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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
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Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934
INTERLINK COMPUTER SCIENCES, INC.
(Name of Subject Company)
INTERLINK COMPUTER SCIENCES, INC.
(Name of Person(s) Filing Statement)
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Common Stock, $.001 par value
(Title of Class of Securities)
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458747 10 2
(CUSIP Number of Class of Securities)
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Augustus J. Berkeley
President and Chief Executive Officer
47370 Fremont Boulevard
Fremont, California 94538
(510) 657-9800
(Name, address and telephone number of person
authorized to receive notices and communications on
behalf of the person(s) filing statement)
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With a copy to:
Thomas C. DeFilipps, Esq.
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304
(650) 493-9300
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Item 1. Security and Subject Company.
The name of the subject company is Interlink Computer Sciences, Inc., a
Delaware corporation (the "Company"). The address of the principal executive
offices of the Company is 47370 Fremont Boulevard, Fremont, California 94538.
The title of the class of equity securities to which this
Solicitation/Recommendation Statement on Schedule 14D-9 (this "Schedule 14D-9"
or "Statement") relates is the common stock, $0.001 par value, of the Company
(the "Common Stock"). Unless the context otherwise requires, as used herein
the term "Shares" shall mean shares of Common Stock and the associated
preferred share purchase rights (the "Rights") issued pursuant to the Rights
Agreement, dated as of February 25, 1998, as amended, between the Company and
BankBoston, N.A. (the "Rights Agreement").
Item 2. Tender Offer of the Bidder.
This Statement relates to the cash tender offer (the "Offer") described in
the Offer to Purchase for Cash on Schedule 14D-1, dated March 30, 1999 (as
amended or supplemented, the "Schedule 14D-1"), filed by Sterling Software,
Inc., a Delaware corporation ("Parent"), and Sterling Software (Southwest),
Inc., a Delaware corporation and indirect, wholly-owned subsidiary of Parent
(the "Purchaser"), with the Securities and Exchange Commission (the "SEC"),
relating to an offer to purchase all of the issued and outstanding Shares at
$7.00 per Share (such amount, or any greater amount per Share paid pursuant to
the Offer, hereinafter referred to as the "Offer Consideration"), net to the
seller in cash, upon the terms and subject to the conditions set forth in the
Purchaser's Offer to Purchase dated March 30, 1999 (the "Offer to Purchase")
and in the related Letter of Transmittal (the Schedule 14D-1, the Offer to
Purchase and the Letter of Transmittal, together with any amendments or
supplements thereto, constitute the "Offer Documents").
The Offer is being made in accordance with an Agreement and Plan of Merger,
dated as of March 23, 1999 (the "Merger Agreement"), by and among Parent, the
Purchaser and the Company. Pursuant to the Merger Agreement, following
completion of the Offer and satisfaction or waiver, if permissible, of certain
conditions, the Purchaser will be merged with and into the Company (the
"Merger"), and the Company will become an indirect, wholly-owned subsidiary of
Parent (the "Surviving Corporation"). At the effective time of the Merger (the
"Effective Time"), each Share issued and outstanding immediately prior to the
Effective Time (other than Shares held by Parent or the Purchaser or any other
subsidiary of Parent and Shares held by stockholders of the Company who will
have properly perfected their dissenter's rights, if any, under Delaware law)
will be converted into the right to receive the Offer Consideration without
interest thereon. The Merger Agreement is summarized in Item 3 of this
Schedule 14D-9.
The Offer Documents indicate that the principal executive offices of Parent
and the Purchaser are located at 300 Crescent Court, Suite 1200, Dallas, Texas
75201-7853.
Item 3. Identity and Background.
(a) Name and Address of the Company.
The name and address of the Company, which is the person filing this
Schedule 14D-9, are set forth in Item 1 above.
(b)(i) Arrangements with the Company's Executive Offices, Directors or
Affiliates.
Certain contracts, agreements, arrangements or understandings between the
Company or its affiliates and certain of its executive officers, directors or
affiliates are described in the Company's Proxy Statement, dated September 18,
1998, relating to its 1998 Annual Meeting of Stockholders (the "Proxy
Statement") under the headings "Security Ownership of Certain Beneficial
Owners and Management," "Executive Compensation and Other Matters," "Director
Compensation," "Option Grants in Fiscal Year 1998," "Aggregate Option Exercise
in Last Fiscal Year and Fiscal Year-End Values," "Employment Agreements and
Change in Control
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Arrangements," "Report of the Compensation Committee," and "Ten-Year Option
Repricings." A copy of the applicable portions of the Proxy Statement has been
filed as Exhibit 99.19 to this Schedule 14D-9 and such portions of the Proxy
Statement are incorporated herein by reference.
Each of the Company's executive officers and directors has entered into one
or more option agreements with the Company pursuant to the Company's 1992
Stock Option Plan and the Company's 1996 Director Option Plan, respectively.
All such options will become fully vested at the time of the consummation of
the Offer, as more fully described below under "The Merger Agreement--
Treatment of Stock Option Plans, Stock Purchase Plans and Warrants."
Under a Consulting Agreement with James A. Barth, formerly the Company's
Chief Financial Officer and Vice President of Finance, the unvested portion of
all stock options held by him under the Company's 1992 Stock Option Plan will
become fully exercisable either (i) immediately prior to the closing of the
Offer (the "Closing") or (ii) upon the signing of a definitive acquisition
agreement for the sale of the Company to any entity other than Purchaser
during the term of the consulting agreement. Any vested stock options held by
Mr. Barth will remain exercisable until the later of (i) the date specified in
Mr. Barth's option agreements under the 1992 Stock Option Plan, or (ii) thirty
(30) days after the Merger Agreement is terminated in accordance with its
terms.
The Company's executive officers are eligible to participate in the
Company's 1996 Employee Stock Purchase Plan (the "ESPP") pursuant to which
such officers are entitled to purchase Common Stock of the Company through
payroll deductions. The Offering Period (as defined in the ESPP) currently in
progress under the ESPP will terminate on the earlier of April 30, 1999 or the
consummation of the Offer, to the extent the consummation of the Offer occurs
prior to April 30, 1999. The ESPP will terminate immediately after the close
of the current Offering Period.
Each of the Company's executive officers is also covered by the Company's
severance program which provides for severance equal to six months of base
salary for termination without cause, unless otherwise agreed by the executive
officer and the Company's Board of Directors.
The Company's Certificate of Incorporation provides that (i) a director of
the Company shall not be liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except to the
extent such exemption from liability is not permitted by the Delaware General
Corporation Law ("DGCL") and (ii) the Company may indemnify to the fullest
extent permitted by law any person made or threatened to be made a party to an
action or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that he, his testator or intestate is or
was a director, officer or employee of the corporation or any predecessor of
the corporation or serves or served at any other enterprise as a director,
officer or employee at the request of the corporation or any predecessor to
the corporation.
The Company's Bylaws provide that the Company shall, to the maximum extent
and in the manner permitted by the DGCL, indemnify each of its directors and
officers against expenses (including attorneys' fees), judgments, fines,
settlements and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was
an agent of the corporation where, a "director" or "officer" of the
corporation includes any person (i) who is or was a director or officer of the
corporation, (ii) who is or was serving at the request of the corporation as a
director or officer of another corporation, partnership, joint venture, trust
or other enterprise, or (iii) who was a director or officer of a corporation
which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
The Company has previously entered into indemnification agreements with
each of its directors and executive officers. The indemnification agreements
generally provide for: (i) indemnification to the fullest extent permitted by
law if an indemnitee was or is or becomes party to or witness or other
participant in, or is threatened to be made a party to or witness or other
participant in, any threatened, pending or completed action, suit, proceeding
or alternative dispute resolution mechanism, or any hearing, inquiry or
investigation that the
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indemnitee in good faith believes might lead to the institution of any such
action, suit, proceeding or alternative dispute resolution mechanism, whether
civil, criminal, administrative, investigative or other, by reason of (or
arising in part out of) any event or occurrence related to the fact that the
indemnitee is or was a director, officer, employee, agent or fiduciary of the
Company, or any subsidiary of the Company, or is or was serving at the request
of the Company as a director, officer, employee, agent or fiduciary of another
corporation, partnership, joint venture, trust or other enterprise, or by
reason of any action or inaction on the part of the indemnitee while serving
in such capacity against any and all expenses (including attorneys' fees and
all other costs, expenses and obligations incurred in connection with
investigating, defending, being a witness in or participating in (including on
appeal), or preparing to defend, be a witness in or participate in, any such
action, suit, proceeding, alternative dispute resolution mechanism, hearing,
inquiry or investigation), judgments, fines, penalties and amounts paid in
settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) of the claim and any federal,
state, local or foreign taxes imposed on such person as a result of actual or
deemed receipt of any payment under the indemnification agreement and (ii)
advancement of all expenses incurred by the indemnitee.
(ii) Arrangements with Sterling Software, Inc., its Executive Officers,
Directors and Affiliates.
The Merger Agreement
The following is a summary of certain provisions of the Merger Agreement.
This summary is not a complete description of the terms and conditions of the
Merger Agreement and is qualified in its entirety by reference to the complete
text of the Merger Agreement, which is filed with the SEC as Exhibit 99.1 to
this Schedule 14D-9 and is incorporated herein by reference. For purposes of
this Item 3(b)(ii), all capitalized terms not defined herein shall have the
definitions assigned to them in the Merger Agreement.
The Offer. The Merger Agreement provides for the commencement of the Offer
as promptly as practicable, but in no event later than five business days
after the initial public announcement of the execution and delivery of the
Merger Agreement. The obligation of Purchaser to accept for payment and pay
for the Shares tendered pursuant to the Offer is subject to the satisfaction
of (i) the Minimum Condition (as described in the "Conditions to the Offer"
section below) prior to the expiration of the Offer and (ii) certain other
conditions described in the "Conditions to the Offer" section below. The
Merger Agreement provides that without the prior written consent of the
Company, Purchaser will not (and Parent shall cause Purchaser not to) (i)
decrease or change the form of the Offer Consideration or decrease the number
of Shares sought pursuant to the Offer, (ii) impose additional conditions to
the Offer, (iii) extend the expiration date of the Offer beyond the initial
expiration date of the Offer (which shall be the 20th business day after
commencement of the Offer), except (A) as required by applicable law, (B) that
if, immediately prior to the expiration date of the Offer (as it may be
extended), the Shares tendered and not withdrawn pursuant to the Offer
constitute more than 75% and less than 90% of the outstanding Shares,
Purchaser may extend the Offer for one or more periods not to exceed an
aggregate of ten business days, notwithstanding that all conditions to the
Offer are satisfied as of such expiration date of the Offer and (C) that if
any condition to the Offer has not been satisfied or waived, Purchaser may, in
its sole discretion, extend the expiration date of the Offer for one or more
periods, provided that the expiration date of the Offer may not be extended
beyond July 31, 1999, (iv) waive the Minimum Condition, or (v) amend any term
or other condition of the Offer in any manner materially adverse to holders of
Shares; provided, however, that, except as set forth above and subject to
applicable legal requirements, Purchaser may waive any condition to the Offer
other than the Minimum Condition in its sole discretion; and provided further
that the Offer may be extended in connection with an increase in the
consideration to be paid pursuant to the Offer so as to comply with applicable
rules and regulations of the SEC. Purchaser will, on the terms and subject to
the prior satisfaction or waiver of the conditions of the Offer, accept for
payment, and pay for, in accordance with the terms and subject to the
conditions of the Offer, all Shares validly tendered and not withdrawn
pursuant to the Offer as soon as practicable after the expiration date
thereof. Notwithstanding the foregoing, if all the conditions to the Offer
have not been satisfied or waived at the initial expiration date of the Offer
and all such conditions are reasonably capable of being satisfied within the
applicable period set forth below, the Purchaser shall (i) extend the Offer
for 10 business days from the initial expiration date of the Offer or (ii)
extend the Offer for 20 business days from the
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initial expiration date of the Offer if the waiting periods under the HSR Act
applicable to the Merger have not expired or been earlier terminated and are
reasonably capable of being satisfied.
Directors. The Merger Agreement provides that, subject to compliance with
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, after
Purchaser or any of its affiliates own beneficially at least a majority of
then outstanding Shares, Parent will be entitled to designate such number of
directors, rounded up to the next whole number, on the Company's Board of
Directors as is equal to the product of the total number of directors on such
Board (after giving effect to any increase in the size of such Board)
multiplied by the percentage that the number of Shares beneficially owned by
Purchaser at such time (including Shares so accepted for payment) bears to the
total number of Shares then outstanding. The Company has further agreed, upon
request of Parent, to use its best efforts promptly either to increase the
size of its Board of Directors or to secure the resignations of such number of
its incumbent directors, or both, as is necessary to enable such designees of
Parent to be so elected or appointed to the Company's Board of Directors, and
to take all actions available to the Company to cause such designees of Parent
to be so elected or appointed. The Company will, if requested by Parent, also
take all action necessary to cause persons designated by Parent to constitute
at least the same percentage (rounded up to the next whole number) as Parent
is entitled to designate on the Company's Board of Directors of each committee
of the Company's Board of Directors, each board of directors (or similar body)
of each subsidiary of the Company and each committee (or similar body) of each
such board.
Notwithstanding the provisions described above, the parties have agreed to
ensure that at least two of the members of the Company's Board of Directors
shall, at all times prior to the Effective Time (as defined below), be
directors of the Company who were directors of the Company on the date of the
Merger Agreement (the "Continuing Directors"). If the number of Continuing
Directors shall be reduced below two for any reason, the remaining Continuing
Director may designate a person to fill such vacancy who will be deemed to be
a Continuing Director, or if no Continuing Directors then remain, the other
directors of the Company then in office will designate two persons to fill
such vacancies who will not be officers or employees or affiliates of the
Company, Parent or either of their subsidiaries and such persons shall be
deemed to be Continuing Directors. Once Parent's designees constitute a
majority of the Company's Board of Directors and prior to the Effective Time,
any amendment or modification of the Merger Agreement, any amendment to the
Company's Certificate of Incorporation or Bylaws inconsistent with the Merger
Agreement, any termination of the Merger Agreement by the Company, any
extension of time for performance of any of the obligations of Parent or
Purchaser under the Merger Agreement, any waiver of any condition to the
Company's obligations under the Merger Agreement or any of the Company's
rights under the Merger Agreement or other action by the Company under the
Merger Agreement may be effected only by the action of a majority of the
Continuing Directors of the Company, which action will be deemed to constitute
the action of any committee specifically designated by the Board of Directors
of the Company to approve the actions contemplated under the Merger Agreement
and the full Board of Directors of the Company; provided, that, if there are
no Continuing Directors, such actions may be effected by majority vote of the
entire Board of Directors of the Company.
The Merger. The Merger Agreement provides that, and in accordance with the
DGCL, the Merger shall be effected as soon as practicable, but in no event
later than 10:00 a.m. on the tenth business day (the "Closing Date") following
satisfaction or waiver of all of the conditions to the Merger, other than
those conditions that by their nature are to be satisfied at the Closing,
subject to the fulfillment or waiver of those conditions, and the Purchaser
shall be merged with and into the Company upon the filing of a certificate of
merger with the Delaware State Secretary, or at such later time as is
specified in the certificate of merger (the "Effective Time"). At the
Effective Time, the separate existence of Purchaser shall cease and the
Company shall continue as the surviving corporation (as such, the "Surviving
Corporation") and shall continue to be governed by the laws of the State of
Delaware.
Company Stockholders Meeting; Preparation of the Proxy Statement; Short-
Form Merger. In the Merger Agreement, the Company has agreed, as soon as
practicable following the acceptance for payment of and payment for Shares by
Purchaser in the Offer, if required by law to consummate the Merger, to hold a
special meeting of the stockholders of the Company (the "Stockholders
Meeting") for the purpose of considering and
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voting upon the Merger Agreement and to solicit proxies pursuant to a proxy
statement prepared and filed in connection therewith. The Company's Board of
Directors will recommend that the holders of Shares vote in favor of the
adoption of the Merger Agreement at the Stockholders Meeting and will cause
such recommendation to be included in the proxy statement. At the Stockholders
Meeting, Parent and Purchaser will cause all of the Shares owned by them to be
voted in favor of the adoption of the Merger Agreement.
In the event that Purchaser or any other wholly owned subsidiary of Parent
shall acquire at least 90% of the outstanding Shares in the Offer, the parties
to the Merger Agreement will, at the request of Purchaser, take all necessary
actions to cause the Merger to become effective, as soon as practicable after
the expiration of the Offer, without a meeting of stockholders of the Company,
in accordance with Section 253 of the DGCL.
Conversion of Securities. At the Effective Time, by virtue of the Merger
and without any action on the part of any holder of Shares or any other shares
of capital stock of the Company or Purchaser, each Share (including the
associated Rights) issued and outstanding immediately prior to the Effective
Time (other than Shares held by the Company or any subsidiary of the Company
or by Parent, Purchaser 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) and any Shares with respect to which
dissenters rights are properly exercised) shall be converted into the right to
receive the Offer Consideration, payable to the holder thereof, without any
interest thereon (the "Merger Consideration"), less any required withholding
taxes, upon surrender and exchange of the certificates representing such
Shares. Each share of common stock of Purchaser issued and outstanding
immediately prior to the Effective Time shall be converted into and become one
validly issued, fully paid and outstanding share of Common Stock to the
Surviving Corporation.
Treatment of Stock Option Plans, Stock Purchase Plans and Warrants. The
parties have agreed that neither the Purchaser nor the Parent will assume the
outstanding options to purchase Shares (collectively, the "Options") under the
Company's 1992 Stock Option Plan and 1996 Director Stock Option Plan
(collectively, the "Stock Option Plans") or substitute an option to purchase
Parent or Purchaser common stock in respect of the Options. Options under the
Stock Option Plans will become fully vested and otherwise treated in
accordance with the terms of the applicable Stock Option Plan document and the
various agreements evidencing the Options. In addition, the Company has agreed
to take all action as shall be necessary or appropriate to cause all Options
under the Stock Option Plans to expire no later than the Effective Time.
Offering Period. The Offering Period currently in progress under the ESPP
will terminate on the earlier of April 30, 1999 or the consummation of the
Offer, to the extent the consummation of the Offer occurs prior to April 30,
1999. The ESPP will terminate immediately after the close of the current
Offering Period.
Parent and Purchaser will not assume or continue any outstanding warrants
to purchase Shares (the "Warrants"). The parties to the Merger Agreement will
take all appropriate action to provide that, in accordance with the respective
terms of the Warrants, at or prior to the Effective Time, each holder of an
outstanding Warrant will be entitled to receive an amount in cash equal to the
product of (i) the excess, if any, of the Offer Consideration over the per
Share exercise price of such Warrant and (ii) the number of Shares subject to
such Warrant.
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties. These include representations
and warranties by the Company with respect to, among other things, (i)
organization, standing and corporate power, (ii) authority and
noncontravention, (iii) consents and approvals, (iv) capital structure, (v)
SEC filings and documents, (vi) absence of certain changes or events, no
undisclosed material liabilities, (vii) certain information, (viii) real
property and other assets, (ix) software, (x) intellectual property, (xi) no
infringement, (xii) material contracts, (xiii) litigation, etc., (xiv)
compliance with applicable laws, (xv) environmental laws, (xvi) taxes, (xvii)
benefit plans, (xviii) absence of changes in benefit plans, (xix) labor
matters, (xx) brokers, (xxi) written opinion of financial advisor, (xxii)
voting requirements, (xxiii) the amendment of the Rights Agreement, (xxiv) the
Company's recent settlement of certain litigation, and (xxv) confidentiality
agreements with third parties containing "standstill" provisions.
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Parent and the Purchaser also have made certain representations and
warranties with respect to, among other things, (i) organization, standing and
corporate power, (ii) authority and noncontravention, (iii) consents and
approvals, (iv) certain information, (v) financing and (vi) interim operations
of the Purchaser.
Certain representations and warranties in the Merger Agreement are
qualified as to "materiality" or "Material Adverse Effect". For the purposes
of the Merger Agreement and this Offer to Purchase, "Material Adverse Effect"
with respect to any person means any event, change, occurrence, effect, fact
or circumstance having, or which could reasonably be expected to have, a
material adverse effect on (i) the ability of such person to perform its
obligations under the Merger Agreement or to consummate the transactions
contemplated thereby or (ii) the financial condition, results of operations,
value or business of such person and its subsidiaries taken as a whole; except
for those changes, events and effects that (x) are caused by conditions
affecting the United States or world economy as a whole or affecting the
industry in which such entity competes as a whole, which conditions do not
affect such entity in a materially disproportionate manner, or (y) are related
to or result from announcement or pendency of the Merger or the Offer.
Amendment to the Company Rights Agreement. Pursuant to the Merger
Agreement, the Company has agreed to amend the Rights Agreement to provide
that, among other things, the Offer and the execution and delivery of the
Merger Agreement (and any amendments thereto) and the Stockholder Agreements
(described below), and the consummation of the Merger and the transactions
contemplated thereby and by the Stockholder Agreements, will not cause (i)
Parent or Purchaser to constitute an "Acquiring Person" (as defined in the
Rights Agreement), (ii) a "Distribution Date," "Section 13 Event," "Triggering
Event," or "Shares Acquisition Date" (each as defined in the Rights Agreement)
to occur or (iii) the Rights to become exercisable pursuant to Section
11(a)(ii) thereof or otherwise. Such amendment has been effected by the
execution of a formal amendment to the Rights Agreement effective March 23,
1999 (the "Rights Amendment") by the Company and the Rights Agent, and the
filing with the SEC (and the effectiveness) of an amendment to the Company's
Registration Statement on Form 8-A/A on March 30, 1999 with respect to such
Rights Amendment.
Conduct of Business of the Company. Except as provided for in the Merger
Agreement, during the period from the date of the Merger Agreement to the
Effective Time, the Company will, and will 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
commercially 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 the Company, and to that end, without limiting the
generality of the foregoing, the Company will not, and will 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 the 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 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 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 and Warrants
outstanding on the date of the Merger Agreement;
(iii) amend its certificate of incorporation, bylaws or other comparable
charter or organizational documents or further amend or redeem the Rights
Agreement;
(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;
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(v) make any new capital expenditure or expenditures in excess of
$50,000 individually, or $250,000 in the aggregate, other than as specified
in the Company's budget for capital expenditures made available to Parent;
(vi) except for software licenses in the ordinary course of business,
enter into, amend or terminate any Material Contract, or waive, release or
assign any material rights or claims;
(vii) 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;
(viii)(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 the Company or any direct or indirect
wholly-owned subsidiary of the Company or (B) make any loans or advances to
any other person, other than to the Company or to any direct or indirect
wholly-owned subsidiary of the 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 Company's
filed SEC documents in the ordinary course of business consistent with past
practice;
(ix) 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;
(x) accelerate the payment, right to payment or vesting of any bonus,
severance, profit sharing, retirement, deferred compensation, stock option,
insurance or other compensation or benefits;
(xi) enter into or amend any employment, consulting, severance or
similar agreement with any individual;
(xii) 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 defined in the "The Merger Agreement--No Solicitation;
Acquisition Proposals" section, below), except as described below in the
"The Merger Agreement--No Solicitations; Acquisition Proposals" section;
(xiii) make or rescind any tax election or settle or compromise any
income tax liability of the Company or of any of its subsidiaries involving
on an individual basis more than $100,000;
(xiv) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction (x) of any such claims,
liabilities or obligations in the ordinary course of business and
consistent with past practice or (y) of claims, liabilities or obligations
reflected or reserved against in, or contemplated by, the consolidated
financial statements (or the notes thereto) of the Company and its
consolidated subsidiaries;
(xv) except as required by generally accepted accounting principles,
make any change in any method of accounting or accounting practice or
policy;
(xvi) settle any action, suit, claim, investigation or proceeding
(legal, administrative or arbitrative) in an amount in excess of $50,000,
except in connection with the Selesta litigation described in the Company's
representations and warranties;
(xvii) permit any material insurance policy naming it as a beneficiary
or a loss payable payee to be cancelled or terminated without notice to
Parent, except in the ordinary course of business and consistent with past
practice;
(xviii) enter into any agreement, understanding or commitment that
restrains, limits or impedes the Company's ability to compete with or
conduct any business or line of business, including, but not limited to,
geographic limitations on the Company's activities;
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(xix) 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 the Company or its
subsidiaries, provided, however, that routine employee terminations for
cause shall not be considered subject to this clause (xix);
(xx) 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 the 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 the Company or any of its subsidiaries to reduce the total
indebtedness of the Company and its subsidiaries for money borrowed;
(xxi) willfully take any action that would result in (i) any of its
representations and warranties set forth in the Merger Agreement that are
qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue in
any material respect or (iii) except to the extent such action is otherwise
expressly contemplated by the Merger Agreement, any of the conditions to
the Offer not being satisfied; or
(xxii) authorize any of, or commit or agree to take any of, the
foregoing actions in respect of which it is restricted by the provisions
described in this section relating to the Conduct of Business of the
Company except to the extent such action is otherwise expressly
contemplated by the Merger Agreement.
No Solicitation; Acquisition Proposals. Pursuant to the Merger Agreement:
(A) The Company has agreed that it will not, nor will it permit any of its
subsidiaries to, nor will it authorize (and will use its best efforts not to
permit) any officer, director or employee of, or any investment banker,
attorney or other advisor or representative of, the Company or any of its
subsidiaries to, (i) solicit or initiate, or intentionally encourage, directly
or indirectly, any inquiries relating to, or the submission of, any
Acquisition Proposal (as defined below), (ii) participate in any discussions
or negotiations regarding any Acquisition Proposal, or, in connection with any
Acquisition Proposal, furnish to any Person any information or data with
respect to or access to the properties of the Company or any of its
subsidiaries, or take any other action, to knowingly facilitate the making of
any proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal or (iii) enter into any agreement with respect to any
Acquisition Proposal or approve or resolve to approve any Acquisition
Proposal; provided, that nothing contained in the Merger Agreement will
prohibit the Company or the Company's Board of Directors from (i) taking and
disclosing to the Company's stockholders a position with respect to a tender
or exchange offer by a third party pursuant to Rules 14d-9 and 14e-2
promulgated under the Exchange Act, or (ii) making such disclosure to the
Company's stockholders as, in the good faith judgment of the Company's Board
of Directors, after consultation with outside counsel, is required under, or
is necessary to comply with, applicable law, provided that the Company may
not, except as described in subsection (C) of this "The Merger Agreement--No
Solicitation; Acquisition Proposals" section below, withdraw or modify, or
propose to withdraw or modify, its position with respect to the Offer or the
Merger or approve or recommend, or propose to approve or recommend any
Acquisition Proposal, or enter into any agreement with respect to any
Acquisition Proposal. The Company agreed that upon execution of the Merger
Agreement it would immediately cease any existing activities, discussions or
negotiations with any parties conducted theretofore with respect to any of the
foregoing. Notwithstanding the foregoing, prior to the time of acceptance of
Shares for payment pursuant to the Offer, the Company may furnish information
concerning its and/or its subsidiaries' business, properties or assets to any
person or group and may negotiate and participate in discussions and
negotiations with such person or group concerning an Acquisition Proposal,
provided that such person or group shall have entered into a confidentiality
agreement, the confidentiality provisions of which shall be no more favorable
to such third party than those provided for in the letter agreement dated
December 21, 1998 between Parent and the Company, if:
(x) such Person or group has submitted a Superior Proposal (as defined
below); and
(y) in the opinion of the Company's Board of Directors such action is
required to discharge the Board's fiduciary duties to the Company's
stockholders under applicable law, determined only after consultation with
independent legal counsel to the Company.
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The Company has agreed that it will promptly (but in no case later than 24
hours) notify Parent in writing of the existence of any proposal, discussion,
negotiation or inquiry received by the Company regarding any Acquisition
Proposal, and the Company will promptly communicate to Parent the terms of any
proposal, discussion, negotiation or inquiry which it may receive regarding
any Acquisition Proposal (and will promptly provide to Parent copies of any
written materials received by the Company in connection with such proposal,
discussion, negotiation or inquiry) and the identity of the party making such
proposal or inquiry or engaging in such discussion or negotiation. The Company
will promptly provide to Parent any non-public information concerning the
Company provided to any other person in connection with any Acquisition
Proposal which was not previously provided to Parent. The Company will keep
Parent informed of the status and details of any such Acquisition Proposal and
of any amendments or proposed amendments to any Acquisition Proposal and of
the status of any discussions or negotiations relating to any Acquisition
Proposal and will promptly (but in no case later than 24 hours) notify Parent
of any determination by the Company's Board of Directors that a Superior
Proposal has been made.
(B) The Merger Agreement provides that except as described in this "The
Merger Agreement--No Solicitation; Acquisition Proposal" section, neither the
Board of Directors of the Company nor any committee thereof will (i) withdraw
or modify, or propose to withdraw or modify, in a manner adverse to Parent or
Purchaser, the approval or recommendation by the Board of Directors of the
Company of the Offer, the Merger Agreement or the Merger, (ii) approve or
recommend, or propose to approve or recommend, any Acquisition Proposal or
(iii) enter into any agreement with respect to any Acquisition Proposal.
Notwithstanding the foregoing or anything else in the Merger Agreement,
subject to compliance with the provisions described in this "The Merger
Agreement--No Solicitation; Acquisition Proposal" section, prior to the time
of acceptance for payment of Shares pursuant to the Offer, the Company's Board
of Directors may withdraw or modify its approval or recommendation of the
Offer, the Merger Agreement or the Merger, approve or recommend a Superior
Proposal, or enter into an agreement with respect to a Superior Proposal, in
each case at any time after the third business day following Parent's receipt
of written notice (including by facsimile) from the Company advising Parent
that the Board of Directors of Company has received a Superior Proposal which
it intends to accept, specifying the material terms and conditions of such
Superior Proposal and identifying the person making such Superior Proposal,
but only if the Company shall have caused its financial and legal advisors to
negotiate with Parent to make such adjustments to the terms and conditions of
this Agreement as would enable the Company to proceed with the transactions
contemplated hereby on such adjusted terms.
(C) The Merger Agreement provides that nothing described in this "The
Merger Agreement--No Solicitation; Acquisition Proposal" section, and no
action taken by the Board of Directors of the Company pursuant to the matters
described in this "The Merger Agreement--No Solicitation; Acquisition
Proposal" section, will (i) permit the Company to enter into any agreement
providing for any transaction contemplated by an Acquisition Proposal for as
long as the Merger Agreement remains in effect or (ii) affect in any manner
any other obligation of the Company under the Merger Agreement.
(D) For purposes of the Merger Agreement, "Acquisition Proposal" means any
bona fide offer, proposal or other indication of interest regarding any of the
following (other than the transactions provided for in the Merger Agreement
involving the Company): (i) any merger, consolidation, share exchange,
recapitalization, business combination or other similar transaction involving
the Company or any of its subsidiaries; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of a significant portion of
the assets of the Company and its subsidiaries, taken as a whole, in a single
transaction or series of related transactions (other than sales of inventory
or used equipment in the ordinary course of business); (iii) any purchase of,
or tender offer or exchange offer for, 20% percent or more of the outstanding
shares of capital stock of Company by any person or the filing of a
registration statement under the Securities Act of 1933, as amended, 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. For purposes of the Merger Agreement, "Superior Proposal" means an
unsolicited Acquisition Proposal on terms which the Board of Directors of the
Company determines in good faith to be more favorable to the Company's
stockholders than the Offer and the Merger (based on advice
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of the Company's independent financial advisor that the value of the
consideration provided for in such proposal is superior to the value of the
consideration provided for in the Offer and the Merger); for which financing,
to the extent required, is then committed or which, in the good faith
reasonable judgment of the Board of Directors of the Company (based on advice
from the Company's independent financial advisor) is reasonably capable of
being financed by such third party provided that the Company's Board of
Directors has also, among other things, duly considered the timing of such
Acquisition Proposal and the likelihood that such Acquisition Proposal will be
consummated.
Employee Benefit Matters. The Merger Agreement provides that Parent will,
and will 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 which have been
disclosed in the Merger Agreement between Company and persons who are or had
been employees of the Company or any of its subsidiaries at or prior to the
Effective Time ("Covered Employees"), all in accordance with their respective
terms and provide Covered Employees who remain in the employ of the Company or
any of its subsidiaries with 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 subject to certain
restrictions and limitations described in the Merger Agreement. To the extent
that Covered Employees are included in any benefit plan of Parent or its
subsidiaries, Parent agrees that the Covered Employees will receive credit
under such plan (other than any such plan providing for sabbaticals) for
service prior to the Effective Time with the Company and its subsidiaries to
the same extent such service was counted under similar plans of the Company
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 has agreed that any such plans shall not
include pre-existing condition exclusions, except to the extent such
exclusions were applicable under the similar plan of the Company 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. Except as set forth above, nothing in the Merger Agreement shall
prevent Parent or the Surviving Corporation from amending or terminating any
plan of the Company in accordance with its terms.
Indemnification; Directors' and Officers' Insurance. The Merger Agreement
provides that for a period of four years after the Effective Time, the
provisions with respect to indemnification set forth in the certificate of
incorporation and by-laws of Purchaser as in effect on the date of the Merger
Agreement shall not be amended, repealed or otherwise modified in any manner
that would adversely affect the rights thereunder of individuals who at any
time prior to the Effective Time were directors or officers of the Company in
respect of actions or omissions occurring at or prior to the Effective Time
(including without limitation the transactions contemplated by the Merger
Agreement), unless such modification is required by law.
In addition, from and after the Effective Time, Parent will, or will cause
the Surviving Corporation to, indemnify, defend and hold harmless each person
who as of the date of the Merger Agreement is, or has been at any time prior
to the date of the Merger Agreement or who becomes prior to the Effective
Time, an officer or director of the 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 the Company ("Indemnified Liabilities"), including all Indemnified
Liabilities based in whole or in part on, or arising in whole or in part out
of, the Merger Agreement or the transactions contemplated thereby, 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. The rights to
indemnification under the Merger Agreement will continue in full force and
effect for a period of four 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.
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Finally, for a period of two years after the Effective Time, Parent will
cause to be maintained in effect policies of directors' and officers'
liability insurance, for the benefit of those persons who are covered by the
Company's directors' and officers' liability insurance policies at the
Effective Time, providing coverage with respect to matters occurring prior to
the Effective Time that is at least equal to the coverage provided under the
Company's current directors' and officers' liability insurance policies, to
the extent that such liability insurance can be maintained at an annual cost
to Parent not greater than 150% of the premium for the current Company
directors' and officers' liability insurance; provided that if such insurance
cannot be so maintained at such cost, Parent will maintain as much of such
insurance as can be so maintained at a cost equal to 150% of the current
annual premiums of the Company for such insurance.
Conditions to Each Party's Obligation to Effect the Merger. The Merger
Agreement provides that the respective obligation of each party thereto to
effect the Merger will be subject to the satisfaction or written waiver on or
prior to the Closing Date of the following conditions:
(a) Purchaser shall have accepted for payment and paid for all Shares
validly tendered in the Offer and not withdrawn; provided, however, that
neither Parent nor Purchaser may invoke this condition if Purchaser shall
have failed to purchase Shares so tendered and not withdrawn in violation
of the terms of the Merger Agreement or the Offer.
(b) The Merger Agreement shall have been adopted by the affirmative vote
of the holders of the requisite number of shares of capital stock of the
Company if such vote is required pursuant to the Company's Certificate of
Incorporation, the DGCL or other applicable law.
(c) 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 prior to invoking this condition, the
party so invoking this condition shall have complied with its commercially
reasonable efforts and filing obligations and the parties to the Merger
Agreement shall have used commercially reasonable efforts to lift or remove
such order, injunction, restraint or prohibition.
(d) All necessary waiting periods under the HSR Act applicable to the
Merger shall have expired or been earlier terminated.
Termination. The Merger Agreement may be terminated and the Merger
contemplated by the Merger Agreement may be abandoned at any time prior to the
Effective Time, whether before or after approval of matters presented in
connection with the Merger by the stockholders of the Company:
(a) By the mutual written consent of Parent and the Company; provided,
however, that if Parent shall have a majority of the directors of the
Company, such consent of the Company may only be given if approved by the
Continuing Directors.
(b) By either of Parent or the Company if (i) a statute, rule or
executive order shall have been enacted, entered or promulgated prohibiting
the transactions contemplated by the Merger Agreement on the terms
contemplated by the Merger Agreement or (ii) any governmental entity shall
have issued an order, decree or ruling or taken any other action (which
order, decree, ruling or other action the parties to the Merger Agreement
shall use their commercially reasonable efforts to lift), in each case
permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by the Merger Agreement and such order, decree,
ruling or other action shall have become final and non-appealable.
