<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): June 21, 1998
STERLING SOFTWARE, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 1-8465 75-1873956
(State of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
300 Crescent Court, Suite 1200
Dallas, Texas 75201
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (214) 981-1000
================================================================================
<PAGE>
ITEM 5. Other Events.
RECENT DEVELOPMENTS
On June 21, 1998, Sterling Software, Inc. (the "Company"), Sterling
Software (Southern), Inc., a Georgia corporation and a wholly owned subsidiary
of the Company ("Merger Sub"), and Synon Corporation, a Delaware corporation
("Synon"), entered into an Agreement and Plan of Merger (the "Merger
Agreement"), providing for the merger (the "Merger") of Synon with and into
Merger Sub (the "Merger"), with Merger Sub continuing as the surviving
corporation and remaining a wholly owned subsidiary of the Company.
Pursuant to the Merger Agreement, at the effective time of the Merger (the
"Effective Time"), (i) each share of Common Stock, Series A Preferred Stock and
Series E Preferred Stock of Synon issued and outstanding immediately before the
Effective Time would be converted into the right to receive 0.14357 shares of
Common Stock, par value $.10 per share ("Sterling Software Common Stock"), of
the Company, and (ii) each share of Series D Preferred Stock of Synon issued and
outstanding immediately prior to the Effective Time would be converted into the
right to receive 0.27149 shares of Sterling Software Common Stock.
Pursuant to the Merger Agreement, at the Effective Time, each then-
outstanding option (a "Synon Option") to purchase shares of Common Stock of
Synon ("Synon Common Stock") under Synon's 1990 Stock Option Plan and Synon's
Executive Share Option Scheme will be assumed by the Company and will constitute
an option to purchase a number of shares of Sterling Software Common Stock
(rounded down to the nearest whole share) determined by multiplying (i) the
number of shares of Synon Common Stock subject to such Synon Option immediately
prior to the Effective Time by (ii) 0.14357 (the "Option Conversion Factor"), at
an exercise price per share of Sterling Software Common Stock (increased to the
nearest whole cent) equal to (i) the exercise per share of Synon Common Stock
subject to such Synon Option divided by (ii) the Option Conversion Factor.
Approximately 2,979,000 shares of Sterling Software Common Stock (inclusive
of shares issuable upon the exercise of Synon Options as described above) would
be issued in connection with the Merger.
The obligations of the parties to the Merger Agreement to consummate the
Merger are conditioned upon, among other things: (i) adoption of the Merger
Agreement by the requisite vote of Synon's stockholders; (ii) the absence of any
order or injunction that prohibits the consummation of the Merger; (iii) the
shares of Sterling Software Common Stock to be issued in connection with the
Merger having been authorized for listing on the New York Stock Exchange, upon
official notice of issuance; (iv) the waiting period pursuant to the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended, having expired or been
earlier terminated; (v) the receipt of certain opinions of counsel to the effect
that the Merger will be treated for federal income tax purposes as a tax-free
reorganization; and (vi) the receipt of certain letters from independent public
accountants relating to the treatment of the Merger as a pooling of interests
transaction for accounting purposes.
In connection with the execution and delivery of the Merger Agreement, the
Company entered into Stockholder Agreements (the "Stockholder Agreements") with
certain stockholders of Synon (the "Principal Stockholders"), pursuant to which
each Principal Stockholder has, among other matters included therein, agreed to
vote all shares of capital stock of Synon owned by such Principal Stockholder in
favor of the adoption of the Merger Agreement. Based upon representations of
Synon and the Principal Stockholders contained in the Merger Agreement and the
Stockholder Agreements, respectively, the Principal Stockholders beneficially
own, in the aggregate, (i) 63% of the outstanding shares of Synon
-2-
<PAGE>
Common Stock, (ii) 100% of the outstanding shares of Synon Series A Preferred
Stock, (iii) 100% of the outstanding shares of Synon Series D Preferred Stock,
and (iv) 100% of the outstanding shares of Synon Series E Preferred Stock. Under
the applicable provisions of the Delaware General Corporation Law and Synon's
certificate of incorporation, the affirmative vote of the holders of the shares
of Synon capital stock beneficially owned by the Principal Stockholders, in the
aggregate, would be sufficient for the adoption of the Merger Agreement by
Synon's stockholders.
A copy of the Merger Agreement is filed as Exhibit 2.1 hereto, and copies
of the Stockholder Agreements are filed as Exhibits 10.1 and 10.2 hereto. All
of such documents are incorporated herein by this reference.
On June 22, 1998, the Company issued a press release announcing the
execution of the Merger Agreement. A copy of the press release is filed as
Exhibit 99.1 hereto and is incorporated herein by this reference.
ITEM 7. Exhibits.
Exhibit
Number Exhibit
------ -------
2.1 Agreement and Plan of Merger, dated June 20, 1998, among the
Company, Merger Sub and Synon.
10.1 Stockholder Agreement, dated June 20, 1998, among the Company and
certain Principal Stockholders.
10.2 Stockholder Agreement, dated June 20, 1998, between the Company
and International Business Machines Corporation.
99.1 Press release, dated June 22, 1998, issued by the Company.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
STERLING SOFTWARE, INC.
By: /s/ Don J. McDermett, Jr.
------------------------------------------
DON J. McDERMETT, JR.
Senior Vice President and General Counsel
June 23, 1998
-4-
<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibit
Number Exhibit
- ------- -------
2.1 Agreement and Plan of Merger, dated June 20, 1998, among the Company,
Merger Sub and Synon.
10.1 Stockholder Agreement, dated June 20, 1998, among the Company and
certain Principal Stockholders.
10.2 Stockholder Agreement, dated June 20, 1998, between the Company and
International Business Machines Corporation.
99.1 Press release, dated June 22, 1998, issued by the Company.
<PAGE>
Exhibit 2.1
-----------
____________________________________________________________
AGREEMENT AND PLAN OF MERGER
among
STERLING SOFTWARE, INC.
STERLING SOFTWARE (SOUTHERN), INC.
and
SYNON CORPORATION
dated as of June 20, 1998
____________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
AGREEMENT AND PLAN OF MERGER.................................................. 1
ARTICLE I - THE MERGER........................................................ 2
Section 1.1 The Merger................................................ 2
Section 1.2 Closing................................................... 2
Section 1.3 Effective Time............................................ 2
Section 1.4 Effects of the Merger..................................... 2
Section 1.5 Certificate of Incorporation; Bylaws...................... 2
Section 1.6 Directors; Officers....................................... 3
Section 1.7 Tax and Accounting Consequences........................... 3
ARTICLE II - EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS......................................... 3
Section 2.1 Effect on Capital Stock................................... 3
Section 2.2 Stock Options............................................. 4
ARTICLE III - EXCHANGE OF CERTIFICATES........................................ 5
Section 3.1 Exchange of Certificates.................................. 5
ARTICLE IV - REPRESENTATIONS AND WARRANTIES................................... 8
Section 4.1 Representations and Warranties of Company................. 8
Section 4.2 Representations and Warranties of Parent and Merger Sub... 23
ARTICLE V - CONDUCT OF BUSINESS OF COMPANY.................................... 26
Section 5.1 Conduct of Business of Company............................ 26
ARTICLE VI - ADDITIONAL COVENANTS............................................. 28
Section 6.1 Preparation of the Proxy Statement/Offering Memorandum.... 28
Section 6.2 Accountants' Letters...................................... 29
Section 6.3 Stockholders Meeting...................................... 29
Section 6.4 Access to Information; Confidentiality.................... 30
Section 6.5 Reasonable Best Efforts................................... 30
Section 6.6 Public Announcements...................................... 30
Section 6.7 No Solicitation; Acquisition Proposals.................... 30
Section 6.8 Consents, Approvals and Filings........................... 32
Section 6.9 Board Action Relating to Stock Option Plans............... 32
Section 6.10 Employee Benefit Matters.................................. 33
Section 6.11 Affiliates and Certain Stockholders....................... 33
Section 6.12 NYSE Listing.............................................. 34
Section 6.13 Tax Treatment............................................. 34
Section 6.14 Pooling of Interests...................................... 34
Section 6.15 Registration of Parent Common Stock....................... 34
</TABLE>
(i)
<PAGE>
<TABLE>
Page
----
<S> <C> <C>
Section 6.16 Rule 144 Reporting........................................ 36
Section 6.17 Availability of Form S-3.................................. 36
Section 6.18 Indemnification........................................... 36
ARTICLE VII - CONDITIONS PRECEDENT................ ........................... 37
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger 37
Section 7.2 Conditions to Obligations of Parent and Merger Sub........ 38
Section 7.3 Conditions to Obligation of Company....................... 40
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER.............................. 40
Section 8.1 Termination............................................... 40
Section 8.2 Effect of Termination..................................... 42
Section 8.3 Amendment................................................. 42
Section 8.4 Extension; Waiver......................................... 42
Section 8.5 Procedure for Termination, Amendment, Extension or Waiver. 42
ARTICLE IX - GENERAL PROVISIONS............................................... 42
Section 9.1 Nonsurvival of Representations and Warranties............. 42
Section 9.2 Fees and Expenses......................................... 43
Section 9.3 Definitions............................................... 43
Section 9.4 Notices................................................... 44
Section 9.5 Interpretation............................................ 45
Section 9.6 Entire Agreement; Third-Party Beneficiaries............... 45
Section 9.7 Governing Law............................................. 46
Section 9.8 Assignment................................................ 46
Section 9.9 Enforcement............................................... 46
Section 9.10 Severability.............................................. 46
Section 9.11 Counterparts.............................................. 47
</TABLE>
(ii)
<PAGE>
EXHIBIT A - Form of Accredited Investor Letter
EXHIBIT B - Form of Investor Letter
EXHIBIT C - Form of Company Affiliate Letter
EXHIBIT D - Form of Parent Affiliate Letter
(iii)
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of June 20, 1998 (this
"Agreement"), is made and entered into among Sterling Software, Inc., a Delaware
corporation ("Parent"), Sterling Software (Southern), Inc., a Georgia
corporation and wholly owned subsidiary of Parent ("Merger Sub"), and Synon
Corporation, a Delaware corporation ("Company").
RECITALS:
A. The Executive Committee of the Board of Directors of Parent and the
respective Boards of Directors of Parent, Merger Sub and Company have determined
that it would be advisable and in the best interests of their respective
stockholders for Parent to acquire Company, by means of a merger of Company with
and into Merger Sub (the "Merger"), on the terms and subject to the conditions
set forth in this Agreement.
B. For federal income tax purposes, it is intended that the Merger will
qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
C. For financial accounting purposes, it is intended that the Merger will
be accounted for as a pooling of interests transaction.
D. Concurrently with the execution and delivery of this Agreement and as
a condition to Parent's and Merger Sub's willingness to enter into this
Agreement, Parent has entered into Stockholder Agreements, dated as of the date
hereof (the "Stockholder Agreements"), with each of the Principal Stockholders
(as hereinafter defined), pursuant to which (x) each Principal Stockholder has
agreed, among other things, to vote all shares of capital stock of Company owned
by such Principal Stockholder in favor of the adoption of this Agreement and (y)
each Principal Stockholder other than International Business Machines
Corporation has granted to Parent an option to purchase all shares of capital
stock of Company owned by such Principal Stockholder.
E. Parent, Merger Sub and Company desire to make certain representations,
warranties and covenants in connection with the Merger and to prescribe various
conditions to the consummation of the Merger.
NOW, THEREFORE, in consideration of the representations, warranties and
covenants contained in this Agreement, the parties hereto hereby agree as
follows:
<PAGE>
ARTICLE I
THE MERGER
Section 1.1 The Merger. On the terms and subject to the conditions set
----------
forth in this Agreement, and in accordance with the Delaware General Corporation
Law (the "DGCL") and the Georgia Business Corporation Code (the "GBCC"), the
Merger shall be effected and Company shall be merged with and into Merger Sub at
the Effective Time (as hereinafter defined). At the Effective Time, the separate
existence of Company shall cease and Merger Sub shall continue as the surviving
corporation (sometimes hereinafter referred to as the "Surviving Corporation").
Section 1.2 Closing. Unless this Agreement shall have been terminated
-------
and the transactions herein contemplated shall have been abandoned pursuant to
Article VIII, and subject to the satisfaction or waiver of all of the conditions
set forth in Article VII, the closing of the Merger (the "Closing") will take
place as soon as practicable, but in no event later than 10:00 a.m. on the
second business day (the "Closing Date") following satisfaction or waiver of all
of the conditions set forth in Article VII, other than those conditions that by
their nature are to be satisfied at the Closing, but subject to the fulfillment
or waiver of those conditions, at the offices of Jones, Day, Reavis & Pogue,
2300 Trammell Crow Center, 2001 Ross Avenue, Dallas, Texas, unless another date,
time or place is agreed to in writing by the parties hereto.
Section 1.3 Effective Time. On the Closing Date (or on such other date
--------------
as Parent and Company may agree), the parties hereto shall file with the
Secretary of State of the State of Delaware (the "Delaware State Secretary") a
certificate of merger complying and executed in accordance with the applicable
provisions of the DGCL (the "Delaware Certificate of Merger"), shall file with
the Secretary of State of the State of Georgia (the "Georgia State Secretary") a
certificate of merger complying and executed in accordance with the applicable
provisions of the GBCC (the "Georgia Certificate of Merger"), and shall make all
other filings or recordings required under the DGCL and the GBCC, as applicable,
in connection with the Merger. The Merger shall become effective upon the later
of the filing of the Delaware Certificate of Merger and the filing of the
Georgia Certificate of Merger, or at such later time as is specified in the
Delaware Certificate of Merger or the Georgia Certificate of Merger (the
"Effective Time").
Section 1.4 Effects of the Merger. The Merger shall have the effects
---------------------
set forth in the applicable provisions of the DGCL and the GBCC. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all property of Company and Merger Sub shall vest in the Surviving
Corporation, and all liabilities of Company and Merger Sub shall become the
liabilities of the Surviving Corporation.
Section 1.5 Certificate of Incorporation; Bylaws. At the Effective
------------------------------------
Time, (a) the certificate of incorporation of Merger Sub as in effect at the
Effective Time shall, from and after the Effective Time, be the certificate of
incorporation of the Surviving Corporation until thereafter changed or amended
in accordance with the provisions thereof and applicable law and (b) the bylaws
of Merger Sub as in effect at the Effective Time shall, from and after the
Effective Time,
2
<PAGE>
be the bylaws of the Surviving Corporation until thereafter changed or amended
in accordance with the provisions thereof and applicable law.
Section 1.6 Directors; Officers. From and after the Effective Time, (a)
-------------------
the directors of Merger Sub shall be the directors of the Surviving Corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be, and (b) the
officers of Merger Sub shall be the officers of the Surviving Corporation, until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
Section 1.7 Tax and Accounting Consequences. It is intended by the
-------------------------------
parties hereto that the Merger shall (i) constitute a reorganization within the
meaning of Section 368 of the Code and (ii) qualify for accounting treatment as
a pooling of interests. The parties to this Agreement hereby adopt this
Agreement as a "plan of reorganization" within the meaning of Sections 1.368-
2(g) and 1.368-3(a) of the United States Treasury Regulations. No party to this
Agreement shall take any action inconsistent with such treatment.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS
Section 2.1 Effect on Capital Stock. At the Effective Time, by virtue
-----------------------
of the Merger and without any action on the part of any holder of shares of
Company's Common Stock, par value $0.001 per share ("Common Shares"), Series A
Preferred Stock, par value $0.001 per share ("Series A Preferred Shares"),
Series D Preferred Stock, par value $0.001 per share ("Series D Preferred
Shares"), or Series E Preferred Stock, par value $0.001 per share ("Series E
Preferred Shares" and, together with the Series A Preferred Shares and the
Series D Preferred Shares, the "Preferred Shares") (the Common Shares and the
Preferred Shares being collectively referred to herein as the "Shares"), or any
other capital stock of Company or any shares of capital stock of Merger Sub:
(a) Common Stock of Merger Sub. Each share of common stock, par value
--------------------------
$0.10 per share, of Merger Sub ("Merger Sub Common Stock") issued and
outstanding immediately prior to the Effective Time shall remain outstanding and
shall not be affected in any manner by the effectiveness of the Merger.
(b) Cancellation of Treasury Shares and Parent-Owned Shares. Each
-------------------------------------------------------
Share issued and outstanding immediately prior to the Effective Time that is
owned by Company or any Subsidiary (as hereinafter defined) of Company or by
Parent, Merger Sub or any other Subsidiary of Parent (other than shares in trust
accounts, managed accounts, custodial accounts and the like that are
beneficially owned by third parties) shall automatically be canceled and retired
and shall cease to exist, and no cash or other consideration shall be delivered
or deliverable in exchange therefor.
3
<PAGE>
(c) Conversion of Shares. Each Share issued and outstanding
--------------------
immediately prior to the Effective Time (other than Shares to be canceled and
retired in accordance with Section 2.1(b) and any Dissenting Shares (as
hereinafter defined)) shall be converted into the right to receive, upon
surrender of the certificate formerly representing such Share in accordance with
this Agreement, the applicable number of fully paid and nonassessable shares of
the Common Stock, par value $0.10 per share ("Parent Common Stock"), of Parent
specified in this Section 2.1(c) (the "Merger Consideration"), which (i) in the
case of each Common Share, each Series A Preferred Share and each Series E
Preferred Share is 0.14357, and (ii) in the case of each Series D Preferred
Share is 0.27149. Consistent with and pursuant to Parent's existing Rights
Agreement, dated as of December 18, 1996, as amended (the "Rights Agreement"),
between Parent and BankBoston N.A., as rights agent, one right issuable pursuant
to the Rights Agreement or any other right issued in substitution thereof (a
"Right"), shall be issued together with and shall attach to each share of Parent
Common Stock issued pursuant to this Section 2.1(c), unless the Rights shall
have expired or been redeemed prior to the Effective Time.
(d) Anti-Dilution. In the event of any stock dividend, stock split,
-------------
reclassification, recapitalization, combination or exchange of shares with
respect to, or rights issued in respect of, Parent Common Stock on or after the
date hereof and prior to the Effective Time, the Merger Consideration shall be
adjusted accordingly.
(e) Dissenting Shares. Notwithstanding anything in this Agreement to
-----------------
the contrary, Shares issued and outstanding immediately prior to the Effective
Time held by a holder (if any) who has the right to demand, and who properly
demands, an appraisal of such Shares in accordance with Section 262 of the DGCL
(or any successor provision) ("Dissenting Shares") shall not be converted into a
right to receive the Merger Consideration unless such holder fails to perfect or
otherwise loses such holder's right to such appraisal, if any. If, after the
Effective Time, such holder fails to perfect or loses any such right to
appraisal, each such Share of such holder shall be treated as a Share that had
been converted as of the Effective Time into the right to receive the Merger
Consideration in accordance with this Section 2.1. At the Effective Time, any
holder of Dissenting Shares shall cease to have any rights with respect thereto,
except the rights provided in Section 262 of the DGCL (or any successor
provision) and as provided in the immediately preceding sentence. Company shall
give prompt notice to Parent of any demands received by Company for appraisal of
Shares, and Parent shall have the right to participate in and direct all
negotiations and proceedings with respect to such demands. Company shall not,
except with the prior written consent of Parent, make any payment with respect
to, or settle or offer to settle, any such demands.
Section 2.2 Stock Options.
-------------
(a) At the Effective Time, each then-outstanding option to purchase
Common Shares (collectively, the "Options") under Company's 1990 Stock Option
Plan and Company's Executive Share Option Scheme (collectively, the "Stock
Option Plans"), whether or not then exercisable or fully vested, shall be
assumed by Parent and shall constitute an option (a "Substitute Option") to
acquire, on substantially the same terms and subject to substantially the same
conditions as were applicable under such Option, including without limitation
term, vesting, exercisability, status as an "incentive stock option" under
Section 422 of the Code (if applicable)
4
<PAGE>
and termination provisions, the number of shares of Parent Common Stock, rounded
down to the nearest whole share, determined by multiplying the number of Common
Shares subject to such Option immediately prior to the Effective Time by 0.14357
(the "Conversion Factor"), at an exercise price per share of Parent Common Stock
(increased to the nearest whole cent) equal to the exercise price per share of
Common Shares subject to such Option divided by the Conversion Factor; provided,
however, that in the case of any Option to which Section 421 of the Code applies
by reason of its qualification as an incentive stock option under Section 422 of
the Code or as an employee stock purchase plan option under Section 423 of the
Code, the conversion formula shall be adjusted if necessary to comply with
Section 424(a) of the Code.
(b) Company shall use its best efforts to obtain all necessary
waivers, consents or releases from holders of Options under the Stock Option
Plans and take any such other action as may be reasonably necessary to give
effect to the transactions contemplated by this Section 2.2.
(c) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery upon
exercise of Substitute Options pursuant to the terms set forth in Section
2.2(a). As soon as practicable after the Effective Time, the shares of Parent
Common Stock subject to Substitute Options will be covered by an effective
registration statement on Form S-8 (or any successor form) or another
appropriate form and Parent shall use its reasonable best efforts to maintain
the effectiveness of such registration statement for so long as the Substitute
Options remain outstanding. In addition, Parent shall use all reasonable
efforts to cause the shares of Parent Common Stock subject to Substitute Options
to be listed on the NYSE (as hereinafter defined) and such other exchanges as
Parent shall determine.
ARTICLE III
EXCHANGE OF CERTIFICATES
Section 3.1 Exchange of Certificates.
------------------------
(a) Exchange Agent. Prior to or concurrently with the Effective Time,
---------------
Parent shall enter into an agreement with such bank or trust company as may be
designated by Parent (the "Exchange Agent"), which shall provide that Parent
shall deposit with the Exchange Agent as of the Effective Time, for the benefit
of the holders of Shares, for exchange in accordance with this Article III,
through the Exchange Agent, certificates representing the shares of Parent
Common Stock (such shares of Parent Common Stock, together with any dividends or
distributions with respect thereto with a record date after the Effective Time,
and any cash payable in lieu of any fractional shares of Parent Common Stock,
being hereinafter referred to as the "Exchange Fund") issuable pursuant to
Section 2.1 in exchange for outstanding Shares.
(b) Letters of Transmittal; Surrender of Certificates. As soon as
-------------------------------------------------
reasonably practicable after the Effective Time, Parent shall instruct the
Exchange Agent to mail to each holder of record (other than Company or any of
its Subsidiaries or Parent, Merger Sub or any other Subsidiary of Parent) of a
certificate or certificates that, immediately prior to the Effective
5
<PAGE>
Time, evidenced outstanding Shares (the "Certificates"), (i) a form of letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent, and shall be in such form and have such
other provisions as Parent may reasonably specify) and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Exchange
Agent together with such letter of transmittal, duly executed, and such other
customary documents as may be required pursuant to such instructions, the holder
of such Certificate shall be entitled to receive in exchange therefor a
certificate representing the number of whole shares of Parent Common Stock (and
cash in lieu of fractional shares of Parent Common Stock as contemplated by this
Section 3.1) that the aggregate number of Shares previously represented by such
Certificate shall have been converted into the right to receive pursuant to
Section 2.1(c), and the Certificate so surrendered shall forthwith be canceled.
No interest shall be paid or accrued on any cash payable upon the surrender of
any Certificate. If payment is to be made to a person other than the person in
whose name the surrendered Certificate is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
payment shall pay any transfer or other taxes required by reason of the payment
to a person other than the registered holder of the surrendered Certificate or
established to the satisfaction of Parent and the Surviving Corporation that
such taxes have been paid or are not applicable.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
------------------------------------------------
other distributions with respect to Parent Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of Parent Common Stock issuable upon the surrender of
such Certificate pursuant to Section 3.1(b), and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 3.1(e),
and all such dividends, other distributions and cash in lieu of fractional
shares of Parent Common Stock shall be paid by Parent to the Exchange Agent and
shall be included in the Exchange Fund, in each case until the surrender of such
Certificate pursuant to Section 3.1(b). Subject to the effect of applicable
escheat or similar laws, following the surrender of any such Certificate
pursuant to Section 3.1(b) there shall be paid to the holder of the certificate
representing the whole shares of Parent Common Stock issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount of
dividends or other distributions with respect to such whole shares of Parent
Common Stock with a record date after the Effective Time theretofore paid with
respect to such whole shares of Parent Common Stock, and the amount of any cash
payable in lieu of a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 3.1(e), and (ii) at the appropriate
payment date, the amount of dividends or other distributions with respect to
such whole shares of Parent Common Stock with a record date after the Effective
Time but prior to such surrender and with a payment date subsequent to such
surrender payable with respect to such whole shares of Parent Common Stock.
(d) Cancellation and Retirement of Shares; No Further Rights. As of
--------------------------------------------------------
the Effective Time, all Shares (other than Shares to be canceled in accordance
with Section 2.1(b)) issued and outstanding immediately prior to the Effective
Time shall cease to be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of any such Shares shall cease
to have any rights with respect thereto or arising therefrom (including without
6
<PAGE>
limitation the right to vote), except the right to receive the Merger
Consideration, without interest, upon surrender of such Certificate in
accordance with Section 3.1(b), and until so surrendered, each such Certificate
shall represent for all purposes only the right to receive the Merger
Consideration, without interest. The Merger Consideration paid upon the
surrender for exchange of Certificates in accordance with the terms of this
Article III shall be deemed to have been paid in full satisfaction of all rights
pertaining to the Shares theretofore represented by such Certificates.
