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AS FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 6, 1998
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, For Use of the
[_] Definitive Proxy Statement Commission Only (as permitted
[X] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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CAYENNE SOFTWARE, INC.
(Name of Registrant as specified in its Charter)
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Payment of filing fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
[_] Fee paid previously with preliminary materials:
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement no.:
(3) Filing Party:
(4) Date Filed:
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Additional Soliciting Materials
Cayenne Software, Inc. (the "Company") is filing the material set forth
below as additional soliciting material pursuant to Rule 14a-6(b) of the General
Rules and Regulations under the Securities Exchange Act of 1934, as amended.
The material contained below, which discusses certain aspects of the proposed
acquisition of the Company by Sterling Software, Inc. and Sterling Software
(Southern), Inc. in a question and answer format, has been posted on the
Company's Web page (http://www.cayennesoft.com) for the information of the
Company's stockholders. It must be read in conjunction with the definitive
proxy materials filed with the Commission on September 24, 1998 and previously
provided to the Company's stockholders.
The following information has been posted:
"Q. EXPLAIN THE DEAL. WHAT AM I GOING TO GET FOR MY STOCK?
A. The total price to be paid for Cayenne is $11.4 million. Cayenne has 2
classes of stockholders, common and preferred. Of the total price, $3.4
million goes to the preferred stockholders. The balance of $8 million
(which is $0.375 per share of outstanding common stock) will be paid to the
common stockholders, subject to reduction by the amount of any interim
financing provided to Cayenne based on Sterling Software's credit support
prior to closing the transaction.
Q. WHAT IS INTERIM FINANCING?
A. In its June 30, 1998 10Q filing with the SEC, Cayenne indicated that
due to the loss that it incurred in the second quarter, it was in default
under its bank loan agreement and that it might be unable to continue as a
going concern. In view of this situation, Sterling Software has agreed to
provide credit support for Cayenne, allowing Cayenne to borrow up to $3
million for working capital requirements until the closing of the
transaction. Any amount that Cayenne is required to borrow under this
arrangement will be deducted from the amount payable to common
stockholders. As stated in its definitive proxy statement, Cayenne believes
that it may not need to make any significant borrowings under the interim
financing so long as the merger closes at a time consistent with the
Special Meeting of Stockholders to be held on October 23, 1998. There are
many factors that could cause Cayenne to require interim financing,
however, including cash collections that are less than forecast, lower
levels of new or repeat sales or unexpectedly high expenses. If the
transaction does not close when scheduled (whether due to the need to
adjourn the Special Meeting to solicit additional proxies or otherwise),
Cayenne may need to borrow a substantial amount from the interim financing
facility.
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Q: WILL ANY SEVERANCE OR RELATED BENEFITS PAID TO EXECUTIVES OF CAYENNE IN
CONNECTION WITH ITS ACQUISITION BY STERLING SOFTWARE ADD TO AMOUNTS THAT
CAYENNE WILL BE REQUIRED TO BORROW PRIOR TO CLOSING, AND THUS REDUCE THE
CASH PAYABLE TO CAYENNE'S COMMON STOCKHOLDERS UNDER THE MERGER AGREEMENT?
A: No. The Merger Agreement specifically provides that Sterling Software
is to assume all of Cayenne's severance obligations to its executives. Any
payments in respect of these obligations will be made by Sterling Software
after the closing of the transaction, (i.e., after the cash payable to
Cayenne's common stockholders has been fixed). Thus, Sterling Software
will effectively absorb these costs, not the stockholders of Cayenne.
Q: AS A COMMON STOCKHOLDER, HOW MUCH WILL I RECEIVE ON A PER SHARE BASIS?
A: The deal is worth up to $0.375 per share to common stockholders,
depending on how much interim financing is required. For example, if
Cayenne required $3 million of interim financing, stockholders would
receive $0.234. On the other hand, if no additional financing is
required, common stockholders will receive $0.375 per share.
Q: HOW MUCH WILL CAYENNE NEED TO BORROW?
A: It is difficult to predict because of the number of factors affecting
Cayenne's need to borrow. In its proxy statement, however, Cayenne stated
that it believes it may be able to avoid making any significant borrowings.