(c) By either of Parent or the Company if the consummation of the Offer
shall not have occurred on or before July 31, 1999; provided, however, that
the party seeking to terminate the Merger Agreement pursuant to this
provision (c) shall not have breached in any material respect its
obligations under the Merger Agreement;
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(d) By the Company:
(i) if the Company has entered into an agreement with respect to a
Superior Proposal or the Company or the Board of Directors of the
Company has approved or recommended a Superior Proposal in accordance
with and provided that the Company has complied with all provisions of
the Merger Agreement, including the notice provisions therein, and that
it simultaneously terminates the Merger Agreement and makes
simultaneous payment to the Parent of the Termination Fee and the
Expenses (as defined in "The Merger Agreement--Fees and Expenses"
section below); or
(ii) if Parent or Purchaser shall have terminated the Offer or the
Offer expires without Parent or Purchaser, as the case may be,
purchasing any Shares pursuant thereto; provided that the Company may
not terminate the Merger Agreement pursuant to this provision if the
Company is in material breach of the Merger Agreement; or
(iii) if Parent, Purchaser or any of their affiliates shall have
failed to commence the Offer on or prior to five business days
following the date of the initial public announcement of the Offer;
provided, that the Company may not terminate the Merger Agreement
pursuant to this provision if the Company is in material breach of the
Merger Agreement; or
(iv) if there shall be a material breach by either Parent or
Purchaser of any of their representations, warranties, covenants or
agreements contained in the Merger Agreement, except where such breach
does not have a material adverse effect on the ability of Parent or
Purchaser to consummate the Offer or the Merger.
(e) By Parent or Purchaser:
(i)(A) if, prior to the purchase of the Shares pursuant to the
Offer, the Board of Directors of the Company shall have withdrawn, or
modified or changed in a manner adverse to Parent or Purchaser, its
approval or recommendation of the Offer, the Merger Agreement or the
Merger or shall have recommended or approved, or announced a neutral
position with respect to, an Acquisition Proposal or upon request of
Parent, shall fail to reaffirm its approval and recommendation of the
Offer, the Merger Agreement, or the Merger; or
(B) if there shall have been a material breach by the Company of any
provision of the Merger Agreement relating to the prohibition of
solicitation of Acquisition Proposals; or
(ii) if the Offer has expired or terminated without Parent or
Purchaser purchasing any Shares thereunder and, pursuant to the
"Conditions to the Offer" described below and the Merger Agreement, the
Purchaser is neither required to accept and pay for the Shares tendered
in the Offer nor extend the expiration date of the Offer, provided that
Parent or Purchaser may not terminate the Merger Agreement pursuant to
this provision if Parent or Purchaser is in material breach of the
Merger Agreement; or
(iii) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of
the conditions set forth in the "Conditions to the Offer" described
below which occurrence is incapable of being cured or remediated prior
to the initial expiration date of the Offer, Parent, Purchaser or any
of their affiliates shall have failed to commence the Offer on or prior
to five business days following the date of the initial public
announcement of the Offer, provided that Parent or Purchaser may not
terminate the Merger Agreement pursuant to this provision if Parent or
Purchaser is in material breach of the Merger Agreement; or
(iv) if any Person or "group" (as defined in Section 13(d)(3) of the
Exchange Act), other than Parent, Purchaser or their affiliates or any
group of which any of them is a member, shall have acquired beneficial
ownership (as determined pursuant to Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of the Shares; or
(v) if there shall be a breach by the Company of any of its
representations or warranties contained in the Merger Agreement
(without reference to any "Material Adverse Effect" or "materiality"
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qualifications contained therein) which breach causes a Material
Adverse Effect on the Company and is incapable of being cured prior to
the twentieth business day following the initial expiration date of the
Offer or there shall be a material breach by the Company of any of its
covenants or agreements contained in the Merger Agreement.
Fees and Expenses. The Merger Agreement provides that except as provided in
the paragraph below, all fees and expenses incurred in connection with the
Offer, the Merger, the Merger Agreement and the transactions contemplated by
the Merger Agreement shall be paid by the party incurring such fees or
expenses, whether or not the Offer or the Merger is consummated.
The Merger Agreement provides that if (x) Parent or Purchaser terminates
the Merger Agreement pursuant to provision (e)(i) described in "The Merger
Agreement--Termination" section above, or (y) the Company terminates the
Merger Agreement pursuant to provision (d)(i) described in "The Merger
Agreement--Termination" section above, then in each case, the Company shall
pay, or cause to be paid to Parent, at the time of termination, an amount
equal to $2,870,000 (the "Termination Fee") and an amount equal to Parent's
and Purchaser's actual and reasonably documented out-of-pocket expenses
incurred by Parent or Purchaser in connection with the Offer, the Merger, the
Merger Agreement and the consummation of the transactions contemplated by the
Merger Agreement up to a maximum expense reimbursement amount of $718,000 (the
"Expenses"). In addition, if the Merger Agreement is terminated by Parent or
Purchaser pursuant to provision (e)(ii) described in "The Merger Agreement--
Termination" section above solely as a result of the failure of the Minimum
Condition or by the Company pursuant to provision (d)(ii) described in "The
Merger Agreement--Termination" section above and, in each case at the time of
such termination, Parent is not in material breach of the Merger Agreement and
there has been previously publicly announced, and not withdrawn, an
Acquisition Proposal, and, if the Company shall thereafter, within nine months
after such termination, enter into an agreement with respect to such
Acquisition Proposal, then the Company shall pay the Termination Fee
concurrently with entering into any such agreement. If the Merger Agreement is
terminated by Parent or Purchaser pursuant to provision (e)(v) described in
"The Merger Agreement--Termination" section above, then the Company shall pay
Parent the Expenses. Any payments required to be made pursuant to this
provision shall be made by wire transfer of same day funds to an account
designated by Parent.
Conditions to the Offer
The Merger Agreement provides that, notwithstanding any other provision of
the Offer and subject to the terms of the Merger Agreement, Purchaser shall
not be required to accept for payment or, subject to any applicable rules and
regulations of the SEC, pay for, and may delay the acceptance for payment of
or the payment for, any tendered Shares, and may amend the Offer consistent
with the terms of the Merger Agreement or terminate the Offer and not accept
for payment any tendered Shares, if (i) there shall not have been validly
tendered and not withdrawn prior to the expiration of the Offer such number of
Shares which, when added to the Shares, if any, beneficially owned by Parent
or Purchaser, would constitute at least a majority of the Shares outstanding
on a fully-diluted basis on the date of purchase ("on a fully-diluted basis"
meaning, as of any date, the number of Shares outstanding, together with the
Shares which the Company may be required to issue pursuant to warrants,
options or obligations outstanding at that date under employee stock purchase
or similar benefit plans or otherwise, whether or not vested or then
exercisable) (the "Minimum Condition"), (ii) any applicable waiting period
under the HSR Act has not expired or been terminated, or (iii) at any time on
or after the date of the Merger Agreement and prior to the Expiration Date,
any of the following events shall occur and be continuing and shall not have
resulted from the breach by Parent or Purchaser of any of their obligations
under the Merger Agreement:
(a) there shall be pending any suit, action or proceeding brought by any
third party that has a high likelihood of success on the merits or by any
Governmental Entity (as defined in the Merger Agreement) before any court
of competent jurisdiction (i) seeking to prohibit or impose any material
limitations on Parent's or Purchaser's ownership or operation (or that of
any of their respective Subsidiaries or affiliates) of all or a material
portion of their or the Company's businesses or assets, (ii) seeking to
compel Parent or
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Purchaser or their respective subsidiaries and affiliates to dispose of or
hold separate any material portion of the business or assets of the Company
or Parent and their respective subsidiaries, in each case taken as a whole,
as a result of the Merger Agreement, (iii) challenging the acquisition by
Parent or Purchaser of any Shares pursuant to the Offer, (iv) seeking to
restrain or prohibit the making or consummation of the Offer or the Merger
or the performance of any of the transactions contemplated by the Merger
Agreement, (v) seeking to obtain from the Company any damages (including
damages against the Company's directors or officers for which they may seek
indemnification from the Company) that would be reasonably likely to have a
Material Adverse Effect on the Company, (vi) seeking to impose material
limitations on the ability of Purchaser, or rendering Purchaser unable, to
accept for payment, pay for or purchase some or all of the Shares pursuant
to the Offer and the Merger, or (vii) seeking to impose material
limitations on the ability of Purchaser or Parent effectively to exercise
full rights of ownership of the Shares, including, without limitation, the
right to vote the Shares purchased by Purchaser or Parent on all matters
properly presented to the Company's stockholders; or
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to
the Offer or the Merger, or any other action shall be taken by any
Governmental Entity, other than the application to the Offer or the Merger
of applicable waiting periods under the HSR Act, that is reasonably likely
to result, directly or indirectly, in any of the consequences referred to
in clauses (i) through (vii) of paragraph (a) above; or
(c)(i) the representations and warranties of the Company relating to the
Company's authority and noncontravention, the opinion of financial advisor,
voting requirements, the Rights Agreement, and the Selesta litigation, and
the first five sentences of the representation regarding capitalization
shall not be true and correct in all material respects as of the date of
consummation of the Offer as though made on or as of such date (other than
any such representations and warranties that by their terms address only
matters as of another specified dated, which shall be true and correct only
as of such other specified date) and (ii) all other representations and
warranties of the Company contained in the Merger Agreement, which
representations and warranties shall be deemed for purposes of this
condition not to include any qualification or limitation with respect to
materiality (whether by reference to "Material Adverse Effect" or
otherwise), shall not be true and correct as of the date of consummation of
the Offer as though made on or as of such 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 in the case of this clause (ii) 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 the Company, with the same
effect as though such representations and warranties were made as of the
date of consummation of the Offer; or
(d) there shall have occurred a Material Adverse Effect on the Company;
or
(e) the Company's Board of Directors (i) shall have withdrawn, or
modified or changed in a manner adverse to Parent or Purchaser (including
by amendment of this Schedule 14D-9) its recommendation of the Offer, the
Merger Agreement, or the Merger, (ii) shall have recommended or announced a
neutral position with respect to an Acquisition Proposal, (iii) shall have
adopted any resolution to effect any of the foregoing, or (iv) upon request
of Parent, shall fail to reaffirm its approval or recommendation of the
Offer, the Merger Agreement, or the Merger; or
(f) any Person or "group" (as defined in Section 13(d)(3) of the
Exchange Act), other than Parent, Purchaser or their affiliates or any
group of which any of them is a member, shall have acquired or announced
its intention to acquire (including by commencement of a tender or exchange
offer) beneficial ownership (as determined pursuant to Rule 13d-3
promulgated under the Exchange Act) of 20% or more of the Shares; or
(g) the Merger Agreement shall have been terminated in accordance with
its terms;
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which in the sole good faith judgment of Parent or Purchaser, in any such
case, and regardless of the circumstances (including any action or inaction by
Parent or Purchaser) giving rise to such condition makes it inadvisable to
proceed with the Offer and/or with such acceptance for payment of or payments
for Shares.
The foregoing conditions are for the sole benefit of Parent and Purchaser
and may (except for the Minimum Condition) be waived by Parent or Purchaser,
in whole or in part, at any time and from time to time, in the sole discretion
of Parent or Purchaser. The failure by Parent or Purchaser at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any right
and each such right shall be deemed an ongoing right which may be asserted at
any time and from time to time.
Stockholder Agreements
The following is a summary of certain provisions of the Stockholder
Agreements. This summary is not a complete description of the terms and
conditions of the Stockholder Agreements and is qualified in its entirety by
reference to the full text of the forms of Stockholder Agreements filed with
the SEC as Exhibits 99.2, 99.3 and 99.4 to this Schedule 14D-9 and
incorporated herein by reference. Capitalized terms not otherwise defined
below shall have the meanings set forth in the Stockholder Agreements.
As a condition and inducement to Parent's entering into the Merger
Agreement and incurring the liabilities therein, all of the Company's then-
current executive officers and directors and certain entities related to
Advent International Corporation (collectively, "Advent") and Cisco Systems,
Inc. ("Cisco") (for purposes of this "Stockholder Agreements" section, the
aforementioned entities shall be referred to as the "Stockholders"), who
collectively have voting power and dispositive power with respect to an
aggregate of 1,171,068 Shares and hold Options to acquire 854,050 Shares,
concurrently with the execution and delivery of the Merger Agreement entered
into the Stockholder Agreements with Parent. Pursuant to the Stockholder
Agreements, the Stockholders have agreed, among other things, to grant Parent
an irrevocable proxy to vote the Shares covered by the Stockholder Agreements
(collectively, the "Subject Shares") in favor of the Merger and against any
other Acquisition Proposal (as defined in the Merger Agreement). The
Stockholders have also granted to Parent an option to purchase the Subject
Shares at an option price of $7.00 per Subject Share (or any higher price
offered by Parent or a subsidiary of Parent to the stockholders of the Company
generally) during the "Option Period". With respect to the option granted to
Parent by the directors and executive officers of the Company, "Option Period"
means the period between March 23, 1999 and the earlier of (i) 120 days after
the purchase of Shares pursuant to the Offer or (ii) the date that the Merger
Agreement is terminated for any reason. With respect to the option granted to
Parent by Advent, "Option Period" means the period between March 23, 1999 and
the earlier of (i) 120 days after the purchase of Shares pursuant to the Offer
or (ii) 120 days after the date on which the Merger Agreement is terminated
for any reason, provided, however, that such option shall terminate (x) if the
Merger Agreement is terminated by the Company because of a material breach by
Parent or Purchaser and at the time of such termination the Company is not in
breach of the Merger Agreement, and (y) if the Merger Agreement is terminated
by the Company or because the condition requiring termination of all necessary
waiting periods under the HSR Act is incapable of being fulfilled. With
respect to the option granted by Cisco, "Option Period" means the period
between March 23, 1999 and the earlier of (i) 120 days after the purchase of
Shares pursuant to the Offer or (ii) 120 days after the date on which the
Merger Agreement is terminated (A) pursuant to provision (d)(i) as described
above in "The Merger Agreement--Termination Section" or (B) pursuant to
provision (e)(i) as described in "The Merger Agreement--Termination Section"
or (iii) 30 days after the date on which the Merger Agreement is terminated
pursuant to provision (e)(v) as described in "The Merger Agreement--
Termination" section, or (iv) the date on which the Merger Agreement is
terminated other than for reasons described in clauses (ii) or (iii) of this
sentence.
During the period from the date of the Stockholder Agreements through and
including the earlier of (i) the Effective Time and (ii) the end of the
relevant Option Period, each Stockholder has agreed not to: (A) except for the
tender of Subject Shares in the Offer, offer for sale, sell, transfer, tender,
pledge, encumber, assign or otherwise dispose of, or enter into any contract,
option or other arrangement, understanding, or consent to do so; (B) grant any
proxies (other than proxies relating to the election of management's slate of
directors at an annual
15
<PAGE>
meeting of the Company's stockholders, and other routine matters which would
not require the filing of a preliminary proxy statement under Rule 14a-6(a) of
the Exchange Act), or powers of attorney, deposit any of the Subject Shares
into a voting trust or enter into a voting agreement with respect to any of
the Subject Shares; or (C) take any action that would make any representation
or warranty contained in the applicable Stockholder Agreement untrue or
incorrect or have the effect of impairing the ability of such Stockholder to
perform the Stockholder's obligations under such Stockholder Agreement or
preventing or delaying the consummation of any of the transactions
contemplated by the Stockholder Agreement and Merger Agreement.
Notwithstanding the foregoing, Advent will have the right (i) to transfer
Subject Shares to an affiliate, as long as, before any such transfer, such
affiliate enters into a written agreement (an "Acknowledgement Agreement")
with Parent whereby such affiliate agrees to be bound by all of the terms and
provisions of Advent's Stockholder Agreement with respect to the Subject
Shares received by such affiliate, (ii) prior to the exercise by Parent of its
option and following the termination of the Merger Agreement (other than a
termination which requires the payment of the Termination Fee), to sell
Subject Shares in open market transactions, provided that any such sale shall
not limit or relieve Advent of its obligation to deliver Subject Shares to
Parent in the event Parent exercises the option to purchase such Subject
Shares, and (iii) transfer or sell Subject Shares to one or more third parties
in privately-negotiated transactions as long as each such third party enters
into an Acknowledgment Agreement with Parent.
Each of the directors and executive officers of the Company entering into a
Stockholder Agreement has also agreed, subject to certain exclusions relating
to indemnification and employment matters, to unconditionally release, as of
the Effective Time, any and all claims and causes of action that such
directors and officers may have against the Company or any of its subsidiaries
or any present or former director, officer, employee or agent of the Company
or any of its subsidiaries (collectively, the "Released Parties") resulting
from any act, omission or occurrence prior to the Effective Time. Advent has
agreed to unconditionally release, as of the Effective Time, any and all
claims and causes of action that Advent may have against the Released Parties
resulting from any act, omission or occurrence prior to the Effective Time.
Cisco has agreed to unconditionally release, as of the Effective Time, any and
all claims and causes of action that Cisco may have against the Released
Parties resulting from any alleged breach of fiduciary duty by any officer or
director of the Company occurring prior to the Effective Time; provided,
however, that such release will not apply to any currently effective contract
or agreement between Cisco and the Company or any claim or cause of action
arising therefrom.
Each Stockholder has agreed that, in the capacity as a stockholder, it will
not respond to any inquiries or the making of any proposal by any person or
entity (other than Parent or any affiliate of Parent) concerning any business
combination, merger, tender offer, exchange offer, sale of assets, sale of
shares of capital stock or debt securities or similar transactions involving
the Company or any subsidiary, division or operating or principal business
unit of the Company. If any Stockholder, in the capacity as a stockholder,
receives any such inquiry or proposal, then the Stockholder has agreed to
promptly inform Parent of the existence thereof. Each Stockholder, in the
capacity as a stockholder, has agreed to immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties previously conducted with respect to any of the foregoing.
The Exclusivity Agreement
The following is a summary of certain provisions of the Exclusivity
Agreement. This summary is not a complete description of the terms and
conditions of the Exclusivity Agreement and is qualified in its entirety by
reference to the full text of the Exclusivity Agreement filed with the SEC as
Exhibit 99.8 to this Schedule 14D-9 and incorporated herein by reference.
Capitalized terms not otherwise defined below shall have the meanings set
forth in the Exclusivity Agreement.
On March 16, 1999, the Company and Parent entered into an exclusivity
agreement ("Exclusivity Agreement") pursuant to which the Company agreed to,
and to use all reasonable efforts to cause all of its and its subsidiaries'
affiliates, officers, directors, employees, agents and representatives to,
discontinue any solicitation efforts with respect to any potential acquisition
of the Company with anyone other than Parent, until the earlier of (a) 6:00
p.m. California time on March 25, 1999, or (b) the execution of a definitive
agreement governing the terms and conditions of the potential acquisition of
the Company by Parent ("Exclusivity
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Period"). The Company also agreed during the Exclusivity Period not to enter
into discussions or negotiations with any other person concerning an
acquisition proposal or to endorse such other proposal and to notify Parent
immediately if, during the Exclusivity Period, the Company received certain
types of expressions of interest from persons other than Parent.
Pursuant to the Exclusivity Agreement, Parent agreed that for a period of
one year from the date of the Exclusivity Agreement, it will not, directly or
indirectly, solicit for employment or attempt to hire or recruit any employee
of the Company (or any subsidiary thereof) with whom Parent has had contact or
who became known to Parent in connection with Parent's consideration of a
potential acquisition. However, Parent will not be deemed to have breached or
violated this restriction solely (a) as a result of generic employment
advertising by Parent (including, without limitation, "open position" and
similar listings in Parent's various World Wide Web pages), (b) as a result of
the efforts of an executive recruitment or similar firm generally engaged to
recruit employees for Parent (without targeting of the Company or its specific
employees) or (c) if any employee of the Company (or any subsidiary thereof)
approaches and obtains employment with Parent after the date of the
Exclusivity Agreement solely as a result of any advertising or recruitment
effort contemplated in clause (a) or (b) above.
Item 4. The Solicitation or Recommendation.
(a) Recommendation of the Company Board of Directors.
The Company Board of Directors has unanimously (i) determined that the
Merger Agreement and the transactions contemplated thereby, including each of
the Offer and the Merger, are fair to and in the best interests of the Company
and its stockholders, (ii) approved and adopted the Merger Agreement and the
transactions contemplated thereby, and (iii) resolved to recommend that the
stockholders of the Company accept the Offer and tender their Shares pursuant
to the Offer and approve and adopt the Merger Agreement and approve the
transactions contemplated thereby.
A letter to the Company's stockholders communicating the Company's
recommendation and a press release announcing the execution of the Merger
Agreement are filed with this Schedule 14D-9 as Exhibits 99.6 and 99.5,
respectively, and are incorporated herein by reference in their entirety.
(b) Background of the Offer; Reasons for the Recommendation.
Background of the Offer.
On several occasions during September 1998, representatives of Broadview
International, LLC, Parent's financial advisor ("Broadview"), contacted Mr.
Augustus J. Berkeley, President and Chief Executive Officer of the Company, to
discuss the possibility of a merger of the Company with a Broadview client. On
September 29, 1998, general information regarding Parent and Company was
exchanged by Parent and Company through Broadview. On October 6, 1998, Mr. Ron
Hardy, Vice President, Business Development, of Parent's Systems Management
Group, met with Mr. Berkeley and Mr. James Barth, Chief Financial Officer of
the Company, at the Hilton Hotel in Newark, California to explore on a
preliminary basis the possibility of such an acquisition. This meeting did not
lead to any agreements or understandings. On December 14, 1998, Mr. Hardy
called Mr. Berkeley to set up a meeting regarding a potential high level
business review meeting and related logistics. On December 16, 1998, the
Company's Board met and reviewed with Mr. Berkeley the extent of the Company's
discussions with Parent. On December 21, 1998, in anticipation of a business
review meeting between Parent and the Company, Parent and the Company entered
into a confidentiality agreement for the purpose of permitting Parent to
review certain nonpublic information relating to the Company in connection
with Parent's evaluation of a possible acquisition.
On December 21, 1998, Mr. Berkeley, all then-current executive officers of
the Company, and Mr. Christopher Schember, a business development advisor to
the Company, met with Mr. Hardy, Mr. Mike Harvey, President of Parent's
Systems Management Group, Mr. Randy Davis, President of Parent's Network
17
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Management Division and Richard Vieira, a representative from Broadview, at
the Courtyard Marriott in Fremont, California to discuss a potential
combination between the Company and Parent. The participants discussed the
Company's products, historical and projected financial information (but only
such financial information as the Company has historically shared with the
financial community). No proprietary information was disclosed by the Company
to Parent at this meeting including information relating to the Company's
sales pipeline, customer names, organizational charts, or prospects (other
than already-disclosed projected financial information).
On December 23, 1998, Mr. Geno P. Tolari, Executive Vice President and
Chief Operating Officer of Parent, held discussions with Mr. Berkeley at Mr.
Tolari's home in Pleasanton, California about setting up a more intensive two-
day business due diligence session. At such meeting and subsequently, Mr.
Berkeley requested Mr. Tolari to provide the Company with an indication of the
price range that Parent would be willing to offer for the Company. Mr.
Berkeley also informed Mr. Tolari that he did not believe that the Company's
current stock price represented the real value of the Company, and that if
Parent was merely interested in a bargain price, then the Company would not be
interested in continuing discussions with Parent. Mr. Tolari advised
Mr. Berkeley that Parent would not be in a position to give a price indication
until after the two-day business review, but assured Mr. Berkeley that if the
follow-on discussion went as well as the December 21, 1998 discussions, that
the proposed price would be fair.
Also on December 23, 1998, Parent provided the Company with an extensive
due diligence list. During the month of January the Company reviewed and
compiled basic information relating to such list.
In early February 1999, Mr. Hardy called Mr. Berkeley to set up a meeting
for a detailed business review meeting between the Company and Parent for
February 5 and 6, 1999.
On February 3, 1999, Mr. Berkeley and Mr. Barth met with representatives of
Hambrecht and Quist LLC, the Company's financial advisor ("H&Q"), and Mr.
Schember to discuss planning for and flow of information from the Company to
Parent and the upcoming meeting on February 5 and 6, 1999 with Parent.
On February 5 and 6, 1999, senior executives of Parent and its financial
advisor met with senior executives of the Company at the Courtyard Marriott in
Fremont, California for the purpose of conducting a detailed business review
of the Company, including a review of the Company's business, operations, and
technology, in order to assess the strategic opportunities of a business
combination with the Company. No information regarding the Company's sales
pipeline, customer names, organizational charts, or prospects (other than
already-disclosed projected financial information) was disclosed by the
Company to Parent at this meeting.
On February 15, 1999, Parent's senior management met internally to consider
the results of its preliminary business review of the Company and the
strategic opportunities presented by an acquisition of the Company. Parent's
senior management decided to pursue an acquisition of the Company but
determined that Parent would request the Company to first seek a waiver from
Cisco Systems, Inc. ("Cisco") of certain provisions of a Stock Purchase
Agreement between the Company and Cisco, dated December 12, 1996 (the "Cisco
Agreement"), pursuant to which, among other things, Cisco was entitled to
receive 20 days prior notice before the Company could accept an acquisition
proposal (the "Acquisition Notice Provision").
On February 16, 1999, representatives of Broadview contacted H&Q, to advise
H&Q that Parent was interested in pursuing an acquisition of the Company but
would require that the Company first obtain a waiver from Cisco of the
Acquisition Notice Provision. Broadview also advised H&Q that Parent, although
not making a formal offer, would be prepared to discuss a transaction at a
price at least equal to $5.50 per Share. On February 16, 1999, Mr. Harvey had
dinner with Mr. Berkeley to discuss Parent's continued interest in the
Company, Mr. Harvey acknowledged his understanding that management of the
Company would not support a transaction unless it was fair to the Company's
stockholders and Mr. Berkeley indicated that he would discuss pursuit of such
waiver from Cisco with the Company's Board.
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<PAGE>
On February 18, 1999, representatives of H&Q met with the Company's Board
and discussed Parent's interest in the Company at a price level of $5.50 per
Share. Parent indicated that the making of an offer would be conditioned on
the Company's obtaining a waiver from Cisco of its right to be notified of
transactions such as that considered by Parent. The Board authorized the
Company's management to seek a waiver from Cisco of the Acquisition Notice
Provision and to negotiate the transaction presented by H&Q at a $7.50 price
per Share. The Company's Board also directed H&Q to identify other companies
that would be interested in acquiring the Company. Thereafter, the Company
sought to obtain such a wavier from Cisco and, on March 3, 1999, the Company
and Cisco entered into a letter agreement which terminated certain provisions
of the Cisco Agreement, including the Acquisition Notice Provision.
On March 6, 1999, Mr. Berkeley telephoned Mr. Tolari and informed him that
the Company was not interested in proceeding with a transaction at the $5.50
per Share level. Mr. Berkeley informed Mr. Tolari that the Company's Board
directed him to discuss a price of $7.50 per Share, and that the Company was
not presently prepared to consider a price that was lower than $7.50.
Between March 6 and March 10, 1999, Mr. Sterling L. Williams, President and
Chief Executive Officer of Parent, and Mr. Tolari had several telephone
conversations with Mr. Berkeley in an effort to set up a meeting. Because of
scheduling difficulties in setting up the meeting, on March 11, 1999, Mr.
Williams telephoned Mr. Berkeley to advise him that Parent was prepared to
proceed with a transaction at a price of $7.00 per Share, subject to
satisfactory completion of due diligence and negotiation of other acceptable
terms and conditions. Mr. Williams requested that Mr. Berkeley respond by the
close of business on March 12, 1999. Mr. Berkeley stated that he would consult
with the Company's Board and called the Company's Board to a meeting for the
following day.
On March 12, 1999, the Company's Board met with representatives of H&Q to
discuss Parent's offer. H&Q advised the Board that a $7.00 per Share offer
represented a substantial premium to the historical trading range of the
Company's common stock and that in H&Q's view the risks of attempting to
negotiate a higher price outweighed the benefits. H&Q also advised the Company
on the status of its contacts with other companies with respect a potential
acquisition. The Board then authorized Company's management to negotiate the
transaction as previously presented, at $7.00 per Share. Following the Board
meeting, Mr. Berkeley advised Mr. Tolari that the Company Board had authorized
the Company's management to engage in discussions with Parent with respect to
a potential acquisition of the Company by Parent at a price of $7.00 per
Share.
Late in the day on March 12, 1999, Parent furnished to the Company, and
Broadview furnished to H&Q, a summary proposal outlining the principal terms
and conditions of a potential acquisition of the Company by Parent.
On March 15, 1999, following its review of the summary proposal, the
Company advised Parent that it was prepared to begin negotiations of
definitive agreements and that, subject to the confirmation of the Company's
Board, Parent's representatives could conduct a detailed due diligence review
of the Company commencing on March 17, 1999.
During the afternoon of March 15, 1999, Parent transmitted to
representatives of the Company a letter agreement providing that the Company
would negotiate exclusively with Parent for a limited period of time (the
"Exclusivity Letter"), a draft Merger Agreement, a draft form of Stockholder
Agreement and a due diligence request list. Parent advised the Company that
Parent would require Cisco, certain limited partnerships controlled by Advent
International Corp. (collectively "Advent") and the executive officers and
directors of the Company to sign Stockholder Agreements granting Parent an
option to purchase their Shares at a price of $7.00 per Share in cash and
grant Parent a proxy with respect to such Shares.
On March 16, 1999, the Company informed the Board of the status of the
negotiations, and the Board authorized the Company's officers to negotiate,
execute and deliver the Exclusivity Letter. Commencing on March 16, 1999,
representatives of Parent and the Company and their respective counsel began
negotiating the
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<PAGE>
Exclusivity Letter, the draft Merger Agreement and the form of Stockholder
Agreement. On the evening of March 16, 1999, Parent and the Company executed
the Exclusivity Letter which provided, among other things, that until the
earlier of 6:00 p.m., California time, on March 25, 1999 and the execution of
a definitive agreement, the Company and its affiliates and representatives
would discontinue any solicitation efforts, discussions or negotiations with
respect to an acquisition proposal by any person other than Parent and would
not solicit or facilitate other proposals to acquire the Company. In addition,
the Company agreed to notify Parent if it received any acquisition proposal
providing aggregate consideration for all of the Company's outstanding Shares
having a value in excess of $7.00 per Share.
Commencing on March 17, 1999, representatives of Parent conducted an
intensive due diligence review of the Company. The negotiation of the Merger
Agreement and the Stockholder Agreements and Parent's due diligence review
continued until March 23, 1999.
On March 18, 1999, Cisco and Advent were furnished a draft of the form of
Stockholder Agreement and on March 19, 1999 Parent began negotiating the terms
of the Stockholder Agreements with representatives of Cisco and Advent, which
negotiations continued until March 23, 1999.
On March 19, 1999, the Company's Board met to review final unresolved
issues relating to the Merger Agreement and Stockholder Agreements.
On March 23, 1999, the Company's Board met, reviewed and discussed the
Merger Agreement and Stockholder Agreements, H&Q delivered its opinion to the
Board that the Offer Consideration per Share was fair to the stockholders of
the Company, from a financial point of view, and the Board voted unanimously
to approve the Merger Agreement and other transactions contemplated thereby,
and to recommend that the Company's stockholders tender their Shares in
response to Parent's tender offer. On March 23, 1999, the Merger Agreement was
executed and delivered by Parent, Purchaser and the Company, and Parent,
Purchaser and the Stockholders entered into the Stockholder Agreements. On
March 24, 1999, Parent and the Company issued a joint press release announcing
the execution of the Merger Agreement. On March 30, 1999, pursuant to the
terms of the Merger Agreement, Parent and Purchaser commenced the Offer.
Factors Considered by the Board of Directors. In approving the Offer, the
Merger Agreement and the transactions contemplated thereby, and recommending
that all stockholders tender their Shares pursuant to the Offer, the Company
Board of Directors considered a number of factors, including:
(1) the financial and other terms of the Offer, the Merger Agreement and
the related Stockholder Agreements, including the benefits of the
transaction being structured as a two-step tender offer and merger, which
would provide the Company's stockholders with an opportunity to receive
$7.00 per Share on an accelerated basis;
(2) the presentation of H&Q, the Company's financial advisor, and H&Q's
opinion to the effect that, as of the date of its opinion and based upon
and subject to certain matters stated therein, the $7.00 per Share cash
consideration to be received by the holders of Shares pursuant to the Offer
and the Merger is fair to the stockholders of the Company from a financial
point of view (the "Fairness Opinion"). The full text of H&Q's written
Fairness Opinion is attached hereto as Annex A. Stockholders are urged to,
and should, read such opinion in its entirety. H&Q presented its final
Fairness Opinion on March 23, 1999, and the Fairness Opinion concluded that
the proposed per Share cash consideration is fair to the stockholders from
a financial point of view;
(3) that the $7.00 per Share tender offer price represents a premium of
approximately 41.8% over the closing price of the Shares on the Nasdaq
National Market System ("Nasdaq") on March 19, 1999, and 81.2% over the
average of all closing prices of the Shares on Nasdaq for the last full
month of trading prior to March 19, 1999;
(4) the history of the price of the Shares on Nasdaq over the last 12
months and the premium represented by the Offer Consideration to such price
history;
20
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(5) the view of the Company Board of Directors, based in part upon the
presentation of management and H&Q to the Company Board of Directors,
regarding the likelihood of a superior offer arising;
(6) the Company's existing competitive and market position, including
the Company's ability to effectively compete with companies having
significantly greater financial resources than the Company;
(7) the provisions of the Merger Agreement, including the provision
allowing the Company to respond to unsolicited bona fide proposals
concerning an acquisition of the Company that the Company's Board of
Directors has concluded represents a Superior Proposal, and the provisions
which permit the Company to terminate the Merger Agreement upon payment to
Purchaser of a break-up fee and reimbursement of certain expenses under
certain circumstances;
(8) the fact that Parent's and Purchaser's obligations under the Merger
Agreement and the Offer were not subject to any financing condition;
(9) Parent's financial condition and ability to cause Purchaser to meet
its obligations under the Merger Agreement;
(10) the alternatives available to the Company, including continuing to
maintain the Company as an independent company and the possibility that if
the Company remained as an independent public corporation because of a
decline in the market price of the Shares or the stock market in general,
the price that might be received by the holders of the Shares in the open
market or in a future transaction might be less than the $7.00 per Share
price to be received by holders of Shares in connection with the Offer and
the Merger;
(11) legal matters relating to the Offer and the Merger Agreement,
including the regulatory clearance under the HSR Act with respect to the
Offer and the favorable prospects for receiving such clearance and the
terms of the Offer and the Merger Agreement related thereto;
(12) the willingness of the directors, members of management and certain
large stockholders of the Company to enter into the Stockholder Agreements,
pursuant to which, among other things, such persons granted to Parent an
option to purchase the Shares owned by them and Shares resulting from
exercise of options held by them and that such Stockholders indicated that
they intended to tender their Shares pursuant to the Offer;
(13) the familiarity of the Company's Board of Directors with the
business, results of operations, properties and financial condition of the
Company and the nature of the industry in which it operates; and
(14) the discussions held by the Company and H&Q on the Company's behalf
with other companies regarding potential business combination transactions
with the Company.
The foregoing discussion of the information and factors considered and given
weight by the Company Board of Directors is not intended to be exhaustive. In
view of the variety of factors considered in connection with its evaluation of
the Merger Agreement and the Offer, the Company Board of Directors did not
find it practicable to, and did not, quantify or otherwise assign relative
weights to the specific factors considered in reaching its determination. In
addition, individual members of the Company Board of Directors may have given
different weights to different factors.
Item 5. Persons Retained, Employed or to Be Compensated.
The Company retained H&Q in connection with the Offer and the Merger.
Pursuant to a letter agreement dated January 29, 1999, the Company paid H&Q,
upon delivery of the Fairness Opinion, a fee, payable in cash, of $450,000,
which is credited against any compensation otherwise payable by the Company to
H&Q upon the consummation of a sale of the Company. Upon consummation by the
Company of a sale, the Company has agreed to pay H&Q an additional fee,
payable in cash on closing, of $900,000 plus 2.0% of all consideration above
$50 million in valuation of all of the Company's capital stock, less any fees
previously paid. In addition to the foregoing compensation, the Company has
agreed to indemnify H&Q against certain liabilities and expenses arising out
of the engagement and the transactions in connection therewith, including
certain liabilities under the federal securities laws.