(e) No Fractional Shares. (i) No certificates or scrip representing
--------------------
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates which have been converted pursuant to Section 2.1(c),
and such fractional share interests shall not entitle the owner thereof to vote
or to any rights of a stockholder of Parent.
(ii) In lieu of any such fractional shares, each holder of Shares
who would otherwise have been entitled to a fraction of a share of Parent Common
Stock upon surrender of Certificates for exchange pursuant to this Section 3.1
will be paid an amount in cash (without interest), rounded to the nearest cent,
determined by multiplying (A) the per share closing price on the NYSE of Parent
Common Stock (as reported on the NYSE Composite Transactions List) on the date
on which the Effective Time occurs (or, if Parent Common Stock does not trade on
the NYSE on such date, the first date of trading of Parent Common Stock on the
NYSE after the Effective Time) by (B) the fractional interest to which such
holder otherwise would be entitled. Such amount in cash shall be deemed to be
substituted for any such fractional share and to constitute a portion of the
Merger Consideration with respect to the related Shares.
(f) Investment of Exchange Fund. The Exchange Agent shall invest any
---------------------------
cash included in the Exchange Fund, as directed by Parent, in (i) direct
obligations of the United States of America, (ii) obligations for which the full
faith and credit of the United States of America is pledged to provide for the
payment of principal and interest, (iii) commercial paper rated the highest
quality by either Moody's Investors Services, Inc. or Standard & Poor's
Corporation, or (iv) certificates of deposit, bank repurchase agreements or
bankers' acceptances of commercial banks with capital exceeding $500 million.
Any net earnings with respect to the Exchange Fund shall be the property of and
paid over to Parent as and when requested by Parent.
(g) Termination of Exchange Fund. Any portion of the Exchange Fund
----------------------------
which remains undistributed to the holders of Certificates for 180 days after
the Effective Time shall be delivered to Parent, upon demand, and any holders of
Certificates that have not theretofore complied with this Article III shall
thereafter look only to Parent, and only as general creditors thereof, for
payment of their claim for any Merger Consideration, any cash in lieu of
fractional shares of Parent Common Stock and any dividends or distributions with
respect to Parent Common Stock provided for in Section 3.1(c).
(h) No Liability. None of Parent, Merger Sub, the Surviving
------------
Corporation or the Exchange Agent shall be liable to any person in respect of
any payments or distributions payable from the Exchange Fund delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificates shall not have been surrendered prior to five
years after the Effective Time (or immediately prior to such earlier date on
which any
7
<PAGE>
Merger Consideration in respect of such Certificate would otherwise escheat to
or become the property of any Governmental Entity (as hereinafter defined)), any
amounts payable in respect of such Certificate shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto.
(i) Withholding Rights. Parent shall be entitled to deduct and
------------------
withhold, or cause to be deducted or withheld, from the consideration otherwise
payable pursuant to this Agreement to any holder of Shares, Options or
Certificates such amounts as are required to be deducted and withheld with
respect to the making of such payment under the Code, or any provision of
applicable state, local or foreign tax law. To the extent that amounts are so
deducted and withheld, such deducted and withheld amounts shall be treated for
all purposes of this Agreement as having been paid to such holders in respect of
which such deduction and withholding was made.
(j) Restrictive Legends; Stop Transfer Instructions. Each certificate
-----------------------------------------------
representing shares of Parent Common Stock issued pursuant to this Article III
shall bear a legend substantially in the form set forth below, which legend
shall be removed by delivery of substitute certificates upon the second
anniversary of the Effective Time or upon (i) the earlier sale of such shares of
Parent Common Stock (A) pursuant to an effective registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), or (B) in
conformity with the provisions of Rule 144 promulgated under the Securities Act
or (ii) the receipt by Parent (or its transfer agent) of an opinion in form and
substance reasonably satisfactory to Parent (or its transfer agent) from counsel
reasonably satisfactory to Parent (or its transfer agent) to the effect that
such legend is no longer required for purposes of the Securities Act.
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE
HOLDER OF SUCH SHARES MAY SELL, TRANSFER OR OTHERWISE DISPOSE OF SUCH
SHARES ONLY PURSUANT TO (1) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR (2) A VALID EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT."
Parent may instruct its transfer agent to stop the transfer of any shares of
Parent Common Stock issued pursuant to this Article III unless Parent (or its
transfer agent) shall have been provided evidence of compliance with the
restrictions set forth in such legend reasonably satisfactory to Parent (or its
transfer agent).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of Company. Company
-----------------------------------------
represents and warrants to Parent and Merger Sub, subject to the exceptions
specifically disclosed in writing in
8
<PAGE>
the Disclosure Schedule (as hereinafter defined) in a manner that identifies
with particularity the representations and warranties to which such exceptions
apply, as follows:
(a) Organization, Standing and Corporate Power. Each of Company and
------------------------------------------
each Subsidiary of Company is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it is incorporated
and has the requisite corporate power and authority to carry on its business as
now being conducted. Each of Company and each Subsidiary of Company is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect (as hereinafter defined) on Company. Company has delivered to
Parent true, complete and correct copies of the certificate of incorporation and
bylaws or comparable governing documents of Company and each Subsidiary of
Company organized under the laws of any jurisdiction in the United States of
America, in each case as amended to the date of this Agreement. A true, correct
and complete list of all Subsidiaries of Company, together with the jurisdiction
of incorporation of each such Subsidiary and the percentage of each such
Subsidiary's capital stock owned by Company or another Subsidiary, is set forth
in Section 4.1(a) of the Disclosure Schedule.
(b) Authority; Noncontravention. Company has the requisite corporate
---------------------------
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Company and the consummation by Company of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Company, subject, in the case of the Merger, to the adoption of this
Agreement by its stockholders as contemplated by Section 6.3. This Agreement has
been duly executed and delivered by Company and, assuming that this Agreement
constitutes a valid and binding obligation of Parent and Merger Sub, constitutes
a valid and binding obligation of Company, enforceable against Company in
accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and to general principles of equity.
Except as specified in Section 4.1(b) of the Disclosure Schedule, the execution
and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby and compliance with the provisions hereof will
not, (i) conflict with any of the provisions of the certificate of incorporation
or bylaws of Company or the comparable governing documents of any Subsidiary of
Company, in each case as amended to the date of this Agreement, (ii) subject to
compliance with the governmental filing and other requirements referred to in
Section 4.1(c), conflict with, result in a breach of or default (with or without
notice or lapse of time, or both) under, or give rise to a material obligation,
a right of termination, cancellation or acceleration of any obligation or a loss
of a material benefit under, or require the consent of any person under, any
indenture or other agreement, permit, concession, franchise, license or similar
instrument or undertaking to which Company or any of its Subsidiaries is a party
or by which Company or any of its Subsidiaries or any of their respective assets
is bound or affected, or (iii) subject to compliance with the governmental
filing and other requirements referred to in Section 4.1(c), contravene any
domestic or foreign law, rule or regulation or any order, writ, judgment,
injunction, decree, determination or award currently in effect, which, in the
case of clauses (ii) and
9
<PAGE>
(iii) above could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Company.
(c) Consents and Approvals. No consent, approval or authorization of,
----------------------
or declaration or filing with, or notice to, any domestic or foreign
governmental agency or regulatory authority (a "Governmental Entity") which has
not been received or made is required by or with respect to Company or any of
its Subsidiaries in connection with the execution and delivery of this Agreement
by Company or the consummation by Company of the transactions contemplated
hereby, except for (i) the filing of premerger notification and report forms
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), with respect to the Merger, (ii) the filing of the Delaware
Certificate of Merger with the Delaware State Secretary and the filing of the
Georgia Certificate of Merger with the Georgia State Secretary, and appropriate
documents with the relevant authorities of other states in which Company is
qualified to do business, (iii) such other consents, approvals, authorizations,
filings or notices as are specified in Section 4.1(c) of the Disclosure
Schedule, and (iv) any other consents, approvals, authorizations, filings or
notices the failure of which to be made or obtained could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Company.
(d) Capital Structure. The authorized capital stock of Company
-----------------
consists solely of (i) 25,000,000 Common Shares, (ii) 3,687,750 Series A
Preferred Shares, (iii) 3,618,269 Series D Preferred Shares, and (iv) 1,666,667
Series E Preferred Shares. At the close of business on the date hereof: (i)
6,934,597 Common Shares were issued and outstanding, (ii) 2,687,750 Series A
Preferred Shares were issued and outstanding, (iii) 3,618,269 Series D Preferred
Shares were issued and outstanding, (iv) 1,666,667 Series E Preferred Shares
were issued and outstanding, (v) 2,615,111 Common Shares were reserved for
issuance pursuant to outstanding Options granted under the Stock Option Plans,
(vi) 7,972,686 Common Shares were reserved for issuance upon conversion of
Preferred Shares, and (vii) 25,744 Common Shares were held by Company in its
treasury. Except as set forth in the immediately preceding sentence, at the
close of business on the date hereof, no shares of capital stock or other equity
securities of Company were issued, reserved for issuance or outstanding. All
outstanding shares of capital stock of Company are duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights, and
each Preferred Share is convertible into one Common Share (except that each
Series D Preferred Share is convertible in certain circumstances into one Common
Share and cash in the amount of (or, at the election of Company, equity
securities of Company having an agreed upon or appraised market value of)
$3.35). Except as specified above or in Section 4.1(d) of the Disclosure
Schedule or as contemplated by this Agreement or the Stockholder Agreements,
neither Company nor any Subsidiary of Company has or is subject to or bound by
or, at or after the Effective Time will have or be subject to or bound by, any
outstanding option, warrant, call, subscription or other right (including any
preemptive right), agreement or commitment which (i) obligates Company or any
Subsidiary of Company to issue, sell or transfer, or repurchase, redeem or
otherwise acquire, any shares of the capital stock of Company or any Subsidiary
of Company, (ii) restricts the transfer of any shares of capital stock of
Company or any of its Subsidiaries, or (iii) relates to the voting of any shares
of capital stock of Company or any of its Subsidiaries. No bonds, debentures,
notes or other indebtedness of Company or any Subsidiary of Company having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which the stockholders of Company or any
Subsidiary of
10
<PAGE>
Company may vote are issued or outstanding. Except as specified in Section
4.1(d) of the Disclosure Schedule, all of the outstanding shares of capital
stock of each Subsidiary of Company have been duly authorized, validly issued,
fully paid and nonassessable and (except for directors' qualifying shares) are
owned by Company, by one or more Subsidiaries of Company or by Company and one
or more such Subsidiaries, free and clear of Liens (as hereinafter defined).
(e) Financial Statements. Section 4.1(e) of the Disclosure Schedule
--------------------
sets forth true, correct and complete copies of (i) the unaudited consolidated
balance sheet of Company and its Subsidiaries as of December 31, 1997, and the
related consolidated statements of income and cash flow for the fiscal year
ended December 31, 1997, together with the notes thereto (collectively, the
"1997 Financial Statements"), (ii) the audited consolidated balance sheet of
Company and its Subsidiaries as of December 31, 1996, and the related
consolidated statements of income and cash flow for the fiscal years ended
December 31, 1995 and December 31, 1996, together with the notes thereto and the
report of Arthur Andersen LLP thereon (collectively, the "Audited Financial
Statements"), and (iii) the unaudited consolidated balance sheet of Company and
its Subsidiaries as of March 31, 1998, and the related consolidated statements
of income and cash flow for the three months ended March 31, 1997 and March 31,
1998 (collectively, the "Interim Financial Statements" and, together with the
1997 Financial Statements and the Audited Financial Statements, the "Financial
Statements"). The Financial Statements have been prepared in accordance with
generally accepted accounting principles (except, in the case of the Interim
Financial Statements, as permitted by Form 10-Q of the Securities and Exchange
Commission (the "SEC")), applied on a consistent basis during the periods
involved (except as may otherwise be indicated in the notes thereto) and fairly
present the consolidated financial position of Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
the Interim Financial Statements, to normal year-end audit adjustments which
were not and are not expected to be material in amount).
(f) Absence of Certain Changes or Events; No Undisclosed Material
-------------------------------------------------------------
Liabilities.
- -----------
(i) Except as specified in Section 4.1(f) of the Disclosure
Schedule, since December 31, 1997, Company and its Subsidiaries have conducted
their businesses only in the ordinary course consistent with past practice, and
there has not been: (A) any change, event or occurrence on or prior to the date
hereof which has had or could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Company; (B) any declaration,
setting aside or payment of any dividend or other distribution in respect of
shares of Company's capital stock, or any redemption or other acquisition by
Company of any shares of its capital stock; (C) any increase in the rate or
terms of compensation payable or to become payable by Company or its
Subsidiaries to their directors, officers or key employees, except increases
occurring in the ordinary course of business consistent with past practice; (D)
any entry into, or increase in the rate or terms of, any bonus, insurance,
severance, pension or other employee or retiree benefit plan, payment or
arrangement made to, for or with any such directors, officers or key employees,
except increases occurring in the ordinary course of business consistent with
past practices or as required by applicable law; (E) any entry into any
agreement, commitment or transaction by Company or any of its Subsidiaries which
is material to Company and its
11
<PAGE>
Subsidiaries taken as a whole, except for agreements, commitments or
transactions entered into in the ordinary course of business consistent with
past practice; (F) any change by Company in accounting methods, principles or
practices, except as required or permitted by generally accepted accounting
principles; (G) any write-off or write-down of, or any determination to write-
off or write-down, any asset of Company or any of its Subsidiaries or any
portion thereof which write-off, write-down or determination exceeds $50,000
individually or $250,000 in the aggregate; (H) any announcement or
implementation of any reduction in force, lay-off, early retirement program,
severance program or other program or effort concerning the termination of
employment of employees of Company or its Subsidiaries; or (I) any announcement
of or entry into any agreement, commitment or transaction by Company or any of
its Subsidiaries to do any of the things described in the preceding clauses (C)
through (H) outside of the ordinary course of their respective businesses
otherwise than as expressly provided for herein.
(ii) Except as reflected in the Financial Statements or specified
in Section 4.1(f) of the Disclosure Schedule, and liabilities incurred in the
ordinary course of business consistent with past practice since March 31, 1998,
there are no liabilities of Company or its Subsidiaries of any kind whatsoever,
whether accrued, contingent, absolute, due, to become due, determined,
determinable or otherwise, having or which could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company.
(g) Certain Information; Characteristics of Holders of Shares. None
---------------------------------------------------------
of the information (including the Financial Statements) supplied or to be
supplied by Company specifically for inclusion or incorporation by reference in,
or which may be deemed to be in incorporated by reference in, the Proxy
Statement/Offering Memorandum referred to in Section 6.1 will, at the time it is
mailed to the stockholders of Company and at the time of the Stockholders
Meeting referred to in Section 6.3, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. To the knowledge of Company as
described in Section 4.1(g) of the Disclosure Schedule, (i) there are no more
than 35 holders of Shares who are not accredited investors, (ii) each holder of
Shares that is not an accredited investor, either alone or with its purchaser
representative, has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the prospective
investment in Parent Common Stock pursuant to the transactions contemplated
hereby, and (iii) each holder of Shares will be acquiring Parent Common Stock
pursuant to the transactions contemplated hereby for its own account.
(h) Real Property; Other Assets. (i) Neither Company nor any of its
---------------------------
Subsidiaries owns any real property in fee.
(ii) Company or one of its Subsidiaries has good and valid title
to each asset reflected in the latest balance sheet of Company included in the
Financial Statements (other than any such other asset disposed of or consumed in
the ordinary course of business or as specified in Section 4.1(h)(ii) of the
Disclosure Schedule) free and clear of all Liens except (A) those reflected or
reserved against in the latest balance sheet of Company included in the
Financial Statements, (B) taxes and general and special assessments not in
default and payable
12
<PAGE>
without penalty and interest, and (C) other Liens that individually or in the
aggregate would not have a Material Adverse Effect on Company.
(iii) Company has heretofore made available to Parent true,
correct and complete copies (in the case of instruments relating to Company's
facilities in Larkspur, California, Irving, Texas and Islington and Hammersmith,
England or accurate summaries of the material terms (in all other cases) of all
leases, subleases and other agreements (the "Real Property Leases") under which
Company or any of its Subsidiaries uses or occupies or has the right to use or
occupy, now or in the future, any real property or facility (the "Leased Real
Property"), including all modifications, amendments and supplements thereto.
Except in each case where the failure could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company: (A)
Company or one of its Subsidiaries has a valid and subsisting leasehold interest
in each parcel of Leased Real Property free and clear of all Liens and each Real
Property Lease is in full force and effect, (B) all rent and other sums and
charges payable by Company or its Subsidiaries as tenants thereunder are current
in all material respects, (C) no termination event or condition or uncured
default of a material nature on the part of Company or any such Subsidiary or,
to Company's knowledge, the landlord, exists under any Real Property Lease, and
(D) Company or one of its Subsidiaries is the sole undisputed lessee of each
Leased Real Property, is in actual possession thereof and is entitled to quiet
enjoyment thereof in accordance with the terms of the applicable Real Property
Lease.
(i) Software.
--------
(i) Section 4.1(i)(i) of the Disclosure Schedule sets forth under
the caption "Owned Software" a true, correct and complete list of all computer
programs (source code or object code) owned by Company or any Subsidiary of
Company, including without limitation any computer programs in the development
or testing phase (collectively, the "Owned Software"), and Section 4.1(i)(i) of
the Disclosure Schedule sets forth under the caption "Licensed Software" a true,
correct and complete list of all computer programs (source code or object code)
licensed to Company or any Subsidiary of Company by another person (other than
any off-the-shelf computer program that is so licensed under a shrink wrap
license and any computer program that is used by Company and its Subsidiaries
primarily for financial, accounting, administrative or other non-technical
applications and is not otherwise material to Company and its Subsidiaries
(collectively, the "Excluded Software")) (collectively, the "Licensed Software"
and, together with the Owned Software, the "Software").
(ii) Except as specified in Section 4.1(i)(ii) of the Disclosure
Schedule, Company, directly or through its Subsidiaries, has good, marketable
and exclusive title to, and the valid and enforceable power and unqualified
right to sell, license, lease, transfer, use or otherwise exploit, all existing
versions and releases of the Owned Software and all copyrights thereof, free and
clear of all Liens. Except as specified in Section 4.1(i)(ii) of the Disclosure
Schedule, Company, directly or through its Subsidiaries, is in actual possession
of the source code and object code for each computer program included in the
Owned Software, and Company, directly or through its Subsidiaries, is in
possession of all other documentation (including without limitation all related
engineering specifications, program flow charts, installation and user manuals,
if any) required for the use of the Software as currently used in Company's
business or
13
<PAGE>
as offered or represented to Company's customers or potential customers.
Company, directly or through its Subsidiaries, is in actual possession of the
object code and user manuals, if any, for each computer program included in the
Licensed Software. The Software, together with the Excluded Software,
constitutes all of the computer programs reasonably necessary to conduct
Company's business as now conducted, and includes all of the computer programs
used in the development, marketing, licensing, sale or support of the products
and the services presently offered by Company. Except as specified in Section
4.1(i)(ii) of the Disclosure Schedule, no person other than Company and its
Subsidiaries has any right or interest of any kind or nature in or with respect
to the Owned Software or any portion thereof or any rights to sell, license,
lease, transfer, use or otherwise exploit the Owned Software or any portion
thereof.
(iii) Section 4.1(i)(iii) of the Disclosure Schedule sets forth a
true, correct and complete list, by computer program, of (A) all persons other
than Company and its Subsidiaries that have been provided with the source code
or have a right to be provided with the source code (including any such right
that may arise after the occurrence of any specified event or circumstance,
either with or without the giving of notice or passage of time or both) for any
of the Owned Software, and (B) all source code escrow agreements relating to any
of the Owned Software (setting forth as to any such escrow agreement the source
code subject thereto and the names of the escrow agent and all other persons who
are actual or potential beneficiaries of such escrow agreement), and identifies
with specificity all agreements and arrangements pursuant to which the
execution, delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby would entitle any third party or parties to
receive possession of the source code for any of the Owned Software or any
related technical documentation. Except as specified in Section 4.1(i)(iii) of
the Disclosure Schedule, no person (other than Company and its Subsidiaries and
any person that is a party to a contract referred to in clause (v) of the first
sentence of Section 4.1(l) that restricts such person from disclosing any
information concerning such source code) is in possession of, or has or has had
access to, any source code for any computer program included in the Owned
Software.
(iv) Except as specified in Section 4.1(i)(iv) of the Disclosure
Schedule, there are no defects in any computer program included in the Software
that would adversely affect the functioning thereof in accordance with any
published specifications therefor or which would cause the Software to fail to
be Year 2000 compliant which, as to being Year 2000 compliant, means that all of
the Software has the following properties and capabilities: (A) the capability
to correctly recognize and accurately process dates expressed as a four-digit
number (or the binary equivalent or other machine readable iteration thereof)
(collectively, the "Four-Digit Dates"); (B) the capability to accurately execute
calculations using Four-Digit Dates; (C) the functionality (both on-line and
batch), including entry, inquiry, maintenance and update, to support processing
involving Four-Digit Dates; (D) the capability to generate interfaces and
reports that support processing involving Four-Digit Dates; (E) the capability
to generate and successfully transition, without human intervention, into the
year 2000 using the correct system date and to thereafter continue processing
with Four-Digit Dates; and (F) the capability to provide correct results in
forward and backward data calculations spanning century boundaries, including
the conversion of pre-2000 dates currently stored as two-digit dates; provided,
however, that no representation or warranty is made as to the effect that
defects in computer programs, hardware or systems provided by third parties (or
the inability of any such programs, hardware or systems
14
<PAGE>
to properly exchange date data with the Software or to meet any of the
specifications described in this Section 4.1(i)(iv)) may, when used in
conjunction with the Software, have on the foregoing capabilities. Each computer
program included in the Software is in machine readable form. Section 4.1(i)(iv)
of the Disclosure Schedule sets forth a true, correct and complete list of any
current developments or maintenance efforts with respect to the Owned Software,
including without limitation the development of new computer programs,
enhancements or revisions to existing computer programs included in the Owned
Software and software fixes in progress for any person to whom or to which
Company or a Subsidiary of Company has sold, licensed, leased, transferred or
otherwise furnished Software or related products or services.
(v) Except as specified in Section 4.1(i)(v) of the Disclosure
Schedule, none of the sale, license, lease, transfer, use, reproduction,
distribution, modification or other exploitation by Company, any Subsidiary of
Company or any of their respective successors or assigns of any version or
release of any computer program included in the Software obligates or will
obligate Company, any Subsidiary of Company or any of their respective
successors or assigns to pay any royalty, fee or other compensation to any other
person. All such royalties, fees and compensation payable by Company or any
Subsidiary of Company that have become due and payable (as determined without
giving effect to any grace period, forbearance or extension of time for such
payment) have been fully paid and discharged.
(vi) Except as specified in Section 4.1(i)(vi) of the Disclosure
Schedule, neither Company nor any of its Subsidiaries markets, or has marketed,
and none of them has supported or is obligated to support, any Licensed
Software.
(vii) Except as specified in Section 4.1(i)(vii) of the Disclosure
Schedule, no agreement, license or other arrangement pertaining to any of the
Software (including without limitation any development, distribution, marketing,
user or maintenance agreement, license or arrangement) to which Company or any
Subsidiary of Company is a party will terminate or become terminable by any
party thereto as a result of the execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated hereby.
(j) Intellectual Property.
---------------------
(i) Section 4.1(j)(i) of the Disclosure Schedule sets forth a
true, correct and complete list (including, to the extent applicable,
registration, application or file numbers) of all patents, copyrights,
trademarks, trade names, service marks and domain names owned by Company or any
Subsidiary of Company, and all registrations of or applications for registration
of any of the foregoing, including any additions thereto or extensions,
continuations, renewals or divisions thereof (setting forth the registration,
issue or serial number and a description of the same) (collectively, together
with all trade dress, trade secrets, processes, formulae, designs, know-how and
other intellectual property rights that are so owned, the "Owned Intellectual
Property"). Parent has heretofore been furnished with true, correct and complete
copies of each registration or application for registration covering any of the
Owned Intellectual Property which is registered with, or in respect of which any
application for registration has been filed with, any Governmental Entity.