There are many factors that could cause Cayenne to require interim
financing, however, including cash collections that are less than forecast,
lower levels of new or repeat sales or unexpectedly high expenses. If the
transaction does not close when scheduled, Cayenne may need to borrow a
substantial amount from the interim financing facility.
Q: HOW MANY VOTES ARE REQUIRED TO CLOSE THE TRANSACTION?
A: A favorable vote by holders of 2/3 of the common shares outstanding is
required to approve the transaction. All of the preferred stockholders
have agreed to vote in favor of the transaction.
Q: WHY DO THE SERIES D CONVERTIBLE PREFERRED STOCKHOLDERS GET $3.4
MILLION?
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A: As its name implies, preferred stock ordinarily has various
preferential rights relative to common stock. In the case of the Series D
convertible preferred stock, these rights include (i) the right to receive
approximately $21.00 per share in any bankruptcy or other liquidation of
Cayenne (prior to any payment being made on account of Cayenne common
stock), (ii) the right to convert into an aggregate of approximately
19,500,000 shares of Cayenne common stock (or, in certain circumstances, to
require Cayenne to repurchase shares of series D convertible preferred
stock), and (iii) the right to vote as a separate class on certain
extraordinary transactions involving Cayenne (i.e., a veto right over
transactions such as the merger). The amount to be received by the holders
of Series D preferred stock in the merger was specified by Sterling
Software in its offer to acquire Cayenne. As required by Sterling Software,
the preferred stockholders agreed to vote in favor of the merger and not to
exercise any conversion rights. Cayenne's common stockholders would receive
substantially less (on a per share basis) in the merger if, hypothetically,
the Series D convertible preferred stock were fully converted into common
stock prior to the effective time of the merger. The relative rights and
preferences of the Series D convertible preferred stock and the common
stock were among the various factors considered by Adams, Harkness & Hill
in rendering its fairness opinion relating to the merger.
Q: HOW MANY SHARES OF COMMON STOCK ARE OUTSTANDING?
A: 21,333,398 shares.
Q: WHY DID CAYENNE CHOOSE TO SELL TO STERLING SOFTWARE?
A: As Cayenne had previously announced, it retained the investment banking
firm of Adams, Harkness and Hill to assist it in evaluating strategic
alternatives during May. At the conclusion of this process and in
consideration of Cayenne's difficult financial situation, Sterling Software
provided Cayenne the best assurance of being able to successfully close
this transaction quickly and agreed to provide credit support for the
interim financing required to carry Cayenne through to the closing.
Sterling Software is a large and financially stable company that has
successfully completed 30 acquisitions.
Q: DID YOU CONSIDER OTHER OFFERS?
A: As Cayenne stated in its proxy statement, other offers and expressions
of interest were considered by the Board. However, there were no other
proposals that provided the same degree of certainty with respect to
closing the transaction
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quickly and successfully. Other proposals included conditions that reduced
the level of certainty with regard to their ability to close in accordance
with their terms.
Q: WHAT HAPPENS IF THE STOCKHOLDERS DO NOT APPROVE THIS TRANSACTION BY THE
REQUIRED VOTE?
A: Sterling Software would have the right to terminate the Merger
Agreement, to require Cayenne to pay it a break-up fee of $570,000 and to
demand immediate repayment of any interim financing advances outstanding.
In addition, Silicon Valley Bank would have the right to demand immediate
repayment of all amounts owed to it by Cayenne. In light of the serious
liquidity concerns disclosed by Cayenne in its June 30, 1998 10Q report
filed with the SEC, it is unlikely that Cayenne would be able to continue
as a going concern.
Q: WHEN WILL I RECEIVE MY PROXY STATEMENT?
A: Shareholders Communication Corporation has been retained by Cayenne
Software, Inc. as proxy solicitor. Mailing of proxy materials commenced on
September 25, 1998. If you do not receive your proxy materials by October
9, 1998 or would like additional information, please contact Shareholders
Communication Corporation at 1-800-733-8481, extension 441.
A Proxy Statement containing more detailed information has been mailed to each
person who, as of September 16, 1998, was a holder of record of Cayenne stock.
Stockholders are urged to read the Proxy Statement carefully and in its entirety
before deciding how to vote."
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