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In addition, the Company agreed to pay Christopher Schember, a business
development advisor, a fee of $20,000 in connection with Mr. Schember's
efforts with regard to the Merger Agreement.
Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any person to
make solicitations or recommendations to the stockholders of the Company on
its behalf with respect to the Offer and the Merger.
Item 6. Recent Transactions and Intent with Respect to Securities.
(a) No transactions in the Shares have been effected during the past 60
days by the Company or, to the best of the Company's knowledge, by any
executive officer, director, affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, all of the Company's
executive officers, directors and all entities related to Advent and Cisco who
own Shares presently intend to tender such Shares to Purchaser pursuant to the
Offer.
Item 7. Certain Negotiations and Transactions by the Subject Company.
(a) Except as set forth herein, the Company is not engaged in any
negotiation in response to the Offer which relates to or would result in (i)
an extraordinary transaction such as a merger or reorganization, involving the
Company or any subsidiary of the Company; (ii) a tender offer for or other
acquisition of securities by or of the Company; or (iii) any material change
in the present capitalization or dividend policy of the Company.
The Company has executed a confidential letter of intent with a foreign
third party and is engaged in preliminary negotiations with respect to the
terms and conditions for the sale of all the Company's assets relating to a
certain product line.
(b) Except as set forth herein, there are no transactions, resolutions of
the Company's Board of Directors, agreements in principle or signed contracts
in response to the Offer that relate to or would result in one or more of the
events referred to in Item 7(a) above.
Item 8. Additional Information to Be Furnished.
Short Form Merger. Under the DGCL, if Purchaser acquires, pursuant to the
Offer or otherwise, at least 90% of the outstanding shares of Common Stock,
the Purchaser will be able to effect the Merger after consummation of the
Offer without a vote of the Company's stockholders. However, if the Purchaser
does not acquire at least 90% of the outstanding Shares of Common Stock
pursuant to the Offer or otherwise and a vote of the Company's stockholders is
required under Delaware Law, a significantly longer period of time will be
required to effect the Merger.
Item 9. Material to Be Filed as Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
99.1 Agreement and Plan of Merger, dated as of March 23, 1999, by and among
Sterling Software, Inc., Sterling Software (Southwest), Inc., and
Interlink Computer Sciences, Inc., including Conditions to the Offer.
99.2 Stockholder Agreement, dated as of March 23, 1999, by and among
Sterling Software, Inc., Sterling Software (Southwest), Inc., and
Cisco Systems, Inc.
99.3 Stockholder Agreement, dated as of March 23, 1999, by and among
Sterling Software, Inc., Sterling Software (Southwest), Inc., and
Adtel Limited Partnership, Adventact Limited Partnership, Advent
International Investors II Limited Partnership, Adwest Limited
Partnership, Global Private Equity II Limited Partnership and Golden
Gate Development and Investment Limited Partnership.
</TABLE>
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<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
99.4 Form of Stockholder Agreement, dated as of March 23, 1999, by and
among Sterling Software, Inc., Sterling Software (Southwest),
Inc., and directors and executive officers of the Company
(together with a schedule indicating the number of shares and
options to purchase shares owned by each director and executive
officer, who entered into a Stockholder Agreement).
99.5 Joint Press release issued by the Company and Sterling Software,
Inc. dated March 24, 1999.
99.6 Letter to Stockholders of Interlink Computer Sciences, Inc., dated
March 30, 1999.*
99.7(1) Fairness Opinion of Hambrecht & Quist LLC, dated March 23, 1999.*
99.8 Exclusivity Agreement, dated March 16, 1999, by and between the
Company and Sterling Software, Inc.
99.9(2) Certificate of Incorporation of the Company, as amended to date.
99.10(2) Bylaws of the Company, as amended to date.
99.11(2) Form of Indemnification Agreement between the Company and its
executive officers and directors.
99.12(2)(5) 1992 Stock Option Plan and related agreements.
99.13(3) 1996 Director Stock Option Plan and related agreements.
99.14(2) 1996 Employee Stock Purchase Plan and related agreements.
99.15(4) Form of Change of Control Severance Agreement between the Company
and its Executive Officers
99.16(4) Letter Agreement between the Company and Augustus J. Berkeley
dated 10/97.
99.17 Consulting Agreement between the Company and James A. Barth, dated
March 19, 1999
99.18(6) The Company's Information Statement pursuant to Section 14(f) of
the Exchange Act and Rule 14f-1 thereunder.*
99.19 Certain portions of pages 2-3 and 8-13 of the Company's Proxy
Statement, dated September 24, 1998, relating to the Company's
Annual Meeting of Shareholders held on November 5, 1998.
</TABLE>
- --------
* Included in the materials mailed to the Company's stockholders.
(1) Attached hereto as Annex A.
(2) Incorporated by reference from the Company's registration statement on
Form S-1, as amended (File No. 333-05243) which became effective on August
15, 1996.
(3) Incorporated by reference from the Company's quarterly report on Form 10-Q
for the quarter ended December 31, 1996 and filed with the SEC on February
13, 1997.
(4) Incorporated by reference from the Company's quarterly report on Form 10-Q
for the quarter ended March 31, 1998 and filed with the SEC on May 15,
1998.
(5) Amendments to the Company's 1992 Stock Option Plan are incorporated by
reference from the Company's registration statements on Form S-8, filed
with the SEC on March 25, 1998 and March 4, 1998.
(6) Attached hereto as Schedule I.
23
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
INTERLINK COMPUTER SCIENCES, INC.
/s/ Augustus J. Berkeley
By: _________________________________
Name: Augustus J. Berkeley
Title:President and Chief
Executive Officer
Dated: March 30, 1999
24
<PAGE>
ANNEX A
Hambrecht & Quist
One Bush Street San Francisco, CA 94104 (415) 439-3000
March 23, 1999
Confidential
The Board of Directors
Interlink Computer Sciences, Inc.
47370 Fremont Boulevard
Fremont, CA 94538
Attention: Augustus J. Berkeley
Chairman and Chief Executive Officer
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of common stock (the "Common
Stock") of Interlink Computer Sciences, Inc. (the "Company") of the
consideration to be received by such stockholders in connection with the
proposed acquisition of the Company by Sterling Software, Inc. ("Acquirer")
pursuant to the Agreement and Plan of Merger to be dated as of March 23, 1999,
among Acquirer, Sterling Software (Southwest), Inc. ("Merger Sub"), a wholly
owned subsidiary of the Acquirer, and the Company (the "Agreement").
We understand that the terms of the Agreement provide, among other things,
that (i) Merger Sub will promptly commence a tender offer (the "Offer") to
purchase for cash, a minimum of 50.1%, and up to 100% of the outstanding
shares of Common Stock at a purchase price of $7.00 per share, net to each of
the selling shareholders, upon the terms and subject to the conditions set
forth in the Agreement; and (ii) Merger Sub will subsequently be merged (the
"Merger") with and into the Company in a transaction that will provide the
holders of Common Stock (other than Acquirer, Merger Sub, and the Company or
their respective subsidiaries) with $7.00 per share in cash. The Offer and the
Merger contemplated by the Agreement constitute the "Proposed Transaction". We
understand that concurrently with the execution of the Agreement, the Acquirer
and certain stockholders (each a "Stockholder") are entering into individual
Stockholder Agreements relating to Acquirer's purchase, under certain
conditions, of the Common Stock of the Company held by each Stockholder as
well as the grant of irrevocable proxies by each Stockholder to the Acquirer,
and an agreement by each Stockholder to vote in favor of the adoption of the
Agreement (the "Stockholder Agreements").
Hambrecht & Quist LLC ("Hambrecht & Quist"), as part of its investment
banking services, is regularly engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, strategic
transactions, corporate restructurings, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. We have acted as a financial
advisor to the Board of Directors of the Company in connection with the
Proposed Transaction, and we will receive a fee for our services, which
include the rendering of this opinion.
San Francisco . New York . Boston . Newport Beach . San Diego . London
MEMBERS NEW YORK STOCK EXCHANGE . AMERICAN STOCK EXCHANGE . PACIFIC STOCK
EXCHANGE
<PAGE>
The Board of Directors
Interlink Computer Sciences, Inc.
Page 2
In connection with our review of the Proposed Transaction, and in arriving
at our opinion, we have, among other things:
(i) reviewed the publicly available consolidated financial statements of
Acquirer for recent years and interim periods to date and certain other
relevant financial and operating data of made available to us from
published sources;
(ii) reviewed the publicly available consolidated financial statements
of the Company for recent years and interim periods to date and certain
other relevant financial and operating data of the Company made available
to us from published sources and from the internal records of the Company;
(iii) reviewed certain internal financial and operating information,
including certain projections, relating to the Company prepared by the
management of the Company;
(iv) discussed the business, financial condition and prospects of the
Company with certain of its officers;
(v) reviewed the recent reported prices and trading activity for the
Common Stock of the Company and compared such information and certain
financial information for the Company with similar information for certain
other companies engaged in businesses we consider comparable;
(vi) reviewed the financial terms, to the extent publicly available, of
certain comparable merger and acquisition transactions;
(vii) reviewed the Agreement; and
(viii) performed such other analyses and examinations and considered
such other information, financial studies, analyses and investigations and
financial, economic and market data as we deemed relevant.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of all of the information concerning the Company considered in
connection with our review of the Proposed Transaction, and we have not
assumed any responsibility for independent verification of such information.
We have not prepared any independent valuation or appraisal of any of the
assets or liabilities of the Company, nor have we conducted a physical
inspection of the properties and facilities of the Company. With respect to
the financial forecasts and projections made available to us and used in our
analysis, we have assumed that they reflect the best currently available
estimates and judgments of the expected future financial performance of the
Company. Our opinion is necessarily based upon market, economic, financial and
other conditions as they exist and can be evaluated as of the date of this
letter and any change in such conditions would require a reevaluation of this
opinion. We have not been requested to, and do not express any opinion
relating to the terms of the Stockholder Agreements.
It is understood that this letter is for the information of the Board of
Directors in connection with its evaluation of the Proposed Transaction and
may not be used for any other purpose without our prior written consent;
provided, however, that this letter may be reproduced in full in any proxy
statement or solicitation / recommendation statement , as the case may be, in
connection with the Proposed Transaction. This letter does not constitute a
recommendation to any stockholder as to whether such stockholder should accept
the Offer, or vote in favor of the Merger, as the case may be.
<PAGE>
The Board of Directors
Interlink Computer Sciences, Inc.
Page 3
Based upon and subject to the foregoing, and after considering such other
matters as we deem relevant, we are of the opinion that as of the date hereof,
the consideration to be received by the holders of Common Stock in the
Proposed Transaction is fair to such holders from a financial point of view.
Very truly yours,
Hambrecht & Quist llc
/s/ Paul B. Cleveland
By __________________________________
Paul B. Cleveland
Managing Director
<PAGE>
SCHEDULE I
INTERLINK COMPUTER SCIENCES, INC.
47370 Fremont Boulevard
Fremont, CA 94538
----------------
INFORMATION STATEMENT PURSUANT TO SECTION 14(f)
OF THE SECURITIES EXCHANGE ACT OF 1934 AND
RULE 14f-1 THEREUNDER
This Information Statement is being mailed on or about March 30, 1999 as
part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") to holders of shares (the "Rights," and together with the
Common Stock the "Shares") of common stock, $0.001 par value (the "Common
Stock"), of Interlink Computer Sciences, Inc., a Delaware corporation (the
"Company") and the associated preferred share purchase rights issued pursuant
to the Rights Agreement dated February 25, 1998, as amended, between the
Company and BankBoston, N.A. Capitalized terms used herein and not otherwise
defined herein shall have the meanings set forth in the Schedule 14D-9. You
are receiving this Information Statement in connection with the possible
election of persons designated by Sterling Software, Inc. ("Parent") to the
board of directors of the Company (the "Company Board"). Such designation is
to be made pursuant to an Agreement and Plan of Merger, dated March 23, 1999
(the "Merger Agreement"), by and between Parent, Sterling Software
(Southwest), Inc. (the "Purchaser"), an indirect, wholly owned subsidiary of
Parent, and the Company.
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
thereunder. You are urged to read this information statement carefully. You
are not, however, required to take any action in connection with this
Information Statement.
Pursuant to the Merger Agreement, the Purchaser has commenced a cash tender
offer to acquire all of the Shares (the "Offer"). The Offer is scheduled to
expire at 12:00 Midnight New York City Time on April 26, 1999, unless the
Offer is extended. Following the successful completion of the Offer, upon
approval by a stockholder vote, if required, and subject to certain other
conditions, the Purchaser will be merged with and into the Company (the
"Merger").
The information contained in this Information Statement concerning Parent
and Purchaser has been furnished to the Company by Parent and Purchaser, and
the Company assumes no responsibility for the accuracy or completeness of such
information.
GENERAL INFORMATION REGARDING THE COMPANY
General
The Common Stock is the only class of voting securities of the Company
outstanding. Each Share entitles its record holder to one vote. As of March
23, 1999, there were 8,308,107 Shares outstanding.
The Company's Board of Directors
The Merger Agreement provides that, promptly after (i) the purchase of and
payment for any Shares by Purchaser or any of its affiliates pursuant to the
Offer as a result of which Purchaser and its affiliates own beneficially at
least a majority of then outstanding Shares and (ii) compliance with Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, whichever
shall occur later, Parent will be entitled to designate such number of
directors, rounded up to the next whole number, on the Company Board as is
equal to the product of the total number of directors on such Board (after
giving effect to any increase in the size of such Board) multiplied by the
percentage that the number of Shares beneficially owned by Purchaser at such
time (including Shares accepted for payment) bears to the total number of
Shares then outstanding. The Company has further agreed, upon request of
Parent, to use its best efforts promptly either to increase the size of the
Company Board
<PAGE>
or to secure the resignations of such number of its incumbent directors, or
both, as is necessary to enable such designees of Parent to be so elected or
appointed to the Company Board, and to take all actions available to the
Company to cause such designees of Parent to be so elected or appointed. The
Company, if requested by Parent, will also take all action necessary to cause
persons designated by Parent to constitute at least the same percentage
(rounded up to the next whole number) as Parent is entitled to designate on
the Company Board, of each committee of the Company Board, each board of
directors (or similar body) of each subsidiary of the Company, and each
committee (or similar body) of each such board.
Notwithstanding the provisions described above, the Company, Parent and
Purchaser will use their respective reasonable best efforts to ensure that at
least two of the members of the Board shall, at all times prior to the
Effective Time, be directors of the Company who were directors of the Company
on the date hereof (the "Continuing Directors"). If the number of Continuing
Directors shall be reduced below two for any reason, the remaining Continuing
Director may designate a person to fill such vacancy who will be deemed to be
a Continuing Director for all purposes of the Merger Agreement, or if no
Continuing Directors then remain, the other directors of Company then in
office will designate two persons to fill such vacancies who will not be
officers or employees or affiliates of the Company, Parent or either of their
subsidiaries and such persons shall be deemed to be Continuing Directors for
all purposes of the Merger Agreement.
From and after the time, if any, that Parent's designees constitute a
majority of the Company's Board of Directors and prior to the Effective Time,
any amendment or modification of the Merger Agreement, any amendment to the
Company's Certificate of Incorporation or Bylaws inconsistent with the Merger
Agreement, any termination of the Merger Agreement by the Company, any
extension of time for performance of any of the obligations of Parent or
Purchaser under the Merger Agreement, any waiver of any condition to the
Company's obligations under the Merger Agreement or any of the Company's
rights under the Merger Agreement or other action by the Company under the
Merger Agreement may be effected only by the action of a majority of the
Continuing Directors of the Company, which action will be deemed to constitute
the action of any committee specifically designated by the Board of Directors
of Company to approve the actions contemplated under the Merger Agreement and
the full Board of Directors of the Company; provided, that, if there are ever
no Continuing Directors, such actions may be effected by majority vote of the
entire Board of Directors of the Company.
2
<PAGE>
Parent has informed the Company that Parent will choose Parent's designees
from the list of persons set forth in the following table. With respect to
Parent's designees, the following table, prepared from information furnished
to the Company by Parent, sets forth the name, age, present principal
occupation or employment and five-year employment history for each of the
persons who may be designated by Parent as Parent's designees. If necessary,
Parent may choose additional or other Parent's designees, subject to the
requirements of Rule 14f-1 promulgated under the Exchange Act. Unless
otherwise indicated below, the business address of each person is 300 Crescent
Court, Suite 1200, Dallas, Texas 75201-7853, and each such person is a
United States citizen.
<TABLE>
<CAPTION>
Present Principal Occupation or Employment;
Material Positions Held During the Past Five
Name Age Years
---- --- --------------------------------------------
<C> <C> <S>
Geno P. Tolari.......... 55 Mr. Tolari has served as an Executive Vice
President of Parent since March 1990 and as
Chief Operating Officer of Parent since April
1996. Mr. Tolari served as President of Parent's
Systems Management Group from December 1994 to
February 1997 and as President of Parent's
Federal Systems Group from October 1985 to
December 1994.
Don J. McDermett, Jr. .. 40 Mr. McDermett has served as Senior Vice President
and General Counsel of Parent since May 1997 and
as Secretary of Parent since October 1998.
Mr. McDermett served as Vice President, Legal of
Parent from July 1996 to May 1997. Prior to that
time Mr. McDermett was employed by Thompson &
Knight, P.C., a Dallas-based law firm, having
been a senior shareholder in that firm's
corporate practice group since 1993.
R. Logan Wray........... 39 Mr. Wray has served as Senior Vice President and
Chief Financial Officer of Parent since May
1997. Prior to that time Mr. Wray was employed
by Ernst & Young LLP, a national accounting
firm, having been a partner in that firm since
1994.
</TABLE>
Parent has advised the Company that to the best knowledge of Parent, none
of Parent's designees currently is a director of, or holds any position with,
the Company, and except as disclosed in the Offer to Purchase, none of
Parent's designees beneficially owns any securities (or rights to acquire any
securities) of the Company or has been involved in any transactions with the
Company or any of its directors, executive officers or affiliates that are
required to be disclosed pursuant to the rules of the SEC, except as may be
disclosed in the Offer to Purchase. None of Parent's designees has any family
relationship with any director or executive officer of the Company.
Parent has advised the Company that each of the persons listed in the table
above has consented to act as a director, and that none of such persons has
during the last five years been convicted in a criminal proceeding (excluding
traffic violations and similar misdemeanors) or was a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and
as a result of such proceeding was, or is, subject to a judgment, decree or
final order enjoining future violations of, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such laws or
is involved in any other legal proceeding which is required to be disclosed
under Item 401(f) of Regulation S-K promulgated by the SEC.
It is expected that Parent's designees may assume office at any time
following the purchase by Parent of a majority of outstanding Shares pursuant
to the Offer and (if necessary) the Stockholders Agreements, which purchase
cannot be earlier than April 27, 1999, and that, upon assuming office,
Parent's designees will thereafter constitute at least a majority of the
Company Board.
3
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The Current Members of the Company Board
The names of the Company's current directors, their ages as of March 30,
1999 and certain other information about them are set forth below. Some of the
current directors may resign effective immediately following the purchase of
Shares by Purchaser pursuant to the Offer.
<TABLE>
<CAPTION>
Director
Name Age Position(s) with the Company Since
---- --- ---------------------------- --------
<S> <C> <C> <C>
Augustus J. Berkeley.... 53 President, Chief Executive Officer and Director 1997
Ronald W.
Braniff(1)(2).......... 63 Director 1993
Andrew I. Fillat(2)..... 50 Director 1994
Ralph B. Godfrey(1)..... 59 Director 1997
</TABLE>
- --------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
There are no family relationships between any of the directors or executive
officers of the Company.
Augustus J. Berkeley has served as President and Chief Executive Officer
from September 1997 to present and a member of the Board of Directors from
November 1997 to present. He has served as Vice President of Worldwide Sales
from January 1996 to September 1997. He also served as Vice President of North
American Sales from January 1995 to December 1995. From March 1993 to January
1995, he served as Vice President of Sales and Marketing at CRAY Research
Superserver Inc., a computer systems company. From May 1990 to January 1993,
Mr. Berkeley served as Vice President of Marketing at Sequoia Systems, Inc., a
computer systems company. Mr. Berkeley holds a B.S. in Economics and Finance
from the University of Southwestern Louisiana.
Ronald W. Braniff has served as a member of the Board of Directors since
March 1993. Mr. Braniff is a private investor and software business
consultant. He also serves as a director of Evoke, Inc., a systems development
tools software company. Mr. Braniff served as President and Chief Executive
Officer of ASK Computer Systems, an enterprise applications software company
from 1984 to 1989. From 1966 to 1984 he was employed by Tymshare, a computer
and network services company, and held the position of Vice President and
General Manager of the Computer Services Group. Mr. Braniff holds a B.S.M.E.
from Oregon State University.
Andrew I. Fillat has served as a member of the Board of Directors since
January 1994. From April 1989 to the present, Mr. Fillat has been a partner
with Advent International, a management company for several venture capital
and private equity funds, and from June 1995 to the present, he has served as
Senior Vice President with Advent International. He serves as a director and
member of the Compensation and Audit Committees of Advanced Radio Telecom, a
wireless services company, Voxware, Inc., a voice-compression and
communications company, and Lightbridge, Inc., a services and software
provider to wireless carriers. Mr. Fillat holds a B.S. and M.S. in Electrical
Engineering and Computer Science from the Massachusetts Institute of
Technology and an M.B.A. from Harvard Graduate School of Business
Administration.
Ralph B. Godfrey has served as a member of the Board of Directors since
December 1997. From 1990 to the present, Mr. Godfrey has been with 3Com
Corporation ("3Com") serving in various capacities. Mr. Godfrey is currently
Senior Vice President of 3Com's Client Access Business Unit and is a member of
3Com's Executive Committee. Prior to Mr. Godfrey's joining 3Com, he was
President of Unisys' Value-Added Marketing Division which was created
following the acquisition of Convergent Technologies in 1989. Mr. Godfrey had
joined Convergent Technologies in 1988 as Vice President of North American
Sales. Prior to Convergent Technologies, Mr. Godfrey spent 20 years with
Hewlett-Packard where he held a variety of sales management positions.
Mr. Godfrey holds a B.S. and M.S. in Electrical Engineering from Auburn
University.
4
<PAGE>
Information Concerning The Board; Director Compensation
The Board of Directors of the Company held a total of 17 meetings during
fiscal 1998. No director attended fewer than 75% of the meetings of the Board
of Directors or committees thereof, upon which such director served, if any.
The Board of Directors has an Audit Committee and a Compensation Committee.
The Board does not have a nominating committee or any committee performing
similar functions.
The Audit Committee, which currently consists of Messrs. Braniff and
Godfrey, held 4 meetings in fiscal 1998. The Audit Committee oversees actions
recommended by the Company's independent accountants and reviews the Company's
internal financial controls.
The Compensation Committee, which consists of Messrs. Braniff and Fillat,
held 7 meetings in fiscal 1998. The Compensation Committee is responsible for
determining salaries, incentives and other forms of compensation for
directors, officers and other employees of the Company and administering
various incentive compensation and benefit plans.
The Company Board on March 13, 1998 created a Stock Option Plan Committee.
The Stock Option Plan Committee, consists of one member, Augustus J. Berkeley.
The Stock Option Plan Committee held one meeting in fiscal year 1998. The
Stock Option Plan Committee is responsible for granting options on an ongoing
basis to new and existing employees of the Company pursuant to the designated
guidelines approved by the Board of Directors. The authority to grant options
to employees does not extend to the granting of options to officers or
director-level employees of the Company which options must be granted and
approved by the Company Board or the Compensation Committee.
Executive Officers Of The Company
The following individuals currently serve as executive officers of the
Company:
<TABLE>
<CAPTION>
Current Position with Office Held
Name Age Company Since
---- --- --------------------- -----------
<C> <C> <S> <C>
Augustus J. Berkeley........ 53 President, Chief Executive 1997
Officer and Director
William C. Jones............ 52 Vice President of Marketing 1998
Victor C. Langford.......... 47 Vice President of Product 1998
Development and Customer
Service
Christopher A. Markle....... 41 Vice President and Chief 1996
Technical Officer
Michael J. Satterwhite...... 43 Vice President of Human 1996
Resources
Gordon Y.S. Leong........... 41 Acting Chief Financial 1999
Officer
</TABLE>
Augustus J. Berkeley has served as President and Chief Executive Officer
from September 1997 to present and a member of the Board of Directors from
November 1997 to present. He has served as Vice President of Worldwide Sales
from January 1996 to September 1997. He also served as Vice President of North
American Sales from January 1995 to December 1995. From March 1993 to January
1995, he served as Vice President of Sales and Marketing at CRAY Research
Superserver Inc., a computer systems company. From May 1990 to January 1993,
Mr. Berkeley served as Vice President of Marketing at Sequoia Systems, Inc., a
computer systems company. Mr. Berkeley holds a B.S. in Economics and Finance
from the University of Southwestern Louisiana.
William C. Jones has served as Vice President of Marketing from April 1998
to the present. Prior to the promotion, he held the position of Director of
Marketing, where he played a major role in the development and execution of
Interlink's e-Access strategy announced on March 30, 1998. Previously, he held
the positions of director of applications product marketing at Interlink from
April 1997 to April 1998 and MVS advanced systems planner at IBM from June
1986 to August 1989. Mr. Jones holds a B.S. in Polymer Chemistry and Textile
Engineering from North Carolina State University at Raleigh.
5
<PAGE>
Victor C. Langford has served as Vice President of Product Development and
Customer Service from March 1998 to the present. From October 1995 to June
1997, Mr. Langford served as Senior Vice President at Novell Corporation. His
responsibilities included managing product development and marketing groups in
various locations worldwide that were responsible for generating annual
revenues of approximately $250 million. Previously, Mr. Langford held senior
management positions at Novell Corporation, Software Publishing Corporation,
Tymlabs and Hewlett-Packard Company. Mr. Langford holds a B.S. in Computer
Science from North Staffordshire Polytechnic in the UK.
Christopher A. Markle has served as Vice President from December 1996 to
the present and was also appointed as the Chief Technical Officer in November
1997. He also served as the Company's Director of Marketing from June 1993 to
December 1996 and as Director of Engineering from April 1990 to June 1993.
Mr. Markle holds a B.S. in Computer Science from the Virginia Polytechnic
Institute.
Michael J. Satterwhite has served as Vice President of Human Resources from
September 1996 to the present. From October 1995 to September 1996 he was
Worldwide Director of Human Resources for Software Publishing Corporation
("SPC"), a visual communications software company. From June 1993 to October
1995, Mr. Satterwhite was the Manager of Human Resources at SPC. From June
1992 to June 1993, he was Manager of Human Resources at Oracle Corporation, an
information management software company. From 1990 to June 1992, he was
Manager of recruiting and employment at International Business Machines, Inc.
Mr. Satterwhite holds a B.S. in Organization Behavior from the University of
San Francisco.
Gordon Y. S. Leong has served as Corporate Controller since May 1998, and
Acting Chief Financial Officer since March 25, 1999. From February 1997 to May
1998, Mr. Leong served as Chief Financial Officer for IBRAIN Software, Inc., a
financial decision support software company. From January 1995 to February
1997, Mr. Leong was Chief Financial Officer for Mainsoft Corporation, a
Windows-to-UNIX translation software company. Prior to January 1995, Mr. Leong
was Controller for Verity, Inc., a company that developed intelligent search
and retrieval software for the Web and other storage repositories. Mr. Leong
holds a B.B.A. in Accounting from the University of Portland and an M.B.A.
from Golden Gate University.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation for services rendered in
all capacities during the fiscal year ended June 30, 1998 awarded to, earned
by, or paid to (i) the Company's Chief Executive Officer and (ii) the
Company's other most highly compensated officers whose salary and bonus for
such fiscal year exceeded $100,000 and who were serving as an officer of the
Company as of the end of such fiscal year (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation Awards(1)
---------------- ------------
Securities
Name and Fiscal Underlying All Other
Principal Position Year Salary Bonus Options Compensation(2)
------------------ ------ -------- ------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Augustus J.
Berkeley(3)............ 1998 $240,283 $70,629 367,300(7) $5,148
President and Chief
Executive Officer 1997 222,817 11,341 65,000 1,099
1996 305,656 8,789 30,000 4,929
Ronald W. Braniff(4).... 1998 80,500 -- 51,750(8) --
Former Interim Chief
Executive Officer 1997 31,000 -- 63,000 --
Christopher A. Markle... 1998 135,006 48,062 47,500(9) 1,732
Vice President and
Chief Technical
Officer 1997 118,834 21,821 22,500 619
Michael J. Satterwhite.. 1998 120,019 49,250 50,000(10) 1,053
Vice President of Human
Resources 1997 86,240 26,504 25,000 631
William C. Jones(5)..... 1998 122,751 20,000 60,000(11) 1,187
Vice President of
Marketing
James A. Barth(6)....... 1998 99,487 18,667 90,000 882
Former Vice President,
Chief Financial
Officer
and Secretary
</TABLE>
- --------
(1) In accordance with the rules of the SEC, other compensation in the form
of perquisites and other personal benefits has been omitted in those
cases where the aggregate amount to such perquisites and other personal
benefits constituted less than the lesser of $50,000 or 10% of the total
annual salary and bonus for the Named Executive Officer for such year.
(2) Includes premiums paid by the Company on life insurance policies where
the Company was not the beneficiary, auto allowances, and travel
advances.
(3) Salary amount includes $72,817 and $205,648 of commissions in 1997 and
1996, respectively.
(4) Mr. Braniff assumed the position of Interim Chief Executive Officer from
May 1997 to September 1997, and was compensated on a consulting basis for
that period.
(5) Mr. Jones assumed the position of Vice President of Marketing in April
1998.
(6) Mr. Barth assumed the position of Vice President, Chief Financial Officer
and Secretary in November 1997 and relinquished such positions effective
March 1999.
(7) Reflects options for 367,300 shares that were repriced in February 1998,
replacing options that were granted in November 1996, March 1997 and
October 1997.
(8) Reflects options for 48,000 shares that were repriced in February 1998,
replacing options that were granted in May 1997.
(9) Reflects options for 32,500 shares that were repriced in February 1998,
replacing options that were granted in April 1996, November 1996 and
December 1996.
(10) Reflects options for 25,000 shares that were repriced in February 1998,
replacing options that were granted in September 1996.
(11) Reflects options for 3,000 shares that were repriced in February 1998,
replacing options that were granted in August 1997.
7
<PAGE>
Grants of Stock Options
Option Grants in Last Fiscal Year
The following table sets forth information regarding the grant of stock
options to each of the Named Executive Officers during the fiscal year ended
June 30, 1998.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants for Option Term(1)
----------------------------------------------------- ------------------------
Percentage of
Number of Total Options
Securities Granted to Exercise
Underlying Employees Price Per Expiration
Name Options Granted in Fiscal 1998 Share(3) Date 5% 10%
---- --------------- -------------- --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Augustus J. Berkeley.... 151,15(2)(7) 8.5% $4.88 2/6/2005 $ 299,974 $ 699,068
151,150(6)(7) 8.5% $4.88 2/6/2005 299,974 699,068
23,000(2)(7) 1.3% $4.88 2/6/2005 45,646 106,375
42,000(2)(7) 2.3% $4.88 2/6/2005 83,354 194,250
James A. Barth.......... 60,000(2) 3.4% $4.39 11/17/2004 107,255 249,949
30,000(6) 1.7% $4.39 11/17/2004 53,627 124,974
Ronald W. Braniff....... 48,000(5)(7) 2.7% $4.88 2/6/2005 95,261 222,000
3,750(4) 0.2% $4.44 2/5/2008 10,465 26,521
William C. Jones........ 3,000(2)(7) 0.2% $4.88 2/6/2005 5,954 13,875
40,000(2) 2.2% $5.50 4/1/2005 89,562 208,718
17,000(6) 1.0% $5.50 4/1/2005 38,064 88,705
Christopher A. Markle... 15,000(2) 0.8% $4.81 10/6/2004 29,391 68,493
10,000(2)(7) 0.6% $4.88 2/6/2005 19,846 46,250
7,500(2)(7) 0.4% $4.88 2/6/2005 14,885 34,687
15,000(2)(7) 0.8% $4.88 2/6/2005 29,769 69,375
Michael J. Satterwhite.. 25,000(2) 1.4% $4.81 10/6/2004 48,984 114,154
25,000(2)(7) 1.4% $4.88 2/6/2005 49,615 115,625
</TABLE>
- --------
(1) These columns show the hypothetical gains or "option spreads" of the
options granted based on assumed annual compound stock appreciation rates
of 5% and 10% over the full seven-year term of the options. The 5% and 10%
assumed rates of appreciation are mandated by the rules of the SEC and do
not represent the Company's estimate or projection of future Common Stock
prices. The gains shown are net of the option exercise price, but do not
include deductions for taxes or other expenses associated with the
exercise of the option or the sale of the underlying shares. The actual
gains, if any, on the exercise of stock options will depend on the future
performance of the Common Stock, the option holder's continued employment
through the option period, and the date on which the options are
exercised.
(2) Options vest as to 9/48th of the option shares after nine months from the
vesting commencement date and as to 1/48th of the option shares each month
thereafter, with full vesting occurring on the fourth anniversary of the
vesting commencement date.
(3) Options were granted at an exercise price equal to the fair market value
of the Company's Common Stock. Exercise price may be paid in cash,
promissory note, by delivery of already-owned shares subject to certain
conditions, or pursuant to a cashless exercise procedure under which the
optionee provides irrevocable instructions to a brokerage firm to sell the
purchased shares and to remit to the Company, out of the sale proceeds, an
amount equal to the exercise price plus all applicable withholding taxes.
(4) Option was granted under the 1996 Director option plan at an exercise
price equal to the fair market value of the Company's Common Stock on the
date of grant. Options vest as to 1/48th of the option shares each month,
with full vesting occurring on the fourth anniversary of the vesting
commencement date. These options expire ten years from the date of grant.
8
<PAGE>
(5) Option was granted under an agreement between Mr. Braniff and the Company,
whereby Mr. Braniff was to act as Interim Chief Executive Officer until a
full-time Chief Executive Officer was hired. Options vest as to 1/12th of
the option shares each month, with full vesting occurring on the
anniversary of the vesting commencement date. Options are also subject to
certain acceleration clauses.
(6) Options vest as to 1/84th of the option shares each month with full
vesting occurring on the seventh anniversary of the vesting commencement
date. According to the terms of these grants, if the average share price
in effect on the grant date doubles and the increased price is sustained
over a one month period, the options will accelerate their vesting by one
year. Thereafter, an additional year of vesting will accelerate for every
$5 of incremental value added to the Company's average stock. The stock
must retain its increased value over a one month period in order for any
acceleration of options to occur. The performance based option grant will
carry a two year minimum vesting schedule regardless of acceleration
factors.
(7) Reflects options that were repriced in February 1998, replacing options
granted in 1996 or 1997.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
The following table sets forth certain information regarding stock options
held as of June 30, 1998 by the Named Executive Officers.
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised In-
Unexercised the-Money
Options at June Options at June
Shares 30, 1998 30, 1998(2)
Acquired on Value ---------------- ----------------
Name Exercise (#) Realized(1) Vested Unvested Vested Unvested
---- ------------ ----------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
August J. Berkeley...... -- -- 58,1988 364,102 109,750 22,250
Ronald W. Braniff....... -- -- 77,516 13,984 56,000 --
James A. Barth.......... -- -- 2,500 87,500 -- --
William C. Jones........ -- -- 405 59,595 -- --
Christopher a. Markle... -- -- 22,262 37,238 32,600 --
Michael J. Satterwhite.. -- -- 13,543 36,457 -- --
</TABLE>
- --------
(1) "Value Realized" represents the fair market value of the underlying
securities on the exercise date minus the aggregate exercise price of such
options.
(2) Calculated on the basis of fair market value of the underlying securities
as of June 30, 1998 of $3.50 per share, the last trading day of fiscal
year 1998, as reported by the NASDAQ National Market, minus the aggregate
exercise price.