15
<PAGE>
(ii) The Owned Intellectual Property, together with all patents,
copyrights, trademarks, tradenames, service marks, domain names, trade dress,
trade secrets, processes, formulae, designs, know-how and other intellectual
property rights held by Company or any Subsidiary of Company under a license or
similar arrangement (collectively, the "Licensed Intellectual Property" and,
together with the Owned Intellectual Property, the "Intellectual Property"),
includes all of the intellectual property rights owned or licensed by Company
and its Subsidiaries that are reasonably necessary to conduct Company's business
as it is now conducted, and includes all of the intellectual property rights
owned or licensed by Company and its Subsidiaries that are used in the
development, marketing, licensing or support of the Software. Except as
specified in Section 4.1(j)(ii) of the Disclosure Schedule, (A) Company,
directly or through its Subsidiaries, has good, marketable and exclusive title
to, and the valid and enforceable power and unqualified right to use, the Owned
Intellectual Property free and clear of all Liens and (B) no person or entity
other than Company and its Subsidiaries has any right or interest of any kind or
nature in or with respect to the Owned Intellectual Property or any portion
thereof or any rights to use, market or exploit the Owned Intellectual Property
or any portion thereof.
(k) No Infringement. Except as specified in Section 4.1(k) of the
---------------
Disclosure Schedule, neither the existence nor the sale, license, lease,
transfer, use, reproduction, distribution, modification or other exploitation by
Company, any Subsidiary of Company or any of their respective successors or
assigns of any Software or Intellectual Property, as such Software or
Intellectual Property, as the case may be, is or was sold, licensed, leased,
transferred, used or otherwise exploited by such persons, does or did (i)
infringe on any patent, trademark, copyright or other right of any other person
or (ii) constitute a misuse or misappropriation of any trade secret, know-how,
process, proprietary information or other right of any other person. Except as
specified in Section 4.1(k) of the Disclosure Schedule, neither Company nor any
of its Subsidiaries has received any complaint, assertion, threat or allegation
or otherwise has notice of any lawsuit, claim, demand, proceeding or
investigation involving matters of the type contemplated by the immediately
preceding sentence or is aware of any facts or circumstances that could
reasonably be expected to give rise to any such lawsuit, claim, demand,
proceeding or investigation. Except as specified in Section 4.1(k) of the
Disclosure Schedule, there are no restrictions on the ability of Company, any
Subsidiary of Company or any of their respective successors or assigns to sell,
license, lease, transfer, use, reproduce, distribute, modify or otherwise
exploit any Software, any Owned Intellectual Property or any Licensed
Intellectual Property that relates to any of the Software.
(l) Material Contracts. With the exception of Software License
------------------
Contracts (as hereinafter defined) that do not satisfy the criteria of either
(i) providing for initial license fees greater than $200,000 or (ii) having been
entered into within five years prior to the date hereof and providing for
initial licenses fees greater than $100,000, and of which true, correct and
complete copies were not made available to Parent and its representatives
(collectively, the "Undelivered Software License Contracts"), there have been
furnished or made available to Parent and its representatives true, correct and
complete copies of all of the following contracts to which Company or any of its
Subsidiaries is a party or by which any of them is bound (collectively, the
"Material Contracts"): (i) contracts with any current officer or director of
Company or any of its Subsidiaries; (ii) contracts pursuant to which Company or
any of its Subsidiaries licenses other persons to use the Software or pursuant
to which other persons license Company or any of its
16
<PAGE>
Subsidiaries to use the Licensed Software, and which, in either such case,
provide for initial license fees greater than $60,000 (collectively, "Software
License Contracts"); (iii) contracts (A) for the sale of any of the assets of
Company or any of its Subsidiaries, other than contracts entered into in the
ordinary course of business or (B) for the grant to any person of any
preferential rights to purchase any of its assets; (iv) contracts which restrict
Company or any of its Subsidiaries from competing in any line of business or
with any person in any geographical area or which restrict any other person from
competing with Company or any of its Subsidiaries in any line of business or in
any geographical area; (v) contracts which restrict Company or any of its
Subsidiaries from disclosing any information concerning or obtained from any
other person or which restrict any other person from disclosing any information
concerning or obtained from Company or any of its Subsidiaries; (vi) indentures,
credit agreements, security agreements, mortgages, guarantees, promissory notes
and other contracts relating to the borrowing of money; (vii) contracts
providing for the provision of professional services by Company or any of its
Subsidiaries on a fixed-fee basis; (viii) contracts pursuant to which Company or
any of its Subsidiaries has granted to any other person the right to distribute,
resell or hold on consignment any products ("Distributor Agreements"); and (ix)
all other agreements, contracts or instruments entered into outside of the
ordinary course of business and which are material to Company. Except as
specified in Section 4.1(l) of the Disclosure Schedule, all of the Material
Contracts that are material to Company and its Subsidiaries are in full force
and effect and are the legal, valid and binding obligation of Company and/or its
Subsidiaries, enforceable against them in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally and subject,
as to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity). Except as specified
in Section 4.1(l) of the Disclosure Schedule, neither Company nor any of its
Subsidiaries is in breach or default in any material respect under any Material
Contract nor, to the knowledge of Company, is any other party to any Material
Contract in breach or default thereunder in any material respect. Except as
specified in Section 4.1(l) of the Disclosure Schedule, none of the Distributor
Agreements grants to any person exclusive rights to distribute, resell or hold
on consignment any products in any geographic area. The Undelivered Software
License Contracts, in the aggregate, do not contain provisions that are
materially less favorable to Company and its Subsidiaries than the provisions
contained in the Software License Contracts that are not Undelivered Software
License Contracts and, in the case of Undelivered Software License Contracts
under which Company or any Subsidiary of Company is a licensor, are in
substantial conformity with the standard forms of end-user license agreements
used by Company and its Subsidiaries in the ordinary course of business. As
promptly as practicable after the date hereof, Company shall furnish or make
available to Parent and its representatives true, correct and complete copies of
all of the Undelivered Software License Contracts.
(m) Litigation, etc. As of the date hereof, except as specified in
---------------
Section 4.1(m) of the Disclosure Schedule, (i) there is no suit, claim, action,
proceeding (at law or in equity) or investigation pending or, to the knowledge
of Company, threatened against Company or any of its Subsidiaries before any
court or other Governmental Entity, and (ii) neither Company nor any of its
Subsidiaries is subject to any outstanding order, writ, judgement, injunction,
decree or arbitration order or award that, in any such case described in clauses
(i) and (ii), has had or could reasonably be expected to have, individually or
in the aggregate, a Material
17
<PAGE>
Adverse Effect on Company. As of the date hereof, there are no suits, claims,
actions, proceedings or investigations pending or, to the knowledge of Company,
threatened, seeking to prevent, hinder, modify or challenge the transactions
contemplated by this Agreement.
(n) Compliance with Applicable Laws. All federal, state, local and
-------------------------------
foreign governmental approvals, authorizations, certificates, filings,
franchises, licenses, notices, permits and rights ("Permits") necessary for each
of Company and its Subsidiaries to own, lease or operate its properties and
assets and to carry on its business as now conducted have been obtained or made,
and there has occurred no default under any such Permit, except for the lack of
Permits and for defaults under Permits which lack or default could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Company. Except as disclosed in Section 4.1(n) of the
Disclosure Schedule, Company and its Subsidiaries are in compliance with all
applicable statutes, laws, ordinances, rules, orders and regulations of any
Governmental Entity, except for non-compliance which could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Company.
(o) Environmental Laws. Except as specified in Section 4.1(o) of the
------------------
Disclosure Schedule and as could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company: (A)
neither Company nor any of its Subsidiaries has violated or is in violation of
any Environmental Law; (B) none of the Owned Real Property or Leased Real
Property (including without limitation soils and surface and ground waters) are
contaminated with any Hazardous Substance in quantities which require
investigation or remediation under Environmental Laws; (C) neither Company nor
any of its Subsidiaries is liable for any off-site contamination; (D) neither
Company nor any of its Subsidiaries has any liability or remediation obligation
under any Environmental Law; (E) no assets of Company or any of its Subsidiaries
are subject to pending or threatened Liens under any Environmental Law; (F)
Company and its Subsidiaries have all Permits required under any Environmental
Law ("Environmental Permits"); and (G) Company and its Subsidiaries are in
compliance with their respective Environmental Permits.
(p) Taxes. Except as specified in Section 4.1(p) of the Disclosure
-----
Schedule:
(i) Except where the failure to do so could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Company, each of Company and each Subsidiary of Company (and any affiliated or
unitary group of which any such person was a member) has (A) timely filed all
federal, state, local and foreign returns, declarations, reports, estimates,
information returns and statements ("Returns") required to be filed by or for it
in respect of any Taxes (as hereinafter defined) and has caused such Returns as
so filed to be true, correct and complete, (B) established reserves that are
reflected in Company's most recent financial statements included in the
Financial Statements and that as so reflected are adequate for the payment of
all Taxes not yet due and payable with respect to the results of operations of
Company and its Subsidiaries through the date hereof, and (C) timely withheld
and paid over to the proper taxing authorities all Taxes and other amounts
required to be so withheld and paid over. Each of Company and each Subsidiary of
Company (and any affiliated or unitary group of which any such person was a
member) has timely paid all Taxes that are shown as being due on the Returns
referred to in the immediately preceding sentence.
18
<PAGE>
(ii) (A) There has been no taxable period since 1991 for which a
Return of Company or any of its Subsidiaries has been examined by the Internal
Revenue Service (the "IRS"), (B) all examinations described in clause (A) have
been completed without the assertion of material deficiencies, and (C) except
for alleged deficiencies which have been finally and irrevocably resolved,
Company has not received formal or informal notification that any deficiency for
any Taxes, the amount of which could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company, has been
or will be proposed, asserted or assessed against Company or any of its
Subsidiaries by any federal, state, local or foreign taxing authority or court
with respect to any period.
(iii) Neither Company nor any of its Subsidiaries has (A) executed
or entered into with the IRS or any other taxing authority any agreement or
other document that continues in force and effect beyond the Effective Time and
that extends or has the effect of extending the period for assessments or
collection of any federal, state, local or foreign Taxes, (B) executed or
entered into with the IRS or any other taxing authority any closing agreement or
other similar agreement (nor has Company or any of its Subsidiaries received any
ruling, technical advice memorandum or similar determination) affecting the
determination of Taxes required to be shown on any Return not yet filed, or (C)
requested any extension of time to be granted to file after the Effective Time
any Return required by applicable law to be filed by it.
(iv) Neither Company nor any of its Subsidiaries has made an
election under Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply to any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Code) owned by Company or any of its
Subsidiaries. None of the assets of Company or any of its Subsidiaries is
required to be treated as being owned by any other person pursuant to the "safe
harbor" leasing provisions of Section 168(f)(8) of the Internal Revenue Code of
1954 as formerly in effect.
(v) Neither Company nor any of its Subsidiaries is a party to,
is bound by or has any obligation under any tax sharing agreement or similar
agreement or arrangement.
(vi) Company has not agreed to make, nor is it required to make,
any material adjustment under Section 481(a) of the Code by reason of a change
in accounting method or otherwise.
(vii) Neither Company nor any of its Subsidiaries is, or has
been, a United States Real Property Holding Corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
(viii) Except for the group of which Company is presently a
member, Company has never been a member of an affiliated group of corporations,
within the meaning of Section 1504 of the Code, other than as a common parent
corporation, and each of Company's Subsidiaries has never been a member of an
affiliated group of corporations, within the meaning of Section 1504 of the
Code, except where Company was the common parent of such affiliated group.
19
<PAGE>
(ix) Neither Company nor any Subsidiary is a party to any
agreement, contract, arrangement or plan that has resulted, or would result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code.
For purposes of this Agreement, "Taxes" shall mean all federal, state,
local, foreign income, property, sales, excise, employment, payroll, franchise,
withholding and other taxes, tariffs, charges, fees, levies, imposts, duties,
licenses or other assessments of every kind and description, together with any
interest and any penalties, additions to tax or additional amounts imposed by
any taxing authority.
(q) Benefit Plans. Section 4.1(q) of the Disclosure Schedule sets
-------------
forth a true, correct and complete list of all the employee benefit plans (as
that phrase is defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) maintained or contributed to (or to
which Company or any of its Subsidiaries has any obligation to contribute) for
the benefit of any current or former employee, officer or director of the
Company or any of its Subsidiaries ("Company ERISA Plans") and any other
material benefit or compensation plan, program or arrangement maintained or
contributed to (or to which Company or any of its Subsidiaries has any
obligation to contribute funds or assets that on an annual basis exceed $50,000)
for the benefit of any current or former employee, officer or director of the
Company or any of its Subsidiaries (Company ERISA Plans and such other plans
being referred to as "Company Plans"). Company has furnished or made available
to Parent and its representatives a true, correct and complete copy of every
document pursuant to which each Company Plan (other than Company Plans that are
solely for the benefit of non-U.S. current or former employees of Company or any
of its Subsidiaries ("Non-U.S. Company Plans")) is established or operated
(including any summary plan descriptions), a written description of any Company
Plan (other than Non-U.S. Company Plans) for which there is no written document,
and the three most recent annual reports, financial statements and actuarial
valuations (if any) with respect to each Company Plan (other than Non-U.S.
Company Plans). Except as specified in Section 4.1(q) of the Disclosure
Schedule:
(i) none of the Company ERISA Plans is a "multiemployer plan"
within the meaning of ERISA;
(ii) none of the Company Plans promises or provides retiree
health benefits or retiree life insurance benefits to any person;
(iii) none of the Company Plans provides for payment of a benefit,
the increase of a benefit amount, the payment of a contingent benefit or the
acceleration of the payment or vesting of a benefit by reason of the execution
of this Agreement or the consummation of the transactions contemplated by this
Agreement;
(iv) neither Company nor any of its Subsidiaries has an
obligation to adopt, or is considering the adoption of, any new benefit or
compensation plan, program or arrangement or, except as required by law, the
amendment of an existing Company Plan;
20
<PAGE>
(v) each Company ERISA Plan intended to be qualified under Section
401(a) of the Code has either received a favorable determination opinion,
notification or advisory letter from the IRS that it is so qualified, or has
remaining a period of time under applicable Treasury Regulations or IRS
pronouncements in which to apply for such a letter and make any amendments
necessary to obtain a favorable determination as to the qualified status of each
such Company ERISA Plan, and nothing has occurred since the date of such letter
that could reasonably be expected to affect the qualified status of such Company
ERISA Plan;
(vi) each Company Plan has been operated in accordance with its
terms and the requirements of all applicable law, and no prohibited transaction
described in Section 406 of ERISA or Section 4975 of the Code has occurred with
respect to any Company ERISA Plan;
(vii) neither Company nor any of its Subsidiaries or members of
their "controlled group" has incurred any direct or indirect liability under
ERISA or the Code in connection with the termination of, withdrawal from or
failure to fund, any Company ERISA Plan or other retirement plan or arrangement,
and no fact or event exists that could reasonably be expected to give rise to
any such liability;
(viii) there are no Company ERISA Plans that are subject to
Title IV of ERISA;
(ix) Company is not aware of any claims relating to the
Company Plans, other than routine claims for benefits;
(x) none of the Company Plans provides for benefits or other
participation therein, and Company has received no claims or demands for
participation in or benefits under any Company Plan, by any individual
classified or treated by the Company as an independent contractor; and
(xi) the Non-U.S. Company Plans, in the aggregate, do not provide
benefits or otherwise result in costs or expenses to Company and its
Subsidiaries that are greater than the benefits that would be provided or the
cash or expenses that would be incurred, respectively, by Company and its
Subsidiaries if each of the Non-U.S. Company Plans provided only such benefits
as are required by law or typically provided under local practice in the
jurisdictions in which the participants therein are or were employed by Company
or any of its Subsidiaries,
provided, however, that the failure of the representations set forth in clauses
(v), (vi), (vii), (ix), (x) and (xi) to be true and correct shall not be deemed
to be a breach of any such representation unless such failures could reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on Company. As promptly as practicable after the date hereof, Company shall
furnish or make available to Parent and its representatives a true, correct and
complete copy of each document pursuant to which each Non-U.S. Company Plan is
established or operated (including any summary plan descriptions), a written
description of any Non-U.S. Company Plan for which there is no written document,
and the three most recent annual reports, financial statements and actuarial
valuations (if any) with respect to each Non-U.S. Company Plan.
21
<PAGE>
(r) Absence of Changes in Benefit Plans. Except as disclosed in
-----------------------------------
Section 4.1(r) of the Disclosure Schedule, since December 31, 1997, neither
Company nor any of its Subsidiaries has adopted or agreed to adopt any
collective bargaining agreement or any Company Plan.
(s) Labor Matters.
-------------
(i) Except as specified in Section 4.1(s)(i) of the Disclosure
Schedule, neither Company nor any of its Subsidiaries is a party to any
employment, labor or collective bargaining agreement, and there are no
employment, labor or collective bargaining agreements which pertain to employees
of Company or any of its Subsidiaries. Company has heretofore made available to
Parent true, complete and correct copies of the agreements set forth in Section
4.1(s)(i) of the Disclosure Schedule, together with all amendments,
modifications, supplements or side letters affecting the duties, rights and
obligations of any party thereunder.
(ii) No employees of Company or any of its Subsidiaries are
represented by any labor organization and, to the knowledge of Company, no labor
organization or group of employees of Company or any of its Subsidiaries has
made a pending demand for recognition or certification. There are no
representation or certification proceedings or petitions seeking a
representation proceeding presently pending or threatened in writing to be
brought or filed with the National Labor Relations Board or any other labor
relations tribunal or authority and, to the knowledge of Company, there are no
organizing activities involving Company or any of its Subsidiaries pending with
any labor organization or group of employees of Company or any of its
Subsidiaries.
(iii) Except as specified in Section 4.1(s)(iii) of the Disclosure
Schedule, there are no (A) unfair labor practice charges, grievances or
complaints pending or threatened in writing by or on behalf of any employee or
group of employees of Company or any of its Subsidiaries, or (B) complaints,
charges or claims against Company or any of its Subsidiaries pending, or
threatened in writing to be brought or filed, with any Governmental Entity or
arbitrator based on, arising out of, in connection with, or otherwise relating
to the employment or termination of employment of any individual by Company or
any of its Subsidiaries.
(t) Tax and Accounting Matters. Neither Company nor any of its
---------------------------
affiliates has taken or agreed to take any action, and Company is not aware of
any circumstances relating to Company or its affiliates, that (i) would prevent
the Merger from being accounted for as a pooling of interests or (ii) would
prevent the Merger from constituting a reorganization within the meaning of
Section 368(a) of the Code.
(u) Brokers. No broker, investment banker, financial advisor or other
-------
person, other than Broadview Associates, LLC ("Broadview"), the fees and
expenses of which will be paid by Company, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by or on
behalf of Company.
(v) Intentionally Omitted.
---------------------
22
<PAGE>
(w) Voting Requirements. The affirmative votes of each of (i) the
-------------------
holders of a majority of the voting power represented by the outstanding Shares
entitled to vote at the Stockholders Meeting referred to in Section 6.3 with
respect to the adoption of this Agreement, taken as a whole, (ii) the holders of
a majority of the voting power represented by the outstanding Common Shares
entitled to vote at the Stockholders Meeting referred to in Section 6.3 with
respect to the adoption of this Agreement, taken separately, (iii) the holders
of a majority of the voting power represented by the outstanding Series A
Preferred Shares and the outstanding Series D Preferred Shares entitled to vote
at the Stockholders Meeting referred to in Section 6.3 with respect to the
adoption of this Agreement, taken together, and (iv) the holders of a majority
of the voting power represented by the outstanding Series E Preferred Shares
entitled to vote at the Stockholders Meeting referred to in Section 6.3 with
respect to the adoption of this Agreement, taken separately, are the only votes
of the holders of any class or series of Company's capital stock or other
securities required in connection with the consummation by Company of the Merger
and the other transactions contemplated hereby to be consummated by Company.
The restrictions contained in Section 203 of the DGCL are not applicable to the
transactions contemplated hereby, including the transactions contemplated by the
Stockholder Agreement.
(x) Disclosure. None of (i) the information contained in the
----------
Disclosure Schedule (other than Section 4.2 thereof), (ii) any other written
information furnished to Parent by Company (as to which the representation and
warranty set forth in this Section 4.1(x)(ii) is made only to Company's
knowledge), or (iii) the representations and warranties of Company contained in
this Section 4.1, contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not false or
misleading; provided, however, that any financial projections furnished by
Company represent only Company's good faith estimate of what it reasonably
believed as of the date such projections were prepared, and are based upon
assumptions that appeared reasonable at the time such projections were prepared.
Company does not make any other representation or warranty regarding any such
projections other than as set forth in this Section 4.1(x).
Section 4.2 Representations and Warranties of Parent and Merger Sub.
-------------------------------------------------------
Parent and Merger Sub represent and warrant to Company, subject to the
exceptions specifically disclosed in writing in the Disclosure Schedule in a
manner that identifies with particularity the representations and warranties to
which such exceptions apply, as follows:
(a) Organization, Standing and Corporate Power. Each of Parent and
------------------------------------------
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated and has
the requisite corporate power and authority to carry on its business as now
being conducted.
(b) Authority; Noncontravention. Parent and Merger Sub have the
---------------------------
requisite corporate power and authority to enter into this Agreement. The
execution and delivery of this Agreement by Parent and Merger Sub and the
consummation by Parent and Merger Sub of the transactions contemplated hereby
have been duly authorized by the Executive Committee of the Board of Directors
of Parent and the Board of Directors of Merger Sub and have been duly approved
by Parent as sole stockholder of Merger Sub, and no other corporate proceedings
on
23
<PAGE>
the part of Parent or Merger Sub are necessary to authorize this Agreement or
to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of Parent and Merger Sub and, assuming this
Agreement constitutes a valid and binding obligation of Company, constitutes a
valid and binding obligation of each of Parent and Merger Sub, enforceable
against each such party in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and to general
principals of equity. The execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated hereby and compliance with the
provisions of this Agreement will not (i) conflict with any of the provisions of
the certificate of incorporation or bylaws of Parent or the certificate of
incorporation or bylaws of Merger Sub, in each case as amended to the date of
this Agreement, (ii) subject to compliance with the governmental filing and
other requirements referred to in Section 4.2(c), conflict with, result in a
breach of or default (with or without notice or lapse of time, or both) under,
or give rise to a material obligation, a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under, or require
the consent of any person under, any indenture, or other agreement, permit,
concession, franchise, license or similar instrument or undertaking to which
Parent or Merger Sub is a party or by which Parent or Merger Sub or any of their
respective assets is bound or affected, or (iii) subject to compliance with the
governmental filing and other requirements referred to in Section 4.2(c),
contravene any law, rule or regulation, or any order, writ, judgment,
injunction, decree, determination or award currently in effect, which, in the
case of clauses (ii) and (iii) above, could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent.
(c) Consents and Approvals. No consent, approval or authorization of,
----------------------
or declaration or filing with, or notice to, any Governmental Entity which has
not been received or made is required by or with respect to Parent or Merger Sub
in connection with the execution and delivery of this Agreement by Parent or
Merger Sub or the consummation by Parent or Merger Sub, as the case may be, of
any of the transactions contemplated hereby, except for (i) the filing of
premerger notification and report forms under the HSR Act with respect to the
Merger, (ii) the filing with the SEC of such reports under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as may be required in
connection with this Agreement and the transactions contemplated hereby, (iii)
the filing of the Delaware Certificate of Merger with the Delaware State
Secretary and the filing of the Georgia Certificate of Merger with the Georgia
State Secretary, and appropriate documents with the relevant authorities of
other states in which Company is qualified to do business, and (iv) any other
consents, approvals, authorizations, filings or notices the failure of which to
be made or obtained could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Parent.
(d) Capital Structures. The authorized capital stock of Parent
-------------------
consists of (i) 125,000,000 shares of Parent Common Stock, and (ii) 10,000,000
shares of Preferred Stock, par value $0.10 per share, of which 1,250,000 shares
have been designated Series A Junior Participating Preferred Stock. At the
close of business on June 18, 1998, (i) 78,288,544 shares of Parent Common Stock
were issued and outstanding, (ii) 2,622,192 shares of Parent Common Stock were
held by Parent in its treasury, (iii) 17,247,196 shares of Parent Common Stock
were reserved for issuance pursuant to outstanding options to purchase shares of
Parent Common Stock granted under Parent's stock option plans, (iv) 3,500,000
shares of Parent Common Stock
24
<PAGE>
were reserved for issuance pursuant to Parent's employee stock purchase plan,
and (v) 1,250,000 shares of Series A Junior Participating Preferred Stock were
reserved for issuance pursuant to the Rights. Except as set forth in the
immediately preceding sentence and for the Rights accompanying the issued and
outstanding shares of Parent Common Stock referred to therein and to accompany
(subject to the provisions of the Rights Agreement) each share of Parent Common
Stock subsequently issued by Parent or delivered from Parent's treasury, at the
close of business on June 18, 1998, no shares of capital stock or other equity
securities of Parent were issued, reserved for issuance or outstanding. All
outstanding shares of capital stock of Parent are, and all shares of Parent
Common Stock which may be issued pursuant to this Agreement will be, when
issued, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. The authorized capital stock of Merger Sub
consists of (i) 10,000 shares of Merger Sub Common Stock and (ii) 1,000 shares
of Preferred Stock, $0.10 par value per share, of which 1,000 shares of Merger
Sub Common Stock have been validly issued, are fully paid and nonassessable, and
are owned by Parent. No bonds, debentures, notes or other indebtedness of Parent
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which the stockholders of Parent may
vote are issued or outstanding. Except as set forth above, Parent does not have
any outstanding option, warrant, subscription or other right, agreement or
commitment which (i) obligates Parent to issue, sell or transfer, repurchase,
redeem or otherwise acquire any shares of the capital stock of Parent, (ii)
restricts the transfer of Parent Common Stock or (iii) relates to the voting of
Parent Common Stock.
