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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 13, 2000
REGISTRATION NO. 333-30842
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
COMPUTER ASSOCIATES INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
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<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>
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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. / /
------------------------------
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 MARCH 13, 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 March , 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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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....................................... 33
Extension, Termination and Amendment...................... 33
Exchange of Sterling Software Shares; Delivery of Computer
Associates Common Stock................................. 34
Cash Instead of Fractional Shares of Computer Associates
Common Stock............................................ 34
Withdrawal Rights......................................... 35
Procedure for Tendering................................... 35
Purpose of the Offer; The Merger; Appraisal Rights........ 38
Conditions of the Offer................................... 40
Regulatory Approvals...................................... 43
Certain Effects of Offer.................................. 43
Source and Amount of Funds................................ 44
Relationships with Sterling Software...................... 44
Accounting Treatment...................................... 44
Fees and Expenses......................................... 45
Stock Exchange Listings................................... 45
THE MERGER AGREEMENT AND THE TENDER AGREEMENT............... 46
The Merger Agreement...................................... 46
The Offer............................................... 46
The Merger.............................................. 46
Effective Time of the Merger............................ 47
Additional Effects of the Merger........................ 47
Exchange Agent; Procedures for Exchange of
Certificates........................................... 47
Sterling Software Board of Directors.................... 48
Other Provisions........................................ 48
The Tender Agreement...................................... 57
Parties................................................. 57
</TABLE>
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<TABLE>
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PAGE
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<S> <C>
Agreement to Tender..................................... 57
Proxy................................................... 58
No Solicitation......................................... 58
Termination............................................. 58
CHANGE OF CONTROL SEVERANCE AGREEMENTS...................... 59
MATERIAL FEDERAL INCOME TAX CONSEQUENCES.................... 60
MARKET PRICES AND DIVIDENDS................................. 67
FINANCIAL PROJECTIONS....................................... 68
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION............................................... 70
DESCRIPTION OF COMPUTER ASSOCIATES CAPITAL STOCK............ 76
Authorized Capital Stock.................................. 76
Computer Associates Common Stock.......................... 76
Transfer and Dividend Paying Agent and Registrar.......... 76
COMPARISON OF RIGHTS OF HOLDERS OF COMPUTER ASSOCIATES
SHARES AND STERLING SOFTWARE SHARES....................... 77
Comparison of Charter and By-law Provisions............... 77
Summary of Certain Statutory Provisions................... 83
FORWARD-LOOKING STATEMENTS.................................. 85
LEGAL MATTERS............................................... 85
EXPERTS..................................................... 86
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: Before the offer expires, 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 40.
4
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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 60. 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
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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
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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 46.
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. Before the offer expires, we will
issue a press release announcing the final exchange ratio and file 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 35 and "The Merger Agreement and the
Tender Agreement--The Merger Agreement--The Offer" beginning on page 46 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
13
<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 47.
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 the mailing of this prospectus to Sterling
Software stockholders. The equivalent price per share data for Sterling Software
common stock
16
<PAGE>
has been determined by multiplying the last 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 60. You
are urged to consult your tax advisors for a full understanding of these tax
consequences.
17
<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 70 and the
accompanying notes.
18
<PAGE>
<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.
29
<PAGE>
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. Computer Associates and Sterling Software have not
agreed to any minimum average Computer Associates trading price or floor below
which either party would be entitled to terminate the Merger Agreement.
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,
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- 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 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. Before the offer expires, we will
issue a press release announcing the final exchange ratio and file 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
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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 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
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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.
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.
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<PAGE>
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 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
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<PAGE>
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
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
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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.
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.
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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 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.
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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.
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
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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 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."
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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 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.
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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 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
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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
- 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
anything to the contrary in this prospectus, we cannot and will not assert any
of the conditions to the offer, other than certain regulatory conditions as, and
to the extent, permitted by applicable rules and regulations of the SEC, at any
time after the expiration date of the offer. Notwithstanding the fact that we
reserve the right to assert the failure of a regulatory 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.
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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 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."
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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 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.
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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 40-42 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 transfer to him, upon a qualifying
termination of employment and payment to Sterling Software of an amount
equal to the cash surrender value of the policy, 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.
** February 18, 2000 is the last day for which such information could be
practicably obtained prior to the date of the mailing of this prospectus to
Sterling Software stockholders.
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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 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 projections were not
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<PAGE>
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 Computer
Associates or its affiliates or independent auditors assume any responsibility
for the accuracy or validity of this information. In addition, because the
realization of the underlying estimates upon which these projections are based
are to a large extent beyond Sterling Software's control, there can be no
assurances that these projections will be realized; actual results may be higher
or lower than those projected. 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 estimates 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 or projections, 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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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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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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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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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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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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<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>
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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>
81
<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>
82
<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
83
<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.
84
<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 23. 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. Any forward-looking statements made in connection
with the offer are not, and have not been, protected under the "safe harbor" for
forward-looking statements provided by the Securities Litigation Reform Act of
1995.
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.
85
<PAGE>
Covington & Burling, New York, New York, acted as counsel to Computer
Associates in connection with the merger agreement.
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.
86
<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 the
first filing 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>
- ------------------------
+ Previously filed.
* 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 amended registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Islandia, State of New
York, on March 13, 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>
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>
*
------------------------------------------- Chairman of the Board and March 13, 2000
Charles B. Wang Chief Executive Officer
Senior Vice President
* Finance, Principal
------------------------------------------- Financial and March 13, 2000
Ira H. Zar Accounting Officer
*
------------------------------------------- Director March 13, 2000
Russell M. Artzt
*
------------------------------------------- Director March 13, 2000
Alfonse M. D'Amato
*
------------------------------------------- Director March 13, 2000
Willem F.P. de Vogel
*
------------------------------------------- Director March 13, 2000
Irving Goldstein
*
------------------------------------------- Director March 13, 2000
Richard A. Grasso
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
*
------------------------------------------- Director March 13, 2000
Shirley Strum Kenny
*
------------------------------------------- Director March 13, 2000
Sanjay Kumar
*
------------------------------------------- Director March 13, 2000
Roel Pieper
</TABLE>
<TABLE>
<S> <C> <C>
*By: /s/ Steven M. Woghin
---------------------------
Steven M. Woghin
Attorney-in-Fact
</TABLE>
II-7
<PAGE>
Exhibit 10.2
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) upon the payment to the Company by the Executive (or his
designee) of the cash surrender value of the split dollar life
insurance policy maintained by the Company with respect to the
Executive's life, transfer and assign to the Executive (or his
designee) all right, title and interest of the Company in and
to such split dollar life insurance policy.
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 Executives
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 section 4999 of the Code to any payment or
benefit provided hereunder. Such payments shall be made within
five (5) business
6
<PAGE>
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
<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
March 8, 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), Amendment No. 1, 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
March 8, 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), Amendment No. 1, 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
March 8, 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
March 9, 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 March 8, 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
March 8, 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 Amendment No. 1 on Form S-4, and to all references to our Firm included
in this Registration Statement on Amendment No. 1 on Form S-4.
/s/ Luboshitz & Kasierer
LUBOSHITZ & KASIERER
MEMBER FIRM OF ARTHUR ANDERSEN
Tel Aviv, Israel
March 9, 2000