EMPLOYMENT CONTRACTS; TERMINATION OF EMPLOYMENT;
AND CHANGE-IN-CONTROL ARRANGEMENTS; CERTAIN TRANSACTIONS
Employment Agreements And Change In Control Arrangements
Mr. Berkeley and Mr. Barth each have entered into letter agreements with
the Company which provide for severance payments if they are terminated
without cause. Mr. Berkeley will be entitled to severance payments equal to
twelve months salary. Mr. Barth has entered into a consulting agreement with
the Company under which the letter agreement regarding severance has been
terminated. See Exhibit 99.17 to the Schedule 14D-9. All of the Named
Executive Officers' employment with the Company is terminable at will. Each of
the Named Executive Officers has entered into a change of control severance
agreement which provides for acceleration of all unvested stock options and/or
restricted stock held by such officer upon an involuntary termination without
cause of such officer within 12 months of a change of a control transaction.
9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of March 23, 1999 for (i) each person known
to the Company to be the beneficial owner of more than 5% percent of the
outstanding Common Stock (ii) each director of the Company, (iii) the Named
Executive Officers, and (iv) all directors and executive officers of the
Company as a group. Except as may be indicated in the footnotes to the table,
each such person has the sole voting and investment power with respect to the
Shares owned, subject to applicable community property laws.
<TABLE>
<CAPTION>
Common Stock Approximate
Five Percent Stockholders, Directors Beneficially Percentage
and Certain Executive Officers Owned Owned(1)
------------------------------------ ------------ -----------
<S> <C> <C>
Franklin Advisory Services, Inc. ................. 478,500 5.8%
One Parker Plaza, 16th Floor
Fort Lee, NJ 07024
Cisco Systems, Inc. .............................. 622,000(13) 7.5%
170 W. Tasman Drive
San Jose, CA 95134-1706
Thomson, Horstmann & Bryant, Inc. ................ 503,200 6.1%
Park 80 West, Plaza Two
Saddlebrook, NJ 07663
ROI Capital Management, Inc. ..................... 494,400 6.0%
17 E. Sir Francis Drake Blvd., Suite 225
Larkspur, CA 94939
Entities affiliated with Advent International
Corp.(2)......................................... 447,232(13) 5.4%
101 Federal Street
Boston, MA 02110
James A. Barth(3)................................. 109,352(14) 1.3%
Augustus J. Berkeley(4)........................... 429,822(14) 4.9%
Ronald W. Braniff(5).............................. 95,250(14) 1.1%
Andrew I. Fillat(6)............................... 473,482(14) 5.7%
Ralph B. Godfrey(7)............................... 18,750(14) *
William C. Jones(8)............................... 73,746(14) *
Victor C. Langford(9)............................. 90,000(14) 1.1%
Christopher A. Markle(10)......................... 61,434(14) *
Michael J. Satterwhite(11)........................ 51,282(14) *
All directors and executive officers as a group
(10 persons)(12)................................. 2,050,118 22.3%
</TABLE>
- --------
* Less than 1%
(1) Applicable percentage of ownership is based on 8,308,107 shares of Common
Stock outstanding as of March 23, 1999 together with applicable options
for such stockholder. Beneficial ownership is determined in accordance
with the rules of the SEC, and includes voting and investment power with
respect to shares. Shares of Common Stock subject to options currently
exercisable, exercisable within 60 days after March 23, 1999 or which
will become exercisable immediately prior to the close of the Offer are
deemed outstanding for computing the percentage ownership of the person
holding such options, but are not deemed outstanding for computing the
percentage ownership of any other person.
(2) Includes 38,629 shares held by Adtel L.P., 21,461 shares held by
Adventact L.P., 861 shares held by Advent International II L.P., 17,169
shares held by Adwest L.P., 322,029 shares held by Global Private
10
<PAGE>
Equity II L.P. and 47,083 shares held by Golden Gate Development and
Investment L.P. (collectively "Advent International").
(3) Includes 90,000 shares subject to stock options.
(4) Includes 412,300 shares subject to stock options.
(5) Includes 74,250 shares subject to stock options.
(6) Includes 26,250 shares subject to stock options. Also includes 447,232
shares owned by entities affiliated with Advent International, of which
Mr. Fillat is a Senior Vice President. Mr. Fillat disclaims beneficial
ownership of all such shares held by those entities.
(7) Includes 18,750 shares subject to stock options.
(8) Includes 60,000 shares subject to stock options.
(9) Includes 75,000 shares subject to stock options.
(10) Includes 47,500 shares subject to stock options.
(11) Includes 50,000 shares subject to stock options.
(12) Includes 879,050 shares subject to stock options.
(13) Pursuant to the Stockholder Agreements, Parent and Purchaser also have
beneficial ownership of these shares.
(14) Pursuant to the Stockholder Agreements, Parent and Purchaser also have
beneficial ownership of these shares and all shares subject to stock
options.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act of 1934 requires the Company's executive
officers and directors, and persons who own more than 10% of a registered
class of the Company's equity securities, to file reports of initial ownership
and changes in ownership with the SEC and the National Association of
Securities Dealers, Inc. Executive officers, directors and greater than ten
percent stockholders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms the file. Based solely on its review of
the copies of such forms received by it, or written representations from
certain reporting persons, the Company believes that during fiscal 1998 all
executive officers and directors of the Company compiled with all applicable
filing requirements.
11
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
------- ----------- ------------
<C> <S> <C>
99.1 Agreement and Plan of Merger, dated as of March 23,
1999, by and among Sterling Software, Inc.,
Sterling Software (Southwest), Inc., and Interlink
Computer Sciences, Inc., including Conditions to
the Offer.
99.2 Stockholder Agreement, dated as of March 23, 1999,
by and among Sterling Software, Inc., Sterling
Software (Southwest), Inc., and Cisco Systems,
Inc.
99.3 Stockholder Agreement, dated as of March 23, 1999,
by and among Sterling Software, Inc., Sterling
Software (Southwest), Inc., and Adtel Limited
Partnership, Adventact Limited Partnership, Advent
International Investors II Limited Partnership,
Adwest Limited Partnership, Global Private Equity
II Limited Partnership and Golden Gate Development
and Investment Limited Partnership.
99.4 Form of Stockholder Agreement, dated as of March
23, 1999, by and among Sterling Software, Inc.,
Sterling Software (Southwest), Inc., and directors
and executive officers of the Company (together
with a schedule indicating the number of shares
and options to purchase shares owned by each
director and executive officer, who entered into a
Stockholder Agreement).
99.5 Joint Press release issued by the Company and
Sterling Software, Inc. dated March 24, 1999.
99.6 Letter to Stockholders of Interlink Computer
Sciences, Inc., dated March 30, 1999.*
99.7(1) Fairness Opinion of Hambrecht & Quist LLC, dated
March 23, 1999.*
99.8 Exclusivity Agreement, dated March 16, 1999, by and
between the Company and Sterling Software, Inc.
99.9(2) Certificate of Incorporation of the Company, as
amended to date.
99.10(2) Bylaws of the Company, as amended to date.
99.11(2) Form of Indemnification Agreement between the
Company and its executive officers and directors.
99.12(2)(5) 1992 Stock Option Plan and related agreements.
99.13(3) 1996 Director Stock Option Plan and related
agreements.
99.14(2) 1996 Employee Stock Purchase Plan and related
agreements.
99.15(4) Form of Change of Control Severance Agreement
between the Company and its Executive Officers
99.16(4) Letter Agreement between the Company and Augustus
J. Berkeley dated 10/97.
99.17 Consulting Agreement between the Company and Jim
Barth, dated March 19, 1999
99.18(6) The Company's Information Statement pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1
thereunder.*
99.19 Certain portions of pages 2-3 and 8-13 of the
Company's Proxy Statement, dated September 24,
1998, relating to the Company's Annual Meeting of
Shareholders held on November 5, 1998.
</TABLE>
- --------
* Included in the materials mailed to the Company's stockholders.
(1) Attached hereto as Annex A.
<PAGE>
(2) Incorporated by reference from the Company's Registration Statement on
Form S-1, as amended (File No. 333-05243) which became effective on August
15, 1996.
(3) Incorporated by reference from the Company's quarterly report on Form 10-Q
for the quarter ended December 31, 1996 and filed with the SEC on February
13, 1997.
(4) Incorporated by reference from the Company's quarterly report on Form 10-Q
for the quarter ended March 31, 1998 and filed with the SEC on May 15,
1998.
(5) Amendments to the Company's 1992 Stock Option Plan are incorporated by
reference from the Company's Registration Statement on Form S-8, filed
with the SEC on March 25, 1998 and March 4, 1998.
(6) Attached hereto as Schedule I.
<PAGE>
EXHIBIT 99.1
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
among
STERLING SOFTWARE, INC.
STERLING SOFTWARE (SOUTHWEST), INC.
and
INTERLINK COMPUTER SCIENCES, INC.
dated as of March 23, 1999
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C>
ARTICLE I THE OFFER....................................................................... 2
Section 1.1 The Offer..................................................... 2
---------
Section 1.2 Offer Documents.................................................3
---------------
Section 1.3 Company Actions.................................................4
---------------
Section 1.4 Directors.......................................................6
---------
ARTICLE II THE MERGER........................................................................8
Section 2.1 The Merger......................................................8
----------
Section 2.2 Closing.........................................................8
-------
Section 2.3 Effective Time..................................................8
--------------
Section 2.4 Effects of the Merger...........................................9
---------------------
Section 2.5 Certificate of Incorporation; Bylaws............................9
------------------------------------
Section 2.6 Directors; Officers.............................................9
-------------------
ARTICLE III EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS; EXCHANGE
OF CERTIFICATES...................................................................9
Section 3.1 Effect on Capital Stock.........................................9
-----------------------
Section 3.2 Stock Options and Warrants.....................................11
--------------------------
Section 3.3 Payment for Shares.............................................11
------------------
ARTICLE IV REPRESENTATIONS AND WARRANTIES...................................................13
Section 4.1 Representations and Warranties of Company......................13
-----------------------------------------
Section 4.2 Representations and Warranties of Parent and
--------------------------------------------
Purchaser......................................................33
---------
ARTICLE V CONDUCT OF BUSINESS OF COMPANY...................................................36
Section 5.1 Conduct of Business of Company.................................36
------------------------------
ARTICLE VI ADDITIONAL COVENANTS.............................................................40
Section 6.1 Company Stockholders Meeting; Preparation of
--------------------------------------------
the Proxy Statement; Short-Form Merger.........................40
--------------------------------------
Section 6.2 Access to Information; Confidentiality.........................41
--------------------------------------
Section 6.3 Commercially Reasonable Efforts................................41
-------------------------------
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 6.4 Public Announcements...........................................42
--------------------
Section 6.5 No Solicitation; Acquisition Proposals.........................42
--------------------------------------
Section 6.6 Consents, Approvals and Filings................................45
-------------------------------
Section 6.7 Employee Benefit Matters.......................................45
------------------------
Section 6.8 Indemnification; Directors' and Officers' Insur-
------------------------------------------------
ance...........................................................46
----
ARTICLE VII CONDITIONS PRECEDENT.............................................................48
Section 7.1 Conditions to Each Party's Obligation to Effect
-----------------------------------------------
the Merger.....................................................48
----------
Section 7.2 Conditions to Parent's or Purchaser's Obligation
------------------------------------------------
to Effect the Merger...........................................49
--------------------
ARTICLE VIII TERMINATION......................................................................49
Section 8.1 Termination....................................................49
-----------
Section 8.2 Effect of Termination..........................................52
---------------------
ARTICLE IX GENERAL PROVISIONS...............................................................52
Section 9.1 Nonsurvival of Representations and Warranties..................52
---------------------------------------------
Section 9.2 Fees and Expenses..............................................52
-----------------
Section 9.3 Definitions....................................................53
-----------
Section 9.4 Amendment and Modification.....................................55
---------------------------
Section 9.5 Extension; Waiver..............................................55
-----------------
Section 9.6 Notices........................................................55
-------
Section 9.7 Interpretation.................................................56
--------------
Section 9.8 Entire Agreement; No Third-Party Beneficia-
-------------------------------------------
ries...........................................................56
----
Section 9.9 Governing Law..................................................57
-------------
Section 9.10 Assignment.....................................................57
----------
Section 9.11 Enforcement....................................................57
-----------
Section 9.12 Severability...................................................58
------------
Section 9.13 Counterparts...................................................58
------------
</TABLE>
EXHIBIT A - Conditions to the Offer
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of March 23, 1999 (this
"Agreement"), is made and entered into among Sterling Software, Inc., a Delaware
corporation ("Parent"), Sterling Software (Southwest), Inc., a Delaware
corporation and indirect wholly owned subsidiary of Parent ("Purchaser"), and
Interlink Computer Sciences, Inc., a Delaware corporation ("Company").
RECITALS:
A. The Executive Committee of the Board of Directors of Parent and the
respective Boards of Directors of Purchaser 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 the Purchaser with and
into Company (the "Merger"), on the terms and subject to the conditions set
forth in this Agreement.
B. To effectuate the acquisition, Parent and Company each desire that
Parent cause Purchaser to commence a cash tender offer to purchase all of the
outstanding shares of common stock, par value $.001 per share, of Company (the
"Shares") (including the associated Preferred Stock Purchase Rights (the
"Rights") issued pursuant to the Preferred Shares Rights Agreement between
Company and BANKBOSTON, N.A., dated as of February 25, 1998 (the "Company Rights
Agreement")) on the terms and subject to the conditions set forth in this
Agreement and the Offer Documents (as defined in Section 1.2) and the Board of
Directors of Company has unanimously approved such tender offer and is
recommending (subject to the limitations contained herein) that Company's
stockholders accept the tender offer and tender their Shares pursuant thereto.
C. Concurrently with the execution and delivery of this Agreement and as
a condition to Parent's and Purchaser's willingness to enter into this
Agreement, Parent and Purchaser have entered into separate Stockholder
Agreements, dated as of the date hereof (the "Stockholder Agreements"), with
each of the Principal Stockholders (as defined in Section 9.3), pursuant to
which each Principal Stockholder has (x) agreed, among other things, to vote all
Shares owned by such Principal Stockholder in favor of the Merger and (y)
granted to Parent an option to purchase all Shares owned by such Principal
Stockholder.
<PAGE>
D. Parent, Purchaser and Company desire to make certain representations
and warranties and to enter into certain covenants in connection with the Offer
(as defined in Section 1.1) and the Merger and also to prescribe various
conditions to the consummation thereof.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties and covenants contained in this Agreement, the parties hereto,
intending to be legally bound hereby, agree as follows:
ARTICLE I
THE OFFER
Section 1.1 The Offer. (a) Provided that none of the events set forth in
---------
Exhibit A hereto shall have occurred and be continuing, as promptly as
practicable (but in any event not later than five business days after the public
announcement of the execution and delivery of this Agreement), Parent shall
cause Purchaser to commence (within the meaning of Rule 14d-2 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), an offer to
purchase (the "Offer") all outstanding Shares at a price of $7.00 per share, net
to the seller in cash (as paid pursuant to the Offer, the "Offer
Consideration"). The obligation of Parent and Purchaser to commence the Offer,
to consummate the Offer and to accept for payment and to pay for Shares validly
tendered in the Offer and not withdrawn shall be subject only to those
conditions set forth in Exhibit A hereto.
(b) Without the prior written consent of Company, Purchaser shall
not (and Parent shall cause Purchaser not to) (i) decrease or change the form of
the Offer Consideration or decrease the number of Shares sought pursuant to the
Offer, (ii) impose additional conditions to the Offer, (iii) extend the
expiration date of the Offer beyond the initial expiration date of the Offer
(which shall be the 20th business day after commencement of the Offer), except
(A) as required by applicable law, (B) that if, immediately prior to the
expiration date of the Offer (as it may be extended), the Shares tendered and
not withdrawn pursuant to the Offer constitute more than 75% and less than 90%
of the outstanding Shares, Purchaser may extend the Offer for one or more
periods not to exceed an aggregate of ten business days, notwithstanding that
all conditions to the Offer are satisfied as of such expiration date of the
Offer and (C) that if any condition to the Offer has not been satisfied or
waived, Purchaser may, in its sole discretion, extend the expiration date of the
Offer
2
<PAGE>
for one or more periods provided, that the expiration date of the Offer may not
be extended beyond July 31, 1999, (iv) waive the condition (the "Minimum
Condition") that there shall be validly tendered and not withdrawn prior to the
time the Offer expires a number of Shares which, when added to the number of
Shares which Parent, Purchaser or any other Subsidiary of Parent "beneficially
owns" (within the meaning of Rule 13d-3 under the Exchange Act), constitutes at
least a majority of the Shares outstanding on a fully-diluted basis on the date
of purchase ("on a fully-diluted basis" meaning, as of any date, the number of
Shares outstanding, together with the Shares which Company may be required to
issue pursuant to warrants, options or obligations outstanding at that date
under employee stock or similar benefit plans or otherwise whether or not vested
or then exercisable), or (v) amend any term or other condition of the Offer in
any manner materially adverse to holders of Shares; provided, however, that,
except as set forth above and subject to applicable legal requirements,
Purchaser may waive any condition to the Offer other than the Minimum Condition
in its sole discretion; and provided further that the Offer may be extended in
connection with an increase in the consideration to be paid pursuant to the
Offer so as to comply with applicable rules and regulations of the United States
Securities and Exchange Commission (the "SEC"). Purchaser shall, on the terms
and subject to the prior satisfaction or waiver of the conditions of the Offer,
accept for payment, and pay for, in accordance with the terms and subject to the
conditions of the Offer, all Shares validly tendered and not withdrawn pursuant
to the Offer as soon as practicable after the expiration date thereof.
Notwithstanding the foregoing, if all the conditions to the Offer have not been
satisfied or waived at the initial expiration date of the Offer and all such
conditions are reasonably capable of being satisfied within the applicable
period set forth below, the Purchaser shall (i) extend the Offer for 10 business
days from the initial expiration date of the Offer or (ii) extend the Offer for
20 business days from the initial expiration date of the Offer if the condition
contained in Section 7.1(d) hereof has not been satisfied and is reasonably
capable of being satisfied.
Section 1.2 Offer Documents. (a) On the date of commencement of the Offer,
---------------
Parent and Purchaser shall file or cause to be filed with the SEC a Tender Offer
Statement on Schedule 14D-1 (the "Schedule 14D-1") with respect to the Offer
which shall contain the offer to purchase and related letter of transmittal and
other ancillary Offer documents and instruments pursuant to which the Offer will
be made (collectively, and with any supplements or amendments thereto, the
"Offer Documents"). Company will promptly supply to Parent and Purchaser in
writing, for inclusion in the Offer Documents, all information concerning
Company required
3
<PAGE>
under the Exchange Act and the rules and regulations thereunder to be included
in the Offer Documents.
(b) The Offer Documents will comply in all material respects with
the provisions of applicable federal securities laws and, on the date filed with
the SEC and on the date first published, sent or given to Company's
shareholders, shall not 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
were made, not misleading, except that no representation is made by Parent or
the Purchaser with respect to information supplied by Company in writing for
inclusion in the Offer Documents. Each of Parent and the Purchaser further
agrees to take all steps necessary to cause the Offer Documents to be filed with
the SEC and to be disseminated to holders of Shares, in each case as and to the
extent required by applicable federal securities laws. Each of Parent, Purchaser
and Company shall promptly correct any information provided by them for use in
the Offer Documents if and to the extent that such information shall be or have
become false or misleading in any material respect, and Parent and Purchaser
shall take all lawful action necessary to cause the Offer Documents as so
corrected to be filed promptly with the SEC and to be disseminated to holders of
Shares as and to the extent required by applicable law. Company and its counsel
shall be given a reasonable opportunity to review and comment on the Offer
Documents and any amendments thereto prior to the filing thereof with the SEC.
Parent and Purchaser agree to provide the Company and its counsel any comments
Parent, Purchaser or their counsel may receive from the SEC or its staff with
respect to the Offer Documents promptly after the receipt of such comments.
(c) Parent shall provide or cause to be provided to Purchaser on a
timely basis the funds necessary to accept for payment and pay for any Shares
that the Purchaser becomes obligated to accept for payment and pay for pursuant
to the Offer.
Section 1.3 Company Actions. (a) Company hereby approves of and consents
---------------
to the Offer and represents and warrants that (i) its Board of Directors (at a
meeting duly called and held) has (A) unanimously determined that each of this
Agreement, the Stockholder Agreements, the Offer and the Merger are fair to and
in the best interests of Company and its stockholders, (B) unanimously approved
this Agreement, the Stockholder Agreements and the transactions contemplated
hereby, including the Offer and the Merger, and such approval is sufficient to
render Section 203 of the Delaware General Corporation Law (the "DGCL")
inapplicable to this
4
<PAGE>
Agreement and the transactions contemplated hereby, including the Offer and the
Merger, and (C) resolved (subject to the limitations herein contained) to
recommend acceptance of the Offer and adoption of this Agreement by the holders
of Shares, and (ii) Hambrecht & Quist has delivered to the Board of Directors of
Company its opinion that the Offer Consideration to be received by the holders
of Shares in the Offer is fair, from a financial point of view, to such holders.
(b) Company shall file with the SEC, simultaneously with the filing
by Parent and Purchaser of the Schedule 14D-1, a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with any supplements or amendments
thereto, the "Schedule 14D-9") containing, subject to the terms of Section 6.5,
such recommendations of the Board of Directors of Company in favor of the Offer
and the adoption of this Agreement. Each of Parent and Purchaser will promptly
supply to Company in writing, for inclusion in the Schedule 14D-9, all
information concerning Parent's Designees (as such term is defined in Section
1.4 hereof), as required by Section 14(f) of the Exchange Act and Rule 14f-1
thereunder, and Company shall include such information in the Schedule 14D-9.
Parent will promptly supply to the Company in writing, for inclusion in the
Schedule 14D-9, any information concerning Parent or Purchaser required under
the Exchange Act and the rules and regulations thereunder to be included in the
Schedule 14D-9. The Schedule 14D-9 will comply in all material respects with the
provisions of applicable federal securities laws and, on the date filed with the
SEC and on the date first published, sent or given to Company's shareholders,
shall not 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 were made,
not misleading, except that no representation is made by Company with respect to
information supplied by Parent or the Purchaser in writing for inclusion in the
Schedule 14D-9. Company further agrees to take all steps necessary to cause the
Schedule 14D-9 to be filed with the SEC and to be disseminated to holders of
Shares, in each case as and to the extent required by applicable federal
securities laws. Each of Company, Parent and Purchaser shall promptly correct
any information provided by them for use in the Schedule 14D-9 if and to the
extent that such information shall be or have become false or misleading in any
material respect and Company shall take all lawful action necessary to cause the
Schedule 14D-9 as so corrected to be filed promptly with the SEC and
disseminated to the holders of Shares as and to the extent required by
applicable law. Parent, Purchaser and their counsel shall be given a reasonable
opportunity to review and comment on the Schedule 14D-9 and any amendments
thereto prior to the filing thereof with the SEC. Company agrees to provide the
Parent and its counsel any comments Company or its counsel receive
5
<PAGE>
from the SEC or its staff with respect to the Schedule 14D-9 promptly after
receipt of such comments.
(c) In connection with the Offer, Company shall promptly furnish
Parent and Purchaser with mailing labels, security position listings and all
available listings or computer files containing the names and addresses of the
record holders of Shares as of the latest practicable date and shall furnish
Parent and Purchaser with such information and assistance (including updated
lists of stockholders, mailing labels and lists of security positions) as Parent
and Purchaser or their agents may reasonably request in communicating the Offer
to the record and beneficial holders of Shares. Subject to the requirements of
applicable law, and except for such actions as are necessary to disseminate the
Offer Documents and any other documents necessary to consummate the Offer and
the Merger, Parent and Purchaser shall, and shall use commercially reasonable
efforts to cause each of their affiliates, associates, partners, employees,
agents and advisors to, hold in confidence the information contained in such
labels, lists and files, and all other information delivered pursuant to this
Section 1.3(c), shall use such information only in connection with the Offer and
the Merger and, if this Agreement is terminated in accordance with its terms,
shall deliver promptly to Company all copies of such information (and any
copies, compilations or extracts thereof or based thereon) then in their
possession or under their control.
Section 1.4 Directors. (a) Promptly after (i) the purchase of and payment
---------
for any Shares by Purchaser or any of its affiliates pursuant to the Offer as a
result of which Purchaser and its affiliates own beneficially at least a
majority of then outstanding Shares and (ii) compliance with Section 14(f) of
the Exchange Act and Rule 14f-1 promulgated thereunder, whichever shall occur
later, Parent shall be entitled to designate such number of directors, rounded
up to the next whole number, on Company's Board of Directors as is equal to the
product of the total number of directors on such Board (after giving effect to
any increase in the size of such Board pursuant to this Section 1.4) multiplied
by the percentage that the number of Shares beneficially owned by Purchaser at
such time (including Shares so accepted for payment) bears to the total number
of Shares then outstanding. In furtherance thereof, Company shall, upon request
of Parent, use its best efforts promptly either to increase the size of its
Board of Directors or to secure the resignations of such number of its incumbent
directors, or both, as is necessary to enable such designees of Parent to be so
elected or appointed to Company's Board of Directors, and Company shall take all
actions available to Company to cause such designees of Parent to be so elected
or appointed. At such time, Company shall, if requested by
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Parent, also take all action necessary to cause persons designated by Parent to
constitute at least the same percentage (rounded up to the next whole number) as
is on Company's Board of Directors of (i) each committee of Company's Board of
Directors, (ii) each board of directors (or similar body) of each Subsidiary (as
defined in Section 9.3) of Company and (iii) each committee (or similar body) of
each such board.
(b) Company shall promptly take all actions required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order
to fulfill its obligations under Section 1.4(a), including mailing to
stockholders the information required by such Section 14(f) and Rule 14f-1 (or
including such information in the Schedule 14D-9 initially filed with the SEC
and distributed to the stockholders of Company) as is necessary to enable
Parent's designees to be elected to Company's Board of Directors. Parent or
Purchaser will supply to Company in writing and be solely responsible for any
information with respect to either of them and their nominees, officers,
directors and affiliates required by such Section 14(f) and Rule 14f-1. The
provisions of this Section 1.4 are in addition to and shall not limit any rights
which Purchaser, Parent or any of their affiliates may have as a holder or
beneficial owner of Shares as a matter of applicable law with respect to the
election of directors or otherwise.
(c) Notwithstanding the provisions of this Section 1.4, the parties
hereto shall use their respective reasonable best efforts to ensure that at
least two of the members of the Board shall, at all times prior to the Effective
Time (as defined in Section 1.6 hereof) be, directors of the Company who were
directors of the Company on the date hereof (the "Continuing Directors"),
provided that, if the number of Continuing Directors shall be reduced below two
for any reason, the remaining Continuing Director may designate a person to fill
such vacancy who shall be deemed to be a Continuing Director for all purposes of
this Agreement, or if no Continuing Directors then remain, the other directors
of Company then in office shall designate two persons to fill such vacancies who
will not be officers or employees or affiliates of Company, Parent or either of
their subsidiaries and such persons shall be deemed to be Continuing Directors
for all purposes of this Agreement. From and after the time, if any, that
Parent's designees constitute a majority of Company's Board of Directors and
prior to the Effective Time, any amendment or modification of this Agreement,
any amendment to Company's Certificate of Incorporation or By-Laws inconsistent
with this Agreement, any termination of this Agreement by Company, any extension
of time for performance of any of the obligations of Parent or Purchaser
hereunder, any waiver of any condition to Company's obligations
7
<PAGE>
hereunder or any of Company's rights hereunder or other action by Company
hereunder may be effected only by the action of a majority of the Continuing
Directors of Company, which action shall be deemed to constitute the action of
any committee specifically designated by the Board of Directors of Company to
approve the actions contemplated hereby and the full Board of Directors of
Company; provided, that, if there shall be no Continuing Directors, such actions
-------- ----
may be effected by majority vote of the entire Board of Directors of Company.
ARTICLE II
THE MERGER
Section 2.1 The Merger. On the terms and subject to the conditions set
----------
forth in this Agreement, and in accordance with the DGCL, the Merger shall be
effected and the Purchaser shall be merged with and into Company at the
Effective Time. At the Effective Time, the separate existence of Purchaser shall
cease and Company shall continue as the surviving corporation (as such, the
"Surviving Corporation") and shall continue to be governed by the laws of the
State of Delaware.
Section 2.2 Closing. Unless this Agreement shall have been terminated and
-------
the transactions contemplated hereby 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 tenth
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 Skadden, Arps, Slate, Meagher &
Flom LLP, 919 Third Avenue, New York, New York, 10022, unless another date, time
or place is agreed to in writing by the parties hereto.
Section 2.3 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 and any other appropriate documents, executed in accordance with the
relevant provisions of the DGCL, and shall make all other filings or recordings
required under the DGCL and other applicable law in connection with the Merger.
The Merger shall become effective upon the filing of the certificate of merger
with the Delaware State Secretary, or at such later time as is specified in the
certificate of
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merger (the "Effective Time").
Section 2.4 Effects of the Merger. The Merger shall have the effects set
---------------------
forth in the applicable provisions of the DGCL. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time, all property of
Company and Purchaser shall vest in the Surviving Corporation, and all
liabilities and obligations of Company and Purchaser shall become liabilities
and obligations of the Surviving Corporation.
Section 2.5 Certificate of Incorporation; Bylaws. At the Effective Time,
------------------------------------
(a) the certificate of incorporation of Company 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 Purchaser as in effect at the Effective Time shall, from and after the
Effective Time, be the bylaws of the Surviving Corporation until thereafter
changed or amended in accordance with the provisions thereof and applicable law.
Section 2.6 Directors; Officers. From and after the Effective Time, (a)
-------------------
the directors of Purchaser 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 Company 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.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
Section 3.1 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 or any
other shares of capital stock of Company or Purchaser:
(a) Common Stock of Purchaser. Each share of common stock, par
-------------------------
value $0.01 per share, of Purchaser issued and outstanding immediately prior to
the Effective Time shall be converted into and become one validly issued, fully
paid and
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<PAGE>
nonassessable share of common stock, par value $0.01 per share, of the Surviving
Corporation.
(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 defined in Section 9.3) of Company or by
Parent, Purchaser 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.
(c) Conversion of Shares. Each share of Company Common Stock
--------------------
(including the associated Rights) issued and outstanding immediately prior to
the Effective Time (other than Shares to be canceled and retired in accordance
with Section 3.1(b) and any Dissenting Shares (as defined in Section 3.1(d))
shall be converted into the right to receive the Offer Consideration, payable to
the holder thereof, without any interest thereon (the "Merger Consideration"),
less any required withholding taxes, upon surrender and exchange of a
Certificate (as defined in Section 3.3).
(d) Dissenting Shares. Notwithstanding anything in this Agreement to
-----------------
the contrary, Shares issued and outstanding immediately prior to the Effective
Time held by any person who has the right to demand, and who properly demands,
an appraisal of such Shares ("Dissenting Shares") in accordance with Section 262
of the DGCL (or any successor provision) 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 Section 3.1(c). 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.
10
<PAGE>
Section 3.2 Stock Options and Warrants.
--------------------------
(a) The parties hereby agree that (i) neither Purchaser nor
Parent shall assume the outstanding options to purchase shares of Company Common
Stock (collectively, the "Options") under Company's 1992 Stock Option Plan and
1996 Director Stock Option Plan (collectively, the "Stock Option Plans") or
substitute an option to purchase Parent or Purchaser common stock in respect of
such Options, (ii) Options under the Stock Option Plans shall be accelerated and
otherwise treated in accordance with the terms of the applicable Stock Option
Plan document and the various agreements evidencing the Options and (iii)
Company shall take all such action as shall be necessary or appropriate to cause
all Options under the Stock Option Plans to expire no later than the Effective
Time.
(b) Parent and Purchaser shall not assume or continue any
outstanding warrants to purchase shares of Company Common Stock (the
"Warrants"). The parties hereto shall take all appropriate action to provide
that, in accordance with the respective terms of the Warrants, at or prior to
the Effective Time, each holder of an outstanding Warrant shall be entitled to
receive an amount in cash equal to the product of (i) the excess, if any, of the
Offer Consideration over the per share exercise price of such Warrant and (ii)
the number of shares subject to such Warrant.
Section 3.3 Payment for Shares.
------------------
(a) Payment Fund. Concurrently with the Effective Time,
------------
Parent shall deposit, or shall cause to be deposited, with or for the account of
a bank or trust company having net capital of not less than $100,000,000
designated by Parent, which shall be reasonably satisfactory to Company (the
"Paying Agent"), for the benefit of the holders of Shares, cash in an amount
sufficient to pay the aggregate Merger Consideration payable upon the conversion
of Shares pursuant to Section 3.1(c) (the "Payment Fund").
(b) Letters of Transmittal; Surrender of Certificates.
-------------------------------------------------
As soon as reasonably practicable after the Effective Time, Parent shall
instruct the Paying Agent to mail to each holder of record (other than Company
or any of its Subsidiaries or Parent, Purchaser or any other Subsidiary of
Parent) of a certificate or certificates that, immediately prior to the
Effective 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
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<PAGE>
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 Paying 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
cash in an amount equal to the product of (i) the number of Shares theretofore
represented by such Certificate and (ii) the Merger Consideration, 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) 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 3.1(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
limitation the right to vote), except the right to receive the Merger
Consideration, without interest, upon surrender of such Certificate in
accordance with Section 3.3(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
Section 3.3 shall be deemed to have been paid in full satisfaction of all rights
pertaining to the Shares theretofore represented by such Certificates.
(d) Investment of Payment Fund. The Paying Agent shall invest the
---------------------------
Payment 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
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<PAGE>
$500 million. Any net earnings with respect to the Payment Fund shall be the
property of and paid over to Parent as and when requested by Parent.
(e) Termination of Payment Fund. Any portion of the Payment 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 Section 3.3 shall
thereafter look only to Parent, and only as general creditors thereof, for
payment of their claim for any Merger Consideration.
(f) No Liability. None of Parent, Purchaser, the Surviving
------------
Corporation or the Paying Agent shall be liable to any person in respect of any
payments or distributions payable from the Payment 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
Merger Consideration in respect of such Certificate would otherwise escheat to
or become the property of any Governmental Entity (as defined in Section
4.1(c)), 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.
(g) 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.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of Company. Except as set
-----------------------------------------
forth in the Disclosure Schedule, Company represents and warrants to Parent and
Purchaser that all of the statements contained in this Article IV are true and
correct as
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<PAGE>
of the date of this Agreement (or, if made as of a specified date, as of such
date). Each exception set forth in the Disclosure Schedule and each other
response to this Agreement set forth in the Disclosure Schedule is identified by
reference to, or has been grouped under a heading referring to, a specific
individual Section of this Agreement and relates only to such Section, except to
the extent that one section of the Disclosure Schedule specifically refers to
another section thereof.
(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 defined in Section 9.3) on Company. Company has delivered or
made available to Parent true, complete and correct copies of the certificate of
incorporation and bylaws or comparable governing documents of Company and each
material Subsidiary of Company, in each case as amended to the date of this
Agreement. Exhibit 21 to the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1998 sets forth a true, correct and complete list of all
material Subsidiaries of Company. Except as set forth in Section 4.1(a) of the
Disclosure Schedule and except for directors' qualifying shares, all
Subsidiaries of the Company are wholly owned directly or indirectly by the
Company.
(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 6.1(a). This Agreement
has been duly executed and delivered by Company and, assuming that this
Agreement constitutes a valid and binding obligation of Parent and Purchaser,
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
14
<PAGE>
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 the governmental filings and other matters
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 the
governmental filings and other matters 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 (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"), (ii) the filing with the SEC of (A) the Schedule 14D-9 and, if
required by applicable law, the Proxy Statement (as defined in Section 6.1(b)),
(B) such reports under the Exchange Act as may be required in connection with
this Agreement and the transactions contemplated hereby, (iii) the filing of the
certificate of merger with the Delaware Secretary of State and appropriate
documents with the relevant authorities of other states in which Company is
qualified to do business, and (iv) any other consents, approvals,
authorizations, filings or notices the failure to make or obtain which 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
-----------------
15
<PAGE>
consists solely of (i) 20,000,000 Shares and (ii) 5,000,000 shares of preferred
stock, par value $.001 per share, ("Preferred Shares"). At the close of business
on March 22, 1999: (i) 8,308,107 Shares were issued and outstanding, (ii) no
Preferred Shares were issued and outstanding, (iii) 1,614,896 Shares were
reserved for issuance pursuant to outstanding Options granted under the Stock
Option Plans, (iv) 260,706 Shares were reserved for issuance upon exercise of
the Warrants, (v) no Shares were held by Company in its treasury, (vi) 100,000
shares of Series A Participating Preferred Stock were reserved for issuance
pursuant to the Company Rights Agreement and (vii) 600,000 Shares have been
reserved for issuance under the 1996 Employee Stock Purchase Plan, of which no
more than an additional 80,000 Shares will be issued prior to April 30, 1999.