(e) SEC Documents. Parent has filed in a timely manner all required
--------------
reports, schedules, forms, statements and other documents with the SEC since
September 30, 1994 (such reports, schedules, forms, statements and other
documents are hereinafter referred to as the "Parent SEC Documents"). As of
their respective dates, the Parent SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such Parent SEC Documents, and none of the Parent SEC Documents as
of such dates contained any untrue statements of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements of Parent included
in the Parent SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited consolidated
quarterly statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may otherwise be
indicated in the notes thereto) and fairly present the consolidated financial
position of Parent and its consolidated Subsidiaries as of the dates thereof and
the consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited quarterly statements, to normal year-
end audit adjustments which were not and are not expected to be material in
amount).
(f) Absence of Certain Changes or Events. Except as disclosed in the
-------------------------------------
Parent SEC Documents filed and publicly available prior to the date of this
Agreement (the "Filed Parent SEC Documents"), since the date of the most recent
audited financial statements included in the Filed Parent SEC Documents, Parent
and its Subsidiaries have conducted their business only in
25
<PAGE>
the ordinary course consistent with past practice, and there has not been any
change, event or occurrence on or prior to the date hereof which has had or
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent.
(g) Certain Information. None of the information supplied or to be
-------------------
supplied by Parent or Merger Sub specifically for inclusion or incorporation by
reference in, or which may be deemed to be incorporated by reference in, the
Proxy Statement/Offering Memorandum referred to in Section 6.1 will, at the time
it is mailed to the stockholders of Company and at the time of the Stockholders
Meeting referred to in Section 6.3, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
(h) Brokers. No broker, investment banker, financial advisor or other
-------
person, other than BT Alex. Brown Incorporated, the fees and expenses of which
will be paid by Parent, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent or Merger Sub.
(i) Tax and Accounting Matters. Neither Parent nor Merger Sub has
--------------------------
taken or agreed to take any action, and Parent is not aware of any circumstances
relating to Parent or Merger Sub, that (i) would prevent the Merger from being
accounted for as a pooling of interests or (ii) would prevent the Merger from
constituting a reorganization within the meaning of Section 368(a) of the Code.
ARTICLE V
CONDUCT OF BUSINESS OF COMPANY
Section 5.1 Conduct of Business of Company. Except as expressly
------------------------------
provided for herein, during the period from the date of this Agreement to the
Effective Time, Company shall, and shall cause each of its Subsidiaries to, act
and carry on its business only in the ordinary course of business consistent
with past practice and, to the extent consistent therewith, use reasonable
efforts to preserve intact its current business organizations, keep available
the services of its current key officers and employees and preserve the goodwill
of those engaged in material business relationships with Company, and to that
end, without limiting the generality of the foregoing, Company shall not, and
shall not permit any of its Subsidiaries to, without the prior consent of
Parent:
(i) (A) declare, set aside or pay any dividends on, or make any
other distributions (whether in cash, securities or other property) in respect
of, any of its outstanding capital stock (other than, with respect to a
Subsidiary of Company, to its corporate parent), (B) split, combine or
reclassify any of its outstanding 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 outstanding capital stock, or (C) purchase, redeem or
otherwise acquire any shares of outstanding
26
<PAGE>
capital stock or any rights, warrants or options to acquire any such shares,
except, in the case of this clause (C), for the acquisition of Common Shares
from holders of Options in full or partial payment of the exercise price payable
by such holder upon exercise of Options;
(ii) issue, sell, grant, pledge or otherwise encumber any shares
of its capital stock, any other voting securities or any securities convertible
into or exchangeable for, or any rights, warrants or options to acquire, any
such shares, voting securities or convertible or exchangeable securities, other
than upon the exercise of Options outstanding on the date of this Agreement;
(iii) amend its certificate of incorporation, bylaws or other
comparable charter or organizational documents;
(iv) directly or indirectly acquire, make any investment in, or
make any capital contributions to, any person other than in the ordinary course
of business consistent with past practice;
(v) directly or indirectly sell, pledge or otherwise dispose of
or encumber any of its properties or assets that are material to its business,
except for sales, pledges or other dispositions or encumbrances in the ordinary
course of business consistent with past practice;
(vi) (A) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another person, other than indebtedness owing to or
guarantees of indebtedness owing to Company or any direct or indirect wholly
owned Subsidiary of Company or (B) make any loans or advances to any other
person, other than to Company or to any direct or indirect wholly owned
Subsidiary of Company and other than routine advances to employees consistent
with past practice, except, in the case of clause (A), for borrowings under
existing credit facilities described in the Financial Statements in the ordinary
course of business consistent with past practice;
(vii) grant or agree to grant to any officer, employee or
consultant any increase in wages or bonus, severance, profit sharing,
retirement, deferred compensation, insurance or other compensation or benefits,
or establish any new compensation or benefit plans or arrangements, or amend or
agree to amend any existing Company Plans, except as may be required under
existing agreements or by law and normal, regularly scheduled increases in
respect of non-officer employees consistent with past practices;
(viii) pay any bonuses to any officer, employee or consultant,
whether or not accrued, discretionary, objectively measured or otherwise;
(ix) enter into or amend any employment, consulting, severance
or similar agreement with any individual, except with respect to new hires of
non-officer employees in the ordinary course of business consistent with past
practice;
27
<PAGE>
(x) adopt or enter into a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
material reorganization or any agreement relating to an Acquisition Proposal (as
hereinafter defined);
(xi) make any tax election or settle or compromise any income tax
liability of Company or of any of its Subsidiaries, in either case involving on
an individual basis more than $50,000;
(xii) make any change in any method of accounting or accounting
practice or policy, except as required by any changes in generally accepted
accounting principles;
(xiii) enter into any agreement, understanding or commitment that
restrains, limits or impedes Company's ability to compete with or conduct any
business or line of business, except for any such agreement, understanding or
commitment entered into in the ordinary course of business consistent with past
practice;
(xiv) plan, announce, implement or effect any reduction in force,
lay-off, early retirement program, severance program or other program or effort
concerning the termination of employment of employees of Company or its
Subsidiaries;
(xv) accelerate the collection of any account receivable or delay
the payment of any account payable, or otherwise reduce the assets or increase
the liabilities of Company or any of its Subsidiaries otherwise than in the
ordinary course of business consistent with past practice, in any such case with
the purpose or effect of using the resulting increase in the cash flow of
Company or any of its Subsidiaries to reduce the total indebtedness of Company
and its Subsidiaries for money borrowed; or
(xvi) authorize any of, or commit or agree to take any of, the
foregoing actions in respect of which it is restricted by the provisions of this
Section 5.1.
ARTICLE VI
ADDITIONAL COVENANTS
Section 6.1 Preparation of the Proxy Statement/Offering Memorandum.
------------------------------------------------------
(a) As soon as practicable following the date hereof, Parent and
Company shall jointly prepare a combined proxy statement and offering memorandum
(the "Proxy Statement/Offering Memorandum") for use in connection with (i) the
solicitation on behalf of Company's Board of Directors of proxies from the
holders of Shares for use at the Stockholders Meeting referred to in Section 6.3
and (ii) the private offering to the holders of Shares of the shares of Parent
Common Stock to be issued pursuant to the Merger. The Proxy Statement/ Offering
Memorandum shall contain information substantially comparable to that which
would be required in a proxy statement/prospectus relating to the transactions
contemplated hereby prepared in compliance with the provisions of Form S-4
promulgated by the SEC under the
28
<PAGE>
Securities Act, together with any additional information contemplated by Rule
502(b) under the Securities Act to be provided in connection with offers and
sales of securities made under Regulation D of the Securities Act. Parent shall
cause an initial draft of the Proxy Statement/ Offering Memorandum to be
prepared and submitted to Company for its review, and Company shall furnish all
information concerning Company and its directors, officers and stockholders as
Parent may reasonably request in connection therewith. Each of Parent and
Company shall cooperate fully with each other and use their respective
reasonable best efforts (i) to cause the Proxy Statement/Offering Memorandum to
be prepared in accordance with the foregoing provisions of this Section 6.1 and
mailed to the stockholders of Company at the earliest practicable date and (ii)
to cause the solicitation of proxies and the private offering of shares of
Parent Common Stock contemplated by this Section 6.1 to be effected in
compliance with all applicable securities laws.
(b) Without limiting the generality or effect of the provisions of
Section 6.1(a), Parent shall take any action (other than qualifying to do
business in any jurisdiction in which it is not now so qualified) required to be
taken under any applicable state securities laws in connection with the private
offering of shares of Parent Common Stock contemplated by this Section 6.1, and
Company shall furnish all information concerning Company and its directors,
officers and stockholders as Parent may reasonably request in connection with
any such action.
(c) Without limiting the generality or effect of the provisions of
Section 6.1(a), Company shall use its reasonable best efforts to obtain from
each holder of Shares that is an accredited investor a representation letter in
the form attached as Exhibit A hereto (the "Accredited Investor Letter"), and to
obtain from each holder of Shares that is not an accredited investor a
representation letter in the form attached as Exhibit B hereto (the "Investor
Letter"), in each case prior to the Stockholders Meeting.
Section 6.2 Accountants' Letters.
--------------------
(a) Company shall use its best efforts to cause to be delivered to
Parent a letter of Arthur Andersen LLP, addressed to Company, dated as of the
Closing Date, setting forth the concurrence of Arthur Andersen LLP with the
conclusion of Company's management that the Merger will qualify as a pooling of
interests transaction under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations if consummated in accordance with this
Agreement.
(b) Parent shall use its best efforts to cause to be delivered to
Company a letter of Ernst & Young LLP, addressed to Parent, dated as of the
Closing Date, setting forth the concurrence of Ernst & Young LLP with the
conclusion of Parent's management that the Merger will qualify as a pooling of
interests transaction under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations if consummated in accordance with this
Agreement.
Section 6.3 Stockholders Meeting. Company shall take all action
--------------------
necessary, in accordance with the DGCL and other applicable law and its
certificate of incorporation and bylaws, to convene and hold a special meeting
of the stockholders of Company (the
29
<PAGE>
"Stockholders Meeting") as promptly as practicable after the date hereof for the
purpose of considering and voting upon this Agreement and to solicit proxies
pursuant to the Proxy Statement/Offering Memorandum in connection therewith.
Subject to the provisions of Section 6.7(b), the Board of Directors of Company
shall recommend that the holders of the Shares vote in favor of the adoption of
this Agreement at the Stockholders Meeting and shall cause such recommendation
to be included in the Proxy Statement/Offering Memorandum. At the Stockholders
Meeting, Parent and Merger Sub shall vote any Shares beneficially owned by them
(which may be voted by them pursuant to applicable law) in favor of the adoption
of this Agreement.
Section 6.4 Access to Information; Confidentiality. Each of Parent and
--------------------------------------
Company shall, and shall cause each of its Subsidiaries to, afford to the other
and its officers, employees, counsel, financial advisors and other
representatives access during the period prior to the Effective Time to all its
properties, books, contracts, commitments, Returns, personnel and records and,
during such period, each of Parent and Company shall, and shall cause each of
its Subsidiaries to, furnish as promptly as practicable to the other such
information concerning its business, properties, financial condition, operations
and personnel as the other may from time to time request. Any such
investigation by Parent or Company shall not affect the representations or
warranties contained in this Agreement. Except as required by law, Parent and
Company will hold, and will cause its directors, officers, employees,
accountants, counsel, financial advisors and other representatives and
affiliates to hold, any non-public information obtained from the other in
confidence to the extent required by, and in accordance with the provisions of,
the letter agreement, dated May 1, 1998, between Parent and Company with respect
to confidentiality and other matters.
Section 6.5 Reasonable Best Efforts. On the terms and subject to the
-----------------------
conditions set forth in this Agreement, each of the parties shall use its
reasonable best efforts to take, or cause to be taken, all actions, and do, or
cause to be done, and 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 Merger and the other transactions
contemplated hereby, including the satisfaction of the respective conditions set
forth in Article VII. Without limiting the generality or effect of the
foregoing, Company shall use its reasonable best efforts to cause the condition
set forth in Section 7.2(h) to be satisfied no later than June 26, 1998.
Section 6.6 Public Announcements. Parent and Merger Sub, on the one
--------------------
hand, and Company, on the other hand, shall consult with each other before
issuing, and provide each other the opportunity to review and comment upon, any
press release or other public statements with respect to the transactions
contemplated hereby, including the Merger, and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by applicable law, by court process or by obligations pursuant
to any listing agreement with any national securities exchange.
Section 6.7 No Solicitation; Acquisition Proposals.
--------------------------------------
(a) During the period from and including the date of this Agreement to
and including the Effective Time, Company shall not, and shall not authorize or
permit any of its
30
<PAGE>
Subsidiaries, or any of its or their affiliates, officers, directors, employees,
agents or represen tatives (including without limitation any investment banker,
financial advisor, attorney or accountant retained by Company or any of its
Subsidiaries), to, directly or indirectly, initiate, solicit or encourage
(including by way of furnishing information or assistance), or take any other
action to facilitate, any inquiries, any expression of interest or the making of
any proposal that constitutes, or may reasonably be expected to lead to, an
Acquisition Proposal, or enter into or maintain or continue discussions or
negotiate with any person in furtherance of such inquiries or to obtain an
Acquisition Proposal or agree to or endorse any Acquisition Proposal; provided,
however, that nothing in this Agreement shall prohibit the Board of Directors of
Company, prior to the time at which this Agreement shall have been adopted by
Company's stockholders, from furnishing information to, or entering into,
maintaining or continuing discussions or negotiations with, any person that
makes an unsolicited, bona fide written Acquisition Proposal after the date
hereof if, and to the extent that, the Board of Directors of Company, after
consultation with and based upon the advice of independent legal counsel,
determines in good faith that (i) such Acquisition Proposal would be more
favorable to Company's stockholders than the Merger, and (ii) the failure to
take such action would result in a breach by the Board of Directors of Company
of its fiduciary duties to Company's stockholders under applicable law, and,
prior to furnishing any non-public information to such person, Company receives
from such person an executed confidentiality agreement with provisions generally
comparable to the letter agreement relating to the furnishing of confidential
information of Company to Parent referred to in the last sentence of Section
6.4. Company shall promptly (and, in any event within 24 hours) notify Parent
after receipt of any Acquisition Proposal or any request for information
relating to Company or any of its Subsidiaries or for access to the properties,
books or records of Company or any of its Subsidiaries by any person who has
informed Company that such person is considering making, or has made, an
Acquisition Proposal (which notice shall identify the person making, or
considering making, such Acquisition Proposal and shall set forth, to the extent
then known, the material terms of any Acquisition Proposal received), and
Company shall keep Parent informed in reasonable detail of the terms, status and
other pertinent details of any such Acquisition Proposal.
(b) During the period from and including the date of this Agreement to
and including the Effective Time, neither the Board of Directors of Company nor
any committee thereof shall withdraw or modify, or propose publicly to withdraw
or modify, in a manner adverse to Parent or Merger Sub, the approval of this
Agreement or the transactions contemplated hereby or the recommendation referred
to in the penultimate sentence of Section 6.3; provided, however, that nothing
contained in this Agreement will prohibit the Board of Directors of Company from
withdrawing or modifying the recommendation referred to in the penultimate
sentence of Section 6.3 following the receipt by Company after the date hereof,
under circumstances not involving any breach of the provisions of Section
6.7(a), of an unsolicited Acquisition Proposal if, and to the extent that, the
Board of Directors of Company, after consultation with and based upon the advice
of independent legal counsel, determines in good faith that (i) the transactions
contemplated by such Acquisition Proposal would be more favorable to Company's
stockholders than the transactions contemplated hereby, and (ii) the failure to
take such action would result in a breach by the Board of Directors of Company
of its fiduciary duties to Company's stockholders under applicable law.
31
<PAGE>
(c) Nothing in this Section 6.7, and no action taken by the Board of
Directors of the Company pursuant to this Section 6.7, will (i) have any effect
on Company's obligations under the first sentence of Section 6.3, which
obligations shall be absolute and unconditional, (ii) permit Company to
terminate this Agreement, (iii) permit Company to enter into any agreement
providing for any transaction contemplated by an Acquisition Proposal for as
long as this Agreement remains in effect, or (iv) affect in any manner any other
obligation of Company under this Agreement.
(d) For purposes of this Agreement, "Acquisition Proposal" means an
inquiry, offer, proposal or other indication of interest regarding any of the
following (other than the transactions contemplated hereby with Parent or Merger
Sub) involving Company: (i) any merger, consolidation, share exchange, business
combination, change-in-control or other similar transaction; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition of all or
substantially all the assets of Company and its Subsidiaries, taken as a whole,
in a single trans action or series of related transactions; (iii) any tender
offer or exchange offer for 20% percent or more of the outstanding shares of
capital stock of Company or the filing of a registration state ment under the
Securities Act in connection therewith; or (iv) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing.
Section 6.8 Consents, Approvals and Filings. Upon the terms and subject
-------------------------------
to the conditions hereof, each of the parties hereto shall (a) make promptly its
respective filings, and thereafter make any other required submissions, under
the HSR Act and the Exchange Act, with respect to the Merger and the other
transactions contemplated hereby and (b) use its reasonable best efforts to
take, or cause to be taken, all appropriate action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the Merger and the other
transactions contemplated hereby, including without limitation using its
reasonable best efforts to obtain all licenses, permits, consents, approvals,
authorizations, qualifications and orders of Governmental Entities and parties
to contracts with Company and its Subsidiaries as are necessary for the
consummation of the Merger and the other transactions contemplated hereby and to
fulfill the conditions to the Merger; provided, however, that in no event shall
Parent or any of its Subsidiaries be required to agree or commit to divest, hold
separate, offer for sale, abandon, limit its operation of or take similar action
with respect to any assets (tangible or intangible) or any business interest of
it or any of its Subsidiaries (including without limitation the Surviving
Corporation after consummation of the Merger) in connection with or as a
condition to receiving the consent or approval of any Governmental Entity
(including without limitation under the HSR Act). In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of each party to
this Agreement shall use their reasonable best efforts to take all such action.
Section 6.9 Board Action Relating to Stock Option Plans. As soon as
-------------------------------------------
practicable following the date of this Agreement, the Board of Directors of
Company (or, if appropriate, any committee administering a Stock Option Plan)
shall adopt such resolutions and take such actions as may be required to cause
each outstanding Option to be automatically converted, at the Effective Time,
into a Substitute Option in accordance with Section 2.2 and shall make such
other
32
<PAGE>
changes to the Stock Option Plans as it deems appropriate to give effect to the
Merger (subject to the approval of Parent, which shall not be unreasonably
withheld).
Section 6.1 Employee Benefit Matters.
------------------------
(a) From and after the Effective Time, Parent shall, and shall cause
its Subsidiaries (including the Surviving Corporation) to, honor and provide for
payment of all accrued obligations and benefits under all Company Plans and
employment or severance agreements between Company and persons who are or had
been employees of Company or any of its Subsidiaries at or prior to the
Effective Time ("Covered Employees"), all in accordance with their respective
terms or the requirements of applicable law.
(b) From and after the Effective Time, Parent shall, and shall cause
its Subsidiaries (including the Surviving Corporation) to, provide Covered
Employees who remain in the employ of Parent or any such Subsidiary employee
benefits that are reasonably comparable to the employee benefits provided to
similarly situated employees of Parent or any such Subsidiary who are not
Covered Employees. To the extent that Covered Employees are included in any
benefit plan of Parent or its Subsidiaries, Parent agrees that the Covered
Employees shall receive credit under such plan (other than any such plan
providing for sabbaticals) for service prior to the Effective Time with Company
and its Subsidiaries to the same extent such service was counted under similar
Company Plans for purposes of eligibility, vesting, eligibility for retirement
(but not for benefit accrual) and, with respect to vacation, disability and
severance, benefit accrual. To the extent that Covered Employees are included
in any medical, dental or health plan other than the plan or plans they
participated in at the Effective Time, Parent agrees that any such plans shall
waive pre-existing condition exclusions, except to the extent such exclusions
were applicable under the similar Company Plan at the Effective Time, and shall
provide credit for any deductibles and co-payments applied or made with respect
to each Covered Employee in the calendar year of the change.
(c) Notwithstanding anything in this Agreement to the contrary, from
and after the Effective Time, the Surviving Corporation will have sole
discretion over the hiring, promotion, retention, firing and other terms and
conditions of the employment of employees of the Surviving Corporation. Except
as otherwise provided in this Section 6.10, nothing herein shall prevent Parent
or the Surviving Corporation from amending or terminating any Company Plan in
accordance with its terms.
Section 6.11 Affiliates and Certain Stockholders. Concurrently with the
-----------------------------------
execution and delivery of this Agreement, Company shall cause each person who is
an "affiliate" of Company for purposes of Rule 145 under the Securities Act to
deliver to Parent a written agreement substantially in the form attached as
Exhibit C hereto. Prior to or at the Closing, Parent shall cause each person
who is an "affiliate" of Parent for purposes of Rule 145 under the Securities
Act to deliver to Parent and Company a written agreement substantially in the
form attached as Exhibit D hereto.
33
<PAGE>
Section 6.12 NYSE Listing. Parent shall use its best efforts to cause
------------
the shares of Parent Common Stock to be issued in the Merger or upon the
exercise of Substitute Options to be approved for listing on the NYSE, subject
to official notice of issuance, prior to the Closing Date.
Section 6.13 Tax Treatment. Each of Company and Parent will use its best
-------------
efforts to cause the Merger to qualify as a reorganization under the provisions
of Section 368 of the Code. Neither Company nor Parent will voluntarily take any
action that would cause such qualification to be unattainable.
Section 6.14 Pooling of Interests. Each of Company and Parent shall use
--------------------
its best efforts to cause the Merger to be accounted for as a pooling of
interests under Opinion 16 of the Accounting Principles Board and applicable SEC
rules and regulations, and such accounting treatment to be accepted by each of
Company's and Parent's independent certified public accountants, and by the SEC.
Neither Company nor Parent shall voluntarily take any action that would cause
such accounting treatment to be unattainable.
Section 6.15 Registration of Parent Common Stock.
-----------------------------------
(a) On the terms and subject to the conditions set forth in this
Section 6.15, as promptly as practicable (and, in any event, within 30 calendar
days) after the Effective Time, Parent shall file, and shall thereafter use its
reasonable best efforts to cause to become and remain effective, for so long as
the shares of Parent Common Stock issued to any Holder (as hereinafter defined)
pursuant to Article III continue to be Registrable Securities (as hereinafter
defined), a registration statement registering for purposes of the Securities
Act the resale of all such Registrable Securities (the "Registration
Statement"). For so long as Parent is required to cause the Registration
Statement to remain effective, Parent shall use its reasonable best efforts to
cause the Parent Common Stock to be (x) registered or qualified (to the extent
not exempt from such registration or qualification) for sale under the blue sky
laws of such states as any Holder may reasonably request (provided that Parent
shall not be required to qualify to do business in, or consent to general
service of process in, any jurisdiction by reason thereof) and (y) listed on a
national securities exchange or accepted for quotation on the National
Association of Securities Dealers Automated Quotation System.
(b) The obligations of Parent hereunder to file the Registration
Statement and to maintain its effectiveness may be suspended for one or more
periods of time not exceeding 60 calendar days, and/or Parent shall be entitled
to provide to the Holders Suspension Notices pursuant to Section 6.15(e)(iv) to
be in effect for one or more periods of time not exceeding 60 calendar days, if
the Board of Directors of Parent (or the Executive Committee thereof) shall have
determined in good faith that (i) the filing of the Registration Statement or
the maintenance of its effectiveness, and/or the continued use of any related
prospectus (a "Prospectus"), would require disclosure of nonpublic information
that would materially and adversely affect Parent or (ii) there shall have
occurred any event which makes any statement made in the Registration Statement
or any Prospectus untrue in any material respect or which requires the making of
any changes in the Registration Statement or a Prospectus or other documents so
that (A) in the case of the Registration Statement, it will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein
34
<PAGE>
not misleading and (B) in the case of a Prospectus, it will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The preparation
and filing of the Registration Statement, and any sale covered thereby, will be
at Parent's expense, except for underwriting discounts or commissions, brokers'
fees and the fees and disbursements of counsel for any Holder related thereto.
(c) Each Holder shall promptly provide all information reasonably
requested by Parent for inclusion in the Registration Statement and any
Prospectus. In connection with any sale or other disposition of Registrable
Securities to be effected pursuant to the Registration Statement, Parent and
each Holder will provide each other and any underwriter with customary
representations, warranties, covenants, indemnification and contribution.
