated ward,
minor, or incompetent
person
7. a) The usual revocable The grantor-trustee(1)
savings trust
account (grantor is
also trustee);
b) So-called trust The actual owner(1)
account that is not
a legal or valid
trust under State
law
- ---------------------------------------------------
<CAPTION>
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ---------------------------------------------------
<S> <C> <C>
8. Sole proprietorship The owner(4)
account
9. A valid trust, estate, The legal entity (Do
or pension trust not furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself is
not designated in the
account title.)(5)
10. Corporate account The corporation
11. Religious, charitable The organization
or educational
organization account
12. Partnership account The partnership
held in the name of
the business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
State or local
government, school
district, or prison)
that receives
agricultural program
payments.
</TABLE>
- ---------------------------------------------
- ---------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) You must show your individual name, but you may also enter business or
"doing business as" name. You may use either your SSN or EIN (if you have
one).
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5. Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service and apply for a number.
PAYEE EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under Section 403(b)(7).
- The United States or any agency or instrumentality thereof.
- A state, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a nonexempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of
1940.
- A foreign central bank of issue.
PAYMENTS EXEMPT FROM BACKUP WITHHOLDINGS
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
- Payments of patronage dividends not paid in money.
- Payments made by certain foreign corporations.
- Payments to nonresident aliens subject to withholding under Section 1441.
Section 404(k) payments made by an ESOP.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: you may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt payees described above should file a Substitute Form W-9 to avoid
possible erroneous backup withholding.
FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER,
WRITE "EXEMPT" ON THE FACE OF THE FORM. SIGN AND DATE THE FORM AND RETURN IT TO
THE PAYER. IF YOU ARE NOT A NON-RESIDENT OR FOREIGN ENTITY NOT SUBJECT TO BACKUP
WITHHOLDING, FILE WITH PAYER A COMPLETED INTERNAL REVENUE FORM W-8 (CERTIFICATE
OF FOREIGN STATUS).
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see sections 6041, 6041A(a), 6042, 6044, 6045, 6049,
6050A, and 6050N, and the regulations under those sections.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. The IRS uses the numbers for identification
purposes and to help verify the accuracy of tax returns. Payers must be given
the numbers whether or not recipients are required to file a tax return. Payers
must generally withhold 31% of taxable interest, dividend, and certain other
payments to a payee who does not furnish a taxpayer identification number to a
payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
Unless otherwise noted herein, all references to section numbers or
regulations are references to the Internal Revenue Code of 1986, as amended, and
the regulations promulgated thereunder.