Except as set forth in the immediately preceding sentence, at the close of
business on March 22, 1999, 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.
Except as specified above or in Section 4.1(d) of the Disclosure Schedule,
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
material 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 Company may vote are issued or outstanding. Section 4.1(d) of
the Disclosure Schedule accurately sets forth information as of the date hereof
regarding the exercise price, date of grant and number of granted Options for
each holder of Options pursuant to any Stock Option Plan. 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 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 defined in Section 9.3).
(e) SEC Documents. Company has filed all required reports, schedules,
-------------
forms, statements and other documents with the SEC since June 5, 1996
16
<PAGE>
(such reports, schedules, forms, statements and other documents being
hereinafter referred to as the "SEC Documents"). As of their respective dates,
the SEC Documents complied in all material respects with the requirements of
the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange
Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such SEC Documents, and none of the 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 Company included
in the 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 Company and
its consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited quarterly statements, to normal year-end audit
adjustments).
(f) Absence of Certain Changes or Events; No Undisclosed Material
-------------------------------------------------------------
Liabilities.
- -----------
(i) Except as disclosed in the SEC Documents filed and publicly
available prior to the date of this Agreement (the "Filed SEC Documents") or
specified in Section 4.1(f) of the Disclosure Schedule, since the date of the
most recent financial statements included in the Filed SEC Documents, Company
and its Subsidiaries have conducted their businesses only in the ordinary
course, and there has not been: (A) 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, or amendment or
modification to, any bonus, insurance, severance, pension or other employee or
retiree benefit plan, payment, agreement 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
17
<PAGE>
required by applicable law; (E) any entry into any agreement, commitment or
transaction by Company or any of its material Subsidiaries which is material to
Company and its 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 $75,000
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 (A)
through (H) otherwise than as expressly provided for herein.
(ii) Except as disclosed in the Filed SEC Documents 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 the date of the
most recent financial statements included in the Filed SEC Documents, 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. Subject to Parent's and Purchaser's
-------------------
fulfillment of their respective obligations with respect thereto, the Schedule
14D-9 and the Proxy Statement will contain (or will be amended in a timely
manner so as to contain) all information which is required to be included
therein in accordance with the Exchange Act and the rules and regulations
thereunder and any other applicable law and will conform in all material
respects with the requirements of the Exchange Act and any other applicable law,
and neither the Schedule 14D-9 nor the Proxy Statement will, at the respective
times they are filed with the SEC or published, sent or given to Company's
stockholders, 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; provided, however, that no representation or warranty is hereby
made by Company with respect to any information supplied by Parent or Purchaser
in writing for inclusion in, or with respect to Parent or Purchaser informa-
18
<PAGE>
tion derived from Parent's public SEC filings which is included or incorporated
by reference in, the Schedule 14D-9 or the Proxy Statement. None of the
information supplied or to be supplied by Company for inclusion or incorporation
by reference in, or which may be deemed to be incorporated by reference in, any
of the Offer Documents will, at the respective times the Offer Documents are
filed with the SEC or published, sent or given to Company's stockholders,
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 are made, not misleading. If at
any time prior to the Effective Time any event with respect to Company, or with
respect to any information supplied by Company for inclusion in any of the Offer
Documents, shall occur which is required to be described in an amendment of, or
a supplement to, any of the Offer Documents, Company shall so describe the event
to Parent.
(h) Real Property; Other Assets. (i) Section 4.1(h)(i) of the
---------------------------
Disclosure Schedule sets forth all of the real property owned in fee by Company
and its Subsidiaries (the "Owned Real Property").
(ii) Company or one of its Subsidiaries has good and
marketable title to each parcel of Owned Real Property and to each other asset
reflected in the latest balance sheet of Company included in the Filed SEC
Documents (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 Filed
SEC Documents, (B) taxes and general and special assessments not in default and
payable 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 of all leases, subleases and other agreements
requiring annual payments of $50,000 or more (the "Real Property Leases"), under
which Company or any of its material 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
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<PAGE>
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 any
third party (other than any off-the-shelf computer program that is so licensed
under a shrink wrap license) (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 versions
and releases of the Owned Software and all copyrights thereof, free and clear of
all Liens. 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)
and know-how required for the effective use of the Software as currently used in
Company's business or 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 for each computer program
included in the Licensed Software, and of the source code when applicable. The
Software constitutes all of the computer programs 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
20
<PAGE>
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 lists 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) 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. Without limiting the generality of the
foregoing, 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
21
<PAGE>
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, other
than those contemplated by the documentation for the Software to be used in
conjunction with the Software, to properly exchange date data with the Software)
may, when used in conjunction with the Software, have on the foregoing
capabilities. Each computer program included in the Software is in machine
readable form and contains all current revisions. 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.
(vi) 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.
22
<PAGE>
(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, trademarks, trade
names, service marks, domain names and registered copyrights and material non-
registered copyrights used by Company or any Subsidiary of Company which are
material to the conduct of Company's business, and all registrations of or
applications for registration of any of the foregoing, including any additions
thereto or extensions, continuations, renewals or divisions thereof (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
used, the "Intellectual Property"). Parent has heretofore been furnished with
true, correct and complete copies of each registration or application for
registration covering any of the Intellectual Property which is registered with,
or in respect of which any application for registration has been filed with, any
Governmental Entity.
(ii) 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 or is expected to be conducted, and includes all of the intellectual
property rights owned by or licensed to 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 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 Intellectual Property or any portion
thereof or any rights to use, market or exploit the 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, or is currently
contemplated to be, sold, licensed, leased, transferred, used or otherwise
exploited by such persons, does, did or will (i) infringe on any patent,
trademark, copyright or other right of any other person, (ii) constitute
23
<PAGE>
a misuse or misappropriation of any trade secret, know-how, process, proprietary
information or other right of any other person, or (iii) entitle any other
person to any interest therein, or right to compensation from Company, any
Subsidiary of Company or any of their respective successors or assigns, by
reason thereof (it being understood and agreed that, insofar as the foregoing
representation and warranty relates to Software and Intellectual Property that
is licensed to Company or any Subsidiary of Company by any third party, such
representation and warranty is made only to Company's knowledge). 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 or Intellectual Property.
(l) Material Contracts. There have been 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; (ii) contracts
involving an initial fee of $100,000 or more pursuant to which Company or any of
its Subsidiaries licenses other persons to use the Software and pursuant to
which other persons license Company or any of its Subsidiaries to use the
Licensed Software; (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 are material to Company and 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) contracts with any stockholders of Company; (vii)
acquisition, merger, asset purchase or sale agreements involving aggregate
consideration of $500,000 or more; (viii) agreements, arrange-
24
<PAGE>
ments, transactions or understandings with any Affiliate that would be required
to be disclosed under Item 404 of Regulation S-K under the Securities Act; and
(ix) contracts which contain a "change in control" or similar provision. Except
as specified in Section 4.1(l) of the Disclosure Schedule, all of the Material
Contracts 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.
(m) Litigation, etc. Except as specified in Section 4.1(m) of
---------------
the Disclosure Schedule or the Filed SEC Documents, (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 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. To the Company's knowledge, Company and its
Subsidiaries are in compliance with all applicable statutes, laws, ordinances,
rules, orders and regulations of any Governmental Entity, and neither Company
nor any of its Subsidiaries has received notification of any
25
<PAGE>
asserted present or past failure to so comply.
(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 (as defined in Section 9.3); (B) to the knowledge of
Company, neither Company nor any of its Subsidiaries is liable for any off-site
contamination; (C) to the knowledge of Company, neither Company nor any of its
Subsidiaries has any liability or remediation obligation under any Environmental
Law; (D) no assets of Company or any of its Subsidiaries are subject to pending
or threatened Liens under any Environmental Law; (E) to the knowledge of
Company, Company and its Subsidiaries have all Permits required under any
Environmental Law ("Environmental Permits"); and (F) 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, as of the date hereof and as of the Effective Time:
(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, including combined unitary or consolidated
returns for any group of entities ("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 Filed
SEC Documents 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 currently due and payable except for those contested in good
faith and for which adequate reserves have been provided for in Company's
financial statements.
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<PAGE>
(ii) (A) The Returns of Company, each of its Subsidiaries and
any affiliated, consolidated, combined or unitary group that includes Company or
any of its Subsidiaries either have been examined and settled with the
appropriate Tax authority or closed by virtue of the expiration of the
applicable statute of limitations and (B) except for alleged deficiencies which
have been finally and irrevocably resolved, neither Company nor any of its
Subsidiaries have 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.
(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) Neither Company nor any of its Subsidiaries has agreed to
make, nor is required to make, any material adjustment under Section 481(a) of
the Code by reason of a change in accounting method or otherwise and, to the
knowledge of Company, the IRS has not proposed any such adjustment or change in
accounting method.
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<PAGE>
(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.
(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.
(x) There are no Tax liens upon any asset of Company or
any of its Subsidiaries except liens for Taxes not yet due.
(xi) No power of attorney currently in force has been
granted by Company or any of its Subsidiaries concerning any Tax matter.
(xii) Neither Company nor any of its Subsidiaries has made
a disclosure on a Return pursuant to Section 6662 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 material "employee
benefit plans" (as that phrase is defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) in each case, that
is sponsored, maintained or contributed to or required to be contributed to by
Company or by any trade or business, whether or not incorporated (an "ERISA
Affiliate"), that together with
28
<PAGE>
Company would be deemed a "single employer" within the meaning of Section
4001(b) of ERISA, or to which Company or an ERISA Affiliate is party, whether
written or oral, for the benefit of any current or former employee, officer or
director of Company or any of its Subsidiaries ("Company ERISA Plans") and any
other material benefit or compensation plan, program or arrangement, in each
case, that is sponsored, maintained or contributed to or required to be
contributed to by Company or an ERISA Affiliate, whether written or oral, for
the benefit of any current or former employee, officer or director of 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 is established or operated
(including any summary plan descriptions), a written description of any Company
Plan for which there is no written document, and the three most recent annual
reports, financial statements and actuarial valuations with respect to each
Company Plan. 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 determined or
occasioned, in whole or in part, 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;
(v) each Company ERISA Plan intended to be qualified under
Section 401(a) of the Code has received a favorable determination notification,
advisory and/or opinion letter, as applicable, from the IRS that it is so
qualified or still has remaining a period of time under applicable Treasury
Regulations or Internal Revenue Service pronouncements in which to apply for
such a letter and to make any
29
<PAGE>
amendments necessary to obtain a favorable determination 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) the aggregate accumulated benefit obligations of each
Company ERISA Plan subject to Title IV of ERISA (as of the date of the most
recent actuarial valuation prepared for such Company ERISA Plan and based on the
discount rate and other actuarial assumptions used in such valuation) do not
exceed the fair market value of the assets of such Company ERISA Plan (as of the
date of such valuation);
(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 Company as an independent contractor; and
(xi) no Right (as such term is defined in the Company's
1992 Stock Option Plan) that has been granted by the Company or any of its
Subsidiaries is outstanding;
provided, however, that the failure of the representations
set forth in clauses (v), (vi), (vii), (ix) and (x) 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.
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<PAGE>
(r) Absence of Changes in Benefit Plans. Except as disclosed in
-----------------------------------
the Filed SEC Documents or in Section 4.1(r) of the Disclosure Schedule, since
the date of the most recent audited financial statements included in the Filed
SEC Documents, neither Company nor any of its material 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 material Subsidiaries, or (B)
complaints, charges or claims against Company or any of its material
Subsidiaries pending, or, to the knowledge of Company, 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) Brokers. No broker, investment banker, financial advisor or
-------
31
<PAGE>
other person, other than Hambrecht & Quist, 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.
(u) Written Opinion of Financial Advisor. Company has received
------------------------------------
the written opinion of Hambrecht & Quist, dated March 23, 1999 (a true, correct
and complete copy of which has been delivered to Parent by Company), to the
effect that, based upon and subject to the matters set forth therein and as of
the date thereof, the Offer Consideration and the Merger Consideration to be
received by the holders of Shares in the Offer and the Merger, respectively, is
fair, from a financial point of view, to such holders and such opinion has not
been withdrawn or modified.
(v) Voting Requirements. In the event that Section 253 of the
-------------------
DGCL is inapplicable and unavailable to effectuate the Merger, the affirmative
vote of the holders of a majority of the outstanding Shares entitled to vote at
the Stockholders Meeting (as defined in Section 6.1(a)) with respect to the
adoption of this Agreement is the only vote 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 this Agreement, the Stockholder
Agreements and the transactions contemplated hereby and thereby, including the
Offer, the Merger and the acquisition of Shares pursuant to the Stockholder
Agreements. No other state takeover statute or similar statute applies or
purports to apply to the Offer, the Merger or the other transactions
contemplated hereby.
(w) Company Rights Agreement. Company and its Board of Directors
------------------------
have taken all action to amend the Company Rights Agreement (the "Rights
Amendment") which may be necessary under the Company Rights Agreement so that
the Offer and the execution and delivery of this Agreement (and any amendments
thereto by the parties hereto) and the Stockholder Agreements, and the
consummation of the Merger and the transactions contemplated hereby and by the
Stockholder Agreements, will not cause (i) Parent or Purchaser to constitute an
"Acquiring Person" (as defined in the Company Rights Agreement), (ii) a
"Distribution Date," "Section 13 Event," "Triggering Event," or "Shares
Acquisition Date" (each as defined in the Company Rights Agreement) to occur or
(iii) the Rights (as defined in the Company Rights Agreement) to become
exercisable pursuant to Section 11(a)(ii) thereof or otherwise. The Rights
Amendment is sufficient to render
32
<PAGE>
the Rights inoperative with respect to the acquisition of Shares by Parent,
Purchaser or their affiliates pursuant this Agreement, the Offer and/or the
Stockholder Agreements. As a result of the Rights Amendment, the Rights shall
not be exercisable upon or at any time after the acceptance for payment of
Shares pursuant to the Offer and/or the purchase of, or right to acquire, Shares
pursuant to the Stockholder Agreements. A true and correct copy of the Rights
Amendment has been delivered to Parent.
(x) Selesta Litigation. The Settlement Agreement, dated
------------------
February, 1999, by and among Selesta Integrazioni, Selesta Gestione Centri and
Gruppo Selesta (including, without limitation, Selesta Auditing, Selesta
Gestione Centri Operations, Selesta Gestione Centri Applications, Selesta
Technologie and Selesta Gestion Centros) (collectively "Selesta"), on the one
hand; and the Company and Interlink France S.A.R.L., Franco Rasello and RASCA
s.a.s. di Ing. Franco Rasello & C., and Marco Spinetti and Integrazione Sistemi
s.a.s. di Ing. Marco Spinetti & C., on the other hand (the "Selesta Settlement
Agreement"), is a valid and binding obligation of the parties thereto,
enforceable in accordance with its terms. Neither the Company nor Selesta has
breached any provision of, or is in default in any respect under, and no
condition exists which, with the passage of time, the giving of notice of, or
both would result in a default by the Company or Selesta under, the terms of the
Selesta Settlement Agreement. The Company has provided to Parent a true, correct
and complete copy of the Selesta Settlement Agreement.
(y) Except as specified in Section 4.1(y) of the Disclosure
Schedule, Company is not a party to any confidentiality, nondisclosure or
similar agreement which contains any "standstill" provisions or similar
restrictions on Acquisition Proposals (as defined in Section 6.5) by any third
party.
Section 4.2 Representations and Warranties of Parent and Purchaser.
------------------------------------------------------
Parent and Purchaser represent and warrant to Company as follows:
(a) Organization, Standing and Corporate Power. Each of Parent
------------------------------------------
and Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated and has
all requisite corporate power and authority to carry on its business. Parent has
delivered or made available to the Company complete and correct copies of the
Certificate of Incorporation and By-laws (or similar charter documents) of
Parent and Purchaser, in each case as amended to the date hereof.
33
<PAGE>
(b) Authority; Noncontravention. Parent and Purchaser have the
---------------------------
requisite corporate power and authority to enter into this Agreement. The
execution and delivery of this Agreement by Parent and Purchaser and the
consummation by Parent and Purchaser 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 Purchaser and have been
duly approved by Parent as sole stockholder of Purchaser, and no other
corporate proceedings on the part of Parent or Purchaser 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 Purchaser and, assuming this Agreement constitutes a valid and
binding obligation of Company, constitutes a valid and binding obligation
of each of Parent and Purchaser, 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
principles 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
Purchaser, in each case as amended to the date of this Agreement, (ii)
subject to the governmental filings and other matters 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
Purchaser is a party or by which Parent or Purchaser or any of their
respective assets is bound or affected, or (iii) subject to the
governmental filings and other matters 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 Purchaser in connection with the execution and
delivery of this Agreement by Parent or Purchaser or the consummation by
Parent or Purchaser, 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, (ii) the filing with the SEC of (A) the
Schedule
34
<PAGE>
14D-1 and (B) such reports under the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated hereby,
(iii) the filing of the certificate of merger with the Delaware 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
to make or obtain which could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent.
(d) Certain Information. Subject to Company's fulfillment of
-------------------
its obligations hereunder with respect thereto, the Offer Documents will
contain (or will be amended in a timely manner so as to contain) all
information which is required to be included therein in accordance with the
Exchange Act and the rules and regulations thereunder and any other
applicable law and will conform in all material respects with the
requirements of the Exchange Act and any other applicable law, and the
Offer Documents will not, at the respective times they are filed with the
SEC or published, sent or given to Company's stockholders, 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; provided, however, that no representation or warranty is hereby
made by Parent or Purchaser with respect to any information supplied by
Company in writing for inclusion in, or with respect to Company information
derived from Company's public SEC filings which is included or incorporated
by reference in the Offer Documents. None of the information supplied or to
be supplied by Parent or Purchaser for inclusion or incorporation by
reference in, or which may be deemed to be incorporated by reference in,
the Schedule 14D-9 or the Proxy Statement will, at the respective times the
Schedule 14D-9 and the Proxy Statement are filed with the SEC or published,
sent or given to Company's stockholders, 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 are made, not misleading. If at any time
prior to the Effective Time any event with respect to Parent or Purchaser,
or with respect to any information supplied by Parent or Purchaser for
inclusion in the Schedule 14D-9 or the Proxy Statement, shall occur which
is required to be described in an amendment of, or a supplement to, such
document, Parent or Purchaser shall so describe the event to Company.
(e) Financing. Parent and Purchaser collectively have cash on
---------
hand or financing commitments from financially responsible third parties,
or a combination thereof, in an aggregate amount sufficient to enable
Parent and Pur-
35
<PAGE>
chaser to pay in full (i) the Offer Consideration, (ii) the Merger
Consideration, and (iii) all fees and expenses payable by Parent and
Purchaser in connection with this Agreement and the transactions
contemplated hereby.
(f) Interim Operations of the Purchaser. The Purchaser has
-----------------------------------
engaged in no significant business activities prior to the date hereof.
ARTICLE V
CONDUCT OF BUSINESS OF COMPANY
Section 5.1 Conduct of Business of Company. Except as expressly
------------------------------
provided for herein or in the Disclosure Schedule, 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 commercially 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 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 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 and
Warrants outstanding on the date of this Agreement;
36
<PAGE>
(iii) amend its certificate of incorporation, bylaws or
other comparable charter or organizational documents or amend or redeem the
Company Rights Agreement;
(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) make any new capital expenditure or expenditures
in excess of $50,000 individually, or $250,000 in the aggregate, other than
as specified in the Company's budget for capital expenditures made
available to Parent or the specific capital expenditures disclosed and set
forth on Schedule 5.1 of the Disclosure Schedule;
(vi) except for software licenses in the ordinary
course of business, enter into, amend or terminate any Material Contract,
or waive, release or assign any material rights or claims;
(vii) 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;
(viii) (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 Filed
SEC Documents in the ordinary course of business consistent with past
practice;
(ix) 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
37
<PAGE>
law;
(x) accelerate the payment, right to payment or
vesting of any bonus, severance, profit sharing, retirement, deferred
compensation, stock option, insurance or other compensation or benefits;
(xi) enter into or amend any employment, consulting,
severance or similar agreement with any individual;
(xii) 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 defined in Section 6.5(d)), except as
provided for in Section 6.5;
(xiii) make or rescind any tax election or settle or
compromise any income tax liability of Company or of any of its
Subsidiaries involving on an individual basis more than $100,000;
(xiv) pay, discharge or satisfy any claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction (x) of any
such claims, liabilities or obligations in the ordinary course of business
and consistent with past practice or (y) of claims, liabilities or
obligations reflected or reserved against in, or contemplated by, the
consolidated financial statements (or the notes thereto) of Company and its
consolidated Subsidiaries;
(xv) except as required by GAAP, make any change in any
method of accounting or accounting practice or policy, except as required
by any changes in generally accepted accounting principles;
(xvi) settle any action, suit, claim, investigation or
proceeding (legal, administrative or arbitrative) in an amount in excess
of $50,000, except in connection with the Selesta litigation described in
Section 4.1(x);
(xvii) permit any material insurance policy naming it as
a beneficiary or a loss payable payee to be cancelled or terminated without
notice to Parent, except in the ordinary course of business and consistent
with past practice;
(xviii) enter into any agreement, understanding or commit-
38
<PAGE>
ment that restrains, limits or impedes Company's ability to compete with or
conduct any business or line of business, including, but not limited to,
geographic limitations on Company's activities;
(xix) 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, provided, however, that routine employee
terminations for cause shall not be considered subject to this clause
(xix);
(xx) 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;
(xxi) willfully take any action that would result in (i)
any of its representations and warranties set forth in this Agreement that
are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue in
any material respect or (iii) except to the extent such action is otherwise
expressly contemplated by this Agreement, any of the conditions to the
Offer set forth in Exhibit A not being satisfied; or
(xxii) 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 except to the extent such action is
otherwise expressly contemplated by this Agreement.
ARTICLE VI
ADDITIONAL COVENANTS
Section 6.1 Company Stockholders Meeting; Preparation of the Proxy
------------------------------------------------------
Statement; Short-Form Merger.
----------------------------
(a) As soon as practicable following the acceptance for
payment
39
<PAGE>
of and payment for Shares by Purchaser in the Offer, if required by law to
consummate the Merger, Company shall take all action necessary, in
accordance with the DGCL, the Exchange Act and other applicable law and its
certificate of incorporation and bylaws to convene and hold a special
meeting of the stockholders of Company (the "Stockholders Meeting") for the
purpose of considering and voting upon this Agreement and to solicit
proxies pursuant to the Proxy Statement in connection therewith. The Board
of Directors of Company shall recommend that the holders of 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. At
the Stockholders Meeting, Parent and Purchaser shall cause all of the
Shares owned by them to be voted in favor of the adoption of this
Agreement.
(b) Company, if requested by Parent, shall promptly prepare and
file with the SEC a proxy statement or information statement (together with
any supplement or amendment thereto, the "Proxy Statement") relating to the
Stockholder Meeting in accordance with the Exchange Act and the rules and
regulations thereunder. Parent, Purchaser and Company will cooperate with
each other in the preparation of the Proxy Statement. Without limiting the
generality or effect of the foregoing, Company shall use its commercially
reasonable efforts to respond to all SEC comments with respect to the Proxy
Statement and, subject to compliance with SEC rules and regulations, to
cause the Proxy Statement to be mailed to Company's stockholders at the
earliest practicable date. Each of Parent and Purchaser shall promptly
supply to Company in writing, for inclusion in the Proxy Statement, all
information concerning Parent and Purchaser required under the Exchange Act
and the rules and regulations thereunder to be included in the Proxy
Statement.
(c) Notwithstanding the foregoing clauses (a) and (b), in the
event that Purchaser or any other wholly owned Subsidiary of Parent shall
acquire at least 90% of the outstanding Shares in the Offer, the parties
hereto shall, at the request of Purchaser, take all necessary actions to
cause the Merger to become effective, as soon as practicable after the
expiration of the Offer, without a meeting of stockholders of Company,
in accordance with Section 253 of the DGCL.
(d) Parent shall: (i) cause Purchaser promptly to submit this
Agreement for adoption by its sole stockholder; (ii) cause the outstanding
shares of capital stock of Purchaser to be voted in favor of the adoption
of this Agreement; and (iii) cause to be taken all additional actions
necessary for Purchaser to adopt this Agreement.
40
<PAGE>
Section 6.2 Access to Information; Confidentiality. Company
--------------------------------------
shall, and shall cause each of its Subsidiaries to, afford to Parent and
its officers, employees, counsel, financial advisors and other
representatives access during the period prior to the Effective Time to all
of Company's and its Subsidiaries' properties, books, contracts,
commitments, Returns, personnel and records and, during such period,
Company shall, and shall cause each of its Subsidiaries to, furnish as
promptly as practicable to Parent such information concerning Company's and
its Subsidiaries' businesses, properties, financial condition, operations
and personnel as Parent may from time to time request. Any such
investigation by Parent shall not affect the representations or warranties
of Company contained in this Agreement. Except as required by law, Parent
and Company will hold, and will use commercially reasonable efforts to
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 (the
"Letter Agreement"), dated December 21, 1998, between Parent and Company
with respect to confidentiality and other matters.
Section 6.3 Commercially Reasonable Efforts. On the terms and
-------------------------------
subject to the conditions set forth in this Agreement, including, without
limitation, Section 6.5 hereof, each of the parties shall use its
commercially reasonable 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 Offer,
the Merger and the other transactions contemplated hereby, including the
satisfaction of the respective conditions set forth in Article VII.
Section 6.4 Public Announcements. Parent and Purchaser, on the one
--------------------
hand, and Company, on the other hand, shall attempt in good faith to
consult with each other before issuing, and provide each other the
opportunity to review and comment upon, any press release, SEC filing
(including without limitation the Offer Documents, the Schedule 14D-9 and
the Proxy Statement) or other public statements with respect to the
transactions contemplated hereby, including the Offer and 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 6.5 No Solicitation; Acquisition Proposals. (a) Company
--------------------------------------
shall
41
<PAGE>
not, nor shall it permit any of its Subsidiaries to, nor shall it authorize
(and shall use its best efforts not to permit) any officer, director or
employee of, or any investment banker, attorney or other advisor or
representative of, Company or any of its Subsidiaries to, (i) solicit or
initiate, or intentionally encourage, directly or indirectly, any inquiries
relating to, or the submission of, any Acquisition Proposal, (ii)
participate in any discussions or negotiations regarding any Acquisition
Proposal, or, in connection with any Acquisition Proposal, furnish to
any Person any information or data with respect to or access to the
properties of Company or any of its Subsidiaries, or take any other action,
to knowingly facilitate the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal or (iii) enter
into any agreement with respect to any Acquisition Proposal or approve or
resolve to approve any Acquisition Proposal; provided, that nothing
contained in this Section 6.5 or any other provision hereof shall prohibit
Company or Company's Board of Directors from (i) taking and disclosing to
Company's stockholders a position with respect to a tender or exchange
offer by a third party pursuant to Rules 14d-9 and 14e-2 promulgated under
the Exchange Act, or (ii) making such disclosure to Company's stockholders
as, in the good faith judgment of Company's Board of Directors, after
consultation with outside counsel, is required under, or is necessary to
comply with, applicable law, provided that Company may not, except as
permitted by Section 6.5(b), withdraw or modify, or propose to withdraw or
modify, its position with respect to the Offer or the Merger or approve or
recommend, or propose to approve or recommend any Acquisition Proposal, or
enter into any agreement with respect to any Acquisition Proposal. Upon
execution of this Agreement, Company will immediately cease any existing
activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. Notwithstanding the
foregoing, prior to the time of acceptance of Shares for payment pursuant
to the Offer, Company may furnish information concerning its and/or its
Subsidiaries' business, properties or assets to any person or group and may
negotiate and participate in discussions and negotiations with such person
or group concerning an Acquisition Proposal, provided that such person or
group shall have entered into a confidentiality agreement, the
confidentiality provisions of which shall be no more favorable to such
third party than those provided for in the Letter Agreement, if:
(x) such Person or group has submitted a Superior
Proposal; and
(y) in the opinion of Company's Board of Directors
such action is required to discharge the Board's fiduciary duties to
Company's
42
<PAGE>
stockholders under applicable law, determined only after consultation
with independent legal counsel to Company.
Company will promptly (but in no case later than 24 hours) notify Parent in
writing of the existence of any proposal, discussion, negotiation or
inquiry received by Company regarding any Acquisition Proposal, and Company
will promptly communicate to Parent the terms of any proposal, discussion,
negotiation or inquiry which it may receive regarding any Acquisition
Proposal (and will promptly provide to Parent copies of any written
materials received by Company in connection with such proposal, discussion,
negotiation or inquiry) and the identity of the party making such proposal
or inquiry or engaging in such discussion or negotiation. Company will
promptly provide to Parent any non-public information concerning Company
provided to any other person in connection with any Acquisition Proposal
which was not previously provided to Parent. Company will keep Parent
informed of the status and details of any such Acquisition Proposal and of
any amendments or proposed amendments to any Acquisition Proposal and of
the status of any discussions or negotiations relating to any Acquisition
Proposal and will promptly (but in no case later than 24 hours) notify
Parent of any determination by Company's Board of Directors that a Superior
Proposal has been made.
(b) Except as set forth in this Section 6.5, neither the Board
of Directors of Company nor any committee thereof shall (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Parent or
Purchaser, the approval or recommendation by the Board of Directors of
Company of the Offer, this Agreement or the Merger, (ii) approve or
recommend, or propose to approve or recommend, any Acquisition Proposal or
(iii) enter into any agreement with respect to any Acquisition Proposal.
Notwithstanding the foregoing or anything else herein, subject to
compliance with the provisions of this Section 6.5, prior to the time of
acceptance for payment of Shares pursuant to the Offer, Company's Board of
Directors may withdraw or modify its approval or recommendation of the
Offer, this Agreement or the Merger, approve or recommend a Superior
Proposal, or enter into an agreement with respect to a Superior Proposal,
in each case at any time after the third business day following Parent's
receipt of written notice (including by facsimile) from Company advising
Parent that the Board of Directors of Company has received a Superior
Proposal which it intends to accept, specifying the material terms and
conditions of such Superior Proposal and identifying the person making such
Superior Proposal, but only if Company shall have caused its financial and
legal advisors to negotiate with Parent to make such adjustments to the
terms and conditions of this Agreement as would enable Company to
proceed with the transactions
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contemplated hereby on such adjusted terms.
(c) Nothing in this Section 6.5, and no action taken by the Board
of Directors of Company pursuant to this Section 6.5, will (i) 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 (ii)
affect in any manner any other obligation of Company under this Agreement.
(d) For purposes of this Agreement, "Acquisition Proposal" means
any bona fide offer, proposal or other indication of interest regarding any of
the following (other than the transactions provided for in this Agreement
involving Company): (i) any merger, consolidation, share exchange,
recapitalization, business combination or other similar transaction involving
the Company or any of its Subsidiaries; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of a significant portion of the
assets of Company and its Subsidiaries, taken as a whole, in a single
transaction or series of related transactions (other than sales of inventory or
used equipment in the ordinary course of business); (iii) any purchase of, or
tender offer or exchange offer for, 20% percent or more of the outstanding
shares of capital stock of Company by any person or the filing of a registration
statement 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. For purposes of this Agreement,
"Superior Proposal" means an unsolicited Acquisition Proposal on terms which the
Board of Directors of Company determines in good faith to be more favorable to
Company's stockholders than the Offer and the Merger (based on advice of
Company's independent financial advisor that the value of the consideration
provided for in such proposal is superior to the value of the consideration
provided for in the Offer and the Merger); for which financing, to the extent
required, is then committed or which, in the good faith reasonable judgment of
the Board of Directors of Company (based on advice from Company's independent
financial advisor) is reasonably capable of being financed by such third party
provided that the Board of Directors of the Company has also, among other
things, duly considered the timing of such Acquisition Proposal and the
likelihood that such Acquisition Proposal will be consummated.
Section 6.6 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 Offer, the Merger and the
other
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transactions contemplated hereby and (b) use commercially reasonable 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 Offer, the Merger and the other
transactions contemplated hereby, including without limitation using
commercially reasonable 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 Offer, the Merger and the other transactions
contemplated hereby and to fulfill the conditions to the Offer and 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 Offer or 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 commercially reasonable efforts to take all such action.
Section 6.7 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 disclosed on the Disclosure
Schedule 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.
(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 Company or any of its Subsidiaries with
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 sabbati-
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cals) 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 not include 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 6.7, nothing herein shall prevent Parent
or the Surviving Corporation from amending or terminating any Company Plan in
accordance with its terms.
(d) "Offering Periods" under the Company 1996 Employee Stock
Purchase Plan (the "ESPP") shall terminate on the earlier to occur of (i) April
30, 1999, or (ii) the expiration date of the Offer, and the Company shall cause
written notice to be given to participants in accordance with the terms of the
ESPP. No further Offering Period under the ESPP shall be created.
Section 6.8 Indemnification; Directors' and Officers' Insurance.
---------------------------------------------------
(a) For a period of four years after the Effective Time, the
provisions with respect to indemnification set forth in the certificate of
incorporation and bylaws of Purchaser 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 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.
(b) From and after the Effective Time, Parent shall, or shall
cause the Surviving Corporation to, indemnify, defend and hold harmless each
person who
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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 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 6.8(b), upon learning of any such claim, action, suit, proceeding
or investigation, shall promptly 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 6.8(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. The rights to
indemnification under this Section 6.8(b) shall continue in full force and
effect for a period of four 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.
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(c) For a period of two years after the Effective Time Parent
shall cause to be maintained in effect policies of directors' and officers'
liability insurance, for the benefit of those persons who are covered by
Company's directors' and officers' liability insurance policies at the Effective
Time, providing coverage with respect to matters occurring prior to the
Effective Time that is at least equal to the coverage provided under Company's
current directors' and officers' liability insurance policies, to the extent
that such liability insurance can be maintained at an annual cost to Parent not
greater than 150 percent of the premium for the current Company directors' and
officers' liability insurance; provided that if such insurance cannot be so
maintained at such cost, Parent shall maintain as much of such insurance as can
be so maintained at a cost equal to 150 percent of the current annual premiums
of Company for such insurance.
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 shall be subject to
the satisfaction or written waiver on or prior to the Closing Date of the
following conditions:
(a) Completion of the Offer. Purchaser shall have accepted for
-----------------------
payment and paid for all Shares validly tendered in the Offer and not withdrawn;
provided, however, that neither Parent nor Purchaser may invoke this condition
if Purchaser shall have failed to purchase Shares so tendered and not withdrawn
in violation of the terms of this Agreement or the Offer.
(b) 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 if such vote is required pursuant to Company's
certificate of incorporation, the DGCL or other applicable law.
(c) 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 prior to
invoking this condition, the party so invoking this condition shall have
complied with its obligations under
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Section 6.3 and Section 6.6 and the parties hereto shall have used commercially
reasonable efforts to lift or remove such order, injunction, restraint or
prohibition.
(d) HSR Act. All necessary waiting periods under the HSR Act
-------
applicable to the Merger shall have expired or been earlier terminated.
Section 7.2 Conditions to Parent's or Purchaser's Obligation to Effect the
--------------------------------------------------------------
Merger. The obligation of Parent and/or Purchaser to effect the Merger shall be
- ------
subject to the satisfaction or written waiver on or prior to the Closing Date of
the following condition: No outstanding Option shall entitle the holder thereof,
at the Effective Time or thereafter, to purchase any capital stock of Company.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be terminated and the Merger
-----------
contemplated herein may be abandoned at any time prior to the Effective Time,
whether before or after approval of matters presented in connection with the
Merger by the stockholders of Company:
(a) By the mutual written consent of Parent and Company; provided,
--------
however, that if Parent shall have a majority of the directors pursuant to
- -------
Section 1.4, such consent of Company may only be given if approved by the
Continuing Directors.
(b) By either of Parent or Company if (i) a statute, rule or
executive order shall have been enacted, entered or promulgated prohibiting the
transactions contemplated hereby on the terms contemplated by this Agreement or
(ii) any Governmental Entity shall have issued an order, decree or ruling or
taken any other action (which order, decree, ruling or other action the parties
hereto shall use their commercially reasonable efforts to lift), in each case
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated hereby and such order, decree, ruling or other action shall have
become final and non-appealable.