(d) For purposes of this Agreement: (i) the term "Registrable
Securities" means shares of Parent Common Stock acquired by any Holder as a
result of the conversion of such Holder's Shares pursuant to Section 2.1(c);
provided however that Registrable Securities will cease to be Registrable
Securities when and to the extent that (A) a registration statement covering
such Registrable Securities has been declared effective under the Securities Act
and such Registrable Securities have been disposed of pursuant to such effective
registration statement, (B) one year (and, if applicable, a number of additional
days equal to the aggregate number of days during which the obligations of
Parent hereunder were suspended pursuant to Section 6.15(b) or Suspension
Notices under Section 6.15(e) were in effect) has elapsed since the Effective
Time, or (C) such Registrable Securities are sold or transferred by a Holder
otherwise than to another Holder; and (ii) the term "Holder" means each person
who is a holder of Shares immediately prior to the Effective Time and who,
within 10 days after the Effective Time, agrees in a writing in form and
substance reasonably satisfactory to Parent to be bound by the provisions of
this Section 6.15. Each Holder shall promptly notify Parent when any of such
Holder's shares of Parent Common Stock shall have ceased to be Registrable
Securities.
(e) Parent will use reasonable best efforts to notify each Holder as
promptly as practicable of (i) any request by the SEC or any other federal or
state governmental authority for amendments or supplements to the Registration
Statement or any Prospectus or for additional information, (ii) the issuance by
the SEC or any other federal or state governmental authority of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose, (iii) any notification with respect to the
suspension of the qualifi cation or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, and (iv) any determination of
the Board of Directors of Parent described in Section 6.15(b). Upon receipt of
any notice from Parent of the occurrence of any event of the kind described in
the immediately preceding sentence (each, a "Suspension Notice"), each Holder
will immediately discontinue offers, sales and other dispositions of Registrable
Securities covered by the Registration Statement or a Prospectus until such
Holder has been advised in writing by Parent that such offers, sales or other
dispositions may be resumed and has received copies of any applicable
supplemental or amended Prospectus or any additional or supplemental filings
that are incorporated or deemed to be incorporated by reference in such
Prospectus.
35
<PAGE>
Section 6.16 Rule 144 Reporting. For a period of two years following the
------------------
Effective Time, Parent agrees to use its reasonable efforts to: (a) make and
keep public information available, as those terms are understood and defined in
Rule 144 under the Securities Act; (b) file with the SEC in a timely manner all
reports and other documents required of Parent under the Exchange Act; and (c)
so long as any Holder owns any Registrable Securities, furnish to such Holder
upon request a written statement by Parent as to its compliance with the
reporting requirements of said Rule 144.
Section 6.17 Availability of Form S-3. Parent represents that it
------------------------
believes it is currently eligible to utilize Form S-3 for registration of the
Parent Common Stock.
Section 6.18 Indemnification.
---------------
(a) For a period of five years after the Effective Time, the
provisions with respect to indemnification set forth in the certificate of
incorporation and bylaws of Merger Sub as in effect on the date of this
Agreement (true, correct and complete copies of which have been provided to
Company) shall not be amended, repealed or otherwise modified in any manner that
would adversely affect the rights thereunder of individuals, including Richard
H. Goldberg, Paul K. Wilde, William R. Yeack, Keith E. Jaeger and Nick S.
Discombe, who at any time prior to the Effective Time were directors or officers
of Company in respect of actions or omissions occurring at or prior to the
Effective Time (including without limitation the transactions contemplated by
this Agreement), unless such modification is required by law; provided, however,
that the provisions of this Section 6.18 shall not prohibit the reincorporation
of Merger Sub as a Delaware corporation so long as the certificate of
incorporation and bylaws of the surviving corporation in the merger pursuant to
which such reincorporation is effected contain provisions with respect to
indemnification comparable to those referred to in this Section 6.18 (subject to
such limitations as may be imposed under Delaware law).
(b) From and after the Effective Time, Parent shall, or shall cause
the Surviving Corporation to, indemnify, defend and hold harmless each person,
including Richard H. Goldberg, Paul K. Wilde, William R. Yeack, Keith E. Jaeger
and Nick S. Discombe, who is now, or has been at any time prior to the date
hereof or who becomes prior to the Effective Time, an officer or director of
Company (the "Indemnified Parties") against all losses, claims, damages, costs,
expenses (including reasonable attorneys' fees and expenses), liabilities or
judgments or amounts that are paid in settlement with the approval of the
indemnifying party (which approval shall not be unreasonably withheld) incurred
in connection with any threatened or actual action, suit or proceeding based in
whole or in part on or arising in whole or in part out of the fact that such
person is or was a director or officer of Company ("Indemnified Liabilities"),
including all Indemnified Liabilities based in whole or in part on, or arising
in whole or in part out of, this Agreement or the transactions contemplated
hereby, in each case, to the full extent that a corporation is permitted under
the DGCL to indemnify its own directors or officers, as the case may be. In the
event any such claim, action, suit, proceeding or investigation is brought
against any Indemnified Party, the indemnifying party shall assume and direct
all aspects of the defense thereof, including settlement, and the Indemnified
Party shall cooperate in the vigorous defense of any such matter. The
Indemnified Party shall have a right to participate in (but not control) the
defense of any such matter with its own counsel and at its own expense. The
indemnifying party
36
<PAGE>
shall not settle any such matter unless (i) the Indemnified Party gives prior
written consent, which shall not be unreasonably withheld, or (ii) the terms of
the settlement provide that the Indemnified Party shall have no responsibility
for the discharge of any settlement amount and impose no other obligations or
duties on the Indemnified Party and the settlement discharges all rights against
Indemnified Party with respect to such matter. In no event shall the
indemnifying party be liable for any settlement effected without its prior
written consent. Any Indemnified Party wishing to claim indemnification under
this Section 6.18(b), upon learning of any such claim, action, suit, proceeding
or investigation, shall notify Parent and the Surviving Corporation (but the
failure so to notify shall not relieve the indemnifying party from any liability
which it may have under this Section 6.18(b) except to the extent such failure
prejudices such indemnifying party), and shall deliver to Parent and the
Surviving Corporation the undertaking contemplated by Section 145(e) of the
DGCL. The Indemnified Parties as a group will be represented by a single law
firm with respect to each such matter unless there is, under applicable
standards of professional conduct, a conflict on any significant issue between
the positions of any two or more Indemnified Parties (which law firm may also
represent the indemnifying party unless there is, under such standards, such a
conflict between the positions of the indemnifying party and one or more of the
Indemnified Parties). The rights to indemnification under this Section 6.18(b)
shall continue in full force and effect for a period of five years from the
Effective Time; provided, however, that all rights to indemnification in respect
of any Indemnified Liabilities asserted or made within such period shall
continue until the disposition of such Indemnified Liabilities.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger.
----------------------------------------------------------
The respective obligation of each party to effect the Merger is subject to the
satisfaction or written waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. This Agreement shall have been adopted by
--------------------
the affirmative vote of the holders of the requisite number of shares of capital
stock of Company in the manner required pursuant to Company's certificate of
incorporation and bylaws, the DGCL and other applicable law.
(b) No Injunctions or Restraints. No temporary restraining order,
----------------------------
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; provided, however, that the party
invoking this condition shall have complied with its obligations under Section
6.8.
(c) NYSE Listing. The shares of Parent Common Stock issuable to
------------
Company's stockholders pursuant to the Merger shall have been approved for
listing on the NYSE, subject to official notice of issuance.
37
<PAGE>
(d) HSR Act. All necessary waiting periods under the HSR Act
-------
applicable to the Merger shall have expired or been earlier terminated.
(e) Pooling Letters. Each of Company and Parent shall have received
---------------
letters from their respective independent certified public accountants, dated as
of the Closing Date, addressed to Company and Parent, as applicable, setting
forth the concurrence of such respective accountants with the conclusions of the
respective managements of Company and Parent, that the Merger will qualify as a
pooling of interests transaction under Opinion 16 of the Accounting Principles
Board and applicable SEC rules and regulations if consummated in accordance with
this Agreement.
Section 7.2 Conditions to Obligations of Parent and Merger Sub. The
--------------------------------------------------
obligation of each of Parent and Merger Sub to effect the Merger is further
subject to satisfaction or written waiver on or prior to the Closing Date of the
following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Company contained in this Agreement (as modified by the exceptions
disclosed in the Disclosure Schedule in the manner contemplated by the preamble
of Section 4.1), which representations and warranties shall be deemed for
purposes of this Section 7.2 not to include any qualification or limitation with
respect to materiality (whether by reference to "Material Adverse Effect" or
otherwise), shall be true and correct as of the Closing Date (other than
representations and warranties that by their terms address matters only as of
another specified date, which shall be true and correct only as of such other
specified date), except where the matters in respect of which such
representations and warranties are not true and correct, in the aggregate, have
not had and could not reasonably be expected to have a Material Adverse Effect
on Company, with the same effect as though such representations and warranties
were made as of the Closing Date, and Parent and Merger Sub shall have received
a certificate signed on behalf of Company by an authorized officer of Company to
such effect.
(b) Performance of Obligations of Company. Company shall have
-------------------------------------
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Parent and Merger
Sub shall have received a certificate signed on behalf of Company by an
authorized officer of Company to such effect.
(c) Certain Litigation. There shall not be pending or threatened any
------------------
suit, action or proceeding seeking to restrain or prohibit the Merger or seeking
to obtain from Parent or Company or any of their respective affiliates in
connection with the Merger any material damages, or seeking any other relief
that, following the Merger, would materially limit or restrict the ability of
Parent and its Subsidiaries to own and conduct both the assets and businesses
owned and conducted by Parent and its Subsidiaries prior to the Merger and the
assets and businesses owned and conducted by Company and its Subsidiaries prior
to the Merger.
(d) Consents. All consents, authorizations, orders and approvals
--------
specified in Section 7.2(d) of the Disclosure Schedule shall have been obtained
or made.
38
<PAGE>
(e) Compliance with Regulation D. Parent shall have received either
----------------------------
an Accredited Investor Letter or an Investor Letter from each person who is a
holder of Shares as of the Closing Date; there shall be no more than 35 persons
who are holders of Shares as of the Closing Date from whom Parent shall not have
obtained an Accredited Investor Letter; and all other conditions for the
exemption from registration provided by Rule 506 under the Securities Act to be
applicable to the offer and sale of shares of Parent Common Stock pursuant to
the transactions contemplated hereby shall have been satisfied.
(f) Tax Opinion. Parent shall have received from Jones, Day, Reavis &
-----------
Pogue, counsel to Parent, an opinion, dated as of the Closing Date, to the
effect that the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code and that Company
and Parent will each be a party to that reorganization within the meaning of
Section 368(b) of the Code and that no gain or loss will be recognized by the
stockholders of Company upon their exchange of Shares for Parent Common Stock
under Section 354 of the Code (except with respect to the receipt of cash in
lieu of fractional shares). In rendering such opinion, counsel shall be
entitled to rely upon, and the parties to this Agreement shall make, reasonable
representations as requested by counsel.
(g) Termination or Modification of Certain Agreements. The First
-------------------------------------------------
Amended and Restated Stockholders Agreement dated August 28, 1992 among Company
and certain stockholders of Company, as subsequently amended and restated, the
Stock Purchase Agreement dated as of August 28, 1992 between Company and
International Business Machines Corporation, as amended on May 28, 1997, the
Employment Agreement between Company and Simon Williams dated July 28, 1994, the
Employment Agreement between Company and Melinda Horton dated July 28, 1994, the
letter agreement between Company and Richard Thompson dated September 15, 1992,
the Agreement among Company, Dysys Limited, Simon Williams and Melinda Horton
dated September 15, 1992 relating to the acquisition of certain intellectual
property included in Company's Obsydian product, and any other contract,
agreement or arrangement (other than those listed on Section 4.1(i)(iii)(B) of
the Disclosure Schedule or Schedule 4.1(i)(v) to the Disclosure Schedule and
identified with an asterisk and customer agreements on Company's standard forms)
pursuant to which Company or any subsidiary of Company is or may become
obligated to (i) pay any royalty, fee or other compensation to any other person
in connection with the sale, license, lease, transfer, use, reproduction,
distribution, modification or other exploitation of the Owned Software, (ii)
make the source code for any computer program included in the Owned Software
available to any person, or (iii) permit any person to sell, license, lease,
transfer, use, reproduce, distribute, modify or otherwise exploit any of the
Owned Software or the Intellectual Property shall have been terminated or
modified on terms reasonably satisfactory to Parent.
(h) Opinion of Financial Advisor. Company shall have (i) received a
----------------------------
written opinion of Broadview to the effect that, based upon and subject to the
matters set forth therein and as of the date thereof, the Merger Consideration
is fair to the holders of Shares from a financial point of view, and such
opinion shall not have been withdrawn or modified and (ii) delivered a true,
correct and complete copy thereof to Parent.
39
<PAGE>
Section 7.3 Conditions to Obligation of Company. The obligation of the
-----------------------------------
Company to effect the Merger is further subject to satisfaction or written
waiver on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of each of Parent and Merger Sub contained in this Agreement (as
modified by the exceptions disclosed in the Disclosure Schedule in the manner
contemplated by the preamble of Section 4.2), which representations and
warranties shall be deemed for purposes of this Section 7.3 not to include any
qualification or limitation with respect to materiality (whether by reference to
"Material Adverse Effect" or otherwise), shall be true and correct as of the
Closing Date (other than representations and warranties that by their terms
address matters only as of another specified date, which shall be true and
correct only as of such other specified date), except where the matters in
respect of which such representations and warranties are not true and correct,
in the aggregate, have not had and could not reasonably be expected to have a
Material Adverse Effect on Parent, with the same effect as though such
representations and warranties were made as of the Closing Date, and Company
shall have received a certificate signed on behalf of Parent and Merger Sub by
an authorized officer of Parent to such effect.
(b) Performance of Obligations of Parent and Merger Sub. Each of
---------------------------------------------------
Parent and Merger Sub shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date, and the Company shall have received a certificate signed on
behalf of Parent by an authorized officer of Parent to such effect.
(c) Tax Opinion. Company shall have received from Wilson, Sonsini,
-----------
Goodrich & Rosati, P.C., counsel to Company, an opinion, dated as of the Closing
Date, to the effect that the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code
and that Company and Parent will each be a party to that reorganization within
the meaning of Section 368(b) of the Code and that no gain or loss will be
recognized by the stockholders of Company upon their exchange of Shares for
Parent Common Stock under Section 354 of the Code (except with respect to the
receipt of cash in lieu of fractional shares). In rendering such opinion,
counsel shall be entitled to rely upon, and the parties to this Agreement shall
make, reasonable representations as requested by counsel.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Termination.
-----------
(a) This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Effective Time, notwithstanding
adoption thereof by the stockholders of Company, in any one of the following
circumstances:
(i) By mutual written consent duly authorized by the Boards of
Directors of Parent and Company.
40
<PAGE>
(ii) By Parent or Company, if the Effective Time shall not have
occurred on or before August 31, 1998, otherwise than as a result of any
material breach of any provision of this Agreement by the party seeking to
effect such termination.
(iii) By Parent or Company, if any federal or state court of
competent jurisdiction or other Governmental Entity shall have issued an order,
decree or ruling, or taken any other action permanently restraining, enjoining
or otherwise prohibiting the Merger and such order, decree, ruling or other
action shall have become final and non-appealable, provided that neither party
may terminate this Agreement pursuant to this Section 8.1(a)(iii) if it has not
complied with its obligations under Section 6.8.
(iv) By Parent or Company, if the Stockholders Meeting shall have
been held and this Agreement shall not have been adopted by the affirmative vote
of the holders of the requisite number of shares of capital stock of Company,
provided that Company may not terminate this Agreement pursuant to this Section
8.1(a)(iv) unless it shall have paid to Parent the Fee provided for in Section
8.1(b).
(v) By Parent, if (A) the Board of Directors of Company or any
committee thereof shall have (1) withdrawn or modified, in a manner adverse to
Parent or Merger Sub, its approval of this Agreement or the transactions
contemplated hereby or the recommendation referred to in the penultimate
sentence of Section 6.3, (2) approved, endorsed or recommended to its
stockholders an Acquisition Proposal, or (3) resolved to do any of the foregoing
or (B) if the Stockholders Meeting shall not have been held by July 31, 1998 as
a result of a breach by Company of its obligations under Section 6.3.
(vi) By Parent or Company, if (A) the other party shall have
failed to comply in any material respect with any of the material covenants and
agreements contained in this Agreement to be complied with or performed by such
party at or prior to such date of termination, and such failure continues for 20
business days after the actual receipt by such party of a written notice from
the other party setting forth in detail the nature of such failure, or (B) the
representations and warranties of the other party contained in this Agreement,
which represen tations and warranties shall be deemed for purposes of this
Section 8.1(a)(vi) not to include any qualification or limitation with respect
to materiality (whether by reference to a "Material Adverse Effect" or
otherwise), shall have been untrue in any respect on the date when made (or in
the case of any representations and warranties that are made as of a different
date, as of such different date) and the matters in respect of which such
representations and warranties shall have been untrue, in the aggregate, have
had or could reasonably be expected to have a Material Adverse Effect on such
other party.
(b) If this Agreement is terminated pursuant to:
(i) Section 8.1(a)(iv); or
(ii) Section 8.1(a)(v);
41
<PAGE>
then, in such event, Company shall pay to Parent prior to such termination, in
the case of termination by Company pursuant to Section 8.1(a)(iv), or promptly
(and in any event within three business days) after such termination, in the
case of termination by Parent pursuant to Section 8.1(a)(iv) or Section
8.1(a)(v), a fee in the amount of $3,900,000 (the "Fee"), which amount shall be
payable in immediately available funds.
Section 8.2 Effect of Termination. In the event of the termination and
---------------------
abandonment of this Agreement pursuant to Section 8.1(a) hereof, this Agreement
(except for the provisions of Section 4.1(u), Section 4.2(h), Section 6.4,
Section 6.6, paragraph (b) of Section 8.1, this Section 8.2 and Article IX)
shall forthwith become void and cease to have any force or effect, without any
liability on the part of any party hereto or any of its affiliates; provided,
however, that nothing in this Section 8.2 shall relieve any party to this
Agreement of liability for any willful or intentional breach of this Agreement.
Section 8.3 Amendment. Subject to any applicable provisions of the DGCL
---------
and the GBCC, at any time prior to the Effective Time, the parties hereto may
modify or amend this Agreement by written agreement executed and delivered by
duly authorized officers of the respective parties; provided, however, that
after adoption of this Agreement at the Stockholders Meeting, no amendment shall
be made which would reduce the amount or change the type of consideration into
which each Share shall be converted upon consummation of the Merger. This
Agreement may not be modified or amended except by written agreement executed
and delivered by duly authorized officers of each of the respective parties.
Section 8.4 Extension; Waiver. At any time prior to the Effective Time,
-----------------
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement, or (c)
subject to Section 8.3, waive compliance with any of the agreements or
conditions of the other parties contained in this Agreement. Any agreement on
the part of a party to any such extension or waiver shall be valid only if set
forth in a written instrument executed and delivered by a duly authorized
officer on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights.
Section 8.5 Procedure for Termination, Amendment, Extension or Waiver.
---------------------------------------------------------
A termination of this Agreement pursuant to Section 8.1, an amendment of this
Agreement pursuant to Section 8.3 or an extension or waiver pursuant to Section
8.4 shall, in order to be effective, require in the case of Parent, Merger Sub
or Company, action by its Board of Directors or the duly authorized designee of
its Board of Directors.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Nonsurvival of Representations and Warranties. None of the
---------------------------------------------
representations and warranties in this Agreement or in any instrument delivered
pursuant to this
42
<PAGE>
Agreement shall survive the Effective Time. This Section 9.1 shall not limit any
covenant or agreement of the parties which by its terms contemplates performance
after the Effective Time.
Section 9.2 Fees and Expenses. Whether or not the Merger shall be
-----------------
consummated, each party hereto shall pay its own expenses incident to preparing
for, entering into and carrying out this Agreement and the consummation of the
transactions contemplated hereby, except that each of Company and Parent shall
bear and pay one-half of the costs and expenses incurred in connection with (a)
the filing, printing and mailing of the Proxy Statement/Offering Memorandum
(including SEC filing fees) and (b) the filing of the premerger notification and
report forms under the HSR Act (including filing fees). Notwithstanding the
foregoing, if the Merger is consummated, all reasonable professional fees
incurred by Company in connection with this Agreement and the transactions
contemplated hereby shall be paid by Parent or the Surviving Corporation.
Section 9.3 Definitions. For purposes of this Agreement:
-----------
(a) "accredited investor" shall have the meaning assigned to such term
in Rule 501(a) under the Securities Act;
(b) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;
(c) "business day" means any day other than Saturday, Sunday or any
other day on which banks in the City of New York are required or permitted to
close;
(d) "Disclosure Schedule" means the disclosure schedule delivered by
each party to the other simultaneously with the execution of this Agreement;
(e) "Environmental Laws" means any federal, state or local law
relating to: (i) releases or threatened releases of Hazardous Substances or
materials containing Hazardous Substances; (ii) the manufacture, handling,
transport, use, treatment, storage or disposal of Hazardous Substances or
materials containing Hazardous Substances; or (iii) otherwise relating to
pollution of the environment or the protection of human health;
(f) "Hazardous Substances" means: (i) those substances defined in or
regulated under the following federal statutes and their state counterparts, as
each may be amended from time to time, and all regulations thereunder: the
Hazardous Materials Transportation Act, the Resource Conservation and Recovery
Act, the Comprehensive Environmental Response, Compensation and Liability Act,
the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the
Federal Insecticide, Fungicide and Rodenticide Act and the Clean Air Act; (ii)
petroleum and petroleum products including crude oil and any fractions thereof;
(iii) natural gas, synthetic gas and any mixtures thereof; (iv) radon; (v) any
other contaminant; and (vi) any substance with respect to which any Governmental
Entity requires environmental investigation, monitoring, reporting or
remediation;
43
<PAGE>
(g) "knowledge" means the actual knowledge of any executive officer of
Company or Parent, as the case may be;
(h) "Liens" means, collectively, all pledges, claims, liens, charges,
mortgages, conditional sale or title retention agreements, hypothecations,
collateral assignments, security interests, easements and other encumbrances of
any kind or nature whatsoever;
(i) a "Material Adverse Effect" with respect to any person means a
material adverse effect on (i) the ability of such person to perform its
obligations under this Agreement or to consummate the transactions contemplated
hereby or (ii) the condition (financial or otherwise), assets, liabilities
(actual or contingent), results of operations or business of such person and its
Subsidiaries taken as a whole; provided, however, that a Material Adverse Effect
shall not include any such adverse effect occurring on or after the date of this
Agreement that is solely attributable to the announcement or pendency of the
Merger;
(j) the "NYSE" means the New York Stock Exchange;
(k) a "person" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity;
(l) "Principal Stockholders" means General Atlantic Partners II, L.P.,
GAP-Synon Partners, L.P., GAP Coinvestment Partners, L.P., Advent Atlantic &
Pacific Limited Partnership, Advent Industrial II, L.P., Advent VI, L.P., Bost &
Co., Saturn & Co., T.A. Venture Investors Limited Partnership, Simon Williams,
International Business Machines Corporation, Melinda Horton, Richard Goldberg
and William Grabe;
(m) "purchaser representative" shall have the meaning assigned to such
term in Rule 501(h) under the Securities Act; and
(n) a "Subsidiary" of any person means any other person of which (i)
the first mentioned person or any Subsidiary thereof is a general partner, (ii)
voting power to elect a majority of the board of directors or others performing
similar functions with respect to such other person is held by the first
mentioned person and/or by any one or more of its Subsidiaries, or (iii) at
least 50% of the equity interests of such other person is, directly or
indirectly, owned or controlled by such first mentioned person and/or by any one
or more of its Subsidiaries.
Section 9.4 Notices. All notices, requests, claims, demands and other
-------
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
44
<PAGE>
(i) if to Parent or to Merger Sub, to
Sterling Software, Inc.
300 Crescent Court
Suite 1200
Dallas, Texas 75201
Attention: Don J. McDermett, Jr., Esq.
Telecopy: (214) 981-1265
with a copy (which shall not constitute notice) to:
Jones, Day, Reavis & Pogue
2300 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: Mark E. Betzen, Esq.
Telecopy: (214) 969-5100
(ii) if to Company, to
Synon Corporation
1100 Larkspur Landing Circle
Larkspur, California 94939
Attention: Richard H. Goldberg
Telecopy: (415) 461-8948
with a copy (which shall not constitute notice) to:
Wilson, Sonsini, Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304
Attention: Mark A. Bertelsen, Esq.
Telecopy: (650) 493-4092
Section 9.5 Interpretation. When a reference is made in this Agreement
--------------
to a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for convenience of reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation".
Section 9.6 Entire Agreement; Third-Party Beneficiaries. This Agreement
-------------------------------------------
constitutes the entire agreement, and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement (except for the letter agreement referenced in
the last sentence of Section 6.4). This Agreement is not intended to
45
<PAGE>
confer upon any person (including without limitation any employees or former
employees of Company), other than the parties hereto, any rights or remedies.