(c) By either of Parent or Company if the consummation of the
Offer shall not have occurred on or before July 31, 1999; provided, however,
-------- -------
that the party seeking to terminate this Agreement pursuant to this Section
8.1(c) shall not
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have breached in any material respect its obligations under this Agreement;
(d) By Company:
(i) if Company has entered into an agreement with respect
to a Superior Proposal or Company or the Board of Directors of Company has
approved or recommended a Superior Proposal in accordance with Section 6.5(b),
provided Company has complied with all provisions of Section 6.5, including the
notice provisions therein, and that it simultaneously terminates this Agreement
and makes simultaneous payment to the Parent of the Termination Fee and the
Expenses (as such terms are defined in Section 9.2); or
(ii) if Parent or Purchaser shall have terminated the Offer
or the Offer expires without Parent or Purchaser, as the case may be, purchasing
any Shares pursuant thereto; provided that Company may not terminate this
Agreement pursuant to this Section 8.1(d)(ii) if Company is in material breach
of this Agreement; or
(iii) if Parent, Purchaser or any of their affiliates shall
have failed to commence the Offer on or prior to five business days following
the date of the initial public announcement of the Offer; provided, that Company
may not terminate this Agreement pursuant to this Section 8.1(d)(iii) if Company
is in material breach of this Agreement; or
(iv) if there shall be a material breach by either Parent or
Purchaser of any of their representations, warranties, covenants or agreements
contained in this Agreement, except where such breach does not have a material
adverse effect on the ability of Parent or Purchaser to consummate the Offer or
the Merger.
(e) By Parent or Purchaser:
(i) (A) if, prior to the purchase of the Shares pursuant to
the Offer, the Board of Directors of Company shall have withdrawn, or modified
or changed in a manner adverse to Parent or Purchaser, its approval or
recommendation of the Offer, this Agreement or the Merger or shall have
recommended or approved, or announced a neutral position with respect to, an
Acquisition Proposal or upon request of Parent, shall fail to reaffirm its
approval and recommendation of the Offer, the Merger Agreement, or the Merger;
or
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(B) if there shall have been a material breach by the Company of
any provision of Section 6.5; or
(ii) if the Offer has expired or terminated without Parent or
Purchaser purchasing any Shares thereunder and, pursuant to Exhibit A and
Article I hereof, the Purchaser is neither required to accept and pay for the
Shares tendered in the Offer nor extend the expiration date of the Offer,
provided that Parent or Purchaser may not terminate this Agreement pursuant to
- --------
this Section 8.1(e)(ii) if Parent or Purchaser is in material breach of this
Agreement; or
(iii) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of the
conditions set forth in Exhibit A hereto which occurrence is incapable of being
cured or remediated prior to the initial expiration date of the Offer, Parent,
Purchaser or any of their affiliates shall have failed to commence the Offer on
or prior to five business days following the date of the initial public
announcement of the Offer, provided that Parent or Purchaser may not terminate
this Agreement pursuant to Section 8.1(e)(iii) if Parent or Purchaser is in
material breach of this Agreement; or
(iv) if any Person or "group" (as defined in Section 13(d)(3) of the
Exchange Act), other than Parent, Purchaser or their affiliates or any group of
which any of them is a member, shall have acquired beneficial ownership (as
determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of the Shares; or
(v) if there shall be a breach by Company of any of its
representations or warranties, contained in this Agreement (without reference to
any "Material Adverse Effect" or "materiality" qualifications contained therein)
which breach causes a Material Adverse Effect on Company and is incapable of
being cured prior to the twentieth business day following the initial expiration
date of the Offer or there shall be a material breach by Company of any of its
covenants or agreements contained in this Agreement.
Section 8.2 Effect of Termination. In the event of termination of this
---------------------
Agreement by either Company or Parent or Purchaser as provided in Section 8.1,
this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Parent, Purchaser or Company, other than
the provisions of Section 4.1(t), Section 6.2, this Section 8.2 and Article IX
and except to the extent
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that such termination results from the willful breach by a party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
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 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. (a) Except as provided in Section 9.2(b)
-----------------
below, all fees and expenses incurred in connection with the Offer, the Merger,
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such fees or expenses, whether or not the Offer or the Merger is
consummated.
(b) If (x) Parent or Purchaser terminates this Agreement
pursuant to Section 8.1(e)(i), or (y) Company terminates this Agreement pursuant
to Section 8.1(d)(i), then in each case, Company shall pay, or cause to be paid
to Parent, at the time of termination, an amount equal to $2,870,000 (the
"Termination Fee") and an amount equal to Parent's and Purchaser's actual and
reasonably documented out-of-pocket expenses incurred by Parent or Purchaser in
connection with the Offer, the Merger, this Agreement and the consummation of
the transactions contemplated hereby up to a maximum expense reimbursement
amount of $718,000 (the "Expenses"). In addition, if this Agreement is
terminated by Parent or Purchaser pursuant to Section 8.1(e)(ii) solely as a
result of the failure of the Minimum Condition or by Company pursuant to Section
8.1(d)(ii) and, in each case at the time of such termination, Parent is not in
material breach of this Agreement and there has been previously publicly
announced, and not withdrawn, an Acquisition Proposal, and, if Company shall
thereafter, within 9 months after such termination, enter into an agreement with
respect to such Acquisition Proposal, then Company shall pay the Termination Fee
concurrently with entering into any such agreement. If this Agreement is
terminated by Parent or Purchaser pursuant to Section 8.1(e)(v), then Company
shall pay Parent the Expenses. Any payments required to be made pursuant to this
Section 9.2 shall be made by wire transfer of same day funds to an
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account designated by Parent.
Section 9.3 Definitions. For purposes of this Agreement:
-----------
(a) 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;
(b) "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;
(c) "Disclosure Schedule" means the disclosure schedule delivered
by Company to Parent and Purchaser simultaneously with the execution of this
Agreement;
(d) "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;
(e) "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;
(f) "knowledge" means the actual knowledge of any executive
officer of Company or Parent, as the case may be, after making due inquiry under
the circumstances;
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(g) "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;
(h) a "Material Adverse Effect" with respect to any person means
any event, change, occurrence, effect, fact or circumstance having, or which
could reasonably be expected to have, 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 financial condition,
results of operations, value or business of such person and its Subsidiaries
taken as a whole; except for those changes, events and effects that (i) are
caused by conditions affecting the United States or world economy as a whole or
affecting the industry in which such entity competes as a whole, which
conditions do not affect such entity in a materially disproportionate manner, or
(ii) are related to or result from announcement or pendency of the Merger or the
Offer;
(i) the "NYSE" means the New York Stock Exchange;
(j) a "person" means an individual, corporation, partnership,
joint venture, association, trust, unincorporated organization or other entity;
(k) "Principal Stockholders" means Cisco Systems, Inc., Advent
International Corp. and certain affiliates thereof, Andrew I. Fillat, Ralph B.
Godfrey, Ronald W. Braniff, Augustus J. Berkeley, William C. Jones, Christopher
A. Markle, Victor C. Langford, James A. Barth and Michael J. Satterwhite;
(l) 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 Amendment and Modification. Subject to applicable law, this
--------------------------
Agreement may be amended, modified and supplemented in any and all respects,
whether before or after any vote of the stockholders of Company contemplated
hereby, by written agreement of the parties hereto (which in the case of Company
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<PAGE>
shall include approvals as contemplated in Section 1.4(c)), at any time prior to
the Closing Date with respect to any of the terms contained herein; provided,
however, that after the approval of this Agreement by the stockholders of
Company, no such amendment, modification or supplement shall reduce the amount
or change the form of the Merger Consideration or otherwise adversely affect the
rights of such stockholders.
Section 9.5 Extension; Waiver. Subject to Section 1.4 hereof, 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 9.4, 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 9.6 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) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(i) if to Parent or to Purchaser, to
Sterling Software, Inc.
300 Crescent Court, Suite 1200
Dallas, Texas 75201
Attention: Don J. McDermett, Jr., Esq.
Telecopy: (214) 981-1265
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with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Blaine V. Fogg, Esq.
Telecopy: (212) 735-2000
(ii) if to Company, to
Interlink Computer Sciences, Inc.
47370 Fremont Boulevard
Fremont, California 94538
Attention: Augustus J. Berkeley
Telecopy: (510) 249-6150
with a copy (which shall not constitute notice) to:
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attention: Thomas C. DeFilipps, Esq.
Telecopy: (650) 845-5000
Section 9.7 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 9.8 Entire Agreement; No 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 6.2). Other than the provisions of Section 6.8,
this Agreement is not intended to confer upon any person (including without
limitation any employees or former employees of Company), other than the parties
hereto, any rights or
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remedies.
Section 9.9 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 conflicts of
laws thereof.
Section 9.10 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
Purchaser 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 Purchaser, 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 9.11 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).
57
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Section 9.12 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 9.13 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.
58
<PAGE>
IN WITNESS WHEREOF, Parent, Purchaser 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.
-------------------------------
Name: Don J. McDermett, Jr.
Title: Senior Vice President
STERLING SOFTWARE (SOUTHWEST), INC.
By: /s/ Don J. McDermett, Jr.
-------------------------------
Name: Don J. McDermett, Jr.
Title: Vice President
INTERLINK COMPUTER SCIENCES, INC.
By: /s/ Augustus J. Berkeley
-------------------------------
Name: Augustus J. Berkeley
Title: President and Chief
Executive Officer
<PAGE>
EXHIBIT A
CONDITIONS TO THE OFFER
Capitalized terms used but not defined herein shall have the meanings set
forth in the Agreement and Plan of Merger (the "Agreement") of which this
Exhibit A is a part. Notwithstanding any other provision of the Offer and
subject to the terms of the Merger Agreement, Purchaser shall not be required to
accept for payment or, subject to any applicable rules and regulations of the
SEC, including Rule 14e-1(c) under the Exchange Act (relating to Purchaser's
obligation to pay for or return tendered Shares promptly after termination or
withdrawal of the Offer), pay for, and may delay the acceptance for payment of
or, subject to the restriction referred to above, the payment for, any tendered
Shares, and may amend the Offer consistent with the terms of the Agreement or
terminate the Offer and not accept for payment any tendered Shares, if (i) there
shall not have been validly tendered and not withdrawn prior to the expiration
of the Offer such number of Shares which, when added to the Shares, if any,
beneficially owned by Parent or Purchaser, would constitute at least a majority
of the Shares outstanding on a fully diluted basis on the date of purchase ("on
a fully-diluted basis" meaning, as of any date, the number of Shares
outstanding, together with the Shares which Company may be required to issue
pursuant to warrants, options or obligations outstanding at that date under
employee stock or similar benefit plans or otherwise whether or not vested or
then exercisable) (the "Minimum Condition"), (ii) any applicable waiting period
under the HSR Act has not expired or been terminated, or (iii) at any time on or
after the date of the Agreement and prior to the Expiration Date, any of the
following events shall occur and be continuing and shall not have resulted from
the breach by Parent or Purchaser of any of their obligations under the
Agreement:
(a) there shall be pending any suit, action or proceeding brought by
any third party that has a high likelihood of success on the merits or by any
Governmental Entity before any court of competent jurisdiction (i) seeking to
prohibit or impose any material limitations on Parent's or Purchaser's ownership
or operation (or that of any of their respective Subsidiaries or affiliates) of
all or a material portion of their or Company's businesses or assets, (ii)
seeking to compel Parent or Purchaser or their respective Subsidiaries and
affiliates to dispose of or hold separate any material portion of the business
or assets of Company or Parent and their respective Subsidiaries, in each case
taken as a whole, as a result of the Agreement, (iii) challenging the
acquisition by Parent or Purchaser of any Shares pursuant to the Offer, (iv)
seeking to restrain or prohibit the making or consumma-
A-1
<PAGE>
tion of the Offer or the Merger or the performance of any of the transactions
contemplated by the Agreement, (v) seeking to obtain from Company any damages
(including damages against Company's directors or officers for which they may
seek indemnification from Company) that would be reasonably likely to have a
Material Adverse Effect on Company, (vi) seeking to impose material limitations
on the ability of Purchaser, or rendering Purchaser unable, to accept for
payment, pay for or purchase some or all of the Shares pursuant to the Offer and
the Merger, or (vii) seeking to impose material limitations on the ability of
Purchaser or Parent effectively to exercise full rights of ownership of the
Shares, including, without limitation, the right to vote the Shares purchased by
Purchaser or Parent on all matters properly presented to Company's stockholders;
or
(b) there shall be any statute, rule, regulation, judgment,
order or injunction enacted, entered, enforced, promulgated or deemed applicable
to the Offer or the Merger, or any other action shall be taken by any
Governmental Entity, other than the application to the Offer or the Merger of
applicable waiting periods under the HSR Act, that is reasonably likely to
result, directly or indirectly, in any of the consequences referred to in
clauses (i) through (vii) of paragraph (a) above; or
(c) (i) the representations and warranties of Company contained
in Sections 4.1(b), 4.1(u), 4.1(v), 4.1(w), 4.1(x) and the first five sentences
of Section 4.1(d) of the Agreement shall not be true and correct in all material
respects as of the date of consummation of the Offer as though made on or as of
such date (other than any such representations and warranties that by their
terms address only matters as of another specified dated, which shall be true
and correct only as of such other specified date) and (ii) all other
representations and warranties of Company contained in the Agreement, which
representations and warranties shall be deemed for purposes of this condition
not to include any qualification or limitation with respect to materiality
(whether by reference to "Material Adverse Effect" or otherwise), shall not be
true and correct as of the date of consummation of the Offer as though made on
or as of such 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 in the case of this clause
(ii) 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
date of consummation of the Offer; or
A-2
<PAGE>
(d) there shall have occurred a Material Adverse Effect on
Company; or
(e) Company's Board of Directors (i) shall have withdrawn, or
modified or changed in a manner adverse to Parent or Purchaser (including by
amendment of the Schedule 14D-9) its recommendation of the Offer, the Merger
Agreement, or the Merger, (ii) shall have recommended or announced a neutral
position with respect to an Acquisition Proposal, (iii) shall have adopted any
resolution tion to effect any of the foregoing, or (iv) upon request of Parent,
shall fail to reaffirm its approval or recommendation of the Offer, the Merger
Agreement, or the Merger; or
(f) any Person or "group" (as defined in Section 13(d)(3) of the
Exchange Act), other than Parent, Purchaser or their affiliates or any group of
which any of them is a member, shall have acquired or announced its intention to
acquire (including by commencement of a tender or exchange offer) beneficial
ownership (as determined pursuant to Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of the Shares; or
(g) the Merger Agreement shall have been terminated in
accordance with its terms;
which in the sole good faith judgment of Parent or Purchaser, in any such case,
and regardless of the circumstances (including any action or inaction by Parent
or Purchaser) giving rise to such condition makes it inadvisable to proceed with
the Offer and/or with such acceptance for payment of or payments for Shares.
The foregoing conditions are for the sole benefit of Parent and
Purchaser and may (except for the Minimum Condition) be waived by Parent or
Purchaser, in whole or in part, at any time and from time to time, in the sole
discretion of Parent or Purchaser. The failure by Parent or Purchaser at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
A-3
<PAGE>
EXHIBIT 99.2
STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT, dated as of March 23, 1999 (this
"Agreement"), is made and entered into among Sterling Software, Inc., a Delaware
corporation ("Parent"), Sterling Software (Southwest), Inc., a Delaware
corporation and indirect wholly owned subsidiary of Parent ("Purchaser"), and
Cisco Systems, Inc. ("Stockholder").
RECITALS:
A. Parent, Purchaser and Interlink Computer Sciences, Inc., 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
the Purchaser will merge with and into Company (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) 622,000 shares of common stock ("Common Stock"), par value
$.001 per share ("Shares"), of Company (such Shares, together with any other
shares of capital stock of Company the beneficial ownership of which is
acquired, or can be acquired upon exercise of options or warrants at a price
equal to or less than the Option Consideration (as defined in Section 2.1), by
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 120
days after the date on which the Merger Agreement is terminated pursuant to
Section 8.1 thereof, are collectively referred to herein as "Subject Shares").
C. Pursuant to the Merger Agreement, Purchaser shall commence a cash
tender offer (the "Offer") to purchase at a price of $7.00 per Share all
outstanding Shares, including all of the Subject Shares. Stockholder has advised
Parent and Purchaser that it intends to tender the Subject Shares in the Offer.
D. As a condition and inducement to Parent's and Purchaser's
willingness to enter into the Merger Agreement, Parent and Purchaser have
requested that Stockholder agree, and Stockholder has agreed, to enter into this
Agreement.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements 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, intending to be legally bound hereby, agree as follows:
ARTICLE I
VOTING AGREEMENT
Section 1.1 Agreement to Vote Shares. During the Option Period (as
------------------------
defined in Section 2.2), 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 written consent of
stockholders of Company, Stockholder shall vote or cause to be voted (including
by written consent, if applicable) all of the Subject Shares, now owned or
hereafter acquired, 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. During
the Option Period, at any meeting of the stockholders of Company called to
consider and vote upon any Other Proposal (as hereinafter defined) (and at any
and all postponements and adjournments thereof), and in connection with any
action to be taken in respect of any Other Proposal by written consent of
stockholders of Company, Stockholder shall vote or cause to be voted (including
by written consent, if applicable) all of the Subject Shares against such Other
Proposal. For purposes of this Agreement, the term "Other Proposal" means any
(a) Acquisition Proposal (as defined in the Merger Agreement) or (b) other
action which is intended or could reasonably be expected to materially impede,
interfere with, delay or materially and adversely affect the consummation of the
Merger or any of the other transactions contemplated by the Merger Agreement or
this Agreement; provided, however, that neither the Merger nor any other
transaction contemplated by the Merger Agreement to be consummated by Company,
Parent or Purchaser in connection with the Merger shall constitute an Other
Proposal. Stockholder shall not enter into any agreement or understanding with
any person or entity the effect of which would be violative of the provisions
and agreements contained in this Section 1.1.
2
<PAGE>
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 DURING THE OPTION PERIOD WITH RESPECT TO THE 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 the Subject Shares are not irrevocable, and that
all such proxies are hereby revoked.
ARTICLE II
OPTION
Section 2.1 Grant of Option. Stockholder hereby grants to Parent an
---------------
irrevocable option (the "Option") to purchase the Subject Shares on the terms
and subject to the conditions set forth herein, at a price per Subject Share
equal to $7.00 in cash or any higher price that Parent or any controlled
affiliate of Parent offers to pay for the shares of Common Stock of the Company
made generally to the stockholders of the Company (such price being referred to
as the "Option Consideration").
Section 2.2 Exercise of Option. (a) Parent may exercise the Option,
------------------
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 date that is 120 days after the purchase of shares of common
stock of the Company pursuant to the Offer, (ii) the date that is 120 days after
the date on which the Merger Agreement is terminated pursuant to Sections
8.1(d)(i) or (e)(i) thereof, (iii) the date that
3
<PAGE>
is 30 days after the date on which the Merger Agreement is terminated pursuant
to Section 8.1(e)(v), and (iv) the date on which the Merger Agreement is
terminated if such termination is other than pursuant to Sections 8.1(d)(i),
(e)(i) or (e)(v) thereof; provided, however, that the Option shall terminate
-------- -------
with respect to any Subject Shares that are tendered pursuant to the Offer and
purchased by Purchaser thereunder. 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 the 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) Parent shall not demand appraisal rights under Section 262 of the
DGCL in respect of any Subject Shares.
(c) If Parent wishes to exercise the Option, it shall deliver to
Stockholder a written notice (an "Exercise Notice") to that effect which
specifies (i) the number of Subject Shares to be purchased from 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 and to the
extent necessary to deliver the number of Shares to be purchased pursuant
hereto, Stockholder shall exercise vested stock options promptly upon receipt of
an Exercise Notice. If the Option Closing cannot be effected on the Option
Closing Date specified in the Exercise Notice by reason of a preliminary or
final injunction or any other 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) Stockholder shall promptly take all such
actions as may be reasonably 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 fifth business day following the elimination of
all such impediments. The place of the Option Closing shall be at the offices of
Skadden, Arps, Slate, Meagher & Flom LLP, Four Embarcadero Center, San
Francisco, California 94111, and the time of the Option Closing shall be 10:00
a.m. (New York Time) on the Option Closing Date.
Section 2.3 Payment and Delivery of Certificates. At any Option
------------------------------------
Closing, Parent shall pay to Stockholder the Option Consideration payable in
respect of the Subject Shares to be purchased from Stockholder at the Option
Closing, and Stockholder shall deliver to Parent such Subject Shares, free and
clear of all Liens, with
4
<PAGE>
the certificate or certificates evidencing such Subject Shares being duly
endorsed for transfer by Stockholder and accompanied by all powers of attorney
and/or other instruments necessary to convey valid and unencumbered title
thereto to Parent, and shall, to the extent permissible, assign to Parent
(pursuant to a written instrument in form and substance satisfactory to Parent)
all rights that 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 the Option shall be borne by Stockholder.
Section 2.4 Adjustment upon Changes in Capitalization, Etc. In the
----------------------------------------------
event of any change in the capital stock of Company by reason of a stock
dividend, split-up, merger, recapitalization, combination, exchange of shares,
extraordinary distribution or similar transaction, the type and number or amount
of shares, securities or other property subject to the Option, and the Option
Consideration payable therefor, shall be adjusted appropriately so that Parent
shall receive upon exercise of Option the type and number or amount of shares,
securities or property that Parent would have retained and/or been entitled to
receive in respect of the Subject Shares if the Option had been exercised
immediately prior to such event relating to Company 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 Stockholder.
-----------------------------------------------------
Stockholder represents and warrants to Parent and Purchaser as follows:
(a) Ownership. Stockholder is the sole record and beneficial owner of
---------
622,000 Shares and has full and unrestricted power to dispose of and to vote
such Shares. Stockholder does not beneficially own any securities of Company on
the date hereof other than such Shares. Stockholder has sole voting power and
sole power to issue instructions with respect to the matters set forth in
Articles I and II hereof, sole power of disposition, sole power of conversion,
sole power to demand appraisal rights and sole power to agree to all of the
matters set forth in this Agreement, in each case
5
<PAGE>
with respect to all of the Subject Shares with no limitations, qualifications or
restrictions on such rights, subject to applicable securities laws and the terms
of this Agreement.
(b) Power and Authority; Execution and Delivery. Stockholder has all
-------------------------------------------
requisite legal capacity, 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 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 the other parties hereto, constitutes a valid and
binding obligation of Stockholder, enforceable against 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 and securities laws, to the
extent applicable, the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not (i) conflict with or result in
any breach of any organizational documents applicable to Stockholder or (ii)
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) materially 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.
(d) No Encumbrances. Except as applicable in connection with the
---------------
transactions contemplated by Articles I and II hereof, the Subject Shares and
the certificates representing the Subject Shares are now, and at all times
during the term hereof will be, held by Stockholder, or by a nominee or
custodian for the benefit of Stockholder, free and clear of all liens, claims,
security interests, proxies, voting trusts or agreements, understandings or
arrangements or any other encumbrances whatsoever, except for any such
encumbrances or proxies arising hereunder or any such encumbrances not caused
or created by Stockholder.
6
<PAGE>
(e) No Finder's Fees. No broker, investment banker, financial advisor
----------------
or other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions contemplated
hereby based upon arrangements made by or on behalf of Stockholder.
Section 3.2 Representations and Warranties of Parent and Purchaser.
------------------------------------------------------
Parent and Purchaser hereby represent and warrant to Stockholder that:
(a) Power and Authority; Execution and Delivery. Parent and Purchaser
-------------------------------------------
each has all requisite legal capacity, 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 Purchaser and the
consummation by Parent and Purchaser of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Parent and Purchaser. This Agreement has been duly executed and delivered by
Parent and Purchaser and, assuming that this Agreement constitutes the valid
and binding obligation of Stockholder, constitutes a valid and binding
obligation of Parent and Purchaser, enforceable against Parent and Purchaser 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 (i) conflict with or result in any breach of any
organizational documents applicable to Parent or Purchaser or (ii) 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 or Purchaser, 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 and Purchaser to perform their obligations under this Agreement or (ii)
prevent or delay the consummation of any of the transactions contemplated
hereby.
7
<PAGE>
(c) Purchase Not for Distribution. The Option and the Subject Shares
-----------------------------
to be acquired upon exercise of the Option are being and shall be acquired by
Parent without a view to public distribution thereof otherwise than in
compliance with the Securities Act and applicable state securities laws and
shall not be transferred or otherwise disposed of except in a transaction
registered or exempt from registration under the Securities Act and in
compliance with applicable state securities laws.
ARTICLE IV
CERTAIN COVENANTS
Section 4.1 Certain Covenants of Stockholder.
--------------------------------
(a) Restriction on Transfer of Subject Shares, Proxies and
-------------------------------------------------------
Noninterference. During the period (the "Restricted Period") from and including
- ---------------
the date hereof through and including the earlier of (i) the Effective Time and
(ii) the end of the Option Period, Stockholder shall not, directly or
indirectly: (A) except pursuant to the terms of this Agreement and except for
the tender of Subject Shares in the Offer, offer for sale, sell, transfer,
tender, pledge, encumber, assign or otherwise dispose of, 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, any or all of the Subject Shares; (B) except
pursuant to the terms of this Agreement, grant any proxies (other than proxies
relating to the election of management's slate of directors at an annual
meeting of Company's stockholders, and other routine matters which would not
require the filing of a preliminary proxy statement under Rule 14a-6(a) of the
Exchange Act), or powers of attorney, deposit any of the Subject Shares into a
voting trust or enter into a voting agreement with respect to any of the Subject
Shares; or (C) 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 or by the Merger Agreement.
8
<PAGE>
(b) Cooperation. Stockholder, in the capacity as a stockholder, shall
-----------
cooperate fully with Parent, Purchaser and Company in connection with their
respective efforts to fulfill the conditions to the Merger set forth in Article
VII of the Merger Agreement.
(c) 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 or resulting from or relating to any alleged breach of fiduciary duty by
any officer or director of the Company occurring prior to the Effective Time;
provided, however, that such release shall not apply to any currently effective
contract or agreement between Stockholder and Company (the "Existing Contracts")
or any claim or cause of action arising therefrom.
(d) No Solicitation. Stockholder shall not, in the capacity as a
---------------
stockholder, respond to any inquiries or the making of any proposal by any
person or entity (other than Parent or any affiliate of Parent) concerning any
business combination merger, tender offer, exchange offer, sale of assets, sale
of shares of capital stock or debt securities or similar transactions involving
Company or any Subsidiary, division or operating or principal business unit of
Company. If Stockholder, in the capacity as a Stockholder, receives any such
inquiry or proposal, then Stockholder shall promptly inform Parent of the
existence thereof. Stockholder, in the capacity as a Stockholder, will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing.
(e) Reliance by Parent. Stockholder understands and acknowledges that
------------------
Parent and Purchaser are entering into, the Merger Agreement in reliance upon
Stockholder's execution and delivery of this Agreement.
9
<PAGE>
ARTICLE V
MISCELLANEOUS
Section 5.1 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 5.2 Amendment; Termination. This Agreement may not be
----------------------
amended except by an instrument in writing signed on behalf of each of the
parties hereto. This Agreement and the proxies granted pursuant to Section 1.2
shall terminate at the end of the Option Period.
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 Entire Agreement; No 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 Section 4.1(c) are intended to inure to the benefit of, and to be
enforceable by, the Released Parties. This Agreement shall not affect or in any
way amend any of the Existing Contracts.
Section 5.5 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 5.6 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 or telecopy
(providing proof of delivery) to the address set forth below (or, in each case,
at such other address as shall be specified by like notice).
10
<PAGE>
If to Parent or Purchaser:
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:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Blaine V. Fogg, Esq.
Telecopy: (212) 735-2000
If to Stockholder:
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, CA 95134-1706
Attention: Vice President, Legal and Government
Affairs
Telecopy: (408) 526-5925
with a copy (which shall not constitute notice) to:
Brobeck, Phleger & Harrison LLP
2200 Geng Road
Two Embarcadero Place
Palo Alto, CA 94303
Attention: Therese A. Mrozek, Esq.
Telecopy: (650) 496-2885
Section 5.7 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 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 and Purchaser hereunder, may be assigned or delegated,
in whole or in part, by Parent and Purchaser
11
<PAGE>
without the consent of or any action by Stockholder upon notice by
Parent or Purchaser to Stockholder 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, assigned or passed, whether by operation of law or otherwise).
Section 5.8 Confidentiality. Stockholder recognizes that successful
---------------
consummation of the transactions contemplated by this Agreement may be dependent
upon confidentiality with respect to the matters referred to herein. In this
connection, pending public disclosure thereof, Stockholder hereby agrees not to
disclose or discuss such matters with anyone not a party to this Agreement
(other than its counsel and advisors, if any) without the prior written consent
of Parent, except for filings required pursuant to the Exchange Act and the
rules and regulations thereunder or disclosures its counsel advises are
necessary in order to fulfill its obligations imposed by law, in which event
Stockholder shall give notice of such disclosure to Parent as promptly as
practicable so as to enable Parent to seek a protective order from a court of
competent jurisdiction with respect thereto.
Section 5.9 Further Assurances. Stockholder shall execute and
------------------
deliver such other documents and instruments and take such further actions as
may be necessary or appropriate or as may be reasonably requested by Parent or
Purchaser in order to ensure that Parent and Purchaser receive the full benefit
of this Agreement.
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
12
<PAGE>
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 Descriptive Headings. The descriptive headings used
--------------------
herein are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
Section 5.13 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]
13
<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.
-------------------------------
Name: Don J. McDermett, Jr.
Title: Senior Vice President
STERLING SOFTWARE (SOUTHWEST), INC.
By: /s/ Don J. McDermett, Jr.
--------------------------------
Name: Don J. McDermett, Jr.
Title: Vice President
CISCO SYSTEMS, INC.
By: /s/ Dennis Powel
--------------------------------
Name: Dennis Powel
Title: Vice President and
Corporate Controller
14
<PAGE>
EXHIBIT 99.3
STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT, dated as of March 23, 1999 (this "Agreement"),
is made and entered into among Sterling Software, Inc., a Delaware corporation
("Parent"), Sterling Software (Southwest), Inc., a Delaware corporation and
indirect wholly owned subsidiary of Parent ("Purchaser"), and Adtel Limited
Partnership, Adventact Limited Partnership, Advent International Investors II
Limited Partnership, Adwest Limited Partnership, Global Private Equity II
Limited Partnership and Golden Gate Development and Investment Limited
Partnership (collectively referred to hereinafter as "Stockholder").
RECITALS:
A. Parent, Purchaser and Interlink Computer Sciences, Inc., 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 the
Purchaser will merge with and into Company (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) 447,232 shares of common stock ("Common Stock"), par value
$.001 per share ("Shares"), of Company (such Shares, together with any other
shares of capital stock of Company the beneficial ownership of which is
acquired, or can be acquired upon exercise of options or warrants at a price
equal to or less than the Option Consideration (as defined in Section 2.1), by
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 120
days after the date on which the Merger Agreement is terminated pursuant to
Section 8.1 thereof, are collectively referred to herein as "Subject Shares").
C. Pursuant to the Merger Agreement, Purchaser shall commence a cash
tender offer (the "Offer") to purchase at a price of $7.00 per Share all
outstanding Shares, including all of the Subject Shares. Stockholder has advised
Parent and Purchaser that it intends to tender the Subject Shares in the Offer.
<PAGE>
D. As a condition and inducement to Parent's and Purchaser's willingness to
enter into the Merger Agreement, Parent and Purchaser have requested that
Stockholder agree, and Stockholder has agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements 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, intending to
be legally bound hereby, agree as follows:
ARTICLE I
VOTING AGREEMENT
Section 1.1 Agreement to Vote Shares. During the Option Period (as
------------------------
defined in Section 2.2), 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 written consent of
stockholders of Company, Stockholder shall vote or cause to be voted (including
by written consent, if applicable) all of the Subject Shares, now owned or
hereafter acquired, 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. During
the Option Period, at any meeting of the stockholders of Company called to
consider and vote upon any Other Proposal (as hereinafter defined) (and at any
and all postponements and adjournments thereof), and in connection with any
action to be taken in respect of any Other Proposal by written consent of
stockholders of Company, Stockholder shall vote or cause to be voted (including
by written consent, if applicable) all of the Subject Shares against such Other
Proposal. For purposes of this Agreement, the term "Other Proposal" means any
(a) Acquisition Proposal (as defined in the Merger Agreement) or (b) other
action which is intended or could reasonably be expected to materially impede,
interfere with, delay or materially and adversely affect the consummation of the
Merger or any of the other transactions contemplated by the Merger Agreement or
this Agreement; provided, however, that neither the Merger nor any other
transaction contemplated by the Merger Agreement to be consummated by Company,
Parent or Purchaser in connection with the Merger shall constitute an Other
Proposal. Stockholder shall not enter into any
2
<PAGE>
agreement or understanding with any person or entity the effect of which would
be violative of the provisions and agreements contained in this Section 1.1.
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 DURING THE OPTION PERIOD WITH RESPECT TO THE 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 the Subject Shares are not irrevocable, and that
all such proxies are hereby revoked.
ARTICLE II
OPTION
Section 2.1 Grant of Option. Stockholder hereby grants to Parent
----------------
an irrevocable option (the "Option") to purchase the Subject Shares on the terms
and subject to the conditions set forth herein, at a price per Subject Share
equal to $7.00 in cash or any higher price that Parent or any controlled
affiliate of Parent offers to pay for the shares of Common Stock of the Company
made generally to the stockholders of the Company (such price being referred to
as the "Option Consideration").
Section 2.2 Exercise of Option. (a) Parent may exercise the
------------------
Option, 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 date that is 120 days after the purchase of shares of
common stock of the Company
3
<PAGE>
pursuant to the Offer, or (ii) the date that is 120 days after the date on which
the Merger Agreement is terminated pursuant to Section 8.1 thereof, provided,
--------
however, that the Option shall terminate (x) with respect to any Subject Shares
- -------
that are tendered pursuant to the Offer and purchased by Purchaser thereunder,
(y) if the Merger Agreement is terminated pursuant to Section 8.1(d)(iv) thereof
and at the time of such termination Company is not in breach of the Merger
Agreement, and (z) if the Merger Agreement is terminated solely because the
condition contained in Section 7.1(d) of the Merger Agreement is incapable of
being fulfilled. 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 the 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) Parent shall not demand appraisal rights under Section 262 of the
DGCL in respect of any Subject Shares.
(c) If Parent wishes to exercise the Option, it shall deliver to
Stockholder a written notice (an "Exercise Notice") to that effect which
specifies (i) the number of Subject Shares to be purchased from 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 and to the
extent necessary to deliver the number of Shares to be purchased pursuant
hereto, Stockholder shall exercise vested stock options promptly upon receipt of
an Exercise Notice. If the Option Closing cannot be effected on the Option
Closing Date specified in the Exercise Notice by reason of a preliminary or
final injunction or any other 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) Stockholder shall promptly take all such
actions as may be reasonably 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 fifth business day following the elimination of all
such impediments. The place of the Option Closing shall be at the offices of
Skadden, Arps, Slate, Meagher & Flom LLP, Four Embarcadero Center, San
Francisco, California 94111, and the time of the Option Closing shall be 10:00
a.m. (New York Time) on the Option Closing Date.
Section 2.3 Payment and Delivery of Certificates. At any Option
------------------------------------
Closing, Parent shall pay to Stockholder the Option Consideration payable in
respect of
4
<PAGE>
the Subject Shares to be purchased from Stockholder at the Option Closing, and
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 Stockholder and accompanied by all powers of
attorney and/or other instruments necessary to convey valid and unencumbered
title thereto to Parent, and shall, to the extent permissible, assign to Parent
(pursuant to a written instrument in form and substance satisfactory to Parent)
all rights that 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 the Option shall be borne by Stockholder.
Section 2.4 Adjustment upon Changes in Capitalization, Etc. In the
----------------------------------------------
event of any change in the capital stock of Company by reason of a stock
dividend, split-up, merger, recapitalization, combination, exchange of shares,
extraordinary distribution or similar transaction, the type and number or amount
of shares, securities or other property subject to the Option, and the Option
Consideration payable therefor, shall be adjusted appropriately so that Parent
shall receive upon exercise of Option the type and number or amount of shares,
securities or property that Parent would have retained and/or been entitled to
receive in respect of the Subject Shares if the Option had been exercised
immediately prior to such event relating to Company 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 Stockholder.
-----------------------------------------------------
Stockholder represents and warrants to Parent and Purchaser as follows:
(a) Ownership. Stockholder is the sole record and beneficial owner of
---------
447,232 Shares and has full and unrestricted power to dispose of and to vote
such Shares. Stockholder does not beneficially own any securities of Company on
the date hereof other than such Shares. Stockholder has sole voting power and
sole power to issue instructions with respect to the matters set forth in
Articles I and II hereof, sole power of disposition, sole power of conversion,
sole power to demand appraisal rights and sole power to agree to all of the
matters set forth in this Agreement, in each case
5
<PAGE>
with respect to all of the Subject Shares with no limitations, qualifications or
restriction on such rights, subject to applicable securities laws and the terms
of this Agreement.
(b) Power and Authority; Execution and Delivery. Stockholder has all
-------------------------------------------
requisite legal capacity, 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 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 the other parties hereto, constitutes a valid and
binding obligation of Stockholder, enforceable against 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 and securities laws, to the extent
applicable, the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not (i) conflict with or result in
any breach of any organizational documents applicable to Stockholder or (ii)
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) materially 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.
(d) No Encumbrances. Except as applicable in connection with the
---------------
transactions contemplated by Articles I and II hereof, the Subject Shares and
the certificates representing the Subject Shares are now, and at all times
during the term hereof will be, held by Stockholder, or by a nominee or
custodian for the benefit of Stockholder, free and clear of all liens, claims,
security interests, proxies, voting trusts or agreements, understandings or
arrangements or any other encumbrances whatsoever, except for any such
encumbrances or proxies arising hereunder or any such encumbrances not caused
or created by Stockholder.
6
<PAGE>
(e) No Finder's Fees. No broker, investment banker, financial advisor or
----------------
other person is entitled to any broker's, finder's, financial adviser's or other
similar fee or commission in connection with the transactions contemplated
hereby based upon arrangements made by or on behalf of Stockholder.
Section 3.2 Representations and Warranties of Parent and Purchaser.
------------------------------------------------------
Parent and Purchaser hereby represent and warrant to Stockholder that:
(a) Power and Authority; Execution and Delivery. Parent and Purchaser
-------------------------------------------
each has all requisite legal capacity, 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 Purchaser and the
consummation by Parent and Purchaser of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Parent and Purchaser. This Agreement has been duly executed and delivered by
Parent and Purchaser and, assuming that this Agreement constitutes the valid
and binding obligation of Stockholder, constitutes a valid and binding
obligation of Parent and Purchaser, enforceable against Parent and Purchaser 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 (i) conflict with or result in any breach of any
organizational documents applicable to Parent or Purchaser or (ii) 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 or Purchaser, 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 and Purchaser to perform their obligations under this Agreement or (ii)
prevent or delay the consummation of any of the transactions contemplated
hereby.
(c) Purchase Not for Distribution. The Option and the Subject Shares to
-----------------------------
be acquired upon exercise of the Option are being and shall be acquired by
7
<PAGE>
Parent without a view to public distribution thereof otherwise than in
compliance with the Securities Act and applicable state securities laws and
shall not be transferred or otherwise disposed of except in a transaction
registered or exempt from registration under the Securities Act and in
compliance with applicable state securities laws.
ARTICLE IV
CERTAIN COVENANTS
Section 4.1 Certain Covenants of Stockholder.
--------------------------------
(a) (i) Restriction on Transfer of Subject Shares, Proxies and
------------------------------------------------------
Noninterference. During the period (the "Restricted Period") from and including
- ---------------
the date hereof through and including the earlier of (x) the Effective Time and
(y) the end of the Option Period, Stockholder shall not, directly or indirectly:
(A) except pursuant to the terms of this Agreement (including Sections
4.1(a)(ii), (iii) and (iv)) and except for the tender of Subject Shares in the
Offer, offer for sale, sell, transfer, tender, pledge, encumber, assign or
otherwise dispose of, 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, any or all of
the Subject Shares; (B) except pursuant to the terms of this Agreement, grant
any proxies (other than proxies relating to the election of management's slate
of directors at an annual meeting of Company's stockholders, and other routine
matters which would not require the filing of a preliminary proxy statement
under Rule 14a-6(a) of the Exchange Act), or powers of attorney, deposit any of
the Subject Shares into a voting trust or enter into a voting agreement with
respect to any of the Subject Shares; or (C) 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 or by the Merger Agreement.
(ii) The restrictions with respect to the transfer of the Subject
Shares contained in Section 4.1(a)(i)(A) of this Agreement (the "Transfer
Restrictions") shall not limit the ability of Stockholder to transfer some, or
all, of the Subject Shares to an affiliate of Stockholder, as long as, before
any such transfer, such affiliate enters into a written agreement (an
"Acknowledgment Agreement") with Parent and Purchaser whereby such affiliate
agrees to be bound by all of the terms and provisions of this Agreement with
respect to the Subject Shares received by such affiliate.
8
<PAGE>
(iii) At any time after the Merger Agreement is terminated in
accordance with its terms, except for the termination of the Merger Agreement
pursuant to Section 8.1(d)(i) or Section 8.1(e)(i) thereof, the Transfer
Restrictions shall not limit the ability of Stockholder to sell some, or all, of
the Subject Shares in open market transactions. The sale of Subject Shares in
open market transactions permitted by this Section 4.1(a)(iii) shall not,
however, limit or relieve Stockholder of its obligations hereunder to deliver
Shares to Parent in the event that Parent validly exercises the Option.
(iv) At any time after the Merger Agreement is terminated in
accordance with its terms, except for the termination of the Merger Agreement
pursuant to Section 8.1(d)(i) or Section 8.1(e)(i) thereof, the Transfer
Restrictions shall not limit the ability of Stockholder to sell or transfer some
or all of the Subject Shares in a privately negotiated transaction to one or
more third parties, as long as, before any such sale or transfer, each such
third party enters into an Acknowledgment Agreement with Parent.
(b) Cooperation. Stockholder, in the capacity as a stockholder, shall
-----------
cooperate fully with Parent, Purchaser and Company in connection with their
respective efforts to fulfill the conditions to the Merger set forth in Article
VII of the Merger Agreement.
(c) 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 or resulting from or relating to any act, omission, event or occurrence
prior to the Effective Time.
(d) No Solicitation. Stockholder shall not, in the capacity as a
---------------
stockholder, respond to any inquiries or the making of any proposal by any
person or entity (other than Parent or any affiliate of Parent) concerning any
business combination merger, tender offer, exchange offer, sale of assets, sale
of shares of capital stock or debt securities or similar transactions involving
Company or any Subsidiary, division or operating or principal business unit of
Company. If Stockholder, in the capacity as a Stockholder, receives any such
inquiry or proposal, then Stockholder shall promptly inform Parent of the
existence thereof. Stockholder, in the capacity as a Stockholder, will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing.
9
<PAGE>
(e) Reliance by Parent. Stockholder understands and acknowledges that
------------------
Parent and Purchaser are entering into, the Merger Agreement in reliance upon
Stockholder's execution and delivery of this Agreement.
ARTICLE V
MISCELLANEOUS
Section 5.1 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 5.2 Amendment; Termination. This Agreement may not be
----------------------
amended except by an instrument in writing signed on behalf of each of the
parties hereto. This Agreement and the proxies granted pursuant to Section 1.2
shall terminate immediately following (i) termination of the Merger Agreement
pursuant to Section 8.1(a) thereof, provided at the time of such termination the
parties intend to abandon the transactions contemplated by the Merger Agreement
or (ii) termination of the Merger Agreement pursuant to Section 8.1(d)(iv)
thereof, provided at the time of such termination Company is not in breach of
the Merger Agreement or (iii) any termination of the Merger Agreement solely
because the condition contained in Section 7.1(d) of the Merger Agreement is
incapable of being fulfilled.
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 Entire Agreement; No 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 Section 4.1(c) are intended to inure to the benefit of, and to be
enforceable by, the Released Parties.
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Section 5.5 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 5.6 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 or telecopy
(providing proof of delivery) to the address set forth below (or, in each case,
at such other address as shall be specified by like notice).
If to Parent or Purchaser:
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:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Blaine V. Fogg, Esq.
Telecopy: (212) 735-2000
If to Stockholder:
c/o Advent International
101 Federal Street
Boston, MA 02110
Attention: Andrew I. Fillat
with a copy (which shall not constitute notice) to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Attention: Thomas C. DeFilipps, Esq.
Telecopy: (650) 493-6811
11
<PAGE>
Section 5.7 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 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 and Purchaser hereunder, may be assigned or delegated, in whole or in
part, by Parent and Purchaser without the consent of or any action by
Stockholder upon notice by Parent or Purchaser to Stockholder 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, assigned or passed, whether by
operation of law or otherwise).
Section 5.8 Confidentiality. Stockholder recognizes that successful
---------------
consummation of the transactions contemplated by this Agreement may be dependent
upon confidentiality with respect to the matters referred to herein. In this
connection, pending public disclosure thereof, Stockholder hereby agrees not to
disclose or discuss such matters with anyone not a party to this Agreement
(other than its counsel and advisors, if any) without the prior written consent
of Parent, except for filings required pursuant to the Exchange Act and the
rules and regulations thereunder or disclosures its counsel advises are
necessary in order to fulfill its obligations imposed by law, in which event
Stockholder shall give notice of such disclosure to Parent as promptly as
practicable so as to enable Parent to seek a protective order from a court of
competent jurisdiction with respect thereto.
Section 5.9 Further Assurances. Stockholder shall execute and deliver
------------------
such other documents and instruments and take such further actions as may be
necessary or appropriate or as may be reasonably requested by Parent or
Purchaser in order to ensure that Parent and Purchaser receive the full benefit
of this Agreement.
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
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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 Descriptive Headings. The descriptive headings used herein
--------------------
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
Section 5.13 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]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed as of the day and year first written above.
ADTEL LIMITED PARTNERSHIP
ADVENTACT LIMITED PARTNERSHIP
ADWEST LIMITED PARTNERSHIP
GLOBAL PRIVATE EQUITY II LIMITED
PARTNERSHIP
GOLDEN GATE DEVELOPMENT AND
INVESTMENT LIMITED PARTNERSHIP
By: Advent International Limited Partnership,
General Partner
By: Advent International Corporation, General
Partner
By: Andrew I. Fillat, Senior Vice President*
ADVENT INTERNATIONAL INVESTORS II LIMITED
PARTNERSHIP
By: Advent International Corporation, General
Partner
By: Andrew I. Fillat, Senior Vice President*
*For all of the above:
/s/ Andrew I. Fillat
----------------------------------
Andrew I. Fillat
<PAGE>
STERLING SOFTWARE, INC.
By: /s/ Don J. McDermett, Jr.
-----------------------------
Name: Don J. McDermett, Jr.
Title: Senior Vice President
STERLING SOFTWARE (SOUTHWEST), INC.
By: /s/ Don J. McDermett, Jr.
-----------------------------
Name: Don J. McDermett, Jr.
Title: Vice President
<PAGE>
EXHIBIT 99.4
FORM OF
STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT, dated as of March 23, 1999 (this
"Agreement"), is made and entered into among Sterling Software, Inc., a Delaware
corporation ("Parent"), Sterling Software (Southwest), Inc., a Delaware
corporation and indirect wholly owned subsidiary of Parent ("Purchaser"), and [
] ("Stockholder").
RECITALS:
A. Parent, Purchaser and Interlink Computer Sciences, Inc., 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
the Purchaser will merge with and into Company (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) [ ] shares of common stock ("Common Stock"), par value
$.001 per share ("Shares"), of Company (such Shares, together with any other
shares of capital stock of Company the beneficial ownership of which is
acquired, or can be acquired upon exercise of vested options at a price equal to
or less than the Option Consideration (as defined in Section 2.1), by
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 120
days after the date on which the Merger Agreement is terminated pursuant to
Section 8.1 thereof, are collectively referred to herein as "Subject Shares").
C. Pursuant to the Merger Agreement, Purchaser shall commence
a cash tender offer (the "Offer") to purchase at a price of $7.00 per Share all
outstanding Shares, including all of the Subject Shares. Stockholder has advised
Parent and Purchaser that it intends to tender the Subject Shares in the Offer.
<PAGE>
D. As a condition and inducement to Parent's and Purchaser's
willingness to enter into the Merger Agreement, Parent and Purchaser have
requested that Stockholder agree, and Stockholder has agreed, to enter into this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements 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, intending to be legally bound hereby, agree as follows:
ARTICLE I
VOTING AGREEMENT
Section 1.1 Agreement to Vote Shares. During the period (the
------------------------
"Voting Period") from and including the date hereof through and including the
earlier of (i) the date that is 120 days after the purchase of shares of common
stock of the Company pursuant to the Offer, (ii) the date that is 120 days after
the date on which the Merger Agreement is terminated pursuant to Section 8.1
thereof, or (iii) the termination of this Agreement pursuant to Section 5.2
hereof, 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 written consent of
stockholders of Company, Stockholder shall vote or cause to be voted (including
by written consent, if applicable) all of the Subject Shares, now owned or
hereafter acquired, 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. During
the Voting Period, at any meeting of the stockholders of Company called to
consider and vote upon any Other Proposal (as hereinafter defined) (and at any
and all postponements and adjournments thereof), and in connection with any
action to be taken in respect of any Other Proposal by written consent of
stockholders of Company, Stockholder shall vote or cause to be voted (including
by written consent, if applicable) all of the Subject Shares against such Other
Proposal. For purposes of this Agreement, the term "Other Proposal" means any
(a) Acquisition Proposal (as defined in the Merger Agreement) or (b) other
action which is intended or could reasonably be expected to materially impede,
interfere with, delay or materially and adversely affect the consummation of the
Merger or any of the other transactions
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contemplated by the Merger Agreement or this Agreement; provided, however, that
neither the Merger nor any other transaction contemplated by the Merger
Agreement to be consummated by Company, Parent or Purchaser in connection with
the Merger shall constitute an Other Proposal. Stockholder shall not enter into
any agreement or understanding with any person or entity the effect of which
would be violative of the provisions and agreements contained in this Section
1.1.
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 DURING THE VOTING PERIOD WITH RESPECT TO THE
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 the Subject Shares are not irrevocable,
and that all such proxies are hereby revoked.
ARTICLE II
OPTION
Section 2.1 Grant of Option. Stockholder hereby grants to
---------------
Parent an irrevocable option (the "Option") to purchase the Subject Shares on
the terms and subject to the conditions set forth herein, at a price per Subject
Share equal to $7.00 in cash or any higher price that Parent or any controlled
affiliate of Parent offers to pay for the shares of Common Stock of the Company
made generally to the stockholders of the Company (such price being referred to
as the "Option Consideration").
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Section 2.2 Exercise of Option. (a) Parent may exercise the
------------------
Option, 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 date that is 120 days after the purchase of shares of
common stock of the Company pursuant to the Offer, or (ii) the date that the
Merger Agreement is terminated pursuant to Section 8.1 thereof, provided,
--------
however, that the Option shall terminate with respect to any Subject Shares that
- -------
are tendered pursuant to the Offer and purchased by Purchaser thereunder.
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 the 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) Parent shall not demand appraisal rights under Section 262
of the DGCL in respect of any Subject Shares.
(c) If Parent wishes to exercise the Option, it shall deliver
to Stockholder a written notice (an "Exercise Notice") to that effect which
specifies (i) the number of Subject Shares to be purchased from 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 and to the
extent necessary to deliver the number of Shares to be purchased pursuant
hereto, Stockholder shall exercise vested stock options promptly upon receipt of
an Exercise Notice. If the Option Closing cannot be effected on the Option
Closing Date specified in the Exercise Notice by reason of a preliminary or
final injunction or any other 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) Stockholder shall promptly take all such
actions as may be reasonably 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 fifth business day following the elimination of all
such impediments. The place of the Option Closing shall be at the offices of
Skadden, Arps, Slate, Meagher & Flom LLP, Four Embarcadero Center, San
Francisco, California 94111, and the time of the Option Closing shall be 10:00
a.m. (New York Time) on the Option Closing Date.
4
<PAGE>
Section 2.3 Payment and Delivery of Certificates. At any
------------------------------------
Option Closing, Parent shall pay to Stockholder the Option Consideration payable
in respect of the Subject Shares to be purchased from Stockholder at the Option
Closing, and 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 Stockholder and accompanied by all
powers of attorney and/or other instruments necessary to convey valid and
unencumbered title thereto to Parent, and shall, to the extent permissible,
assign to Parent (pursuant to a written instrument in form and substance
satisfactory to Parent) all rights that 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 the Option shall be borne by
Stockholder.
Section 2.4 Adjustment upon Changes in Capitalization, Etc. In
----------------------------------------------
the event of any change in the capital stock of Company by reason of a stock
dividend, split-up, merger, recapitalization, combination, exchange of shares,
extraordinary distribution or similar transaction, the type and number or amount
of shares, securities or other property subject to the Option, and the Option
Consideration payable therefor, shall be adjusted appropriately so that Parent
shall receive upon exercise of Option the type and number or amount of shares,
securities or property that Parent would have retained and/or been entitled to
receive in respect of the Subject Shares if the Option had been exercised
immediately prior to such event relating to Company 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 Stock
-----------------------------------------------
holder. Stockholder represents and warrants to Parent and Purchaser as follows:
- ------
(a) Ownership. Stockholder is the sole record and beneficial
---------
owner of [ ] Shares and has full and unrestricted power to dispose of and
to vote such Shares. Stockholder is the beneficial owner of options to
purchase [ ] Shares of which [ ] options to purchase Shares are
fully vested. Stockholder
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does not beneficially own any securities of Company on the date hereof other
than such Shares. Stockholder has sole voting power and sole power to issue
instructions with respect to the matters set forth in Articles I and II hereof,
sole power of disposition, sole power of conversion, sole power to demand
appraisal rights and sole power to agree to all of the matters set forth in this
Agreement, in each case with respect to all of the Subject Shares with no
limitations, qualifications or restrictions on such rights, subject to
applicable securities laws and the terms of this Agreement.
(b) Power and Authority; Execution and Delivery. Stockholder
-------------------------------------------
has all requisite legal capacity, 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 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 the other parties hereto,
constitutes a valid and binding obligation of Stockholder, enforceable against
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 and securities laws, to the
extent applicable, the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not (i) conflict with or result in
any breach of any organizational documents applicable to Stockholder or (ii)
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) materially 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.
(d) No Encumbrances. Except as applicable in connection with
---------------
the transactions contemplated by Articles I and II hereof, the Subject Shares
and the
6
<PAGE>
certificates representing the Subject Shares are now, and at all times during
the term hereof will be, held by Stockholder, or by a nominee or custodian for
the benefit of Stockholder, free and clear of all liens, claims, security
interests, proxies, voting trusts or agreements, understandings or arrangements
or any other encumbrances whatsoever, except for any such encumbrances or
proxies arising hereunder or any such encumbrances not caused or created by
Stockholder.
(e) No Finder's Fees. No broker, investment banker, financial
----------------
advisor or other person is entitled to any broker's, finder's, financial
adviser's or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of Stockholder.
Section 3.2 Representations and Warranties of Parent and
--------------------------------------------
Purchaser. Parent and Purchaser hereby represent and warrant to Stockholder
- ---------
that:
(a) Power and Authority; Execution and Delivery. Parent and
-------------------------------------------
Purchaser each has all requisite legal capacity, 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 Purchaser and
the consummation by Parent and Purchaser of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Parent and Purchaser. This Agreement has been duly executed and delivered by
Parent and Purchaser and, assuming that this Agreement constitutes the valid and
binding obligation of Stockholder, constitutes a valid and binding obligation
of Parent and Purchaser, enforceable against Parent and Purchaser 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 (i) conflict with or result in any breach of any
organizational documents applicable to Parent or Purchaser or (ii) 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
7
<PAGE>
on Parent or Purchaser, 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 and Purchaser to perform their
obligations under this Agreement or (ii) prevent or delay the consummation of
any of the transactions contemplated hereby.
(c) Purchase Not for Distribution. The Option and the Subject
-----------------------------
Shares to be acquired upon exercise of the Option are being and shall be
acquired by Parent without a view to public distribution thereof otherwise than
in compliance with the Securities Act and applicable state securities laws and
shall not be transferred or otherwise disposed of except in a transaction
registered or exempt from registration under the Securities Act and in
compliance with applicable state securities laws.
ARTICLE IV
CERTAIN COVENANTS
Section 4.1 Certain Covenants of Stockholder.
--------------------------------
(a) Restriction on Transfer of Subject Shares, Proxies and
------------------------------------------------------
Noninterference. During the period (the "Restricted Period") from and including
- ---------------
the date hereof through and including the earlier of (i) the Effective Time and
(ii) the end of the Option Period (or, in the case of clause (B), the end of the
Voting Period), Stockholder shall not, directly or indirectly: (A) except
pursuant to the terms of this Agreement and except for the tender of Subject
Shares in the Offer, offer for sale, sell, transfer, tender, pledge, encumber,
assign or otherwise dispose of, 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,
any or all of the Subject Shares; (B) except pursuant to the terms of this
Agreement, grant any proxies (other than proxies relating to the election of
management's slate of directors at an annual meeting of Company's stockholders,
and other routine matters which would not require the filing of a preliminary
proxy statement under Rule 14a-6(a) of the Exchange Act), or powers of attorney,
deposit any of the Subject Shares into a voting trust or enter into a voting
agreement with respect to any of the Subject Shares; or (C) 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
8
<PAGE>
Agreement or preventing or delaying the consummation of any of the transactions
contemplated hereby or by the Merger Agreement.
(b) Cooperation. Stockholder, in the capacity as a
-----------
stockholder, shall cooperate fully with Parent, Purchaser and Company in
connection with their respective efforts to fulfill the conditions to the Merger
set forth in Article VII of the Merger Agreement.
(c) 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 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 to any entitlement
to indemnification, or to compensation or benefits earned or accrued by or for
the benefit of Stockholder prior to the Effective Time in respect of services
performed by Stockholder to Company as a director, officer, consultant or
employee of Company.
(d) No Solicitation. Stockholder shall not, in the capacity as
---------------
a stockholder, respond to any inquiries or the making of any proposal by any
person or entity (other than Parent or any affiliate of Parent) concerning any
business combination merger, tender offer, exchange offer, sale of assets, sale
of shares of capital stock or debt securities or similar transactions involving
Company or any Subsidiary, division or operating or principal business unit of
Company. If Stockholder, in the capacity as a Stockholder, receives any such
inquiry or proposal, then Stockholder shall promptly inform Parent of the
existence thereof. Stockholder, in the capacity as a Stockholder, will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing.
(e) Reliance by Parent. Stockholder understands and
------------------
acknowledges that Parent and Purchaser are entering into, the Merger Agreement
in reliance upon Stockholder's execution and delivery of this Agreement.
9
<PAGE>
ARTICLE V
MISCELLANEOUS
Section 5.1 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 5.2 Amendment; Termination. This Agreement may not be
----------------------
amended except by an instrument in writing signed on behalf of each of the
parties hereto. This Agreement and the proxies granted pursuant to Section 1.2
shall terminate immediately following (i) termination of the Merger Agreement
pursuant to Section 8.1(a) thereof, provided at the time of such termination the
parties intend to abandon the transactions contemplated by the Merger Agreement
or (ii) termination of the Merger Agreement pursuant to Section 8.1(d)(iv)
thereof, provided at the time of such termination Company is not in breach of
the Merger Agreement or (iii) any termination of the Merger Agreement solely
because the condition contained in Section 7.1(d) of the Merger Agreement is
incapable of being fulfilled.
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 Entire Agreement; No 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 Section 4.1(c) are intended to inure to the
benefit of, and to be enforceable by, the Released Parties.
Section 5.5 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.
10
<PAGE>
Section 5.6 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 or telecopy
(providing proof of delivery) to the address set forth below (or, in each case,
at such other address as shall be specified by like notice).
If to Parent or Purchaser:
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:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Blaine V. Fogg, Esq.
Telecopy: (212) 735-2000
If to Stockholder:
with a copy (which shall not constitute notice) to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Attention: Thomas C. DeFilipps, Esq.
Telecopy: (650) 493-6811
Section 5.7 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 Stockholder without the prior written consent
of Parent, and
11
<PAGE>
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 and Purchaser hereunder, may be assigned or delegated, in whole or in
part, by Parent and Purchaser without the consent of or any action by
Stockholder upon notice by Parent or Purchaser to Stockholder 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, assigned or passed, whether by
operation of law or otherwise).
Section 5.8 Confidentiality. Stockholder recognizes that
---------------
successful consummation of the transactions contemplated by this Agreement may
be dependent upon confidentiality with respect to the matters referred to
herein. In this connection, pending public disclosure thereof, Stockholder
hereby agrees not to disclose or discuss such matters with anyone not a party to
this Agreement (other than its counsel and advisors, if any) without the prior
written consent of Parent, except for filings required pursuant to the Exchange
Act and the rules and regulations thereunder or disclosures its counsel advises
are necessary in order to fulfill its obligations imposed by law, in which event
Stockholder shall give notice of such disclosure to Parent as promptly as
practicable so as to enable Parent to seek a protective order from a court of
competent jurisdiction with respect thereto.
Section 5.9 Further Assurances. Stockholder shall execute and
------------------
deliver such other documents and instruments and take such further actions as
may be necessary or appropriate or as may be reasonably requested by Parent or
Purchaser in order to ensure that Parent and Purchaser receive the full benefit
of this Agreement.
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
appro-
12
<PAGE>
priate 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 Descriptive Headings. The descriptive headings
--------------------
used herein are inserted for convenience of reference only and are not intended
to be part of or to affect the meaning or interpretation of this Agreement.
Section 5.13 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]
13
<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:
--------------------------
Name: Don J. McDermett, Jr.
Title: Senior Vice President
STERLING SOFTWARE (SOUTHWEST), INC.
By: ___________________________
Name: Don J. McDermett, Jr.
Title: Vice President
______________________________
[ ]
14
<PAGE>
ANNEX
Share Ownership for Stockholders who
executed Stockholder Agreements
<TABLE>
<CAPTION>
SHARES ISSUABLE OPTIONS VESTED AS
OUTSTANDING PURSUANT TO OF MARCH 23,
STOCKHOLDER SHARES OUTSTANDING OPTIONS 1999
- ------------------------------------ --------------- ------------------------- ---------------------
<S> <C> <C> <C>
OFFICERS & DIRECTORS
Ralph B. Godfrey 0 18,750 4,688
Andrew I. Fillat 0 26,250 10,001
Ronald W. Braniff 21,000 74,250 58,001
Augustus J. Berkeley 17,522 412,300 129,455
William C. Jones 13,746 60,000 13,938
Christopher A. Markle 13,934 47,500 21,043
Victor C. Langford 15,000 75,000 18,752
James A. Barth 19,352 90,000 25,714
Michael J. Satterwhite 1,282 50,000 22,917
OTHER STOCKHOLDERS
CISCO Systems, Inc. 622,000 0 0
(Advent International Entities)
Adtel, L.P. 38,629 0 0
Adventact, L.P. 21,461 0 0
Advent International Investors II
L.P. 861 0 0
Adwest L.P. 17,169 0 0
Global Private Equity II L.P. 322,029 0 0
Golden Gate Development and
Investment L.P. 47,083 0 0
--------------- ----------------------- ---------------------
1,171,068 854,050 304,509
</TABLE>
15
<PAGE>
EXHIBIT 99.5
[LOGO OF STERLING SOFTWARE APPEARS HERE]
NEWS RELEASE
- --------------------------------------------------------------------------------
STERLING SOFTWARE TO ACQUIRE
INTERLINK COMPUTER SCIENCES
DALLAS, TX and FREMONT, CA, March 24, 1999 - Sterling Software, Inc. (SSW-
NYSE), one of the 20 largest independent software companies in the world, today
announced that it had entered into a definitive agreement to acquire Interlink
Computer Sciences, Inc. (INLK-NASDAQ), a leading supplier of high-performance
solutions for enterprise systems networking, headquartered in Fremont,
California. The transaction is valued at approximately $64 million (net of
exercise proceeds from outstanding options and warrants) and will be structured
as a $7.00 per share first-step cash tender offer, followed by a second-step
merger at the same price per share. The companies anticipate closing the
acquisition in late April or early May 1999 and at that time combining
Interlink's business with Sterling Software's worldwide network management
business.
Interlink's software solutions allow enterprise servers to inter-operate
with TCP/IP networks and enable customers to provide secure, managed access to
their enterprise applications and data over public and private connections.
These offerings are in direct support of growing customer requirements to allow
internal and external access to their enterprise servers, where most enterprise-
scale applications continue to reside, for e-commerce and other network-centric
business strategies.
"This acquisition brings us tremendous opportunities to strengthen our
strategic position in the marketplace and capitalize on the explosive growth of
the Internet as a cost-effective, open network for enterprise computing," said
Sterling L. Williams, president and chief executive officer of Sterling
Software. "With the addition of Interlink's network management technology, we
will be able to extend our lead in OS/390 TCP/IP management and enhance our
ability to manage specific applications running on TCP/IP networks. This
acquisition also gives us a significant customer base and an excellent
opportunity to leverage our SOLVE family of network management products."
<PAGE>
Mr. Williams noted that, when completed, this will be Sterling Software's
33rd acquisition and the second systems management acquisition announced
in less than three weeks. Earlier this month, the company announced it was
acquiring the storage management software business of Spectra Logic Corporation.
He added the acquisition of Interlink would be accretive to earnings per share.
A.J. Berkeley, president and chief executive officer of Interlink, said:
"Interlink's software solutions are a perfect fit with Sterling Software's
network management products. Sterling Software will be able to broaden its
TCP/IP network management solutions, and Interlink's products will now reach the
very large corporations that need the performance and reliability that our
products provide. With our common heritage and focus, I think this union will
produce one of the best network management teams in the world. I am excited for
our customers and employees."
Under the merger agreement, Sterling Software will commence a first-step
tender offer to purchase all outstanding shares of Interlink for $7.00 per share
in cash. Following completion of the tender offer, Interlink would be merged
with a wholly-owned subsidiary of Sterling Software and the remaining Interlink
shares would be converted into the right to receive $7.00 per share. The tender
offer and merger were unanimously approved by Interlink's Board of Directors.
The tender offer is scheduled to commence on or prior to March 30, 1999.
In connection with the merger agreement, Sterling Software has entered into
Stockholder Agreements with certain major stockholders of Interlink owning an
aggregate of approximately 19.7% of Interlink's shares, calculated on a fully-
diluted basis, under which such stockholders have, among other things, granted
Sterling Software an option to purchase their shares at a price of $7.00 per
share.
The tender offer will be conditioned, among other things, on the valid
tender of Interlink shares which, together with shares subject to the
Stockholder Agreements or owned by Sterling Software, represent a majority of
Interlink's outstanding shares on a fully diluted basis, and the expiration or
termination of the Hart-Scott-Rodino Act's waiting period.
Interlink Computer Sciences, Inc. is an international supplier of solutions
that enable its customers to securely manage and control their business
environments over intranets and public
<PAGE>
networks. The company's products and services focus on TCP/IP-centric operations
in the data center that enable customers to securely use their IBM and IBM-
compatible OS/390 mainframes as "enterprise servers" in distributed,
heterogeneous client/server network environments. For the fiscal year ended June
30, 1998, Interlink reported revenues of $29 million. For more information, you
can visit the company's Web site at www.interlink.com.
Sterling Software is a leading provider of software and services for the
application development, information management, systems management and federal
systems markets. The company is ranked among Business Week's 1998 "Info Tech
100" as one of the world's best performing information technology companies.
Headquartered in Dallas, Sterling Software has a worldwide installed base of
more than 20,000 customer sites and 3,600 employees in 90 offices worldwide. For
more information on Sterling Software, visit the company's Web site at
www.sterling.com.
This news release contains certain forward-looking statements that reflect
the current views and expectations of Sterling Software and Interlink with
respect to future events. Such statements are subject to a number of risks,
uncertainties and assumptions, including those mentioned in the two companies'
periodic reports filed with the Securities and Exchange Commission. Actual
results may vary significantly.
CONTACTS:
Julie Kupp A.J. Berkeley Cindy Foor
VP, Investor Relations President & CEO Director, Corporate
Communications
Sterling Software, Inc. Interlink Computer
Sciences, Inc. Sterling Software, Inc.
(214) 981-1000 (510) 657-9800 (214) 981-1000
[email protected] [email protected] [email protected]
<PAGE>
EXHIBIT 99.6
[Interlink Computer Sciences, Inc. Letterhead]
March 30, 1999
To Our Stockholders:
On behalf of the Board of Directors of Inerlink Computer Sciences, Inc.
(the "Company"), we are pleased to inform you that on March 23, 1999, the
Company entered into an Agreement and Plan of Merger (the "Merger Agreement")
with Sterling Software, Inc. and Sterling Software (Southwest), Inc., its
indirect, wholly owned subsidiary, pursuant to which Sterling Software
(Southwest), Inc. today has commenced a cash tender offer (the "Offer") to
purchase all of the outstanding shares (the "Shares") of the Common Stock of
the Company at $7.00 per share. Under the Merger Agreement, the Offer will be
followed by a merger (the "Merger") in which any remaining shares of the
Common Stock of the Company will be converted into the right to receive $7.00
per share in cash, without interest (except any Shares as to which the holder
has properly exercised dissenter's rights of appraisal). Stockholders owning
or having options to acquire approximately 19.7% of the Company's outstanding
Shares on a fully dilated basis have agreed to tender their Shares in the
Offer.
Your Board of Directors has unanimously determined that the Offer and
Merger are fair and in the best interests of the Company and its stockholders
and has approved the Offer and Merger; and the Board of Directors recommends
that the stockholders of the Company accept the Offer and tender their Shares
pursuant to the Offer.
In arriving at its recommendation, the Board of Directors gave careful
consideration to the factors described in the attached
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
that is being filed today with the Securities and Exchange Commission. Among
other things, the Board of Directors considered the opinion of its financial
advisor, Hambrecht & Quist LLC, that the consideration to be received by the
holders of Shares in the Offer and Merger is fair to such holders from a
financial point of view.
In addition to the attached Schedule 14D-9, enclosed also is the Offer to
Purchase dated March 30, 1999, together with related materials, including a
Letter of Transmittal to be used for tendering your certificates representing
Shares in the Offer. These documents state the terms and conditions of the
Offer and the Merger and provide instructions as to how to tender your Shares.
We urge you to read these documents carefully in making your decision with
respect to tendering your shares pursuant to the Offer.
On behalf of the Board of Directors,
/s/ Augustus J. Berkeley
Augustus J. Berkeley
Chief Executive Officer and
Chairman of the Board
<PAGE>
EXHIBIT 99.8
STERLING SOFTWARE, INC.
300 Crescent Court
Suite 1200
Dallas, Texas 75201
March 16, 1999
Interlink Computer Sciences, Inc.
47370 Fremont Boulevard
Fremont, California 94538
Attn: A.J. Berkeley, President
Re: Potential Acquisition Transaction
---------------------------------
Gentlemen:
This letter is to confirm certain agreements we have reached regarding
the potential acquisition (the "Potential Acquisition") by Sterling Software,
Inc. ("Sterling Software") of Interlink Computer Sciences, Inc. ("Interlink").
As a material inducement to Sterling Software's continuation of negotiations
with Interlink with respect to the terms and conditions of the Potential
Acquisition, and in consideration of the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. Exclusivity Period. Upon the execution of this letter
------------------
agreement and continuing until the earlier of (a) 6:00 p.m. California time on
March 25, 1999 and (b) the execution of a definitive agreement governing the
terms and conditions of the Potential Acquisition (such period, the "Exclusivity
Period"), Interlink shall, shall cause its subsidiaries to, and shall use
reasonable efforts to cause all of its or their affiliates, officers, directors,
employees, agents and representatives (including without limitation any
investment banker, financial advisor, attorney and accountant retained by
Interlink or any of its subsidiaries or affiliates) to, discontinue any
solicitation efforts, discussions or negotiations with respect to any
Acquisition Proposal (as hereinafter defined) with any person or entity other
than Sterling Software. During the Exclusivity Period, Interlink shall not, and
shall not authorize or permit any of its subsidiaries or any of its or their
affiliates, officers, directors, employees, agents or representatives (including
without limitations any investment banker, financial advisor, attorney or
accountant retained by Interlink or any of its subsidiaries or affiliates) to,
directly or indirectly, initiate, solicit or intentionally 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 would 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 seek to obtain
an Acquisition Proposal or agree to or endorse any Acquisition Proposal.