Section 9.7 Governing Law. Except to the extent necessarily governed by
-------------
the GBCC, this Agreement shall be governed by, and construed in accordance with,
the laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
Section 9.8 Assignment. Neither this Agreement nor any of the rights,
----------
interests or obligations under this Agreement may be assigned or delegated, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties, and any such assignment without
such prior written consent shall be null and void, except that Parent and/or
Merger Sub may assign this Agreement to any direct or indirect wholly owned
Subsidiary of Parent without the prior consent of Company; provided that Parent
and/or Merger Sub, as the case may be, shall remain liable for all of its
obligations under this Agreement. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
Section 9.9 Enforcement. Irreparable damage would occur in the event
-----------
that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. Accordingly, the parties
shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this Agreement
in the Court of Chancery in and for New Castle County in the State of Delaware
(or, if such court lacks subject matter jurisdiction, any appropriate state or
federal court in New Castle County in the State of Delaware), this being in
addition to any other remedy to which they are entitled at law or in equity.
Each of the parties hereto (i) shall submit itself to the personal jurisdiction
of the Court of Chancery in and for New Castle County in the State of Delaware
(or, if such court lacks subject matter jurisdiction, any appropriate state or
federal court in New Castle County in the State of Delaware) in the event any
dispute arises out of this Agreement or any of the transactions contemplated
hereby, (ii) shall not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court, and (iii) shall not bring
any action relating to this Agreement or any of the transactions contemplated
hereby in any court other than the Court of Chancery in and for New Castle
County in the State of Delaware (or, if such court lacks subject matter
jurisdiction, any appropriate state or federal court in New Castle County in the
State of Delaware).
Section 9.10 Severability. Whenever possible, each provision or portion
------------
of any provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
46
<PAGE>
Section 9.11 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same instrument and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
[signature page follows]
47
<PAGE>
IN WITNESS WHEREOF, Parent, Merger Sub and Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
STERLING SOFTWARE, INC.
By: /s/ Don J. McDermett, Jr.
-------------------------------------
Don J. McDermett, Jr.
Senior Vice President and
General Counsel
STERLING SOFTWARE (SOUTHERN), INC.
By: /s/ Don J. McDermett, Jr.
-------------------------------------
Don J. McDermett, Jr.
Vice President and Secretary
SYNON CORPORATION
By: /s/ Richard H. Goldberg
-------------------------------------
Richard H. Goldberg
President and Chief Executive Officer
48
<PAGE>
EXHIBIT A
---------
[FORM OF ACCREDITED INVESTOR LETTER]
__________ __, 1998
Synon Corporation
1100 Larkspur Landing Circle
Larkspur, California 94939
Ladies and Gentlemen:
I have been provided with a Proxy Statement/Offering Memorandum, dated
_____________ ___, 1998, relating to the proposed merger (the "Merger") of Synon
Corporation ("Company") with a wholly owned subsidiary of Sterling Software,
Inc. ("Parent") pursuant to an Agreement and Plan of Merger dated as of June 20,
1998 (the "Merger Agreement"). In addition, I have been provided the
opportunity to ask questions and receive answers concerning the terms and
conditions of the Merger and to obtain any additional information that I
believed to be necessary to verify the accuracy of the information contained in
the Proxy Statement/Offering Memorandum.
I understand that, if the Merger is consummated, I will receive shares of
Common Stock of Parent ("Parent Common Stock") in exchange for my shares of
capital stock of Company. I further understand that the shares of Parent Common
Stock being offered and to be issued in connection with the Merger are being
offered and will be issued without registration under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to an exemption therefrom. In
connection with such exemption, I hereby represent to Parent as follows:
1. I am (i) a natural person whose individual net worth, or joint net worth
with my spouse, exceeds $1,000,000, (ii) a natural person who had
individual income in excess of $200,000 in each of the two most recent
years or joint income with my spouse in excess of $300,000 in each of such
years, and who has a reasonable expectation of reaching the same income
level in the current year, or (iii) otherwise an "accredited investor," as
such term is defined in Rule 501(a) under the Securities Act.
2. I will be acquiring all shares of Parent Common Stock issued to me in
connection with the Merger (i) for my own account and (ii) not with a view
to any resale or other disposition thereof otherwise than in compliance
with the Securities Act and applicable state securities laws.
1
<PAGE>
Synon Corporation
______________ __, 1998
I further understand that Parent may rely upon the representations set forth
above in determining whether the offering and issuance of Parent Common Stock in
connection with the Merger are exempt from registration under the Securities
Act.
In the event that any of the representations set forth above cease to be true
prior to the consummation of the Merger, I will notify Parent of such fact as
promptly as practicable.
Sincerely,
-----------------------------------------------
Printed Name:
----------------------------------
2
<PAGE>
EXHIBIT B
---------
[FORM OF INVESTOR LETTER]
__________ __, 1998
Synon Corporation
1100 Larkspur Landing Circle
Larkspur, California 94939
Ladies and Gentlemen:
I have been provided with a Proxy Statement/Offering Memorandum, dated
_____________ ___, 1998, relating to the proposed merger (the "Merger") of Synon
Corporation ("Company") with a wholly owned subsidiary of Sterling Software,
Inc. ("Parent") pursuant to an Agreement and Plan of Merger dated as of June 20,
1998 (the "Merger Agreement"). In addition, I have been provided the
opportunity to ask questions and receive answers concerning the terms and
conditions of the Merger and to obtain any additional information that I
believed to be necessary to verify the accuracy of the information contained in
the Proxy Statement/Offering Memorandum.
I understand that, if the Merger is consummated, I will receive shares of
Common Stock of Parent ("Parent Common Stock") in exchange for my shares of
capital stock of Company. I further understand that the shares of Parent Common
Stock being offered and to be issued in connection with the Merger are being
offered and will be issued without registration under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to an exemption therefrom. In
connection with such exemption, I hereby represent to Parent as follows:
1. I, alone or with my purchaser representative, as such term is defined in
Rule 501(h) of the Securities Act, have such knowledge and experience in
financial and business matters that I am capable of evaluating the merits
and risks of the prospective investment in the shares of Parent Common
Stock that will be issued to me in connection with the Merger.
2. I will be acquiring shares of Parent Common Stock received by me pursuant
to the transactions contemplated by the Merger Agreement for my own
account.
1
<PAGE>
Synon Corporation
__________ __, 1998
I further understand that Parent may rely upon the representations set forth
above in determining whether the offering and issuance of Parent Common Stock in
connection with the Merger are exempt from registration under the Securities
Act.
In the event that any of the representations set forth above cease to be true
prior to the consummation of the Merger, I will notify Parent of such fact as
promptly as practicable.
Sincerely,
-----------------------------------------------
Printed Name:
----------------------------------
2
<PAGE>
EXHIBIT C
---------
[FORM OF COMPANY AFFILIATE LETTER]
__________ __, 1998
Sterling Software, Inc.
300 Crescent Court
Suite 1200
Dallas, Texas 75201
Ladies and Gentlemen:
Reference is made to the provisions of the Agreement and Plan of
Merger, dated as of the date hereof (together with any amendments thereto, the
"Merger Agreement"), among Sterling Software, Inc., a Delaware corporation
("Parent"), Sterling Software (Southern), Inc., a Georgia corporation and a
wholly owned subsidiary of Parent ("Merger Sub"), and Synon Corporation, a
Delaware corporation ("Company"), pursuant to which Company will be merged with
and into Merger Sub, with Merger Sub continuing as the surviving corporation
(the "Merger"). This letter is being delivered as contemplated by Section 6.11
of the Merger Agreement.
I understand that I may be deemed to be an "affiliate" of Company
within the meaning of Rule 145 ("Rule 145") promulgated under the Securities Act
of 1933, as amended (the "Securities Act"), and may be deemed to be an
"affiliate" of Company for purposes of qualifying the Merger for pooling of
interests accounting treatment under Opinion 16 of the Accounting Principles
Board and the applicable rules and regulations of the Securities and Exchange
Commission (the "SEC"). Notwithstanding the foregoing, nothing herein shall be
construed as an admission that I am an affiliate of Company for any purpose.
I understand that the transferability of any shares of Common Stock,
par value $.10 per share, of Parent (the "Parent Shares") that I receive (i)
upon the consummation of the Merger in exchange for any shares of capital stock
of Company ("Company Shares") beneficially owned by me or (ii) upon the exercise
of any options to purchase Parent Shares that I receive upon the consummation of
the Merger in exchange for any options held by me to purchase Company Shares,
may be restricted. Accordingly, I hereby represent, warrant and covenant to
Parent that I will not sell, transfer or otherwise dispose of any such Parent
Shares except (i) pursuant to an effective registration statement under the
Securities Act or (ii) as permitted by, and in accordance with, Rule 144 or any
other applicable exemption from registration under the Securities Act. In
addition, I hereby acknowledge that, except as expressly provided in the Merger
Agreement, Parent is under no obligation to register the sale, transfer or other
disposition of any such Parent Shares under the Securities Act or to take any
other action necessary for the purpose of making an exemption from registration
thereunder available.
I hereby further covenant to Parent that (i) during the 30 days
preceding the effective time of the Merger, I will not sell, transfer or
otherwise dispose of any Company Shares
<PAGE>
Sterling Software, Inc.
___________ __, 1998
or Parent Shares beneficially owned by me and (ii) from and after the effective
time of the Merger, I will not sell, transfer or otherwise dispose of any Parent
Shares beneficially owned by me (including any Parent Shares received by me in
connection with the Merger) until after such time as financial results covering
at least 30 days of combined operations of Company and Parent have been
published by Parent in the form of a quarterly earnings report, an effective
registration statement filed with the SEC, a report to the SEC on Form 10-K, 10-
Q or 8-K, or any other public filing or announcement which includes such
combined financial results. [Notwithstanding the foregoing, the provisions of
this paragraph shall not operate to prohibit any pro rata distribution to the
undersigned's partners, provided that all such partners receiving such pro rata
distribution shall have agreed in a writing in form and substance satisfactory
to Company to be bound by the provisions of this paragraph as though a party
hereto prior to such pro rata distribution.]*
I understand that Parent will issue stop transfer instructions to its
transfer agent with respect to the Parent Shares and that a restrictive legend
will be placed on certificates delivered to me evidencing the Parent Shares in
substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN CONNECTION
WITH A MERGER WHICH IS BEING ACCOUNTED FOR AS A POOLING OF INTERESTS.
THE SHARES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF (I)
UNTIL SUCH TIME AS STERLING SOFTWARE, INC. SHALL HAVE PUBLISHED
FINANCIAL RESULTS COVERING AT LEAST 30 DAYS OF COMBINED OPERATIONS
AFTER THE EFFECTIVE TIME OF SUCH MERGER AND (II) EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT. REFERENCE IS MADE TO THAT CERTAIN LETTER
AGREEMENT BETWEEN THE REGISTERED HOLDER HEREOF AND THE ISSUER, A COPY
OF WHICH IS ON FILE IN THE PRINCIPAL OFFICE OF STERLING SOFTWARE,
INC., WHICH CONTAINS FURTHER RESTRICTIONS ON THE TRANSFERABILITY OF
THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY."
It is understood and agreed that the restrictive legend set forth
above will be removed by delivery of substitute certificates without such legend
if such legend is no longer
- ---------------------------------
* Alternative language to be included in letters signed on behalf of
partnerships.
2
<PAGE>
Sterling Software, Inc.
___________ __, 1998
required for purposes of the Securities Act or qualification of the Merger for
pooling of interest accounting treatment. In such event, Parent will also
rescind the stop transfer instructions referred to above.
I hereby acknowledge that the receipt of this letter by Parent is an
inducement to the obligation of Parent to cause Merger Sub to consummate the
Merger and that I understand the requirements of this letter and the limitations
imposed upon the sale, transfer or other disposition of Company Shares and
Parent Shares.
Very truly yours,
--------------------------------------------------
Printed Name:
-------------------------------------
Agreed and Accepted:
STERLING SOFTWARE, INC.
By:
---------------------------------------------
Don J. McDermett, Jr.
Senior Vice President and General Counsel
3
<PAGE>
EXHIBIT D
---------
[FORM OF PARENT AFFILIATE LETTER]
______ 1998
Sterling Software, Inc.
300 Crescent Court
Suite 1200
Dallas, Texas 75201
Attention: Legal Department
Re: "Affiliate Letter" -- Acquisition of Synon Corporation
------------------------------------------------------
Ladies and Gentlemen:
Reference is made to the provisions of the Agreement and Plan of Merger,
dated as of June 20, 1998 (together with amendments thereto, the "Merger
Agreement"), among Sterling Software, Inc., a Delaware corporation ("Parent"),
Sterling Software (Southern), Inc., a Georgia corporation and a wholly-owned
subsidiary of Parent ("Merger Sub"), and Synon Corporation, a Delaware
corporation ("Company"), pursuant to which Company will be merged with and into
Merger Sub, with Merger Sub continuing as the surviving corporation (the
"Merger"). This letter is being delivered as contemplated by Section 6.11 of
the Merger Agreement.
I understand that I may be deemed to be an "affiliate" of the Parent for
purposes of qualifying the Merger for pooling of interests accounting treatment
("Pooling Treatment") under Opinion 16 of the Accounting Principles Board and
the applicable rules and regulations of the Securities and Exchange Commission
(the "SEC"). Notwithstanding the foregoing, nothing herein shall be construed
as an admission that I am an affiliate of Parent for any purpose.
I hereby covenant to Parent that I will not sell, transfer or otherwise
dispose of any shares of the common stock, par value $.10 per share ("Common
Stock"), of Parent beneficially owned by me (including without limitation any
shares of Common Stock beneficially owned by me pursuant to (i) the Sterling
Software, Inc. Savings and Security (401(k)) Plan, (ii) the Sterling Software,
Inc. Employee Stock Ownership Plan, or (iii) stock options granted to me
pursuant to the Amended and Restated 1996 Stock Option Plan of Sterling
Software, Inc.) at any time during
<PAGE>
Sterling Software, Inc.
_____________, 1998
Page 2
the period commencing 30 days prior to the "Effective Time" of the Merger and
concluding on the date that financial results covering at least 30 days of
combined operations of Parent and Company are published by Parent in the form of
a quarterly earnings report, an effective registration statement filed with the
SEC, a report to the SEC on Form 10-K, 10-Q or 8-K, or any other public filing
or announcement which includes such combined financial results.
Very truly yours,
--------------------------------------------------
Printed Name:
-------------------------------------
Agreed and Accepted:
STERLING SOFTWARE, INC.
By:
----------------------------------------------
Don J. McDermett, Jr.
Senior Vice President and General Counsel
<PAGE>
Exhibit 10.1
------------
STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT, dated as of June 20, 1998 (this "Agreement"),
is made and entered into among Sterling Software, Inc., a Delaware corporation
("Parent"), General Atlantic Partners II, L.P., GAP-Synon Partners, L.P., GAP
Coinvestment Partners, L.P., Advent Atlantic & Pacific Limited Partnership,
Advent Industrial II, L.P., Advent VI, L.P., Bost & Co., Saturn & Co., T.A.
Venture Investors Limited Partnership, Simon Williams, Melinda Horton, Richard
Goldberg and William Grabe (each, a "Stockholder" and, collectively, the
"Stockholders").
RECITALS:
A. Parent, Sterling Software (Southern), Inc., a Georgia corporation and
wholly owned subsidiary of Parent ("Merger Sub"), and Synon Corporation, a
Delaware corporation ("Company"), propose to enter into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to which
Company will merge with and into Merger Sub (the "Merger") on the terms and
subject to the conditions set forth in the Merger Agreement. Except as
otherwise defined herein, terms used herein with initial capital letters have
the respective meanings ascribed thereto in the Merger Agreement.
B. As of the date hereof, each Stockholder beneficially owns and is
entitled to dispose of (or to direct the disposition of) and to vote (or to
direct the voting of) the number of shares of capital stock of Company ("Capital
Stock") set forth opposite such Stockholder's name on Schedule A hereto (such
shares of Capital Stock, together with any other shares of capital stock of
Company, the beneficial ownership of which is acquired by such Stockholder
during the period from and including the date hereof through and including the
earlier of (i) the Effective Time and (ii) the date that is one year after the
date on which the Merger Agreement is terminated pursuant to Section 8.1
thereof, are collectively referred to herein as such Stockholder's "Subject
Shares").
C. As a condition and inducement to Parent's willingness to enter into
the Merger Agreement, Parent has requested that each Stockholder agree, and each
Stockholder has agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties and covenants contained in this Agreement and the Merger Agreement
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
<PAGE>
ARTICLE I
VOTING AGREEMENT
Section 1.1 Agreement to Vote Shares. During the period from and
------------------------
including the date hereof through and including the earlier of (i) the Effective
Time and (ii) the date on which the Merger Agreement is terminated pursuant to
Section 8.1 thereof, at any meeting of the stock holders of Company called to
consider and vote upon the adoption of the Merger Agreement (and at any and all
postponements and adjournments thereof), and in connection with any action to be
taken in respect of the adoption of the Merger Agreement by written consent of
stockholders of Company, each Stockholder shall vote or cause to be voted
(including by written consent, if applicable) all of such Stockholder's Subject
Shares in favor of the adoption of the Merger Agreement and in favor of any
other matter necessary for the consummation of the transactions contemplated by
the Merger Agreement and considered and voted upon at any such meeting or made
the subject of any such written consent, as applicable.
Section 1.2 Irrevocable Proxy.
-----------------
(a) Grant of Proxy. EACH STOCKHOLDER HEREBY APPOINTS PARENT AND ANY
--------------
DESIGNEE OF PARENT, EACH OF THEM INDIVIDUALLY, SUCH STOCKHOLDER'S PROXY AND
ATTORNEY-IN-FACT PURSUANT TO THE PROVISIONS OF SECTION 212 OF THE DELAWARE
GENERAL CORPORATION LAW, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, TO
VOTE OR ACT BY WRITTEN CONSENT WITH RESPECT TO SUCH STOCKHOLDER'S SUBJECT SHARES
IN ACCORDANCE WITH SECTION 1.1 HEREOF. THIS PROXY IS GIVEN TO SECURE THE
PERFORMANCE OF THE DUTIES OF SUCH STOCKHOLDER UNDER THIS AGREEMENT. EACH
STOCKHOLDER AFFIRMS THAT THIS PROXY IS COUPLED WITH AN INTEREST AND SHALL BE
IRREVOCABLE. EACH STOCKHOLDER SHALL TAKE SUCH FURTHER ACTION OR EXECUTE SUCH
OTHER INSTRUMENTS AS MAY BE NECESSARY TO EFFECTUATE THE INTENT OF THIS PROXY.
(b) Other Proxies Revoked. Each Stockholder represents that any
---------------------
proxies heretofore given in respect of such Stockholder's Subject Shares are not
irrevocable, and that all such proxies are hereby revoked.
ARTICLE II
OPTION
Section 2.1 Grant of Option. Each Stockholder hereby grants to Parent an
---------------
irrevocable option (each, an "Option" and, collectively, the "Options") to
purchase such Stockholder's Subject Shares on the terms and subject to the
conditions set forth herein, in exchange for the number of shares of common
stock, par value $0.10 per share, of Parent ("Parent Common Stock") equal to the
product of (a) (i) 0.14357, in the case of Subject Shares that are Common Shares
or Series A Preferred Shares, and (ii) 0.27149, in the case of Subject Shares
that are Series D Preferred Shares, and (b) the number of such Subject Shares to
be purchased upon any
2
<PAGE>
particular exercise of such Option (such product being the "Option
Consideration"), with the type and number of shares, securities or other
property subject to each of the Options, and the Option Consideration payable
therefor, being subject to adjustment as provided herein.
Section 2.2 Exercise of Option. Parent may exercise all or any of the
------------------
Options, in whole or in part, at any time or from time to time during the period
(the "Option Period") from and including the date hereof through and including
the earlier of (i) the Effective Time and (ii) the date that is one year after
the date on which the Merger Agreement is terminated pursuant to Section 8.1
thereof. Notwithstanding anything in this Agreement to the contrary, Parent
shall be entitled to purchase all Subject Shares in respect of which it shall
have exercised an Option in accordance with the terms hereof prior to the
expiration of the Option Period, and the expiration of the Option Period shall
not affect any rights hereunder which by their terms do not terminate or expire
prior to or as of such expiration.
(b) If Parent wishes to exercise an Option, it shall deliver to the
applicable Stockholder (each a "Selling Stockholder") a written notice (an
"Exercise Notice") to that effect which specifies (i) the number and kind of
Subject Shares to be purchased from such Selling Stockholder and (ii) a date (an
"Option Closing Date") not earlier than three business days after the date such
Exercise Notice is delivered for the consummation of the purchase and sale of
such Subject Shares (an "Option Closing"). If the Option Closing cannot be
effected on the Option Closing Date specified in the Exercise Notice by reason
of any applicable judgment, decree, order, law or regulation, or because any
applicable waiting period under the HSR Act shall not have expired or been
terminated, (i) the Stockholders shall promptly take all such actions as may be
requested by Parent, and shall otherwise fully cooperate with Parent, to cause
the elimination of all such impediments to the Option Closing and (ii) the
Option Closing Date specified in the Exercise Notice shall be extended to the
third business day following the elimination of all such impediments. The place
of the Option Closing shall be at the offices of Jones, Day, Reavis & Pogue,
2300 Trammell Crow Center, 2001 Ross Avenue, Dallas, Texas, and the time of the
Option Closing shall be 10:00 a.m. (Central Time) on the Option Closing Date.
Section 2.3 Payment and Delivery of Certificates. At any Option Closing,
-------------------------------------
Parent shall deliver to each Selling Stockholder a certificate or certificates
evidencing the Option Consideration payable in respect of the Subject Shares to
be purchased from such Selling Stockholder at the Option Closing, and each
Selling Stockholder shall deliver to Parent such Subject Shares, free and clear
of all Liens, with the certificate or certificates evidencing such Subject
Shares being duly endorsed for transfer by such Selling Stockholder and
accompanied by all powers of attorney and/or other instruments necessary to
convey valid and unencumbered title thereto to Parent, and shall assign to
Parent (pursuant to a written instrument in form and substance satisfactory to
Parent) all rights that such Selling Stockholder may have to require Company to
register such Subject Shares under the Securities Act. Transfer taxes, if any,
imposed as a result of the exercise of an Option shall be borne by the Selling
Stockholder.
Section 2.4 Adjustment upon Changes in Capitalization, Etc. In the event
-----------------------------------------------
of any change in the capital stock of either Company or Parent by reason of a
stock dividend, split-up, merger, recapitalization, combination, exchange of
shares, extraordinary distribution or similar transaction, the type and number
of shares, securities or other property subject to each of the
3
<PAGE>
Options, and the Option Consideration payable therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transaction, so that (a) Parent shall receive upon exercise of any Option
the number and class of shares, securities or property that Parent would have
received in respect of the applicable Selling Stockholder's Subject Shares if
the Option had been exercised immediately prior to such event relating to
Company or the record date therefor, as applicable, and (b) the applicable
Selling Stockholder shall receive upon exercise of any Option granted by such
Selling Stockholder the number and class of shares, securities or other property
that such Selling Stockholder would have received in respect of such Selling
Stockholder's Subject Shares if the Option had been exercised immediately prior
to such event relating to Parent or the record date therefor, as applicable.
The provisions of this Section 2.4 shall apply in a like manner to successive
stock dividends, split-ups, mergers, recapitalizations, combinations, exchanges
of shares or extraordinary distributions or similar transactions.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Certain Representations and Warranties of the Stockholders.
----------------------------------------------------------
Each Stockholder, severally and not jointly, represents and warrants to Parent
as follows:
(a) Ownership. Except as specified on Schedule A hereto, such
---------
Stockholder is the sole record and beneficial owner of the number of shares of
Capital Stock set forth opposite such Stockholder's name on such Schedule A and
has full and unrestricted power to dispose of and to vote such shares of Capital
Stock. Such Stockholder does not own any securities of Company on the date
hereof other than the shares of Capital Stock set forth on such Schedule A and
the options to purchase shares of Capital Stock set forth on such Schedule A.
(b) Due Authorization. Such Stockholder has all requisite power and
-----------------
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. In the case of each Stockholder that is not a natural
person, the execution and delivery of this Agreement by such Stockholder and the
consummation by such Stockholder of the transactions contemplated hereby have
been duly authorized by all necessary action, if any, on the part of such
Stockholder. This Agreement has been duly executed and delivered by such
Stockholder and, assuming that this Agreement constitutes the valid and binding
obligation of the other parties hereto, constitutes a valid and binding
obligation of such Stockholder, enforceable against such Stockholder in
accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and to general principles of equity.
(c) No Conflicts. The execution and delivery of this Agreement do
------------
not, and, subject to compliance with the HSR Act, to the extent applicable, the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, conflict with, result in a breach or violation of or
default (with or without notice or lapse of time or both) under, or give rise to
a material obligation, a right of termination, cancellation, or acceleration of
any obligation or a loss of a material benefit under, or require notice to or
the consent of any
4
<PAGE>
person under any agreement, instrument, undertaking, law, rule, regulation,
judgment, order, injunction, decree, determination or award binding on such
Stockholder, other than any such conflicts, breaches, violations, defaults,
obligations, rights or losses that individually or in the aggregate would not
(i) impair the ability of such Stockholder to perform such Stockholder's
obligations under this Agreement or (ii) prevent or delay the consummation of
any of the transactions contemplated hereby.
(d) Purchase for Own Account, Etc. The Parent Common Stock to be
------------------------------
acquired by each Stockholder upon Parent's exercise of an Option shall be so
acquired for such Stockholder's own account, and shall not be sold, transferred
or otherwise disposed of by such Stockholder except in a transaction registered
or exempt from registration under the Securities Act and in compliance with
applicable state securities laws.
Section 3.2 Representations and Warranties of Parent. Parent hereby
----------------------------------------
represents and warrants to each Stockholder that:
(a) Due Authorization. Parent has all requisite corporate power and
-----------------
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Parent and
the consummation by Parent of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Parent. This
Agreement has been duly executed and delivered by Parent and, assuming that this
Agreement constitutes the valid and binding obligation of each Stockholder,
constitutes a valid and binding obligation of Parent, enforceable against Parent
in accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and to general principles of equity.
(b) No Conflicts. The execution and delivery of this Agreement do
------------
not, and, subject to compliance with the HSR Act, to the extent applicable, the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, conflict with, result in a breach or violation of or
default (with or without notice or lapse of time or both) under, or give rise to
a material obligation, right of termination, cancellation, or acceleration of
any obligation or a loss of a material benefit under, or require notice to or
the consent of any person under any agreement, instrument, undertaking, law,
rule, regulation, judgment, order, injunction, decree, determination or award
binding on Parent, other than any such conflicts, breaches, violations,
defaults, obligations, rights or losses that individually or in the aggregate
would not (i) impair the ability of Parent to perform its obligations under this
Agreement or (ii) prevent or delay the consummation of any of the transactions
contemplated hereby.
(c) Purchase for Own Account, Etc. The Options and the Subject
------------------------------
Shares to be acquired upon exercise of the Options are being and shall be
acquired by Parent for its own account, and shall not be sold, transferred or
otherwise disposed of by Parent except in a transaction registered or exempt
from registration under the Securities Act and in compliance with applicable
state securities laws.
5
<PAGE>
ARTICLE IV
CERTAIN COVENANTS
Section 4.1 Certain Covenants of Stockholders.
---------------------------------
(a) Restriction on Transfer of Subject Shares, Proxies and
------------------------------------------------------
Noninterference. During the period from and including the thirtieth calendar
- ---------------
day immediately preceding the Effective Time through and including the earlier
of the Effective Time and the date that is one year after the date on which the
Merger Agreement is terminated pursuant to Section 8.1 thereof (the "Restricted
Period"), no Stockholder shall, directly or indirectly, except pursuant to the
terms of this Agreement or the Merger Agreement, offer for sale, sell, transfer,
tender, pledge, encumber, assign or otherwise dispose of (including in the case
of Preferred Shares, by reason of conversion thereof into Common Shares), or
enter into any contract, option or other arrangement or understanding with
respect to or consent to the offer for sale, sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of (including in the case of
Preferred Shares, by reason of conversion thereof into Common Shares), any or
all of such Stockholder's Subject Shares; provided, however, that the provisions
of this sentence shall not apply to any of Advent Atlantic & Pacific Limited
Partnership, Advent Industrial II, L.P., Advent VI, L.P., Bost & Co., Saturn &
Co. and T.A. Venture Investors Limited Partnership. During the period from and
including the date hereof through and including the last day of the Restricted
Period, no Stockholder shall, directly or indirectly, (i) except pursuant to the
terms of this Agreement, grant any proxies or powers of attorney, deposit any of
such Stockholder's Subject Shares into a voting trust or enter into a voting
agreement with respect to any of such Stockholder's Subject Shares or (ii) take
any action that would make any representation or warranty contained herein
untrue or incorrect or have the effect of impairing the ability of such
Stockholder to perform such Stockholder's obligations under this Agreement or
preventing or delaying the consummation of any of the transactions contemplated
hereby.
(b) Restrictions on Transfer of Parent Common Stock. Prior to the
-----------------------------------------------
second anniversary of any Option Closing, no Stockholder shall sell, transfer or
otherwise dispose of any of the shares of Parent Common Stock received by such
Stockholder in connection with such Option Closing, except (i) pursuant to an
effective registration statement under the Securities Act, (ii) in conformity
with the provisions of Rule 144 promulgated under the Securities Act ("Rule
144"), or (iii) in a transaction which, in the opinion of counsel reasonably
satisfactory to Parent, is not required to be registered under the Securities
Act. Each Stockholder understands and acknowledges that, except as provided in
Section 4.2, Parent shall not be required to maintain the effectiveness of any
registration statement under the Securities Act for the purpose of facilitating
the resale of any such shares of Parent Common Stock by such Stockholder. In the
event of a sale, transfer or other disposition by any Stockholder of any such
shares of Parent Common Stock received by such Stockholder at any Option Closing
pursuant to Rule 144, such Stockholder shall supply Parent with evidence of
compliance with such Rule, in the form of a letter in the form of Annex I hereto
and the opinion of counsel referred to above. Each Stockholder understands and
acknowledges that Parent may instruct its transfer agent to stop the transfer of
any such shares of Parent Common Stock, but that (provided such transfer is not
prohibited by any other provision
6
<PAGE>
of this Agreement) upon receipt of such evidence of compliance, Parent shall
cause the transfer agent to effectuate the transfer of such shares of Parent
Common Stock as indicated in such letter.
(c) Tax and Accounting Treatment. No Stockholder shall take any
----------------------------
position on any federal, state or local income tax return, or take any other
action or reporting position, that is inconsistent with the treatment of the
Merger as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or with the representa tions made
in this Agreement, unless otherwise required pursuant to a "determination" (as
defined in Section 1313(a)(1) of the Code). No Stockholder shall take any action
that could prevent the Merger from being accounted for as a pooling of interests
transaction under Opinion 16 of the Accounting Principles Board and applicable
SEC rules and regulations.
(d) Cooperation. Each Stockholder shall cooperate fully with Parent
-----------
and Company in connection with their respective efforts to fulfill the
conditions to the Merger set forth in Article VII of the Merger Agreement.
(e) Acknowledgments and Waivers. Each Stockholder hereby (i)
---------------------------
acknowledges that such Stockholder is familiar with (A) the provisions of the
certificate of incorporation of Company fixing the powers, preferences and
rights appurtenant to such Stockholder's Subject Shares, (B) the provisions of
the certificate of incorporation and bylaws of Company and of any and all
agreements, understandings or arrangements between such Stockholder and Company
or any other Stockholder relating to the acquisition, disposition or voting of
shares of Capital Stock (including without limitation any restrictions on
transfer, rights of first offer or first refusal, call options, put options,
buy/sell arrangements or preemptive or similar rights, whether fixed or
contingent), and (C) the provisions of the Merger Agreement and this Agreement,
and (ii) consents to the provisions of the Merger Agreement and this Agreement,
(iii) agrees that if and to the extent that the provisions of the Merger
Agreement or this Agreement conflict with or are inconsistent with any of the
provisions of the instruments, agreements, understandings or arrangements
referred to in clauses (i)(A) or (i)(B) of this sentence, the provisions of the
Merger Agreement and of this Agreement shall control and any and all such
conflicts or inconsistencies (and any and all claims and causes of action that
might otherwise exist with respect thereto) are hereby irrevocably waived.
Without limiting the generality or effect of the foregoing, (i) each Stockholder
hereby irrevocably waives any and all claims and causes of action that might
otherwise exist with respect to the manner in which the aggregate consideration
to holders of Capital Stock provided for in the Merger Agreement has been
allocated pursuant to the Merger Agreement among the various classes and series
of Capital Stock, and (ii) each Stockholder hereby agrees that, following any
purchase by Parent of all of such Stockholder's Subject Shares (pursuant to the
Merger, the exercise of any Option or otherwise), such Stockholder will not
assert or seek to exercise any rights that it might have under the First Amended
and Restated Stockholders Agreement dated August 28, 1992 among Company and
certain stockholders of Company, as subsequently amended and restated.
(f) Releases. Each Stockholder hereby fully, unconditionally and
--------
irrevocably releases, effective as of the Effective Time, any and all claims and
causes of action that such Stockholder has or may have against Company or any of
its Subsidiaries or any present or former director, officer, employee or agent
of Company or any of its Subsidiaries (collectively, the
7
<PAGE>
"Released Parties") arising or resulting from or relating to any act, omission,
event or occurrence prior to the Effective Time; provided, however, that such
release shall not apply to any claim or cause of action insofar as it relates
(i) in the case of any Stockholder who is a natural person, to (A) any
entitlement to compensation or benefits earned or accrued by or for the benefit
of such Stockholder prior to the Effective Time in respect of services performed
by such Stockholder to Company, in the ordinary course of Company's business, as
a director, officer or employee of Company, or (B) any entitlement to the
indemnification contemplated by Section 6.18 of the Merger Agreement and (ii) in
the case of Simon Williams and Melinda Horton, (x) to any commissions which are
owed or which may in the future become payable to such Stockholders pursuant to
the Employment Agreement between Company and Simon Williams dated July 28, 1994
and the Employment Agreement between Company and Melinda Horton dated July 28,
1994, respectively, and (y) to any rights possessed by such Stockholders
pursuant to the Agreement among Company, Dysys Limited, Simon Williams and
Melinda Horton dated September 15, 1992 relating to the acquisition of certain
intellectual property included in Company's Obsydian product.
Section 4.2 Registration Rights. On the terms and subject to the
-------------------
conditions set forth in this Section 4.2, as promptly as practicable (and, in
any event, within 30 calendar days) after the first Option Closing, Parent shall
file, and shall thereafter use its reasonable best efforts to cause to become
and remain effective, for so long as the shares of Parent Common Stock received
by any Stockholder in connection with any Option Closing continue to be
Registrable Securities (as hereinafter defined), a registration statement
registering for purposes of the Securities Act the resale of all Registrable
Securities held by the Stockholders (the "Registration Statement"). For so long
as Parent is required to cause the Registration Statement to remain effective,
Parent shall use its reasonable best efforts to cause the Parent Common Stock to
be (x) registered or qualified (to the extent not exempt from such registration
or qualification) for sale under the blue sky laws of such states as any
Stockholder may reasonably request (provided that Parent shall not be required
to qualify to do business in, or consent to general service of process in, any
jurisdiction by reason thereof) and (y) listed on a national securities exchange
or accepted for quotation on the National Association of Securities Dealers
Automated Quotation System.
(b) The obligations of Parent hereunder to file the Registration
Statement and to maintain its effectiveness may be suspended for one or more
periods of time not exceeding 60 calendar days, and/or Parent shall be entitled
to provide to the Stockholders Suspension Notices pursuant to Section 4.2(e) to
be in effect for one or more periods of time not exceeding 60 calendar days, if
the Board of Directors of Parent (or the Executive Committee thereof) shall have
determined in good faith that (i) the filing of the Registration Statement or
the maintenance of its effectiveness, and/or the continued use of any related
prospectus (a "Prospectus"), would require disclosure of nonpublic information
that would materially and adversely affect Parent or (ii) there shall have
occurred any event which makes any statement made in the Registration Statement
or any Prospectus untrue in any material respect or which requires the making of
any changes in the Registration Statement or a Prospectus or other documents so
that (A) in the case of the Registration Statement, it will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
and (B) in the case of a Prospectus, it will not contain any untrue statement of
a
8
<PAGE>
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The preparation and filing of the
Registration Statement, and any sale covered thereby, will be at Parent's
expense, except for underwriting discounts or commissions, brokers' fees and the
fees and disbursements of counsel for any Stockholder related thereto.
(c) Each Stockholder shall promptly provide all information
reasonably requested by Parent for inclusion in the Registration Statement and
any Prospectus. In connection with any sale or other disposition of Registrable
Securities to be effected pursuant to the Registration Statement, Parent and
each Stockholder will provide each other and any underwriter with customary
representations, warranties, covenants, indemnification and contribution.
(d) For purposes of this Agreement, the term "Registrable
Securities" means shares of Parent Common Stock acquired by any Stockholder as
Option Consideration at any Option Closing; provided however that Registrable
Securities will cease to be Registrable Securities when and to the extent that
(i) a registration statement covering such Registrable Securities has been
declared effective under the Securities Act and such Registrable Securities have
been disposed of pursuant to such effective registration statement, (ii) one
year (and, if applicable, a number of additional days equal to the aggregate
number of days during which the obligations of Parent hereunder were suspended
pursuant to Section 4.2(b) or Suspension Notices under Section 4.2(e) were in
effect) has elapsed since the acquisition of such Registrable Securities by the
applicable Stockholder, or (iii) such Registrable Securities are sold or
transferred by a Stockholder otherwise than to another Stockholder. Each
Stockholder shall promptly notify Parent when any of such Stockholder's shares
of Parent Common Stock shall have ceased to be Registrable Securities.
(e) Parent will use reasonable efforts to notify each Stockholder as
promptly as practicable of (i) any request by the Securities and Exchange
Commission (the "SEC") or any other federal or state governmental authority for
amendments or supplements to the Registration Statement or any Prospectus or for
additional information, (ii) the issuance by the SEC or any other federal or
state governmental authority of any stop order suspending the effectiveness of
the Registration Statement or the initiation of any proceedings for that
purpose, (iii) any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, and (iv) any determination of the Board of
Directors of Parent described in Section 4.2(b). Upon receipt of any notice
from Parent of the occurrence of any event of the kind described in the
immediately preceding sentence (each, a "Suspension Notice"), each Stockholder
will immediately discontinue offers, sales and other dispositions of Registrable
Securities covered by the Registration Statement or a Prospectus until such
Stockholder has been advised in writing by Parent that such offers, sales or
other dispositions may be resumed and has received copies of any applicable
supplemental or amended Prospectus or any additional or supplemental filings
that are incorporated or deemed to be incorporated by reference in such
Prospectus.
9
<PAGE>
ARTICLE V
MISCELLANEOUS
Section 5.1 Fees and Expenses. Except to the extent otherwise provided in
-----------------
Section 4.2(b), each party hereto shall pay its own expenses incident to
preparing for, entering into and carrying out this Agreement and the
consummation of the transactions contemplated hereby.
Section 5.2 Amendment and Term. This Agreement may not be amended except
------------------
by an instrument in writing signed on behalf of each of the parties hereto.
Notwithstanding anything to the contrary contained herein, upon any termination
of the Merger Agreement pursuant to Section 8.1(a)(i), 8.1(a)(ii) or 8.1(a)(iii)
thereof, or any termination of the Merger Agreement by Company pursuant to
Section 8.1(a)(vi) thereof, this Agreement and the proxy granted pursuant to
Section 1.2 shall immediately terminate and thereupon cease to have any further
force or effect; except that (i) no such termination will relieve any party
hereto of any liability for any breach hereof occurring prior to such
termination and (ii) the provisions of Section 4.1(e) and this Article V shall
survive such termination and continue to be in full force and effect in
accordance with their terms.
Section 5.3 Extension; Waiver. Any agreement on the part of a party to
-----------------
waive any provision of this Agreement, or to extend the time for any performance
hereunder, shall be valid only if set forth in an instrument in writing signed
on behalf of such party. The failure of any party to this Agreement to assert
any of its rights under this Agreement or otherwise shall not constitute a
waiver of such rights.
Section 5.4 Legend. Each Stockholder acknowledges and agrees that a
------
legend substantially in the form set forth below shall be placed on certificates
representing shares of Parent Common Stock received by such Stockholder in
connection with any Option Closing, which legend shall be removed by delivery of
substitute certificates upon the second anniversary of such Option Closing, or
upon (a) the earlier sale of such shares of Parent Common Stock (i) pursuant to
an effective registration statement under the Securities Act or (ii) in
conformity with the provisions of Rule 144 or (b) the receipt by Parent (or its
transfer agent) of an opinion in form and substance reasonably satisfactory to
Parent (or its transfer agent) from counsel reasonably satisfactory to Parent
(or its transfer agent) to the effect that such legend is no longer required for
purposes of the Securities Act.
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE
HOLDER OF SUCH SHARES MAY SELL, TRANSFER OR OTHERWISE DISPOSE OF SUCH SHARES
ONLY PURSUANT TO (1) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR (2) A VALID EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT. THE FOREGOING RESTRICTIONS ON TRANSFER ARE SET FORTH
IN A STOCKHOLDER AGREEMENT, DATED JUNE 20, 1998, A COPY OF WHICH MAY BE
OBTAINED FROM STERLING SOFTWARE, INC. "
10
<PAGE>
Section 5.5 Entire Agreement; Third-Party Beneficiaries. This Agreement
-------------------------------------------
constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement, and is not intended to confer upon any person
other than the parties any rights or remedies; provided, however, that the
provisions of Sections 4.1(e) and 4.1(f) are intended to inure to the benefit
of, and to be enforceable by, the Released Parties.
Section 5.6 Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflict of
laws thereof.
Section 5.7 Notices. All notices, requests, claims, demands and other
-------
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, or sent by overnight courier (providing proof of
delivery), in the case of the Stockholders, to the address set forth on Schedule
A hereto or, in the case of Parent, to the address set forth below (or, in each
case, at such other address as shall be specified by like notice).
Sterling Software, Inc.
300 Crescent Court
Suite 1200
Dallas, Texas 75201
Attention: Don J. McDermett, Jr., Esq.
Telecopy: (214) 981-1265
with a copy (which shall not constitute notice) to:
Jones, Day, Reavis & Pogue
2300 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: Mark E. Betzen, Esq.
Telecopy: (214) 969-5100
Section 5.8 Assignment. Neither this Agreement nor any of the rights,
----------
interests, or obligations under this Agreement may be assigned or delegated, in
whole or in part, by operation of law or otherwise, by any Stockholder without
the prior written consent of Parent, and any such assignment or delegation that
is not consented to shall be null and void. This Agreement, together with any
rights, interests, or obligations of Parent hereunder, may be assigned or
delegated, in whole or in part, by Parent without the consent of or any action
by any Stockholder upon notice by Parent to each Stockholder affected thereby as
herein provided. Subject to the preceding sentence, this Agreement shall be
binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns (including without limitation an person
to whom any Subject Shares are sold, transferred or assigned).
11
<PAGE>
Section 5.9 Further Assurances. Each Stockholder and Parent shall execute
------------------
and deliver all other documents and instruments and take all other action that
may be reasonably necessary in order to effectuate the provisions hereof and to
consummate the transactions provided for herein.
Section 5.10 Enforcement. Irreparable damage would occur in the event
-----------
that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. Accordingly, the parties
shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this Agreement
in the Court of Chancery in and for New Castle County in the State of Delaware
(or, if such court lacks subject matter jurisdiction, any appropriate state or
federal court in New Castle County in the State of Delaware), this being in
addition to any other remedy to which they are entitled at law or in equity.
Each of the parties hereto (i) shall submit itself to the personal jurisdiction
of the Court of Chancery in and for New Castle County in the State of Delaware
(or, if such court lacks subject matter jurisdiction, any appropriate state or
federal court in New Castle County in the State of Delaware) in the event any
dispute arises out of this Agreement or any of the transactions contemplated
hereby, (ii) shall not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court, and (iii) shall not bring
any action relating to this Agreement or any of the transactions contemplated
hereby in any court other than the Court of Chancery in and for New Castle
County in the State of Delaware (or, if such court lacks subject matter
jurisdiction, any appropriate state or federal court in New Castle County in the
State of Delaware).
Section 5.11 Severability. Whenever possible, each provision or portion
------------
of any provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
Section 5.12 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same instrument and
shall become effective when one or more counterparts have been signed by each
party and delivered to the other parties.
[signature page follows]
12
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
signed as of the day and year first written above.
STERLING SOFTWARE, INC.
By: /s/ Don J. McDermett, Jr.
------------------------------------------
Don J. McDermett, Jr.
Senior Vice President and General Counsel
STOCKHOLDERS:
GENERAL ATLANTIC PARTNERS II, L.P.
By: General Atlantic Partners, LLC,
------------------------------------------
General Partner
---------------
By: /s/ William O. Grabe
--------------------------------------
William O. Grabe
General Partner
GAP-SYNON PARTNERS, L.P.
By: /s/ Stephen P. Reynolds
------------------------------------------
Stephen P. Reynolds
General Partner
GAP COINVESTMENT PARTNERS, L.P.
By: /s/ William O. Grabe
--------------------------------------
William O. Grabe
General Partner
ADVENT ATLANTIC & PACIFIC LIMITED PARTNERSHIP
By: TA Associates AAP Limited Partnership, its
------------------------------------------
General Partner
---------------
By: TA Associates AAP Venture Limited
--------------------------------------
Partnership, its General Partner
--------------------------------
By: TA Associates, Inc., its
General Partner
By: /s/ Brian J. Conway
----------------------------------
Brian J. Conway
Managing Director
13
<PAGE>
ADVENT INDUSTRIAL II, L.P.
By: TA Associates VI, L.P.,
--------------------------------------
its General Partner
--------------------------------------
By: TA Associates, Inc.,
----------------------------------
its General Partner
----------------------------------
By: /s/ Brian J. Conway
------------------------------
Brian J. Conway
Managing Director
ADVENT VI, L.P.
By: TA Associates VI, L.P.,
--------------------------------------
its General Partner
--------------------------------------
By: TA Associates, Inc.,
----------------------------------
its General Partner
----------------------------------
By: /s/ Brian J. Conway
------------------------------
Brian J. Conway
Managing Director
CHESTNUT III LIMITED PARTNERSHIP
By: TA Associates VI, L.P.,
its Attorney-in-Fact
By: TA Associates, Inc.,
its General Partner
By: /s/ Brian J. Conway
--------------------------------------
Brian J. Conway
Managing Director
DESIFTA LIMITED
By: TA Associates V Limited Partnership,
its Attorney-in-Fact
By: /s/ Brian J. Conway
--------------------------------------
Brian J. Conway
Authorized Signator
T.A. VENTURE INVESTORS LIMITED PARTNERSHIP
By: /s/ Brian J. Conway
--------------------------------------
Brian J. Conway
General Partner
/s/ Simon Williams
--------------------------------------
SIMON WILLIAMS
[Signature Page to Stockholder Agreement]
14
<PAGE>
/s/ Melinda Horton
-----------------------------------
MELINDA HORTON
/s/ Richard Goldberg
-----------------------------------
RICHARD GOLDBERG
/s/ William Grabe
-----------------------------------
WILLIAM GRABE
[Signature Page to Stockholder Agreement]
15
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Total No. of
Total No. of Total No. of Series Total No. of Series Common Shares
Name and Address Common Shares A Preferred Shares D Preferred Shares Subject to Options
of Stockholder Beneficially Owned Beneficially Owned Beneficially Owned Beneficially Owned
---------------- ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
General Atlantic Partners II, L.P. 1,484,575 2,411,064 3,150,165 -0-
c/o David Hodgson
3 Pickwick Plaza
Greenwich, CT 06830
GAP-Synon Partners, L.P. 26,823 143,556 109,895 -0-
c/o David Hodgson
3 Pickwick Plaza
Greenwich, CT 06830
GAP Coinvestment Partners, L.P. 50,490 -0- -0- -0-
c/o David Hodgson
3 Pickwick Plaza
Greenwich, CT 06830
Advent Atlantic & Pacific 19,250 19,250 51,796 -0-
Limited Partnership
c/o Brian Conway
High Street Tower
125 High Street Suite 2500
Boston, MA 02110
Advent Industrial II, L.P. 9,500 9,500 25,561 -0-
c/o Brian Conway
High Street Tower
125 High Street Suite 2500
Boston, MA 02110
Advent VI, L.P. 88,750 88,750 238,797 -0-
c/o Brian Conway
High Street Tower
125 High Street Suite 2500
Boston, MA 02110
Bost & Co. 10,000 10,000 26,907 -0-
c/o Brian Conway
High Street Tower
125 High Street Suite 2500
Boston, MA 02110
Saturn & Co. 4,130 4,130 11,112 -0-
c/o Brian Conway
High Street Tower
125 High Street Suite 2500
Boston, MA 02110
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
T.A. Venture Investors 1,500 1,500 4,036 -0-
Limited Partnership
c/o Brian Conway
High Street Tower
125 High Street Suite 2500
Boston, MA 02110
Simon Williams 1,990,316 -0- -0- -0-
3 Butlers Wharf West
40 Shad Thames
London, SE1 2YA
England
Melinda Horton 715,473 -0- -0- -0-
3 Butlers Wharf West
40 Shad Thames
London, SE1 2YA
England
Richard Goldberg -0- -0- -0- 500,000
56 Elizabeth Circle
Greenbrae, CA 94904
William Grabe -0- -0- -0- 360,000
Two River Lane
Westport, CT 06880
</TABLE>
17
<PAGE>
ANNEX I
[Name] [Date]
On _______________ __, ____, Stockholder sold the securities of
Sterling Software, Inc., a Delaware corporation ("Parent"), described below in
the space provided for that purpose (the "Securities"). The Securities were
received by Stockholder in connection with the merger of Synon Corporation, a
Delaware corporation, with and into Sterling Software (Southern), Inc., a
Georgia corporation and wholly owned subsidiary of Parent.