<PAGE>
Interlink Computer Sciences, Inc.
March 16, 1999
Page 2
Interlink shall notify Sterling Software immediately if any such inquiries,
expressions of interest or proposals are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with Interlink or any of its subsidiaries, affiliates,
agents or representatives; provided, however, that Interlink's obligation under
this and the immediately succeeding two sentences shall only be applicable to
such of the foregoing as (i) involve any items of non-cash consideration other
than securities for which there is an existing public market ("Marketable
Securities"), or (ii) involve aggregate consideration consisting of cash and/or
Marketable Securities in exchange for all of Interlink's outstanding shares of
common stock, such consideration having a value per share of $7.00 or greater
(each, a "Superior Proposal"). Such notice shall include the identity of the
party making, and the terms of (including delivery of copies thereof), any
inquiry or proposal relating to a Superior Proposal. Interlink will keep
Sterling Software fully informed of the status of, and any modification to, any
Superior Proposal. For purposes of this letter agreement, "Acquisition Proposal"
means an inquiry, offer, proposal or other indication of interest (other than by
Sterling Software in connection with the Potential Acquisition) regarding any of
the following matters involving Interlink: (i) any merger, consolidation, share
exchange, tender or exchange offer, recapitalization, business combination or
other similar transaction immediately following the consummation of which, the
stockholders of Interlink immediately prior thereto would hold less than 80% of
the voting stock of the surviving or resulting entity; (ii) any acquisitions of
voting stock or other securities issued by Interlink or any of its subsidiaries
representing more than 80% of the outstanding voting stock of Interlink or any
of its subsidiaries; (iii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition of all or substantially all of the assets of Interlink and
its subsidiaries, taken as a whole, in a single transaction or series of related
transactions; or (iv) any agreement in principle or other agreement to engage in
any of the foregoing.
2. Certain Obligations Only on Definitive Agreement. No agreement
------------------------------------------------
providing for the Potential Acquisition shall be deemed to exist unless and
until definitive documentation providing therefor has been executed and
delivered by Sterling Software and Interlink (and/or any other appropriate party
or parties thereto). Unless and until such definitive documentation concerning a
Potential Acquisition has been executed, neither Sterling Software nor any of
our representatives will have any liability to Interlink with respect to a
Potential Acquisition, whether by virtue of this letter agreement or otherwise.
3. Non-Solicitation of Employees. Sterling Software agrees that for
-----------------------------
a period of one year from the date of this letter agreement, it will not,
directly or
<PAGE>
Interlink Computer Sciences, Inc.
March 16, 1999
Page 3
indirectly, solicit for employment or attempt to hire or recruit any employee of
Interlink (or any subsidiary thereof) with whom Sterling Software has had
contact or who became known to Sterling Software in connection with Sterling
Software's consideration of the Potential Acquisition. Notwithstanding anything
to the contrary herein, Sterling Software shall not be deemed to have breached
or violated this paragraph 3 solely (a) as a result of generic employment
advertising by Sterling Software (including, without limitation, "open position"
and similar listings in Sterling Software's various World Wide Web pages), (b)
as a result of the efforts of an executive recruitment or similar firm generally
engaged to recruit employees for Sterling Software (without targeting of
Interlink or its specific employees) or (c) if any employee of Interlink (or any
subsidiary thereof) approaches and obtains employment with Sterling Software
after the date hereof solely as a result of any advertising or recruitment
effort contemplated in clause (a) or (b) above.
4. General Provisions. No failure or delay in exercising any right
------------------
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right. This letter agreement shall be binding on and inure to the
benefit of the parties hereto and their respective successors and assigns,
although neither party may assign any of its rights or obligations hereunder
without the prior written consent of the other party, which consent may be
withheld in the sole and absolute discretion of such other party. Money damages
would not be a sufficient remedy for any breach or violation of the terms of
this letter agreement and, accordingly, Sterling Software or Interlink, as the
case may be, shall be entitled to specific performance and injunctive relief as
remedies for any breach or violation, in addition to all other remedies
available at law or equity. This letter agreement may not be amended except by
virtue of a written instrument executed by both of the parties hereto. This
letter agreement shall be governed by and construed in accordance with the laws
of the State of Delaware, without giving effect to the principles of conflict of
laws thereof.
<PAGE>
Interlink Computer Sciences, Inc.
March 16, 1999
Page 4
Please sign and return one copy of this letter agreement to evidence
your acceptance of and agreement to the foregoing, whereupon this letter
agreement will become the binding obligation of each of the undersigned subject
to the terms hereof.
Very truly yours,
STERLING SOFTWARE, INC.
By: /s/ Don J. McDermett, Jr.
------------------------------
Don J. McDermett, Jr.
Senior Vice President and
General Counsel
Accepted and agreed to as of
the date first written above:
INTERLINK COMPUTER SCIENCES, INC.
By: /s/ James A. Barth
--------------------------------------
James A. Barth
Vice President and Chief Financial
Officer
<PAGE>
EXHIBIT 99.17
INTERLINK COMPUTER SCIENCES, INC.
CONSULTING AGREEMENT
--------------------
This Consulting Agreement ("Agreement") is made and entered into as of the
16th day of March, 1998 by and between Interlink Computer Sciences, Inc. (the
"Company"), and James A. Barth ("Consultant").
RECITALS
--------
1. Consultant was employed by the Company as its Chief Financial
Officer and Vice President of Finance pursuant to that certain Employment
Agreement dated November 5, 1997 (the "Employment Agreement") by and between
Consultant and the Company.
2. The Company and Consultant wish to document the terms agreed to
between the Company and the Consultant in connection with (i) Consultant's
resignation as Chief Financial Officer, Vice President of Finance and Corporate
Secretary of the Company, (ii) the subsequent retention of the Consultant to
perform consulting services for the Company, (iii) the termination of
Consultant's Employment Agreement and (iv) the treatment of Consultant's
outstanding stock options pursuant to the Interlink Computer Sciences, Inc. 1992
Stock Option Plan (the "1992 Stock Plan").
NOW THEREFORE, in connection with the promises made herein, the Company and
Consultant hereby agree as follows:
1. Resignation Date. Consultant hereby resigns as an employee, Chief
----------------
Financial Officer, Vice President of Finance and Corporate Secretary of the
Company effective as of the close of business on March 24, 1999.
2. Cancellation of Employment Agreement. Consultant and Company
------------------------------------
agree to cancel and cease any continuing obligations under the Employment
Agreement, as well as any and all amendments and modifications to such
agreement, all severance benefits whether provided for in such Employment
Agreement or otherwise, except as otherwise provided in Section 3(b) herein.
3. Services and Compensation.
--------------------------
(a) Consultant agrees to perform for the Company the services
("Services") described in Exhibit A, attached hereto, until the expiration of
---------
this Agreement as provided in Section 4 herein.
(b) Notwithstanding any provision to the contrary in the 1992 Stock
Plan or the Consultant's Stock Option Agreements, the unvested portion of all
stock options held by Consultant under the Company's 1992 Stock Plan (the
"Unvested Options") shall fully accelerate (i) immediately prior to the closing
of the proposed tender offer by Sterling Software, Inc., a Delaware corporation
(the
<PAGE>
"Closing"), or (ii) upon the signing of a definitive acquisition agreement
for the sale of the Company to any other entity during the term of this
Agreement. Any vested stock options (including any Unvested Options that vest
pursuant hereto) held by Consultant shall remain exercisable until the later of
either (i) the date specified for Consultant's option pursuant to the 1992 Stock
Plan, or (ii) thirty (30) days after the Merger Agreement among Sterling,
Sterling Software (Southwest), Inc. and the Company, dated as of March 23, 1999,
is terminated in accordance with its terms. In the event of Consultant's death
or disability during the term of this Agreement, the Consultant or Consultant's
representative, as the case may be, shall have the right to exercise all or any
portion of such vested stock options (including any Unvested Options that vest
pursuant hereto).
4. Term.
----
This Agreement will commence on the date hereof and will continue for
sixty (60) days following the such Consultant's resignation date.
5. Assignment.
----------
Neither this Agreement nor any right hereunder or interest herein may
be assigned or transferred by Consultant without the express written consent of
the Company.
6. Independent Contractor.
----------------------
It is the express intention of the parties that Consultant is an
independent contractor. Nothing in this Agreement shall in any way be construed
to constitute Consultant as an agent, employee or representative of the Company,
but Consultant shall perform the Services hereunder as an independent
contractor. Consultant agrees to furnish (or reimburse the Company for) all
tools and materials necessary to accomplish this contract, and shall incur all
expenses associated with performance, except as expressly provided on Exhibit A
---------
of this Agreement. Consultant acknowledges and agrees that Consultant is
obligated to report as income all compensation received by Consultant pursuant
to this Agreement, and Consultant agrees to and acknowledges the obligation to
pay all self-employment and other taxes thereon. Consultant further agrees to
indemnify and hold harmless the Company and its directors, officers, and
employees from and against all taxes, losses, damages, liabilities, costs and
expenses, including attorney's fees and other legal expenses, arising directly
or indirectly from (i) any negligent, reckless or intentionally wrongful act of
Consultant or Consultant's assistants, employees or agents, (ii) a determination
by a court or agency that the Consultant is not an independent contractor, or
(iii) any breach by the Consultant or Consultant's assistants, employees or
agents of any of the covenants contained in this Agreement.
7. Benefits.
--------
Consultant acknowledges and agrees and it is the intent of the parties
hereto that Consultant receive no Company-sponsored benefits from the Company
either as a Consultant or employee, other than (i) any indemnification
arrangements that Consultant has with the Company or (ii) any D&O insurance
coverage applicable to the Consultant in any of his capacities related to the
Company. Such benefits include, but are not limited to, paid vacation, sick
leave, medical insurance and 401(k) participation. Notwithstanding the above,
If Consultant is eligible for and timely elects
<PAGE>
group health continuation coverage pursuant to the Consolidated Omnibus
Reconciliation Act of 1985, as amended ("COBRA"), the Company will reimburse
Consultant for his COBRA premiums until the earlier of (i) April 30, 1999; or
(ii) the date Consultant is no longer eligible to receive continuation
coverage pursuant to COBRA. Consultant shall thereafter be responsible for the
payment of COBRA coverage at 102% of the actual premium cost for the remaining
COBRA period. If Consultant is reclassified by a state or federal agency or
court as an employee, Consultant will become a reclassified employee and will
receive no benefits except those mandated by state or federal law, even if by
the terms of the Company's benefit plans in effect at the time of such
reclassification Consultant would otherwise be eligible for such benefits.
8. Arbitration and Equitable Relief.
--------------------------------
(a) Disputes. Except as provided in Section 8(c) below, the Company
--------
and Consultant agree that any dispute or controversy arising out of, relating to
or in connection with the interpretation, validity, construction, performance,
breach or termination of this Agreement shall be settled by binding arbitration
to be held in Santa Clara County, California, in accordance with the Commercial
Arbitration Rules, supplemented by the Supplemental Procedures for Large Complex
Disputes, of the American Arbitration Association as then in effect (the
"Rules"). The arbitrator may grant injunctions or other relief in such dispute
or controversy. The decision of the arbitrator shall be final, conclusive and
binding on the parties to the arbitration. Judgment may be entered on the
arbitrator's decision in any court of competent jurisdiction.
(b) Consent to Personal Jurisdiction. The arbitrator(s) shall apply
--------------------------------
California law to the merits of any dispute or claim, without reference to
conflicts of law rules. Consultant hereby consents to the personal jurisdiction
of the state and federal courts located in California for any action or
proceeding arising from or relating to this Agreement or relating to any
arbitration in which the parties are participants.
(c) Equitable Relief. The parties may apply to any court of competent
----------------
jurisdiction for a temporary restraining order, preliminary injunction, or other
interim or conservatory relief, as necessary, without breach of this arbitration
agreement and without abridgment of the powers of the arbitrator.
(d) Acknowledgment. CONSULTANT HAS READ AND UNDERSTANDS SECTION 8,
--------------
WHICH DISCUSSES ARBITRATION. CONSULTANT UNDERSTANDS THAT BY SIGNING THIS
AGREEMENT, CONSULTANT AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO,
OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY,
CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF, TO BINDING
ARBITRATION, EXCEPT AS PROVIDED IN SECTION 9 (d), AND THAT THIS ARBITRATION
CLAUSE CONSTITUTES A WAIVER OF CONSULTANT'S RIGHT TO A JURY TRIAL AND RELATES TO
THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE RELATIONSHIP
BETWEEN THE PARTIES.
<PAGE>
9. Governing Law.
-------------
This Agreement shall be governed by the internal substantive laws, but
not the choice of law rules, of the State of California.
10. Entire Agreement.
----------------
This Agreement and any Stock Option Agreements are the entire
agreements of the parties and supersede any prior agreements between them,
whether written or oral, with respect to the subject matter hereof. No waiver,
alteration, or modification of any of the provisions of this Agreement shall be
binding unless in writing and signed by duly authorized representatives of the
parties hereto.
11. Attorney's Fees.
---------------
In any court action at law or equity which is brought by one of the
parties to enforce or interpret the provisions of this Agreement, the prevailing
party will be entitled to reasonable attorney's fees, in addition to any other
relief to which that party may be entitled.
12. Severability.
------------
The invalidity or unenforceability of any provision of this Agreement,
or any terms thereof, shall not affect the validity of this Agreement as a
whole, which shall at all times remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
CONSULTANT
By: /s/James A. Barth
--------------------------------
Address: 18237 Constitution Ave.
----------------------------
Monte Sereno CA 95030
----------------------------
INTERLINK COMPUTER SCIENCES, INC.
By: /s/ Augustus S. Berkeley
--------------------------------
Title: C.E.O.
-----------------------------
Address: 47370 Fremont Bl.
----------------------------
Fremont, CA. 94538
----------------------------
<PAGE>
EXHIBIT A
---------
SERVICES AND COMPENSATION
-------------------------
1. Contact. Consultant's principal Company contact:
-------
Name: Augustus J. Berkeley
Title: Chief Executive Officer and President
2. Services. Consultant will render to the Company the following
--------
Services:
Assistance with closing of the tender offer by Sterling
--------------------------------------------------------------
Software, Inc. or the signing of a definitive acquisition
--------------------------------------------------------------
agreement for the sale of the Company to another entity.
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
<PAGE>
EXHIBIT 99.19
CERTAIN PORTIONS OF INTERLINK COMPUTER SCIENCES, INC.'S
PROXY STATEMENT DATED SEPTEMBER 24, 1998
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of July 31, 1998 by (i) each person
known by the Company to own beneficially more than 5% of the outstanding shares
of Common Stock, (ii) each director of the Company, (iii) each executive officer
named in the Summary Compensation Table below, and (iv) all directors and
executive officers as a group. Except as otherwise noted below, the Company
knows of no agreements among its stockholders which relate to voting or
investment power of its Common Stock.
<TABLE>
<CAPTION>
COMMON STOCK APPROXIMATE
FIVE PERCENT STOCKHOLDERS, BENEFICIALLY PERCENTAGE
DIRECTORS AND CERTAIN EXECUTIVE OFFICERS OWNED OWNED (1)
- ------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Franklin Advisory Services, Inc.................................... 703,100 8.61%
One Parker Plaza, 16th Floor
Fort Lee, NJ 07024
Cisco Systems, Inc................................................. 622,000 7.62%
170 W. Tasman Drive
San Jose, CA 95134-1706
Thomson, Horstmann & Bryant, Inc................................... 504,200 6.18%
Park 80 West, Plaza Two
Saddlebrook, NJ 07663
ROI Capital Management, Inc........................................ 494,400 6.06%
17 E. Sir Francis Drake Blvd., Suite 225
Larkspur, CA 94939
Entities affiliated with Advent International Corp. (2)............ 447,232 5.48%
101 Federal Street
Boston, MA 02110
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCK APPROXIMATE
FIVE PERCENT STOCKHOLDERS, BENEFICIALLY PERCENTAGE
DIRECTORS AND CERTAIN EXECUTIVE OFFICERS OWNED OWNED (1)
- ------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
James A. Barth (3)................................................. 16,071 *
Augustus J. Berkeley (4)........................................... 61,046 *
Ronald W. Braniff (5).............................................. 76,813 *
Thomas H. Bredt (6)................................................ 22,224 *
Andrew I. Fillat (7)............................................... 455,045 *
Ralph B. Godfrey (8)............................................... 2,813 *
William C. Jones................................................... 11,868 *
Christopher A. Markle (9).......................................... 27,940 *
Michael J. Satterwhite (10)........................................ 17,384 *
All Directors and executive officers as a group (10 persons) (11).. 696,204 8.33%
*Less than 1%
</TABLE>
(1) Applicable percentage of ownership is based on 8,163,425 shares of Common
Stock outstanding as of July 31, 1998 together with applicable options for
such stockholder. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission, and includes voting and
investment power with respect to shares. Shares of Common Stock subject to
options currently exercisable or exercisable within 60 days after July 31,
1998 are deemed outstanding for computing the percentage ownership of the
person holding such options, but are not deemed outstanding for computing
the percentage ownership of any other person.
(2) Includes 38,629 shares held by Adtel L.P., 21,461 shares held by Adventact
L.P., 861 shares held by Advent International II L.P., 17,169 shares held
by Adwest L.P., 322,029 shares held by Global Private
<PAGE>
Equity II L.P. and 47,083 shares held by Golden Gate Development and
Investment L.P. (collectively "Advent International").
(3) Includes 16,071 shares subject to stock options that are exercisable within
60 days of July 31, 1998.
(4) Includes 55,876 shares subject to stock options that are exercisable
within 60 days of July 31, 1998.
(5) Includes 76,813 shares subject to stock options that are exercisable within
60 days of July 31, 1998.
(6) Includes 7,813 shares subject to stock options that are exercisable within
60 days of July 31, 1998.
(7) Includes 7,813 shares subject to stock options that are exercisable within
60 days of July 31, 1998. Also includes 447,232 shares owned by entities
affiliated with Advent International, of which Mr. Fillat is a Senior Vice
President. Mr. Fillat disclaims beneficial ownership of all such shares
held by those entities.
(8) Includes 2,813 shares subject to stock options that are exercisable within
60 days of July 31, 1998.
(9) Includes 15,106 shares subject to stock options that are exercisable within
60 days of July 31, 1998.
(10) Includes 16,667 shares subject to stock options that are exercisable within
60 days of July 31, 1998.
(11) Includes 198,972 shares subject to stock options that are exercisable
within 60 days of July 31, 1998.
EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
The following table sets forth all compensation for services rendered in
all capacities during the fiscal year ended June 30, 1998 awarded to, earned by,
or paid to (i) the Company's Chief Executive Officer and (ii) the Company's
other most highly compensated officers whose salary and bonus for such fiscal
year exceeded $100,000 and who were serving as an officer of the Company as of
the end of such fiscal year (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION(1) ----------------
---------------- SECURITIES
FISCAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#) COMPENSATION (2)
- --------------------------- ------ -------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Augustus J. Berkeley (4)............... 1998 $240,283 $ 70,629 367,300(7) $5,148
President and Chief Executive Officer 1997 222,817 11,341 65,000 1,099
1996 305,656 8,789 30,000 4,929
Ronald W. Braniff (3).................. 1998 80,500 - 51,750(8) -
Former Interim Chief Executive Officer 1997 31,000 - 63,000 -
Christopher A. Markle.................. 1998 135,006 48,062 47,500(9) 1,732
Vice President and Chief Technical 1997 118,834 21,821 22,500 619
Officer
Michael J. Satterwhite................. 1998 120,019 49,250 50,000(10) 1,053
Vice President of Human Resources 1997 86,240 26,504 25,000 631
William C. Jones (5)................... 1998 122,751 20,000 60,000(11) 1,187
Vice President of Marketing
James A. Barth (6)..................... 1998 99,487 18,667 90,000 882
Vice President, Chief
Financial Officer and Secretary
</TABLE>
(1) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
has been omitted in those cases where the aggregate amount to such
perquisites and other personal benefits constituted less than the lesser of
$50,000 or 10% of the total annual salary and bonus for the Named Executive
Officer for such year.
(2) Includes premiums paid by the Company on life insurance policies where the
Company was not the beneficiary, auto allowances, and travel advances.
-2-
<PAGE>
(3) Mr. Braniff assumed the position of Interim Chief Executive Officer from
May 1997 to September 1997, and was compensated on a consulting basis for
that period.
(4) Salary amount includes $72,817 and $205,648 of commissions in 1997 and
1996, respectively.
(5) Mr. Jones assumed the position of Vice President of Marketing in April
1998.
(6) Mr. Barth assumed the position of Vice President, Chief Financial Officer
and Secretary in November 1997.
(7) Reflects options for 367,300 shares that were repriced in February 1998,
replacing options that were granted in November 1996, March 1997 and
October 1997.
(8) Reflects options for 48,000 shares that were repriced in February 1998,
replacing options that were granted in May 1997.
(9) Reflects options for 32,500 shares that were repriced in February 1998,
replacing options that were granted in April 1996, November 1996 and
December 1996.
(10) Reflects options for 25,000 shares that were repriced in February 1998,
replacing options that were granted in September 1996.
(11) Reflects options for 3,000 shares that were repriced in February 1998,
replacing options that were granted in August 1997.
OPTION GRANTS IN FISCAL YEAR 1998
The following table sets forth information regarding the grant of stock
options to each of the Named Executive Officers during the fiscal year ended
June 30, 1998.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUME
----------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENTAGE OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------
NAME GRANTED FISCAL 1998 PER SHARE(3) DATE 5% 10%
- ------------------------ ------------- ----------- ------------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Augustus J. Berkeley.... 151,150(2)(7) 8.5% $4.88 2/6/2005 $299,974 $699,068
151,150(6)(7) 8.5% $4.88 2/6/2005 299,974 699,068
23,000(2)(8) 1.3% $4.88 2/6/2005 45,646 106,375
42,000(2)(9) 2.3% $4.88 2/6/2005 83,354 194,250
James A. Barth.......... 60,000(2) 3.4% $4.39 11/17/2004 107,255 249,949
30,000(6) 1.7% $4.39 11/17/2004 53,627 124,974
Ronald W. Braniff....... 48,000(5)(10) 2.7% $4.88 2/6/2005 95,261 222,000
3,750(4) 0.2% $4.44 2/5/2008 10,465 26,521
William C. Jones........ 3,000(2)(11) 0.2% $4.88 2/6/2005 5,954 13,875
40,000(2) 2.2% $5.50 4/1/2005 89,562 208,718
17,000(6) 1.0% $5.50 4/1/2005 38,064 88,705
Christopher A. Markle... 15,000(2) 0.8% $4.81 10/6/2004 29,391 68,493
10,000(2)(12) 0.6% $4.88 2/6/2005 19,846 46,250
7,500(2)(8) 0.4% $4.88 2/6/2005 14,885 34,687
15,000(2)(13) 0.8% $4.88 2/6/2005 29,769 69,375
Michael J. Satterwhite.. 25,000(2) 1.4% $4.81 10/6/2004 48,984 114,154
25,000(2)(14) 1.4% $4.88 2/6/2005 49,615 115,625
</TABLE>
(1) This column shows the hypothetical gains or "option spreads" of the options
granted based on assumed annual compound stock appreciation rates of 5% and
10% over the full seven-year term of the options. The 5% and 10% assumed
rates of appreciation are mandated by the rules of the Securities and
Exchange Commission and do not represent the Company's estimate or
projection of future Common Stock prices. The gains shown are net of the
option exercise price, but do not include deductions for taxes or other
expenses associated with the exercise of the option or the sale of the
underlying shares. The actual gains, if any, on the exercise of stock
options will depend on the future performance of the Common Stock, the
option holder's continued employment through the option period, and the
date on which the options are exercised.
-3-
<PAGE>
(2) Options vest as of 9/48th of the option shares after nine months from the
vesting commencement date and as to 1/48th of the option shares each month
thereafter, with full vesting occurring on the fourth anniversary of the
vesting commencement date.
(3) Options were granted at an exercise price equal to the fair market value of
the Company's Common Stock. Exercise price may be paid in cash, promissory
note, by delivery of already-owned shares subject to certain conditions, or
pursuant to a cashless exercise procedure under which the optionee provides
irrevocable instructions to a brokerage firm to sell the purchased shares
and to remit to the Company, out of the sale proceeds, an amount equal to
the exercise price plus all applicable withholding taxes.
(4) Option was granted under the 1996 Director option plan at an exercise price
equal to the fair market value of the Company's Common Stock on the date of
grant. Options vest as to 1/48th of the option shares each month, with
full vesting occurring on the fourth anniversary of the vesting
commencement date. These options expire ten years from the date of grant.
(5) Option was granted under an agreement between Mr. Braniff and the Company,
whereby Mr. Braniff was to act as Interim Chief Executive Officer until a
full-time Chief Executive Officer was hired. Options vest as to 1/12th of
the option shares each month, with full vesting occurring on the
anniversary of the vesting commencement date. Options are also subject to
certain acceleration clauses.
(6) Options vest as to 1/84th of the option shares each month with full vesting
occurring on the seventh anniversary of the vesting commencement date.
According to the terms of these grants, if the average share price in
effect on the grant date doubles and the increased price is sustained over
a one month period, the options will accelerate their vesting by one year.
Thereafter, an additional year of vesting will accelerate for every $5 of
incremental value added to the Company's average stock. The stock must
retain its increased value over a one month period in order for any
acceleration of options to occur. The performance based option grant will
carry a two year minimum vesting schedule regardless of acceleration
factors.
(7) Reflects options that were repriced in February 1998, replacing options
granted in October 1997.
(8) Reflects options that were repriced in February 1998, replacing options
granted in November 1996.
(9) Reflects options that were repriced in February 1998, replacing options
granted in March 1997.
(10) Reflects options that were repriced in February 1998, replacing options
granted in May 1997.
(11) Reflects options that were repriced in February 1998, replacing options
granted in August 1997.
(12) Reflects options that were repriced in February 1998, replacing options
granted in April 1996.
(13) Reflects options that were repriced in February 1998, replacing options
granted in December 1996.
(14) Reflects options that were repriced in February 1998, replacing options
granted in September 1996.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
The following table sets forth certain information regarding stock options
held as of June 30, 1998 by the Named Executive Officers.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at June 30, 1998 June 30, 1998 (2)
Shares Acquired Value ---------------------------- -----------------------
Name on Exercise Realized (1) Vested Unvested Vested Unvested
- ------------------------ --------------- --------------- -------- ----------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Augustus J. Berkeley.... - - 58,198 364,102 109,750 22,250
Ronald W. Braniff....... - - 77,516 13,984 56,000 -
James A. Barth.......... - - 2,500 87,500 - -
William C. Jones........ - - 405 59,595 - -
Christopher A. Markle... - - 22,262 37,238 32,600 -
Michael J. Satterwhite.. - - 13,543 36,457 - -
</TABLE>
(1) "Value Realized" represents the fair market value of the underlying
securities on the exercise date minus the aggregate exercise price of such
options.
-4-
<PAGE>
(2) Calculated on the basis of fair market value of the underlying securities
as of June 30, 1998 of $3.50 per share, the last trading day of fiscal year
1998, as reported by the NASDAQ National Market, minus the aggregate
exercise price.
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
Mr. Berkeley and Mr. Barth each have entered into letter agreements with
the Company which provide for severance payments if they are terminated without
cause. Mr. Berkeley will be entitled to severance payments equal to twelve
months salary, Mr. Barth will be entitled to severance payments equal to six
months salary. All of the Named Executive Officers' employment with the Company
is terminable at will. In addition, each of the Named Executive Officers has
entered into a change of control severance agreement which provides for
acceleration of all unvested stock options and/or restricted stock held by such
officer upon an involuntary termination without cause of such officer within
twelve (12) months of a change of control transaction.
DIRECTOR COMPENSATION
Members of the Company's Board of Directors that are employees of the
Company do not receive compensation for their services as directors. The
Company's 1996 Director Option Plan provides that options will be granted to
non-employee directors of the Company pursuant to an automatic nondiscretionary
grant mechanism. Upon joining the Board of Directors, each new non-employee
director will automatically be granted an option to purchase 15,000 shares of
Common Stock and each non-employee director will subsequently be granted an
additional option to purchase 3,750 shares of Common Stock annually, each such
option to be granted at the fair market value of the Common Stock on the date of
grant. The initial option grant of 15,000 shares vests at a rate of 1/48th of
the shares per month following the date of grant, and the subsequent option
grant of 3,750 shares vests at the end of four years. In addition, the Company
reimburses the reasonable travel expenses of the directors.
REPORT OF THE COMPENSATION COMMITTEE
The following is the Report of the Compensation Committee of the Company
describing the compensation policies and rationale applicable to the Company's
executive officers with respect to the compensation paid to such executive
officers for the fiscal year ended June 30, 1998. The information contained in
the report shall not be deemed to be "soliciting material" or to be "filed" with
the Securities and Exchange Commission nor shall such information be
incorporated by reference into any future filing under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended, except to
the extent that the Company specifically incorporates it by reference into such
filing.
General. The responsibilities of the Compensation Committee are to
administer the Company's various incentive plans, including the Company's 1992
Stock Option Plan and the 1996 Employee Stock Purchase Plan, and to set
compensation policies applicable to the Company's executive officers. The
Committee's fundamental policy is to offer the Company's executive officers
competitive compensation opportunities based upon overall Company performance,
their individual contribution to the financial success of the Company and their
personal performance. It is the Committee's objective to have a substantial
portion of each officer's compensation contingent upon the Company's
performance, as well as upon such officer's own level of performance.
Accordingly, each executive officer's compensation package comprises three
elements: (i) base salary, which is established primarily on the basis of
individual performance and market considerations; (ii) annual variable
performance awards payable in cash and tied to the Company's achievement of
financial performance goals and the executive's contribution; and (iii) long-
term stock-based incentive awards, which strengthen the mutuality of interests
between the executive officers and the stockholders.
Base Salary. Base salary is primarily used by the Company as a device to
attract, motivate, reward and retain highly skilled executives. The Committee
reviewed and approved fiscal year 1998 base salaries for the Chief Executive
Officer and other executive officers at the beginning of the fiscal year or at
the date of their appointment. Base salaries were established by the Committee
based on an executive officer's job responsibilities, level of experience,
individual performance, contribution to the business, the Company's financial
performance for the past year and recommendations from management. The Committee
also took into
-5-
<PAGE>
account the salaries for similar positions at comparable companies, based on
each individual Committee member's industry experience. In reviewing base
salaries, the Committee focused significantly on each executive officer's prior
performance with the Company and expected contribution to the Company's future
success. In making base salary decisions, the Committee exercised its discretion
and judgment using these factors. No specific formula was applied to determine
the weight of each factor.
Annual Incentive Bonuses. Each executive officer's bonus is based on
qualitative and quantitative factors. Bonuses are intended to motivate and
reward executive officers by directly linking the amount of the bonus to
specific Company-based performance targets. Annual incentive bonuses for
executive officers are intended to reflect the Committee's belief that a portion
of the compensation of each executive officer should be contingent upon the
performance of the Company. To carry out this philosophy, the Board reviews and
approves the financial budget for the fiscal year. The Committee then
establishes target bonuses for each executive officer as a percentage of the
officer's base salary. The executive officers, must successfully achieve these
performance targets, which are submitted by management to the Committee for its
evaluation and approval at the beginning of the fiscal year. Company-based
performance goals are tied to different indicators of Company performance, such
as the operating results of the Company. The Committee evaluates the completion
of the Company-based performance targets and approves a performance rating
relative to the goals completed. This scoring is influenced by the Committee's
perception of the importance of the various corporate goals. The Committee
believes that the bonus arrangement provides an excellent link between the
Company's earnings performance and the incentives paid to executives.
Stock Options. The Committee provides the Company's executive officers with
long-term incentive compensation through grants of stock options under the
Company's 1992 Stock Option Plan. The Committee believes that stock options
provide the Company's executive officers with the opportunity to purchase and
maintain an equity interest in the Company and to share in the appreciation of
the value of the Company's Common Stock. The Committee believes that stock
options directly motivate an executive to maximize long-term stockholder value.
The options also use vesting periods that encourage key executives to continue
in their employment with the Company. All options granted to executive officers
to date have been granted at the fair market value of the Company's Common Stock
on the date of grant. The Committee considers the grant of each option
subjectively, considering factors such as the executive officer's relative
position and responsibilities with the Company, the individual performance of
the executive officer over the previous fiscal year, and the anticipated
contribution of the executive officer to the attainment of the Company's long-
term strategic performance goals. Stock options granted in prior years are also
taken into consideration. The Committee views stock option grants as an
important component of its long-term, performance-based compensation philosophy.
CEO Salary. The compensation of Mr. Berkeley, President and Chief Executive
Officer of the Company, consisted of base salary, an annual bonus and incentive
stock options. The Board of Directors periodically reviews the CEO's base salary
and bonus and revises his compensation based on the Board's overall evaluation
of his performance toward the achievement of the Company's financial, strategic
and other goals, with consideration given to his length of service and to
comparative chief executive officer compensation information. The Compensation
Committee believes that the Company's success is dependent in part upon the
efforts of its Chief Executive Officer. In fiscal 1998, Mr. Berkeley earned a
base salary of $276,000 as set by the Compensation Committee and earned a bonus
of $70,629 which was based on performance objectives. Mr. Berkeley also
received an option to purchase 367,300 shares of Common Stock of the Company
(with an exercise price of 100% of market value of the Common Stock on the date
of grant).
Option Repricing Report. In February 1998, all employees who held
outstanding options under the Company's stock options plans, including all
executive officers, were given the opportunity to reprice outstanding stock
options to the then current market price of $4.88 per share in return for
changing the vesting start date of the option to a point six months after the
original start date. The Company took this action to retain key employees at a
time of intense competition for experienced personnel. There were no separate
analyses of the impact of the repricing on the overall compensation of the
executive officers or any other employees.
The following table provides the specified information concerning all
repricings of options to purchase the Company's Common stock held by any
executive officer of the Company since August 15, 1996, the date of the
Company's initial public offering:
-6-
<PAGE>
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
Number of Length of Original
Securities Market Price Option Term
Underlying of Stock at Exercise Price Remaining at Date
Options Time of at Time of New of Repricing or
Repriced or Repricing or Repricing or Exercise Amendment
Name and Position Date Amended Amendment Amendment Price (months)
- ------------------------------ ---------- ----------- ------------ -------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Augustus J. Berkeley.......... 2/6/98(1) 23,000 $4.88 $ 8.13 $4.88 75
President and Chief 2/6/98(1) 42,000 4.88 8.13 4.88 75
Executive Officer 2/6/98(1) 151,150 4.88 5.00 4.88 80
2/6/98(1) 151,150 4.88 5.00 4.88 80
5/2/97(1) 42,000 8.13 12.13 8.13 82
5/2/97(1) 23,000 8.13 9.00 8.13 78
Christopher A. Markle......... 2/6/98(1) 10,000 4.88 8.00 4.88 62
Vice President and Chief 2/6/98(1) 7,500 4.88 9.00 4.88 69
Technical Officer 2/6/98(1) 15,000 4.88 8.13 4.88 75
5/2/97(1) 15,000 8.13 16.25 8.13 77
William C. Jones.............. 2/6/98(1) 3,000 4.88 6.44 4.88 79
Vice President of
Marketing
Michael J. Satterwhite........ 2/6/98(1) 25,000 4.88 9.38 4.88 67
Vice President of
Human Resources
Gloria M. Purdy (3)........... 2/6/98(1) 30,000 4.88 9.00 4.88 69
Former Vice President
and Former CFO
D. Benedict Dulley (2).... 5/2/97(1) 12,500 8.13 12.00 8.13 71
Former Vice President
and Former Director
</TABLE>
(1) Options that were repriced in May 1997 and February 1998 were subject to a
similar vesting schedule commencing six months after the original vesting
commencement date.
(2) Mr. Dulley resigned his position as Vice President of the HARBOR division
and as a member of the Board of Directors in December 1997. He is no
longer an employee of the Company.
(3) Ms. Purdy resigned her position as Vice President, Chief Financial Officer,
and Secretary in October 1997. She is no longer an employee of the
Company.
Respectfully submitted by members of the Compensation Committee: Ronald W.
Braniff and Andrew I. Fillat
-7-