Based upon the most recent report or statement filed by Parent with
the Securities and Exchange Commission, the Securities sold by Stockholder were
within the prescribed limitations set forth in paragraph (e) of Rule 144
promulgated under the Securities Act of 1933, as amended (the "Securities Act").
Stockholder hereby represents that the Securities were sold in
"brokers' transactions" within the meaning of Section 4(4) of the Securities Act
or in transactions directly with a "market maker" as that term is defined in
Section 3(a)(38) of the Securities Exchange Act of 1934, as amended.
Stockholder further represents that Stockholder has not solicited or arranged
for the solicitation of orders to buy the Securities, and that Stockholder has
not made any payment in connection with the offer or sale of the Securities to
any person other than to the broker who executed the order in respect of such
sale.
Very truly yours,
[Space to be provided for description of the Securities.]
18
<PAGE>
Exhibit 10.2
------------
STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT, dated as of June 20, 1998 (this "Agreement"),
is made and entered into between Sterling Software, Inc., a Delaware corporation
("Parent"), and International Business Machines Corporation, a New York
corporation ("Stockholder").
RECITALS:
A. Parent, Sterling Software (Southern), Inc., a Georgia corporation and
wholly owned subsidiary of Parent ("Merger Sub"), and Synon Corporation, a
Delaware corporation ("Company"), propose to enter into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to which
Company will merge with and into Merger Sub (the "Merger") on the terms and
subject to the conditions set forth in the Merger Agreement. Except as
otherwise defined herein, terms used herein with initial capital letters have
the respective meanings ascribed thereto in the Merger Agreement.
B. As of the date hereof, Stockholder beneficially owns and is entitled
to dispose of (or to direct the disposition of) and to vote (or to direct the
voting of) the number of shares of capital stock of Company ("Capital Stock")
set forth opposite Stockholder's name on Schedule A hereto (such shares of
Capital Stock, together with any other shares of capital stock of Company, the
beneficial ownership of which is acquired by Stockholder during the period from
and including the date hereof through and including the date on which this
Agreement terminates, are collectively referred to herein as Stockholder's
"Subject Shares").
C. As a condition and inducement to Parent's willingness to enter into
the Merger Agreement, Parent has requested that Stockholder agree, and
Stockholder has agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties and covenants contained in this Agreement and the Merger Agreement
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
VOTING AGREEMENT
Section 1.1 Agreement to Vote Shares. During the period from
------------------------
and including the date hereof through and including the earliest of (i) the
Effective Time, (ii) the date on which the Merger Agreement is terminated
pursuant to Section 8.1 thereof, and (iii) September 30, 1998, at any meeting of
the stockholders of Company called to consider and vote upon the adoption of the
Merger Agreement (and at any and all postponements and adjournments thereof),
and in connection with any action to be taken in respect of the adoption of the
Merger Agreement by
<PAGE>
written consent of stockholders of Company, Stockholder shall vote or cause to
be voted (including by written consent, if applicable) all of Stockholder's
Subject Shares in favor of the adoption of the Merger Agreement and in favor of
any other matter necessary for the consummation of the transactions contemplated
by the Merger Agreement and considered and voted upon at any such meeting or
made the subject of any such written consent, as applicable.
Section 1.2 Irrevocable Proxy.
-----------------
(a) Grant of Proxy. STOCKHOLDER HEREBY APPOINTS PARENT AND ANY
--------------
DESIGNEE OF PARENT, EACH OF THEM INDIVIDUALLY, STOCKHOLDER'S PROXY AND ATTORNEY-
IN-FACT PURSUANT TO THE PROVISIONS OF SECTION 212 OF THE DELAWARE GENERAL
CORPORATION LAW, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, TO VOTE OR
ACT BY WRITTEN CONSENT WITH RESPECT TO STOCKHOLDER'S SUBJECT SHARES IN
ACCORDANCE WITH SECTION 1.1 HEREOF. THIS PROXY IS GIVEN TO SECURE THE
PERFORMANCE OF THE DUTIES OF STOCKHOLDER UNDER THIS AGREEMENT. STOCKHOLDER
AFFIRMS THAT THIS PROXY IS COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE.
STOCKHOLDER SHALL TAKE SUCH FURTHER ACTION OR EXECUTE SUCH OTHER INSTRUMENTS AS
MAY BE NECESSARY TO EFFECTUATE THE INTENT OF THIS PROXY.
(b) Other Proxies Revoked. Stockholder represents that any
---------------------
proxies heretofore given in respect of Stockholder's Subject Shares are not
irrevocable, and that all such proxies are hereby revoked.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Certain Representations and Warranties of the
---------------------------------------------
Stockholder. Stockholder represents and warrants to Parent as follows:
- -----------
(a) Ownership. Except as specified on Schedule A hereto,
---------
Stockholder is the sole record and beneficial owner of the number of shares of
Capital Stock set forth opposite Stockholder's name on such Schedule A and has
full and unrestricted power to dispose of and to vote such shares of Capital
Stock. Stockholder does not own any securities of Company on the date hereof
other than the shares of Capital Stock set forth on such Schedule A and the
options to purchase shares of Capital Stock set forth on such Schedule A.
(b) Due Authorization. Stockholder has all requisite power and
-----------------
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Stockholder
and the consummation by Stockholder of the transactions contemplated hereby have
been duly authorized by all necessary action, if any, on the part of
Stockholder. This Agreement has been duly executed and delivered by Stockholder
and, assuming that this Agreement constitutes the valid and binding obligation
of Parent, constitutes a valid and binding obligation of Stockholder,
enforceable against Stockholder in
2
<PAGE>
accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and to general principles of equity.
(c) No Conflicts. The execution and delivery of this Agreement
------------
do not, and the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not, conflict with, result in a
breach or violation of or default (with or without notice or lapse of time or
both) under, or give rise to a material obligation, a right of termination,
cancellation, or acceleration of any obligation or a loss of a material benefit
under, or require notice to or the consent of any person under any agreement,
instrument, undertaking, law, rule, regulation, judgment, order, injunction,
decree, determination or award binding on Stockholder, other than any such
conflicts, breaches, violations, defaults, obligations, rights or losses that
individually or in the aggregate would not (i) impair the ability of Stockholder
to perform Stockholder's obligations under this Agreement or (ii) prevent or
delay the consummation of any of the transactions contemplated hereby.
Section 2.2 Representations and Warranties of Parent. Parent hereby
----------------------------------------
represents and warrants to Stockholder that:
(a) Due Authorization. Parent has all requisite corporate power
-----------------
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Parent and
the consummation by Parent of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Parent. This
Agreement has been duly executed and delivered by Parent and, assuming that this
Agreement constitutes the valid and binding obligation of Stockholder,
constitutes a valid and binding obligation of Parent, enforceable against Parent
in accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and to general principles of equity.
(b) No Conflicts. The execution and delivery of this Agreement
------------
do not, and the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not, conflict with, result in a
breach or violation of or default (with or without notice or lapse of time or
both) under, or give rise to a material obligation, right of termination,
cancellation, or acceleration of any obligation or a loss of a material benefit
under, or require notice to or the consent of any person under any agreement,
instrument, undertaking, law, rule, regulation, judgment, order, injunction,
decree, determination or award binding on Parent, other than any such conflicts,
breaches, violations, defaults, obligations, rights or losses that individually
or in the aggregate would not (i) impair the ability of Parent to perform its
obligations under this Agreement or (ii) prevent or delay the consummation of
any of the transactions contemplated hereby.
3
<PAGE>
ARTICLE III
CERTAIN COVENANTS
Section 3.1 Certain Covenants of Stockholder.
--------------------------------
(a) Restriction on Transfer of Subject Shares, Proxies and
------------------------------------------------------
Noninterference. During the period from and including the thirtieth calendar day
- ---------------
immediately preceding the Effective Time through and including the earliest of
(i) the Effective Time, (ii) the date on which the Merger Agreement is
terminated pursuant to Section 8.1 thereof, and (iii) September 30, 1998 (the
"Restricted Period"), Stockholder shall not directly or indirectly (except
pursuant to the terms of this Agreement or the Merger Agreement and for any
transfer to a wholly owned subsidiary of Stockholder that agrees in a writing
delivered to Parent to be bound by the provisions hereof), offer for sale, sell,
transfer, tender, pledge, encumber, assign or otherwise dispose of (including in
the case of Preferred Shares, by reason of conversion thereof into Common
Shares), or enter into any contract, option or other arrangement or
understanding with respect to or consent to the offer for sale, sale, transfer,
tender, pledge, encumbrance, assignment or other disposition of (including in
the case of Preferred Shares, by reason of conversion thereof into Common
Shares), any or all of Stockholder's Subject Shares. During the period from and
including the date hereof through and including the last day of the Restricted
Period, no Stockholder shall, directly or indirectly (i) except pursuant to the
terms of this Agreement, grant any proxies or powers of attorney, deposit any of
Stockholder's Subject Shares into a voting trust or enter into a voting
agreement with respect to any of Stockholder's Subject Shares or (ii) take any
action that would make any representation or warranty contained herein untrue or
incorrect or have the effect of impairing the ability of Stockholder to perform
Stockholder's obligations under this Agreement or preventing or delaying the
consummation of any of the transactions contemplated hereby.
(b) Tax Treatment. Stockholder shall not take any position on
-------------
any federal, state or local income tax return, or take any other action or
reporting position, that is inconsistent with the treatment of the Merger as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), unless otherwise required pursuant to a
"determination" (as defined in Section 1313(a)(1) of the Code).
(c) Cooperation. Stockholder shall use reasonable efforts to
-----------
cooperate with Parent and Company in connection with their respective efforts to
fulfill the conditions to the Merger set forth in Article VII of the Merger
Agreement.
(d) Consents and Waivers. Stockholder hereby represents and
--------------------
warrants to Parent that, except for the specific provisions of specific
agreements referred to below, Stockholder is not aware of any contract or
agreement between Stockholder and Company or Stockholder and any other Principal
Stockholder that would conflict with or be breached by reason of the execution,
delivery or performance of this Agreement or the Merger Agreement. Without
limiting the generality or effect of the foregoing, Stockholder hereby (i)
irrevocably waives any and all claims and causes of action that might otherwise
exist with respect to the manner in which the aggregate consideration to holders
of Capital Stock provided for in the
4
<PAGE>
Merger Agreement has been allocated pursuant to the Merger Agreement among the
various classes and series of Capital Stock, (ii) agrees that, following any
purchase by Parent of all of Stockholder's Subject Shares (pursuant to the
Merger), Stockholder will not assert or seek to exercise any rights that it
might have under the First Amended and Restated Stockholders Agreement dated
August 28, 1992 among Company and certain stockholders of Company, as
subsequently amended and restated (the "Pre-Existing Stockholder Agreement"),
(iii) irrevocably waives all rights under Sections 8.01 and 8.02 of the Stock
Purchase Agreement dated as of August 28, 1992 between Company and Stockholder,
as amended on May 28, 1997 (the "Series E Preferred Stock Purchase Agreement"),
that it might otherwise have as a result of the execution, delivery or
performance of the Merger Agreement by Parent, Merger Sub and Company or the
consummation of the transactions contemplated thereby (and any and all claims
and causes of action that might otherwise exist with respect thereto), (iv)
agrees that it will not assert or seek to exercise any rights that it might have
under Sections 7.16 and 8.01 of the Series E Preferred Stock Purchase Agreement
during the period from and including the date hereof through and including the
date on which this Agreement terminates, and (v) assigns, transfers and conveys
to Parent all rights that Stockholder might have under Section 8.01 of the
Series E Preferred Stock Purchase Agreement.
(e) Releases. Stockholder hereby fully, unconditionally and
--------
irrevocably releases, effective as of the Effective Time, any and all claims and
causes of action that Stockholder has or may have against Company or any of its
Subsidiaries or any present or former director, officer, employee or agent of
Company or any of its Subsidiaries (collectively, the "Released Parties")
arising solely out of (i) Stockholder's ownership of Subject Shares (including
any and all claims and causes of action based upon any alleged breach of
fiduciary duty), (ii) the Series E Preferred Stock Purchase Agreement, or (iii)
the Pre-Existing Stockholder Agreement.
(f) Restrictions on Transfer of Shares of Parent Common Stock.
---------------------------------------------------------
Stockholder shall not sell, transfer or otherwise dispose of any shares of
Parent Common Stock issued to Stockholder upon the consummation of the Merger in
exchange for Subject Shares ("Parent Shares") except (i) pursuant to an
effective registration statement under the Securities Act or (ii) as permitted
by, and in accordance with, Rule 144 or any other applicable exemption from
registration under the Securities Act. Stockholder hereby acknowledges that,
except as expressly provided in the Merger Agreement, Parent is under no
obligation to register the sale, transfer or other disposition of any such
Parent Shares under the Securities Act or to take any other action necessary for
the purpose of making an exemption from registration thereunder available. In
addition (except for transfers of Parent Shares to a wholly owned subsidiary of
Stockholder that agrees in a writing delivered to Parent to be bound by the
provisions hereof), from and after the Effective Time, Stockholder shall not
sell, transfer or otherwise dispose of any Parent Shares beneficially owned by
it (including any Parent Shares received by it in connection with the Merger)
until after such time as financial results covering at least 30 days of combined
operations of Company and Parent have been published by Parent in the form of a
quarterly earnings report, an effective registration statement filed with the
SEC, a report to the SEC on Form 10-K, 10-Q or 8-K, or any other public filing
or announcement which includes such combined financial results; provided,
however, that the provisions of this sentence shall lapse and cease to be of any
force or effect at the close of business on December 31, 1998. Stockholder
acknowledges that Parent will issue stop transfer instructions to its transfer
agent with respect to the Parent Shares and that a
5
<PAGE>
restrictive legend will be placed on certificates delivered to me evidencing the
Parent Shares in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN
CONNECTION WITH A MERGER WHICH IS BEING ACCOUNTED FOR AS A
POOLING OF INTERESTS. THE SHARES MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF (I) UNTIL THE EARLIER OF DECEMBER 31, 1998
AND SUCH TIME AS STERLING SOFTWARE, INC. SHALL HAVE PUBLISHED
FINANCIAL RESULTS COVERING AT LEAST 30 DAYS OF COMBINED
OPERATIONS AFTER THE EFFECTIVE TIME OF SUCH MERGER AND (II)
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT.
REFERENCE IS MADE TO THAT CERTAIN STOCKHOLDER AGREEMENT BETWEEN
THE REGISTERED HOLDER HEREOF AND THE ISSUER, A COPY OF WHICH IS
ON FILE IN THE PRINCIPAL OFFICE OF STERLING SOFTWARE, INC.,
WHICH CONTAINS FURTHER RESTRICTIONS ON THE TRANSFERABILITY OF
THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY."
The restrictive legend set forth above will be removed by delivery of substitute
certificates without such legend as follows: (i) the restrictions included
therein relating to compliance with the Securities Act will be so removed when
such restrictions are no longer required for purposes of assuring compliance
with the Securities Act, (ii) the first sentence thereof and the restrictions
therein relating to pooling of interest accounting treatment will be so removed
following the close of business on December 31, 1998 or when no longer required
for purposes of assuring compliance with the requirements for qualification of
the Merger for pooling of interest accounting treatment, whichever is earlier,
and (iii) the last sentence thereof will be so removed when the last of the
other provisions thereof have been so removed. In each such event, Parent will
also modify or rescind the stop transfer instructions referred to above in a
consistent manner.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Fees and Expenses. Each party hereto shall pay its own
-----------------
expenses incident to preparing for, entering into and carrying out this
Agreement and the consummation of the transactions contemplated hereby.
Section 4.2 Amendment and Term. This Agreement may not be amended except
------------------
by an instrument in writing signed on behalf of each of the parties hereto.
Notwithstanding anything to
6
<PAGE>
the contrary herein contained, upon the earliest to occur of (i) the Effective
Time, (ii) any termination of the Merger Agreement pursuant to Section 8.1
thereof, and (iii) September 30, 1998, this Agreement and the proxy granted
pursuant to Section 1.2 shall immediately terminate and shall thereupon cease to
have any further force or effect; except that (x) no such termination will
relieve any party hereto of any liability for any breach hereof occurring prior
to such termination and (y) the provisions of Sections 3.1(d), 3.1(e) and 3.1(f)
and this Article IV shall survive any termination hereof that occurs by reason
of the occurrence of the Effective Time and continue to be in full force and
effect in accordance with their terms.
Section 4.3 Extension; Waiver. Any agreement on the part of a party to
-----------------
waive any provision of this Agreement, or to extend the time for any performance
hereunder, shall be valid only if set forth in an instrument in writing signed
on behalf of such party. The failure of any party to this Agreement to assert
any of its rights under this Agreement or otherwise shall not constitute a
waiver of such rights.
Section 4.4 Entire Agreement; Third-Party Beneficiaries. This Agreement
-------------------------------------------
constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement, and is not intended to confer upon any person
other than the parties any rights or remedies; provided, however, that the
provisions of Sections 3.1(d) and 3.1(e) are intended to inure to the benefit
of, and to be enforceable by, the Released Parties.
Section 4.5 Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflict of
laws thereof.
Section 4.6 Notices. All notices, requests, claims, demands and other
-------
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, or sent by overnight courier (providing proof of
delivery), in the case of the Stockholder, to the address set forth on Schedule
A hereto or, in the case of Parent, to the address set forth below (or, in each
case, at such other address as shall be specified by like notice).
Sterling Software, Inc.
300 Crescent Court
Suite 1200
Dallas, Texas 75201
Attention: Don J. McDermett, Jr.
Telecopy: (214) 981-1265
7
<PAGE>
with a copy (which shall not constitute notice) to:
Jones, Day, Reavis & Pogue
2300 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: Mark E. Betzen, Esq.
Telecopy: (214) 969-5100
Section 4.7 Assignment. Neither this Agreement nor any of the rights,
----------
interests, or obligations under this Agreement may be assigned or delegated, in
whole or in part, by operation of law or otherwise (except in connection with a
transfer of Subject Shares to a wholly owned subsidiary of Stockholder that
agrees in a writing delivered to Parent to be bound by the provisions hereof),
by Stockholder without the prior written consent of Parent, and any such
assignment or delegation that is not consented to shall be null and void. This
Agreement, together with any rights, interests, or obligations of Parent
hereunder, may be assigned or delegated, in whole or in part, by Parent without
the consent of or any action by Stockholder upon notice by Parent to Stockholder
affected thereby as herein provided. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns (including without
limitation any person to whom any Subject Shares are sold, transferred or
assigned).
Section 4.8 Further Assurances. Stockholder and Parent shall execute and
------------------
deliver all other documents and instruments and take all other action that may
be reasonably necessary in order to effectuate the provisions hereof and to
consummate the transactions provided for herein. A copy of a draft of the Merger
Agreement, dated June 18, 1998, was furnished to Stockholder in connection with
the execution and delivery of this Agreement. Parent hereby covenants that the
Merger Agreement that is actually executed and delivered by the parties thereto
will not include any revisions to Article II or Section 6.15 thereof that are
adverse to Stockholder.
Section 4.9 Enforcement. Irreparable damage would occur in the event
-----------
that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. Accordingly, the parties
shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this Agreement
in the Court of Chancery in and for New Castle County in the State of Delaware
(or, if such court lacks subject matter jurisdiction, any appropriate state or
federal court in New Castle County in the State of Delaware), this being in
addition to any other remedy to which they are entitled at law or in equity.
Each of the parties hereto (i) shall submit itself to the personal jurisdiction
of the Court of Chancery in and for New Castle County in the State of Delaware
(or, if such court lacks subject matter jurisdiction, any appropriate state or
federal court in New Castle County in the State of Delaware) in the event any
dispute arises out of this Agreement or any of the transactions contemplated
hereby, (ii) shall not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court, and (iii) shall not bring
any action relating to this Agreement or any of the transactions contemplated
hereby in any court other than the Court of Chancery in and for New Castle
County in the State of Delaware (or, if
8
<PAGE>
such court lacks subject matter jurisdiction, any appropriate state or federal
court in New Castle County in the State of Delaware).
Section 4.10 Severability. Whenever possible, each provision or portion
------------
of any provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
Section 4.11 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same instrument and
shall become effective when one or more counterparts have been signed by each
party and delivered to the other parties.
[signature page follows]
9
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed as of the day and year first written above.
STERLING SOFTWARE, INC.
By: /s/ Don J. McDermett, Jr.
---------------------------------
Don J. McDermett, Jr.
Senior Vice President and
General Counsel
INTERNATIONAL BUSINESS MACHINES CORPORATION
By: /s/ Suzanne C. Lewis
---------------------------------
Suzanne C. Lewis
Corporate Development Consultant
10
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Total No. of
Total No. of Common
Series E Shares
Preferred Subject to
Shares Options
Beneficially Beneficially
Name and Address of Stockholder Owned Owned
- ------------------------------- ------------ ------------
<S> <C> <C>
International Business Machines 1,666,667 -0-
Corporation
1 New Orchard Road
Armonk, New York 10504
Attention: Donald Westfall
Associate General Counsel
</TABLE>
<PAGE>
Exhibit 99.1
------------
STERLING SOFTWARE TO ACQUIRE
SYNON CORPORATION
DALLAS, TX and LARKSPUR, CA, June 22, 1998 - Sterling Software, Inc. (SSW-
NYSE), the leading provider of enterprise application development solutions, and
Synon Corporation, the leading provider of AS/400 application development
solutions, today announced they have signed a definitive agreement for Sterling
Software to purchase Synon in a stock-for-stock merger transaction.
Approximately 2,979,000 Sterling Software common shares will be issued in
connection with the transaction. Based upon recent closing prices for Sterling
Software's common stock, the acquisition has a total value of approximately $79
million. The companies anticipate closing in July 1998.
The proposed merger is subject to the approval of Synon's stockholders and
compliance with certain regulatory requirements, but has received unanimous
approval from the board of directors of Synon. For accounting purposes, the
merger is planned to be treated as a pooling of interests.
Synon is known for its leadership in model-based application development
for IBM AS/400 and Windows NT(TM) platforms. Synon's technology combines model-
based application development with pattern libraries of reusable objects,
allowing software developers to efficiently implement business changes into
their applications.
"With the addition of Synon's products to our product portfolio, we're able
to expand our leadership position in the enterprise application development
market to include the AS/400 market, while delivering additional NT
capabilities," said Sterling L. Williams, president and chief executive officer
of Sterling Software. He added: "This acquisition will help meet the changing
<PAGE>
needs of many of our large-scale customers who also have AS/400 and NT
environments, while also offering the strength of Sterling Software's COOL
product portfolio to the Synon customer base. We'll be able to offer Synon's
customers the industry's most advanced and comprehensive environment for
enterprise-scale, business-driven, component-based application development."
Mr. Williams said that execution of Sterling Software's on-going acquisition
strategy has increased stockholder value by accelerating revenue growth and
enhancing earnings per share. He also noted that the acquisition of Synon is
expected to be accretive to Sterling Software's earnings per share.
Richard H. Goldberg, president and chief executive officer of Synon, said,
"Sterling Software is one of the most innovative application development
companies in the industry. By joining ranks with a financially strong, rapidly
growing market leader, we're confident that we've made an excellent decision
that will benefit our customers, employees and stockholders."
Sterling Software's fiscal 1998 applications management revenue
expectations, exclusive of the proposed Synon acquisition, are approximately
$300 million. For the year ended December 31, 1997, Synon had revenue of $79
million.
Synon is a privately held company with solutions and services that help
corporations deploy and maintain applications on AS/400, UNIX and NT platforms.
Synon has partnered with a wide variety of industry leaders, including Microsoft
and IBM, to create a strategic foundation in a rapidly growing, dynamic
marketplace. Founded in 1983, Synon has approximately 500 employees and is
headquartered near San Francisco in Larkspur, California. The company has
international offices in the U.K., France, Italy, Australia, and Japan, and more
than 65 distributors worldwide. For more information, see Synon's Web site at
http://www.synon.com.
Sterling Software is a leading provider of software and services for the
applications management, systems management and federal systems markets.
Sterling Software, with its headquarters in Dallas, has a worldwide installed
base of more than 20,000 customer sites and has 3,100 employees in 85 offices
worldwide. For more information on Sterling Software, visit the company's Web
site at http://www.sterling.com.
<PAGE>
This news release contains certain forward-looking statements that reflect
the current views and expectations of Sterling Software with respect to future
events. Such statements are subject to a number of risks, uncertainties and
assumptions detailed in Sterling Software's periodic reports filed with the
Securities and Exchange Commission. Actual results may vary significantly.
<TABLE>
<S> <C> <C>
CONTACTS: Julie Kupp Cindy Foor
Vice President, Investor Relations Director, Corporate Communications
Sterling Software, Inc. Sterling Software, Inc.
(214) 981-1000 (214) 981-1000
[email protected] [email protected]
Shawn Gathas
Marketing Communications Manager
Synon Corporation
(415) 461-5000, ext. 1860
[email protected]
</TABLE>
Names used herein may be trademarks or registered trademarks
of their respective companies.
